Employee Benefits and Stock Compensation

12 Months Ended

Dec. 31, 2014

Compensation and Retirement Disclosure [Abstract]

Employee Benefits and Stock Compensation

Note J Employee Benefits and Stock Compensation

The Company’s profit sharing and retirement plan covers substantially all employees after one year of service and includes a matching benefit feature for employees electing to defer the elective portion of their profit sharing compensation. In addition, amounts of compensation contributed by employees are matched on a percentage basis under the plan. The profit sharing and retirement contributions charged to operations were $1,198,000 in 2014, $807,000 in 2013, and $771,000 in 2012.

The Company’s stock option and stock appreciation rights plans were approved by the Company’s shareholders on April 25, 1991, April 25, 1996, April 20, 2000, May 8, 2008 and May 23, 2013. The number of shares of common stock that may be granted pursuant to the 1991 and 1996 plans shall not exceed 198,000 shares for each plan, pursuant to the 2000 plan shall not exceed 264,000 shares, pursuant to the 2008 plan shall not exceed 300,000 shares, and pursuant to the 2013 plan shall not exceed 1,300,000 shares. The Company has granted options and stock appreciation rights (“SSARs”) on 166,000, 187,000, and 158,000 shares for the 1991, 1996, and 2000 plans, respectively, through December 31, 2014; no options or SSARs have been granted under the 2008 plan and  462,000 shares have been granted under the 2013 plan. Under the 2008 plan the Company issued 229,000 of restricted stock awards at $7.10 per share during 2011 and 15,000 of restricted stock awards at $8.10 per share during 2012. Under the 2013 plan, the Company issued 195,000 of restricted stock units at $11.00 per share during 2013 and 28,000 of restricted stock units at $10.19 per share during 2014. The restricted stock units allow the grantee to earn 0-160 percent of the target award as determined by two criteria, the Company’s after-tax earnings and its classified assets ratio. Any restricted stock units that become eligible for vesting pursuant to the performance requirements will vest by one-third on each of the first, second and third anniversaries of the last day of the performance period, December 31, 2016, 2017 and 2018, respectively. If the Company does not achieve the target performance goal for both criteria by December 31, 2015, then none of the restricted stock units will vest and they will be forfeited. Under the plans, the options, stock awards, SSARs or restricted stock units’ exercise price equals the common stock’s market price on the date of the grant. All options or SSARs issued after December 31, 2002 have a vesting period of three to five years and a contractual life of ten years. All stock awards and restricted stock units have a contractual life of three or five years. To the extent the Company has treasury shares available, stock options exercised or stock grants awarded may be issued from treasury shares or, if treasury shares are insufficient, the Company can issue new shares. The Company has a single share repurchase program in place, approved on September 18, 2001, authorizing the repurchase of up to 165,000 shares. On May 20, 2014 the Company authorized an additional 250,000 shares for the repurchase program; the maximum number of shares that may yet be purchased under these programs is 237,000.

The Company granted stock options totaling 413,000 shares in 2014 and 49,000 shares in 2013 at weighted average fair value per share of $2.26 and $3.10, respectively, but did not grant any stock options or SSARs in 2012. Stock option fair value is measured on the date of grant using the Black-Scholes option pricing model with market assumptions. Option pricing models require the use of highly subjective assumptions, including expected price volatility, which when changed can materially affect fair value estimates. Accordingly, the model does not necessarily provide a reliable single measure of the fair value of the Company’s stock options or SSARs. The more significant assumptions used in estimating the fair value of stock options granted in 2014 include: a weighted average risk-free interest rate of 2.7 percent; no dividends; weighted average expected life of 5 years; and a weighted average volatility of the Company’s common stock of 17.0 percent. The 2014 estimated fair value of stock options was not reduced by an estimate of forfeiture experience due to the relatively small pool of stock option recipients and short vesting terms.

The following table presents a summary of stock option and SSARs activity for the years ended December 31, 2014, 2013 and 2012:

	Number of Shares		Option or SSAR Exercise Price Per Share		Weighted Average Exercise Price		Aggregate Intrinsic Value
Dec. 31, 2011		107,000		85.40 – 136.80		107.10		0
Granted		0		0		0
Exercised		0		0		0
Expired		0		0		0
Cancelled		(20,000)		85.40 – 133.60		113.30
Dec. 31, 2012		87,000		85.40 – 136.80		105.60		0
Granted		49,000		11.00		11.00
Exercised		0		0		0
Expired		(28,000)		85.40		85.40
Cancelled		(6,000)		111.10 – 136.80		113.57
Dec. 31, 2013		102,000		11.00 – 133.60		65.10		0
Granted		413,000		10.54 – 10.97		10.67
Exercised		0		0		0
Expired		(11,500)		112.00		112.00
Cancelled		(10,500)		11.00 – 133.60		50.55
Dec. 31, 2014		493,000		10.54 – 133.60		18.72		0

No stock options were exercised during 2014. No windfall tax benefits were realized from the exercise of stock options and no cash was utilized to settle equity instruments granted under stock option awards.

The following table summarizes information about stock options outstanding and exercisable at December 31, 2014:

Options / SSARs Outstanding				Options / SSARs Exercisable (Vested)
Number of Shares Outstanding		Weighted Average Remaining Contractual Life in Years		Number of Shares Exercisable		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life in Years		Aggregate Intrinsic Value
	493,000		8.62		101,000	$	49.73		6.49	$	188,000

At December 31, 2014, non-vested stock options after adjusting for potential forfeiture experience outstanding at December 31, 2014, are as follows:

Number of Non-Vested Stock Options		Weighted Average Remaining Contractual Life In Years		Weighted Average Fair Value		Remaining Unrecognized Compensation Cost		Weighted Average Remaining Recognition Period in Years
	392,000		9.17	$	2.32	$	774,244		2.34

Since December 31, 2013, restricted stock awards of 131,000 shares were issued, 120,000 awards have vested and 9,000 awards were cancelled. Non-vested restricted stock awards totaling 170,000 shares were outstanding at December 31, 2014, 2,000 more than at December 31, 2013, and are as follows:

Number of Non-Vested Restricted Stock Award Shares	Remaining Unrecognized Compensation Cost		Weighted Average Remaining Recognition Period in Years
170,000	$	1,114,000		2.85

During 2014, restricted stock units totaling 28,000 were issued, none were vested and 14,000 were cancelled. Non-vested restricted stock units totaling 191,000 were outstanding at December 31, 2014, and are as follows:

Number of Non-Vested Restricted Stock Units	Remaining Unrecognized Compensation Cost		Weighted Average Remaining Recognition Period in Years
191,000	$	1,929,000		4.00

In 2014, 2013 and 2012 the Company recognized $1,299,000 ($798,000 after tax), $246,000 ($151,000 after tax) and $796,000 ($489,000 after tax), respectively of non-cash compensation expense.

No cash was utilized to settle equity instruments granted under restricted stock awards. No compensation cost has been capitalized and no significant modifications have occurred with regard to the contractual terms for stock options, SSARs or restricted stock awards.