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13. Employee Benefits
 12 Months Ended
Dec. 31, 2013
Employee Benefits and Share-based Compensation [Abstract]  
Employee Benefits

Retirement Plans:  We have defined contribution profit-sharing plans with 401(k) provisions covering substantially all employees.  Contributions to the plans are at the discretion of the Board of Directors.  Contributions made to the plans and charged to expense were $354,000, $331,000, and $313,000 for the years ended December 31, 2013, 2012, and 2011, respectively.

 

Employee Stock Ownership Plan:  We have an Employee Stock Ownership Plan (“ESOP”), which enables eligible employees to acquire shares of our common stock.  The cost of the ESOP is borne by us through annual contributions to an Employee Stock Ownership Trust in amounts determined by the Board of Directors.

 

 The expense recognized by us is based on cash contributed or committed to be contributed by us to the ESOP during the year.  Contributions to the ESOP for the years ended December 31, 2013, 2012 and 2011 were $173,000, $100,000, and $69,000 respectively.  Dividends paid by us to the ESOP are reported as a reduction to retained earnings.  The ESOP owned 321,781 and 304,781 shares of our common stock at December 31, 2013 and 2012, respectively, all of which were purchased at the prevailing market price and are considered outstanding for earnings per share computations.  The trustees of the Retirement Plans and ESOP are also members of our Board of Directors.

 

Supplemental Executive Retirement Plan:  In May 1999, Summit Community Bank entered into a non-qualified Supplemental Executive Retirement Plan (“SERP”) with certain senior officers, which provides participating officers with an income benefit payable at retirement age or death.  During 2000, Shenandoah Valley National Bank adopted a similar plan and during 2002, Summit Financial Group, Inc. adopted a similar plan.  The liabilities accrued for the SERP’s at December 31, 2013 and 2012 were $3.41 million and $2.95 million, respectively, which are included in other liabilities.  In addition, we purchased certain life insurance contracts to fund the liabilities arising under these plans.  At December 31, 2013 and 2012, the cash surrender value of these insurance contracts was $35.2 million and $29.2 million, respectively, and is included in other assets in the accompanying consolidated balance sheets.

 

Stock Option Plan:  The 2009 Officer Stock Option Plan was adopted by our shareholders in May 2009 and provides for the granting of stock options for up to 350,000 shares of common stock to our key officers.    Each option granted under the Plan vests according to a schedule designated at the grant date and has a term of no more than 10 years following the vesting date.  Also, the option price per share was not to be less than the fair market value of our common stock on the date of grant.  The 2009 Officer Stock Option Plan, which expires in May 2019, replaces the 1998 Officer Stock Option Plan (collectively the “Plans”) that expired in May 2008.

 

The fair value of our employee stock options granted is estimated at the date of grant using the Black-Scholes option-pricing model. This model requires the input of highly subjective assumptions, changes to which can materially affect the fair value estimate.  Additionally, there may be other factors that would otherwise have a significant effect on the value of employee stock options granted but are not considered by the model.  Because our employee stock options have characteristics significantly different from those of traded options and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options at the time of grant.  There were no options granted in 2013 or 2012.

 

We recognize compensation expense based on the estimated number of stock awards expected to actually vest, exclusive of the awards expected to be forfeited.  During 2011, 2012, and 2013, our stock compensation expense and related deferred taxes were insignificant.

 

 

 

 

A summary of activity in our Officer Stock Option Plans during 2011, 2012 and 2013 is as follows:

 

 

      Weighted-
      Average
      Exercise Price
  Options   (WAEP)
 Outstanding, December 31, 2010 317,180   $ 18.17
     Granted -     -
     Exercised -     -
     Forfeited -     -
     Expired -     -
 Outstanding, December 31, 2011 317,180   $ 18.17
     Granted -     -
     Exercised -     -
     Forfeited (44,680 )   -
     Expired (22,800 )   -
 Outstanding, December 31, 2012 249,700   $ 18.98
     Granted -     -
     Exercised (17,800 )   5.37
     Forfeited (1,750 )   19.69
     Expired (44,740 )   21.83
 Outstanding, December 31, 2013 185,410   $ 19.59
         
 Exercisable Options:        
    December 31, 2013 182,810   $ 19.82
    December 31, 2012 245,500   $ 19.24
    December 31, 2011 311,280   $ 18.44

 

 

Other information regarding options outstanding and exercisable at December 31, 2013 is as follows:

 

 

  Options Outstanding     Options Exercisable
          Wted. Avg.   Aggregate             Aggregate
          Remaining   Intrinsic             Intrinsic
Range of # of       Contractual   Value     # of       Value
exercise price shares   WAEP   Life (yrs)   (in thousands)     shares   WAEP   (in thousands)
$ 2.54 - $6.00 16,950   $ 4.69   3.78   $ 88     14,950   $ 4.98   $ 74
  6.01 - 10.00 23,160     9.07   3.23     20     22,560     9.14     17
  10.01 - 17.50 2,300     17.43   0.16     -     2,300     17.43     -
  17.51 - 20.00 38,500     17.80   3.00     -     38,500     8.00     -
  20.01 - 25.93 104,500     25.04   2.74     -     104,500     25.04     -
                                       
    185,410   $ 19.59       $ 108     182,810   $ 19.82   $ 91