Stock-Based Compensation

9 Months Ended

Sep. 30, 2013

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock-Based Compensation

Note 2. Stock-Based Compensation

Share-based compensation expense of $669,000 and $559,000 was recognized for the nine months ended September 30, 2013 and 2012, respectively. As of September 30, 2013, there was unrecognized compensation cost of $1.6 million related to unvested restricted stock; that cost is expected to be recognized over a weighted average period of approximately 2.9 years. Unrecognized compensation expense related to unvested stock options was approximately $138,000 as of September 30, 2013 and is expected to be recognized over a period of 2.5 years.

In the first nine months of 2013, the Company granted 104,182 shares of restricted stock at an average grant date fair value of $9.88 per share under the Company’s 2009 equity compensation program. These shares vest over a five year period. Compensation expense on these shares is expected to average approximately $206,000 per year for the next five years. In the first nine months of 2012, the Company granted 91,269 shares of restricted stock at a grant date fair value of $9.50 per share under the 2009 program. Compensation expense on these shares is expected to average approximately $173,000 per year over a five year period.

On May 31, 2013, the Company granted options to purchase 50,000 shares to two new non-employee directors of the Company at an exercise price of $9.91 per share under the 2009 program. Each director’s options are exercisable in five equal installments beginning at the date of grant and continuing on the next four anniversaries of the grant date. The fair value of these options were estimated using the Black-Scholes option pricing model with the following weighted average assumptions:

Risk-free interest rates		1.55	%
Expected dividend yield		2.82	%
Expected volatility		45.45	%
Expected lives (years)		7.00
Weighted average fair value of options granted	$	3.48

There were no grants of stock options in the first nine months of 2012.

The Company also assumed the outstanding options granted under Somerset Hills’ stock option plans at the time of merger. Based on the conversion ratio in the merger, the Company assumed options to purchase 376,372 shares of Lakeland stock in these plans at a weighted average exercise price of $6.65.

Option activity under the Company’s stock option plans is as follows:

						Weighted
						average
				Weighted		remaining
				average		contractual
	Number of			exercise		term		Aggregate
	shares			price		( in years)		intrinsic value
Outstanding, January 1, 2013		475,697		$	12.31			$	53,853
Issued		426,372			7.03
Exercised		(98,895	)		7.18
Forfeited		(7,826	)		12.93
Outstanding, September 30, 2013		795,348		$	10.11		2.88	$	1,504,444
Options exercisable at
September 30, 2013		749,835		$	10.14		2.49	$	1,434,088

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the Company’s closing stock price on the last trading day of the first nine months of 2013 and the exercise price, multiplied by the number of in-the-money options).

The aggregate intrinsic value of stock options exercised during the nine months ended September 30, 2013 was $391,000. Exercise of stock options during the first nine months of 2013 resulted in cash receipts of $709,000.

Information regarding the Company’s restricted stock (all unvested) and changes during the nine months ended September 30, 2013 is as follows:

				Weighted
	Number of			average
	shares			price
Outstanding, January 1, 2013		222,556		$	9.15
Granted		104,182			9.88
Vested		(65,782	)		8.60
Forfeited		(2,711	)		9.26
Outstanding, September 30, 2013		258,245		$	9.58