NOTE 14 – STOCK COMPENSATION EXPENSE

From time to time the Company grants stock options to its employees. The Company estimates the fair value of the options at the time they are granted to employees and expenses that fair value over the vesting period of the option grant. In 2002, the Company registered 500,000 shares of its common stock to be reserved for stock based incentive programs over the next 10 years (“the 2002 Plan”). In 2012, the Company registered another 500,000 shares of its common stock to be reserve for stock based incentive programs over the subsequent 10 years (“the 2012 Long-term Incentive Plan”).

On March 19, 2014, 46,300 incentive stock options were granted out of the 2012 Long Term Incentive Plan at an exercise price of $14.43, the closing market price of Premier’s common stock on the grant date. These options vest in three equal annual installments ending on March 19, 2017. On March 20, 2013, 52,900 incentive stock options were granted out of the 2012 Long Term Incentive Plan at an exercise price of $11.39, the closing market price of Premier’s common stock on the grant date. These options vest in three equal annual installments ending on March 20, 2016. On March 21, 2012, 105,700 incentive stock options were granted out of the 2002 Plan at an exercise price of $7.47, the closing market price of Premier on the grant date. These options vest in three equal annual installments ending on March 21, 2015.

The fair value of the Company's 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. The assumptions used in the Black-Scholes option-pricing model are as follows

	2014			2013			2012
Risk-free interest rate		2.78	%		1.96	%		2.31	%
Expected option life (yrs)		10.00			10.00			10.00
Expected stock price volatility		31.19	%		35.24	%		34.93	%
Dividend yield		3.33	%		3.86	%		2.68	%
Weighted average fair value of options granted during the year	$	3.74		$	2.85		$	2.34

The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield in effect at the time of the grant. The expected option life was estimated since there has been little option exercise history. The expected stock price volatility is based on historical volatilities of the Company’s common stock during the three-year period prior to the grant date. The dividend yield was estimated by annualizing the current quarterly dividend on the Company’s common stock at the time of the option grant or by using historical dividends and dividend yields during the time the Company was restricted from paying dividends by its primary regulator.

On April 16, 2014, 6,000 shares of Premier’s common stock were granted to Robert W. Walker as stock-based bonus compensation under the 2012 Long-term Incentive Plan. The fair value of the stock at the time of the grant was $14.20 per share based upon the closing price of Premier’s stock of the date of grant and $85 of stock-based compensation was recorded as a result.

Compensation expense of $248, $169, and $181 was recorded for the years ended December 31, 2014, 2013, and 2012, respectively. Stock-based compensation expense is recognized ratably over the requisite service period for all awards. Unrecognized stock-based compensation expense related to stock options totaled $108 at December 31, 2014. This unrecognized expense is expected to be recognized over the next 26 months based on the vesting periods of the options.

During the year ending December 31, 2014, 118,506 options were exercised while 78,584 options were exercised during the year ending December 31, 2013 and 25,550 options were exercised during the year ending December 31, 2012.

A summary of the Company’s stock option activity is as follows:

	----------2014----------					----------2013----------					----------2012----------
	Options			Weighted Average Exercise Price		Options			Weighted Average Exercise Price		Options			Weighted Average Exercise Price
Outstanding at beginning of year		354,281		$	9.84		392,366		$	9.24		350,949		$	9.69
Grants		46,300			14.43		52,900			11.39		105,700			7.47
Exercises		(118,506	)		8.86		(78,584	)		7.77		(25,550	)		7.52
Forfeitures or expired		(8,133	)		9.27		(12,401	)		7.90		(38,733	)		9.61
Outstanding at year-end		273,942		$	11.06		354,281		$	9.84		392,366		$	9.24

Exercisable at year-end		168,523		$	10.67		212,731		$	10.55		220,646		$	10.68
Weighted average remaining life		6.1					6.1					6.6

Options outstanding at year-end are expected to fully vest.

Additional information regarding stock options outstanding and exercisable at December 31, 2014 is provided in the following table:

	- - - - - - - - Outstanding - - - - - - - -						- - - - - - - - Currently Exercisable - - - - - - - -
Range of Exercise Prices	Number		Weighted Average Exercise Price		Aggregate Intrinsic Value		Number		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Aggregate Intrinsic Value

$6.50 to $10.00		114,482	$	7.56	$	919		86,623		6.2	$	7.58	$	693
$10.01 to $12.50		43,000		11.39		180		11,740		8.2		11.39		49
$12.51 to $15.00		92,960		13.98		149		46,660		2.6		13.53		96
$15.01 to $17.50		23,500		16.00		-		23,500		1.1		16.00		-
Outstanding at Dec 31, 2014		273,942		11.06	$	1,248		168,523		4.6		10.67	$	838