STOCK-BASED COMPENSATION PLANS

6 Months Ended

Jun. 30, 2013

STOCK-BASED COMPENSATION PLANS [Abstract]

STOCK-BASED COMPENSATION PLANS

(4) STOCK-BASED COMPENSATION PLANS

The Company's shareholders approved the 2005 Equity Incentive Plan ("2005 Plan") in June 2005.  An amendment to the 2005 Plan was approved at the June 2009 annual meeting of shareholders to increase the number of authorized shares of Common Stock issuable under the 2005 Plan from 425,000 shares to 625,000 shares.  An additional amendment to the 2005 Plan was approved at the June 2012 annual meeting of shareholders to increase the number of authorized shares of Common Stock issuable under the 2005 Plan by 150,000 shares from 625,000 shares to 775,000 shares.  The 2005 Plan provides for the grant of incentive stock options, restricted stock, restricted stock units and stock grants to employees (including officers and employee-directors) and non-statutory stock options to employees, directors and consultants. The objectives of the 2005 Plan are to attract and retain the best personnel and provide for additional performance incentives by providing employees with the opportunity to acquire equity in the Company.  As of June 30, 2013, there were 45,868 shares available for issuance under the 2005 Plan.  The 2005 Plan is administered by a committee of two or more independent directors from the Company's Board of Directors (the "Committee"). The Committee determines the eligible individuals to whom awards under the 2005 Plan may be granted, as well as the time or times at which awards will be granted, the number of shares subject to awards to be granted to any eligible individual, the life of any award, and any other terms and conditions of the awards in addition to those contained in the 2005 Plan. As of June 30, 2013, there were 299,336 vested options and 213,997 unvested options under the 2005 Plan.

The Company uses the Black-Scholes option-pricing model to estimate the fair value of each option granted with the following weighted average assumptions:

	Quarters Ended						Six Months Ended
	June 30,						June 30,
Valuation Assumptions	2012			2013			2012			2013
Expected life (1)		5.19			5.00			5.11			5.00
Risk-free interest rate (2)		0.92	%		0.84	%		0.90	%		0.85	%
Expected volatility (3)		50	%		50	%		50	%		50	%
Expected dividend yield		4.87	%		5.08	%		4.83	%		5.07	%
Expected Forfeiture (4)		-			17.72	%		-			17.72	%

⁽¹⁾ The expected life, in years, of stock options is estimated based on historical experience.

⁽²⁾ The risk-free interest rate is based on U.S. Treasury bills whose term is consistent with the expected life of the stock options.

⁽³⁾ The expected volatility is estimated based on historical and current stock price data for the Company.

⁽⁴⁾ Forfeitures are estimated based on historical experience.

A summary of option activity as of June 30, 2013, and changes during the six months then ended, is presented below:

	Number of Options			Weighted- Average Exercise  Price		Range of Exercise Prices		Weighted- Average Remaining Contractual Term (years)		Aggregate Intrinsic Value (thousands)
Outstanding at December 31, 2012		477,767		$	18.63	$	10.75 - $21.85		4.3	$	223
Granted		80,000		$	17.34	$	17.25 - $17.50
Exercised		(32,834	)	$	17.88	$	10.75 - $20.02
Cancelled		(11,600	)	$	17.53	$	17.50 - $17.75
Outstanding at June 30, 2013		513,333		$	18.50	$	10.75 - $21.85		4.4	$	307
Exercisable at June 30, 2013		299,336		$	18.96	$	10.75 - $21.85		3.4	$	186

The weighted average grant date fair values of options granted were $4.89 per share and $5.30 per share during the six months ended June 30, 2013 and 2012, respectively.  Net cash proceeds from the exercise of stock options during the six months ended June 30, 2013 and 2012 were $43,000 and $0, respectively.  The associated income tax effect from stock options exercised during the six months ended June 30, 2013 and 2012 was approximately ($32,000) and $0, respectively.  As of the date of exercise, the total intrinsic values of options exercised during the six months ended June 30, 2013 and 2012 were $146,741 and $131,545, respectively. As of June 30, 2013, there was approximately $700,000 of total unrecognized compensation expense related to non-vested stock options, which is expected to be recognized over a weighted average period of 2.19 years.