(7)	SHAREHOLDERS' EQUITY

Shares Repurchased and Retired

The Company from time to time may purchase its Common Stock on the open market or in privately negotiated transactions. During 2011, the Company, in 25 separate transactions repurchased a total of 28,426 shares of its Common Stock for total consideration of approximately $479,000 at prices ranging from $15.02 to $19.00 per share. During 2012, the Company, in 41 separate transactions repurchased a total of 37,787 shares of its Common Stock for total consideration of approximately $622,000 at prices ranging from $15.75 to $19.00 per share. During 2013, the Company did not purchase any shares of its Common Stock. As of December 31, 2013, approximately $891,000 of the previously authorized amount was available for these purchases.

Stock-Based Compensation Plans

At the Company’s June 2005 annual meeting of shareholders, the shareholders approved the 2005 Equity Incentive Plan (the “2005 Plan”). The 2005 Plan was amended at the June 2007 annual meeting of shareholders to reserve an additional 425,000 shares of Common Stock for issuance and was amended again at the June 2009 annual meeting of shareholders to reserve 625,000 additional shares of Common Stock for issuance. 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 this plan include attracting and retaining the best personnel and providing for additional performance incentives by providing employees with the opportunity to acquire Common Stock. As of December 31, 2013, there were 55,701 shares available for issuance under the 2005 Plan. The exercise price of the stock options issued under the 2005 Plan is equal to the market price, or market price plus 10% for shareholders who own greater than 10% of the Company, at the date of grant. These stock options expire seven years, or five years for shareholders who own greater than 10% of the Company, from the date of the grant and vest annually over a service period ranging from three to five years. The 2005 Plan is administered by a committee of two or more outside 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 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 December 31, 2013, there were 276,169 vested options and 206,664 unvested options outstanding under the 2005 Plan.

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

	For years ended December 31,
Valuation Assumptions	2011			2012			2013

Expected life ⁽¹⁾		3.0			5.1			5.0
Risk-free interest rate ⁽²⁾		1.25	%		0.88	%		0.90	%
Expected volatility ⁽³⁾		57	%		50	%		50	%
Expected dividend yield		4.46	%		4.91	%		5.05	%
Expected forfeiture ⁽⁴⁾		10.50	%		1.26	%		17.77	%

____________________________

⁽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 stock option activity as of December 31, 2011, 2012 and 2013, and changes during the years then ended, are presented below:

	Number of Options/ Warrants			Weighted-Average Exercise Price		Range of Exercise Prices		Weighted-Average Remaining Contractual Term (years)		Aggregate Intrinsic Value (thousands)
Balance at December 31, 2010		313,438		$	16.95	$	9.66 - $21.85		3.6	$	853
Granted		147,000		$	19.72	$	19.03 - $19.75
Exercised		(43,749	)	$	12.94	$	9.66 - $19.40
Canceled		(6,000	)	$	14.60	$	11.50 - $15.22

Balance at December 31, 2011		410,689		$	18.41	$	10.20 - $21.85		4	$	219
Granted		132,000		$	17.97	$	16.50 - $18.39
Exercised		(34,422	)	$	14.35	$	10.20 - $17.61
Canceled		(30,500	)	$	17.61	$	17.61 - $17.61

Balance at December 31, 2012		477,767		$	18.63	$	10.75 - $21.85		4.3	$	223
Granted		89,000		$	17.41	$	17.25 - $18.95
Exercised		(53,501	)	$	18.27	$	10.75 - $20.02
Canceled		(30,433	)	$	18.00	$	15.22 - $20.02

Balance at December 31, 2013		482,833		$	18.48	$	10.75 - $21.85		3.9	$	214

Exercisable at December 31, 2011		204,691		$	18.43	$	10.20 - $21.85		2.4	$	152

Exercisable at December 31, 2012		224,437		$	19.21	$	10.75 - $21.85		3.1	$	126

Exercisable at December 31, 2013		276,169		$	18.95	$	10.75 - $21.85		2.9	$	152

The weighted average grant date fair value of options granted was $5.98, $5.16 and $4.93 per option during the years ended December 31, 2011, 2012 and 2013, respectively. Net cash proceeds from the exercise of stock options during the years ended December 31, 2011, 2012 and 2013 were $0, $0 and $43,000, respectively. The associated income tax effect from stock options exercised during the years ended December 31, 2011, 2012 and 2013 was $19,000, ($18,000) and ($60,000), respectively. As of the date of exercise, the total intrinsic value of options exercised during the years ended December 31, 2011, 2012 and 2013 was $305,000, $142,000 and $165,000, respectively. As of December 31, 2013, there was approximately $500,000 of total unrecognized compensation expense related to non-vested stock options, which is expected to be recognized over a weighted average period of 2.12 years.

The following table summarizes information about the options outstanding at December 31, 2013:

		Options Outstanding						Options Exercisable
Range of Exercise Prices		Number of Options Outstanding at December 31, 2013		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Number of Options Exercisable at December 31, 2013		Weighted Average Exercise Price
$	8.74 — 10.92		10,000		0.2	$	10.75		10,000		10.75
	10.93 — 13.11		6,667		1.8		11.50		6,667		11.50
	13.12 — 15.29		21,000		1.1		15.22		8,000		15.22
	15.30 — 17.48		106,000		5.5		16.87		27,002		16.42
	17.49 — 19.66		132,000		5.4		18.32		55,333		18.47
	19.67 — 21.85		207,166		2.7		20.34		169,167		20.47

$	8.74 — 21.85		482,833		3.9	$	18.48		276,169	$	18.95