STOCK-BASED COMPENSATION PLANS

3 Months Ended

Mar. 31, 2014

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.  The Company's shareholders have approved several amendments to the 2005 Plan to increase the number of authorized shares of Common Stock issuable under the 2005 Plan (i) from 300,000 shares to 425,000 shares in June 2007, (ii) from 425,000 shares to 625,000 shares in June 2009, and (iii) from 625,000 shares to 775,000 shares in June 2012. At the 2014 annual meeting of shareholders that will be held on June 5, 2014, the shareholders will vote on a proposal to increase the number of authorized shares of Common Stock issuable under the 2005 Plan from 775,000 shares to 1,025,000 shares.  The 2005 Plan provides for the grant of incentive stock options, restricted stock, restricted stock units and stock grants to eligible employees (including officers and employee-directors) and non-statutory stock options to eligible 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 eligible employees with the opportunity to acquire equity in the Company.  As of March 31, 2014, there were 75,701 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 March 31, 2014, there were 295,836 vested options and 156,997 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
	March 31,
Valuation Assumptions	2013			2014 (5)
Expected life (1)		5.0			-
Risk-free interest rate (2)		0.88	%		-
Expected volatility (3)		49	%		-
Expected dividend yield		5.03	%		-
Expected Forfeiture (4)		17.72	%		-

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⁽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.

⁽⁵⁾ The Company did not issue any options during the quarter ended March 31, 2014.

A summary of option activity as of March 31, 2014, and changes during the quarter 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 January 1, 2014		482,833		$	18.48	$	10.75 - $21.85		3.9	$	214
Exercised		(10,000	)	$	10.75	$	10.75 - $10.75
Cancelled		(20,000	)	$	20.82	$	17.25 - $21.85
Outstanding at March 31, 2014		452,833		$	18.55	$	11.50 - $21.00		3.9	$	227
Exercisable at March 31, 2014		295,836		$	18.85	$	11.50 - $21.00		3.0	$	147

The weighted average grant date fair values of options granted was $4.84 per share during the quarter ended March 31, 2013.  No options were granted during the quarter ended March 31, 2014.  Net cash proceeds from the exercise of stock options during the quarters ended March 31, 2014 and 2013 were $64,500 and $43,000, respectively.  The associated income tax effect from stock options exercised during the quarters ended March 31, 2014 and 2013 was approximately $6,000 and ($32,000), respectively.  As of the date of exercise, the total intrinsic values of options exercised during quarters ended March 31, 2014 and 2013 were $66,740 and $146,741, respectively. As of March 31, 2014, there was approximately $399,000 of total unrecognized compensation expense related to non-vested stock options, which is expected to be recognized over a weighted average period of 2.13 years.