Note 9. Share-based Compensation

6 Months Ended

Jun. 30, 2013

Notes

Note 9. Share-based Compensation

9.             Share-Based Compensation

Total share-based compensation expense was  $9,000 and $8,000 for the three months ended June 30, 2013 and 2012, respectively, and $17,000 and $16,000 for the six months ended June 30, 2013 and 2012, respectively.  Related tax benefits of $3,000 and $3,000 were recognized for the three months ended June 30, 2013 and 2012, respectively, and $6,000 and $6,000 for the six months ended June 30, 2013 and 2012, respectively.

Under the terms of the Company’s stock-based compensation plan, option exercise prices are equal to the quoted market price of the shares at the date of grant; option terms are ten years; and vesting periods range from three to four years.  The Company may also grant shares of restricted stock, stock appreciation rights and share-based performance awards.  Restricted shares are valued at the quoted market price of the shares at the date of grant, and have a three year vesting period.

Stock Options

The following table summarizes information regarding outstanding and exercisable options as of June 30, 2013:

		Outstanding		Exercisable
Number of options		222,285		202,284
Weighted average exercise price per share	$	11.46	$	11.95
Aggregate intrinsic value of options	$	62,000	$	53,000
Weighted average contractual term remaining		3.28 years		2.68 years

The Company’s stock option activity for the six months ended June 30, 2013 is as follows:

	No. of	Weighted
	Shares	Average
	Under	Exercise
	Option	Price
Balance, December 31, 2012	227,285	$	11.40
Expired	(18,334)		7.50
Granted	13,334		7.01
Balance, June 30, 2013	222,285	$	11.46

The fair value of an option award is estimated on the date of grant using the Black-Scholes option valuation model.  The weighted average grant-date fair-value of options granted during the six months ended June 30, 2013 was $4.04 per share.  No options were granted in 2012.  The assumptions set forth in the table below were used to value the stock options granted during the six months ended June 30, 2013:

		June 30,
		2013
Weighted-average risk-free interest rate		2.30%
Annual dividend rate per share	$	-
Weighted-average volatility factor of the Company's common stock		45.00
Weighted-average expected term of options		5 years

Compensation expense of $9,000 and $8,000 was recognized for the three months ended June 30, 2013 and 2012, respectively, and $17,000 and $16,000 for the six months ended June 30, 2013 and 2012, respectively, for the portion of the fair value of stock options vesting during that period.

As of June 30, 2013, there was approximately $84,000 of total unrecognized compensation expense related to non-vested options which will be recognized over the remaining requisite service periods.