14. Stock plans:

The Company has a stock option plan covering non-employee directors and a stock incentive plan for certain officers and key employees. The plans are administered by a committee of the Board of Directors. The activity under the plans for each of the years in the three-year period ended December 31, 2013, is summarized as follows:


	2013					2012				2011
December 31	Options			Weighted Average Price		Options		Weighted Average Price		Options		Weighted Average Price
Outstanding, beginning of year		25,227		$	29.66		25,227	$	29.66		25,227	$	29.66
Options associated with merger		8,900			30.93
Granted
Exercised		(3,150	)		26.38
Forfeited		(150	)		27.50

Outstanding, end of year		30,827			30.37		25,227		29.66		25,227		29.66

Exercisable, end of year		30,827		$	30.37		25,227	$	29.66		25,227	$	29.66

The Company granted 13,636 stock appreciation rights “SAR” to an executive on January 3, 2006 at a strike price of $31.50 per share. The rights were fully vested as of January 2, 2011 and are expected to be settled in cash when exercised. The current assumptions in calculating the vesting rights fair value used an expected volatility of 14.55%, expected annual dividend yield of 4.54%, a risk-free interest rate of 0.72%, and an expected term of 0.5 years. The Company granted 11,591 SAR to an executive on February 29, 2008 at a strike price of $27.50 per share. The rights vest on a straight-line basis over a five year period and are expected to be settled in cash when exercised. The grant date fair value was computed assuming expected volatility of 22.21%, expected annual dividend yield of 4.00%, a risk-free interest rate of 3.53%, and an expected term of 7.50 years. The Company calculates the value of the vested rights using the Black-Scholes method and has recorded an expense of $34 in 2013, $2 in 2012 and $(2) in 2011. The Company acquired options issued by Peoples to certain employees on November 12, 2004 at a strike price of $34.10 per share and on October 3, 2005 at a strike price of $30.75 per share. All of the stock options are fully vested and the weighted-average remaining contractual life of the options outstanding was approximately 1.50 years at December 31, 2013.

The Long-Term Incentive Plan allows for named executive officers to be granted equity awards, the plan was a legacy plan of Penn Security Bank and Trust Company. Under the 2008 Long-Term Incentive Plan (“2008 Plan”), the Compensation Committee of the board of directors has broad authority with respect to awards granted under the 2008 Plan, including, without limitation, the authority to:

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Designate the individuals eligible to receive awards under the 2008 Plan.

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Determine the size, type and date of grant for individual awards, provided that awards approved by the Committee are not effective unless and until ratified by the board of directors.

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Interpret the 2008 Plan and award agreements issued with respect to individual participants.

Persons eligible to receive awards under the 2008 Plan include directors, officers, employees, consultants and other service providers of the Company and its subsidiaries, except that incentive stock option may be granted only to individuals who are employees on the date of grant.

There are 146,451 shares of the Company’s common stock available for grant as awards pursuant to the 2008 Plan, including existing awards.

The 2008 Plan authorizes grants of stock options, stock appreciation rights, dividend equivalents, performance awards, restricted stock and restricted stock units. There were restricted stock grants awarded with a total cost of $50, $300 and $55 during the years ended December 31, 2013, 2012 and 2011, respectively.

The activity related to restricted stock for each of the years ended December 31, 2013, 2012 and 2011 was as follows:


Year Ended December 31,	2013		2012		2011
Nonvested, January 1		15,425		4,883		2,936
Granted shares		1,820		10,542		1,947
Vested shares
Forfeited shares

Nonvested, December 31		17,245		15,425		4,883

Restricted stock granted to officers are fully vested after five years. The weighted average period over which these expenses will be recognized is approximately four years.

The Company began to expense the fair value of all-share based compensation over the requisite service periods commencing at grant date. The fair value of restricted stock is expensed on a straight-line basis. The Company classifies share-based compensation for employees within “salaries and employee benefits” on the Consolidated Statements of Income.

The Company recognized $25, $40 and $55 of compensation expense for stock awards granted in the years ended December 31, 2013, 2012 and 2011, respectively. As of December 31, 2013, the Company had $243 of unrecognized compensation expense associated with restricted stock awards.