14. Stock plans:

The Company has a stock plan (“Stock Plan”) covering non-employee directors and the 2008 long-term incentive plan (“2008 Plan”) for certain officers and key employees. The plans are administered by a committee of the Board of Directors. The activity for 25,227 stock appreciation rights (“SAR”) and 5,600 options under the Stock Plan for each of the years in the three-year period ended December 31, 2014, is summarized as follows:


	2014					2013					2012
December 31	Awards			Weighted Average Price		Awards			Weighted Average Price		Awards		Weighted Average Price
Outstanding, beginning of year		30,827		$	30.37		25,227		$	29.66		25,227	$	29.66
Associated with merger							8,900			30.93
Granted
Settled		(30,827	)	$	30.37		(3,150	)		26.38
Forfeited							(150	)		27.50

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

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

The Company granted 13,636 SAR to an executive on January 3, 2006 at a strike price of $31.53 per share. The rights were fully vested as of January 2, 2011 and were settled in cash when exercised in 2014. The assumptions in calculating the vesting rights fair value used an expected volatility of 26.83%, expected annual dividend yield of 2.42%, a risk-free interest rate of 0.90%, and an expected term of 1.75 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 vested on a straight-line basis over a five year period and were settled in cash when exercised in 2014. 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 recorded an expense of $395 in 2014, $34 in 2013 and $2 in 2012. In addition, the Company settled an additional 5,600 in options under the Stock Plan during 2014 for $83.

The 2008 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 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:

•

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

•

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.

•

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 129,207 shares of the Company’s common stock available for grant as awards pursuant to the 2008 Plan.

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 and $300 during the years ended December 31, 2013 and 2012, respectively. No restricted stock grants were awarded in 2014.

The activity related to restricted stock for each of the years ended December 31, 2014, 2013 and 2012 was as follows:


Year Ended December 31,	2014		2013		2012
Nonvested, January 1		17,245		15,425		4,883
Granted shares				1,820		10,542
Vested shares		2,936
Forfeited shares

Nonvested, December 31		14,309		17,245		15,425

The Company expenses the fair value of all-share based compensation over the requisite service period of five years commencing at grant date. The fair value of restricted stock is expensed on a straight-line basis. Restricted stock granted to officers cliff vest after five years. The Company classifies share-based compensation for employees within “salaries and employee benefits expense” on the Consolidated Statements of Income and Comprehensive Income.

The Company recognized $70, $25 and $40 of compensation expense for stock awards granted in the years ended December 31, 2014, 2013 and 2012, respectively. As of December 31, 2014, the Company had $173 of unrecognized compensation expense associated with restricted stock awards.