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Note 12 - Stock-Based Compensation

12 Months Ended

Dec. 31, 2013

Disclosure Text Block Supplement [Abstract]

Compensation and Employee Benefit Plans [Text Block]

12. STOCK-BASED COMPENSATION

The Company maintains a stock option plan under which incentive stock options and nonqualified stock options may be granted. On March 2, 2006, the Company’s Board of Director’s adopted, and stockholders later approved, the 2006 Stock Option Plan (the “2006 Plan”). The 2006 Plan replaced the expired 1995 Stock Option Plan which had 263,500 options remaining which were never issued. Under the 2006 Plan 750,000 shares were reserved for the issuance of stock options to directors, officers, key employees and others. The option exercise price under the 2006 Plan is the fair market value of the stock on the date the option is granted. The fair market value is determined by the average of the highest and lowest sales prices for a share of the Company’s common stock, on its primary exchange, on the same date that the option is granted.

Outstanding nonqualified stock options at December 31, 2013, must be exercised within either five or ten years from the date of grant. Nonqualified stock options granted to members of the Company’s Board of Directors vest immediately while nonqualified stock options issued to employees vest in increments of 20% each year. During 2013, nonqualified options for 35,000 shares were issued to members of the Company’s Board of Directors under the 2006 Plan at an option exercise price of $10.44 per share. At December 31, 2013, 366,000 shares were available for granting future options.

Also, during 2013 the Compensation Committee of the Board of Directors granted 9,500 restricted shares of the Company’s stock to certain key employees. This restricted stock award has a grant date fair value of $18.17, based on the closing price of the Company’s stock on the date of grant, and vests in increments of 20% each year.

In May 2012, the Company granted to certain key employees, 104,000 nonqualified stock options. The exercise price for these awards was fixed at the grant date and was equal to the fair market value of the stock on that date. These nonqualified stock options vest in increments of 20% each year.

In November 2010, the Company granted to certain key employees, 50,000 nonqualified stock options and 64,000 performance-based variable nonqualified stock options. The exercise price for these awards was fixed at the grant date and was equal to the fair market value of the stock on that date. The nonqualified stock options vest in increments of 20% each year. The performance-based nonqualified stock options were eligible to be earned in four quarterly installments and one annual installment with vesting to occur in increments of 20% each year for any options earned. In order to meet the performance criteria, certain quarterly and annual “operating ratio” results must have been achieved during 2011. During 2011, 4,442 performance-based variable nonqualified stock options were earned with vesting to begin during the third quarter of 2012. The remaining 59,558 performance-based variable nonqualified stock options expired as the related performance criteria was not met.

The grant date fair value of options vested during 2013, 2012 and 2011 was approximately $346,000, $268,000 and $162,000, respectively. No restricted shares vested during any of the years presented. Total pre-tax stock-based compensation expense, recognized in Salaries, wages and benefits was approximately $317,000 during 2013 and includes approximately $179,000 as a result of the increased annual grant of 5,000 shares to each non-employee director during 2013. The Company recognized a total income tax benefit of approximately $123,000 related to stock-based compensation expense during 2013. The recognition of stock-based compensation expense decreased diluted earnings per common share and basic earnings per common share by approximately $0.02 and $0.03, respectively during 2013. As of December 31, 2013, the Company had stock-based compensation plans with total unvested stock-based compensation expense of approximately $518,000 which is being amortized on a straight-line basis over the remaining vesting period. As a result, the Company expects to recognize approximately $156,000 in additional compensation expense related to unvested option awards during 2014, $151,000 in additional compensation expense related to unvested option awards during 2015, $120,000 in additional compensation expense related to unvested option awards during 2016, $62,000 in additional compensation expense related to unvested option awards during 2017 and $29,000 in additional compensation expense related to unvested option awards during 2018.

Total pre-tax stock-based compensation expense, recognized in Salaries, wages and benefits was approximately $352,000 during 2012 and included approximately $199,000 recognized as a result of the annual grant of 5,000 shares to each non-employee director during the first quarter of 2012. The Company recognized a total income tax benefit of approximately $139,000 related to stock-based compensation expense during 2012. The recognition of stock-based compensation expense decreased diluted and basic income per common share by approximately $0.02 during 2012. At December 31, 2012, the Company had stock-based compensation plans with total unvested stock-based compensation expense of approximately $749,000.

Total pre-tax stock-based compensation expense, recognized in Salaries, wages and benefits was approximately $164,000 during 2011 and included approximately $98,000 recognized as a result of the annual grant of 2,000 shares to each non-employee director during the first quarter of 2011. The Company recognized a total income tax benefit of approximately $80,000 related to stock-based compensation expense during 2011. The recognition of stock-based compensation expense increased diluted and basic loss per common share by approximately $0.01 during 2011. At December 31, 2011, the Company had stock-based compensation plans with total unvested stock-based compensation expense of approximately $272,000.

Transactions in stock options under these plans are summarized as follows:

	Shares Under Option			Weighted- Average Exercise Price

Outstanding—January 1, 2011:		251,500		$	15.86
Granted		16,000			11.75
Exercised		(5,000	)		3.84
Canceled		(81,558	)		14.35

Outstanding—December 31, 2011:		180,942		$	16.50
Granted		139,000			10.96
Exercised		(6,000	)		9.04
Canceled		(78,500	)		22.64

Outstanding—December 31, 2012:		235,442		$	11.38
Granted		35,000			10.44
Exercised		(7,257	)		10.94
Canceled		(99,087	)		11.71

Outstanding—December 31, 2013:		164,098		$	10.99
Options exercisable—December 31, 2013:		96,059		$	11.01

The fair value of the Company’s stock options was estimated at the date of grant using a Black-Scholes-Merton (“BSM”) option-pricing model using the following assumptions:

	2013		2012				2011

Dividend yield		0%			0%			0%
Volatility range		62.69%		57.88%	—	65.89%		65.81%
Risk-free rate range		0.61%		0.64%	—	1.09%		1.79%
Expected life (years)		4.3		4.2	—	6.5		4.3
Fair value of options (per share)		$5.13		$5.54	—	$6.06		$6.14

The Company does not anticipate paying any additional dividends in the foreseeable future. The estimated volatility is based on the historical volatility of our stock. The risk free rate for the periods within the expected life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The expected life of the options was calculated based on the historical exercise behavior.

Information related to the Company’s option activity as of December 31, 2013, and changes during the year then ended is presented below:

	Shares Under Option			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term		Aggregate Intrinsic Value*
				(per share)		(in years)
Outstanding at January 1, 2013		235,442		$	11.38
Granted		35,000			10.44
Exercised		(7,257	)		10.94
Canceled/forfeited/expired		(99,087	)		11.71
Outstanding at December 31, 2013		164,098		$	10.99		5.9	$	1,596,390

Fully vested and exercisable at December 31, 2013		96,059		$	11.01		4.3	$	932,357

___________________________
* The intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds the exercise price of the option. The per share market value of our common stock, as determined by the closing price on December 31, 2013, was $20.72.

The weighted-average grant-date fair value of options granted during the years 2013, 2012 and 2011 was $5.13, $5.96 and $6.14 per share, respectively. The weighted-average grant-date fair value of options either canceled, forfeited, or expired during the years 2013, 2012 and 2011 was $5.92, $8.88 and $6.43 per share, respectively.

The total intrinsic value of options exercised during the years ended December 31, 2013, 2012 and 2011, was approximately $53,000, $15,000 and $33,000, respectively.

A summary of the status of the Company’s nonvested options and restricted stock as of December 31, 2013 and changes during the year ended December 31, 2013, is presented below:

Stock Options:

	Number of Options			Weighted- Average Grant Date Fair Value

Nonvested at January 1, 2013		137,553		$	6.13
Granted		35,000			5.13
Canceled/forfeited/expired		(42,414	)		6.16
Vested		(62,100	)		5.56
Nonvested at December 31, 2013		68,039		$	6.11

Restricted Shares:

	Number of Options		Weighted- Average Grant Date Fair Value (1)

Nonvested at January 1, 2013		-	$	-
Granted		9,500		18.17
Canceled/forfeited/expired		-		-
Vested		-		-
Nonvested at December 31, 2013		9,500	$	18.17

(1)	The weighted-average grant date fair value was based on the closing price of the Company’s stock on the date of the grant.

The number, weighted average exercise price and weighted average remaining contractual life of options outstanding as of December 31, 2013 and the number and weighted average exercise price of options exercisable as of December 31, 2013 is as follows:

Exercise Price	Shares Under Outstanding Options		Weighted- Average Remaining Contractual Term		Shares Under Exercisable Options
			(in years)
$3.84		4,000		0.2		4,000
$10.44		25,000		4.2		25,000
$10.90		15,000		3.4		15,000
$10.90		67,000		8.4		11,800
$11.22		27,098		6.9		14,259
$11.54		8,000		3.2		8,000
$11.75		8,000		2.2		8,000
$14.32		10,000		1.2		10,000
		164,098		5.9		96,059

Cash received from option exercises totaled approximately $46,000, $54,000 and $19,000 during the years ended December 31, 2013, 2012 and 2011, respectively. The Company issues new shares upon option exercise.