Quarterly report pursuant to Section 13 or 15(d)

EMPLOYEE AND DIRECTOR BENEFITS

v2.4.0.8
EMPLOYEE AND DIRECTOR BENEFITS
 3 Months Ended
Mar. 31, 2014
Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]  
EMPLOYEE AND DIRECTOR BENEFITS
NOTE 6 - EMPLOYEE AND DIRECTOR BENEFITS
 
Stock Options
 
At March 31, 2014, the Company had stock incentive plans as described below. The compensation cost that has been charged to earnings for the plans was approximately $1,020,000 and $259,000 for the three months ended March 31, 2014 and 2013. The Company recognized a non-routine expense of $703,000 as a result of an immaterial correction of its accounting for vested stock options previously granted to members of its advisory boards in the Dothan, Huntsville and Montgomery, Alabama markets. Such grants were historically accounted for under the provisions of Accounting Standards Codification (“ASC”) 718-10, Compensation – Stock Compensation, and now have been determined to be recognized as an expense of the fair value of such grants in accordance with the provisions of ASC 505-50, Equity-Based Payments to Non-Employees.
 
The Company’s 2005 Amended and Restated Stock Incentive Plan allows for the grant of stock options to purchase up to 1,025,000 shares of the Company’s common stock. The Company’s 2009 Stock Incentive Plan authorizes the grant of up to 425,000 shares and allows for the issuance of Stock Appreciation Rights, Restricted Stock, Stock Options, Non-stock Share Equivalents, Performance Shares or Performance Units. Both plans allow for the grant of incentive stock options and non-qualified stock options, and awards are generally granted with an exercise price equal to the estimated fair market value of the Company’s common stock at the date of grant. The maximum term of the options granted under the plans is ten years.
 
The Company has granted non-plan options to certain persons representing key business relationships to purchase up to an aggregate amount of 55,000 shares of the Company’s common stock at between $15.00 and $20.00 per share for ten years. These options are non-qualified and not part of either plan.
 
The Company estimates the fair value of each stock option award using a Black-Scholes-Merton valuation model which incorporates the assumptions noted in the following table. Expected volatilities are based on an index of southeastern United States publicly traded banks. The expected term for options granted is based on the short-cut method and represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods within the contractual life of the option is based on the U. S. Treasury yield curve in effect at the time of grant.
 
 
 
2014
 
 
2013
 
Expected volatility
 
 
19.25
%
 
 
18.50
%
Expected dividends
 
 
1.45
%
 
 
-
%
Expected term (in years)
 
 
8 years
 
 
 
7 years
 
Risk-free rate
 
 
2.33
%
 
 
1.39
%
 
The weighted average grant-date fair value of options granted during the three months ended March 31, 2014 and March 31, 2013 was $8.86 and $8.03, respectively.
 
The following table summarizes stock option activity during the three months ended March 31, 2014 and March 31, 2013:
 
 
 
 
 
 
 
 
 
Weighted
 
 
 
 
 
 
 
 
 
Weighted
 
Average
 
 
 
 
 
 
 
 
 
Average
 
Remaining
 
 
 
 
 
 
 
 
 
Exercise
 
Contractual
 
Aggregate
 
 
 
Shares
 
Price
 
Term (years)
 
Intrinsic Value
 
 
 
 
 
 
 
 
 
 
 
 
(In Thousands)
 
Three Months Ended March 31, 2014:
 
 
 
 
 
 
 
 
 
 
 
 
 
Outstanding at January 1, 2014
 
 
776,300
 
$
23.08
 
 
5.5
 
$
14,300
 
Granted
 
 
38,000
 
 
41.50
 
 
9.9
 
 
-
 
Exercised
 
 
(174,800)
 
 
15.62
 
 
2.8
 
 
4,523
 
Forfeited
 
 
-
 
 
-
 
 
-
 
 
-
 
Outstanding at March 31, 2014
 
 
639,500
 
 
26.21
 
 
6.1
 
$
9,777
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Exercisable at March 31, 2014
 
 
243,744
 
$
15.99
 
 
3.4
 
$
6,217
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31, 2013:
 
 
 
 
 
 
 
 
 
 
 
 
 
Outstanding at January 1, 2013
 
 
816,500
 
$
20.87
 
 
5.8
 
$
9,905
 
Granted
 
 
25,000
 
 
33.00
 
 
10.0
 
 
-
 
Exercised
 
 
(9,000)
 
 
10.00
 
 
2.2
 
 
207
 
Forfeited
 
 
-
 
 
-
 
 
-
 
 
-
 
Outstanding at March 31, 2013
 
 
832,500
 
 
21.35
 
 
5.7
 
$
9,698
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Exercisable at March 31, 2013
 
 
458,995
 
$
14.37
 
 
3.5
 
$
8,550
 
 
As of March 31, 2014, outstanding stock options include 55,000 options granted to non-employees of the Company. 20,000 of these stock options were granted to the Company’s advisory board in its Dothan, Alabama market in February 2009 and were fully vested as of March 31, 2014. 35,000 of these options were granted to the Company’s advisory board in its Mobile, Alabama and Pensacola, Florida markets in December 2013 and vest on their fifth anniversary.
 
As of March 31, 2014, there was $1,711,000 of total unrecognized compensation cost related to non-vested stock options. The cost is expected to be recognized on the straight-line method over the next 2.1 years.
 
Restricted Stock
 
The Company has issued 78,500 shares of restricted stock to certain employees. The value of restricted stock awards is determined to be the current value of the Company’s stock at the time of grant, and this total value will be recognized as compensation expense over the vesting period, which is five years from the date of grant. As of March 31, 2014, there was $1,299,000 of total unrecognized compensation expense. The expense is expected to be recognized evenly over the remaining 1.8 years of the restricted stock’s vesting period.
 
Stock Warrants
 
The Company granted warrants for 15,000 shares of common stock of the Company with an exercise price of $25 per share in the second quarter of 2009. These warrants were granted in connection with the issuance of the Company’s 8.25% Subordinated Note. All of these warrants were outstanding and fully vested as of March 31, 2014.