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Eagle Bancorp 10-Q 2009
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)
( X )              QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
  OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2009

OR

(   )              TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                   to_________

Commission File Number 0-25923

Eagle Bancorp, Inc.
(Exact name of registrant as specified in its charter)

Maryland
52-2061461
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)

7815 Woodmont Avenue, Bethesda, Maryland
20814
     (Address of principal executive offices)
(Zip Code)
 
(301) 986-1800
(Registrant's telephone number, including area code)
 
N/A
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes [x]    No  [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [x]    No  [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  [ ]
Accelerated filer  [x]
Non-accelerated filer  [ ]
Smaller Reporting Company  [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act
Yes [ ]    No [x]

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

As of November 5, 2009, the registrant had 19,514,154 shares of Common Stock outstanding.

 
1

 
EAGLE BANCORP, INC.
TABLE OF CONTENTS

PART I.
FINANCIAL INFORMATION
   
       
   
     
     
     
     
     
       
   
     
     
     
       
   
       
   
       
PART II.
OTHER INFORMATION
   
       
   
       
   
       
   
       
   
       
   
       
   
       
   
       
     

 
 
2

 
Item 1 – Financial Statements

EAGLE BANCORP, INC.
September 30, 2009 and December 31, 2008
(dollars in thousands, except per share data)
 
   
September 30,
   
December 31,
 
   
2009
   
2008
 
Assets
 
(Unaudited)
   
(Audited)
 
Cash and due from banks
  $ 21,253     $ 27,157  
Federal funds sold
    83,002       191  
Interest bearing deposits with banks and other short-term investments
    7,433       2,489  
Investment securities available for sale, at fair value
    219,652       169,079  
Loans held for sale
    1,068       2,718  
Loans
    1,317,089       1,265,640  
Less allowance for credit losses
    (19,929 )     (18,403 )
Loans, net
    1,297,160       1,247,237  
Premises and equipment, net
    9,246       9,666  
Deferred income taxes
    11,011       11,106  
Bank owned life insurance
    12,797       12,450  
Intangible assets, net
    4,447       2,533  
Other real estate owned
    4,581       909  
Other assets
    11,123       11,292  
           Total Assets
  $ 1,682,773     $ 1,496,827  
                 
Liabilities
               
Deposits:
               
Noninterest bearing demand
  $ 233,994     $ 223,580  
Interest bearing transaction
    55,513       54,801  
Savings and money market
    475,138       271,791  
Time, $100,000 or more
    299,171       249,516  
Other time
    268,186       329,692  
Total deposits
    1,332,002       1,129,380  
Customer repurchase agreements
               
and federal funds purchased
    79,301       98,802  
Other short-term borrowings
    30,000       55,000  
Long-term borrowings
    29,300       62,150  
Other liabilities
    10,654       9,124  
Total Liabilities
    1,481,257       1,354,456  
                 
Stockholders' Equity
               
Preferred stock, par value $.01 per share, shares authorized
         
1,000,000, Series A, $1,000 per share liquidation preference,
         
shares issued and outstanding 38,235 and 38,235 respectively,
         
discount of $696 and $1,892, respectively, net
    37,487       36,312  
Common stock, $.01 par value; shares authorized 50,000,000, shares
         
issued and outstanding  19,505,339 (2009) and 12,714,355 (2008)
    195       127  
Warrants
    946       1,892  
Additional paid in capital
    128,977       76,822  
Retained earnings
    30,756       24,866  
Accumulated other comprehensive income
    3,155       2,352  
Total Stockholders' Equity
    201,516       142,371  
Total Liabilities and Stockholders' Equity
  $ 1,682,773     $ 1,496,827  
 
See notes to consolidated financial statements.

 
3

 
EAGLE BANCORP, INC.>
For the Nine and Three Month Periods Ended September 30, 2009 and 2008 (Unaudited)
 (dollars in thousands, except per share data)
 
   
Nine Months Ended
   
Three Months Ended
 
   
September 30,
   
September 30,
 
Interest Income
 
2009
   
2008
   
2009
   
2008
 
Interest and fees on loans
  $ 56,427     $ 41,098     $ 19,744     $ 15,274  
Interest and dividends on investment securities
    5,391       3,492       1,623       1,365  
Interest on balances with other banks and short-term investments
    56       -       19       -  
Interest on federal funds sold
    51       163       40       105  
Total interest income
    61,925       44,753       21,426       16,744  
Interest Expense
                               
Interest on deposits
    16,090       13,130       5,481       4,794  
Interest on customer repurchase agreements and
                               
federal funds purchased
    774       1,019       200       324  
Interest on other short-term borrowings
    428       381       270       83  
Interest on long-term borrowings
    1,832       1,466       457       628  
Total interest expense
    19,124       15,996       6,408       5,829  
Net Interest Income
    42,801       28,757       15,018       10,915  
Provision for Credit Losses
    5,141       2,529       1,857       995  
Net Interest Income After Provision For Credit Losses
    37,660       26,228       13,161       9,920  
                                 
Noninterest Income
                               
Service charges on deposits
    2,182       1,293       727       530  
Gain on sale of loans
    950       406       292       127  
Gain on sale of investment securities
    1,537       55       -       45  
Increase in the cash surrender value of bank owned life insurance
    348       350       118       117  
Other income
    1,004       1,001       349       376  
Total noninterest income
    6,021       3,105       1,486       1,195  
Noninterest Expense
                               
Salaries and employee benefits
    15,477       11,458       5,128       4,172  
Premises and equipment expenses
    5,500       3,563       1,798       1,380  
Marketing and advertising
    785       320       228       125  
Data processing
    1,780       1,153       658       411  
Legal, accounting and professional fees
    2,041       656       664       248  
FDIC insurance premiums
    2,465       399       550       152  
Other expenses
    4,098       2,761       1,254       1,082  
Total noninterest expense
    32,146       20,310       10,280       7,570  
Income Before Income Tax Expense
    11,535       9,023       4,367       3,545  
Income Tax Expense
    4,067       3,256       1,625       1,284  
Net Income
    7,468       5,767       2,742       2,261  
Preferred Stock Dividends and Discount Accretion
    1,767       -       595       -  
Net Income Available to Common Stockholders
  $ 5,701     $ 5,767     $ 2,147     $ 2,261  
                                 
Earnings Per Common Share
                               
Basic
  $ 0.44     $ 0.53     $ 0.16     $ 0.20  
Diluted
  $ 0.43     $ 0.52     $ 0.15     $ 0.19  
Dividends Declared Per Common Share
  $ -     $ 0.1091     $ -     $ -  
 
See notes to consolidated financial statements.

 
4

 
For the Nine Month Periods Ended September 30, 2009 and 2008 (Unaudited)
 (dollars in thousands, except per share data)
 
   
2009
   
2008
 
Cash Flows From Operating Activities
           
Net income
  $ 7,468     $ 5,767  
Adjustments to reconcile net income to net cash
         
provided by operating activities
               
Provision for credit losses
    5,141       2,529  
Depreciation and amortization
    1,706       1,101  
Gains on sale of loans
    (950 )     (406 )
Origination of loans held for sale
    (78,827 )     (27,449 )
Proceeds from sale of loans held for sale
    81,427       27,188  
Increase in cash surrender value of BOLI
    (348 )     (350 )
Gain on sale of investment securities
    (1,537 )     (55 )
Gain on sale of other real estate owned
    (64 )     -  
Stock-based compensation expense
    427       232  
Excess tax benefit from exercise of non-qualified stock options
    (24 )     (195 )
Increase in other assets
    (5,521 )     (13,381 )
Increase in other liabilities
    1,554       17,230  
Net cash provided by operating activities
    10,452       12,211  
                 
Cash Flows From Investing Activities
               
Increase in interest bearing deposits with other banks
         
and short term investments
    (4,944 )     (2,468 )
Purchases of available for sale investment securities
    (143,525 )     (62,378 )
Proceeds from maturities and principal payments
         
of available for sale securities
    45,169       12,193  
Proceeds from sale/call of available for sale securities
    49,320       19,925  
Net increase in loans
    (55,064 )     (96,354 )
Net cash received in acquisition
    -       10,885  
Proceeds from the sale of other real estate owned
    907          
Bank premises and equipment acquired
    (1,147 )     (968 )
Net cash used in investing activities
    (109,284 )     (119,165 )
                 
Cash Flows From Financing Activities
               
Increase in deposits
    202,622       119,696  
Decrease in customer repurchase agreements and
         
federal funds purchased
    (19,501 )     (19,490 )
Decrease in other short-term borrowings
    (25,000 )     (16,100 )
(Decrease) increase in long-term borrowings
    (32,850 )     46,150  
Payment of dividends on preferred stock
    (1,328 )     -  
Issuance of common stock
    51,772       1,149  
Excess tax benefit from exercise of non-qualified stock options
    24       195  
Payment of dividends and payment in lieu of fractional shares
    -       (1,178 )
Net cash provided by financing activities
    175,739       130,422  
                 
Net Increase In Cash And Due From Banks
    76,907       23,468  
                 
Cash And Due From Banks At Beginning Of Period
    27,348       15,652  
                 
Cash and Due from Banks At End Of Period
  $ 104,255     $ 39,120  
                 
Supplemental Cash Flows Information
               
Interest paid
  $ 20,037     $ 15,802  
Income taxes paid
  $ 5,515     $ 4,761  
Stock issued for acquisition of Fidelity
  $ -     $ 13,330  
Non-Cash Investing Activities
               
Transfers from loans to other real estate owned
  $ 6,122     $ 65  
 
See notes to consolidated financial statements.
 
 
5

 
EAGLE BANCORP, INC.
For the Nine Month Periods Ended September 30, 2009 and 2008 (Unaudited)
 (dollars in thousands, except per share data)

                                 
Accumulated
       
                      Additional          
Other
   
Total
 
   
Preferred
 
Common
         
Paid
   
Retained
   
Comprehensive
   
Stockholders'
 
   
Stock
   
Stock
   
Warrants
   
in Capital
   
Earnings
   
Income (Loss)
   
Equity
 
Balance, January 1, 2009
  $ 36,312     $ 127     $ 1,892     $ 76,822     $ 24,866     $ 2,352     $ 142,371  
Comprehensive Income
                                                       
Net Income
                                    7,468               7,468  
Other comprehensive income:
                                                       
Unrealized gain on securities available
for sale (net of taxes)
                                    1,787       1,787  
Less: reclassification adjustment for gains
net of taxes of $553 included in net income
                      (984 )     (984 )
Total Comprehensive Income
                         
 
                      8,271  
Preferred stock dividends  ($34.73 per share)
                                    (1,328 )             (1,328 )
Stock-based compensation
                            427                       427  
Shares issued under the capital offering -
                                                       
6,731,640 shares, net of issuance costs of $3,457
            68               51,674                       51,742  
Exercise of options for 9,759 shares of common stock
                      30                       30  
Tax benefit on non-qualified options exercise
                            24                       24  
Preferred stock:
                                                       
Warrants reduced by 385,434 warrants
    946               (946 )                             -  
Issuance costs
    (21 )                                             (21 )
Discount accretion
    250                               (250 )             -  
Balance, September 30, 2009
  $ 37,487     $ 195     $ 946     $ 128,977     $ 30,756     $ 3,155     $ 201,516  
                                                         
Balance, January 1, 2008
  $ -     $ 97     $ -     $ 52,290     $ 28,195     $ 584     $ 81,166  
Comprehensive Income
                                                       
Net Income
                                    5,767               5,767  
Other comprehensive income:
                                                       
Unrealized gain on securities available
for sale (net of taxes)
                                    61       61  
Less: reclassification adjustment for gains
net of taxes of $22 included in net income
                      (33 )     (33 )
Total Comprehensive Income
                         
 
                      5,795  
Shares issued to effect merger with Fidelity -
                                                       
1,638,031 shares, net of issuance costs of $96
            16               13,218                       13,234  
Cash Dividend ($0.1091 per share)
                                    (1,178 )             (1,178 )
Shares issued under dividend reinvestment plan -
                                                       
76,246 shares
            1               806                       807  
10% Stock dividend declaration
                            9,561       (9,561 )             -  
Stock-based compensation
                            232                       232  
Exercise of options for 97,252 shares of common stock
    -       1       -       341                       342  
Tax benefit on non-qualified options exercise
                            195                       195  
Balance, September 30, 2008
  $ -     $ 115     $ -     $ 76,643     $ 23,223     $ 612     $ 100,593  

See notes to consolidated financial statements.

 
6

 
EAGLE BANCORP, INC.
For the Three and Nine Months Ended September 30, 2009 and 2008 (Unaudited)


1. BASIS OF PRESENTATION

The consolidated financial statements of Eagle Bancorp, Inc. (the “Company”) included herein are unaudited.  The consolidated financial statements reflect all adjustments, consisting only of normal recurring accruals that in the opinion of Management, are necessary to present fairly the results for the periods presented. The amounts as of and for the year ended December 31, 2008 were derived from audited consolidated financial statements. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. There have been no significant changes to the Company’s Accounting Policies as disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.  The Company believes that the disclosures are adequate to make the information presented not misleading. The results of operations for the three and nine months ended September 30, 2009 are not necessarily indicative of the results of operations to be expected for the remainder of the year, or for any other period. Certain reclassifications have been made to amounts previously reported to conform to the classifications made in 2009.

Management has evaluated subsequent events for potential recognition and/or disclosure through November 6, 2009, which is the date that the Company’s financial statements included in this Quarterly Report on Form 10-Q were issued.  No material subsequent events have occurred since September 30, 2009 that required recognition or disclosure in these financial statements.

2. NATURE OF OPERATIONS

The Company, through EagleBank, its bank subsidiary (the “Bank”), conducts a full service community banking business, primarily in Montgomery County, Maryland, Washington, D.C. and Fairfax County in Northern Virginia. On August 31, 2008, the Company completed the acquisition of Fidelity & Trust Financial Corporation (“Fidelity”) and Fidelity & Trust Bank (“F&T Bank”).  The primary financial services offered by the Bank include real estate, commercial and consumer lending, as well as traditional deposit and repurchase agreement products. The Bank is also active in the origination and sale of residential mortgage loans and the origination of small business loans. The guaranteed portion of small business loans is typically sold through the Small Business Administration, in a transaction apart from the loan’s origination. The Bank currently offers its products and services through thirteen banking offices and various electronic capabilities, including remote deposit services. Eagle Commercial Ventures, LLC (“ECV”), a direct subsidiary of the Company provides subordinated financing for the acquisition, development and construction of real estate projects, where the primary financing is provided by the Bank. Refer to Note 4 - Higher Risk Lending – Revenue Recognition below.

3. CASH FLOWS

For purposes of reporting cash flows, cash and cash equivalents include cash and due from banks, and federal funds sold (items with an original maturity of three months or less).

 
7

 
4. HIGHER RISK LENDING – REVENUE RECOGNITION

The Company has occasionally made higher risk acquisition, development, and construction (“ADC”) loans that entail higher risks than ADC loans made following normal underwriting practices (“higher risk loan transactions”). These higher risk loan transactions are made through the Company’s subsidiary, ECV. This activity is limited as to individual transaction amount and total exposure amounts based on capital levels and is carefully monitored. The loans are carried on the balance sheet at amounts outstanding and meet the loan classification requirements of the Accounting Standards Executive Committee (“AcSEC”) guidance reprinted from the CPA Letter, Special Supplement, dated February 10, 1986 (also referred to as Exhibit 1 to AcSEC Practice Bulletin No. 1). Additional interest earned on these higher risk loan transactions (as defined in the individual loan agreements) is recognized as realized under the provisions contained in  Exhibit 1 to AcSEC Practice Bulletin No.1 and Staff Accounting Bulletin (“SAB”) No. 101 (Revenue Recognition in Financial Statements). The additional interest is included as a component of noninterest income. The Bank had one higher risk lending transaction, amounting to $1.6 million and $1.8 million, outstanding as of September 30, 2009 and December 31, 2008, respectively.  There were no higher risk lending transactions in 2009

5. OTHER REAL ESTATE OWNED (OREO)

Assets acquired through loan foreclosure are held for sale and are initially recorded at the lower of cost or fair value less estimated selling costs when acquired, establishing a new cost basis. The new basis is supported by recent appraisals. Costs after acquisition are generally expensed. If the fair value of the asset declines, a write-down is recorded through noninterest expense. The valuation of foreclosed assets is subjective in nature and may be adjusted in the future because of changes in economic conditions or review by regulatory examiners.
 
6. INVESTMENT SECURITIES AVAILABLE FOR SALE

Amortized cost and estimated fair value of securities available for sale are summarized as follows:
 
         
Gross
   
Gross
   
Estimated
 
 
 
Amortized
   
Unrealized
   
Unrealized
   
Fair
 
September 30, 2009
 
Cost
   
Gains
   
Losses
   
Value
 
(dollars in thousands)
                       
U. S. Government agency securities
  $ 61,580     $ 550     $ 23     $ 62,107  
Mortgage backed securities - GSEs
    119,918       3,829       2       123,745  
Municipal bonds
    22,414       999       33       23,380  
Federal Reserve and Federal Home Loan Bank stock
    10,053       -       -       10,053  
Other equity investments
    396       -       29       367  
    $ 214,361     $ 5,378     $ 87     $ 219,652  
 
         
Gross
   
Gross
   
Estimated
 
 
 
Amortized
   
Unrealized
   
Unrealized
   
Fair
 
December 31, 2008
 
Cost
   
Gains
   
Losses
   
Value
 
(dollars in thousands)
                       
U. S. Government agency securities
  $ 71,837     $ 2,197     $ 5     $ 74,029  
Mortgage backed securities - GSEs
    77,242       2,559       31       79,770  
Municipal bonds
    5,061       -       353       4,708  
Federal Reserve and Federal Home Loan Bank stock
    9,599       -       -       9,599  
Other equity investments
    1,396       -       423       973  
    $ 165,135     $ 4,756     $ 812     $ 169,079  

 
8

 
Gross unrealized losses and fair value by length of time that the individual available for sale securities have been in a continuous unrealized loss position are as follows:
 
   
Less than
   
12 Months
             
   
12 Months
   
or Greater
   
Total
 
   
Estimated
         
Estimated
         
Estimated
       
 
 
Fair
   
Unrealized
   
Fair
   
Unrealized
   
Fair
   
Unrealized
 
September 30, 2009
 
Value
   
Losses
   
Value
   
Losses
   
Value
   
Losses
 
(dollars in thousands)
                                   
U. S. Government agency securities
  $ 16,799     $ 23     $ -     $ -     $ 16,799     $ 23  
Mortgage backed securities - GSEs
    946       2       -       -       946       2  
Municipal bonds
    2,294       33       -       -       2,294       33  
Other equity investments
    149       29       -       -       149       29  
    $ 20,188     $ 87     $ -     $ -     $ 20,188     $ 87  
 
   
Less than
   
12 Months
             
   
12 Months
   
or Greater
   
Total
 
   
Estimated
         
Estimated
         
Estimated
       
 
 
Fair
   
Unrealized
   
Fair
   
Unrealized
   
Fair
   
Unrealized
 
December 31, 2008
 
Value
   
Losses
   
Value
   
Losses
   
Value
   
Losses
 
(dollars in thousands)
                                   
U. S. Government agency securities
  $ 4,480     $ 5     $ -     $ -     $ 4,480     $ 5  
Mortgage backed securities - GSEs
    7,715       31       -       -       7,715       31  
Municipal bonds
    4,707       353       -       -       4,707       353  
Other equity investments
    576       423       -       -       576       423  
    $ 17,478     $ 812     $ -     $ -     $ 17,478     $ 812  
 
The unrealized losses that exist are generally the result of changes in market interest rates and spread relationships since original purchases. The weighted average duration of debt securities, which comprise 95% of total investment securities, is relatively short at 3.2 years. The Company does not believe that the investment securities that were in an unrealized loss position as of September 30, 2009 represent an other-than-temporary impairment.  Total gross unrealized losses were primarily attributed to changes in market interest rates since the original purchases, and not due to the credit quality of the investment securities.  The Company does not intend to sell the investments and it is more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity.

The amortized cost and estimated fair value of investments available for sale at September 30, 2009 by contractual maturity are shown in the table below.  Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

 
9

 
   
Available-for-Sale
 
   
Amortized
   
Estimated
 
(dollars in thousands)
 
Cost
   
Fair Value
 
Amounts maturing
           
U. S. Government agency securities maturing:
           
   One year or less
  $ 5,000     $ 5,064  
   After one year through five years
    56,580       57,043  
Mortgage backed securities - GSEs
    119,918       123,745  
Municipal bonds maturing:
               
   Five years through ten years
    3,030       3,112  
   After ten years
    19,384       20,268  
FRB, FHLB and  other equity securities
    10,449       10,420  
    $ 214,361     $ 219,652  
 
The carrying value of securities pledged as collateral for certain government deposits, securities sold under agreement to repurchase, and certain lines of credit with correspondent banks at September 30, 2009 was $181 million. As of September 30, 2009 and December 31, 2008, there were no holdings of securities of any one issuer, other than the U.S. Government and U.S. Government agency securities that exceeded ten percent of stockholders’ equity.

7. EARNINGS PER SHARE

The calculation of net income per common share for the nine and three months ended September 30 was as follows:
 
   
Nine Months Ended
   
Three Months Ended
 
   
September 30,
   
September 30,
 
(dollars and shares in thousands)
 
2009
   
2008
   
2009
   
2008
 
Basic
                       
Net income available to common stockholders
  $ 5,701     $ 5,767     $ 2,147     $ 2,261  
Average common shares outstanding
    12,999       11,021       13,505       11,482  
Basic net income per common  share
  $ 0.44     $ 0.53     $ 0.16     $ 0.20  
                                 
Diluted
                               
Net income available to common stockholders
  $ 5,701     $ 5,767     $ 2,147     $ 2,261  
Average common shares outstanding
    12,999       11,021       13,505       11,482  
Adjustment for common share equivalents
    113       139       290       94  
Average common shares outstanding-diluted
    13,112       11,160       13,795       11,576  
Diluted net income per common share
  $ 0.43     $ 0.52     $ 0.15     $ 0.19  
 
Per share amounts and the number of outstanding shares have been adjusted to give effect to the 10% common stock dividend paid on October 1, 2008.
 
10

 
8. STOCK-BASED COMPENSATION
 
The Company maintains the 1998 Stock Option Plan (“1998 Plan”) and the 2006 Stock Plan (“2006 Plan”). No additional options may be granted under the 1998 Plan.

The 2006 Plan provides for the issuance of awards of incentive options, nonqualifying options, restricted stock and stock appreciation rights to selected key employees and members of the Board. The 2006 Plan authorized shares were increased from 715,000 to 1,215,000 on May 21, 2009 by approval of an amendment to the plan by the stockholders. Option awards were made with an exercise price equal to the average of the high and low price of the Company’s shares at the date of grant.

In January 2009, the Company awarded options to purchase 315,437 shares of common stock and 30,763 shares of restricted stock to employees, senior officers and to a Director. Of the total options awarded, 263,700 have a ten-year term and vest in five substantially equal installments beginning on the first year anniversary of the date of grant. The remaining options have a ten-year term and vest over a four-year period beginning on the seventh year anniversary of the date of grant. The restricted stock is service based, which vest in five substantially equal installments beginning on the first year anniversary of the date of grant. The restricted stock is being recognized as compensation expense over a five-year period based on the market value of shares at the date of grant.
 
In April 2009, the Company awarded options to purchase 1,500 shares to an employee under the 2006 Plan which have a ten-year term and vest in five substantially equal installments on the first through fifth anniversaries of the date of grant.

In June 2009, the Company awarded 18,822 shares of restricted stock to eighteen nonemployee Directors of the Company and Bank. The restricted stock vests in three substantially equal installments beginning on the first year anniversary of the date of grant. The restricted stock is being recognized as compensation expense over a three-year period based on the market value of shares at the date of grant.

In August 2009, the Company awarded options to purchase 5,000 shares to an employee under the 2006 Plan which have a five-year term and vest in four substantially equal installments on the first through fourth anniversaries of the date of grant.

In September 2009, the Company awarded options to purchase 3,000 shares to an employee under the 2006 Plan which have a five-year term and vest in three substantially equal installments on the date of grant, and the first and second anniversaries of the date of grant.

 The fair value of each option grant and other equity based award is estimated on the date of grant using the Black-Scholes option pricing model with the assumptions shown in the table below used for grants during the nine months ended September 30, 2009 and the twelve months ended December 31, 2008 and 2007.

Below is a summary of changes in shares under option plans (split adjusted) for the nine months ended September 30, 2009. The information excludes restricted stock awards.

 
11

 
                     
Weighted-Average
 
Weighted-Average
 
Aggregate
 
               
Weighted-Average
 
Remaining
 
Grant Date
 
Intrinsic
 
As of 1/1/2009
   
Stock Options
   
Exercise Price
 
Contractual Life
 
Fair Value
   
Value
 
Outstanding
          1,028,580     $ 13.01       -     $ 2.57       -  
Vested
          799,884       13.05       -       2.43       -  
Nonvested
          228,696       12.86       -       3.07       -  
                                               
Period Activity
                                         
Issued
          324,937     $ 6.41       -     $ 2.04       -  
Exercised
          9,759       3.07       -       1.36       -  
Forfeited
          7,792       8.40       -       2.22       -  
Expired
          36,937       20.70       -       0.96       -  
                                               
As of 9/30/2009
                                         
Outstanding
      1,299,029     $ 11.24       5.18     $ 2.50     $ 2,001,988  
Vested
          832,746       12.75       3.76       2.51       967,093  
Nonvested
          466,283       8.55       7.72       2.46       1,034,896  
                                               
                                               
                                               
Outstanding:
                   
Weighted-Average
               
Range of
       
Stock Options
   
Weighted-Average
 
Remaining
               
Exercise Prices
   
Outstanding
   
Exercise Price
 
Contractual Life
               
$2.98      -
  $ 8.10       546,175     $ 5.94       6.18                  
$8.11      -
  $ 11.07       254,190       10.21       4.70                  
$11.08    -
  $ 15.43       247,209       13.01       3.83                  
$15.44    -
  $ 26.86       251,455       22.08       4.82                  
              1,299,029       11.24       5.18                  
                                                 
Exercisable:
                                         
Range of
   
Stock Options
   
Weighted-Average
                       
Exercise Prices
   
Outstanding
   
Exercise Price
                       
$2.98      -
  $ 8.10       222,061     $ 5.27                          
$8.11      -
  $ 11.07       246,188       10.24                          
$11.08    -
  $ 15.43       133,354       12.91                          
$15.44    -
  $ 26.86       231,143       22.52                          
              832,746       12.75