Note 8:

Stock-Based Compensation

On June 28, 2013, the Company registered a new stock-based compensation plan, which superseded all other plans in terms of the ability of the Company to grant stock-based compensation. There are 385,000 shares available for grant under this plan at June 30, 2013.

Stock-based compensation expense related to stock awards during the six-month periods ended June 30, 2013 and June 30, 2012 was $122,429 and $2,925, respectively. There was no unrecognized compensation expense related to stock options as of June 30, 2013. A total of 89,500 options were granted during the six months ended June 30, 2013. Compensation expense for stock options is the estimated fair value of options granted using the Black-Scholes Model amortized on a straight-line basis over the vesting period of the award. The fair value of options granted under the former 2003 Incentive Stock Option Plan and the former 2008 Non-Employee Directors Stock Option Plan during the six months ended June 30, 2013 was $1.08, respectively. The variables used in these calculations include the historical dividend yield of 3.6%, expected life of the options of five years, expected stock price volatility of 33.8%, and a risk-free interest rate of 0.86%, which is assumed to be the rate on 5-year U.S. Treasury bonds.

Stock option plan activity for the six months ended June 30, 2013 (unaudited) is summarized below:


	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value (1)

Options outstanding, January 1		120,617		$	9.51		5.4

Granted		89,500			5.25
Forfeited		—			—
Exercised		—			—
Expired		(7,596	)		13.80


Options outstanding, June 30		202,521		$	7.46		7.2	$	9,425


Options exercisable, June 30		202,521		$	7.46		7.2	$	9,425

(1)

The aggregate intrinsic value of a stock option in the table above represents the total pre-tax intrinsic value (the amount by which the current market value of the underlying stock exceeds the exercise price of the option) that would have been received by the option holders had all option holders exercised their options on June 30, 2013. This amount changes based on changes in the market value of the Company’s common stock.

As of February 21, 2013, a total of 7,000 shares of the Company’s common stock were awarded to the Chief Executive Officer, the Executive Vice President and the Chief Financial Officer. These shares vested immediately and $36,750 in compensation expense was recognized on that date.