STOCK BASED COMPENSATION PLAN

12 Months Ended

Dec. 31, 2012

STOCK BASED COMPENSATION PLANS [Abstract]

STOCK BASED COMPENSATION PLANS

NOTE 13:  STOCK BASED COMPENSATION PLANS

The February 1997 Stock Option Plan

In February 1997, the Board of Directors approved an option plan and granted options thereunder with an exercise price equal to the market value of the Company's shares at the date of grant.  Under the Stock Option Plan, up to 132,249 options had been authorized for grant of incentive stock options and nonqualified stock options.  None of the original options granted prior to July 2001 remain outstanding at December 31, 2012 or December 31, 2011.
 

In July 2001, the Board approved the issuance of 38,499 stock options remaining in the 1997 Stock Option Plan.  The exercise price was equal to the market value of the Company's shares at the date of grant ($8.34).  The options granted under the issuance had a 10-year term and expired on July 31, 2011.

The April 2010 Stock Option Plan

In June 2011, the Board of Directors of the Company approved the grant of stock option awards to its Directors and Executive Officers under the 2010 Stock Option Plan that was approved at the Annual Meeting of Shareholders on April 28, 2010 when 150,000 shares were authorized for award.  A total of 45,000 stock option awards were granted to the nine directors of the Company and 75,000 stock option awards, in total, were granted to the Chief Executive Officer and the Company's four Senior Vice Presidents.  The awards will vest ratably over five years (20% per year for each year of the participant's service with the Company) and will expire ten years from the date of the grant, or June 2021.

The fair value of each option grant was established at the date of grant using the Black-Scholes option pricing model. The Black-Scholes model used the following weighted average assumptions: risk-free interest rate of 2.2%; volatility factors of the expected market price of the Company's common stock of .45; weighted average expected lives of the options of 7.0 years: cash dividend yield of 1.49%. Based upon these assumptions, the weighted average fair value of options granted was $3.77.

The compensation expense of the awards is based on the fair value of the instruments on the date of grant.  The Company recorded compensation expense in the amount of $81,000 and $47,000 in 2012 and 2011, respectively, and is expected to record $79,000 in each of the years 2013 through 2015, and $38,000 in 2016.

At December 31, 2012, there were 106,000 options outstanding, of which 22,000 were exercisable at an exercise price of $9.00, and an average remaining contractual life of 8.5 years.  Expiring options in 2012 were the result of Director attrition.

Activity in the stock option plans is as follows:

				Weighted
	Options			Average		Shares
(Shares in thousands)	Outstanding			Exercise Price		Exercisable
Outstanding at December 31, 2010		19		$	8.34		19
Granted		120		$	9.00		-
Exercised		(8	)		8.34		(8	)
Expired		(11	)		8.34		(11	)
Outstanding at December 31, 2011		120		$	9.00		-
Granted		-		$	-		-
Newly Vested		-			9.00		23
Exercised		(1	)		9.00		(1	)
Expired		(13	)		9.00		-
Outstanding at December 31, 2012		106		$	9.00		22

The aggregate intrinsic value of a stock option 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 prior to the expiration date.  The intrinsic value can change based on fluctuations in the market value of the Company's stock.  At December 31, 2012, the intrinsic value of the stock options was $138,000.  At December 31, 2011, the value of the Company's stock was less than the stock option price, therefore the outstanding and exercisable stock options had no intrinsic value.