STOCK BASED COMPENSATION

12 Months Ended

Dec. 31, 2011

STOCK BASED COMPENSATION [Abstract]

STOCK BASED COMPENSATION

NOTE 14 -    STOCK BASED COMPENSATION

The Company established an Ownership Incentive Plan (the "Plan") during 2002 that allows for stock-based awards to eligible employees, as determined by the Board of Directors.  The awards may be in the form of stock options, share awards, and/or appreciation rights.  The Plan provides for the issuance of up to 200,000 shares.

Options granted to date vest ratably over a five year period and expire ten years after the date of grant. Stock options outstanding at December 31, 2011 were as follows:

		Outstanding Stock Options						Exercisable Stock Options
Exercise Price Range		Number		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Number		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)
$	9.00 - $10.99		29,110	$	9.00		6.3		13,891	$	9.00		5.4
$	11.00 - $12.99		59,799		11.89		7.1		18,918		12.08		4.1
$	13.00 - $14.99		11,056		13.09		1.0		11,056		13.09		1.0
$	17.00 - $18.99		24,158		18.16		3.2		22,844		18.17		3.1
			124,123		12.54		5.6		66,709		13.69		3.5

The following table summarizes stock option activity for the years indicated:

	Year ended December 31,
	2011					2010				2009
	Options		Weighted Average Exercise Price			Options		Weighted Average Exercise Price		Options		Weighted Average Exercise Price
Outstanding, beginning of year		99,040		$	12.71		78,242		13.04	$	49,132		15.43
Granted		25,083			11.85		20,798		11.50		29,110		9.00
Exercised		-			-		-		-		-		-
Outstanding, end of year		124,123			12.54		99,040		12.71		78,242		13.04
Exercisable, end of year		66,709			13.69		41,770		14.78		29,954		15.73

The aggregate intrinsic value (the amount by which the current market value of the underlying stock exceeds the exercise price of the option) for options outstanding at December 31, 2011 that were “in the money” (market price greater than exercise price) was $178,000.  The aggregate intrinsic value at that date for only the options that were exercisable was $71,000.  The aggregate intrinsic value for options outstanding at December 31, 2010 that were in the money was $95,000 and the aggregate intrinsic value at that date for only the options that were exercisable was $17,000.  The intrinsic value changes based on changes in the market value of the Company's stock.

The fair value of options granted is estimated at the date of grant using the Black-Scholes option-pricing model.  The following table shows the estimated weighted-average fair value of options granted and the assumptions used in calculating that value for the years indicated:

	2011			2010			2009
Estimated weighted-average fair value of options granted	$	2.09			2.27			1.89
Risk-free interest rate		2.84	%		3.34	%		3.49	%
Average dividend yield		4.43	%		4.31	%		4.04	%
Volatility factor of the expected market  price of the Company's common stock		27.37	%		28.32	%		27.54	%
Average life in years		6.5			7.0			9.0

Total expense related to options included in salaries and wages in the consolidated statements of income for the years ended December 31, 2011, 2010, and 2009 was $45,000, $40,000, and $32,000, respectively. Total compensation cost related to option awards to be recognized ratably through the first quarter of 2016 is approximately $88,000.

A total of 2,511 restricted shares were granted to an executive officer in February 2010 and vested in November 2010.  Until they vested, they were restricted from sale, transfer, or assignment in accordance with the terms of the agreement under which they were issued.  At the date of vesting, the shares were issued from treasury stock and, therefore, did not affect the number of securities remaining available for future issuance in the table above.  No restricted shares were granted prior to February 2010 or during 2011.