Stock Options

3 Months Ended

Mar. 31, 2012

Stock Options [Abstract]

STOCK OPTIONS

NOTE E – STOCK OPTIONS

Shareholders of the Company approved a stock option plan in April 2000 and a stock incentive plan in June 2005. The plans authorized the Company to issue up to 115,500 and 157,500 shares, respectively. In May 2008, shareholders of the Company ratified amendments to the Stock Incentive Plan of 2005, which among other things increased the authorized shares for issuance from 157,500 to 300,000. On March 20, 2010, the April 2000 stock option plan terminated. As of March 31, 2012, there were 54,482 shares available for future issuance under the 2005 plan.

A summary of stock option activity is as follows for the three months ended March 31, 2012:

	Shares		Weighted Average Price
Outstanding at beginning of year		221,026	$	21.06
Granted		7,875		11.20
Exercised		—		—
Forfeited		—		—
Outstanding at March 31, 2012		228,901	$	20.72
Options exercisable at March 31, 2012		148,951	$	21.40

The fair value of each option award is estimated on the date of grant using a Black-Scholes option valuation model that uses the weighted average assumptions noted in the following table. The expected volatility and life assumptions are based on historical experience. The interest rate is based on the U.S. Treasury yield curve and the dividend assumption is based on the Company’s history and expected dividend payouts. Following are the assumptions used in calculating the fair value of the options issued during the three months ended March 31, 2012:

Dividend yield		2.93	%
Expected life		8 years
Expected volatility		22.84	%
Risk-free interest rate		0.26	%
Weighted average fair value of options granted during 2012	$	1.59

The Company recorded compensation expense of $8,000 and $15,000, respectively, related to stock options during the three month periods ended March 31, 2012 and 2011.

Restricted Stock – Shares of restricted stock may also be granted under the Stock Incentive Plan of 2005. Compensation expense is recognized over the vesting period of the shares based on the market value of the shares on the grant date. All shares of restricted stock issued and outstanding vest 20% per year over five years. Compensation expense related to the award of shares of restricted stock was $39,000 and $15,000, respectively, during the three months ended March 31, 2012 and 2011. As of March 31, 2012, there was $540,000 of total unrecognized compensation expense related to non-vested shares of restricted stock granted under the plan, which is expected to be recognized over a weighted average period of 3.8 years.

A summary of restricted stock activity is as follows for the three months ended March 31, 2012:

	Shares			Weighted Average Grant Date Fair Value
Nonvested at January 1, 2012		41,309		$	11.33
Granted		18,125			11.20
Vested		(6,231	)		10.35
Forfeited		—			—
Nonvested at March 31, 2012		53,203		$	11.40