Stock Based Compensation

12 Months Ended

Dec. 31, 2011

Stock Based Compensation [Abstract]

Stock Based Compensation

Note 13 – Stock-Based Compensation

The Company's 2008 Stock Incentive Plan (“2008 Plan”) was adopted by the Board of Directors of the Company on February 19, 2008 and approved by shareholders on April 22, 2008 at the Company's 2008 Annual Meeting of Shareholders.  The 2008 Plan provides for the granting of restricted stock awards and incentive and non-statutory options to employees and directors on a periodic basis, at the discretion of the Board of Directors or a Board designated committee.  The 2008 Plan authorizes the issuance of up to 500,000 shares of common stock. The 2008 Plan replaced the Company's stock option plan that was approved by the shareholders at the 1997 Annual Meeting, which plan terminated in 2006.

Stock Options

Accounting guidance requires that compensation cost relating to share-based payment transactions be recognized in the financial statements with measurement based upon the fair value of the equity or liability instruments issued.

A summary of stock option transactions is as follows:

	Option  Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate  Intrinsic  Value  ($000)
Outstanding at December 31, 2010		159,499		$	21.48
Acquired in acquisition		120,312			26.54
Granted		-			-
Exercised		(10,522	)		16.45
Forfeited		(650	)		22.69
Outstanding at December 31, 2011		268,639		$	23.94	4.44 years	$	147
Exercisable at December 31, 2011		268,639		$	23.94	4.44 years	$	147

The aggregate intrinsic value of stock options 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 December 31, 2011.  This amount changes based on changes in the market value of the Company's common stock.

The total proceeds of the in-the-money options exercised during the year ended December 31, 2011, 2010, and 2009 were $173,000, $48,000, and $474,000, respectively.  Total intrinsic value of options exercised during years ended December 31, 2011, 2010, and 2009 was $56,000, $11,000, and $105,000, respectively.

As of December 31, 2011, 2010, and 2009, there was $16,000, $63,000, and $127,000, respectively, in unrecognized compensation expense.  Compensation expense related to stock options was $63,000 in 2011, $63,000 in 2010, and $62,000 in 2009.

The following table summarizes information related to stock options outstanding on December 31, 2011:

Options Outstanding								Options Exercisable
Range of Exercise Prices		Number of Outstanding Options		Weighted-Average Remaining Contractual Life		Weighted-Average Exercise Price		Number of Options Exercisable		Weighted Average  Exercise Price
$	16.00 to $20.00		72,245	5.21	yrs	$	17.54		72,245	$	17.54
	20.01 to 25.00		85,174	4.60			23.48		85,174		23.48
	25.01 to 30.00		62,302	3.60			26.04		62,302		26.04
	30.01 to 41.67		48,918	4.09			31.54		48,918		31.54
			268,639	4.44	yrs	$	23.94		268,639	$	23.94

No stock options were granted in 2011 and 2010.  The fair value of the stock options granted in 2009 was estimated on the date of grant using the Black-Scholes option valuation model that uses the assumptions noted in the following table:

	2009
Dividend yield		5.75	%
Expected life in years		6.6
Expected volatility		17.90	%
Risk-free interest rate		3.61	%
Weighted average fair value per option granted	$	4.63

The expected volatility is based on historical volatility.  The risk-free interest rates for periods within the contractual life of the awards are based on the U.S. Treasury yield curve in effect at the time of the grant.  The expected life is based on historical exercise experience.  The dividend yield assumption is based on the Company's history and expectation of dividend payouts.

Restricted Stock

The Company from time-to-time grants shares of restricted stock to key employees and non-employee directors.  These awards help align the interests of these employees and directors with the interests of the shareholders of the Company by providing economic value directly related to increases in the value of the Company's common stock.  The value of the stock awarded is established as the fair market value of the stock at the time of the grant.  The Company recognizes expense, equal to the total value of such awards, ratably over the vesting period of the stock grants. Restricted stock granted in 2011 cliff vests over 24 to 36 months based on the term of the award.

Nonvested restricted stock activity for the 12 months ended December 31, 2011 is summarized in the following table. 

Restricted Stock	Shares		Weighted Average Grant Date Value
Nonvested at January 1, 2011		8,712	$	21.36
Granted		29,637	$	20.29
Vested		-		-
Forfeited		-		-
Nonvested at December 31, 2011		38,349	$	20.53

As of December 31, 2011 and 2010, there was $404,000 and $93,000, respectively, in unrecognized compensation cost related to nonvested restricted stock granted under the 2008 Plan.  This cost is expected to be recognized over the next 12 to 30 months. The share based compensation expense for nonvested restricted stock was $291,000 and $93,000 during 2011 and 2010 respectively.

Starting in 2010, the Company began offering its directors an option with respect to director compensation. Their regular monthly retainer could be received as $1,000 per month in cash or $1,250 in immediately vested, but restricted stock. In 2011, monthly meeting fees could also be received as $400 per meeting in cash or $500 in immediately vested, but restricted stock.  For 2011, 13 of 15 directors elected to receive stock in lieu of cash for their monthly retainer board meeting fees. Only outside directors receive board fees. The Company issued 12,818 and 5,784 shares and recognized share based compensation expense of $ 242,000 and $120,000 during 2011 and 2010, respectively.