Stock Based Compensation

9 Months Ended

Sep. 30, 2012

Stock Based Compensation

Stock Based Compensation

NOTE 8: Stock Based Compensation

The shareholders of the Company voted at the Company’s Annual Meeting, April 13, 2010 to approve the 2010 Omnibus Stock Incentive Plan, including 330,000 shares (adjusted for a 10% stock dividend declared on August 26, 2010) reserved under the plan (copy of the plan was filed with 2010 Proxy Statement). This plan is intended to assist the Company in recruiting and retaining employees with ability and initiative by enabling employees to participate in its future success and to associate their interest with those of the Company and its shareholders. Under the Omnibus Stock Incentive Plan, options are periodically granted to employees at a price not less than 100% of the fair market value of the shares at the date of the grant. All employees are eligible to participate in this plan if the Executive Committee, in its sole discretion, determines that such person has contributed or can be expected to contribute to the profits or growth of the Company or its subsidiary. Options may be exercised in whole at any time or in part from time to time at such times and in compliance with such requirements as the Executive Committee shall determine. The maximum period in which an Option may be exercised is determined at the date of grant and shall not exceed ten years from the date of grant.

The options are not transferable except by will or by the laws of descent and distribution. On June 28, 2012 the Executive Committee granted options to purchase 9,000 shares to five employees. Fair value was estimated at the date of grant using the Black-Scholes option pricing model with the following assumptions: dividend yield 3.97%, historical volatility 33.94%, with an expected life of ten years, and a risk free interest rate of 1.60%. In addition, the Board of Director’s granted options to purchase 2,500 shares to one employee on September 24, 2012. Fair value was estimated at the date of grant using the Black-Scholes option pricing model with the following assumptions: dividend yield 3.97%, historical volatility 33.94%, with an expected life of ten years, and a risk free interest rate of 1.74%.

On March 24, 2011, the Executive Committee granted options to purchase 5,000 shares of stock to one employee. The Executive Committee also granted options to purchase 96,000 shares to twenty-two employees on June 23, 2011. Fair value was estimated at the date of grant using the Black-Scholes option pricing model with the following assumptions used for the March 24, and June 23, 2011 grant: dividend yield 4.02%, historical volatility 54.43% with an expected life of ten years. The risk free interest rate was 3.42%, and 2.93% for March 24, and June 23, 2011, respectively. There were no options granted during the three months ended September 30, 2011.

On April 14, 1998 the Company adopted the 1998 Omnibus Stock Incentive Plan which expired on April 14, 2008. Options can no longer be granted under the 1998 Plan. Options granted before April 14, 2008, shall remain valid in accordance with their terms.

Under both plans employees become 20% vested after five years and vest 20% each year until fully vested. The right to exercise each such 20% of the options is cumulative and will not expire until the tenth anniversary of the date of the grant.

The following is a summary of the activity under the 1998 and 2010 Omnibus Stock Incentive Plan for the three and nine months ending September 30, 2012 and three and nine months ended September 30, 2011.

Three Months Ended September 30, 2012		Options		Weighted Average Exercise Price
	Balance at July 1, 2012		175,467	$	11.25
	Granted		2,500		12.00
	Balance at September 30, 2012		177,967	$	11.26

Nine months Ended September 30, 2012		Options			Weighted Average Exercise Price
	Balance at January 1, 2012		168,266		$	11.23
	Granted		11,500			11.30
	Forfeited		(500	)		10.77
	Exercised		(1,299	)		8.54
	Balance at September 30, 2012		177,967		$	11.26

Three Months Ended September 30, 2011		Options			Weighted Average Exercise Price
	Balance at July 1, 2011		174,681		$	11.21
	Granted		—			—
	Exercised		(665	)		8.54
	Forfeited		—			—
	Balance at September 30, 2011		174,016		$	11.22

Nine months Ended September 30, 2011		Options			Weighted Average Exercise Price
	Balance at January 1, 2011		88,831		$	11.51
	Granted		101,000			10.48
	Exercised		(15,074	)		8.19
	Forfeited		(741	)		8.11
	Balance at September 30, 2011		174,016		$	11.22
	Options exercisable at September 30, 2012		4,532		$	8.54