STOCK-BASED COMPENSATION

3 Months Ended

Mar. 31, 2012

Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

NOTE 10   STOCK-BASED COMPENSATION

The Corporation has two stock option plans, the 1997 Stock Option Plan and the 2009 Incentive Stock Option Plan. No additional grants may be made under the 1997 Stock Option Plan. The 2009 Plan, which is shareholder approved, permits the grant of stock options, restricted stock and certain other stock-based awards for up to 150,000 shares. At March 31, 2012, a total of 103,300 shares remained available for issuance. Stock-based compensation expense is based on the estimated fair value of the award at the date of grant. The fair value of each option award is estimated on the date of grant using an option-pricing model, requiring the use of subjective assumptions. The fair value is amortized as compensation expense on a straight-line basis over the vesting period of the grants. Compensation expense related to employees is included in personnel expense while compensation expense related to directors is included in other operating expense.

Assumptions are used in estimating the fair value of stock options granted. Expected stock volatility is based on several factors including the historical volatility of the Corporation’s stock, implied volatility determined from traded options and other factors. The Corporation uses historical data to estimate option exercises and employee terminations to estimate the expected life of options. The risk-free interest rate for the expected life of the options is based on the U.S. Treasury yield curve in effect on the date of grant. The expected dividend yield is based on the Corporation’s expected dividend yield over the life of the options.

The Corporation did not grant any stock options during the first quarter of 2012. Assumptions used in estimating the fair value for options granted during 2011 was as follows:

Dividend yield		3.32	%
Risk-free interest rate		1.65	%
Expected volatility		24.14	%
Weighted average expected life		8 yrs
Weighted average per share fair value of options	$	2.94

Activity in the stock option plan for the three months ended March 31, 2012 was as follows:

			Weighted
	Number		Average		Number
	Of		Exercise		of Options
Stock Options	Options		Price		Exercisable
Outstanding options at January 1, 2012		40,330	$	14.45		17,105
Granted		—		—
Exercised		—		—
Forfeited		—		—
Expired		—		—
Outstanding options at March 31, 2012		40,330	$	14.45		17,105

The following is a summary of outstanding and exercisable stock options as of March 31, 2012.

			Weighted Average
	Number		Remaining
Exercise Price	of Shares		Contractual Life
$22.75		1,130		0.76 years
$26.75		1,000		3.76 years
$12.30		17,300		7.37 years
$13.25		11,100		8.38 years
$17.40		9,800		9.37 years
Total		40,330		7.86 years

Intrinsic value represents the amount by which the fair market value of the underlying stock exceeds the exercise price of the stock option. At March 31, 2012, the aggregate intrinsic value of stock options outstanding and exercisable was $222,000 and $107,000, respectively compared to an aggregate intrinsic value of $165,000 and $85,000 at December 31, 2011.

For the three-month period ended March 31, 2012 and 2011, the Corporation recognized compensation expense of $7,000 and $5,000, respectively, for the vesting of stock options. At March 31, 2012, the Corporation had $37,000 of unrecognized compensation expense related to stock options that is expected to be recognized over a remaining weighted average vesting period of 21.9 months.

The following table summarizes information about the Corporation’s nonvested stock option activity for the three months ended March 31, 2012.

	Number		Weighted
	Of		Average
Nonvested Options	Options		Price
Nonvested options at January 1, 2012		23,225	$	14.75
Granted		—		0.00
Vested		—		0.00
Forfeited		—		0.00
Nonvested options at March 31, 2012		23,225	$	14.75

The fair value of restricted stock is equal to the fair market value of the Corporation’s common stock on the date of grant. Restricted stock awards are recorded as deferred compensation, a component of shareholders’ equity, and amortized to compensation expense over the vesting period. Compensation expense for restricted stock awards of approximately $10,000 and $4,000 was recorded during the three-month period ended March 31, 2012 and 2011, respectively. At March 31, 2012, the Corporation had $66,000 of unrecognized compensation expense related to restricted stock options that is expected to be recognized over a remaining weighted average vesting period of 24.8 months.

A summary of restricted stock award activity for the period is presented below:

			Weighted
	Non-vested		Average
	Number of		Grant Date
Restricted Stock	Shares		Fair Value
Nonvested balance at January 1, 2012		7,700	$	15.01
Granted		—		—
Vested		—		—
Forfeited/expired		—		—
Nonvested balance at March 31, 2012		7,700	$	15.01