STOCK-BASED COMPENSATION

3 Months Ended

Mar. 31, 2013

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

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

NOTE 11 STOCK-BASED COMPENSATION

The Corporation has two share-based compensation plans in existence; the 1997 Stock Option Plan (expired but having outstanding options that may still be executed) and the 2009 Incentive Stock Option Plan, which is described below.

The Corporation’s 2009 Incentive Stock Option Plan is a shareholder approved plan that permits the granting of stock options, restricted stock and certain other stock-based awards to selected key employees on a periodic basis at the discretion of the board. The plan authorizes the issuance of up to 150,000 shares of common stock of which 86,300 shares are available for issuance at March 31, 2013. Option awards are granted with an exercise price equal to the market price of the Corporation’s common stock at the date of grant and have an expiration period of ten years.

The fair value of each option award is estimated on the date of grant using an option-pricing model that uses the assumptions noted in the table below. Expected volatilities are based on several factors including historical volatility of the Corporation’s common 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 term of the options is based on the U.S. Treasury yield curve in effect at the time of the 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 2013. The fair value of options granted in 2012 was determined using the following weighted-average assumptions as of the date of grant,

	2012
Dividend yield		3.20	%
Risk-free interest rate		1.15	%
Expected volatility		23.62	%
Weighted average expected life		8 yrs
Weighted average per share fair value of options	$	3.01

Intrinsic value represents the amount by which the fair market value of the underlying stock exceeds the exercise price of the stock options. At March 31, 2013, the aggregate intrinsic value of stock options outstanding and exercisable was $238,000 and $185,000, respectively, compared to an aggregate intrinsic value of $186,000 and $155,000 at December 31, 2012.

The following table summarizes stock option activity for the three months ended March 31, 2013.

				Weighted
	Number			Average		Number
	of			Exercise		of Options
Stock Options	Options			Price		Exercisable
Outstanding options at January 1, 2013		54,630		$	15.83		29,199
Granted		0			0
Exercised		0			0
Forfeited		0			0
Expired		(1,130	)		22.75
Outstanding options at March 31, 2013		53,500		$	15.68		28,069

The fair value of options granted is amortized as compensation expense, recognized on a straight-line basis over the vesting period of the respective stock option grant. Compensation expense related to employees is included in personnel expense while compensation expense related to directors is included in other operating expense. The Corporation recognized compensation expense of $8,000 during the first quarter of 2013, related to the awards of nonrestricted stock options compared to $7,000 for the first quarter of 2012. At March 31, 2013, the Corporation had $51,000 of unrecognized compensation expense related to nonrestricted stock options. This remaining cost is expected to be recognized over a weighted average vesting period of approximately 23.8 months.

The following is a summary of outstanding and exercisable stock options at March 31, 2013.

		Number		Weighted Average			Number
		Of Shares		Remaining			Of Shares
Exercise Price		Outstanding		Contractual Life			Exercisable
$	26.75		1,000		2.76	years		1,000
$	12.30		16,400		6.37	years		16,400
$	13.25		11,100		7.38	years		7,402
$	17.40		9,800		8.37	years		3,267
$	19.28		15,200		9.28	years		0
Total			53,500		7.70	years		28,069

The following table summarizes information about the Corporation’s nonvested stock option activity for the three months ended March 31, 2013.

	Number		Weighted
	Of		Average
Nonvested Options	Options		Price
Nonvested options at January 1, 2013		25,431	$	17.92
Granted		0		0.00
Vested		0		0.00
Forfeited		0		0.00
Nonvested options at March 31, 2013		25,431	$	17.92

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 unearned compensation, a component of shareholders’ equity, and amortized to compensation expense over the vesting period. The Corporation recognized compensation expense of $11,000 during the first quarter of 2013, related to restricted stock grants compared to $10,000 for the first quarter of 2012. At March 31, 2013, the Corporation had approximately $66,000 of unrecognized compensation expense related to restricted stock awards. This remaining cost is expected to be recognized over a weighted average vesting period of approximately 21.5 months.

The following table summarizes restricted stock activity for the three months ended March 31, 2013.

			Weighted
	Non-vested		Average
	Number of		Grant Date
Restricted Stock	Shares		Fair Value
Nonvested balance at January 1, 2013		7,800	$	16.95
Granted		0		0.00
Vested		0		0.00
Forfeited/expired		0		0.00
Nonvested balance at March 31, 2013		7,800	$	16.95