Stock Option Plan

12 Months Ended

Dec. 31, 2011

Note 15: Stock Option Plan

The Company’s Incentive Stock Option Plan (the Plan), which is shareholder approved, permits the grant of stock options to its directors, officers and other key employees. The Plan authorized the grant of options for up to 238,050 shares of the Company’s common stock, which generally vest at a rate of 20 percent a year and have a 10-year contractual term. The Company believes that such awards better align the interests of its directors and employees with those of its shareholders. Option awards are generally granted with an exercise price equal to the market price of the Company’s stock at the date of grant. Certain option awards provide for accelerated vesting if there is a change in control (as defined in the Plans). The Company generally issues shares from its authorized shares to satisfy option exercises.

The fair value of each option award is estimated on the date of grant using a binomial option valuation model that uses the assumptions related to expected volatility, expected term of the options awarded and the risk-free rate. Expected volatility is based on historical volatility of the Company’s stock and other factors. The Company uses historical data to estimate option exercise and employee termination within the valuation model. The expected term of options granted is derived from the output of the option valuation model and represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. No grants were made in 2011 or 2010.

A summary of option activity under the Plan as of December 31, 2011, and changes during the year then ended, is presented below:

	Shares		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term		Aggregate Intrinsic Value

Outstanding, beginning of year		32,400	$	15.41		5.47
Granted		—
Exercised		—					$	—
Forfeited or expired		—

Outstanding, end of year		32,400	$	15.41		4.47	$	37

Exercisable, end of year		26,400	$	15.60		3.96	$	31

There were no options exercised during the year ended December 31, 2011. The total intrinsic value of options exercised during the year ended December 31, 2010 was $103,000.

As of December 31, 2011 and 2010, there was $12,000 and $19,000 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Plan. That cost is expected to be recognized over a weighted-average period of 1.75 years.

During 2011 and 2010, the Company recognized $6,000 and $10,000 of share-based compensation expense with a tax benefit of $3,000 and $4,000 related to the share-based compensation expense.