Note 5. Stock Based Compensation

6 Months Ended

Jun. 30, 2012

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

Note 5. Stock Based Compensation

The Company has a 2005 Stock Option Plan (the Plan) pursuant to which the Company’s Board of Directors may grant stock options to directors, officers and employees. The Plan authorizes grants of options to purchase up to 550,000 shares of the Company’s authorized but unissued common stock. Accordingly, options for the purchase of 485,760 shares of authorized common stock have been issued under the Plan and 64,240 shares of authorized common stock are available for issue under the Plan. There are options for 485,760 shares granted currently outstanding as of June 30, 2012, of which, all options are vested. All stock options have been granted with an exercise price equal to the stock’s fair market value at the date of the grant. As of June 30, 2012, no options have been exercised. The Company recorded compensation expense of $14 thousand for the six months ended June 30, 2012 and $16 thousand for the six months ended June 30, 2011. The aggregate intrinsic value of outstanding stock options was $0 at June 30, 2012. The weighted average remaining contractual term of outstanding options was 4.0 years at June 30, 2012.

The Board of Directors adopted a Restricted Stock Plan (“the Plan”) in September 2009 whereby 120,000 shares of the Company’s authorized but unissued common stock was set aside to be granted by the Board of Directors in its discretion. The principal purpose of the Plan was to make shares available for issue to the executive officers of the Company and the Bank in payment of incentives earned under the Incentive Compensation Plan. Because the Company is a TARP participant, the Company’s most highly paid employee cannot be paid a cash bonus. However, the Treasury regulations permit payment of such a bonus in restricted stock. Even though the restriction would only apply to the CEO in the case of the Company and the Bank, each of the executive officers of the Company and the Bank have elected to take their bonuses in stock rather than cash.

The restrictions attached to stock issued under the Plan restrict transfer of the shares during the time TARP funding is outstanding and provide for vesting over a five-year period. During the first six month period of 2012, the Company issued 20,971 shares of stock under the Plan. None were issued during 2011.

The remaining unamortized compensation expense for restricted stock was $111 thousand at June 30, 2012 and will be recognized over the next 4.7 years. All compensation expense for stock options has been recognized.