Note

Stock Based Compensation

The Company recorded stock based compensation expense of $

thousand and

$37

thousand for the years to date

March

31,

2017

and

2016,

respectively.

The

2005

Stock Option Plan (the Plan) pursuant to which the Board of Directors granted stock options to directors, officers and employees expired in

2016,

thus there are no options available for future issuance. Under the fair value recognition provisions of relevant accounting guidance, stock-based compensation cost

was measured at the grant date based on the fair value of the award and was and continues to be recognized as expense on a straight-line basis over the requisite service period, which is the vesting period.

The Company used the Black-Scholes option pricing model to determine the fair value of stock options. The fair value of the stock based payment awards

was affected by the price of the Company's stock and a number of financial assumptions and variables. These variables included the risk-free interest rate, expected dividend rate, expected stock price volatility and the expected life of the options.

stock options were granted during

2017

2016.

Compensation expense is charged to income ratably over the vesting period and was

$18

thousand and

$19

thousand for the year to date

March

31,

2017

and

March

31,

2016,

respectively. As of

March

31,

2017,

there was

$194

thousand of total unrecognized compensation cost related to nonvested stock options granted under the Plan. The cost will be recognized over the next

2.75

years. At the discretion of the Board of Directors, the stock option plan was not modified for the

stock dividend distributed on

July

11,

2016.

A summary of option activity under the

2005

stock option plan year to date

March

31,

2017

is as follows:

	Options Outstanding		Weighted Average Exercise Price		Aggregate Intrinsic Value (1)		Weighted Average Contractual Term (years)
Balance at December 31, 2016		201,000	$	7.80
Granted		–		–
Exercised		–		–
Expired		–		–
Forfeited		–		–
Balance at March 31, 2017		201,000	$	7.80	$	439,600		6.26
Exerci sable at March 31, 2017		109,200	$	8.56	$	182,560		5.03

(1)

The aggregate intrinsic value of a stock option in the table above represents the total pre-tax intrinsic value (the amount by which the current market value of the underlying stock exceeds the exercise price of the option) that would have been received by the option holders had

all option holders exercised their options on

March

31,

2017.

2009,

the

Board of Directors authorized

132,000

shares of common stock for issuance under the Restricted Stock Plan. On

July

11,

2016,

stock dividend was distributed and added

5,280

to the total number of shares authorized for issuance and currently raising the total available to

137,280.

The plan provides for restricted stock awards to key employees. Restricted shares awarded to employees generally vest over a

five

year period and compensation expense is charged to income ratably over the vesting period and was

thousand for the years to date

March

31,

2017

and

2016.

Compensation is accounted for using the fair market value of the Company’s common stock on the date the restricted shares are awarded. The Company granted

8,258

and

11,149*

shares of restricted stock under the plan during the years to date

March

31,

2017

and

March

31,

2016,

respectively. The weighted-average grant date fair value of restricted stock granted in

20176

was

$9.87

compared to

$9.09*

2016.

As of

March

31,

2017,

there was

$228

thousand of total unrecognized compensation cost related to restricted stock granted under the Plan. The cost is expected to be recognized through

2022.

A summary of the activity for restricted stock awards for the periods indicated is presented below:

	For the Three Months Ended March 31, 2017					For the Three Months Ended March 31, 2016
	Shares			Weighted- Average Grant Date Fair Value		Shares				Weighted- Average Grant Date Fair Value
Nonvested at beginning of year		31,546		$	7.03		39,352		*	$	6.00	*
Granted		8,258			9.87		11,149		*		9.09	*
Vested		(11,125	)		6.03		(11,371	)	*		5.44	*
Forfeited		-			-		-		*		-
Nonvested at the end of the period		28,679		$	8.23		39,130		*	$	7.05	*

The Restricted Stock Plan provides for the adjustment

of the total number of shares reserved for issuance under the plan and the number of shares covered by each outstanding Award for stock dividends and stock splits.

*Restated for the

stock dividend distributed

July

11,

2016.