Note

Stock Based Compensation

The Company recorded stock-based compensation expense of

$159

thousand and

$109

thousand for the years to date

September

30,

2018

and

2017,

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

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

2018

2017.

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

$53

thousand each of the years to date

September 30, 2018

and

September 30, 2017,

respectively. As of

September 30, 2018,

there was

$78

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

1.25

years.

A summary of option activity under the

2005

stock option plan year to date

September 30, 2018

is as follows:

	Options Outstanding			Weighted Average Exercise Price		Aggregate Intrinsic Value (1)		Weighted Average Contractual Term (years)
Balance at December 31, 2017		187,000		$	7.78
Granted		–			–
Exercised		(18,300	)		7.83
Expired		(31,500	)		10.79
Forfeited		–			–
Balance at September 30, 2018		137,200		$	7.08	$	867,250		6.22
Exercisable at September 30, 2018		80,000		$	7.21	$	495,450		5.82

(

) 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

September 30, 2018.

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

$106

thousand and

$56

thousand for the years to date

September 30, 2018

and

2017,

respectively. 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

22,649

and

8,258

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

September 30, 2018

and

September 30, 2017,

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

2018

was

$11.32

compared to

$9.87

2017.

As of

September 30, 2018,

there was

$367

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

2023.

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

	For the Nine Months Ended September 30, 2018					For the Nine Months Ended September 30, 2017
	Shares			Weighted- Average Grant Date Fair Value		Shares			Weighted- Average Grant Date Fair Value
Nonvested at beginning of year		32,087		$	8.63		31,546		$	7.03
Granted		22,649			11.32		8,258			9.87
Vested		(12,241	)		7.71		(11,125	)		6.03
Forfeited		-			-		-			-
Nonvested at the end of the period		42,495		$	10.33		28,679		$	8.23

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.