Stock-Based Compensation

9 Months Ended

Sep. 30, 2012

Stock-Based Compensation [Abstract]

Stock-Based Compensation

Note 2.  Stock-Based Compensation 

The Company records compensation expense for employee stock options based on the estimated fair value of the options on the date of grant using the Black-Scholes-Merton (“BSM”) model with the assumptions included in the table below. The Company uses historical data among other factors to estimate the expected price volatility, the expected option life and the expected forfeiture rate. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for the estimated life of the option. At September 30, 2012, the Company had one stock-based employee compensation plan.  On July 18, 2012 the Company granted each of its four outside directors options to purchase2,500 shares of common stock recognizing compensation expense of approximately $6,000 based on the grant date fair value. 

The assumptions made in estimating the fair value of the options on the grant date based upon the BSM option-pricing model are as follows:

Dividend yield	0.00%
Expected volatility	6.63%
Risk free interest rate	2.21%
Expected life	10 years

The Company calculates expected volatility for stock options and awards using historical volatility as the Company believes the expected volatility will approximate historical volatility. 

There were no options granted in the nine months ended September 30, 2011.  During the nine months ended September 30, 2011, two employees exercised options to purchase a total of 4,500 shares of common stock.  There were no options exercised during the nine months ended September 30, 2012.