STOCK-BASED COMPENSATION

3 Months Ended

Mar. 31, 2012

STOCK-BASED COMPENSATION

6. STOCK-BASED COMPENSATION

The Company has stock option and incentive arrangements to attract and retain key personnel. In May 2005, the 2005 Equity Compensation Plan (the “Plan”) was approved by the shareholders, which authorizes the issuance of restricted stock, stock appreciation rights, stock units and stock options to the Board of Directors and key employees. Compensation expense for service based awards is recognized over the vesting period. Performance based awards are recognized based on a vesting, if applicable, and the probability of achieving the goals.

Stock-based compensation expense totaled $65,522 and $50,888 for the three months ended March 31, 2012 and 2011, respectively, which consisted of grants of restricted stock and restricted stock units. Stock-based compensation included director compensation for stock granted in lieu of cash compensation. All outstanding options were fully vested at December 31, 2011. The Company has not granted any stock options since 2007.

The fair value of the Company’s employee stock options is estimated on the date of grant using the Black-Scholes option pricing model. The Company estimates expected market price volatility and expected term of the options based on historical data and other factors.

The exercise price for options is set at the discretion of the committee administering the Plan, but is not less than the market value of the shares as of the date of grant. An option’s maximum term is 10 years and the options vest at the discretion of the committee. The following tables below summarize outstanding and exercisable options at March 31, 2012 and December 31, 2011.

				Weighted				Weighted-Average
				Average		Aggregate		Contractual Life
				Exercise		Intrinsic		Remaining In
	Shares			Price		Value		Years
Outstanding at January 1, 2012		264,156		$	17.90	$	175,911
Granted at fair value		-			-
Exercised		(5,756	)		12.64		9,338
Expired		-
Forfeited		(2,044	)		19.73
Outstanding at March 31, 2012		256,356		$	18.00	$	395,637		1.8
Exercisable at March 31, 2012		256,356		$	18.00	$	395,637		1.8

				Weighted				Weighted-Average
				Average		Aggregate		Contractual Life
				Exercise		Intrinsic		Remaining In
	Shares			Price		Value		Years
Outstanding at January 1, 2011		299,237		$	16.86	$	524,392
Granted at fair value		-			-
Exercised		(33,163	)		8.75		286,061
Expired		(338	)		8.44
Forfeited		(1,580	)		15.00
Outstanding at December 31, 2011		264,156		$	17.90	$	175,911		1.7
Exercisable at December 31, 2011		264,156		$	17.90	$	175,911		1.7

Options outstanding are all currently exercisable and are summarized as follows:

Number Outstanding		Weighted Average	Weighted Average
March 31, 2012		Remaining Contractual Life	Exercise Price
	14,891	1 years	$	11.56
	54,098	2 years		12.95
	85,817	3 years		15.89
	80,138	4 years		22.29
	21,411	6 years		27.70
	256,356			18.00

The aggregate intrinsic value of outstanding stock options and exercisable stock options was $395,637 and $175,911 at March 31, 2012 and December 31, 2011, respectively. Aggregate intrinsic value represents the difference between the Company’s closing stock price on the last trading day of the period, which was $17.00 and $15.00 at March 31, 2012 and December 31, 2011, respectively, and the exercise price multiplied by the number of options outstanding.

The Company has outstanding restricted stock and stock units granted in accordance with the Plan. The following tables below summarize the unvested restricted stock awards and units outstanding at March 31, 2012 and December 31, 2011.

	Restricted Stock					Restricted Stock Units
	Number of Shares			Weighted  Average Grant Date Fair Value		Number of Units			Fair Value
Nonvested at December 31, 2011		8,113		$	16.47		6,845		$	15.00
Granted		12,329			14.25		2,105			17.00
Vested		(4,110	)		14.25		(3,739	)		14.80
Nonvested at March 31, 2012		16,332		$	15.35		5,211		$	17.00

	Restricted Stock					Restricted Stock Units
	Number of Shares			Weighted  Average Grant Date Fair Value		Number of Units		Fair Value
Nonvested at January 1, 2011		2,720		$	11.90		3,739	$	15.00
Granted		12,934			16.49		3,106		15.00
Vested		(7,541	)		14.86		-		-
Nonvested at December 31, 2011		8,113		$	16.47		6,845	$	15.00