7. Earnings Per Share and Stock Options

Basic earnings per common share is computed by dividing net income attributable to the Company by the weighted-average number of common shares outstanding during the reporting period. Diluted earnings per common share is computed by dividing net income attributable to the Company by the combination of dilutive potential common stock, comprised of shares issuable under the Company's share-based compensation plans and the weighted-average number of common shares outstanding during the reporting period. Dilutive common share equivalents include the dilutive effect of in-the-money share-based awards, which are calculated based on the average share price for each period using the treasury stock method. Under the treasury stock method, when share-based awards are exercised, (a) the exercise price of a share-based award; (b) the amount of compensation cost, if any, for future service that the Company has not yet recognized; and (c) the amount of estimated tax benefits that would be recorded in additional paid-in capital, if any, are assumed to be used to repurchase shares in the current period. The incremental dilutive potential common shares, calculated using the treasury stock method were 35,090 and 18,286 for 2012 and 2011, respectively. The following table sets forth the computation of basic and diluted earnings per share for the years ended December 31:


For the Years Ended December 31,		2012		2011
Net income attributable to the Company	$	11,102,496	$	6,933,936
Weighted average common shares outstanding - Basic		2,081,703		2,151,350
Incremental shares outstanding assuming
the exercise of dilutive stock options and SARs (share-settled)		35,090		18,286
Weighted average common shares outstanding - Diluted		2,116,793		2,169,636
Basic earnings per common share	$	5.33	$	3.22
Diluted earnings per common share	$	5.24	$	3.20

In 2011, 11,500 awards were excluded from the computation of diluted earnings per share because their exercise price was greater than the stock price and therefore considered anti-dilutive. There were no potential shares excluded from the computation of diluted earnings per share in 2012.

The Company has adopted employee stock award plans (the "Plans") under which restricted stock, and options or stock appreciation rights ("SARs") to purchase shares (not to exceed 500,000 shares) of the Company's stock, may be granted to key employees or directors of the Company at a price not less than the market value on the date of grant. SARs and options (which have predominantly been incentive stock options) awarded under the Plans thus far are exercisable and vest immediately or within one year or at 10% to 20% per year beginning on the date of grant and generally expire in five to ten years. All SARs issued to date have been share-settled only. No SARs were exercised in 2012 or 2011.

A summary of share-based award transactions for all share-based award plans follows:


				Weighted	Average
				Average	Remaining		Aggregate
	Number			Exercise	Contractual		Intrinsic
	of Shares			Price	Term (years)		Value
Outstanding as of January 1, 2011	110,800		$	28.77	4.51	$	353,955
SARs granted	3,000			41.50
Options exercised	(7,700	)		20.15
Options/SARs cancelled/forfeited/expired	(4,500	)		28.61
Outstanding as of December 31, 2011	101,600		$	29.81	3.91	$	697,780
SARs granted	3,000			50.50
Options exercised	(6,380	)		25.17
Options/SARs cancelled/forfeited/expired	(70	)		31.00
Outstanding as of December 31, 2012	98,150		$	30.74	3.17	$	2,871,710

Exercisable as of December 31, 2012	97,150		$	30.59	3.15	$	2,857,350

Unvested as of December 31, 2012	1,000		$	45.64	5.20	$	14,360

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted price of the Company's common stock at December 31, 2012. The intrinsic values of options exercised during 2012 and 2011 were approximately $153,000 and $118,000, respectively.

The following tables summarize information about fixed stock options outstanding at December 31, 2012:


					Options Outstanding at Year-End				Options Exercisable at Year-End
						Weighted	Weighted				Weighted
						Average	Average				Average
					Number	Remaining	Exercise		Number		Exercise
	Range of Exercise Prices				Outstanding	Contractual Life	Price		Exercisable		Price
$	20.00	-	$	27.96	2,400	0.76	$	25.54	2,400	$	25.54
	27.98	-		31.99	750	1.07		31.20	500		31.27
	33.32	-		36.79	2,000	2.38		36.79	2,000		36.79
$	10.00	-	$	36.79	5,150	1.43	$	30.73	4,900	$	30.72


					SARs Outstanding at Year-End				SARs Exercisable at Year-End
						Weighted	Weighted				Weighted
						Average	Average				Average
					Number	Remaining	Exercise		Number		Exercise
	Range of Exercise Prices				Outstanding	Contractual Life	Price		Exercisable		Price
$	27.97	-	$	27.97	75,000	3.17	$	27.97	75,000	$	27.97
	32.00	-		32.00	2,500	3.39		32.00	2,500		32.00
	33.31	-		33.31	3,000	4.38		33.31	3,000		33.31
	36.80	-		58.59	12,500	3.58		46.51	11,750		46.25
$	27.97	-	$	49.04	93,000	3.27	$	30.74	92,250	$	30.58

In 2012, 3,900 options and SARs vested with a fair value of $64,700.

During both the second quarters of 2012 and 2011, the Company issued 3,000 share-settled SARs to the directors of the Company. SARs give the holder the right to receive stock equal to the appreciation in the value of shares of stock from the grant date for a specified period of time, and as a result, are accounted for as equity instruments. As such, the SARs were valued using the Black-Scholes option valuation model. The fair value of each award is estimated on the date of grant using the Black-Scholes option valuation model with the weighted-average assumptions noted in the following table. Expected volatilities are based on both the implied and historical volatility of the Company's stock. The Company uses historical data to project SAR exercises and pre-exercise forfeitures within the valuation model. The expected term of awards represents the period of time that SARs granted are expected to be outstanding. The interest rate for periods during the expected life of the award is based on the U.S. Treasury yield curve in effect at the time of the grant. The weighted-average fair values per share-settled SAR issued during 2012 and 2011 were $18.84 and $15.55, respectively, and were estimated using the following weighted-average assumptions:


	2012		2011
Expected Life in Years	5.0		5.0
Volatility	44.6	%	43.6	%
Interest Rate	0.8	%	1.9	%
Yield Rate	0.6	%	0.8	%

There was approximately $75,000 and $214,000 of compensation expense relating to shares vesting on or before December 31, 2012 and December 31, 2011, respectively, included in salaries, employee benefits and payroll taxes in the Consolidated Statements of Income. As of December 31, 2012, there was approximately $24,000 of total unrecognized compensation cost related to unvested share-based compensation arrangements granted under the Company's stock awards plans. That cost is expected to be recognized over a weighted-average period of approximately 4 months.

The estimated weighted-average grant-date fair value of SARs granted for the years ended December 31 was as follows:


For the Years Ended December 31,		2012		2011
Exercise price equal to market price on date of grant:
Weighted-average market price	$	50.50	$	41.50
Weighted-average grant-date fair value	$	18.84	$	15.55

There are no stock options or SARs granted where the exercise price is less than the market price on the date of grant.