14. Stock-Based Compensation

At the 2011 Annual Meeting held on May 12, 2011, the Company's stockholders approved the 2011 Incentive Compensation Plan (the "Plan") which provides for the granting of stock-based compensation awards. The Plan replaced the 2002 Incentive Compensation Plan and increased the total number of shares available for issuance by 1,200,000. Under the Plan, directors, officers and employees selected by the Board of Directors are eligible to receive awards, including incentive stock options, nonqualified stock options, stock appreciation rights, stock awards and performance awards. The Company has only issued nonqualified stock options and restricted stock awards under the Plan. As of December 31, 2011, a total of 1,588,110 shares of common stock were authorized for use in the Plan. The amount of shares available for future grants may increase as any outstanding issuances under the 2002 Plan are either forfeited, terminated or otherwise lapse or expire without the issuance of shares. As of December 31, 2011, 1,600,630 shares were available for future grants, including forfeitures of prior outstanding issuances.

During 2011, the Company recognized $2.6 million of stock-based compensation expense which consisted of $2.2 million related to restricted stock grants and $430,000 related to stock options grants. In comparison, during 2010, the Company recognized $2.2 million of stock-based compensation expense which consisted of $1.6 million for restricted stock grants and $512,000 for stock option grants, while total stock-based compensation expense in 2009 was $2.1 million which consisted of $1.7 million for restricted stock grants and $406,000 for stock option grants.

Stock Options:

The Company is required to estimate the fair value of stock-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as compensation expense in the Company's Consolidated Statements of Operations over the requisite service periods using a straight-line method. Since stock-based compensation expense is based on awards ultimately expected to vest, the expense is reduced for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

Generally, stock options are granted with an exercise price equal to the fair market value of the common stock on the date of grant. Since 2006, stock options granted vest over a four year period (vesting at 25% per year) and expire eight years following grant date. Stock options granted prior to 2006 vest over a five year period (vesting at 20% per year) and expire 10 years following the grant date. In either case, upon death, disability, retirement or change of control of the Company (as defined in the Plan) vesting may be accelerated to 100%.

The following is a summary of stock option activity for the year ended December 31, 2011:


	Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term in Years		Aggregate Intrinsic Value ($000)
Outstanding at January 1, 2011		910,103		$	16.82
Granted		—			—
Exercised		(1,562	)		6.23
Forfeited		(29,823	)		7.82
Expired		(62,687	)		23.50

Outstanding at December 31, 2011		816,031			16.66		4.8	$	844

Exercisable at December 31, 2011		593,195			19.82		4.3

As of December 31, 2011, the total compensation cost related to nonvested stock options that have not yet been recognized totaled $671,000 and the weighted average period over which these costs are expected to be recognized is approximately 2.0 years.

Restricted Stock:

Under the Plan, the Company can grant restricted stock awards that vest upon completion of future service requirements or specified performance criteria. The fair value of these awards is equal to the market price of the common stock at the date of grant. The Company recognizes stock-based compensation expense for these awards over the vesting period, using the straight-line method, based upon the number of awards ultimately expected to vest. For grants prior to 2006, the Company recognized compensation expense over the service period of each separately vesting portion of the award, in effect treating each vesting portion as a separate award. Generally, restricted stock awards based upon completion of future service requirements vest 50% at the end of year three, 75% at the end of year four and 100% at the end of year five or upon death, disability, retirement or change of control of the Company (as defined in the Plan). In 2008 the Company granted a restricted stock award to an executive that vested 25% per year over a four year term. If a participant terminates employment prior to the end of the continuous service period, the unearned portion of the stock award is forfeited. The Company may also issue awards that vest upon satisfaction of specified performance criteria. For these types of awards, the final measure of compensation cost is based upon the number of shares that ultimately vest considering the performance criteria.

Under the United States Department of the Treasury's ("UST") Troubled Asset Relief Program ("TARP"), restrictions are placed on the top five most highly compensated employees from receiving incentive compensation, except in restricted stock valued at up to one-third of their total compensation. If granted, the restricted stock may not fully vest for at least two years and until the repayment of TARP, although for every 25% of TARP funds repaid, 25% of the restricted stock may become transferable.

The following table provides information regarding nonvested restricted stock:


	Shares			Weighted- Average Grant- Date Fair Value
Nonvested at January 1, 2011		538,461		$	14.13
Granted		28,452			10.65
Vested		(253,387	)		14.57
Forfeited		(6,149	)		16.49

Nonvested at December 31, 2011		307,377		$	13.40

The fair value of restricted stock awards that vested during 2011 was $2.5 million, compared to $438,000 and $1.3 million during the years ended December 31, 2010 and 2009, respectively. As of December 31, 2011, the total compensation cost related to nonvested restricted stock that has not yet been recognized totaled $2.6 million, and the weighted average period over which these costs are expected to be recognized is approximately 1.6 years.

Valuation Information:

The Company uses the modified Black-Scholes option-pricing model ("Black-Scholes model") for determining the fair value of stock options issued to employees and directors. The determination of the fair value of stock-based payment awards using the Black-Scholes model is impacted by the Company's stock price on the date of grant as well as several assumptions used as inputs into the model. The assumptions include the risk-free interest rate at grant date, expected stock price volatility, expected dividend payout, and expected option life.

The risk-free interest rate assumption is based upon observed interest rates for the expected term of the Company's stock options. The expected volatility input into the model takes into account the historical volatility of the Company's common stock or the expected term of the option. The expected dividend yield assumption is based upon the Company's historical dividend payout, if any, determined at the date of grant. In addition, the Company used the methodology outlined in the Securities and Exchange Commission's Staff Accounting Bulletin No. 107 in determining the expected life of the awards. This methodology takes into account the vesting periods and the contractual term of the award.

The following are the assumptions used to determine the weighted average fair value of stock option awards, using the Black-Scholes model, for each of the periods indicated:


	For the Years Ended December 31,
	2011*		2010			2009
Grant date fair value per share	$	—	$	4.44		$	3.03
Significant assumptions:
Risk-free interest rate at grant date		*		2.59	%		2.61	%
Expected stock price volatility		*		55.00	%		52.00	%
Expected dividend payout		*		0.00	%		0.00	%
Expected option life, in years		*		5.25			5.25

*	There were no grants issued during 2011.