Note 6 - Stock-Based Compensation

9 Months Ended

Sep. 30, 2012

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

6. Stock-Based Compensation

The Company maintains the 1998 Stock Option Plan (“1998 Plan”), the 2006 Stock Plan (“2006 Plan”) and the 2011 Employee Stock Purchase Plan (“2011 ESPP”). In connection with the acquisition of Fidelity and its subsidiary Fidelity & Trust Bank (F&T Bank”), the Company assumed the Fidelity 2004 Long Term Incentive Plan and 2005 Long Term Incentive Plan (the “Fidelity Plans”). No additional options may be granted under the 1998 Plan or the Fidelity Plans.

The 2006 Plan provides for the issuance of awards of incentive options, nonqualifying options, restricted stock and stock appreciation rights to selected key employees and members of the Board. As amended, 1,815,000 shares of common stock are subject to issuance pursuant to awards under the 2006 Plan.  Option awards are made with an exercise price equal to the average of the high and low price of the Company’s shares at the date of grant.

For awards that are service based, compensation expense is being recognized over the service (vesting) period based on fair value, which for stock option grants is computed using the Black Scholes model, and for restricted stock awards is based on the average of the high and low stock price of the Company’s shares at the date of grant. For awards that are performance based, compensation expense is recorded based on the probability of achievement of the goals underlying the grant. No performance based awards are outstanding at September 30, 2012.

In February 2012, the Company awarded 243,767 shares of restricted stock to senior officers, directors and employees.  The shares vest in five substantially equal installments beginning on the date of grant.

Below is a summary of changes in shares under option plans pursuant to our equity compensation plans for the nine months ended September 30, 2012 and 2011. The information excludes restricted stock units and awards.

	Nine Months Ended September 30,
	2012					2011
	Shares			Weighted-Average Exercise Price		Shares			Weighted-Average Exercise Price
Beginning Balance		831,393		$	11.19		995,005		$	10.54
Issued		-			-		4,500			12.96
Exercised		(68,132	)		11.35		(98,752	)		6.97
Forfeited		(2,400	)		6.34		(13,620	)		6.34
Expired		(28,498	)		15.31		(13,108	)		12.33
Ending Balance		732,363		$	11.03		874,025		$	10.99

The following summarizes information about stock options outstanding at September 30, 2012. The information excludes restricted stock units and awards.

Outstanding:
Range of Exercise Prices				Stock Options Outstanding		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Life
$	6.05	-	$8.10		274,456	$	6.51		5.55
$	8.11	-	$11.07		208,955		10.11		1.67
$	11.08	-	$15.43		136,196		11.91		2.38
$	15.44	-	$26.86		112,756		22.64		3.17
					732,363	$	11.03		3.49

Exercisable:
Range of Exercise Prices				Stock Options Exercisable		Weighted-Average Exercise Price
$	6.05	-	$8.10		141,984	$	6.67
$	8.11	-	$11.07		206,955		10.12
$	15.44	-	$26.86		110,077		22.78
					564,312	$	12.05

The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option pricing model with the assumptions as shown in the table below used for grants during the years ended December 31, 2011 and 2010. There were no stock options granted under the 2006 Plan during the nine months ended September 30, 2012.

	Year Ended December 31,
	2011				2010
Expected Volatility		33.61 %	-	36.64 %		44.44	%
Weighted-Average Volatility			35.60%			44.44	%
Expected Dividends			0.0%			0.0	%
Expected Term (In years)		6.0	-	7.5		8.5
Risk-Free Rate			1.82%			1.01	%
Weighted-Average Fair Value (Grant date)	$		5.07		$	6.23

The expected lives are based on the “simplified” method allowed by ASC Topic 718 “Compensation,” whereby the expected term is equal to the midpoint between the vesting period and the contractual term of the award.

The total intrinsic value of outstanding stock options and outstanding exercisable stock options was $4.9 million at September 30, 2012. The total intrinsic value of stock options exercised during the nine months ended September 30, 2012 and 2011 was $341 thousand and $583 thousand, respectively. The total fair value of stock options vested was $134 thousand and $145 thousand for the nine months ended September 30, 2012 and 2011, respectively. Unrecognized stock-based compensation expense related to stock options totaled $258 thousand at September 30, 2012. At such date, the weighted-average period over which this unrecognized expense is expected to be recognized was 2.99 years.

The Company has unvested restricted stock award grants of 314,584 shares under the 2006 Plan at September 30, 2012.  Unrecognized stock based compensation expense related to restricted stock awards totaled $3.5 million at September 30, 2012. At such date, the weighted-average period over which this unrecognized expense was expected to be recognized was 2.56 years.  The following table summarizes the unvested restricted stock awards at September 30, 2012 and 2011.

	Nine Months Ended September 30,
	2012					2011
	Shares			Weighted-Average  Grant Date Fair Value		Shares			Weighted-Average  Grant Date Fair Value
Unvested at Beginning		202,555		$	11.67		114,275		$	9.20
Issued		243,767			16.83		102,162			13.83
Forfeited		(15,787	)		12.99		(423	)		11.99
Vested		(115,951	)		12.91		(19,104	)		8.83
Unvested at End		314,584		$	15.15		196,910		$	11.63

Approved by shareholders in May 2011, the 2011 ESPP reserved 500,000 shares of common stock for issuance to employees. Whole shares are sold to participants in the plan at 85% of the lower of the stock price at the beginning or end of each quarterly offering period. The 2011 ESPP is available to all eligible employees who have completed at least one year of continuous employment, work at least 20 hours per week and at least five months a year.  Participants may contribute a minimum of $10 per pay period to a maximum of $6,250 per offering period or $25,000 annually (not to exceed more than 10% of compensation per pay period). At September 30, 2012, the 2011 ESPP had 460,653 shares remaining for issuance.

Included in salaries and employee benefits the Company recognized $2.1 million and $818 thousand in stock-based compensation expense for the nine months ended September 30, 2012 and 2011, respectively. Stock-based compensation expense is recognized ratably over the requisite service period for all awards.