18. STOCK-BASED COMPENSATION PLANS

At December 31, 2011, the Company has three stock-based compensation plans: the 1997 Stock Option Plan, the 2005 Equity Incentive Plan and the 2011 Incentive Plan (collectively, “the Plans”). Under the Plans, options to purchase common stock were granted to officers and key employees at exercise prices not less than the fair market value of the Company’s common stock on the date of the grant. The Company issues new common stock to satisfy stock option exercises and the issuance of restricted stock awards.

Stock options and restricted stock awards were granted on December 1, 2011, 2010 and 2009. Under the 2011 Incentive Plan, stock options and restricted stock awards are valued at fair market value based on the Company’s closing stock price on the date of grant. Under all former plans, stock options were valued at fair market value based on the average of the Company’s high and low trade prices on the date of grant. The stock options and restricted stock awards granted in 2011, 2010 and 2009 vest ratably over four years. Stock options granted under the 2011 Incentive Plan expire six years from the date of grant. Stock options granted under the 2005 Equity Incentive Plan expire five years from the date of grant. Stock options granted prior to 2006 expire ten years from the grant date, with the exception of certain incentive stock options, which expired five years from the date of grant. As of December 31, 2011, there were 745,000 shares remaining available for stock-based awards under the 2011 Incentive Plan.

The Company expenses stock-based compensation in accordance with ASC 718 using the modified prospective method.

The Company’s policy is to estimate the fair market value of each option award granted on the date of grant using the Black-Scholes option pricing model that uses the assumptions noted in the table below. The Company estimates the fair value of each restricted stock award based on the fair market value of the Company’s stock price on the grant date. The resulting compensation cost for both the options and restricted stock is amortized on a straight-line basis over the vesting period of the respective awards.

In accordance with ASC 718, stock-based compensation expense was recognized in the 2011, 2010 and 2009 consolidated financial statements for stock options and restricted stock awards granted since 2006. An estimate of forfeitures, based on historical data, was included in the calculation of stock-based compensation, and the estimate was adjusted quarterly to the extent that actual forfeitures differ, or are expected to materially differ, from such estimates. The effect of applying the expense recognition provisions of ASC 718 in 2011, 2010 and 2009 decreased Earnings Before Provision For Income Taxes by approximately $1,224,000, $1,128,000 and $877,000, respectively.

As of December 31, 2011, there was $2.1 million of total unrecognized compensation cost related to non-vested stock options granted in the years 2008 through 2011 which is expected to be recognized over the weighted-average remaining vesting period of 3.1 years. As of December 31, 2011, there was $904,000 of total unrecognized compensation cost related to non-vested restricted stock awards granted in the years 2008 through 2011 which is expected to be recognized over the weighted-average remaining vesting period of 3.0 years.

The following weighted-average assumptions were used to determine compensation expense related to stock options in 2011, 2010 and 2009:


	2011		2010			2009
Risk-free interest rate		0.66%		1.00	%		1.35	%
Expected dividend yield		2.65%		2.56	%		2.61	%
Expected term		4.3 years		3.5 years			3.5 years
Expected volatility		29.6%		33.0	%		33.3	%

The risk-free interest rate is based on U. S. Treasury bonds with a remaining term equal to the expected term of the award. The expected dividend yield is based on the Company’s expected annual dividend as a percentage of the market value of the Company’s common stock in the year of grant. The expected term of the stock options is determined using historical experience. The expected volatility is based upon historical stock prices over the most recent period equal to the expected term of the award.

The following tables summarize stock option activity under the Company’s plans:

Stock Options


	Years ended December 31,
	2011				2010					2009
Stock Options	Shares		Weighted Average Exercise Price		Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price
Outstanding at beginning of year		1,269,426	$	20.25		1,195,276		$	18.68		1,100,012		$	17.14
Granted		235,700		24.21		192,000			24.49		184,900			23.09
Exercised		(122,463)		8.95		(113,500	)		10.59		(85,586	)		7.98
Forfeited or expired		(75,175)		24.93		(4,350	)		26.90		(4,050	)		28.03
Outstanding at end of year		1,307,488	$	21.76		1,269,426		$	20.25		1,195,276		$	18.68
Exercisable at end of year		821,510	$	20.16		848,200		$	17.81		846,151		$	15.69
Weighted average fair market value of options granted	$	4.51			$	4.97				$	4.81


	Weighted Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value
Outstanding – December 31, 2011		2.9	$	4,683,000
Exercisable – December 31, 2011		1.9	$	4,470,000

The aggregate intrinsic value for outstanding and exercisable stock options is defined as the difference between the market value of the Company’s stock at December 30, 2011, the last trading day of the year, of $24.55 and the exercise price.

Non-vested Stock Options


Non-vested Stock Options	Number of Options			Weighted Average Exercise Price		Weighted Average Fair Value
Non-vested – December 31, 2008		239,050		$	28.91	$	5.27
Granted		184,900			23.09		4.81
Vested		(71,175	)		28.43		5.40
Forfeited		(3,450	)		28.57		5.31
Non-vested – December 31, 2009		349,325		$	25.93	$	5.00
Granted		192,000			24.49		4.97
Vested		(116,999	)		26.33		5.17
Forfeited		(3,100	)		26.84		5.00
Non-vested – December 31, 2010		421,226		$	25.16	$	4.94
Granted		235,700			24.21		4.51
Vested		(145,298	)		25.86		5.05
Forfeited		(25,650	)		25.62		4.91
Non-vested – December 31, 2011		485,978		$	24.46	$	4.70

The following table summarizes information about outstanding and exercisable stock options at December 31, 2011:


	Options Outstanding						Options Exercisable
Range of Exercise Prices	Options Outstanding		Weighted Average Remaining Contractual Life (in years)		Weighted Average Exercise Price		Number of Options		Weighted Average Exercise Price
$12.04 to $15.46		170,596		0.93	$	12.74		170,596	$	12.74
$16.79 to $18.03		319,492		2.18		17.30		319,492		17.30
$19.33 to $24.49		592,600		4.42		23.96		134,647		23.52
$27.38 to $30.67		224,800		1.43		29.14		196,775		28.92
		1,307,488		2.91	$	21.76		821,510	$	20.16

The following table summarizes stock option activity for the years ended December 31:


	2011		2010		2009
	(Dollars in thousands)
Total intrinsic value of stock options exercised	$	1,299	$	1,443	$	943
Cash received from stock option exercises	$	1,096	$	1,202	$	683
Income tax benefit from the exercise of stock options	$	507	$	563	$	368
Total fair value of stock options vested	$	733	$	604	$	385

Restricted Stock

The following table summarizes restricted stock award activity during the years ended December 31, 2009, 2010 and 2011:


Non-vested Restricted Stock	Shares of Restricted Stock			Weighted Average Grant Date Fair Value
Non-vested – December 31, 2008		53,668		$	26.20
Issued		12,300			23.09
Vested		(19,298	)		25.77
Non-vested – December 31, 2009		46,670		$	25.56
Issued		12,800			24.49
Vested		(22,372	)		25.40
Forfeited		(1,650	)		25.00
Non-vested – December 31, 2010		35,448		$	24.79
Issued		19,300			24.21
Vested		(16,748	)		25.91
Forfeited		—			—
Non-vested – December 31, 2011		38,000		$	24.47

At December 31, 2011, the Company expected 38,000 of shares of restricted stock to vest over a weighted-average remaining contractual term of 3.3 years. These shares had an aggregate intrinsic value of $933,000 at December 31, 2011. The aggregate intrinsic value was calculated using the market value of the Company’s stock on December 30, 2011, the last trading day of the year, of $24.55 multiplied by the number of non-vested restricted shares outstanding. The income tax benefit from the vesting of restricted stock for the years ended December 31 was $158,000 in 2011, $214,000 in 2010 and $173,000 in 2009.