Stock-Based Compensation Plan

12 Months Ended

Dec. 31, 2011

Stock-Based Compensation Plan [Abstract]

Stock-Based Compensation Plan

(11) Stock–Based Compensation Plan

Stock Options

The Company grants stock options to its officers, independent directors and certain senior management employees pursuant to its 2007 Equity Incentive Plan (Plan) which was adopted on April 23, 2007 and amended on June 5, 2009 and June 3, 2011. The following table summarizes the activity in the Company's stock option plan for the three years ended December 31, 2011:

	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Options outstanding, December 31, 2008		450,180	$	15.01
Options granted- officers		450,000	$	5.60
Options granted- directors		30,000	$	5.60
Options outstanding, December 31, 2009		930,180	$	10.16
Options granted- directors		42,500	$	13.97
Options outstanding, December 31, 2010		972,680	$	10.32
Options granted- officers		180,000	$	24.82
Options granted- directors		40,000	$	21.62
Options outstanding, December 31, 2011		1,192,680	$	12.89		7.1	$	4,997
Options exercisable at December 31, 2011		803,930	$	11.31		6.4	$	3,333
Expected to vest after December 31, 2011 (net of estimated forfeitures)		380,180	$	16.39		7.1	$	1,579

The aggregate intrinsic value represents the value by which the Company's closing stock price on the last trading day of the year ended December 31, 2011 exceeds the exercise price of the stock multiplied by the number of options outstanding or exercisable, excluding options that have a zero or negative intrinsic value.

The total fair value of stock options granted to the Company's officers, certain management employees and independent directors at the time of grant was approximately $2.6 million, or $12.04 per share, $0.2 million, or $5.18 per share and $1.0 million, or $2.07 per share for the years ended December 31, 2011, 2010 and 2009, respectively, calculated using the Black-Scholes-Merton pricing model under the following weighted average assumptions:

		2011			2010			2009
Stock Price	$	24.24		$	13.97		$	5.60
Exercise Price	$	24.24		$	13.97		$	5.60
Volatility		50.2	%		37.3	%		35.1	%
Expected term- Officers and employees		6.25 years		N/A				6.25 years
Expected term- Independent directors		5.5 years		5.5 years			5.5 years
Estimated forfeiture		-				-	7.0		%
Risk free interest rate- minimum		1.60	%		1.28	%		2.83	%
Risk free interest rate- maximum		1.97	%		1.98	%		2.83	%
Dividend yield		-			-			-

An estimated forfeiture rate of 7.0% was applied for the year ended December 31, 2009. The forfeiture rate was estimated based on the average forfeiture rates for similar companies and the Company's estimated future forfeitures. No forfeiture rate was assumed for stock options granted during the years ended December 31, 2011 and 2010 as management believes that none of the grantees will leave the Company during the vesting period. The risk-free rate is based on the implied yield on a U.S. Treasury bond with a term approximating the expected term of the option. In the absence of sufficient historical data, 50.0% of the assumed volatility factor used in the calculation of fair values for stock options granted during 2011 was derived from the average volatility of common shares for similar companies over a period approximating the expected term of the options. The remaining 50.0% was derived from the average volatility of the Company's common shares since their initial public offering in 2007. The assumed volatility factors used in the calculation for the 2010 and 2009 grants were derived from the average price volatility of common shares for similar companies over a period approximating the expected term of the options. As the Company has limited historical data, the expected option term is calculated using the simplified method (“Plain Vanilla” approach).

The Company recorded stock-based compensation expense of $1.1 million, $1.0 million and $0.8 million relating to stock options for the years ended December 31, 2011, 2010 and 2009, respectively. As of December 31, 2011, the remaining unamortized stock-based compensation cost relating to stock options granted to the Company's executive officers, management employees and independent directors was approximately $2.4 million which is to be recognized over the remaining average vesting period of 2.9 years.

Restricted Stock Grant

The Company granted certain employees approximately 39,000 shares of restricted common stock in 2007. The restricted stock had a three-year vesting period, with one third of vested shares issued every 12 months from grant date. Approximately 4,000 shares of restricted stock were forfeited while the remaining 35,000 shares were fully vested in May and July 2010. For the years ended December 31, 2010 and 2009, the Company withheld 3,186 shares and 3,124 shares, respectively, from employees to cover minimum withholding taxes on vested restricted stock. The Company returned the withheld shares to the Equity Incentive Plan to make them available for future grant and paid the applicable taxes to federal and state taxing authorities. No additional shares of restricted common stock have been granted since July 2007. Compensation expense relating to restricted stock for the years ended December 31, 2011, 2010 and 2009 was zero, $0.1 million and $0.2 million, respectively.

Compensation expense relating to stock options and restricted stock is recorded as a component of administrative expenses in the Company's consolidated statements of income with a corresponding credit to additional paid-in capital in the Company's consolidated balance sheet.