Share-based Compensation

The Company uses the fair value method of accounting for stock-based compensation. The fair value of stock options is estimated at the date of grant using the Black-Scholes option pricing model.

The following table is a summary of stock awards activity:



	2005 Plan								1999 Plan
		Restricted Stock				Stock Options			Stock Options
	Shares Available For Grant	Number of Shares		Weighted Average Grant Date Fair Value		Number Of Shares	Weighted Average Exercise Price		Number Of Shares	Weighted Average Exercise Price
January 1, 2011	603,634	63,000		$	16.995	16,600	$	12.043	15,800	$	16.018
Awards Granted	—	—		—		—	—		—	—
Vested	—	—		—		—	—		—	—
Forfeitures	3,000	(3,000	)	17.075		—	—		—	—
Expired	—	—		—		—	—		—	—
March 31, 2011	606,634	60,000		$	16.991	16,600	$	12.043	15,800	$	16.018
January 1, 2012	613,434	46,000		$	17.032	17,800	$	10.526	15,800	$	16.018
Awards Granted	—	—		—		—	—		—	—
Vested	—	—		—		—	—		—	—
Forfeitures	—	—		—		—	—		—	—
Expired	—	—		—		—	—		—	—
March 31, 2012	613,434	46,000		$	17.032	17,800	$	10.526	15,800	$	16.018
Shares exercisable at March 31, 2012		—		—		9,400	$	14.301	15,800	$	16.018

The Company estimates a forfeiture rate of 9.45% (1.89% annual rate) for stock options issued to employees and a forfeiture rate of 5.45% (1.09% annual rate) for stock options issued to directors in determining net compensation costs. At March 31, 2012, there were $9 thousand in unrecognized compensation costs related to stock option awards.

The Company has issued restricted stock awards to certain executives and senior officers. The awards vest over periods of one to seven years and are forfeited in their entirety if the officer leaves the Company before the end of the vesting term. Additionally the restricted shares include a performance condition that may accelerate vesting at the achievement of a diluted earnings per share and net income target. Non-achievement of the performance condition during the vesting period would not prevent vesting of the shares. Dividends are paid quarterly to restricted stock grantees. At March 31, 2012, there were $54 thousand in unrecognized compensation costs. The unrecognized costs at March 31, 2012, are expected to be recognized over a weighted-average period of seven months. The Company estimates that 4.00% (.57% annual rate) of the nonvested shares will be forfeited in determining net compensation expenses recognized.

In July 2010 the Board of Directors approved the reservation of 1,000,000 shares of authorized, unissued shares for issuance in lieu of cash for directors’ fees earned for 2010 and beyond. All shares are issued at market value and provide a convenient way for directors to receive shares of the Company based on the amount of directors’ fees that would otherwise be paid. Directors individually elect a percentage of their compensation, not less than 50%, to be received in common stock with the balance of the fees being paid in cash each quarter. For the first quarter of 2012, 7,785 shares were issued to directors in lieu of fees.