Share-based Compensation

6 Months Ended

Jun. 30, 2012

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

Share-based Compensation

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	(3,000	)	—		—		3,000		4.120		—		—
Vested	—		(6,000	)	16.855		—		—		—		—
Forfeitures	4,800		(3,000	)	17.075		(1,800	)	13.840		—		—
Expired	—		—		—		—		—		—		—
June 30, 2011	605,434		54,000		$	17.006	17,800		$	10.526	15,800		$	16.018
January 1, 2012	613,434		46,000		$	17.032	17,800		$	10.526	15,800		$	16.018
Awards Granted	(428,746	)	428,746		4.510		—		—		—		—
Vested	—		—		—		—		—		—		—
Forfeitures	—		—		—		—		—		(600	)	5.140
Expired	—		—		—		—		—		(5,000	)	12.625
June 30, 2012	184,688		474,746		$	5.723	17,800		$	10.526	10,200		$	18.322
Shares exercisable at June 30, 2012			—		—		12,400		$	12.672	10,200		$	18.322

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 June 30, 2012, there were $8 thousand in unrecognized compensation costs related to stock option awards.

The Company issues restricted stock awards to certain executives and other key employees. 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. In April2012 the Company granted 298,746 shares of restricted stock to certain officers and other employees. Also during April2012 the Company granted 130,000 shares of restricted stock to the directors of the Company who are not members of management. The April grants vest over a 5 year period and may be forfeited if the employee or director leaves before the completion of the vesting period. The 2012 stock grants do not contain any performance conditions. At June 30, 2012, there were $1.863 million in unrecognized compensation costs for all restricted stock grants. The unrecognized costs at June 30, 2012, are expected to be recognized over a weighted-average period of 4.69 years. The Company estimates that 4.00% (0.80% annual rate) of the employee shares and 2.00% (0.40% annual rate) of the director shares will be forfeited in determining net compensation expenses recognized.

As a sublimit under the plan, there are 100,000 shares available for awards to directors who are not employees of the Company at the time of the grant. At the time of the April2012 grants, 82,200 shares remained available for grants to such directors. The grants of 130,000 shares to non-employee directors would exceed the amount of shares currently available under the applicable sublimit. The Board proposes to amend the sublimit without affecting the total authorized shares under the plan and to seek shareholder approval of the proposed amendment. The amount of these grants in excess of the existing limitation are contingent on shareholder approval of the amendment.

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 second quarter of 2012, 9,377 shares were issued to directors in lieu of fees. For the first six months of 2012, 17,162 shares were issued to directors in lieu of fees.