Share-based Compensation

9 Months Ended

Sep. 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	12,800		(11,000	)	16.915		(1,800	)	13.840		—		—
Expired	—		—		—		—		—		—		—
September 30, 2011	613,434		46,000		$	17.032	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	(380,646	)	380,646		4.510		—		—		—		—
Vested	—		(37,000	)	17.075		—		—		—		—
Forfeitures	4,600		(4,000	)	4.510		(600	)	5.140		—		—
Expired	—		—		—		—		—		(5,000	)	12.625
September 30, 2012	237,388		385,646		$	4.798	17,200		$	10.714	10,800		$	17.590
Shares exercisable at September 30, 2012			—		—		11,800		$	13.055	10,800		$	17.590

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 September 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. 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 grants to non-management directors were revised during the third quarter by the Board due to a limit on the number of shares that could be granted under the plan. The revised grants to non-management directors were 81,900 shares of restricted stock with a Board commitment to issue an additional 48,100 restricted shares in April 2013 pending shareholder approval of an increase in the director sublimit in the plan. 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 - 48,100 shares in this case - are contingent on shareholder approval of the amendment. 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 September 30, 2012, there were $1.534 million in unrecognized compensation costs for all restricted stock grants. The unrecognized costs at September 30, 2012, are expected to be recognized over a weighted-average period of 4.45 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.

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 third quarter of 2012, 5,994 shares were issued to directors in lieu of fees. For the first nine months of 2012, 23,156 shares were issued to directors in lieu of fees.