(16) STOCK INCENTIVE AND STOCK OPTION PLANS

Key employees and directors of the Company and its subsidiaries have been granted stock options under the Company’s Long-Term Equity Incentive Plan, 1995 Non-Qualified Stock Option Plan for Non-Employees (the “1995 Plan”) and 1998 Stock Option Plan (collectively, the “Plans”). Further, restricted stock and restricted stock units may be awarded under the 1995 Plan, and restricted stock, restricted stock units and performance shares may be awarded under the Long-Term Equity Incentive Plan. All options granted pursuant to these plans have an exercise price equal to the market value on the date of the grant and are exercisable over periods of one to ten years. Upon the exercise of stock options, new shares are issued by the Company.

The Company’s Directors’ Fee Unfunded Plan provides that a minimum of 50% of the compensation payable to each director is paid in the form of the Company’s common stock. This plan is registered under the Company’s dividend reinvestment plan and the shares are purchased through the Company’s dividend reinvestment plan which purchases shares in the open market.

FASB ASC 718 requires that compensation expense be measured using estimates of fair value of all stock-based awards. Compensation expense arising from stock options that has been charged against income for the Plans was $1.3 million, $1.9 million and $2.1 million for 2013, 2012 and 2011, respectively. As of December 31, 2013, there was approximately $361,000 of total unrecognized compensation cost related to nonvested stock options. That cost is expected to be recognized over the remaining vesting period of non-vested stock options.

In January 2012, the Company granted stock options to purchase 338,681 shares of the Company’s common stock to its employees under the Long-Term Equity Incentive Plan. These stock options have a contractual life of seven years and vest over a one, two or three-year service period. No stock options were granted during 2013 or 2011. The following tables present the stock option activity under the Plans as of December 31, 2013 and 2012 and changes during the years then ended:


	2013
			Weighted-
			Average
		Weighted-	Remaining	Aggregate
		Average	Contractual	Intrinsic
		Exercise	Term	Value
	Shares	Price	(years)	(In thousands)
Options
Outstanding at January 1, 2013	2,764,854	$ 20.58
Exercised	(64,000)	15.97
Cancelled or forfeited	(509,236)	22.67
Expired	(307,300)	23.60
Outstanding at December 31, 2013	1,884,318	$ 19.69	2.7	$ 10,806

Exercisable at December 31, 2013	1,715,431	$ 20.45	2.5	$ 8,528


	2012
			Weighted-
			Average
		Weighted-	Remaining	Aggregate
		Average	Contractual	Intrinsic
		Exercise	Term	Value
	Shares	Price	(years)	(In thousands)
Options
Outstanding at January 1, 2012	2,714,023	$ 21.72
Granted	338,681	11.93
Exercised	(6,333)	12.94
Cancelled or forfeited	(174,183)	22.04
Expired	(107,334)	20.03
Outstanding at December 31, 2012	2,764,854	$ 20.58	3.1	$ 1,374

Exercisable at December 31, 2012	2,306,860	$ 22.23	2.6	$ 1,332


	2011
			Weighted-
			Average
		Weighted-	Remaining	Aggregate
		Average	Contractual	Intrinsic
		Exercise	Term	Value
	Shares	Price	(years)	(In thousands)
Options
Outstanding at January 1, 2011	2,946,307	$ 21.41
Exercised	(2,225)	9.40
Cancelled or forfeited	(76,659)	22.86
Expired	(153,400)	15.39
Outstanding at December 31, 2011	2,714,023	$ 21.72	3.6	$ 2

Exercisable at December 31, 2011	2,330,234	$ 22.23	3.3	$ 2

The following table presents the status of the Company’s nonvested options as of December 31, 2013

and changes during the year then ended:


		Weighted-	Weighted-
		Average	Average
		Exercise	Grant Date
	Shares	Price	Fair Value
Nonvested Options
Outstanding at January 1, 2013	457,994	$ 12.30	$ 4.11
Granted	-	-	-
Vested	(257,399)	12.53	4.08
Forfeited or cancelled	(31,708)	12.38	4.10
Outstanding at December 31, 2013	168,887	$ 11.93	$ 4.16

The Company uses historical data to estimate stock option exercise and employee departure behavior used in the Black-Scholes-Merton option valuation model. Groups of participants (executive, non-executives and directors) are considered separately for valuation purposes. The expected term of stock options granted is derived from analysis of all historical data on stock option activity and represents the period of time that stock options granted are expected to be outstanding; the range given below results from certain groups of participants exhibiting different post-vesting behaviors. The risk-free rate for periods within the contractual term of the stock option is based on the U. S. Treasury yield curve in effect at the time of grant. The expected volatility is estimated based on the Company’s historical experience. The following table provides the range of assumptions used for stock options granted during the year ended December 31, 2012:


		2012

Expected volatility		49.9%
Weighted-average volatility		49.9%
Expected dividends		2.50%
Expected term (in years)		4.8 - 4.9
Risk-free rate		0.81%

The weighted-average grant-date fair value of stock options granted during 2012 was $4.16. The intrinsic value of stock options exercised during the years ended December 31, 2013, 2012 and 2011 was approximately $289,000, $9,000 and $6,000, respectively.

The following table summarizes information about stock options outstanding at December 31, 2013:


	Options Outstanding			Options exercisable
Range of	Number	Weighted-Avg	Weighted-Avg	Number	Weighted-Avg
Exercise Prices	Outstanding	Remaining Life (years)	Exercise Price	Exercisable	Exercise Price

$10.07 to $13.25	635,251	4.4	$ 12.63	466,364	$ 12.59
$17.10 to $22.97	539,217	2.0	22.32	539,217	22.32
$23.19 to $24.03	349,000	1.4	23.58	349,000	23.58
$24.27 to $25.31	360,850	2.0	24.39	360,850	24.39
$10.07 to $25.31	1,884,318	2.7	$ 19.69	1,715,431	$ 20.45

The Company’s Long-Term Equity Incentive plan allows for the issuance of performance shares. Performance shares entitle the recipient to receive shares of the Company’s common stock upon the achievement of performance goals that are specified in the award over a specified performance period. The recipient of performance shares is not treated as a shareholder of the Company and is not entitled to vote or receive dividends until the performance conditions stated in the award are satisfied and the shares of stock are actually issued to the recipient.

In January 2010, the Company granted 125,395 performance shares to employees for the two-year performance period from January 1, 2010 through December 31, 2011. In March 2011, the Company granted 125,410 performance shares to employees for the two-year performance period from January 1, 2011 through December 31, 2012. In January 2012, the Company granted 103,055 performance shares to employees for the two-year performance period from January 1, 2012 through December 31, 2013. In January 2013, the Company granted 83,620 performance shares to employees for the two-year performance period from January 1, 2013 through December 31, 2014. All of these performance shares vest over a three-year period and are valued at the fair value of the Company’s stock at the grant date based upon the estimated number of shares expected to vest. No expense was recorded in 2011 related to the 2010 grant, as the Company failed to meet the performance threshold for the 2010-2011 performance period. Compensation expense of approximately $193,000, $659,000 and $147,000 was recognized in 2013, 2012 and 2011, respectively, related to the 2011 grant of performance shares. Compensation expense of approximately $650,000 and $731,000 was recognized in 2013 and 2012, respectively, related to the 2012 grant of performance shares. Compensation expense of approximately $801,000 was recognized in 2013 related to the 2013 grant of performance shares.

In May 2010, the Company awarded 5,000 restricted stock units covering 5,000 shares of Company common stock to its directors and the shares of stock covered by this award were issued to the directors in May 2011. No restricted stock units were awarded during 2011. In May 2012, the Company awarded 7,500 restricted stock units covering 7,500 shares of Company common stock to its directors with the shares of stock covered by this award issued to the directors in May 2013. In May 2013, the Company awarded 7,500 restricted stock units covering 7,500 shares of Company common stock to its directors with the shares of stock covered by this award to be issued to the directors in May 2014. Compensation expense of approximately $104,000, $67,000, and $37,000 was recognized in 2013, 2012, and 2011, respectively, related to the restricted stock units issued to the Company’s directors.

In June 2012, pursuant to the Long-Term Equity Incentive Plan, the Company awarded 60,000 restricted stock units covering 60,000 shares of Company common stock to senior executives with the shares of stock covered by this award to be issued to the senior executives equally beginning in June 2013 over a five-year period. Compensation expense of approximately $311,000 and $199,000 was recognized in 2013 and 2012 related to the restricted stock units issued to the Company’s senior executives.

In November 2012, pursuant to the Long-Term Equity Incentive Plan, the Company awarded 24,083 shares of restricted stock to a senior executive with the shares of stock covered by this award to be issued to the senior executive in November 2017. Compensation expense of approximately $68,000 was recorded in 2013 related to the restricted stock issued to the Company’s senior executive. Also in November 2012, pursuant to the Long-Term Equity Incentive Plan, the Company awarded 88,232 shares of restricted stock to a senior executive, with the shares of stock covered by this award to be issued to the senior executive in January 2015. Compensation expense of approximately $600,000 was recorded in 2013 related to the restricted stock issued to the Company’s senior executive.

In March 2013, pursuant to the Long-Term Equity Incentive Plan, the Company awarded 582,500 shares of restricted stock to employees, with the shares of stock covered by this award to be issued to employees in May 2018. Compensation expense of $1.4 million was recorded in 2013 related to the restricted stock issued to the Company’s employees. Also in March 2013, pursuant to the Long-Term Equity Incentive Plan, the Company awarded 21,341 shares of restricted stock to a senior executive with the shares of stock covered by this award to be issued to the senior executive equally beginning in March 2014 over a three-year period. Compensation expense of approximately $160,000 was recorded in 2013 related to the restricted stock issued to the Company’s senior executive.