Incentive Stock Options

3 Months Ended

Mar. 31, 2011

Incentive Stock Options [Abstract]

Incentive Stock Options

9.         Incentive Stock Options

In April 1993, we adopted the Southside Bancshares, Inc. 1993 Incentive Stock Option Plan ("the ISO Plan"), a stock-based incentive compensation plan.  The ISO Plan expired March 31, 2003.

As of March 31, 2011 and 2010, there were no nonvested shares.  For the three months ended March 31, 2011 and 2010, there was no stock-based compensation expense.

As of March 31, 2011 and 2010, there was no unrecognized compensation cost related to the ISO Plan for nonvested options granted in March 2003.

The fair value of each stock option granted is estimated on the date of grant using the Black-Scholes method of option pricing with the following weighted-average assumptions for grants in 2003: dividend yield of 1.93%; risk-free interest rate of 4.93%; expected life of six years; and expected volatility of 28.90%.

Under the ISO Plan, we were authorized to issue shares of common stock pursuant to "Awards" granted in the form of incentive stock options (intended to qualify under Section 422 of the Internal Revenue Code of 1986, as amended).  Before the ISO Plan expired, awards were granted to selected employees and directors.  No stock options have been available for grant under the ISO Plan since its expiration in March 2003.

The ISO Plan provided that the exercise price of any stock option not be less than the fair market value of the common stock on the date of grant.  The outstanding stock options have contractual terms of 10 years.  All options vest on a graded schedule, 20% per year for five years, beginning on the first anniversary date of the grant date.

A summary of the status of our stock options as of March 31, 2011 and the changes during the three months ended March 31, 2011 is presented below:

	Number of Options			Weighted Average Exercise Prices		Weighted Average Remaining Contract Life (Years)		Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2010		10,825		$	10.38		-		-
Exercised		(838	)	$	10.38		-		-
Cancelled		-		$	-		-		-
Outstanding at March 31, 2011		9,987		$	10.38		2.0	$	100
Exercisable at March 31, 2011		9,987		$	10.38		2.0	$	100

The total intrinsic value (i.e., the amount by which the fair value of the underlying common stock exceeds the exercise price of a stock option on exercise date) of stock options exercised during the three months ended March 31, 2011 and 2010 were $7,000 and $775,000, respectively.

Cash received from stock option exercises for the three months ended March 31, 2011 and 2010 was $9,000 and $212,000, respectively.  The tax benefit realized for the deductions related to the stock option exercises were $2,000 and $145,000 for the three months ended March 31, 2011 and 2010, respectively.

On April 16, 2009, our shareholders approved the Southside Bancshares, Inc. 2009 Incentive Plan (the "2009 Incentive Plan"), which is a stock-based incentive compensation plan.  A total of 1,157,625 shares of our common stock are reserved and available for issuance pursuant to awards granted under the 2009 Incentive Plan.  As of March 31, 2011, no awards had been granted under this plan.