Share-based Incentive Plans

9 Months Ended

Sep. 30, 2011

Share-based Incentive Plans [Abstract]

Share-based Incentive Plans

9.  Share-based Incentive Plans

2009 Incentive Plan (the "2009 Incentive Plan")

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 were reserved and available for issuance pursuant to awards granted under the 2009 Incentive Plan.  Under the 2009 Incentive Plan, we were authorized to grant nonqualified stock options ("NQSOs"), restricted stock units ("RSUs") or any combination thereof to certain officers.  During the three months ended June 30, 2011, we granted RSUs and NQSOs pursuant to the 2009 Incentive Plan.

As of September 30, 2011, there were 204,202 nonvested awards outstanding.  For the three and nine months ended September 30, 2011, there was $117,000 and $143,000, respectively, share-based compensation expense related to the 2009 Incentive Plan.  As of September 30, 2010, there were no awards granted or nonvested.  There was no share-based compensation expense for the three and nine months ended September 30, 2010.

As of September 30, 2011, there was $1.5 million of unrecognized compensation cost related to the 2009 Incentive Plan for the nonvested awards granted in June 2011.  The cost is expected to be recognized over a weighted-average period of 3.24 years.

The fair value of each NQSO 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 2011:  dividend yield of 3.54%; risk-free interest rate of 2.30%; expected life of 6.5 and 7.0 years for the three-year and four-year vesting schedule, respectively; and expected volatility of 42.07% and 41.50% for the three-year and four-year vesting schedule, respectively.

The NQSOs which have contractual terms of 10 years and vest in equal annual installments over either a three- or four-year period.

The fair value of each RSU is the ending stock price on the date of grant.  The RSUs vest in equal annual installments over either a three- or four-year period.

Each award is evidenced by an award agreement that specifies the option price, if applicable, the duration of the award, the number of shares to which the award pertains, and such other provisions as the Board determines.

1993 Incentive Stock Option Plan ("the ISO Plan")

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 September 30, 2011 and 2010, there were no nonvested shares for the ISO Plan.  For the nine months ended September 30, 2011 and 2010, there was no stock-based compensation expense related to the ISO Plan.

As of September 30, 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 combined summary of activity in our share-based plans as of September 30, 2011 is presented below:

				Restricted Stock Units Outstanding				Stock Options Outstanding
	Shares Available for Grant			Number of Shares		Weighted- Average Grant-Date Fair Value		Number of Shares			Weighted- Average Exercise Price
Balance, January 1, 2011		1,157,625			-	$	-		10,825		$	10.38
Granted		(204,202	)		33,392		19.19		170,810			19.19
Stock options exercised		-			-		-		(838	)		10.38
Stock awards vested		-			-		-		-			-
Forfeited		-			-		-		-			-
Canceled/expired		-			-		-		-			-
Balance, September 30, 2011		953,423			33,392	$	19.19		180,797		$	18.70

Other information regarding options outstanding and exercisable as of September 30, 2011 is as follows:

			Options Outstanding				Options Exercisable
Range of Exercise Prices			Number of Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life in Years	Number of Shares	Weighted- Average Exercise Price
	$	10.38-10.38	9,987	$	10.38	1.50	9,987	$	10.38
		19.19-19.19	170,810		19.19	9.69	-		-
Total			180,797	$	18.70	9.24	9,987	$	10.38

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 outstanding stock options and exercisable stock options was zero and $76,000 at September 30, 2011, respectively.

The total intrinsic value of stock options exercised during the nine months ended September 30, 2011 and 2010 was $7,000 and $1.5 million, respectively.

Cash received from stock option exercises for the nine months ended September 30, 2011 and 2010 was $9,000 and $419,000, respectively.  The tax benefit realized for the deductions related to the stock option exercises was $2,000 and $328,000 for the nine months ended September 30, 2011 and 2010, respectively.