NOTE J – STOCK-BASED COMPENSATION

The Corporation has awards outstanding under two share-based compensation plans. The Corporation's 2006 Stock Compensation Plan ("2006 Plan") was approved by its shareholders on April 18, 2006, as a successor to the 1996 Stock Option and Appreciation Rights Plan ("1996 Plan").

The 2006 Plan permits the granting of stock options, stock appreciation rights, restricted stock, and restricted stock units ("RSUs") to employees and non-employee directors for up to 600,000 shares of common stock. At December 31, 2012, 143,730 shares of common stock were available for grant under the 2006 Plan of which the Corporation's Board of Directors granted 27,576 RSUs on January 22, 2013. If any outstanding award under the 2006 Plan for any reason expires or is terminated, the shares allocable to the unexercised portion of such award, including shares of restricted stock and RSUs which did not vest, may again be made subject to an award. The number of awards that can be granted under the 2006 Plan to any one person in any one fiscal year is limited to 70,000 shares.

Through December 31, 2011, equity grants to executive officers and directors under the 2006 Plan consisted of a combination of nonqualified stock options ("NQSOs") and RSUs, while equity grants to other officers consisted solely of NQSOs. Beginning with the January 2012 grant, the Corporation's Board of Directors determined that equity compensation for all officers and directors will consist solely of RSUs. Under the terms of the 2006 Plan, stock options and stock appreciation rights cannot have an exercise price that is less than 100% of the fair market value of one share of the underlying common stock on the date of grant. The terms and/or vesting of awards made under the 2006 Plan will be determined from time to time in accordance with rules adopted by the Corporation's Compensation Committee. Thus far, the Compensation Committee has used a five year vesting period and a ten year term for stock options granted under the 2006 Plan and has made the ability to convert RSUs into shares of common stock and the related conversion ratio contingent upon the financial performance of the Corporation in the third year of the three calendar year period beginning in the year in which the RSUs were awarded. Notwithstanding anything to the contrary in any award agreement, awards under the 2006 Plan will become immediately exercisable or will immediately vest, as the case may be, in the event of a change in control and, in accordance with the terms of the related award agreements, all awards granted to date under the 2006 Plan will become immediately exercisable or will immediately vest, as applicable, in the event of retirement or total and permanent disability, as defined, or death.

The Corporation's 1996 Plan permitted the granting of stock options, with or without stock appreciation rights attached, and stand alone stock appreciation rights to employees and non-employee directors for up to 1,080,000 shares of common stock. The number of stock options and stock appreciation rights that could have been granted under the 1996 Plan to any one person in any one fiscal year was limited to 50,000. Each option granted under the 1996 Plan was granted at a price equal to the fair market value of one share of the Corporation's stock on the date of grant. Options granted under the 1996 Plan on or before December 31, 2000, became exercisable in whole or in part commencing six months from the date of grant and ending ten years after the date of grant. Options granted under the 1996 Plan in January 2005, became exercisable in whole or in part commencing ninety days from the date of grant and ending ten years after the date of grant. By the terms of their grant, all other options under the 1996 Plan were granted with a three-year vesting period and a ten-year expiration date. However, vesting was subject to acceleration in the event of a change in control, retirement, death, disability, and certain other limited circumstances.

Fair Value of Stock Option Awards. The grant date fair value of option awards was estimated on the date of grant using the Black-Scholes option pricing model. The fair values of awards made in 2011 and 2010, as well as the assumptions utilized in determining such values, is presented below. There were no stock options granted by the Corporation's Board of Directors during 2012.

	2011			2010
Grant date fair value		$10.30			$9.13
Expected volatility		45.83	%		47.68	%
Expected dividends		3.03	%		3.19	%
Expected term (in years)		7.16			6.82
Risk-free interest rate		1.93	%		2.34	%

Expected volatility was based on historical volatility for the expected term of the options. The Corporation used historical data to estimate the expected term of options granted. The risk-free interest rate was the implied yield at the time of grant on U.S. Treasury zero-coupon issues with a remaining term equal to the expected term of the options.

Fair Value of Restricted Stock Units. The fair value of restricted stock units is based on the market price of the shares underlying the awards on the grant date, discounted for dividends which are not paid on restricted stock units.

Compensation Expense. Compensation expense for stock options is recognized ratably over the five-year vesting period or the period from the grant date to the participant's eligible retirement date, whichever is shorter. Compensation expense for RSUs is recognized over the three-year performance period and adjusted periodically to reflect the estimated number of shares of the Corporation's common stock into which the RSUs will ultimately be convertible. However, if the period between the grant date and the grantee's eligible retirement date is less than three years, compensation expense is recognized ratably over this shorter period. In determining compensation expense for stock options and RSUs outstanding and not yet vested, the Corporation assumes, based on prior experience that no forfeitures will occur. The Corporation recorded compensation expense for share-based payments of $782,000, $756,000 and $647,000 in 2012, 2011 and 2010, respectively, and related income tax benefits of $311,000, $300,000 and $257,000, respectively.

Stock Option Activity. The following table presents a summary of options outstanding under the Corporation's stock-based compensation plans as of December 31, 2012 and changes during the year then ended.

	Number of Options			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (yrs.)		Aggregate Intrinsic Value (in thousands)
Outstanding at January 1, 2012		449,504			$22.31
Exercised		(129,285	)		20.14
Forfeited or expired		(16,158	)		21.20
Outstanding at December 31, 2012		304,061			$23.29		4.99	$	1,563
Exercisable at December 31, 2012		199,901			$22.31		3.95	$	1,209

All options outstanding at December 31, 2012 are either fully vested or expected to vest. The total intrinsic value of options exercised in 2012, 2011 and 2010 was $1,017,000, $727,000 and $477,000, respectively.

Restricted Stock Activity. On January 24, 2012, the Corporation's Board of Directors granted 29,824 RSUs under the 2006 Plan. The Corporation's financial performance for 2014 will determine the number of shares of common stock, if any, into which the RSUs will ultimately be converted. In the table that follows, the number of RSUs granted represents the maximum number of shares into which the RSUs can be converted. A summary of the status of the Corporation's non-vested shares as of December 31, 2012, and changes during the year then ended is presented below.

				Weighted-
				Average
	Number of			Grant-Date
	Shares			Fair Value
Nonvested at January 1, 2012		30,023			$24.62
Granted		29,824			24.23
Vested		(10,968	)		22.69
Forfeited		(3,435	)		22.69
Nonvested at December 31, 2012		45,444			$24.98

The total fair value of RSUs vested during the years ended December 31, 2012, 2011 and 2010, was $311,000, $430,000 and $558,000, respectively.

Unrecognized Compensation Cost. As of December 31, 2012, there was $1.1 million of total unrecognized compensation cost related to non-vested equity awards. The cost is expected to be recognized over a weighted-average period of 2.20 years.

Cash Received and Tax Benefits Realized. Cash received from option exercises in 2012, 2011 and 2010, was $2,603,000, $1,279,000 and $676,000, respectively. The actual tax benefit realized for the tax deductions from option exercises in 2012, 2011 and 2010, was $261,000, $148,000 and $11,000, respectively.

Other. No cash was used to settle stock options in 2012, 2011 or 2010. The Corporation uses newly issued shares to settle stock option exercises and for the conversion of RSUs.