Share-Based Compensation

12 Months Ended

Dec. 31, 2011

Share-Based Compensation

Share-Based Compensation

Note 20—Share-Based Compensation

        Compensation cost is recognized for stock options and restricted stock awards issued to employees. Compensation cost is measured as the fair value of these awards on their date of grant. A Black-Scholes model is utilized to estimate the fair value of stock options, while the market price of the Company's common stock at the date of grant is used as the fair value of restricted stock awards. Compensation cost is recognized over the required service period, generally defined as the vesting period for stock option awards and as the restriction period for restricted stock awards. For awards with graded vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award.

        The Company's 1999 and 2004 stock incentive programs are long-term retention programs intended to attract, retain, and provide incentives for key employees and non-employee directors in the form of incentive and non-qualified stock options and restricted stock.

Stock Options

        With the exception of non-qualified options granted to directors under the 1999 and 2004 plans, which in some cases may be exercised at any time prior to expiration and in some other cases may be exercised at intervals less than one year following the grant date, incentive stock options granted under the plans may not be exercised in whole or in part within one year following the date of the grant, as these incentive stock options become exercisable in 25% increments ratably over the four year period following the grant date. The options are granted at an exercise price at least equal to the fair value of the common stock at the date of grant and have terms ranging from five to ten years. No options were granted under the 1999 plan after January 2, 2004, and the plan is closed other than for any options still unexercised and outstanding. The 2004 plan is the only plan from which new share-based compensation grants may be issued.

        Activity in the Company's stock option plans is summarized in the following table. All information has been retroactively adjusted for stock dividends and stock splits.

	2011					2010					2009
	Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price
Outstanding at January 1		386,207		$	29.02		348,575		$	27.84		351,553		$	26.94
Granted		27,542			32.05		55,857			33.47		33,288			27.48
Exercised		(43,533	)		16.79		(16,220	)		18.88		(30,831	)		17.24
Forfeited		(1	)		11.39		(2,005	)		28.79		(4,099	)		30.80
Expired		(8	)		15.64		—			—		(1,336	)		18.45
Outstanding at December 31		370,207			30.69		386,207			29.02		348,575			27.84
Exercisable at December 31		285,987			30.38		289,469			27.93		274,829			26.82
Weighted-average fair value of options granted during the year				$	11.65				$	13.90				$	9.75

        The aggregate intrinsic value of 370,207 and 386,207 stock options outstanding at December 31, 2011 and 2010 was $448,000 and $1.8 million, respectively. The aggregate intrinsic value of 285,987 and 289,469 stock options exercisable at December 31, 2011 and 2010 was $421,000 and $1.6 million, respectively.

        Information pertaining to options outstanding at December 31, 2011, is as follows:

	Options Outstanding					Options Exercisable
	Number Outstanding		Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		Number Outstanding		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life
$11.39 - $16.00		253	0.1 years	$	15.91		241	$	15.92
$16.01 - $21.00		5,899	1.0 years		19.85		5,897		19.85
$21.01 - $26.00		35,501	1.1 years		22.60		35,485		22.60
$26.01 - $31.00		104,317	3.9 years		27.47		87,131		27.46
$31.01 - $36.00		171,029	6.0 years		32.14		110,024		32.02
$36.01 - $40.99		53,208	5.7 years		39.01		47,209		39.18
		370,207	4.8 years		30.69		285,987		30.38	3.9 years

        The fair value of options is estimated at the date of grant using the Black- Scholes option pricing model and expensed over the options' vesting periods. The following weighted-average assumptions were used in valuing options issued:

	2011	2010	2009
Dividend yield	2.23%	2.05%	2.47%
Expected life	5 years	6 years	6 years
Expected volatility	43.8% - 49.7%	49.0% - 50.1%	44.9% - 49.2%
Risk-free interest rate	2.32%	2.73%	1.87%

        As of December 31, 2011, there was $652,000 of total unrecognized compensation cost related to non-vested stock option grants under the plans. The cost is expected to be recognized over a weighted-average period of 1.04 years as of December 31, 2011. The total fair value of shares vested during the years ended December 31, 2011, 2010 and 2009 was approximately $458,000, $332,000 and $313,000, respectively. Compensation expense of $443,000, $442,000, and $310,000 was recorded in 2011, 2010, and 2009, respectively.

Restricted Stock

        The Company from time-to-time also grants shares of restricted stock to key employees and non-employee directors. These awards help align the interests of these employees and directors with the interests of the shareholders of the Company by providing economic value directly related to increases in the value of the Company's stock. The value of the stock awarded is established as the fair market value of the stock at the time of the grant. The Company recognizes expense, equal to the total value of such awards, ratably over the vesting period of the stock grants. Grants to employees have typically vested over a 48-month period, and beginning in 2007, most new grants cliff vest after four years. Grants to employees for the year ended December 31, 2011 and 2010 cliff vest after four years. Grants to non-employee directors typically vest within a 12-month period.

        All restricted stock agreements are conditioned upon continued employment. Termination of employment prior to a vesting date, as described below, would terminate any interest in non-vested shares. Prior to vesting of the shares, as long as employed by the Company, the key employees and non-employee directors will have the right to vote such shares and to receive dividends paid with respect to such shares. All restricted shares will fully vest in the event of change in control of the Company or upon the death of the recipient.

        Non-vested restricted stock for the year ended December 31, 2011 is summarized in the following table. All information has been retroactively adjusted for stock dividends and stock splits.

Restricted Stock	Shares			Weighted- Average Grant-Date Fair Value
Nonvested at January 1		150,629		$	30.74
Granted		57,639			31.85
Vested		(36,564	)		34.42
Forfeited		—			—
Nonvested at December 31		171,704			30.32

        The Company granted 57,639, 23,562, and 96,257 shares for the years ended December 31, 2011, 2010, and 2009, respectively. The weighted-average- grant-date fair value of restricted shares granted in 2011, 2010, and 2009 was $31.85, $38.13, and $26.76, respectively. Compensation expense of $1.3 million, $1.2 million, and $1.1 million was recorded in 2011, 2010, and 2009, respectively.

        The vesting schedule of these shares as of December 31, 2011 is as follows:

	Shares
2012		35,642
2013		12,978
2014		17,166
2015		48,062
2016		11,649
Thereafter		46,207
		171,704

        As of December 31, 2011, there was $3.5 million of total unrecognized compensation cost related to non-vested restricted stock granted under the plans. The cost is expected to be recognized over a weighted-average period of 4.03 years as of December 31, 2011. The total fair value of shares vested during the years ended December 31, 2011, 2010 and 2009 was approximately $1.3 million, $755,000 and $983,000, respectively.

Employee Stock Purchase Plan

        The Company has registered 363,825 shares of common stock in connection with the establishment of an Employee Stock Purchase Plan. The plan, which expires June 30, 2012, is available to all employees who have attained age 21 and completed six months of service. The Company currently has more than 180,000 shares available for issuances under the plan. The Company intends to extend this plan for five more years to June 30, 2017. The price at which common stock may be purchased for each quarterly option period is the lesser of 95% of the common stock's fair value on either the first or last day of the quarter.

        The 2002 Employee Stock Purchase Plan permits eligible employees to purchase Company stock at a discounted price. Beginning July 1, 2009, the 15% discount was reduced to 5%. The Company recognized $37,000, $35,000 and $69,000 in share-based compensation expense for the years ended December 31, 2011, 2010 and 2009, respectively.