Share-Based Compensation

6 Months Ended

Jun. 30, 2011

Share-Based Compensation

Share-Based Compensation

Note 12 — Share-Based Compensation

The Company’s 1999 and 2004 stock option 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 stock 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 pro 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 expire ten years from the date of grant.  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.  It is the Company’s policy to grant options out of the 661,500 shares registered under the 2004 plan.

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.

						Weighted-
				Weighted-		Average
				Average		Remaining	Aggregate
	Number of			Exercise		Contractual	Intrinsic
Options	Shares			Price		Life (Yrs.)	Value (000’s)
Outstanding at January 1, 2011	386,207			$	29.02
Granted	25,142			32.46
Exercised	(11,550		)	18.46
Expired/Forfeited	(1		)	11.39
Outstanding at June 30, 2011	399,798			29.54		4.93	$	797
Exercisable at June 30, 2011	316,870			28.96		3.99	$	777
Weighted-average fair value of options granted during the year	$	11.85

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:

	Six Months Ended
	June 30,
	2011	2010
Dividend yield	2.20%	2.00%
Expected life	6 years	6 years
Expected volatility	44%	50%
Risk-free interest rate	2.37%	2.73%

As of June 30, 2011, there was $833,000 of total unrecognized compensation cost related to nonvested stock option grants under the plans.  The cost is expected to be recognized over a weighted-average period of 1.55 years as of June 30, 2011.  The total fair value of shares vested during the six months ended June 30, 2011 was $448,000.

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 expenses, equal to the total value of such awards, ratably over the vesting period of the stock grants.  Restricted stock grants to employees typically “cliff vest” after four years.  On occasion, grants of restricted stock will “cliff vest” over a longer period, such as seven or ten years.  Grants to non-employee directors typically vest within a 12-month period.

Nonvested restricted stock for the six months ended June 30, 2011 is summarized in the following table.  All information has been retroactively adjusted for stock dividends and stock splits.

			Weighted-
			Average
			Grant-Date
Restricted Stock	Shares		Fair Value
Nonvested at January 1, 2011	150,629		$	30.74
Granted	52,678		32.21
Vested	(23,931	)	37.06
Forfeited	—		—
Nonvested at June 30, 2011	179,376		30.32

As of June 30, 2011, there was $4.0 million of total unrecognized compensation cost related to nonvested restricted stock granted under the plans.  This cost is expected to be recognized over a weighted-average period of 4.2 years as of June 30, 2011.  The total fair value of shares vested during the six months ended June 30, 2011 was $887,000.