Quarterly report pursuant to Section 13 or 15(d)

Stock-Based Compensation

Stock-Based Compensation
9 Months Ended
Sep. 30, 2011
Stock-Based Compensation  
Stock-Based Compensation

The Company's 2011 Stock Incentive Plan (the "2011 Plan") and the 2003 Stock Incentive Plan (the "2003 Plan") provide for the granting of incentive stock options, non-statutory stock options, and nonvested stock awards to key employees of the Company and its subsidiaries. The 2011 Plan became effective on January 1, 2011 after its approval by shareholders at the annual meeting of shareholders held on April 26, 2011. The 2011 Plan makes available 1,000,000 shares, which may be awarded to employees of the Company and its subsidiaries in the form of incentive stock options intended to comply with the requirements of Section 422 of the Internal Revenue Code of 1986 ("incentive stock options"), non-statutory stock options, and nonvested stock. Fewer than 1,700 shares remain available for grant under the 2003 Plan. Under both plans, the option price cannot be less than the fair market value of the stock on the grant date. The Company issues new shares to satisfy stock-based awards. 904,793 shares remained available as of September 30, 2011 for issuance under the 2011 Plan.


For the three month and nine month periods ended September 30, 2011, the Company recognized stock-based compensation expense of approximately $182,000 and $374,000 net of tax, respectively, and less than $0.01 per common share for both periods ended September 30, 2011.

Stock Options

The following table summarizes the stock option activity for the nine months ended September 30, 2011:


     Number of Stock
Exercise Price

Options outstanding, December 31, 2010

     324,776      $ 19.38   


     134,046        12.11   


     (6,450     8.54   


     (4,110     17.22   


     (413     29.77   




Options outstanding, September 30, 2011

     447,849        17.37   




Options exercisable, September 30, 2011

     210,084        21.03   




The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option valuation model that uses the assumptions noted in the following table for the nine months ended September 30, 2011 and 2010:


     Nine Months Ended September 30,  
     2011     2010  

Dividend yield (1)

     2.36     2.48

Expected life in years (2)

     7.0        7.0   

Expected volatility (3)

     41.02     37.92

Risk-free interest rate (4)

     2.71     3.23

Weighted average fair value per option granted

   $ 4.31      $ 5.53   


(1) Calculated as the ratio of historical dividends paid per share of common stock to the stock price on the date of grant.
(2) Based on the average of the contractual life and vesting schedule for the respective option.
(3) Based on the monthly historical volatility of the Company's stock price over the expected life of the options.
(4) Based upon the U.S. Treasury bill yield curve, for periods within the contractual life of the option, in effect at the time of grant.

The following table summarizes information concerning stock options issued to the Company's employees that are vested or are expected to vest and stock options exercisable as of September 30, 2011 (dollars in thousands):


     Stock Options
Vested or
Expected to Vest

Stock options

     423,735         210,084   

Weighted average remaining contractual life in years

     6.14         3.19   

Weighted average exercise price on shares above water

   $ 10.67       $ 10.67   

Aggregate intrinsic value

   $ 1       $ 1   

The total intrinsic value for stock options exercised during the nine months ended September 30, 2011 was $37,000. There were no stock options exercised during the third quarter of 2011. The fair value of stock options vested during the nine months ended September 30, 2011 was approximately $233,000. Cash received from the exercise of stock options for the nine months ended September 30, 2011 was $56,000.


Nonvested Stock

The 2011 and 2003 Plans permit the granting of nonvested stock, but are limited to one-third of the aggregate number of total awards granted. This equity component of compensation is divided between restricted (time-based) stock grants and performance-based stock grants. Generally, the restricted stock vests fifty percent on each of the third and fourth anniversaries from the date of the grant. The performance-based stock is subject to vesting on the fourth anniversary of the date of the grant dependent upon the performance of the Company's stock price. The value of the nonvested stock awards was calculated by multiplying the fair market value of the Company's common stock on grant date by the number of shares awarded. Employees have the right to vote the shares and to receive cash or stock dividends (restricted stock), if any, except for the nonvested stock under the performance-based component (performance stock).

The following table summarizes the nonvested stock activity for the nine months ended September 30, 2011:


     Number of
Shares of
Restricted Stock
Average Grant-
Date Fair Value

Balance, December 31, 2010

     94,277        15,000      $ 15.93   


     77,225        —          11.39   


     (12,243     —          23.83   


     (11,189     (9,000     12.05   







Balance, September 30, 2011

     148,070        6,000        12.53   







The estimated unamortized compensation expense, net of estimated forfeitures, related to nonvested stock and stock options issued and outstanding as of September 30, 2011 that will be recognized in future periods is as follows (dollars in thousands):


     Stock Options      Restricted

For the remaining three months of 2011

   $ 71       $ 171       $ 242   

For year ending December 31, 2012

     262         632         894   

For year ending December 31, 2013

     254         398         652   

For year ending December 31, 2014

     252         83         335   

For year ending December 31, 2015

     176         16         192   

For year ending December 31, 2016

     55         —           55   











   $ 1,070       $ 1,300       $ 2,370