10.     EMPLOYEE BENEFITS

The Company has a 401(k) Plan that allows employees to make pre-tax contributions for retirement. The 401(k) Plan provides for the Company to match employee contributions based on each employee contribution percentage. For each employee's 1% through 3% dollar contributions, the Company will match 100% of such dollar contributions, and for each employee's 4% through 5% dollar contributions, the Company will match 50% of such dollar contributions. The Company also has an Employee Stock Ownership Plan ("ESOP"). All full-time employees of the Company with 1,000 hours of service are eligible to participate in the ESOP. The Company makes discretionary profit sharing contributions into the 401(k) Plan, ESOP and in cash. Company discretionary contributions to both the 401(k) Plan and the ESOP are allocated to participant accounts in proportion to each participant's compensation and vest over five and six year periods, respectively. Employee contributions to the ESOP are not allowed. The 401(k) Plan does provide for limited investment in the Company's common stock.

The following were payments made in accordance with the plans described above in 2011, 2010, and 2009 (dollars in thousands):

The Company has an obligation to certain members of the Bank's Board of Directors under deferred compensation plans in the amount of $1.0 million at December 31, 2011 and 2010. The expenses related to the deferred compensation plans were $80,000, $84,000 and $102,000 for the years ended December 31, 2011, 2010 and 2009, respectively. These benefits will be fully funded by life insurance proceeds.

The Company's Board of Directors has approved an annual incentive compensation plan as a means of attracting, rewarding and retaining key executives. Each annual plan, as it may be amended from time to time, is based on both corporate and individual objectives established annually for each participant. Each participant is evaluated within these two categories to determine eligibility and rate of incentive compensation based on performance. Salaries and benefits expense for incentive compensation under this plan was $711,000, $650,000 and zero for the years ended December 31, 2011, 2010 and 2009, respectively.

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. Approximately 3,600 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. The stock option's maximum term is ten years from the date of grant and vests in equal annual installments of 20% over a five year vesting schedule. There remain approximately 907,000 shares available as of December 31, 2011 for issuance under the 2011 and 2003 Plans.

For the year ended December 31, 2011, the Company recognized stock-based compensation expense of approximately $552,000 net of tax, or $0.02 per common share. For the years ended December 31, 2010 and 2009, the Company recognized stock-based compensation expense of approximately $567,000 and $306,000, respectively, net of tax, or $0.02 per common share in both years.

Stock Options

The following table summarizes the stock option activity for the last three years:

A summary of options outstanding at December 31, 2011 is as follows:

The fair value of each stock option grant was estimated on the date of grant using the Black-Scholes option valuation model that uses the assumptions noted in the following table for the years ended December 31, 2011, 2010, and 2009:

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 December 31, 2011 (dollars in thousands, except share and per share amounts):

During the year ended December 31, 2011, the total intrinsic value for stock options exercised was $88,000. The total intrinsic value of stock options outstanding was $1,000. The fair value of stock options vested was approximately $238,000. Cash received from the exercise of stock options for the year ended December 31, 2011 was approximately $302,000, and the tax benefits realized from tax deductions associated with options exercised during the year were $15,000.

During the year ended December 31, 2010, the total intrinsic value for stock options exercised during the year was $32,000. The total intrinsic values of stock options outstanding and exercisable were $138,000. The fair value of stock options vested was approximately $97,000. Cash received from the exercise of stock options for the year ended December 31, 2010 was approximately $61,000 and the tax benefits realized from tax deductions associated with options exercised during the year were $7,000.

Nonvested Stock

The 2003 and the 2011 Stock Incentive 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 50% 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 based on 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 nonvested stock activity for the year ended December 31, 2011:

The estimated unamortized compensation expense, net of estimated forfeitures, related to nonvested stock and stock options issued and outstanding as of December 31, 2011 will be recognized as follows for the years ending (dollars in thousands):

At December 31, 2011, there was $2.1 million of total unrecognized compensation cost related to nonvested stock-based compensation arrangements granted under the plan. The cost is expected to be recognized through 2016.