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Note 21: Stock Option Plan | 12 Months Ended
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Dec. 31, 2012
Notes |
Note 21: Stock Option Plan | Note 21: Stock Option Plan The Company established the 1997 Stock Option and Incentive Plan for employees and directors of the Company and its subsidiaries. Under the plan, stock options or other awards could be granted with respect to 1,600,000 (adjusted for stock splits) shares of common stock. Upon stockholders’ approval of the 2003 Stock Option and Incentive Plan, the 1997 Stock Option and Incentive Plan was frozen; therefore, no new stock options or other awards may be granted under this plan. At December 31, 2012, no options were outstanding under this plan, however there were options exercised under this plan during the year. The Company established the 2003 Stock Option and Incentive Plan for employees and directors of the Company and its subsidiaries. Under the plan, stock options or other awards could be granted with respect to 1,196,448 (adjusted for stock splits) shares of common stock. At December 31, 2012, 733,292 options were outstanding under the plan. Stock options may be either incentive stock options or nonqualified stock options, and the option price must be at least equal to the fair value of the Company’s common stock on the date of grant. Options generally are granted for a 10 year term and generally become exercisable in four cumulative annual installments of 25% commencing two years from the date of grant. The Stock Option Committee may accelerate a participant’s right to purchase shares under the plan. Stock awards may be granted to key officers and employees upon terms and conditions determined solely at the discretion of the Stock Option Committee. The table below summarizes transactions under the Company’s stock option plans:
| Available to |  | Shares Under |  | Weighted
| Grant |  | Option |  | Average Exercise Price
Balance, January 1, 2010 | 524,510 |  | 730,186 |  | $23.215
Granted | (88,190) |  | 88,190 |  | 22.105
Exercised | -- |  | (47,597) |  | 14.088
Forfeited from terminated plan(s) | -- |  | (850) |  | 7.785
Forfeited from current plan(s) | 26,133 |  | (26,133) |  | 25.916
Balance, December 31, 2010 | 462,453 |  | 743,796 |  | 23.592
Granted | (120,100) |  | 120,100 |  | 19.349
Exercised | -- |  | (25,856) |  | 12.053
Forfeited from terminated plan(s) | -- |  | (4,000) |  | 12.898
Forfeited from current plan(s) | 24,987 |  | (24,987) |  | 23.349
Balance, December 31, 2011 | 367,340 |  | 809,053 |  | 23.391
Granted | (105,200) |  | 105,200 |  | 24.759
Exercised | -- |  | (116,479) |  | 19.488
Forfeited from current plan(s) | 64,482 |  | (64,482) |  | 23.168
Balance, December 31, 2012 | 326,622 |  | 733,292 |  | $24.227
The Company’s stock option grants contain terms that provide for a graded vesting schedule whereby portions of the options vest in increments over the requisite service period. These options typically vest one-fourth at the end of years two, three, four and five from the grant date. As provided for under FASB ASC 718, the Company has elected to recognize compensation expense for options with graded vesting schedules on a straight-line basis over the requisite service period for the entire option grant. In addition, ASC 718 requires companies to recognize compensation expense based on the estimated number of stock options for which service is expected to be rendered. Because the historical forfeitures of its share-based awards have not been material, the Company has not adjusted for forfeitures in its share-based compensation expensed under ASC 718. The fair value of each option award is estimated on the date of the grant using the Black-Scholes option pricing model with the following assumptions:
| December 31, | December 31, | December 31,
| 2012 | 2011 | 2010
Expected dividends per share | $0.72 | $0.72 | $0.72
Risk-free interest rate | 0.65% | 0.93% | 1.52%
Expected life of options | 5 years | 5 years | 5 years
Expected volatility | 28.83% | 27.99% | 37.69%
Weighted average fair value of |  |  |
options granted during year | $4.55 | $3.15 | $5.60
Expected volatilities are based on the historical volatility of the Company’s stock, based on the monthly closing stock price. The expected term of options granted is based on actual historical exercise behavior of all employees and directors and approximates the graded vesting period of the options. Expected dividends are based on the annualized dividends declared at the time of the option grant. The risk-free interest rate is based on the five-year treasury rate on the grant date of the options. The following table presents the activity related to options under all plans for the year ended December 31, 2012.
|  |  | Weighted
|  | Weighted | Average
|  | Average | Remaining
|  | Exercise | Contractual
| Options | Price | Term
Options outstanding, January 1, 2012 | 809,053 | $23.391 | 5.43
Granted | 105,200 | 24.759 | --
Exercised | (116,479) | 19.488 | --
Forfeited | (64,482) | 23.168 | --
Options outstanding, December 31, 2012 | 733,292 | 24.227 | 5.34
Options exercisable, December 31, 2012 | 432,589 | 26.163 | 2.97
For the years ended December 31, 2012, 2011 and 2010, options granted were 105,200, 120,100 and 88,190, respectively. The total intrinsic value (amount by which the fair value of the underlying stock exceeds the exercise price of an option on exercise date) of options exercised during the years ended December 31, 2012, 2011 and 2010, was $1.0 million, $145,000 and $388,000, respectively. Cash received from the exercise of options for the years ended December 31, 2012, 2011 and 2010, was $2.3 million, $311,000 and $671,000, respectively. The actual tax benefit realized for the tax deductions from option exercises totaled $888,000, $97,000 and $309,000 for the years ended December 31, 2012, 2011 and 2010, respectively. The following table presents the activity related to nonvested options under all plans for the year ended December 31, 2012.
|  | Weighted | Weighted
|  | Average | Average
|  | Exercise | Grant Date
| Options | Price | Fair Value
Nonvested options, January 1, 2012 | 300,644 | $19.744 | $4.940
Granted | 105,200 | 24.759 | 4.545
Vested this period | (63,730) | 20.035 | 5.509
Nonvested options forfeited | (41,411) | 19.709 | 5.563
Nonvested options, December 31, 2012 | 300,703 | 21.442 | 4.596
At December 31, 2012, there was $1.4 million of total unrecognized compensation cost related to nonvested options granted under the Company’s plans. This compensation cost is expected to be recognized through 2017, with the majority of this expense recognized in 2013 and 2014. The following table further summarizes information about stock options outstanding at December 31, 2012:
| Options Outstanding | Options Exercisable
|  | Weighted |  |  |
|  | Average | Weighted |  | Weighted
|  | Remaining | Average |  | Average
Range of | Number | Contractual | Exercise | Number | Exercise
Exercise Prices | Outstanding | Life | Price | Exercisable | Price
$8.360 to $19.960 | 143,244 | 8.08 years | $16.456 | 25,481 | $8.472
$20.120 to $25.000 | 304,303 | 6.51 years | $22.531 | 121,363 | $21.012
$25.480 to $36.390 | 285,745 | 2.74 years | $29.928 | 285,745 | $29.928
| 733,292 | 5.34 years | $24.227 | 432,589 | $26.163

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