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Equity-Based Compensation
 12 Months Ended
Dec. 31, 2011
Equity-Based Compensation [Abstract]  
Equity-Based Compensation
Note 11. Equity-Based Compensation

Stock Options

The Company maintains share-based compensation plans to promote the long-term success of the Company by encouraging officers, employees, directors and individuals performing services for the Company to focus on critical long-range objectives.

At the 2004 Annual Meeting, the Company’s shareholders ratified approval of the 2004 Omnibus Stock Option Plan (“2004 Plan”) which made available up to 200,000 shares for potential grants of incentive stock options, non-qualified stock options, restricted stock awards or performance awards. Non-qualified and incentive stock options, as well as restricted and unrestricted stock may continue to be awarded under the 2004 Plan. Vesting under the 2004 Plan is generally over a three-year period.

In 2001, the Company instituted a plan to grant stock options to non-employee directors (the “Directors’ Option Plan”). The options granted pursuant to the Directors’ Option Plan expire at the earlier of ten years from the date of grant or two years after the optionee ceases to serve as a director of the Company. Options not exercised within the appropriate time shall expire and be deemed cancelled. Options under the Directors’ Option Plan were granted in the form of non-statutory stock options with the aggregate number of shares of Common Stock available for grant under the Directors’ Option Plan set at 108,900 shares (adjusted for the 10% stock dividends paid in 2002 and 2003).

In 1999, the Company instituted the 1999 Stock Option Plan (the “1999 Plan”). Options under the 1999 Plan were granted in the form of non-statutory stock options with the aggregate number of shares of Common Stock available for grant under the Plan set at 332,750 (adjusted for 10% stock dividends paid in 2002 and 2003). The options granted under the 1999 Plan represent the rights to acquire the option shares with deemed grant dates of January 1st for each year beginning with the initial year granted and the following four anniversaries. All stock options granted pursuant to the 1999 Plan vest ratably on the first through the seventh anniversary dates of the deemed grant date. The option price of each stock option is equal to the fair market value (as defined by the 1999 Plan) of the Company’s Common Stock on the date of each deemed grant during the five-year grant period. Vested stock options granted pursuant to the 1999 Plan are exercisable during employment and for a period of five years after the date of the grantee’s retirement, provided retirement occurs at or after age 62. If employment is terminated other than by early retirement, disability, or death, vested options must be exercised within 90 days after the effective date of termination. Any option not exercised within such period will be deemed cancelled.

The Company also has options from various option plans other than described above (the Prior Plans); however, no common shares of the Company are available for grants under the Prior Plans. Awards outstanding under the Prior Plans will remain in effect in accordance with their respective terms.

The cash flows from the tax benefits resulting from tax deductions in excess of the compensation expense recognized for those options and restricted stock (“excess tax benefits”) are classified as financing cash flows. Excess tax benefits totaling $5 thousand, $9 thousand, and $2 thousand are classified as financing cash inflows for 2011, 2010, and 2009, respectively.

During the three years ended December 31, 2011, the Company recognized pre-tax compensation expense related to total equity-based compensation of $98 thousand, $58 thousand, and $153 thousand, respectively. The Company recognizes equity-based compensation on a straight line pro-rata basis, so that the percentage of the total expense recognized for an award is never less than the percentage of the award that has vested.

As of December 31, 2011, there was $221 thousand in unrecognized compensation cost related to unvested stock options. That cost is expected to be recognized over a weighted average period of 1.47 years. The actual compensation cost recognized will differ from this estimate due to a number of items, including new awards granted and changes in estimated forfeitures.

 

The following table summarizes the Company’s stock option activity, and related information for the year ended December 31, 2011:

 

                                 
    Option
Shares		     Weighted
Average
Exercise Price
Per Share		     Weighted Average
Remaining Contractual
Term (Years)		     Aggregate
Intrinsic
Value		  
(Amounts in thousands, except share and per share data)                        

Outstanding at January 1, 2011

     403,218     $ 22.81                  

Granted

     102,844       12.07                  

Exercised

     2,969       9.11                  

Forfeited

     23,650       19.31                  
   

 

 

    

 

 

    

 

 

    

 

 

  

Outstanding at December 31, 2011

     479,443     $ 20.78       7.2     $ 53  
   

 

 

    

 

 

    

 

 

    

 

 

  

Exercisable at December 31, 2011

     395,243     $ 22.61       6.7     $ 21  
   

 

 

    

 

 

    

 

 

    

 

 

  

The fair value of options was estimated at the date of grant using the Black-Scholes-Merton option pricing model and certain assumptions. Expected volatility is based on the weekly historical volatility of the Company’s stock price over the expected term of the option. Expected dividend yield is based on the ratio of the most recent dividend rate paid per share of the Company’s Common Stock to recent trading price of the Company’s Common Stock. The expected term is generally calculated using the “shortcut method.” The risk-free interest rate is based on the U.S. Treasury yield curve at the time of grant for the period equal to the expected term of the option.

The fair values of grants made during the three years ended December 31, 2011, were estimated using the following weighted average assumptions:

 

                         
    2011     2010     2009  
       

Volatility

     27.96 %      —         44.83 % 

Expected dividend yield

     3.24 %      —         2.71 % 

Expected term (in years)

     6.18       —         6.20  

Risk-free rate

     1.50 %      —         2.81 % 

The weighted average grant-date fair value of options granted and the aggregate intrinsic value of options exercised during the year ended December 31, 2011, was $2.56 and $13 thousand, respectively. There were no grants made during the year ended December 31, 2010. The weighted average grant-date fair value of options granted and the aggregate intrinsic value of options exercised during the year ended December 31, 2009, was $5.33 and $5 thousand, respectively.

Stock Awards

The 2004 Plan permits the granting of restricted and unrestricted shares of the Company’s Common Stock either alone, in addition to, or in tandem with other awards made by the Company. Stock grants are generally measured at fair value on the date of grant based on the number of shares granted and the quoted price of the Company’s Common Stock. Such value is recognized as expense over the corresponding service period. Compensation costs related to these types of awards are consistently reported for all periods presented.

 

The following table summarizes the changes in the Company’s nonvested shares of the Company’s Common Stock for the year ended December 31, 2011:

 

                 
          Weighted Average  
    Shares     Grant-Date Fair Value  
     

Nonvested at January 1, 2011

     3,700     $ 15.06  

Granted

     3,600       12.03  

Vested

     950       12.85  

Forfeited

     —         —    
   

 

 

    

 

 

  

Nonvested at December 31, 2011

     6,350     $ 13.67  
   

 

 

    

 

 

  

As of December 31, 2011, there was $76 thousand in unrecognized compensation cost related to unvested stock awards. That cost is expected to be recognized over a weighted average period of 1.05 years. The actual compensation cost recognized will differ from this estimate due to a number of items, including new awards granted and changes in estimated forfeitures.