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STOCK-BASED COMPENSATION PLANS
 12 Months Ended
Dec. 31, 2012
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Disclosure of Compensation Related Costs, Share-based Payments [Text Block]
18. STOCK-BASED COMPENSATION PLANS

 

At December 31, 2012, the Company had three stock-based compensation plans: the 1997 Stock Option Plan, the 2005 Equity Incentive Plan and the 2011 Incentive Plan (collectively, “the Plans”). Under the Plans, options to purchase common stock were granted to officers and key employees at exercise prices not less than the fair market value of the Company’s common stock on the date of the grant. The Company issues new common stock to satisfy stock option exercises and the issuance of restricted stock awards. Awards are no longer granted under the 1997 and 2005 plans.

 

Stock options and restricted stock awards were granted on December 1, 2012, 2011 and 2010. Under the 2011 Incentive Plan, stock options and restricted stock awards are valued at fair market value based on the Company’s closing stock price on the date of grant. Under the 1997 and 2005 plans, stock options were valued at fair market value based on the average of the Company’s high and low trade prices on the date of grant. The stock options and restricted stock awards granted in 2012, 2011 and 2010 vest ratably over four years. Stock options granted in 2012 and 2011 expire six years from the date of grant. Stock options granted between 2006 and 2010 expire five years from the date of grant. Stock options granted prior to 2006 expire ten years from the grant date, with the exception of certain incentive stock options, which expired five years from the date of grant. As of December 31, 2012, there were 472,000 shares remaining available for stock-based awards under the 2011 Incentive Plan.

 

The Company expenses stock-based compensation in accordance with ASC 718 using the modified prospective method.

 

The Company’s policy is to estimate the fair market value of each option award granted on the date of grant using the Black-Scholes option pricing model that uses the assumptions noted in the table below. The Company estimates the fair value of each restricted stock award based on the fair market value of the Company’s stock price on the grant date. The resulting compensation cost for both the options and restricted stock is amortized on a straight-line basis over the vesting period of the respective awards.

 

In accordance with ASC 718, stock-based compensation expense was recognized in the 2012, 2011 and 2010 consolidated financial statements for stock options and restricted stock awards granted since 2007. An estimate of forfeitures, based on historical data, was included in the calculation of stock-based compensation, and the estimate was adjusted quarterly to the extent that actual forfeitures differ, or are expected to materially differ, from such estimates. The effect of applying the expense recognition provisions of ASC 718 in 2012, 2011 and 2010 decreased Earnings Before Provision For Income Taxes by approximately $1,201,000, $1,224,000 and $1,128,000, respectively.

 

As of December 31, 2012, there was $2.2 million of total unrecognized compensation cost related to non-vested stock options granted in the years 2009 through 2012 which is expected to be recognized over the weighted-average remaining vesting period of 2.9 years. As of December 31, 2012, there was $987,000 of total unrecognized compensation cost related to non-vested restricted stock awards granted in the years 2009 through 2012 which is expected to be recognized over the weighted-average remaining vesting period of 3.1 years.

 

The following weighted-average assumptions were used to determine compensation expense related to stock options in 2012, 2011 and 2010:

 

    2012     2011     2010  
Risk-free interest rate     0.51 %     0.66 %     1.00 %
Expected dividend yield     2.89 %     2.65 %     2.56 %
Expected term     4.3 years       4.3 years       3.5 years  
Expected volatility     26.4 %     29.6 %     33.0 %

 

The risk-free interest rate is based on U.S. Treasury bonds with a remaining term equal to the expected term of the award. The expected dividend yield is based on the Company’s expected annual dividend as a percentage of the market value of the Company’s common stock in the year of grant. The expected term of the stock options is determined using historical experience. The expected volatility is based upon historical stock prices over the most recent period equal to the expected term of the award.

 

The following tables summarize stock option activity under the Company’s plans:

 

Stock Options

 

    Years ended December 31,  
    2012     2011     2010  
Stock Options   Shares     Weighted
Average
Exercise
Price		     Shares     Weighted
Average
Exercise
Price		     Shares     Weighted
Average
Exercise
Price		  
Outstanding at beginning of year     1,307,488     $ 21.76       1,269,426     $ 20.25       1,195,276     $ 18.68  
Granted     253,400       23.53       235,700       24.21       192,000       24.49  
Exercised     (174,646 )     13.17       (122,463 )     8.95       (113,500 )     10.59  
Forfeited or expired     (120,450 )     27.37       (75,175 )     24.93       (4,350 )     26.90  
Outstanding at end of year     1,265,792     $ 22.76       1,307,488     $ 21.76       1,269,426     $ 20.25  
Exercisable at end of year     706,863     $ 21.89       821,510     $ 20.16       848,200     $ 17.81  
Weighted average fair market value of options granted   $ 3.68             $ 4.51             $ 4.97          

 

    Weighted Average Remaining
Contractual Life (in Years)		     Aggregate Intrinsic Value  
Outstanding - December 31, 2012   3.1     $ 2,022,000  
Exercisable - December 31, 2012   1.8     $ 2,010,000  
                 

The aggregate intrinsic value of outstanding and exercisable stock options is defined as the difference between the market value of the Company’s stock on December 31, 2012 of $23.36 and the exercise price multiplied by the number of in-the-money outstanding and exercisable stock options.

 

Non-vested Stock Options

 

Non-vested Stock Options   Number of
Options		     Weighted
Average
Exercise Price		     Weighted Average
Fair Value		  
Non-vested - December 31, 2009     349,325     $ 25.93     $ 5.00  
Granted     192,000       24.49       4.97  
Vested     (116,999 )     26.33       5.17  
Forfeited     (3,100 )     26.84       5.00  
Non-vested - December 31, 2010     421,226     $ 25.16     $ 4.94  
Granted     235,700       24.21       4.51  
Vested     (145,298 )     25.86       5.05  
Forfeited     (25,650 )     25.62       4.91  
Non-vested - December 31, 2011     485,978     $ 24.46     $ 4.70  
Granted     253,400       23.53       3.68  
Vested     (173,824 )     25.05       4.73  
Forfeited     (6,625 )     24.26       4.60  
Non-vested - December 31, 2012     558,929     $ 23.86     $ 4.23  

 

The following table summarizes information about outstanding and exercisable stock options at December 31, 2012:

 

    Options Outstanding     Options Exercisable  
Range of Exercise Prices   Number of
Options
Outstanding		     Weighted
Average
Remaining
Contractual
Life (in Years)		     Weighted
Average
Exercise
Price		     Number of
Options
Exercisable		     Weighted
Average
Exercise
Price		  
$15.46 to $18.03     318,292       1.22     $ 17.15       318,292     $ 17.15  
$23.09 to $23.53     423,400       4.31       23.35       127,949       23.09  
$24.21 to $30.67     524,100       3.37       25.69       260,622       27.09  
      1,265,792       3.14     $ 22.76       706,863     $ 21.89  

 

The following table summarizes stock option activity for the years ended December 31:

 

    2012     2011     2010  
    (Dollars in thousands)  
Total intrinsic value of stock options exercised   $ 1,704     $ 1,299     $ 1,443  
Cash received from stock option exercises   $ 2,300     $ 1,096     $ 1,202  
Income tax benefit from the exercise of stock options   $ 664     $ 507     $ 563  
Total fair value of stock options vested   $ 821     $ 733     $ 604  

 

Restricted Stock

 

The following table summarizes restricted stock award activity during the years ended December 31, 2010, 2011 and 2012:

 

Non-vested Restricted Stock   Shares of
Restricted Stock		     Weighted Average
Grant Date Fair
Value		  
Non-vested - December 31, 2009     46,670     $ 25.56  
Issued     12,800       24.49  
Vested     (22,372 )     25.40  
Forfeited     (1,650 )     25.00  
Non-vested - December 31, 2010     35,448     $ 24.79  
Issued     19,300       24.21  
Vested     (16,748 )     25.91  
Forfeited     -       -  
Non-vested - December 31, 2011     38,000       24.47  
Issued     19,600       23.53  
Vested     (15,025 )     24.97  
Forfeited     -       -  
Non-vested - December 31, 2012     42,575     $ 23.87  

 

At December 31, 2012, the Company expected 42,575 of shares of restricted stock to vest over a weighted-average remaining contractual term of 3.10 years. These shares had an aggregate intrinsic value of $995,000 at December 31, 2012. The aggregate intrinsic value was calculated using the market value of the Company’s stock on December 31, 2012 of $23.36 multiplied by the number of non-vested restricted shares outstanding. The income tax benefit from the vesting of restricted stock for the years ended December 31 was approximately $137,000 in 2012, $158,000 in 2011 and $214,000 in 2010.