Equity Plan

12 Months Ended

Dec. 31, 2011

Equity Plan

Equity Plan

(10) Equity Plan

        The Company has an Amended and Restated 2004 Equity Plan (the "Equity Plan") for directors, officers, and key employees. The Equity Plan provides for the grant of incentive and non-qualified stock options and restricted stock. The Equity Plan provides that the option price for both incentive and non-qualified stock options will be determined by the Board of Directors at no less than the fair value at the date of grant. Options granted vest on a schedule determined by the Board of Directors at the time of grant. Generally, options vest over four years. All options expire no later than ten years from the date of grant. As of December 31, 2011, there are 523,595 shares available for future grants under the Equity Plan.

        Stock option activity under the Equity Plan is as follows:

Total Stock Options	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Outstanding at January 1, 2011		1,150,821		$	15.47
Granted		153,000		$	5.15
Exercised		—		$	—
Forfeited or expired		(27,902	)	$	11.60
Outstanding at December 31, 2011		1,275,919		$	14.32		5.7	$	198,100
Vested or expected to vest		1,212,123					5.7	$	188,200
Exercisable at December 31, 2011		996,332					4.9	$	83,100

        Information related to the Equity Plan for each of the last three years:

	2011		2010		2009
Intrinsic value of options exercised	$	—	$	—	$	—
Cash received from option exercise	$	—	$	—	$	—
Tax benefit realized from option exercises	$	—	$	—	$	—
Weighted average fair value of options granted	$	2.89	$	2.00	$	2.92

        As of December 31, 2011, there was $807,000 of total unrecognized compensation cost related to nonvested stock options granted under the Equity Plan. That cost is expected to be recognized over a weighted-average period of approximately 2.53 years.

        The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model that uses the assumptions noted in the following table, including the weighted average assumptions for the option grants in each year.

	2011			2010			2009
Expected life in months(1)		72			72			72
Volatility(1)		60	%		59	%		45	%
Weighted average risk-free interest rate(2)		1.86	%		2.11	%		2.48	%
Expected dividends(3)		0.00	%		0.00	%		0.33	%

(1)

The expected life of employee stock options represents the weighted average period the stock options are expected to remain outstanding based on historical experience. Volatility is based on the historical volatility of the stock price over the same period of the expected life of the option.

(2)

Based on the U.S. Treasury constant maturity interest rate with a term consistent with the expected life of the option granted.

(3)

Each grant's dividend yield is calculated by annualizing the most recent quarterly cash dividend and dividing that amount by the market price of the Company's common stock as of the grant date.

        The Company estimates the impact of forfeitures based on historical experience. Should the Company's current estimate change, additional expense could be recognized or reversed in future periods. The Company issues authorized shares of common stock to satisfy stock option exercises.

        The Company granted 51,000 restricted shares of its common stock to an executive officer pursuant to the terms of a restricted stock agreement, dated March 17, 2005. The grant price was $18.15. Under the terms of the agreement, the restricted shares vested 25% per year at the end of years three, four, five and six, provided the executive officer was still with the Company, subject to accelerated vesting upon a change of control, termination without cause, termination by the executive officer for good reason (as defined by the executive employment agreement), death or disability. The fair value of stock award at the grant date was $926,000, which was amortized over the six-year vesting period on the straight-line method. Amortization expense was $33,000, $154,000, and $154,000 in 2011, 2010 and 2009, respectively. All of the shares were vested at December 31, 2011.

        The Company granted 13,500 restricted shares of its common stock to three officers pursuant to the terms of the restricted stock agreements, dated July 26, 2010, under the Equity Plan. The grant price was $3.57. Under the terms of the agreements, the period of restriction, during which the Common Shares shall be subject to the Company's return right, shall lapse upon the later of the following: (a) the date the Company has redeemed all of the issued and outstanding shares of the Company's Series A Fixed Rate Cumulative Perpetual Preferred Stock, or (b) upon the second anniversary of the grant date. However, upon the occurrence of a change in control, or the death or disability of the participant, the Company's return right will lapse immediately. The fair value of stock award at the grant date was $48,195, which is being amortized over two-year period on the straight-line method. Amortization expense was $26,000 and $7,000 in 2011 and 2010, respectively. None of the shares were vested at December 31, 2011.

        The Company granted 62,000 restricted shares of its common stock, at a grant price of $5.16, to eight officers pursuant to the terms of the restricted stock agreements, dated June 16, 2011, under the Amended and Restated 2004 Equity Plan. Under the terms of the agreements, the common stock is subject to risk of forfeiture until the common stock has vested. The common stock will vest upon the later of the following: (a) the date the Company has redeemed all of the issued and outstanding shares of the Company's Series A Fixed Rate Cumulative Perpetual Preferred Stock, or (b) upon the second anniversary of the grant date. However, upon the occurrence of a change in control, or the death or disability of the participant, the common stock will vest immediately. The fair value of stock awards at the grant date was $319,920, which is being amortized over a two year period on the straight-line method. Amortization expense related to the 62,000 shares was $87,000 for the year ended December 31, 2011. None of the shares were vested at December 31, 2011.