Shareholders' Equity

9 Months Ended

Sep. 30, 2012

Shareholders' Equity [Abstract]

Shareholders' Equity

Note 12 – Shareholders’ Equity

Stock-Based Compensation

The compensation cost related to stock options, restricted stock and restricted stock units (included in salaries and employee benefits) was $1.0 million and $3.0 million for the three and nine months ended September 30, 2012, respectively, as compared to $942,000 and $2.9 million for the three and nine months ended September 30, 2011, respectively. The total income tax benefit recognized related to stock-based compensation was $415,000 and $1.2million for the three and nine months ended September 30, 2012, respectively, as compared to $377,000 and $1.2million for the three and nine months ended September 30, 2011, respectively.

In 2011, the Company’s Compensation Committee modified restricted stock awards and option grants that were originally issued to fourteen executive officers. As a result of the modification, there was no incremental compensation cost. The modification:

· Added performance vesting conditions linking total shareholder return, compared to the return of a regional bank stock total return index;

· Provided that the awards will cliff vest after three years instead of time vest over a four year period, but only to the extent that the performance conditions are met; and

· Provided that grants will vest in whole or in part only if total shareholder return achieves specified targets, subject to prorated vesting upon death, disability, qualifying retirement, termination for good reason or a change of control.

The following table summarizes information about stock option activity for the nine months ended September 30, 2012:

(in thousands, except per share data)
	Nine months ended September 30, 2012
				Weighted-Avg
	Options	Weighted-Avg		Remaining Contractual	Aggregate
	Outstanding	Exercise Price		Term (Years)	Intrinsic Value
Balance, beginning of period	2,151	$	14.48
Exercised	(31)	$	10.39
Forfeited/expired	(113)	$	14.08
Balance, end of period	2,007	$	14.57	5.11	$	2,842
Options exercisable, end of period	1,403	$	15.85	4.05	$	1,961

The total intrinsic value (which is the amount by which the stock price exceeded the exercise price on the date of exercise) of options exercised during the three and nine months ended September 30, 2012 was $65,000 and $82,000, respectively, as compared to three and nine months ended September 30, 2011  of  none and $147,000, respectively.  During the three and nine months ended September 30, 2012, the amount of cash received from the exercise of stock options was $246,000 and $324,000, respectively, as compared to the three and nine months ended September 30, 2011of none and $310,000, respectively.

The fair value of each option grant is estimated as of the grant date using the Black-Scholes option-pricing model.  There were no stock options granted in the nine months ended September 30, 2012.

The following weighted average assumptions were used for stock options granted in the nine months ended September 30, 2011:

	Nine months ended
	September 30,
	2011
Dividend yield		2.79%
Expected life (years)		7.1
Expected volatility		52%
Risk-free rate		2.71%
Weighted average fair value of options on date of grant	$	4.65

The Company grants restricted stock periodically as a part of the 2003 Stock Incentive Plan for the benefit of employees. Restricted shares issued prior to 2011 generally vest on an annual basis over five years. Restricted shares issued since 2011 generally vest over a three year period, subject to performance vesting conditions stated above.  The following table summarizes information about nonvested restricted share activity for the nine months ended September 30, 2012:

(in thousands, except per share data)
	Nine months ended September 30, 2012
	Restricted	Weighted
	Shares	Average Grant
	Outstanding	Date Fair Value
Balance, beginning of period	585	$	12.98
Granted	360	$	11.80
Released	(144)	$	13.54
Forfeited/expired	(1)	$	13.02
Balance, end of period	800	$	12.35

The total fair value of restricted shares vested and released during the three and nine months ended September 30, 2012 was $136,000 and $1.8 million, respectively, as compared to the three and nine months ended September 30, 2011 of $120,000 and $886,000, respectively.

The Company grants restricted stock units as a part of the 2007 Long Term Incentive Plan for the benefit of certain executive officers.  Restricted stock unit grants are subject to performance-based vesting as well as other approved vesting conditions.  The total number of restricted stock units granted represents the maximum number of restricted stock units eligible to vest based upon the performance and service conditions set forth in the grant agreements.  The following table summarizes information about restricted stock unit activity for the nine months ended September 30, 2012:

(in thousands, except per share data)
	Nine months ended September 30, 2012
	Restricted		Weighted
	Stock Units		Average Grant
	Outstanding		Date Fair Value
Balance, beginning of period	219	$	9.17
Granted	25	$	10.39
Forfeited/expired	(114)	$	8.01
Balance, end of period	130	$	10.41

There were no restricted stock units vested and released during the three and nine months ended September 30, 2012. The total fair value of restricted stock units vested and released during the three and nine months ended September 30, 2011 was none and $677,000 respectively.

As of September 30, 2012, there was $1.8 million of total unrecognized compensation cost related to nonvested stock options which is expected to be recognized over a weighted-average period of 1.8 years.  As of September 30, 2012, there was $5.3 million of total unrecognized compensation cost related to nonvested restricted stock which is expected to be recognized over a weighted-average period of 2.2years. As of September 30, 2012, there was $657,000 of total unrecognized compensation cost related to nonvested restricted stock units which is expected to be recognized over a weighted-average period of 1.6years, assuming expected performance conditions are met.

For the three and nine months ended September 30, 2012, the Company received income tax benefits of $79,000 and $764,000, respectively, as compared to the three and nine months ended September 30, 2011 of $48,000 and $682,000 related to the exercise of non-qualified employee stock options, disqualifying dispositions on the exercise of incentive stock options, the vesting of restricted shares and the vesting of restricted stock units. In the nine months ended September 30, 2012, the Company had net tax deficiencies (tax deficiency resulting from tax deductions less than the compensation cost recognized) of $60,000, compared to $260,000 for the nine months ended September 30, 2011.  Only cash flows from gross excess tax benefits are classified as financing cash flows.