Shareholders' Equity

3 Months Ended

Mar. 31, 2012

Shareholders' Equity [Abstract]

Shareholders' Equity

Note 11 – 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 $916,000 and $1.1 million for the three months ended March 31, 2012 and 2011, respectively. The total income tax benefit recognized related to stock-based compensation was $366,000 and $448,000 for the three months ended March 31, 2012 and 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;

• 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

• The modified 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 three months ended March 31, 2012:

(in thousands, except per share data)

	Three months ended March 31, 2012
	Options Outstanding			Weighted-Avg Exercise Price		Weighted-Avg Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Balance, beginning of period		2,151		$	14.48
Exercised		(2	)	$	9.33
Forfeited/expired		(91	)	$	13.35
Balance, end of period		2,058		$	14.54		5.56	$	3,683
Options exercisable, end of period		1,382		$	15.95		4.37	$	2,337

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 months ended March 31, 2012 and 2011 was $7,000 and $115,000, respectively. During the three months ended March 31, 2012 and 2011, the amount of cash received from the exercise of stock options was $20,000 and $212,000, 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 three months ended March 31, 2012. The following weighted average assumptions were used for stock options granted in the three months ended March 31, 2011:

	Three months ended
	March 31,
	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 three months ended March 31, 2012:

(in thousands, except per share data)

	Three months ended March 31, 2012
	Restricted Shares        Outstanding			Weighted Average Grant       Date Fair Value
Balance, beginning of period		585		$	12.98
Granted		356		$	12.28
Released		(122	)	$	13.63
Balance, end of period		819		$	12.58

The total fair value of restricted shares vested and released during the three months ended March 31, 2012 and 2011 was $1.6 million and $651,000, 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 three months ended March 31, 2012:

(in thousands, except per share data)

	Three months ended March 31, 2012
	Restricted Stock Units Outstanding			Weighted Average Grant Date Fair Value
Balance, beginning of period		219		$	9.17
Granted		25		$	11.30
Forfeited/expired		(114	)	$	8.01
Balance, end of period		130		$	10.59

There were no restricted stock units vested and released during the three months ended March 31, 2012 and the total fair value of restricted stock units vested and released during the three months ended March 31, 2011 was $677,000.

As of March 31, 2012, there was $2.4 million of total unrecognized compensation cost related to nonvested stock options which is expected to be recognized over a weighted-average period of 2.2 years. As of March 31, 2012, there was $6.7 million of total unrecognized compensation cost related to nonvested restricted stock which is expected to be recognized over a weighted-average period of 2.7 years. As of March 31, 2012, there was $890,000 of total unrecognized compensation cost related to nonvested restricted stock units which is expected to be recognized over a weighted-average period of 2.0 years, assuming expected performance conditions are met.

For the three months ended March 31, 2012 and 2011, the Company received income tax benefits of $622,000 and $457,000, respectively, 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 three months ended March 31, 2012 and 2011, the Company had net tax deficiencies (tax deficiency resulting from tax deductions less than the compensation cost recognized) of $42,000 and $233,000, respectively. Only cash flows from gross excess tax benefits are classified as financing cash flows.