Performance Restricted Stock Units

9 Months Ended

Sep. 30, 2011

Performance Restricted Stock Units [Abstract]

Performance Restricted Stock Units

10. Performance Restricted Stock Units

On March 14, 2011, the Company granted 122,144 performance restricted stock units ("PRSUs") to its executive officers that may be settled in cash. The number of PRSUs eligible to be settled in cash will be based on the achievement of return on equity (determined by the quotient resulting from dividing the Company's consolidated net income for 2011 by the average of its beginning of the year and end of the year stockholders' equity for 2011) ("ROE"), and will not be determinable until March 1, 2012 or soon thereafter, but in no event later than March 15, 2012 ("Settlement Date") when the Compensation Committee of the Company's Board of Directors will certify the ROE level achieved for 2011. The payout percentages for the ROE target levels are as follows:

• 50% of the PRSUs will be awarded if the Company achieves an ROE equal to or greater than 14%; and,

• 100% of the PRSUs will be awarded if the Company achieves an ROE equal to or greater than 18%.

If the Company's actual ROE falls between the 14% and 18% levels, the payout amount will be determined by linear interpolation.

If the payout level is achieved, then the amount of the award will be determined by multiplying the number of PRSUs corresponding to the ROE level achieved by the fair market value (at closing market price) of the Company's common stock on the Settlement Date. Payment of the award will be equally divided into three tranches corresponding to the required vesting period where the first tranche will be paid on the Settlement Date and the remaining tranches will be paid to vested participants on or between March 1 and March 15, 2013 and 2014, respectively. Vesting criteria for PRSU awards require employment with the Company throughout 2011 as well as achievement of the performance goal, and employment up through each applicable service vesting date which will be December 31, 2011, 2012 and 2013 for each of the three respective tranches.

The Company applies a graded vesting expense methodology when accounting for the PRSUs and the fair value of the liability is remeasured at the end of each reporting period through the Settlement Date. Compensation expense associated with the PRSUs is based upon the closing market price of the Company's common stock on the measurement date and the number of units expected to be earned after assessing the probability that certain performance criteria will be met and the associated targeted payout level that is forecasted will be achieved, net of estimated forfeitures. Cumulative adjustments are recorded each quarter to reflect changes in the stock price and estimated outcome of the performance-related conditions until the Settlement Date. Compensation expense of approximately $596,000 was recorded by the Company for the nine months ended September 30, 2011 related to the PRSUs.