14. Stock-Based Compensation

The Company maintains two award plans under which stock-based compensation has been granted, the 2006 Stock Option Plan (the "2006 Plan") and the 2007 Long-Term Incentive Plan (Amended and Restated as of May 5, 2011) (the "LTIP"). Upon the adoption of the LTIP, awards were no longer granted under the 2006 Plan. The LTIP was approved by our shareholders and provides for grants of (a) incentive stock options qualified as such under U.S. federal income tax laws, (b) stock options that do not qualify as incentive stock options, (c) stock appreciation rights, (d) restricted stock awards, (e) performance awards, (f) phantom stock, (g) stock bonuses, (h) dividend equivalents, or (i) any combination of such awards. The LTIP permits the granting of up to 3,000,000 shares to directors, officers and other employees of the Company. Grants of awards to employees are approved by the Compensation Committee of the Board of Directors and grants to independent members of the Board of Directors are approved by the Board of Directors. All awards are made with an exercise price or base price, as the case may be, that is not less than the full fair market value per share on the date of grant. No stock option or stock appreciation right may be exercised more than 10 years from the date of grant.

Shares issued as a result of stock option exercises or stock grants may be made available from authorized unissued shares of Common Stock or treasury stock. The Company believes that it currently has adequate authorized unissued shares to meet any requirements to issue shares during 2013. The Company has been given authorization from the Board of Directors to use its discretion to repurchase shares from time-to-time based upon the volume of stock options that have been exercised. To date, the Company has not made any such repurchases.

Stock Options

Stock options granted to employees vest ratably over a three or four year vesting period. Options are granted with an exercise price equal to the market price of the Company's stock on the date of grant. The Company uses the Black-Scholes-Merton option-pricing model to estimate the fair value of each stock option grant as of the date of grant. The resulting compensation cost for fixed awards with graded vesting schedules is amortized on a straight-line basis over the vesting period for the entire award. The expected term of awards granted under the LTIP was determined using the simplified method as outlined in the applicable guidance because the Company did not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term due to the limited period of time its equity shares had been publicly traded. The expected volatility was determined based on the average of comparable public companies', deemed competitors of the Company, historical stock prices over the most recent period commensurate with the expected term of the award. This average volatility approximated the volatility of the Company's common stock over the less-than-four-year period during which it was publicly traded prior to the 2012 grants. The risk-free interest rate was based on U.S. Treasury zero-coupon issues with a remaining term commensurate with the expected term of the award. The expected dividend yield is based on the Company's current intent to not issue cash dividends.

The following summarizes the assumptions used in determining the fair value of stock options granted for fixed awards with graded vesting schedules during the years ended December 31, 2012 and 2011 and 2010.

	2012	2011	2010

Risk-free interest rate	1.2% - 1.4%	2.4%	3.0%
Expected dividend yield	0.0%	0.0%	0.0%
Weighted average expected volatility	50%	49%	50%
Expected term	6.0 - 6.3 years	6.0 years	6.0 years
Weighted average grant-date fair value	$8.57	$11.88	$8.72

A summary of the activity relating to the options outstanding under the Company's plans for the years ended December 31, 2012, 2011 and 2010 is presented below.

			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value (in thousands)

Outstanding at January 1, 2010	1,817,332		$	6.43
Granted	106,912		$	17.18
Exercised	(145,715	)	$	4.60
Forfeited	(12,276	)	$	13.57

Outstanding at December 31, 2010	1,766,253		$	7.18	6.1 years	$	24,398

Granted	90,080		$	24.18
Exercised	(332,099	)	$	4.12
Forfeited	(8,850	)	$	14.89
Expired	(500	)	$	13.00

Outstanding at December 31, 2011	1,514,884		$	8.82	5.5 years	$	16,083

Granted	169,088		$	17.76
Exercised	(245,054	)	$	5.78
Forfeited	(4,680	)	$	19.19
Expired	(2,010	)	$	18.85

Outstanding at December 31, 2012	1,432,228		$	10.34	5.1 years	$	17,220

Exercisable at December 31, 2012	1,179,959		$	8.49	4.4 years	$	16,305

Other data relating to option activity for the years ended December 31 are as follows:

(dollars in thousands)	2012		2011		2010

Intrinsic value of options exercised	$	3,421	$	6,637	$	1,956
Fair value of options vested		725		1,163		895

The following table summarizes information with respect to stock options outstanding and exercisable under the Company's plans at December 31, 2012.

	Options Outstanding

	Options Outstanding					Options Exercisable
					Weighted- Average Remaining Contractual Term	Options Exercisable
Exercise Price Ranges	Number Of Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Number Of Options		Weighted- Average Exercise Price
$3.65 - $9.00		643,361	$	3.69	3.5 years		643,361	$	3.69
$9.01 - $18.00		677,609	$	14.56	6.2 years		501,696	$	13.55
$18.01 - $24.18		111,258	$	23.17	8.4 years		34,902	$	24.18

		1,432,228	$	10.34	5.1 years		1,179,959	$	8.49

Restricted Stock

Restricted stock awards granted to employees vest over three to five years. Restricted stock awards granted to eligible members of the Board of Directors vest ratably, on an annual basis, over a three-year period. The grant date fair value of the restricted stock was equal to the closing market price of the Company's common stock on the date of grant. During the restriction period, the restricted stockholders are entitled to the same rights as a common stockholder with respect to the shares, including the right to vote and receive dividends. Restricted stock awards are also subject to certain claw-back provisions, as defined in the grant agreements.

Following is a summary of restricted stock activity for the three-year period ending December 31, 2012:

			Per Share Weighted- Average Grant Date Fair Value

Outstanding at January 1, 2010	—
Granted	54,502		$	17.15
Forfeited	(557	)	$	17.18

Outstanding unvested at December 31, 2010	53,945		$	17.15
Granted	65,285		$	24.23
Vested	(11,128	)	$	17.13
Forfeited	(1,264	)	$	17.74

Outstanding unvested at December 31, 2011	106,838		$	21.47
Granted	106,289		$	17.95
Vested	(25,248	)	$	21.07
Forfeited	(2,115	)	$	18.91

Outstanding unvested at December 31, 2012	185,764		$	19.54

Performance Awards

The grant date fair value of performance stock awarded was equal to the closing market price of the Company's common stock on the date of grant. Performance stock awards cliff vest on December 31^st of the third year of the performance period, subject to the achievement of certain specified levels of the Company's average return-on-equity ("ROE") over the performance period. ROE is defined as net income divided by stockholders' equity at the beginning of the period. If the Company achieves an ROE that is equal to or greater than the threshold ROE, as defined in the grant agreements, the payment of the performance stock awards will vary depending upon the actual ROE that the Company achieves over the performance period, with the potential payout ranging from a minimum of 50% to a maximum of 200% of the target award. However, if the Company were to achieve an ROE that is less than the threshold ROE, there would not be any payout under these awards and the awards would be forfeited. Additionally, these performance stock awards are subject to certain claw-back provisions, as defined in the grant agreements.

Following is a summary of performance stock award activity for the three-year period ending December 31, 2012:

			Per Share Weighted- Average Grant Date Fair Value

Outstanding at January 1, 2010	—
Granted	40,741		$	17.18
Forfeited	(485	)	$	17.18

Outstanding unvested at December 31, 2010	40,256		$	17.18
Granted	34,179		$	24.18

Outstanding unvested at December 31, 2011	74,435		$	20.39
Granted	41,755		$	17.48
Vested	(30,855	)	$	17.18
Forfeited	(10,412	)	$	17.43

Outstanding unvested at December 31, 2012	74,923		$	20.51

A total of 30,855 shares, or 76.6% of the target number of shares, were earned by the participants for the performance period ending December 31, 2012.

Stock-based Compensation Expense

The Company recognized stock-based compensation expense of approximately $2.9 million, $2.1 million and $1.6 million for the years ended December 31, 2012, 2011 and 2010, respectively, in selling, general and administrative expenses. As of December 31, 2012, there was approximately $5.3 million of total unrecognized stock-based compensation expense related to awards granted under the LTIP, net of estimated forfeitures. This included $1.4 million of unrecognized compensation cost related to non-vested stock options to be recognized over a remaining weighted average vesting period of approximately 1.9 years, $2.8 million of unrecognized compensation cost related to non-vested restricted stock expected to be recognized over a remaining weighted average vesting period of approximately 3.2 years and $1.1 million of unrecognized compensation cost related to non-vested performance awards, expected to be recognized over a remaining weighted average vesting period of approximately 1.7 years.