Note 16 - Share-Based Compensation

12 Months Ended

Dec. 31, 2011

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

16.   SHARE-BASED COMPENSATION

Share-Based Plans

Omnibus Stock and Incentive Plan (the “OmnibusPlan”) –  In 1989, the Board adopted the Omnibus Plan, which allows for the granting of both incentive and non-statutory (“nonqualified”) stock options, stock appreciation rights, restricted stock awards, restricted stock units, performance units, and performance shares to certain key employees.

In August 2006, as an enhancement to the current compensation program, the Board approved the granting of restricted stock awards and restricted stock units to certain key officers. These awards are restricted to transfer, but are not restricted to dividend payment and voting rights.

Since the inception of the Omnibus Plan through 2008, certain key employees were granted nonqualified stock options in February of each year. The option exercise price is set at the fair value of the Company’s Common Stock on the date the options are granted. The fair value is defined as the average of the high and low stock price on the date of grant. All options have a term of ten years from the date of grant, include reload features, and are non-transferable except to immediate family members, family trusts, or partnerships.

Since 2008, the Company grants restricted stock awards instead of nonqualified stock options to certain key employees, typically in February of each year. Both stock options and restricted stock awards vest over three years with 50% vesting after two years from the date of grant and the remaining 50% vesting three years after the date of grant provided the employee remains employed by the Company during this period (subject to accelerated vesting in the event of change-in-control or upon termination of employment, as set forth in the applicable award agreement).

Nonemployee Directors Stock Plan (the “Directors Plan”) – In 1997, the Board adopted the Directors Plan, which provides for the grant of equity awards to non-management Board members. Until 2008, only non-qualified stock options were issued under the Directors Plan. The exercise price of the options is equal to the fair value of the Common Stock on the date of grant. All options have a term of ten years from the date of grant.

In 2008, the Company amended the Directors Plan to allow for the grant of restricted stock awards. The awards are restricted to transfer but are not restricted to dividend payment and voting rights. Both the options and the awards vest one year from the date of grant subject to accelerated vesting in the event of retirement, death, disability, or change-in-control, as defined in the Directors Plan.

Options or restricted stock awards are granted annually at the first regularly scheduled Board meeting in each calendar year (generally in February). Directors elected during the service year are granted equity awards on a pro-rata basis.

Both the Omnibus Plan and the Directors Plan have been submitted to and approved by the stockholders of the Company. The Company issues treasury shares to satisfy stock option exercises and restricted stock award releases.

Shares of Common Stock Available Under Share-Based Plans

	December 31, 2011
	Shares Authorized		Shares Available For Grant
Omnibus Plan		8,631,641		2,474,769
Directors Plan		481,250		98,026

Salary Stock Awards – In October 2009, the Board approved adjustments to the 2010 base salaries of certain of its executive officers, as permitted by the executive compensation provisions of TARP. The approved adjustments became effective on January 1, 2010 and modified the mix between the fixed and variable components of compensation to be paid to these officers during 2010 and 2011. The salary adjustments were paid in accordance with the Company’s standard payroll procedures with 25% paid in cash and 75% paid in fully vested shares of Common Stock. The number of shares of Common Stock granted as of each payroll period end date to each executive officer is determined by dividing that portion of the executive officer’s salary adjustment payable for the period by the closing price of the Common Stock on the date prior to the applicable payroll date.

In 2011, 45,889 shares were granted at a weighted-average price of $10.10 per share, and in 2010, 49,569 shares were granted at a weighted-average price of $12.30 per share. The issuance of these shares is included in share-based compensation expense, but does not reduce the number of shares issued and outstanding under the Omnibus Plan as the issuance is not considered part of the share-based plans referenced above.

Since the Company’s participation in the CPP was concluded in December 2011, the Company is no longer subject to the executive compensation provisions of TARP.

Accounting Treatment

The Company recognizes share-based compensation expense based on the estimated fair value of the option or award at the date of grant or modification. Share-based compensation expense is included in salaries and wages in the Consolidated Statements of Income.

Effect of Recording Share-Based Compensation Expense

(Dollar amounts in thousands, except per share data)

	Years ended December 31,
	2011			2010			2009
Stock option expense	$	291		$	317		$	785
Restricted stock/unit award expense		5,607			4,712			2,731
Salary stock award expense		464			609			-
Total share-based compensation expense		6,362			5,638			3,516
Income tax benefit		2,602			2,199			1,371
Share-based compensation expense, net of tax	$	3,760		$	3,439		$	2,145
Basic earnings per common share	$	0.05		$	0.05		$	0.04
Diluted earnings per common share	$	0.05		$	0.05		$	0.04
Cash flows (used in) provided by operating activities	$	(47	)	$	189		$	177
Cash flows provided by (used in) financing activities (1)	$	47		$	(189	)	$	(177	)

(1)    Amount represents cash flows resulting from the tax benefits of tax deductions in excess of recognized compensation expense.

Stock Options

Nonqualified Stock Option Transactions

(Amounts in thousands, except per share data)

	Year Ended December 31, 2011
	Options			Average Exercise Price		Weighted Average Remaining Contractual Term (1)		Aggregate Intrinsic Value (2)
Outstanding at beginning of year		2,492		$	32.23
Granted		42			12.17
Expired		(560	)		30.62
Outstanding at end of period		1,974		$	32.25		3.60	$	-
Ending vested and expected to vest		1,974		$	32.25		3.60	$	-
Exercisable at end of period		1,974		$	32.25		3.60	$	-

(1)

Represents the average remaining contractual life in years.

(2)

Aggregate intrinsic value represents the total pre-tax intrinsic value (i.e., the difference between the Company’s average of the high and low stock price on the last trading day of the year and the option exercise price, multiplied by the number of shares) that would have been received by the option holders if they had exercised their options on December 31, 2011. This amount will fluctuate with changes in the fair value of the Common Stock.

Stock Option Valuation Assumptions–The Company estimates the fair value of stock options at the date of grant using a Black-Scholes option-pricing model that utilizes the assumptions outlined in the following table. No stock options were granted in 2009 or 2010.

Stock Option Valuation Assumptions

	Years Ended December 31,
	2011			2010		2009
Expected life of the option (in years)		5.3			-		-
Expected stock volatility		42	%		-		-
Risk-free interest rate		2	%		-		-
Expected dividend yield		0.33	%		-		-
Weighted-average fair value of options at their grant date	$	4.72		$	-	$	-

Expected life is based on historical exercise and termination behavior. Expected stock price volatility is derived from historical volatility of the Common Stock over the expected life of the options. The risk-free interest rate is based on the implied yield currently available on U.S. Treasury zero-coupon issues with a remaining term equal to the expected life of the option. The expected dividend yield represents the three-year historical average of the annual dividend yield as of the date of grant. Management reviews and adjusts the assumptions used to calculate the fair value of an option on a periodic basis to better reflect expected trends.

Other Stock Option Information

(Dollar amounts in thousands)

	Years Ended December 31,
	2011			2010			2009
Share-based compensation expense		$	291		$	317		$	785
Unrecognized compensation expense		$	-		$	23		$	283
Weighted-average amortization period remaining (in years)			-			0.1			0.4

No stock options were exercised during the three years ended December 31, 2011. No stock option award modifications were made during 2009, 2010, or 2011.

Restricted Stock and Restricted Stock Unit Awards

Restricted Stock Award Transactions

(Amounts in thousands, except per share data)

	Years Ended December 31,
	2011					2010
	Number of Shares/Units			Weighted Average  Grant Date Fair Value		Number of Shares/Units			Weighted Average  Grant Date Fair Value
Restricted Stock Awards
Non-vested awards at beginning of year		978		$	11.99		653		$	11.94
Granted		490			12.08		448			13.26
Vested		(358	)		11.77		(108	)		16.90
Forfeited		(99	)		13.95		(15	)		11.99
Non-vested awards at end of year		1,011		$	11.92		978			11.99
Restricted Stock Units
Non-vested awards at beginning of year		-		$	-		-		$	-
Granted		26			12.08		-			-
Non-vested awards at end of year		26		$	12.08		-			-

The fair value of restricted stock/unit awards is determined based on the average of the high and low stock price on the date of grant and is recognized as compensation expense over the vesting period.

Other Restricted Stock Award/Unit Information

(Dollar amounts in thousands)

	Years Ended December 31,
	2011		2010		2009
Share-based compensation expense	$	5,607	$	4,712	$	2,731
Unrecognized compensation expense	$	4,784	$	5,248	$	4,489
Weighted-average amortization period remaining (in years)		0.95		1.1		1.6
Total fair value of vested restricted stock awards/unit, at end of period	$	10,264	$	11,421	$	7,205
Income tax benefit realized from vesting/release of restricted stock awards/unit	$	1,828	$	724	$	258

No restricted stock unit award modifications were made during 2009, 2010, or 2011.