Note 16 - Share-Based Compensation

12 Months Ended

Dec. 31, 2012

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 grant 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 of 2006, the Board approved the grant 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 the end of 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 grant date. The fair value is defined as the average of the high and low stock price on the grant date. All options have a term of ten years from the grant date, 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. Both stock options and restricted stock awards vest over three years with 50% vesting after two years from the grant date and the remaining 50% vesting three years after the grant date provided the employee remains employed by the Company during this period (subject to accelerated vesting in the event of change-in-control or upon certain terminations 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 Company’s common stock on the grant date. All options have a term of ten years from the grant date.

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 grant date subject to accelerated vesting in the event of retirement, death, disability, or change-in-control, as defined in the Directors Plan.

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, 2012
	Shares Authorized		Shares Available For Grant
Omnibus Plan		8,631,641		2,322,994
Directors Plan		481,250		76,727

Salary Stock Awards – In October of 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 the three years ended December 31, 2012. 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 the Company’s 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. The Company concluded its participation in the TARP in the fourth quarter of 2011.

Salary Stock Awards Granted

	Years ended December 31,
	2012		2011		2010
Shares granted		10,983		45,889		49,569
Weighted-average price	$	11.51	$	10.10	$	12.30

The issuance of salary stock award 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.

Accounting Treatment

The Company recognizes share-based compensation expense based on the estimated fair value of the option or award at the grant or modification date. 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,
	2012			2011			2010
Restricted stock/unit award expense	$	5,877		$	5,607		$	4,712
Salary stock award expense		127			464			609
Stock option expense		-			291			317
Total share-based compensation expense		6,004			6,362			5,638
Income tax benefit		2,456			2,602			2,199
Share-based compensation expense, net of tax	$	3,548		$	3,760		$	3,439
Basic earnings per common share	$	0.05		$	0.05		$	0.05
Diluted earnings per common share	$	0.05		$	0.05		$	0.05
Cash flows provided by (used in) operating activities	$	170		$	(179	)	$	350
Cash flows (used in) provided by financing activities (1)	$	(21	)	$	47		$	(189	)

(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, 2012
	Options			Average Exercise Price		Weighted Average Remaining Contractual Term (1)		Aggregate Intrinsic Value (2)
Outstanding at the beginning of the year		1,974		$	32.25
Expired		(256	)		31.15
Outstanding at the end of the year		1,718		$	32.42		2.90	$	13
Ending vested and expected to vest		1,718		$	32.42		2.90	$	13
Exercisable at the end of the year		1,718		$	32.42		2.90	$	13

(1)

Represents the average remaining contractual life in years.

(2)

Aggregate intrinsic value represents the total pre-tax intrinsic value that would have been received by the option holders if they had exercised their options on December 31, 2012. Intrinsic value equals 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. This amount will fluctuate with changes in the fair value of the Company’s common stock.

Stock Option Valuation Assumptions–The Company estimates the fair value of stock options at the grant date using a Black-Scholes option-pricing model that utilizes the assumptions outlined in the following table. No stock options were granted during the years ended December 31, 2012 or 2010.

Stock Option Valuation Assumptions

	Years Ended December 31,
	2012		2011			2010
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 the 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 Company’s 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 grant date. 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,
	2012		2011		2010
Share-based compensation expense	$	-	$	291	$	317
Unrecognized compensation expense	$	-	$	-	$	23
Weighted-average amortization period remaining (in years)		-		-		0.1

No stock options were exercised and no stock option award modifications were made during the three years ended December 31, 2012.

Restricted Stock and Restricted Stock Unit Awards

Restricted Stock Award Transactions

(Amounts in thousands, except per share data)

	Years Ended December 31,
	2012					2011
	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 the beginning of the year		1,011		$	11.92		978		$	11.99
Granted		610			11.35		490			12.08
Vested		(429	)		11.23		(358	)		11.77
Forfeited		(105	)		11.90		(99	)		13.95
Non-vested awards at the end of the year		1,087		$	11.87		1,011		$	11.92
Restricted Stock Units
Non-vested awards at the beginning of the year		26		$	12.08		-		$	-
Granted		55			11.35		26			12.08
Vested		(19	)		11.23		-			-
Non-vested awards at the end of the year		62		$	11.87		26		$	12.08

Other Restricted Stock Award/Unit Information

(Dollar amounts in thousands)

	Years Ended December 31,
	2012		2011		2010
Share-based compensation expense	$	5,877	$	5,607	$	4,712
Unrecognized compensation expense	$	5,674	$	4,784	$	5,248
Weighted-average amortization period remaining (in years)		1.1		1.0		1.1
Total fair value of vested restricted stock awards/unit, at end of period	$	13,559	$	10,264	$	11,421
Income tax benefit realized from vesting/release of restricted stock awards/unit	$	1,884	$	1,828	$	724

No restricted stock/unit award modifications were made during the periods presented.