Note 5 - Stock-Based Compensation

9 Months Ended

Sep. 30, 2012

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

5. Stock-Based Compensation

Under the Company’s equity incentive plans, directors and eligible employees may be granted incentive or non-statutory stock options and/or restricted stock units, or awarded non-vested stock.As of September 30, 2012, the only options granted by the Company were non-statutory stock options to selected Bank officers and non-employee directors at exercise prices equal to the fair market value of a share of the Company’s common stock on the date of grant.  Such options have a maximum ten-year term and vest in 20% annual increments (subject to early termination in certain events) except certain options granted to the Chief Executive Officer of the Company in 2005 and 2008.  If such options expire or terminate without having been exercised, any shares not purchased will again be available for future grants or awards. There were no options granted during 2011 or during the first nine months of 2012.

Option compensation expense totaled $194,000 for the three months ended September 30, 2012, and $194,000 for the three months ended September 30, 2011.  For the nine months ended September 30, option compensation expense totaled $581,000 for 2012 and $756,000 for 2011.  Stock-based compensation is recognized ratably over the requisite service period for all awards.  Unrecognized stock-based compensation expense related to stock options totaled $323,000 at September 30, 2012, and is expected to be recognized over the next 5 months.

No stock options were exercised in the third quarter of 2012 or in the same quarter a year ago.  For the nine months ended September 30, stock options covering 39,784 shares were exercised in 2012 compared to 86,860 shares in 2011.  Cash received totaled $647,000 and the aggregate intrinsic value totaled $34,000 from the exercise of stock options during the nine months ended September 30, 2012, compared to cash received of $1.3 million and the aggregate intrinsic value of $172,000 from the exercise of stock options for the same period a year ago.  The table below summarizes stock option activity for the periods indicated:

	Shares			Weighted-average exercise price		Weighted-average remaining contractual life (in years)		Aggregate intrinsic value (in thousands)
Balance, December 31, 2011		4,356,985		$	28.86		3.0	$	37
Exercised		(39,784	)		16.28
Forfeited		(249,506	)		22.27
Balance, March 31, 2012		4,067,695		$	29.40		3.0	$	65
Forfeited		(281	)		23.37
Balance, June 30, 2012		4,067,414		$	29.40		2.7	$	53
Forfeited		(33,604	)		28.92
Balance, September 30, 2012		4,033,810		$	29.41		2.5	$	61
Exercisable, September 30, 2012		3,926,694		$	29.57		2.4	$	61

At September 30, 2012, 2,436,865 shares were available under the Company’s 2005 Incentive Plan for future grants.

In 2011, the Company granted restricted stock units for 147,661 shares. The Company granted restricted stock units for 1,943 shares on March 30, 2012, and restricted stock units for 47,314 shares on May 8, 2012.  The restricted stock units granted in 2011 and 2012 are scheduled to vest two years from grant date.

The following table presents information relating to the restricted stock units as of September 30, 2012:

	Units
Balance at December 31, 2011		171,410
Granted		49,257
Forfeited		(5,158	)
Vested		(11,814	)
Balance at September 30, 2012		203,695

The compensation expense recorded related to the restricted stock units was $459,000 for the three months ended September 30, 2012, compared to $213,000 for the three months ended September 30, 2011.   For the nine months ended September 30, compensation expense recorded related to the restricted stock units was $1.2 million in 2012 and $523,000 in 2011.  Unrecognized stock-based compensation expense related to restricted stock units was $1.7 million at September 30, 2012, and is expected to be recognized over the next 1.2 years.

The following table summarizes the tax short-fall from share-based payment arrangements:

	For the three months ended September 30,						For the nine months ended September 30,
(Dollars in thousands)	2012			2011			2012			2011
Short-fall of tax deductions in excess of grant-date fair value	$	(114	)	$	(5	)	$	(679	)	$	(276	)
Benefit of tax deductions on grant-date fair value		114			5			777			348
Total benefit of tax deductions	$	-		$	-		$	98		$	72