Quarterly report pursuant to Section 13 or 15(d)

Share-Based Payments

v2.4.0.6
Share-Based Payments
 3 Months Ended
Mar. 31, 2013
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Share-Based Payments
Share-Based Payments

The Company’s general practice has been to make a single annual grant of share-based compensation to key employees and to make other employee grants only in connection with new employment or promotions.  Forms of share-based compensation granted to employees by the Company include stock options, non-vested shares of common stock (“non-vested share”), and performance shares.  The Company also typically makes a single annual grant of non-vested shares to non-employee directors in conjunction with the annual election of non-employee directors to the Board of Directors.  Share-based compensation is based on the grant date fair value of the instrument and is recognized, net of estimated forfeitures, ratably over the requisite service period, or vesting period. The Company estimates forfeitures based upon historical experience.  All share-based compensation expense is recognized in salaries, wages and employee benefits.

Employee Activity - Stock Options
 
Stock option grants to employees generally expire seven years from the grant date and typically vest ratably over a three-year period.  The Company used the Black-Scholes option-pricing model to estimate the grant-date fair value of options granted.  The weighted-average fair value of options granted and assumptions used to calculate their fair value during the three months ended March 31, 2013 and 2012 were as follows:





Three months ended

March 31,
2013

March 31,
2012
Expected dividend yield
1.2
%

0.9
%
Expected stock price volatility
43.7
%

46.6
%
Weighted average risk-free interest rate
0.9
%

0.8
%
Expected life of options (years)
5.3


4.2

Weighted average grant date fair value
$
13


$
13


The following tables summarize the Company’s employee stock option activity and related information:
Three months ended March 31, 2013







Weighted-



Weighted-

Aggregate

Average



Average

Intrinsic

Remaining

Options

Exercise

Value

Contractual

(000)

Price

(000)

Term
Outstanding at December 31, 2012
2,874


$
26





Granted
109


37





Exercised
(722
)

25





Forfeited
—


—





Outstanding at March 31, 2013
2,261


$
27


$
22,645


2.8
Exercisable at March 31, 2013
2,050


$
27


$
22,231


2.5
 
Three months ended

March 31,
2013

March 31,
2012
Shared-based compensation for options
$
424


$
822

Tax benefit for option compensation
$
136


$
217

Unrecognized compensation cost for options, net of estimated forfeitures
$
2,488


$
3,265


Employee Activity - Non-vested Shares

Non-vested share grants to employees vest ratably over a three-year period.  The non-vested shares’ fair values were estimated using closing market prices on the day of grant. The following tables summarize the Company’s employee non-vested share activity and related information:











Three months ended March 31, 2013



Weighted-

Aggregate

Non-vested

Average

Grant Date

Shares

Grant Date

Fair Value

(000)

Fair Value

(000)
Outstanding and non-vested at December 31, 2012
168


$
33



Granted
97


37



Vested
(68
)

37



Forfeited
—


—



Outstanding and non-vested at March 31, 2013
197


$
35


$
6,991



Three months ended

March 31,
2013

March 31,
2012
Shared-based compensation for non-vested shares
$
743


$
445

Tax benefit for non-vested share compensation
$
284


$
174

Unrecognized compensation cost for non-vested shares, net of estimated forfeitures
$
6,398


$
5,319


Employee Activity - Performance Shares

In 2013 and 2012, the Company granted performance shares to key employees.  Under the terms of the performance share agreements, on the third anniversary of the grant date, the Company will issue to the employees a calculated number of common stock shares based on the three year performance of the Company’s common stock share price as compared to the share price performance of a selected peer group.  No shares may be issued if the Company share price performance outperforms 30% or less of the peer group, but the number of shares issued may be doubled if the Company share price performs better than 90% of the peer group.  The fair value of the performance shares was estimated using a Monte Carlo simulation. The weighted average assumptions used in the Monte Carlo calculation were as follows:


Three months ended

March 31,
2013

March 31,
2012
Expected stock price volatility
34.5
%

40.8
%
Weighted average risk-free interest rate
0.4
%

0.4
%

The following tables summarize the Company’s employee performance share activity, assuming median share awards, and related information:
Three months ended March 31, 2013



Weighted-

Aggregate

Performance

Average

Grant Date

Shares

Grant Date

Fair Value

(000)

Fair Value

(000)
Outstanding and non-vested at December 31, 2012
62


$
36



Granted
26


40



Vested
—


—



Outstanding and non-vested at March 31, 2013
88


$
37


$
3,278



Three months ended

March 31,
2013

March 31,
2012
Shared-based compensation for performance shares
$
233


$
147

Tax benefit for performance share compensation
$
89


$
57

Unrecognized compensation cost for performance shares, net of estimated forfeitures
$
2,012


$
1,724


Non-employee Director Activity - Non-vested Shares

Grants of non-vested shares to non-employee directors vest ratably over the elected term to the Board of Directors, or one year.  The following tables summarize the Company’s non-employee non-vested share activity and related information:

Three months ended March 31, 2013



Weighted-

Aggregate

Non-vested

Average

Grant Date

Shares

Grant Date

Fair Value

(000)

Fair Value

(000)
Outstanding and non-vested at December 31, 2012
20


$
32



Granted
—


—



Vested
—


—



Outstanding and non-vested at March 31, 2013
20


$
32


$
640



Three months ended

March 31,
2013

March 31,
2012
Shared-based compensation for non-vested shares
$
157


$
192

Tax benefit for non-vested share compensation
$
60


$
75

Unrecognized compensation cost for non-vested shares, net of estimated forfeitures
$
67


$
78


Non-employee Director Activity - Stock Options

In addition to the above activity, each May from 1995 to 2005 options were granted to the non-employee directors of the Company.  The options have terms of ten years and are fully exercisable.  At March 31, 2013, 26,250 options were outstanding and will expire between May 2014 and May 2015.  At March 31, 2013, the weighted average exercise price per share and remaining contractual term for the outstanding options of non-employee directors were $23 and 1.7 years, respectively.