Stock-Based Compensation

6 Months Ended

Jun. 30, 2011

Stock-Based Compensation [Abstract]

Stock-Based Compensation

NOTE 4: Stock-Based Compensation

The fair value of stock options granted is estimated on the date of grant using a Black-Scholes option pricing model, while the fair value of restricted stock shares and salary shares is their fair market value on the date of grant. The fair values of stock grants are amortized as compensation expense on a straight-line basis over the vesting period of the grants. Compensation expense recognized is included in personnel expense in the consolidated statements of income.

Assumptions are used in estimating the fair value of stock options granted. The weighted average expected life of the stock option represents the period of time that stock options are expected to be outstanding and is estimated using historical data of stock option exercises and forfeitures. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. The expected volatility is based on the historical volatility of the Corporation’s stock. The following assumptions were used in estimating the fair value for options granted in the first half of 2011 and full year 2010:

	2011			2010
Dividend yield		2.00	%		3.00	%
Risk-free interest rate		2.30	%		2.70	%
Expected volatility		47.20	%		45.38	%
Weighted average expected life	6 years			6 years
Weighted average per share fair value of options	$	5.59		$	4.60

The Corporation is required to estimate potential forfeitures of stock grants and adjust compensation expense recorded accordingly. The estimate of forfeitures will be adjusted over the requisite service period to the extent that actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures will be recognized in the period of change and will also impact the amount of stock compensation expense to be recognized in future periods.

A summary of the Corporation’s stock option activity for the year ended December 31, 2010 and for the six months ended June 30, 2011, is presented below.

						Weighted Average
				Weighted Average		Remaining		Aggregate Intrinsic
Stock Options	Shares			Exercise Price		Contractual Term		Value (000s)
Outstanding at December 31, 2009		6,708,618		$	26.16
Granted		1,348,474			13.24
Exercised		(14,868	)		12.71
Forfeited or expired		(740,766	)		20.95
Outstanding at December 31, 2010		7,301,458		$	24.33		5.01	$	2,460
Options exercisable at December 31, 2010		5,275,738		$	27.60		3.63	$	63
Outstanding at December 31, 2010		7,301,458		$	24.33
Granted		1,560,238			14.26
Exercised		(23,437	)		12.66
Forfeited or expired		(1,306,848	)		24.53
Outstanding at June 30, 2011		7,531,411		$	22.24		6.09	$	827
Options exercisable at June 30, 2011		4,958,251		$	26.38		4.54	$	278

The following table summarizes information about the Corporation’s nonvested stock option activity for the year ended December 31, 2010, and for the six months ended June 30, 2011.

				Weighted Average
Stock Options	Shares			Grant Date Fair Value
Nonvested at December 31, 2009		1,896,992		$	3.60
Granted		1,348,474			4.60
Vested		(920,969	)		3.93
Forfeited		(298,777	)		3.78
Nonvested at December 31, 2010		2,025,720		$	4.09
Granted		1,560,238			5.59
Vested		(884,669	)		3.77
Forfeited		(128,129	)		4.78
Nonvested at June 30, 2011		2,573,160		$	5.07

For the six months ended June 30, 2011 and for the year ended December 31, 2010, the intrinsic value of stock options exercised was immaterial. (Intrinsic value represents the amount by which the fair market value of the underlying stock exceeds the exercise price of the stock option.) The total fair value of stock options that vested was $3.3 million for the first half of 2011 and $3.6 million for the year ended December 31, 2010. For the six months ended June 30, 2011 and 2010, the Corporation recognized compensation expense of $2.6 million and $1.7 million, respectively, for the vesting of stock options. For the full year 2010, the Corporation recognized compensation expense of $3.4 million for the vesting of stock options. At June 30, 2011, the Corporation had $10.6 million of unrecognized compensation expense related to stock options that is expected to be recognized over the remaining requisite service periods that extend predominantly through fourth quarter 2013.

The following table summarizes information about the Corporation’s restricted stock awards activity (excluding salary shares) for the year ended December 31, 2010, and for the six months ended June 30, 2011.

				Weighted Average
Restricted Stock	Shares			Grant Date Fair Value
Outstanding at December 31, 2009		527,131		$	19.67
Granted		604,343			12.38
Vested		(205,239	)		21.68
Forfeited		(153,973	)		17.12
Outstanding at December 31, 2010		772,262		$	13.94
Granted		558,601			14.42
Vested		(143,545	)		18.38
Forfeited		(91,114	)		13.65
Outstanding at June 30, 2011		1,096,204		$	13.88

The Corporation amortizes the expense related to restricted stock awards as compensation expense over the vesting period specified in the grant. Restricted stock awards granted during 2011 to the senior executive officers and the next 20 most highly compensated employees will vest ratably over a three year period, subject to the full repayment of the funds received under the Capital Purchase Program (“CPP”), and the restricted stock award recipient must continue to perform substantial services for the Corporation for at least two years after the date of grant. Restricted stock awards granted during 2010 to the senior executive officers and the next 20 most highly compensated employees will vest in 25% increments as the funds received under the CPP are repaid (i.e., 0% vest when less than 25% is repaid, 25% vest when 25-49% is repaid, 50% vest when 50-74% is repaid, 75% vest when 75-99% is repaid, and 100% vest when the full amount is repaid), and the restricted stock award recipients must continue to perform substantial services for the Corporation for at least two years after the date of grant. Expense for restricted stock awards of approximately $3.1 million and $2.8 million was recognized for the six months ended June 30, 2011 and 2010, respectively. The Corporation recognized approximately $5.6 million of expense for restricted stock awards for the full year 2010. The Corporation had $9.6 million of unrecognized compensation costs related to restricted stock awards at June 30, 2011, that is expected to be recognized over the remaining requisite service periods that extend predominantly through fourth quarter 2013.

The Corporation recognizes expense related to salary shares as compensation expense. Each share is fully vested as of the date of grant and is subject to restrictions on transfer that lapse over a period of 9 to 28 months, based on the month of grant. The Corporation recognized compensation expense of $2.0 million on the granting of 139,371 salary shares (or an average cost per share of $14.25) for the six months ended June 30, 2011, $1.4 million on the granting of 101,844 shares (or an average cost per share of $13.55) for the six months ended June 30, 2010, and $3.3 million on the granting of 244,062 salary shares (or an average cost per share of $13.43) for the year ended December 31, 2010.

The Corporation issues shares from treasury, when available, or new shares upon the exercise of stock options, vesting of restricted stock awards, and the granting of salary shares. The Board of Directors has authorized management to repurchase shares of the Corporation’s common stock each quarter in the market, to be made available for issuance in connection with the Corporation’s employee incentive plans and for other corporate purposes. The repurchase of shares will be based on market opportunities, capital levels, growth prospects, and other investment opportunities, and is subject to restrictions under the CPP and the Memorandum of Understanding with the Federal Reserve Bank of Chicago.