Shareholders' Equity

6 Months Ended

Jun. 30, 2011

Shareholders' Equity

Shareholders' Equity

Note 12 – Shareholders' Equity

On February 3, 2010, the Company raised $303.6 million through a public offering by issuing 8,625,000 shares of the Company's common stock, including 1,125,000 shares pursuant to the underwriters' over-allotment option, at a share price of $11.00 per share and 18,975,000 depository shares, including 2,475,000 depository shares pursuant to the underwriter's over-allotment option, also at a price of $11.00 per share. Fractional interests (1/100th) in each share of the Series B Common Stock Equivalent were represented by the 18,975,000 depositary shares; as a result, each depositary share would convert into one share of common stock. The net proceeds to the Company after deducting underwriting discounts and commissions and offering expenses were $288.1 million. The net proceeds from the offering were used to redeem the preferred stock issued to the United States Department of the Treasury (U.S. Treasury) under the Troubled Asset Relief Program ("TARP") Capital Purchase Program ("CPP"), to fund FDIC-assisted acquisition opportunities and for general corporate purposes.

On February 17, 2010, the Company redeemed all of the outstanding Fixed Rate Cumulative Perpetual Preferred Stock, Series A, issued to the U.S. Treasury under the TARP CPP for an aggregate purchase price of $214.2 million. As a result of the repurchase of the Series A preferred stock, the Company incurred a one-time deemed dividend of $9.7 million due to the accelerated amortization of the remaining issuance discount on the preferred stock.

On March 31, 2010, the Company repurchased the common stock warrant issued to the U.S. Treasury pursuant to the TARP CPP, for $4.5 million. The warrant repurchase, together with the Company's redemption in February 2010 of the entire amount of Fixed Rate Cumulative Perpetual Preferred Stock, Series A, issued to the U.S. Treasury, represents full repayment of all TARP obligations and cancellation of all equity interests in the Company held by the U.S. Treasury.

On April 20, 2010, shareholders of the Company approved an amendment to the Company's Restated Articles of Incorporation. The amendment, which became effective on April 21, 2010, increased the number of authorized shares of common stock to 200,000,000 (from 100,000,000). As a result of the effectiveness of the amendment, as of the close of business on April 21, 2010, the Company's Series B Common Stock Equivalent preferred stock automatically converted into newly issued shares of common stock at a conversion rate of 100 shares of common stock for each share of Series B Common Stock Equivalent preferred stock. All shares of Series B Common Stock Equivalent preferred stock and representative depositary shares ceased to exist upon the conversion. Trading in the depositary shares on NASDAQ (ticker symbol "UMPQP") ceased and the UMPQP symbol voluntarily delisted effective as of the close of business on April 21, 2010.

Stock-Based Compensation

The compensation cost related to stock options, restricted stock and restricted stock units (included in salaries and employee benefits) was $868,000 and $2.0 million for the three and six months ended June 30, 2011, respectively, as compared to $799,000 and $1.4 million for the three and six months ended June 30, 2010, respectively. The total income tax benefit recognized related to stock-based compensation was $347,000 and $795,000 for the three and six months ended June 30, 2011, respectively, as compared to $320,000 and $570,000 for the comparable periods in 2010, respectively.

On June 17, 2011, the Company's Compensation Committee modified restricted stock awards and option grants that were issued to fourteen executive officers on January 31, 2011, as follows:

• Added performance vesting conditions linking total shareholder return, compared to the return of a regional bank stock total return index;

• Awards will cliff vest after three years instead of time vest over a four year period, but only to the extent that the performance conditions are met; and

• The modified grants will vest in whole or in part only if total shareholder return achieves specified targets, subject to prorated vesting upon death, disability, qualifying retirement, termination for good reason or a change of control.

As a result of the modification, there was no incremental compensation cost.

The following table summarizes information about stock option activity for the six months ended June 30, 2011:

(in thousands, except per share data)

	Six months ended June 30, 2011
	Options       Outstanding		Weighted-Avg     Exercise Price		Weighted-Avg   Remaining Contractual   Term (Years)		Aggregate     Intrinsic Value
Balance, beginning of period		2,067	$	14.82
Granted		237	$	11.01
Exercised		(40)	$	7.67
Forfeited/expired		(87)	$	15.62
Balance, end of period		2,177	$	14.50		6.00	$	1,692
Options exercisable, end of period		1,284	$	16.36		4.22	$	1,288

The total intrinsic value (which is the amount by which the stock price exceeded the exercise price on the date of exercise) of options exercised during the three and six months ended June 30, 2011 was $32,000 and $147,000, respectively. This compared to the total intrinsic value of options exercised during the three and six months ended June 30, 2010 of $93,000 and $382,000, respectively. During the three and six months ended June 30, 2011, the amount of cash received from the exercise of stock options was $97,000 and $309,000, respectively, as compared to $153,000 and $917,000 for the same periods in 2010, respectively.

The fair value of each option grant is estimated as of the grant date using the Black-Scholes option-pricing model. The following weighted average assumptions were used for stock options granted in the six months ended June 30, 2011 and 2010:

	Six months ended              June 30,
	2011		2010
Dividend yield		2.79%		2.73%
Expected life (years)		7.1		7.1
Expected volatility		52%		52%
Risk-free rate		2.71%		3.04%
Weighted average fair value of options on date of grant	$	4.65	$	5.18

The Company grants restricted stock periodically as a part of the 2003 Stock Incentive Plan for the benefit of employees. Restricted shares issued generally vest on an annual basis over five years. A deferred restricted stock award was granted to an executive in the second quarter of 2007. That award is now fully vested. The Company will issue certificates for the vested award within the seventh month following termination of the executive's employment. The following table summarizes information about nonvested restricted share activity for the six months ended June 30, 2011:

(in thousands, except per share data)

	Six months ended June 30, 2011
	Restricted Shares         Outstanding		Weighted Average  Grant         Date Fair Value
Balance, beginning of period		401	$	15.29
Granted		279	$	11.02
Released		(68)	$	18.57
Forfeited/expired		(13)	$	13.31
Balance, end of period		599	$	12.98

The total fair value of restricted shares vested and released during the three and six months ended June 30, 2011 was $114,000 and $765,000, respectively. This compares to the total fair value of restricted shares vested and released during the three and six months ended June 30, 2010 of $51,000 and $538,000, respectively.

The Company grants restricted stock units as a part of the 2007 Long Term Incentive Plan for the benefit of certain executive officers. Restricted stock unit grants are subject to performance-based vesting as well as other approved vesting conditions. The total number of restricted stock units granted represents the maximum number of restricted stock units eligible to vest based upon the performance and service conditions set forth in the grant agreements. The following table summarizes information about restricted stock unit activity for the six months ended June 30, 2011:

(in thousands, except per share data)

	Six months ended June 30, 2011
	Restricted Stock Units         Outstanding		Weighted Average  Grant         Date Fair Value
Balance, beginning of period		225	$	11.13
Granted		105	$	10.42
Released		(63)	$	14.33
Forfeited/expired		(48)	$	14.33
Balance, end of period		219	$	9.17

No restricted stock units were vested and released during the three months ended June 30, 2010. The total fair value of restricted stock units vested and released during the six months ended June 30, 2011 was $677,000. This compares to the total fair value of restricted stock units vested and released during the three and six months ended June 30, 2010 of none and $213,000, respectively.

As of June 30, 2011, there was $3.2 million of total unrecognized compensation cost related to nonvested stock options which is expected to be recognized over a weighted-average period of 2.9 years. As of June 30, 2011, there was $4.6 million of total unrecognized compensation cost related to nonvested restricted stock which is expected to be recognized over a weighted-average period of 3.0 years. As of June 30, 2011, there was $1.0 million of total unrecognized compensation cost related to nonvested restricted stock units which is expected to be recognized over a weighted-average period of 1.6 years, assuming expected performance conditions are met.

For the three and six months ended June 30, 2011, the Company received income tax benefits of $58,000 and $633,000, respectively, related to the exercise of non-qualified employee stock options, disqualifying dispositions on the exercise of incentive stock options, the vesting of restricted shares and the vesting of restricted stock units. For the three and six months ended June 30, 2010, the Company received income tax benefits of $54,000 and $380,000, respectively. In the six months ended June 30, 2011, the Company had net tax deficiencies (tax deficiency resulting from tax deductions less than the compensation cost recognized) of $251,000, compared to net tax deficiencies of $205,000 for the six months ended June 30, 2010. Only cash flows from gross excess tax benefits are classified as financing cash flows.