Stock-Based Compensation

9 Months Ended

Sep. 30, 2017

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 awards is their fair market value on the date of grant. The fair values of stock options and restricted stock awards are amortized as compensation expense on a straight-line basis over the vesting period of the grants. For retirement eligible colleagues, expenses related to stock options and restricted stock awards are fully recognized on the date the colleague meets the definition of normal or early retirement. 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 implied volatility of the Corporation’s stock.

The following assumptions were used in estimating the fair value for options granted in the first nine months of 2017 and full year 2016.



	2017		2016
Dividend yield	2.00	%	2.50	%
Risk-free interest rate	2.00	%	2.00	%
Weighted average expected volatility	25.00	%	25.00	%
Weighted average expected life	5.5 years		5.5 years
Weighted average per share fair value of options	$5.30		$3.36

A summary of the Corporation’s stock option activity for the nine months ended September 30, 2017 is presented below.



Stock Options	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value^(a)
Outstanding at December 31, 2016	6,357,843		$	17.67	6.10	$	47,902
Granted	799,558		25.61
Exercised	(1,291,244	)	16.32
Forfeited or expired	(506,395	)	31.90
Outstanding at September 30, 2017	5,359,762		$	18.07	6.55	$	34,334
Options Exercisable at September 30, 2017	3,072,811		$	16.54	5.25	$	23,911


(a)	$ in Thousands

Intrinsic value represents the amount by which the fair market value of the underlying stock exceeds the exercise price of the stock option. For the nine months ended September 30, 2017, the intrinsic value of stock options exercised was approximately $12 million. For the nine months ended September 30, 2016, the intrinsic value of the stock options exercised was $2 million. The total fair value of stock options vested was $4 million and $3 million for the nine months ended September 30, 2017 and September 30, 2016, respectively. The Corporation recognized compensation expense for the vesting of stock options of $3 million for both the nine months ended September 30, 2017 and September 30, 2016. Included in compensation expense for 2017 was approximately $570,000 of expense for the accelerated vesting of stock options granted to retirement eligible colleagues. At September 30, 2017, the Corporation had approximately $5 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 first quarter 2021.

The following table summarizes information about the Corporation’s restricted stock activity for the nine months ended September 30, 2017.



Restricted Stock	Shares		Weighted Average Grant Date Fair Value
Outstanding at December 31, 2016	2,377,380		$	17.40
Granted	748,024		25.55
Vested	(872,020	)	17.92
Forfeited	(101,703	)	20.02
Outstanding at September 30, 2017	2,151,681		$	19.94

The Corporation amortizes the expense related to restricted stock awards as compensation expense over the vesting period specified in the grant's award agreement. Performance-based restricted stock awards granted during 2016 and 2017 will vest ratably over a three year period, while service-based restricted stock awards granted during 2016 and 2017 will vest ratably over a four year period. Expense for restricted stock awards of approximately $14 million was recorded for the nine months ended September 30, 2017 and approximately $15 million for the nine months ended September 30, 2016. Included in compensation expense for 2017 was approximately $2 million of expense for the accelerated vesting of restricted stock awards granted to retirement eligible colleagues. The Corporation had $22 million of unrecognized compensation costs related to restricted stock awards at September 30, 2017, that is expected to be recognized over the remaining requisite service periods that extend predominantly through first quarter 2021.

The Corporation has the ability to issue shares from treasury or new shares upon the exercise of stock options or the granting of restricted stock awards. The Board of Directors has authorized management to repurchase shares of the Corporation’s common stock 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 and investment opportunities, capital levels, growth prospects,

and regulatory constraints. Such repurchases may occur from time to time in open market purchases, block transactions, private transactions, accelerated share repurchase programs, or similar facilities.