Stock-Based Compensation

3 Months Ended

Mar. 31, 2021

The fair values of stock options and restricted stock awards (including restricted stock units) are amortized as compensation expense on a straight-line basis over the vesting period of the grants. For colleagues who meet the definition of retirement eligible under the 2017 Incentive Compensation Plan and the 2020 Incentive Compensation Plan, 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 on 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 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 Corporation did not grant stock options in the first three months of 2021. The following assumptions were used in estimating the fair value for options granted for the full year 2020:


	2020
Dividend yield	3.50	%
Risk-free interest rate	1.60	%
Weighted average expected volatility	21.00	%
Weighted average expected life	5.75 years
Weighted average per share fair value of options	$2.39

A summary of the Corporation’s stock option activity for the three months ended March 31, 2021 is presented below:


Stock Options	Shares(a)	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value(a)
Outstanding at December 31, 2020	6,473	$	19.77	6.23 years	$	2,005

Exercised	615	15.96
Forfeited or expired	35	20.99
Outstanding at March 31, 2021	5,823	$	20.17	6.21 years	$	13,099
Options Exercisable at March 31, 2021	4,240	$	20.19	5.39 years	$	10,154

(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 three months ended March 31, 2021, the intrinsic value of stock options exercised was $3 million compared to less than $1 million for the three months ended March 31, 2020. The total fair value of stock options vested was $3 million for both the three months ended March 31, 2021 and 2020.

The Corporation recognized compensation expense for the vesting of stock options of $403 thousand for the three months ended March 31, 2021, compared to $2 million for the three months ended March 31, 2020. Included in compensation expense for 2021 was no expense for the accelerated vesting of stock options granted to retirement eligible colleagues. At March 31, 2021, the Corporation had approximately $2 million of unrecognized compensation expense related to stock options that is expected to be recognized over the remaining requisite service periods that extend predominately through the first quarter of 2024.

The Corporation also has issued time-based and performance-based restricted stock awards under the 2017 Incentive Compensation Plan and subsequent 2020 Incentive Compensation Plan. Performance awards are based on performance goals of earnings per share and total shareholder return with vesting ranging from a minimum of 0% to a maximum of 150% of the target award. Performance awards are valued utilizing a Monte Carlo simulation model to estimate fair value of the awards at the grant date.

The following table summarizes information about the Corporation’s restricted stock awards activity for the three months ended March 31, 2021:


Restricted Stock Awards	Shares(a)	Weighted Average Grant Date Fair Value
Outstanding at December 31, 2020	2,293	$	20.70
Granted	771	19.59
Vested	571	21.69
Forfeited	28	24.13
Outstanding at March 31, 2021	2,466	$	19.72

(a) In thousands

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 2020 and 2021 will vest ratably over a period of three years. Service-based restricted stock awards granted during 2020 and 2021 will vest ratably over a period of four years. Expense for restricted stock awards issued of approximately $3 million was recorded for the three months ended March 31, 2021 and $9 million was recorded for the three months ended March 31, 2020. Included in compensation expense for the first three months of 2021 was approximately $1 million of expense for the accelerated vesting of restricted stock awards granted to retirement eligible colleagues. The Corporation had $24 million of unrecognized compensation costs related to restricted stock awards at March 31, 2021 that are expected to be recognized over the remaining requisite service periods that extend predominately through the first quarter of 2025.

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, if any, 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.