Stock-Based Compensation

9 Months Ended

Sep. 30, 2012

Stock-Based Compensation [Abstract]

Stock-Based Compensation

NOTE 4: Stock-Based Compensation

On January 23, 2012, the Compensation and Benefits Committee (the “Committee”) of the Board of Directors of Associated Banc-Corp approved the performance criteria for its short-term cash incentive plan (the “2012 Management Incentive Plan”) and its long-term incentive performance plan (the “2012 Long Term Incentive Performance Plan”). The approvals were the latest step in the Corporation's transition toward a performance-based short-term and long-term incentive compensation program following the full repayment of the U.S. Department of the Treasury's investment in the Corporation under the Capital Purchase Program. The Committee intends to ensure that further incentive compensation criteria align to the Corporation's bottom line financial results, on which it believes shareholders measure their investments in the Corporation.

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 and salary shares 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 and the fair value of salary shares is recognized as compensation expense on the date of grant. 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 options 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 and implied volatility of the Corporation's stock. The following assumptions were used in estimating the fair value for options granted in the first nine monthsof 2012 and full year 2011.

		2012			2011
Dividend yield		2.00	%		2.00	%
Risk-free interest rate		1.20	%		2.27	%
Weighted average expected volatility		49.11	%		47.24	%
Weighted average expected life		6 years			6 years
Weighted average per share fair value of options	$	5.05		$	5.56

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, 2011 and for the nine months endedSeptember 30, 2012, is presented below.

				Weighted Average		Aggregate Intrinsic
		Weighted Average		Remaining		Value
Stock Options	Shares	Exercise Price		Contractual Term		(000s)
Outstanding at December 31, 2010	7,301,458	$	24.33
Granted	1,624,369		14.20
Exercised	(23,437)		12.66
Forfeited or expired	(1,847,116)		24.51
Outstanding at December 31, 2011	7,055,274	$	21.99		5.61	$	27
Options exercisable at December 31, 2011	4,623,935	$	26.10		4.01		7
Outstanding at December 31, 2011	7,055,274	$	21.99
Granted	3,025,269		12.98
Exercised	(11,120)		13.16
Forfeited or expired	(1,156,987)		21.04
Outstanding at September 30, 2012	8,912,436	$	19.06		6.52	$	817
Options exercisable at September 30, 2012	4,818,426	$	23.98		4.45		56

The following table summarizes information about the Corporation's nonvested stock option activity for the year ended December 31, 2011, and for the nine months endedSeptember 30, 2012.

		Weighted Average
Stock Options	Shares	Grant Date Fair Value
Nonvested at December 31, 2010	2,025,720	$	4.09
Granted	1,624,369		5.56
Vested	(955,454)		3.77
Forfeited	(263,296)		4.85
Nonvested at December 31, 2011	2,431,339	$	5.11
Granted	3,025,269		5.05
Vested	(1,073,821)		4.88
Forfeited	(288,777)		5.13
Nonvested at September 30, 2012	4,094,010	$	5.13

For the nine months endedSeptember 30, 2012and for the year ended December 31, 2011, 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 $5 million for the firstnine months of 2012and $4 million for the year ended December 31, 2011. For the nine months endedSeptember 30, 2012and 2011, the Corporation recognized compensation expense of $7million and $4million, respectively, for the vesting of stock options. For the full year 2011, the Corporation recognized compensation expense of $5 million for the vesting of stock options. At September 30, 2012, the Corporation had $15million 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 2014.

The following table summarizes information about the Corporation's restricted stock awards activity (excluding salary shares) for the year ended December 31, 2011, and for the nine months endedSeptember 30, 2012.

		Weighted Average
Restricted Stock	Shares	Grant Date Fair Value
Outstanding at December 31, 2010	772,262	$	13.94
Granted	593,437		14.27
Vested	(169,499)		17.74
Forfeited	(182,435)		13.86
Outstanding at December 31, 2011	1,013,765	$	13.79
Granted	500,127		13.00
Vested	(522,784)		13.41
Forfeited	(53,264)		13.73
Outstanding at September 30, 2012	937,844	$	13.59

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 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. Expense for restricted stock awards of approximately $5million and $5million was recognized for the nine months endedSeptember 30, 2012 and 2011, respectively. The Corporation recognized approximately $6million of expense for restricted stock awards for the full year 2011. The Corporation had $6 million of unrecognized compensation costs related to restricted stock awards at September 30, 2012 that is expected to be recognized over the remaining requisite service periods that extend predominantly through fourth quarter 2014.

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. No salary shares were issued during the first nine months of 2012, as the Corporation changed its compensation plan upon the full repayment of the funds received under the Capital Purchase Program during 2011. The Corporation recognized compensation expense of $3 million on the granting of 234,969 salary shares (or an average cost per share of $12.99) for the nine months endedSeptember 30, 2011, and a total of $4million on the granting of 317,450 salary shares (or an average cost per share of $12.41) for the year ended December 31, 2011.

The Corporation issues shares from treasury, when available, or new shares upon the exercise of stock options, granting 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.