value is debited to additional paid-in capital for the amount per share that it was originally credited. Any remaining excess is charged to retained earnings. 

## Stock option plan 

The cost associated with the stock option plan under which certain employees receive options to buy shares of stock of the Corporation must be recognized either by the fair value method or the intrinsic value method. The Corporation uses the intrinsic value method of accounting. Under the intrinsic value method, compensation cost is the excess, if any, of the quoted market price of the stock at grant date or other measure- ment date over the amount an employee must pay to acquire the stock. Entities using the intrinsic value method on awards granted to employees must make pro forma disclosures of net income and earnings per share, as if the fair value method of accounting had been applied. Under the fair value method, compensation cost is measured at the grant date based on the fair value of the award and is recognized over the service period, which is usually the vesting period. 

## Earnings per common share 

Earnings per share-basic is calculated by dividing income available to com- mon stockholders by the weighted average number of outstanding com- mon shares. The computation of earnings per share-diluted is similar to the computation of earnings per share-basic except that the weighted aver- age common shares are increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued. Stock options outstanding under the Corporation’s stock option plan are considered in the earnings per share- diluted by application of the treasury stock method, which assumes that proceeds for the exercise of options are used to repurchase common stock in the open market. Any stock splits or stock dividends are retroac- tively recognized in all periods presented in financial statements. 

## Comprehensive income 

Comprehensive income includes net income and several other items that current accounting standards require to be recognized outside of net income, primarily the unrealized gain (loss) on securities available for sale and the change in fair value attributable to credit risk on securities hedged with interest rate swaps, net of taxes. 

## Recently issued accounting pronouncements 

On January 1, 2001, the Corporation adopted the Statement of Financial Accounting Standards (SFAS) No. 133, “Accounting for Derivative Instruments and Hedging Activities.” This statement establishes accounting and reporting standards for derivative instruments, including derivative instruments that are embedded in other contracts, and for hedging activi- ties. SFAS No. 138, “Accounting for Certain Derivative Instruments and Certain Hedging Activities”, amended SFAS No. 133. 

SFAS No. 133, as amended, standardizes accounting for derivative instru- ments by requiring the recognition of all derivatives (both assets and liabil- ities) in the statement of financial position at fair value. Under SFAS No. 133, changes in the fair value of derivative instruments are accounted for as current income or other comprehensive income, depending on their intended use and designation. For transactions that qualify for hedge accounting, SFAS No. 133 provides for a matching of the timing of gain or loss recognition on the hedging instrument with the recognition in earn- ings of (a) the changes in the fair value of the hedged asset, liability, or a firm commitment that are attributable to the hedged risk or (b) the effect of the exposure to the variability of cash flows from the hedged asset, lia- bility, or forecasted transaction. SFAS No. 133 also provided that at the date of the initial application, a corporation may transfer any held to matu- rity security into the available for sale category or the trading category. 

