Citibank 2008 Annual Report Download - page 149

The following table summarizes the information about stock options outstanding under Citigroup stock option plans at December 31, 2008:
Options outstanding Options exercisable
Range of exercise prices
Number
outstanding
Weighted average
contractual life
remaining
Weighted average
exercise price
Number
exercisable
Weighted average
exercise price
$7.77–$9.99 1,627 2.6 years $ 7.77 1,627 $ 7.77
$10.00–$19.99 2,263,074 7.0 years $17.54 97,985 $14.27
$20.00–$29.99 13,592,346 5.2 years $24.61 1,006,628 $25.48
$30.00–$39.99 27,325,170 1.6 years $33.11 25,200,815 $33.07
$40.00–$49.99 86,577,676 2.0 years $46.26 84,779,475 $46.22
$50.00–$56.83 14,100,764 2.2 years $52.59 12,568,265 $52.38
143,860,657 2.3 years $41.84 123,654,795 $43.97
As of December 31, 2008, there was $45.8 million of total unrecognized compensation cost related to stock options; this cost is expected to be recognized over a
weighted average period of 1.9 years.
Fair Value Assumptions
SFAS 123(R) requires that reload options be treated as separate grants from
the related original grants. Pursuant to the terms of currently outstanding
reloadable options, upon exercise of an option, if employees use previously
owned shares to pay the exercise price and surrender shares otherwise to be
received for related tax withholding, they will receive a reload option
covering the same number of shares used for such purposes, but only if the
market price on the date of exercise is at least 20% greater than the option
exercise price. Reload options vest after six months and carry the same
expiration date as the option that gave rise to the reload grant. The exercise
price of a reload grant is the fair market value of Citigroup common stock on
the date the underlying option is exercised. Reload options are intended to
encourage employees to exercise options at an earlier date and to retain the
shares acquired. The result of this program is that employees generally will
exercise options as soon as they are able and, therefore, these options have
shorter expected lives. Shorter option lives result in lower valuations.
However, such values are expensed more quickly due to the shorter vesting
period of reload options. In addition, since reload options are treated as
separate grants, the existence of the reload feature results in a greater
number of options being valued. Shares received through option exercises
under the reload program, as well as certain other options, are subject to
restrictions on sale.
Additional valuation and related assumption information for Citigroup
option plans is presented below. Citigroup uses a lattice-type model to value
stock options.
For options granted during 2008 2007 2006
Weighted average per share fair value,
at December 31 $ 3.62 $ 6.52 $ 6.59
Weighted averaged expected life
Original grants 5.00 yrs. 4.66 yrs. 4.57 yrs.
Reload grants 1.04 yrs. 1.86 yrs. 2.56 yrs.
Valuation assumptions
Expected volatility 25.11% 19.21% 20.15%
Risk-free interest rate 2.76% 4.79% 4.60%
Expected dividend yield 4.53% 4.03% 3.95%
Expected annual forfeitures
Original and reload grants 7% 7% 7%
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