SunTrust 2011 Annual Report Download - page 162
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Notes to Consolidated Financial Statements (Continued)
146
Shares of restricted stock may be granted to employees and directors and typically cliff vest after three years. Restricted stock
grants may be subject to one or more criteria, including employment, performance, or other conditions as established by the
Committee at the time of grant. Any shares of restricted stock that are forfeited will again become available for issuance under
the Stock Plan. An employee or director has the right to vote the shares of restricted stock after grant unless and until they are
forfeited. Compensation cost for restricted stock is equal to the fair market value of the shares at the date of the award and is
amortized to compensation expense over the vesting period. Dividends are paid on awarded but unvested restricted stock.
The fair value of each stock option award is estimated on the date of grant using a Black-Scholes valuation model. The expected
volatility represents the implied volatility of SunTrust stock. The expected term represents the period of time that stock options
granted are expected to be outstanding and is derived from historical data which is used to evaluate patterns such as stock option
exercise and employee termination. Through repurchase of preferred stock issued to the U.S. Treasury in first quarter 2011, the
expected dividend yield was based on the current rate in effect at grant date. Beginning in second quarter, the Company began
using the projected dividend to be paid in the dividend yield assumption. The risk-free interest rate is derived from the U.S. Treasury
yield curve in effect at the time of grant based on the expected life of the option.
The weighted average fair values of options granted during 2011, 2010 and 2009 were $10.51, $12.78 and $5.13 per share,
respectively. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model
with the following assumptions:
Dividend yield
Expected stock price volatility
Risk-free interest rate (weighted average)
Expected life of options
Year Ended December 31
2011
0.75%
34.87
2.48
6 years
2010
0.17%
56.09
2.80
6 years
2009
4.16%
83.17
1.94
6 years