US Bank 2015 Annual Report Download - page 126

NOTE 18 STOCK-BASED COMPENSATION
As part of its employee and director compensation programs, the
Company currently may grant certain stock awards under the
provisions of its stock incentive plan. The plan provides for grants
of options to purchase shares of common stock at a fixed price
equal to the fair value of the underlying stock at the date of grant.
Option grants are generally exercisable up to ten years from the
date of grant. In addition, the plan provides for grants of shares of
common stock or stock units that are subject to restriction on
transfer prior to vesting. Most stock and unit awards vest over
three to five years and are subject to forfeiture if certain vesting
requirements are not met. Stock incentive plans of acquired
companies are generally terminated at the merger closing dates.
Participants under such plans receive the Company’s common
stock, or options to buy the Company’s common stock, based
on the conversion terms of the various merger agreements. At
December 31, 2015, there were 47 million shares (subject to
adjustment for forfeitures) available for grant under various plans.
STOCK OPTION AWARDS
The following is a summary of stock options outstanding and exercised under prior and existing stock incentive plans of the Company:
Year Ended December 31
Stock
Options/Shares
Weighted-
Average
Exercise Price
Weighted-Average
Remaining
Contractual Term
Aggregate
Intrinsic Value
(in millions)
2015
Number outstanding at beginning of period ........................ 33,649,198 $29.31
Granted .................................................. 1,122,697 44.28
Exercised ................................................. (8,721,834) 29.59
Cancelled(a) ................................................ (324,353) 32.93
Number outstanding at end of period(b) ........................... 25,725,708 $29.82 3.6 $331
Exercisable at end of period .................................... 22,446,095 $28.68 3.0 $314
2014
Number outstanding at beginning of period ........................ 46,724,765 $29.12
Granted .................................................. 1,246,451 40.32
Exercised ................................................. (13,851,590) 29.59
Cancelled(a) ................................................ (470,428) 31.12
Number outstanding at end of period(b) ........................... 33,649,198 $29.31 4.0 $526
Exercisable at end of period .................................... 28,923,260 $28.79 3.4 $467
2013
Number outstanding at beginning of period ........................ 63,171,918 $28.83
Granted .................................................. 1,168,011 33.99
Exercised ................................................. (17,260,740) 28.41
Cancelled(a) ................................................ (354,424) 29.22
Number outstanding at end of period(b) ........................... 46,724,765 $29.12 4.4 $527
Exercisable at end of period .................................... 39,556,000 $29.19 3.8 $444
(a) Options cancelled include both non-vested (i.e., forfeitures) and vested options.
(b) Outstanding options include stock-based awards that may be forfeited in future periods. The impact of the estimated forfeitures is reflected in compensation expense.
Stock-based compensation expense is based on the
estimated fair value of the award at the date of grant or
modification. The fair value of each option award is estimated
on the date of grant using the Black-Scholes option-pricing
model, requiring the use of subjective assumptions. Because
employee stock options have characteristics that differ from
those of traded options, including vesting provisions and
trading limitations that impact their liquidity, the determined
value used to measure compensation expense may vary from
the actual fair value of the employee stock options. The
following table includes the weighted average estimated fair
value of stock options granted and the assumptions utilized
by the Company for newly issued grants:
Year Ended December 31 2015 2014 2013
Estimated fair value ........................................................................ $12.23 $11.38 $12.13
Risk-free interest rates ...................................................................... 1.7% 1.7% 1.0%
Dividend yield ............................................................................. 2.6% 2.6% 2.6%
Stock volatility factor ....................................................................... .37 .38 .49
Expected life of options (in years) ............................................................. 5.5 5.5 5.5
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