Bank of Montreal 2015 Annual Report Download - page 170

Notes
Options outstanding and exercisable at October 31, 2015 and 2014 by range of exercise price were as follows:
(Canadian $, except as noted) 2015 2014
Options outstanding Options exercisable Options outstanding Options exercisable
Range of exercise
prices
Number
of stock
options
Weighted-
average
remaining
contractual
life (years)
Weighted-
average
exercise
price
Number
of stock
options
Weighted-
average
remaining
contractual
life (years)
Weighted-
average
exercise
price
Number
of stock
options
Weighted-
average
remaining
contractual
life (years)
Weighted-
average
exercise
price
Number
of stock
options
Weighted-
average
remaining
contractual
life (years)
Weighted-
average
exercise
price
$30.01 to $40.00 577,358 3.1 34.13 577,358 3.1 34.13 718,299 4.1 34.13 718,299 4.1 34.13
$40.01 to $50.00 187,327 3.6 42.46 187,327 3.6 42.46 208,437 4.6 42.36 208,437 4.6 42.36
$50.01 to $60.00 4,218,387 5.3 56.00 3,624,686 5.2 56.00 5,087,750 5.7 56.05 3,000,262 6.0 55.73
$60.01 to $70.00 5,458,588 5.2 63.94 1,531,760 4.5 61.87 5,956,232 6.0 63.89 1,313,192 4.1 62.71
$70.01 and over (1) 1,669,493 4.7 170.26 1,038,438 2.0 226.28 1,367,047 2.6 232.14 1,367,047 2.6 232.14
(1) Issued as part of the acquisition of M&I.
The following table summarizes non-vested stock option activity for the years ended October 31, 2015 and 2014:
(Canadian $, except as noted) 2015 2014
Number of
stock options
Weighted-average
grant date fair value
Number of
stock options
Weighted-average
grant date fair value
Non-vested at beginning of year 6,730,528 6.74 7,685,390 7.18
Granted 641,875 7.45 1,618,223 6.36
Vested 1,533,402 6.90 1,971,073 7.56
Expired 623,730 8.55 559,841 8.83
Forfeited/cancelled 63,687 6.68 42,171 6.49
Non-vested at end of year 5,151,584 6.55 6,730,528 6.74
The following table summarizes further information about our Stock Option Plan:
(Canadian $ in millions, except as noted) 2015 2014 2013
Unrecognized compensation cost for non-vested stock option awards 456
Weighted-average period over which this cost will be recognized (in years) 2.3 2.7 2.1
Total intrinsic value of stock options exercised 18 49 35
Cash proceeds from stock options exercised 46 115 99
Actual tax benefits realized on stock options exercised 11–
Weighted-average share price for stock options exercised (in dollars) 76.1 76.6 64.8
The fair value of options granted was estimated using a binomial option pricing model. The weighted-average fair value of options granted during the
years ended October 31, 2015, 2014 and 2013 was $7.45, $6.36 and $5.29, respectively. To determine the fair value of the stock option tranches on
the grant date, the following ranges of values were used for each option pricing assumption:
2015 2014 2013
Expected dividend yield 4.7% – 4.8% 5.0% 6.0% – 6.2%
Expected share price volatility 16.9% – 17.0% 16.4% 18.1% – 18.6%
Risk-free rate of return 1.9% – 2.0% 2.5% – 2.6% 1.7% – 1.9%
Expected period until exercise (in years) 6.5 – 7.0 6.5 – 7.0 5.5 – 7.0
Changes to the input assumptions can result in different fair value estimates.
Expected dividend yield is based on market expectations of future dividends on our common shares. Expected share price volatility is determined
based on the market consensus implied volatility for traded options on our common shares. The risk-free rate is based on the yields of a Canadian
swap curve with maturities similar to the expected period until exercise of the options. The weighted-average exercise price on the grant date for the
years ended October 31, 2015, 2014 and 2013 was $78.09, $68.60 and $60.11, respectively.
Other Share-Based Compensation
Share Purchase Plans
We offer various employee share purchase plans. The largest of these plans provides the employee the option of directing a portion of their gross
salary toward the purchase of our common shares. We match 50% of employee contributions up to 6% of their individual gross salary. Our initial
contributions vest after two years participation in the plan, with subsequent contributions vesting immediately. The shares held in the employee
share purchase plan are purchased on the open market and are considered outstanding for purposes of computing earnings per share. The dividends
earned on our common shares held by the plan are used to purchase additional common shares on the open market.
We account for our contribution as employee compensation expense when it is contributed to the plan.
Employee compensation expense related to these plans for the years ended October 31, 2015, 2014 and 2013 was $52 million, $50 million and
$50 million, respectively. There were 19.0 million, 18.7 million and 19.3 million common shares held in these plans for the years ended October 31,
2015, 2014 and 2013, respectively.
Mid-Term Incentive Plans
We offer mid-term incentive plans for executives and certain senior employees. Payment amounts are adjusted to reflect reinvested dividends and
changes in the market value of our common shares. Depending on the plan, the recipient receives either a single cash payment at the end of the
three-year period of the plan, or cash payments over the three years of the plan. As the awards are cash settled, they are recorded as liabilities.
BMO Financial Group 198th Annual Report 2015 183