US Bank 2013 Annual Report Download - page 120

Expected stock volatility is based on several factors
including the historical volatility of the Company’s stock,
implied volatility determined from traded options and other
factors. The Company uses historical data to estimate option
exercises and employee terminations to estimate the
expected life of options. The risk-free interest rate for the
expected life of the options is based on the U.S. Treasury
yield curve in effect on the date of grant. The expected
dividend yield is based on the Company’s expected
dividend yield over the life of the options.
The following summarizes certain stock option activity of the Company:
Year Ended December 31 (Dollars in Millions) 2013 2012 2011
Fair value of options vested ...................................................................................... $41 $49 $54
Intrinsic value of options exercised ............................................................................... 144 143 61
Cash received from options exercised ........................................................................... 489 362 165
Tax benefit realized from options exercised ...................................................................... 56 75 23
To satisfy option exercises, the Company predominantly uses treasury stock.
Additional information regarding stock options outstanding as of December 31, 2013, is as follows:
Outstanding Options Exercisable Options
Range of Exercise Prices Shares
Weighted-
Average
Remaining
Contractual
Life (Years)
Weighted-
Average
Exercise
Price Shares
Weighted-
Average
Exercise
Price
$11.02 – $15.00 ............................................. 4,661,087 5.1 $11.39 4,661,087 $11.40
$15.01 – $20.00 ............................................. 167,391 2.4 19.54 167,391 19.54
$20.01 – $25.00 ............................................. 3,390,179 6.2 23.85 2,216,001 23.84
$25.01 – $30.00 ............................................. 13,108,918 5.2 29.05 8,276,837 29.29
$30.01 – $35.00 ............................................. 17,999,955 3.9 31.97 16,837,858 31.83
$35.01 – $36.25 ............................................. 7,397,235 3.1 36.07 7,396,826 36.07
Total 46,724,765 4.4 $29.12 39,556,000 $29.19
Restricted Stock and Unit Awards
A summary of the status of the Company’s restricted shares of stock and unit awards is presented below:
2013 2012 2011
Year Ended December 31 Shares
Weighted-
Average Grant-
Date Fair Value Shares
Weighted-
Average Grant-
Date Fair Value Shares
Weighted-
Average Grant-
Date Fair Value
Nonvested Shares
Outstanding at beginning of period .... 8,935,743 $25.04 8,995,295 $22.46 8,811,027 $19.74
Granted ............................. 3,717,635 33.88 3,085,077 28.70 3,136,086 28.20
Vested ............................... (3,744,411) 22.17 (2,931,820) 20.97 (2,552,979) 20.15
Cancelled ........................... (255,108) 29.18 (212,809) 25.01 (398,839) 22.20
Outstanding at end of period .......... 8,653,859 $29.96 8,935,743 $25.04 8,995,295 $22.46
The total fair value of shares vested was $127 million,
$86 million and $72 million for the years ended December
31, 2013, 2012 and 2011, respectively. Stock-based
compensation expense was $129 million, $129 million and
$118 million for the years ended December 31, 2013, 2012
and 2011, respectively. On an after-tax basis, stock-based
compensation was $80 million, $80 million and $73 million
for the years ended December 31, 2013, 2012 and 2011,
respectively. As of December 31, 2013, there was $142
million of total unrecognized compensation cost related to
nonvested share-based arrangements granted under the
plans. That cost is expected to be recognized over a
weighted-average period of 2.4 years as compensation
expense.
118 U.S. BANCORP