US Bank 2014 Annual Report Download - page 126

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) 2014 2013 2012
Fair value of options vested .................................................................................... $33 $41 $49
Intrinsic value of options exercised ............................................................................. 171 144 143
Cash received from options exercised .......................................................................... 408 489 362
Tax benefit realized from options exercised .................................................................... 66 56 75
To satisfy option exercises, the Company predominantly uses treasury stock.
Additional information regarding stock options outstanding as of December 31, 2014, 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 ................................................. 3,366,770 4.1 $11.33 3,366,770 $11.33
$15.01 – $20.00 ................................................. 161,742 1.3 19.57 161,742 19.57
$20.01 – $25.00 ................................................. 2,513,347 5.1 23.85 2,505,271 23.84
$25.01 – $30.00 ................................................. 9,825,343 4.6 28.95 7,101,828 29.06
$30.01 – $35.00 ................................................. 11,611,190 3.4 32.13 10,798,653 31.99
$35.01 – $40.00 ................................................. 4,988,996 2.1 36.04 4,988,996 36.04
$40.01 – $41.61 ................................................. 1,181,810 9.1 40.32 – –
Total.......................................................... 33,649,198 4.0 $29.31 28,923,260 $28.79
RESTRICTED STOCK AND UNIT AWARDS
A summary of the status of the Company’s restricted shares of stock and unit awards is presented below:
2014 2013 2012
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
Outstanding at beginning of period ......... 8,653,859 $29.96 8,935,743 $25.04 8,995,295 $22.46
Granted ................................. 3,133,168 40.37 3,717,635 33.88 3,085,077 28.70
Vested ................................... (3,409,650) 29.38 (3,744,411) 22.17 (2,931,820) 20.97
Cancelled ............................... (455,806) 34.05 (255,108) 29.18 (212,809) 25.01
Outstanding at end of period ............... 7,921,571 $34.09 8,653,859 $29.96 8,935,743 $25.04
The total fair value of shares vested was $139 million,
$127 million and $86 million for the years ended
December 31, 2014, 2013 and 2012, respectively. Stock-
based compensation expense was $125 million, $129 million
and $129 million for the years ended December 31, 2014,
2013 and 2012, respectively. On an after-tax basis, stock-
based compensation was $78 million, $80 million and $80
million for the years ended December 31, 2014, 2013 and
2012, respectively. As of December 31, 2014, there was $167
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.
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