BB&T 2008 Annual Report Download - page 113

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BB&T CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
BB&T also has equity-based plans outstanding as the result of assuming the plans of acquired companies. At
December 31, 2008, there were 192 thousand stock options outstanding in connection with these plans, with option
prices ranging from $22.62 to $29.54.
BB&T measures the fair value of each option award on the date of grant using the Black-Scholes option-
pricing model with the following weighted average assumptions used for grants awarded in 2008, 2007 and 2006,
respectively:
For the Years Ended December 31,
2008 2007 2006
Assumptions:
Risk-free interest rate 3.7% 4.7% 4.6%
Dividend yield 4.5 4.0 3.8
Volatility factor 15.5 14.0 16.0
Expected life 6.9 yrs 6.9 yrs 6.5 yrs
Fair value of options per share $3.43 $5.34 $5.58
BB&T determines the assumptions used in the Black-Scholes option pricing model as follows: the risk-free
interest rate is based on the U.S. Treasury yield curve in effect at the time of the grant; the dividend yield is
based on the historical dividend yield of BB&T’s stock, adjusted to reflect the expected dividend yield over the
expected life of the option; the volatility factor is based on the historical volatility of BB&T’s stock, adjusted to
reflect the ways in which current information indicates that the future is reasonably expected to differ from the
past; and the weighted-average expected life is based on the historical behavior of employees related to exercises,
forfeitures and cancellations.
BB&T measures the fair value of restricted shares based on the price of BB&T’s common stock on the grant
date and the fair value of restricted share units based on the price of BB&T’s common stock on the grant date less
the present value of expected dividends that are foregone during the vesting period.
BB&T recorded $75 million, $70 million and $58 million in equity-based compensation in 2008, 2007 and 2006,
respectively. In connection with this compensation expense, BB&T recorded an income tax benefit of $29 million,
$27 million and $22 million in 2008, 2007 and 2006, respectively. The total intrinsic value of options exercised or
restricted share units vested during 2008, 2007 and 2006 was $20 million, $37 million and $46 million, respectively.
The total grant date fair value of equity-based awards that vested during 2008 was $43 million. As of
December 31, 2008, there was $105 million of unrecognized compensation costs related to BB&T’s equity-based
awards that is expected to be recognized over a weighted-average life of 3.1 years.
The following table details the activity during 2008 related to stock options awarded by BB&T:
For the Year Ended
December 31, 2008
Options
Wtd. Avg.
Exercise
Price
Outstanding at beginning of period 38,042,742 $36.61
Granted 6,718,748 34.04
Exercised (2,195,993) 29.39
Forfeited or expired (727,993) 37.57
Outstanding at end of period 41,837,504 36.55
Exercisable at end of period 26,633,411 35.73
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