Regions Bank 2010 Annual Report Download - page 176

STOCK OPTIONS
During 2010, Regions made stock option grants that vest based upon a service condition. The fair value of
these stock options was estimated on the date of the grant using a Black-Scholes option pricing model and related
assumptions. The stock options vest ratably over a three-year term. During 2009, Regions made stock option
grants from prior long-term incentive plans that vest based upon a service condition and a market condition in
addition to awards that were similar to prior grants. The fair value of these stock options was estimated on the
date of the grant using a Monte-Carlo simulation method. The simulation generates a defined number of stock
price paths in order to develop a reasonable estimate of the range of future expected stock prices and minimize
standard error.
The following table summarizes the weighted-average assumptions used and the weighted-average
estimated fair values related to stock options granted during the years ended December 31:
2010 2009 2008
Expected option life ............................................ 5.8yrs. 6.8 yrs. 5.8 yrs.
Expected volatility ............................................. 74.0% 67.2% 26.4%
Expected dividend yield ......................................... 2.2% 1.8% 6.9%
Risk-free interest rate ........................................... 2.2% 2.8% 2.9%
Fair value .................................................... $3.86 $1.79 $2.46
Refer to Note 1 for a discussion of the methodologies used to derive the underlying assumptions used in the
Black-Scholes option pricing model. The stock option awards granted during 2010 were granted to a broader
pool of employees than the 2009 awards. The expected exercise behavior of the broader base of employees
receiving awards resulted in a lower expected option life when comparing 2010 to 2009. The expected volatility
increased based upon increases in the historical volatility of Regions’ stock price, offset slightly by reductions in
the implied volatility measurements from traded options on the Company’s stock. The expected dividend yield
increased in 2010 based upon the Company’s expectation of increased dividends over the long term.
The following table summarizes the activity for 2010, 2009 and 2008 related to stock options:
Number of
Options
Weighted-
Average
Exercise
Price
Aggregate
Intrinsic
Value (In
Millions)
Weighted-
Average
Remaining
Contractual
Term
Outstanding at December 31, 2007 ....................... 48,044,207 $29.71
Granted ......................................... 10,011,105 21.57
Exercised ....................................... (90,801) 17.94
Canceled/Forfeited ................................ (5,009,213) 29.51
Outstanding at December 31, 2008 ....................... 52,955,298 $28.22 $— 5.53 yrs.
Granted ......................................... 4,083,209 3.30
Exercised ....................................... — —
Canceled/Forfeited ................................ (4,069,947) 27.84
Outstanding at December 31, 2009 ....................... 52,968,560 $26.34 $ 8 5.04 yrs.
Granted ......................................... 7,173,667 7.00
Exercised ....................................... (137,736) 3.29
Canceled/Forfeited ................................ (5,004,865) 20.66
Outstanding at December 31, 2010 ....................... 54,999,626 $24.41 $ 11 4.76 yrs.
Exercisable at December 31, 2010 ........................ 44,711,301 $27.80 $ 6 3.83 yrs.
For the years ended December 31, 2010, 2009 and 2008, the total intrinsic value of options exercised was
immaterial for all years.
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