Quarterly report pursuant to Section 13 or 15(d)

Share-Based Compensation

 v2.3.0.11
Share-Based Compensation
 6 Months Ended
Jun. 30, 2011
Share-Based Compensation [Abstract]  
SHARE-BASED COMPENSATION
11. SHARE-BASED COMPENSATION
Huntington sponsors nonqualified and incentive share-based compensation plans. These plans provide for the granting of stock options and other awards to officers, directors, and other employees. Compensation costs are included in personnel costs on the Condensed Consolidated Statements of Income. Stock options are granted at the closing market price on the date of the grant. Options granted typically vest ratably over three years or when other conditions are met. Options granted prior to May 2004 have a term of ten years. All options granted after May 2004 have a term of seven years.
Huntington uses the Black-Scholes option pricing model to value share-based compensation expense. Forfeitures are estimated at the date of grant based on historical rates and reduce the compensation expense recognized. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the date of grant. Expected volatility is based on the estimated volatility of Huntington’s stock over the expected term of the option. The expected dividend yield is based on the dividend rate and stock price at the date of the grant. The following table illustrates the weighted-average assumptions used in the option-pricing model for options granted in the three-month and six-month periods ended June 30, 2011 and 2010.
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2011     2010     2011     2010  
Assumptions
                               
Risk-free interest rate
    2.20 %     2.83 %     2.35 %     2.90 %
Expected dividend yield
    0.61       0.69       0.59       0.81  
Expected volatility of Huntington’s common stock
    30.0       60.0       31.3       60.0  
Expected option term (years)
    6.0       6.0       6.0       6.0  
 
                               
Weighted-average grant date fair value per share
  $ 2.05     $ 3.19     $ 2.20     $ 2.76  
The following table illustrates total share-based compensation expense and related tax benefit for the three-month and six-month periods ended June 30, 2011 and 2010:
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
(dollar amounts in thousands)   2011     2010     2011     2010  
Share-based compensation expense
  $ 3,898     $ 3,676     $ 7,523     $ 6,609  
Tax (expense) benefit
    1,364       1,287       2,633       2,313  
Huntington’s stock option activity and related information for the six-month period ended June 30, 2011, was as follows:
                                 
                    Weighted-        
            Weighted-     Average        
            Average     Remaining     Aggregate  
            Exercise     Contractual     Intrinsic  
(amounts in thousands, except years and per share amounts)   Options     Price     Life (Years)     Value  
Outstanding at January 1, 2011
    21,862     $ 15.96                  
Granted
    128       6.79                  
Exercised
    (47 )     4.21                  
Forfeited/expired
    (1,362 )     15.18                  
 
                       
Outstanding at June 30, 2011
    20,581     $ 15.98       2.6     $ 7,576  
 
                       
Vested and expected to vest at June 30, 2011 (1)
    20,322     $ 16.11       2.6     $ 7,303  
 
                       
Exercisable at June 30, 2011
    15,900     $ 19.07       1.8     $ 2,329  
 
                       
     
(1)   The number of options expected to vest includes an estimate of expected forfeitures.
The aggregate intrinsic value represents the amount by which the fair value of underlying stock exceeds the “in-the-money” option exercise price. For the six-month period ended June 30, 2011, cash received for the exercises of stock options was $0.2 million and the tax benefit realized from stock option exercises was less than $0.1 million. There were no exercises of stock options for the six-month period ended June 30, 2010.
Huntington also grants restricted stock units and awards. Restricted stock units and awards are issued at no cost to the recipient, and can be settled only in shares at the end of the vesting period. Restricted stock awards provide the holder with full voting rights and cash dividends during the vesting period. Restricted stock units do not provide the holder with voting rights or cash dividends during the vesting period, but do accrue a dividend equivalent that is paid upon vesting, and are subject to certain service restrictions. The fair value of the restricted stock units and awards is the closing market price of the Huntington’s common stock on the date of award.
The following table summarizes the status of Huntington’s restricted stock units and restricted stock awards as of June 30, 2011, and activity for the six-month period ended June 30, 2011:
                                 
            Weighted-             Weighted-  
            Average             Average  
    Restricted     Grant Date     Restricted     Grant Date  
    Stock     Fair Value     Stock     Fair Value  
(amounts in thousands, except per share amounts)   Units     Per Share     Awards (1)     Per Share  
Nonvested at January 1, 2011
    5,511     $ 5.78       466     $ 5.24  
Granted
    697       7.45       —       —  
Vested
    (42 )     8.76       (376 )     5.72  
Forfeited
    (156 )     6.04       —       —  
 
                       
Nonvested at June 30, 2011
    6,010     $ 5.94       90     $ 3.24  
 
                       
     
(1)   Includes restricted stock awards granted under the Second Amended and Restated 2007 Stock and Long-Term Incentive Plan to certain executives as a portion of their annual base salary. These awards are 100% vested as of the grant date and are not subject to any requirement of future service. However, the shares are subject to restrictions regarding sale, transfer, pledge, or disposition until certain conditions are met. All awards vested in the 2011 second quarter.
The weighted-average grant date fair value of nonvested shares granted for the six-month periods ended June 30, 2011 and 2010, were $7.45 and $5.64, respectively. The total fair value of awards vested was $2.7 million and $0.3 million during the six-month periods ended June 30, 2011, and 2010, respectively. As of June 30, 2011, the total unrecognized compensation cost related to nonvested awards was $18.9 million with a weighted-average expense recognition period of 1.5 years.
Of the remaining 43.4 million shares of common stock authorized for issuance at June 30, 2011, 27.1 million were outstanding and 16.3 million were available for future grants. Huntington issues shares to fulfill stock option exercises and restricted stock units from available authorized shares. At June 30, 2011, Management believes there are adequate authorized shares available to satisfy anticipated stock option exercises in 2011.