Quarterly report pursuant to Section 13 or 15(d)

Share-Based Compensation

Share-Based Compensation
9 Months Ended
Sep. 30, 2011
Share-Based Compensation [Abstract]  

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 nine-month periods ended September 30, 2011 and 2010.

      Three Months Ended     Nine Months Ended
      September 30,     September 30,
      2011       2010       2011       2010  
  Risk-free interest rate   1.97 %     2.14 %     1.97 %     2.31 %
  Expected dividend yield   2.64       0.63       2.62       0.67  
  Expected volatility of Huntington's common stock   30.0       32.5       30.0       38.6  
  Expected option term (years)   6.0       6.0       6.0       6.0  
Weighted-average grant date fair value per share $ 1.40     $ 2.05     $ 1.41     $ 2.21  

The following table illustrates total share-based compensation expense and related tax benefit for the three-month and nine-month periods ended September 30, 2011 and 2010:

    Three Months Ended       Nine Months Ended  
    September 30,       September 30,  
(dollar amounts in thousands)   2011       2010       2011       2010  
Share-based compensation expense $ 6,463     $ 4,525     $ 13,986     $ 11,413  
Tax benefit   2,182       1,584       4,815       3,995  

Huntington's stock option activity and related information for the nine-month period ended September 30, 2011, was as follows:

              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   10,625     6.03            
  Exercised   (99)     4.06            
  Forfeited/expired   (4,756)     19.02            
Outstanding at September 30, 2011   27,632   $ 11.65     4.3   $ 1,614
Vested and expected to vest at September 30, 2011 (1)   26,327   $ 11.94     4.2   $ 1,583
Exercisable at September 30, 2011   14,160   $ 17.15     2.3   $ 959
(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 nine-month period ended September 30, 2011 and September 30, 2010, cash received for the exercises of stock options was $0.4 million and $0.2 million, respectively. The tax benefit realized from stock option exercises was less than $0.1 million for each respective period.


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 September 30, 2011, and activity for the nine-month period ended September 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 3,775     6.27   ---     ---
  Vested (963)     5.97   (428)     5.43
  Forfeited (258)     6.33   (13)     3.11
Nonvested at September 30, 2011 8,065   $ 5.97   25   $ 3.11
(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 nine-month periods ended September 30, 2011 and 2010, were $6.27 and $6.20, respectively. The total fair value of awards vested was $8.7 million and $2.8 million during the nine-month periods ended September 30, 2011, and 2010, respectively. As of September 30, 2011, the total unrecognized compensation cost related to nonvested awards was $32.2 million with a weighted-average expense recognition period of 2.0 years.

Of the remaining 38.8 million shares of common stock authorized for issuance at September 30, 2011, 35.7 million were outstanding and 3.1 million were available for future grants. Huntington issues shares to fulfill stock option exercises and restricted stock units from available authorized shares. At September 30, 2011, Management believes there are adequate authorized shares available to satisfy anticipated stock option exercises in 2011.