Quarterly report pursuant to Section 13 or 15(d)

Share-Based Compensation

Share-Based Compensation
3 Months Ended
Mar. 31, 2012
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 Unaudited 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 periods ended March 31, 2012 and 2011.

        Three Months Ended
        March 31,
        2012       2011  
  Risk-free interest rate     1.17 %     2.49 %
  Expected dividend yield     2.73       0.58  
  Expected volatility of Huntington's common stock     30.0       32.5  
  Expected option term (years)     6.0       6.0  
Weighted-average grant date fair value per share   $ 1.27     $ 2.35  

The following table illustrates total share-based compensation expense and related tax benefit for the three-month periods ended March 31, 2012 and 2011:

      Three Months Ended  
      March 31,  
(dollar amounts in thousands)     2012       2011  
Share-based compensation expense   $ 5,303     $ 3,625  
Tax benefit     1,759       1,269  

Huntington's stock option activity and related information for the three-month period ended March 31, 2012, 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, 2012   27,205   $ 11.47            
  Granted   117     5.85            
  Exercised   (106)     3.96            
  Forfeited/expired   (803)     16.03            
Outstanding at March 31, 2012   26,413   $ 11.33     4.0   $ 11,308
Vested and expected to vest at March 31, 2012 (1)   25,461   $ 11.54     4.0   $ 10,821
Exercisable at March 31, 2012   13,155   $ 16.82     2.0   $ 3,816
(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 three-month periods ended March 31, 2012 and March 31, 2011, cash received for the exercises of stock options was $0.4 million and $0.1 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 March 31, 2012, and activity for the three-month period ended March 31, 2012:

        Restricted     Grant Date
        Stock     Fair Value
(amounts in thousands, except per share amounts)   Units     Per Share
Nonvested at January 1, 2012   7,591   $ 6.09
  Granted   208     5.88
  Vested   (190)     7.52
  Forfeited   (62)     5.99
Nonvested at March 31, 2012   7,547   $ 6.05

The weighted-average grant date fair value of nonvested shares granted for the three-month periods ended March 31, 2012 and 2011, were $5.88 and $7.50, respectively. The total fair value of awards vested was $1.1 million and $0.2 million during the three-month periods ended March 31, 2012, and 2011, respectively. As of March 31, 2012, the total unrecognized compensation cost related to nonvested awards was $25.4 million with a weighted-average expense recognition period of 1.7 years.

Of the remaining 36.9 million shares of common stock authorized for issuance at March 31, 2012, 34.0 million were outstanding and 2.9 million were available for future grants. Huntington issues shares to fulfill stock option exercises and restricted stock units from available authorized shares. At March 31, 2012, Management believes there are adequate authorized shares available to satisfy anticipated stock option exercises and award releases in 2012.