Annual report pursuant to Section 13 and 15(d)

Share-Based Compensation

v2.4.0.8
Share-Based Compensation
12 Months Ended
Dec. 31, 2013
Share-Based Compensation [Abstract]  
SHARE-BASED COMPENSATION

16. SHARE-based Compensation

 

Huntington sponsors nonqualified and incentive share based compensation plans. These plans provide for the granting of stock options and other share-based awards to officers, directors, and other employees. Compensation costs are included in personnel costs on the 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. Stock options, which represented a portion of our grant values, have no intrinsic value until the stock price increases. Options granted prior to May 2004 have a term of ten years. All options granted after May 2004 have a term of seven years.

 

In 2012, shareholders approved the Huntington Bancshares Incorporated 2012 Long-Term Incentive Plan (the Plan) which authorized 51 million shares for future grants. The Plan is the only active plan under which Huntington is currently granting share based options and awards. At December 31, 2013, 24.4 million shares from the Plan were available for future grants. Huntington issues shares to fulfill stock option exercises and restricted stock unit and award vesting from available authorized common shares. At December 31, 2013, the Company believes there are adequate authorized common shares to satisfy anticipated stock option exercises and restricted stock unit and award vesting in 2014.

 

Huntington uses the Black-Scholes option pricing model to value options in determining our share-based compensation expense. Forfeitures are estimated at the date of grant based on historical rates, and updated as necessary, 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. The expected dividend yield is based on the dividend rate and stock price at the date of the grant. Expected volatility is based on the estimated volatility of Huntington's stock over the expected term of the option.

 

The following table illustrates the weighted average assumptions used in the option-pricing model for options granted in the three years ended December 31, 2013, 2012, and 2011:

 

      2013       2012       2011  
Assumptions                      
  Risk-free interest rate   0.79 %     1.10 %     1.95 %
  Expected dividend yield   2.83       2.38       2.63  
  Expected volatility of Huntington's common stock   35.0       34.9       30.0  
  Expected option term (years)   5.5       6.0       6.0  
                         
Weighted-average grant date fair value per share $ 1.71     $ 1.78     $ 1.40  

The following table illustrates total share-based compensation expense and related tax benefit for the three years ended December 31, 2013, 2012, and 2011:

 

(dollar amounts in thousands)   2013       2012       2011  
Share-based compensation expense $ 37,007     $ 27,873     $ 19,666  
Tax benefit   12,472       9,298       6,708  

Huntington's stock option activity and related information for the year ended December 31, 2013, 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, 2013   26,768   $ 8.87            
Granted   3,299     7.07            
Exercised   (2,498)     5.77            
Forfeited/expired   (4,269)     16.17            
                       
Outstanding at December 31, 2013   23,300   $ 7.61     4.2   $ 71,702
                       
Expected to vest at December 31, 2013 (1)   8,893   $ 6.55     5.3   $ 27,606
                       
Exercisable at December 31, 2013   13,536   $ 8.37     3.4   $ 41,570
(1) The number of options expected to vest includes an estimate of 871 shares expected to be forfeited.

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 years ended December 31, 2013, 2012, and 2011, cash received for the exercises of stock options was $14.4 million, $2.3 million and $0.5 million, respectively. The tax benefit realized for the tax deductions from option exercises totaled $1.8 million, $0.3 million and $0.1 million in 2013, 2012, and 2011, respectively.

 

The weighted-average grant date fair value of nonvested shares granted for the years ended December 31, 2013, 2012 and 2011, were $7.12, $6.69, and $6.24, respectively. The total fair value of awards vested during the years ended December 31, 2013, 2012, and 2011, was $13.7 million, $9.1 million, and $11.2 million, respectively. As of December 31, 2013, the total unrecognized compensation cost related to nonvested awards was $54.8 million with a weighted-average expense recognition period of 2.4 years.

 

The following table presents additional information regarding options outstanding as of December 31, 2013:

(amounts in thousands, except years and per share amounts) Options Outstanding     Exercisable Options
          Weighted-                  
          Average     Weighted-           Weighted-
          Remaining     Average           Average
Range of         Contractual     Exercise           Exercise
Exercise Prices   Shares     Life (Years)     Price     Shares     Price
$0 to $5.63   2,221     2.6   $ 4.60     1,896   $ 4.53
$5.64 to $6.02   8,623     4.4     6.02     5,681     6.02
$6.03 to $15.95   10,265     5.1     6.82     3,768     6.71
$15.96 to $24.56   2,191     0.8     20.64     2,191     20.64
Total   23,300     4.2   $ 7.61     13,536   $ 8.37

        Weighted-         Weighted-
        Average         Average
  Restricted     Grant Date   Performance     Grant Date
  Stock     Fair Value   Share     Fair Value
(amounts in thousands, except per share amounts) Units     Per Share   Awards     Per Share
Nonvested at January 1, 2013 8,484   $ 6.40   694   $ 6.77
Granted 6,878     7.13   1,125     7.06
Vested (2,472)     6.35   ---     ---
Forfeited (826)     6.72   (173)     6.91
Nonvested at December 31, 2013 12,064   $ 6.80   1,646   $ 6.95