Quarterly report pursuant to Section 13 or 15(d)

Share-Based Compensation

Share-Based Compensation
3 Months Ended
Sep. 30, 2013
Share-Based Compensation [Abstract]  

12. 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. Stock options, which represented a significant 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 51.0 million shares for future grants. The Plan is the only active plan under which Huntington is currently granting share based options and awards. At September 30, 2013, 24.2 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 September 30, 2013, the Company believes there are adequate authorized common shares to satisfy anticipated stock option exercises and restricted stock unit and award vesting in 2013.


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 for the three-month and nine-month periods ended September 30, 2013 and 2012:

      Three Months Ended     Nine Months Ended
      September 30,     September 30,
      2013       2012       2013       2012  
  Risk-free interest rate   1.75 %     0.87 %     0.79 %     1.10 %
  Expected dividend yield   2.46       2.46       2.83       2.37  
  Expected volatility of Huntington's common stock   35.0       35.0       35.0       34.9  
  Expected option term (years)   5.5       6.0       5.5       6.0  
Weighted-average grant date fair value per share $ 2.17     $ 1.68     $ 1.71     $ 1.79  

The following table illustrates total share-based compensation expense and related tax benefit for the three-month and nine-month periods ended September 30, 2013 and 2012:

    Three Months Ended       Nine Months Ended  
    September 30,       September 30,  
(dollar amounts in thousands)   2013       2012       2013       2012  
Share-based compensation expense $ 9,746     $ 7,138     $ 27,643     $ 19,958  
Tax benefit   3,278       2,366       9,311       6,627  

Huntington's stock option activity and related information for the nine-month period ended September 30, 2013, 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, 2013   26,768   $ 8.87            
  Granted   3,291     7.07            
  Exercised   (1,914)     5.75            
  Forfeited/expired   (4,075)     16.20            
Outstanding at September 30, 2013   24,070   $ 7.63     4.4   $ 43,973
Vested and expected to vest at September 30, 2013 (1)   8,982   $ 6.52     5.6   $ 15,588
Exercisable at September 30, 2013   14,002   $ 8.41     3.6   $ 26,696
(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 periods ended September 30, 2013 and 2012, cash received for the exercises of stock options was $11.0 million and $1.8 million, respectively. The tax benefit realized from stock option exercises was $1.3 million and $0.3 million for each respective period.


Huntington also grants restricted stock, restricted stock units, performance share awards and other stock-based 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. Performance share awards are payable contingent upon Huntington achieving certain predefined performance objectives over the three-year measurement period. The fair value of these awards is the closing market price of Huntington's common stock on the date of award.


The following table summarizes the status of Huntington's restricted stock units and performance share awards as of September 30, 2013, and activity for the nine-month period ended September 30, 2013:

            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 6,859     7.13   1,125     7.06
  Vested (2,335)     6.33   ---     ---
  Forfeited (686)     6.70   (170)     6.90
Nonvested at September 30, 2013 12,322   $ 6.80   1,649   $ 6.95

The weighted-average grant date fair value of nonvested shares granted for the nine-month periods ended September 30, 2013 and 2012, were $7.12 and $6.71, respectively. The total fair value of awards vested was $14.8 million and $6.9 million during the nine-month periods ended September 30, 2013, and 2012, respectively. As of September 30, 2013, the total unrecognized compensation cost related to nonvested awards was $62.8 million with a weighted-average expense recognition period of 2.6 years.