Huntington National Bank 2011 Annual Report Download - page 186

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. 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, 2011, 2010, and 2009.
2011 2010 2009
Assumptions
Risk-free interest rate ......................................... 1.95% 2.30% 2.70%
Expected dividend yield ....................................... 2.63 0.68 0.96
Expected volatility of Huntington’s common stock .................. 30.0 38.5 51.8
Expected option term (years) ................................... 6.0 6.0 6.0
Weighted-average grant date fair value per share .................. $1.40 $2.20 $1.95
The following table illustrates total share-based compensation expense and related tax benefit for the three
years ended December 31, 2011, 2010, and 2009:
2011 2010 2009
(dollar amounts in thousands)
Share-based compensation expense ........................... $19,666 $15,453 $8,492
Tax benefit .............................................. 6,708 5,408 2,972
During 2009, Huntington updated its forfeiture rate assumption, as a result of increased employee turnover,
and adjusted share-based compensation expense to account for the higher forfeiture rate.
Huntington’s stock option activity and related information for the year ended December 31, 2011, was as
follows:
Options
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Life (Years)
Aggregate
Intrinsic
Value
(amounts in thousands, except years and per share amounts)
Outstanding at January 1, 2011 ....................... 21,862 $15.96
Granted ........................................... 10,918 6.00
Exercised .......................................... (124) 4.03
Forfeited/expired .................................... (5,451) 18.70
Outstanding at December 31, 2011 .................... 27,205 $11.47 4.2 $3,542
Vested and expected to vest at December 31, 2011 (1) .... 26,075 $11.71 4.1 $3,469
Exercisable at December 31, 2011 ..................... 13,649 $17.03 2.1 $1,968
(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 years ended December 31, 2011 and 2010, cash received for the
exercises of stock options was $0.5 million and $0.2 million. The tax benefit realized for the tax deductions from
option exercises totaled $0.1 million in 2011 and less than $0.1 million in 2010. There were no exercises of stock
options for the year ended December 31, 2009.
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