Huntington National Bank 2007 Annual Report Download - page 99

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Huntington did not repurchase any shares under the 2006 Repurchase Program for the year ended December 31, 2007. At the end
of the period, 3.9 million shares may be purchased under the 2006 Repurchase Program.
15. EARNINGS PER SHARE
Basic earnings per share is the amount of earnings for the period available to each share of common stock outstanding during the
reporting period. Diluted earnings per share is the amount of earnings available to each share of common stock outstanding
during the reporting period adjusted to include the effect of potentially dilutive common shares. The calculation of basic and
diluted earnings per share for each of the three years ended December 31 was as follows:
(in thousands, except per share amounts) 2007 2006 2005
Year ended December 31,
Net income $ 75,169 $461,221 $412,091
Average common shares outstanding 300,908 236,699 230,142
Dilutive potential common shares 2,547 3,221 3,333
Diluted average common shares outstanding 303,455 239,920 233,475
Earnings Per Share
Basic $ 0.25 $ 1.95 $ 1.79
Diluted 0.25 1.92 1.77
Potentially dilutive common shares include incremental shares issued upon exercise of outstanding stock options, the vesting of
restricted stock units and awards, and the distribution of shares from deferred compensation plans. Dilutive potential common
shares related to stock options are computed based on the number of shares subject to options that have an exercise price less than
the average market price of Huntington’s common stock for the period.
Approximately 14.9 million, 5.5 million, and 5.7 million options to purchase shares of common stock outstanding at the end of
2007, 2006, and 2005, respectively, were not included in the computation of diluted earnings per share because the effect would be
antidilutive. The weighted average exercise price for these options was $23.20 per share, $25.69 per share, and $25.68 per share at
the end of each respective period.
16. 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. Stock options are granted at the closing market price on the
date of the grant. Options 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.
Beginning in 2006, Huntington began granting restricted stock units under the 2004 Stock and Long-Term Incentive Plan.
Restricted stock units are issued at no cost to the recipient, and can be settled only in shares at the end of the vesting period,
subject to certain service restrictions. The fair value of the restricted stock unit awards is the closing market price of the Company’s
common stock on the date of award.
Huntington uses the Black-Scholes option-pricing model to value share-based compensation expense. This model assumes that the
estimated fair value of options is amortized over the options’ vesting periods. Compensation costs are included in personnel costs
on the consolidated statements of income. 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 historical volatility of Huntington’s stock. The expected term of options granted is derived from
historical data on employee exercises. The expected dividend yield is based on the dividend rate and stock price on the date of the
97
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS HUNTINGTON BANCSHARES INCORPORATED