Huntington National Bank 2008 Annual Report Download - page 107

TROUBLED ASSET RELIEF PROGRAM (TARP)
On November 14, 2008, Huntington received $1.4 billion of equity capital by issuing to the U.S. Department of Treasury 1.4 million
shares of Huntington’s 5.00% Series B Non-voting Cumulative Preferred Stock, par value $0.01 per share with a liquidation
preference of $1,000 per share and a ten-year warrant to purchase up to 23.6 million shares of Huntington’s common stock, par
value $0.01 per share, at an exercise price of $8.90 per share. The proceeds received were allocated to the preferred stock and
additional paid-in-capital based on their relative fair values. The resulting discount on the preferred stock is amortized against
retained earnings and is reflected in Huntington’s consolidated statement of income as “Dividends on preferred shares,” resulting in
additional dilution to Huntington’s earnings per share. The warrants would be immediately exercisable, in whole or in part, over a
term of 10 years. The warrants were included in Huntington’s diluted average common shares outstanding (subject to anti-
dilution). Both the preferred securities and warrants were accounted for as additions to Huntington’s regulatory Tier 1 and Total
capital.
The Series B Preferred Stock is not mandatorily redeemable and will pay cumulative dividends at a rate of 5% per year for the first
five years and 9% per year thereafter. Huntington cannot redeem the preferred securities during the first three years after issuance
except with the proceeds from a “qualified equity offering.” Any redemption before three years or thereafter requires Federal
Reserve approval. The Series B Preferred Stock will rank on equal priority with Huntington’s existing 8.50% Series A Non-
Cumulative Perpetual Convertible Preferred Stock.
A company that participates must adopt certain standards for executive compensation, including (a) prohibiting “golden
parachute” payments as defined in the Emergency Economic Stabilization Act of 2008 (EESA) to senior Executive Officers;
(b) requiring recovery of any compensation paid to senior Executive Officers based on criteria that is later proven to be materially
inaccurate; (c) prohibiting incentive compensation that encourages unnecessary and excessive risks that threaten the value of the
financial institution, and (d) accept restrictions on the payment of dividends and the repurchase of common stock.
SHARE REPURCHASE PROGRAM
On April 20, 2006, the Company announced that its board of directors authorized a new program for the repurchase of up to
15 million shares of common stock (the 2006 Repurchase Program). The 2006 Repurchase Program does not have an expiration
date. The 2006 Repurchase Program cancelled and replaced the prior share repurchase program, authorized by the board of
directors in 2005. The Company announced its expectation to repurchase the shares from time to time in the open market or
through privately negotiated transactions depending on market conditions.
Huntington did not repurchase any shares under the 2006 Repurchase Program for the year ended December 31, 2008. At the end
of the period, 3.9 million shares were available for repurchase; however, as a condition to participate in the TARP, Huntington may
not repurchase any additional shares without prior approval from the Department of Treasury. On February 18, 2009, the board of
directors terminated the 2006 Repurchase Program.
15. (LOSS) EARNINGS PER SHARE
Basic (loss) earnings per share is the amount of (loss) earnings (adjusted for dividends declared on preferred stock) available to
each share of common stock outstanding during the reporting period. Diluted (loss) earnings per share is the amount of (loss)
earnings available to each share of common stock outstanding during the reporting period adjusted to include the effect of
potentially dilutive common shares. Potentially dilutive common shares include incremental shares issued for stock options,
restricted stock units, distributions from deferred compensation plans, and the conversion of the Company’s convertible preferred
stock and warrants (See Note 14). Potentially dilutive common shares are excluded from the computation of diluted earnings per
share in periods in which the effect would be antidilutive. For diluted (loss) earnings per share, net (loss) income available to
common shares can be affected by the conversion of the Company’s convertible preferred stock. Where the effect of this conversion
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Notes to Consolidated Financial Statements Huntington Bancshares Incorporated