Huntington National Bank 2008 Annual Report Download - page 108

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would be dilutive, net (loss) income available to common shareholders is adjusted by the associated preferred dividends. The
calculation of basic and diluted (loss) earnings per share for each of the three years ended December 31 was as follows:
(in thousands, except per share amounts) 2008 2007 2006
Year Ended December 31,
Basic (loss) earnings per common share
Net (loss) income $(113,806) $ 75,169 $461,221
Preferred stock dividends and amortization of discount (46,400) ——
Net (loss) income available to common shareholders $(160,206) $ 75,169 $461,221
Average common shares issued and outstanding 366,155 300,908 236,699
Basic (loss) earnings per common share $ (0.44) $ 0.25 $ 1.95
Diluted (loss) earnings per common share
Net (loss) income available to common shareholders $(160,206) $ 75,169 $461,221
Effect of assumed preferred stock conversion ———
Net (loss) income applicable to diluted earnings per share $(160,206) $ 75,169 $461,221
Average common shares issued and outstanding 366,155 300,908 236,699
Dilutive potential common shares:
Stock options and restricted stock units —1,887 2,917
Shares held in deferred compensation plans —660 304
Conversion of preferred stock ———
Dilutive potential common shares: —2,547 3,221
Total diluted average common shares issued and outstanding 366,155 303,455 239,920
Diluted (loss) earnings per common share $ (0.44) $ 0.25 $ 1.92
Due to the loss attributable to common shareholders for the year ended December 31, 2008, no potentially dilutive shares are
included in loss per share calculation as including such shares in the calculation would reduce the reported loss per share.
Approximately 26.3 million, 14.9 million and 5.5 million options to purchase shares of common stock outstanding at the end of
2008, 2007, and 2006, 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 $19.45 per share, $23.20 per share, and $25.69 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. 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 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.
In 2006, Huntington also began granting restricted stock units. 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. 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 estimated dividend rate and stock price over the expected term of
106
Notes to Consolidated Financial Statements Huntington Bancshares Incorporated