SCHEDULE 14A

Information Required in Proxy Statement

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934

Filed by the Registrant þ

Filed by a Party other than the Registrant o

Check the appropriate box:

o		Preliminary Proxy Statement
o		Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
þ		Definitive Proxy Statement
o		Definitive Additional Materials
o		Soliciting Material Under Rule 14a-12

Huntington Bancshares Incorporated

Payment of Filing Fee (Check the appropriate box):

þ		No fee required.
o		Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

	(1)		Title of each class of securities to which transaction applies:
	(2)		Aggregate number of securities to which transaction applies:
	(3)		Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined):
	(4)		Proposed maximum aggregate value of transaction:
	(5)		Total fee paid:

o		Fee paid previously with preliminary materials.
o		Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

	(1)		Amount Previously Paid:
	(2)		Form, Schedule or Registration Statement No.:
	(3)		Filing Party:
	(4)		Date Filed:

 

 

Huntington Bancshares Incorporated

Huntington Center

41 South High Street

Columbus, Ohio 43287

 

Richard A. Cheap

General Counsel and Secretary

 

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

 

To Our Shareholders:

 

We will hold the 2011 annual meeting of shareholders of Huntington Bancshares Incorporated, a Maryland corporation, on Thursday, April 21, 2011, in the Grand Ballroom at The Westin Great Southern Hotel, 310 South High Street, Columbus, Ohio at 1:00 p.m., local Columbus, Ohio time.

 

The purposes of the annual meeting are to consider and vote on the following matters:

 

 

We are pleased to invite you to the meeting, and we hope you can attend.

 

Your vote is important. You may vote by executing and returning your proxy card in the accompanying envelope, or by authorizing your proxy electronically over the Internet or by telephone. Please refer to the proxy card enclosed for information on authorizing your proxy electronically. If you attend the meeting, you may vote in person.

 

Sincerely,

 

Richard A. Cheap

March 7, 2011

 

Important Notice Regarding the Availability of Proxy Materials for the

Shareholder Meeting to Be Held on April 21, 2011

 

The proxy statement and annual report to security holders are available at www.edocumentview.com/HBAN2011

 

Information for Shareholders Who Plan to Attend the 2011 Annual Meeting of Shareholders

 

 

Suggested parking is in the Columbus Commons Parking Garage (previously the City Center Garage). This parking garage is located on the block bordered by South High Street, South Third Street, East Rich Street and East Main Street. Entrances to the garage are on Rich and Main Street. The garage is just across Main Street from The Westin Great Southern Hotel where the shareholders meeting is being held. When you register for the shareholders meeting, you will be given a voucher to use to pay for parking in this garage.

 

Directions to The Westin Great Southern Hotel and Columbus Commons Parking Garage

 

From East

 

Take Interstate 70 West to Fourth Street. Turn right immediately onto Fourth Street. At the first traffic light, turn left onto Mound Street. Proceed to the second traffic light at High Street and turn right. The hotel is one block ahead on the right at the corner of High and Main Streets. Turn right onto Main Street and turn left into the Columbus Commons parking garage.

 

From North

 

Take Interstate 71 South to Interstate 670 West. Proceed on I-670 West to Third Street and pass through nine traffic lights. Turn right onto Mound Street. Continue one block to High Street. Turn right onto High Street. The hotel is one block ahead on the right at the corner of High and Main Streets. Turn right onto Main Street and turn left into the Columbus Commons parking garage.

 

From West

 

Take Interstate 70 East to the Front Street/High Street Exit. At the second traffic light, turn left onto High Street. The hotel is three blocks ahead on the right at the corner of High and Main Streets. Turn right onto Main Street and turn left into the Columbus Commons parking garage.

 

From South

 

Take Interstate 71 North to Interstate 70 East. Proceed on I-70 and take the Front/High Street Exit. Continue to the second light and turn left onto High Street. The hotel is three blocks ahead on the right at the corner of High and Main Streets. Turn right onto Main Street and turn left into the Columbus Commons parking garage.

 

 

PROXY STATEMENT

 

We are providing this proxy statement in connection with the solicitation by the board of directors of Huntington Bancshares Incorporated, a Maryland corporation, (“we”, “us”, “our”) of proxies to be voted at our 2011 annual meeting of shareholders to be held on April 21, 2011, and at any adjournment. We are sending or making this proxy statement available to our shareholders starting on March 7, 2011.

 

General Information About the Meeting

 

Voting Procedures

 

Holders of common stock at the close of business on February 16, 2011, are entitled to vote at the annual meeting. As of that date, there were 864,366,068 shares of common stock outstanding and entitled to vote. Holders of our Series A Preferred Stock are not entitled to vote.

 

Each holder of shares of common stock is entitled to cast one vote on each matter submitted at the annual meeting for each share of stock held of record at the close of business on February 16, 2011. The shares represented by a properly submitted proxy will be voted as directed provided we receive the proxy prior to or at the meeting. A properly executed proxy without specific voting instructions will be voted FOR the nominees for director named in this proxy statement, FOR the approval of the Management Incentive Plan for Covered Officers, FOR the approval of the Supplemental Stock Purchase and Tax Savings Plan and Trust, FOR the ratification of the appointment of Deloitte & Touche LLP as the independent registered public accounting firm for 2011, FOR the advisory approval of executive compensation, and for the recommendation that future advisory votes on executive compensation occur once every THREE calendar years. A properly submitted proxy will also confer discretionary authority to vote on any other matter which may properly come before the meeting or any adjournment or postponement of the meeting.

 

You may vote by executing and returning your proxy card in the envelope provided, or by voting electronically over the Internet or by telephone. Please refer to the proxy card for information on voting electronically. If you attend the meeting, you may vote in person and the proxy will not be used.

 

We are not currently aware of any matters that may properly be presented other than those described in this proxy statement. If any matters not described in the proxy statement are properly presented at the meeting, the proxies will use their own judgment to determine how to vote your shares. If the meeting is adjourned, the proxies can vote your common stock at the adjournment as well, unless you have revoked your proxy instructions.

 

Revoking Your Proxy

 

If your common stock is held in street name, you must follow the instructions of your broker, bank or other nominee to revoke your voting instructions. If you are a holder of record and wish to revoke your proxy instructions, you must advise our secretary in writing before the proxies vote your common stock at the meeting, deliver later dated proxy instructions, or attend the meeting and vote your shares in person.

 

Expenses of Solicitation

 

We will pay the expenses of this proxy solicitation, including the reasonable charges and expenses of brokerage firms and others for forwarding solicitation material to their customers who are beneficial owners. In addition to soliciting proxies by mail and via the Internet, our employees may also solicit proxies by telephone and in person. We have retained Morrow & Co. LLC, 470 West Avenue, Stanford, Connecticut, to assist in the solicitation of proxies for a fee of $9,500 plus reasonable out-of-pocket expenses.

 

Vote Required

 

A quorum is required to conduct business at the annual meeting. Shareholders entitled to cast a majority of all the votes entitled to be cast at the annual meeting, present in person or by proxy, will constitute a quorum. Under the laws of Maryland, our state of incorporation, abstentions and broker non-votes are counted for purposes of determining the presence or absence of a quorum, but are not counted as votes cast at the meeting. Broker non-votes occur when brokers who hold their customers’ shares in street name submit proxies for such shares on some matters, but not others. Generally, this would occur when brokers have not received any instructions from their customers. In these cases, the brokers, as the holders of record, are permitted to vote on “routine” matters, which typically include the ratification of the independent registered public accounting firm, but not on non-routine matters. Since January 1,

 

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2010, brokers are no longer permitted to vote on the election of directors without instructions from their customers. In addition, as of September 9, 2010, brokers are no longer permitted to vote on matters related to executive compensation without instructions from their customers.

 

A nominee for election to the board of directors at a meeting of stockholders at which a quorum is present will be elected only if the number of votes cast “for” such nominee’s election exceeds the total number of votes cast “against” or affirmatively “withheld” as to such nominee’s election; provided, however, that if, on either the date of the company’s proxy statement for the meeting or on the date of the meeting, the number of nominees exceeds the number of directors to be elected, the directors shall be elected by a plurality of all the votes cast at the meeting.

 

Approval of the Management Incentive Plan for Covered Officers, approval of the Supplemental Stock Purchase and Tax Savings Plan and Trust, ratification of the appointment of Deloitte & Touche LLP, the advisory approval of executive compensation and the recommendation of the frequency of future advisory votes on executive compensation each requires the affirmative vote of a majority of all votes cast on the matter by the holders of common stock at a meeting at which a quorum is present.

 

The recommendation of the frequency of future advisory votes on executive compensation permits shareholders to vote for a frequency of one, two or three calendar years. As a result, it is possible that no option receives a majority of the votes cast on the matter. If no frequency receives a majority of the votes cast on the matter (excluding any abstentions), we will consider the frequency for future advisory votes on executive compensation receiving the greatest number of votes (every one, two or three years) to be the frequency recommended by stockholders.

 

Broker non-votes and abstentions will have no effect on the election of any director or the approval of the other matters described above since they are not counted as votes cast at the meeting, but votes affirmatively “withheld” from the election of any nominee will have the effect of a vote against that nominee’s election as a director.

 

Board Recommendation

 

The board of directors recommends that you vote FOR each of the director nominees, FOR the approval of the Management Incentive Plan for Covered Officers, FOR the approval of the Supplemental Stock Purchase and Tax Savings Plan and Trust, FOR the ratification of the appointment of the independent public accountants, FOR the advisory approval of executive compensation and to recommend a frequency of THREE years for future advisory votes on executive compensation.

 

Election of Directors

 

Beginning with this annual meeting, all directors will be elected annually. Directors elected at this year’s annual meeting will each be elected to serve a one-year term expiring at our 2012 annual meeting when their successors are duly elected and qualify. Upon consultation with the Nominating and Corporate Governance Committee, the board of directors proposes the election of fourteen directors. Each of the nominees is currently serving as a director.

 

Our board of directors currently consists of 15 members. Since the 2010 annual meeting, Gene E. Little retired from the board in July 2010 after four years of service. In addition, the board has elected two new directors. Ann B. Crane joined the board in August 2010 and Steven G. Elliott joined the board in January 2011. All of the directors currently serving are being nominated for election at this meeting with the exception of Wm. J. Lhota who is retiring due to the age limitations in our bylaws.

 

Unless otherwise directed, the shares represented by a properly submitted proxy will be voted FOR the election of each nominee. We have no reason to believe that any nominee will be unable or unwilling to serve as a director if elected. However, in the event that any of these nominees should become unavailable, the board of directors may decrease the number of directors pursuant to the bylaws, or the board of directors may designate a substitute nominee, for whom shares represented by a properly submitted proxy would be voted.

 

The board of directors recommends a vote FOR the election of each of the nominees for director.

 

Information about the Nominees

 

The following provides biographical information regarding each of the nominees, including their specific business experience, qualifications, attributes and skills that the board considered, in addition to their prior service on the board, when it determined to nominate them.

 

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Don M. Casto III

Principal /Chief Executive Officer, CASTO

Director Since 1985

Age 66

 

Mr. Casto is responsible for the development activities of CASTO, a regional real estate development and services firm based in Columbus, Ohio. The firm specializes in the development of shopping centers, multi-family housing and mixed-use entertainment projects. Mr. Casto is also an attorney, and practiced law in California prior to joining CASTO in 1972. Mr. Casto is active in the community and has served on the boards of numerous non-profit organizations, including the Greater Columbus Chamber of Commerce. Mr. Casto has also served as a director of The Huntington National Bank since 1985. Mr. Casto is widely recognized in Central Ohio as an experienced business and community leader. This experience, along with his history as a director with our company make him an effective director and chairman of the board’s Executive Committee. Mr. Casto also serves on the board’s Compensation Committee and Nominating and Corporate Governance Committee.

 

Ann (“Tanny”) B. Crane

President and Chief Executive Officer, Crane Group Company

Director Since 2010

Age 54

 

Since 2003, Ms. Crane has led Crane Group Company, a privately-held, diversified portfolio company comprised of businesses primarily serving the home building and commercial markets, as well as managing investments in private equity firms and real estate and bond portfolios. Ms. Crane joined the manufacturer Crane Plastics Company in 1987 as director of human resources, and became vice president of sales and marketing in 1993. She was named president in 1996. In 2003, Ms. Crane was appointed as a director for the Federal Reserve Bank of Cleveland. After serving as a director for five years, she was named chair of the board and served in that capacity for two years. Ms. Crane also served on the board of Wendy’s International from 2003 to 2007. She and her company are widely recognized for their philanthropy throughout Central Ohio. Ms. Crane is an accomplished executive who is knowledgeable of the financial services industry and is deeply involved in community support and investment. Because of her knowledge and experience, Ms. Crane was appointed to serve on the Audit Committee. Ms. Crane has also been elected to serve on the Community Development Committee.

 

Steven G. Elliott

Retired Senior Vice Chairman, BNY Mellon

Director Since 2011

Age 64

 

During his 23-year career with BNY Mellon, Mr. Elliott served as chief financial officer, led a number of the company’s servicing businesses and was co-leader of the integration of The Bank of New York and Mellon Financial Corporation when they merged in 2007. A certified public accountant, Mr. Elliott joined Mellon in 1987 as head of finance. He was named chief financial officer in 1990, vice chairman in 1992 and senior vice chairman in 1998. As chief financial officer from 1990 to 2002, Mr. Elliott led strategic acquisitions, divestitures and restructurings. He also has held various line of business leadership roles in asset servicing, securities lending, foreign exchange, capital markets, global cash management and institutional banking. Mr. Elliott also served as a director of Mellon Financial Corporation from 2001 until the merger in July 2007. He was then a director of BNY Mellon through July 2008. Prior to joining Mellon, Mr. Elliott served as chief financial officer of First Commerce Corporation, corporate controller of Crocker National Bank, senior vice president of Continental Illinois National Bank and corporate controller of United California Bank. As one of the most broadly experienced financial services executives in the United States, Mr. Elliott brings valuable insight and advice to our board. He has been appointed to the board’s Risk Oversight Committee, where we believe his experience will contribute to building strong and effective risk management. Mr. Elliott has been elected to chair the Risk Oversight Committee following Mr. Lhota’s retirement in April, and to serve on the Capital Planning Committee as well.

 

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Michael J. Endres

Principal, Stonehenge Financial Holdings, Inc.

Director since 2003

Age 63

 

Mr. Endres is a principal of Stonehenge Financial Holdings, Inc., located in Columbus, Ohio. Stonehenge, acting through its affiliate Stonehenge Partners, is a private equity investment firm investing in middle market companies throughout the Midwest. Prior to joining Stonehenge, Mr. Endres was vice chairman of Banc One Capital Holdings Corporation (BOCHC) and chairman of BancOne Capital Partners, where he directed the merchant banking activities of the firm and originated direct investments for the corporate-related private equity and mezzanine investments. He also managed Bank One’s SBIC (Small Business Investment Company) then one of the largest in the United States. Mr. Endres also serves as a board member of Tim Hortons, Worthington Industries, and OhioHealth Corporation. Mr. Endres has a depth of experience in equity investing, business development, strategic initiatives and acquisitions, financial analysis, leadership and management. Mr. Endres brings this experience and financial expertise to his role as chairman of the board’s Capital Planning Committee. He also serves on the board’s Executive Committee and Risk Oversight Committee.

 

John B. Gerlach, Jr.

Chairman, President and Chief Executive Officer, Lancaster Colony Corporation

Director since 1999

Age 56

 

Mr. Gerlach has led Lancaster Colony Corporation, a publicly held diversified marketer of specialty foods, glassware and candles for 14 years. He was elected chairman of the board of directors and chief executive officer of Lancaster Colony Corporation in February 1997. He had been president and chief operating officer since May 1994. He joined the Lancaster Colony companies in April of 1976 and has served in various capacities, including executive vice president, for nine years. Mr. Gerlach has served on the Lancaster Colony board of directors since November 1985 and has served on the boards of numerous non-profit organizations, including the Columbus Foundation, Nationwide Children’s Hospital, The Ohio State University Foundation and the Richard M. Ross Heart Hospital Board. Mr. Gerlach brings significant public company leadership and operational management experience to the board and to his role as chair of the Compensation Committee. He also serves on the Nominating and Corporate Governance Committee.

 

D. James Hilliker

Vice President/Managing Shareholder, Better Food Systems, Inc.

Director Since 2007

Age 63

 

For more than thirty years, Mr. Hilliker has led his family-owned business, Better Food Systems, Inc. which owns, leases and operates Wendy’s franchises in Ohio and Indiana. Mr. Hilliker has also served on various bank boards for more than 30 years. He joined the Huntington board after we acquired Sky Financial Group Inc. in 2007. He served on the Sky board for 10 years, on the board of Sky’s predecessor MidAm, Inc., from 1995 to 1998; on the board of Americom Bank, Lima, Ohio, (a subsidiary of MidAm, Inc.) from 1992 to 1995; and on the board of Colonial Federal Savings and Loan, Bellefontaine, Ohio, (which was bought by Americom Bank) from 1987 to 1992. Mr. Hilliker first served our company as a bank advisory board member in Bellefontaine, Ohio from 1978 to 1987. Mr. Hilliker was also a member of the board of trustees for The Ohio State University for 10 years, and was a director of Community Mutual Insurance Company of Cincinnati, Ohio where he was a member of the audit committee. Mr. Hilliker brings many years of business and director experience, including bank board service, to our board and the Audit Committee.

 

David P. Lauer

Certified Public Accountant

Director Since 2003

Age 68

 

Mr. Lauer has more than four decades of accounting and banking experience. He first joined Deloitte & Touche LLP in 1966 and eventually served as the Office Managing Partner for the Columbus office from 1989 to 1997. That same year, he joined Bank One, Columbus, NA, and was the chief operating officer and president of Columbus

 

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Commercial Operations from 1997 to 2001. Beginning that year until 2004, Mr. Lauer was the interim acting chief financial officer for The Ohio State University Medical Center. Mr. Lauer has served on the board of The Huntington National Bank since 2003, and previously served as a director of Huntington Preferred Capital Inc. He currently is a member of the boards of RG Barry Corporation and Diamond Hill Investment Group, and is a member of their audit committees. Within the past 5 years, Mr. Lauer has also served on the boards and the audit committees of Wendy’s International Inc. and Tim Hortons, Inc. We greatly benefit from having a director and Audit Committee chair with Mr. Lauer’s extensive audit and board experience, as well as banking experience. He is also a member of the Capital Planning Committee.

 

Jonathan A. Levy

Managing Partner, Redstone Investments

Director since 2007

Age 50

 

Mr. Levy is co-founder and managing partner of Redstone Investments, a full service commercial real estate firm. The company was formed in 1991 and is headquartered in Youngstown, Ohio, with an additional office located in Tampa, Florida. Redstone is involved in property management, construction, development and commercial real estate brokerage. Their portfolio includes properties located throughout 13 states. Mr. Levy has over 25 years of experience in the commercial real estate business. Mr. Levy served on the board of Sky Financial Group, Inc. from 1999 until Huntington’s acquisition of Sky. He served as lead director of the Sky board from 2003 to 2007. Before serving on the Sky board, Mr. Levy served on the boards of Western Reserve Bank and Citizens Bankshares, Inc. Mr. Levy also has hands on banking experience with his service at Marine Midland Banks, NA as a construction and commercial real estate lender, from 1983 to 1988. Mr. Levy has also served on the boards on numerous community non-profit organizations. Mr. Levy has been a member of the board of The Huntington National Bank since 2007. Mr. Levy brings many years of business, banking, real estate and director experience to our organization. He serves on the Capital Planning Committee, the Executive Committee and the Risk Oversight Committee.

 

Gerard P. Mastroianni

President, Alliance Ventures, Inc.

Director Since 2007

Age 55

 

Mr. Mastroianni is president of Alliance Ventures, Inc., Crestview Ventures LLC., and Louisville Ventures, LLC., all real estate and property management firms located in Alliance, Ohio which he has managed since 1989. Mr. Mastroianni previously served on the board of Citizens Bankshares, and on the board of Sky Financial Group, Inc. for 9 years prior to its merger with Huntington in 2007. In addition to his business acumen and experience as a bank director, Mr. Mastroianni also has substantial non-profit board experience, including with the Stark Development Board and service as trustee and finance committee chair for The University of Mount Union, Alliance for Children and Family, and Sisters of Charity Foundation. Mr. Mastroianni brings broad business and community leadership experience to the board and to the Community Development Committee.

 

Richard W. Neu

Chairman, MCG Capital Corporation

Chairman, Dollar Thrifty Automotive Group

Director Since 2010

Age 55

 

Mr. Neu has been chairman of the board of the Washington, D.C.-based MCG Capital Corp. since 2009. MCG is a publicly traded business development corporation providing financing to middle market companies throughout the United States. He first joined the MCG board in 2007 and is a member of the audit, nominating and corporate governance, and valuation and investment committees. Since 2006, Mr. Neu has served on the board of the Dollar Thrifty Automotive Group and was appointed chairman in December 2010. He previously served as chairman of the audit committee and is a member of the corporate governance committee. From 1995 to 2004, Mr. Neu served as executive vice president, chief financial officer, treasurer, and director of both Charter One Financial, Inc. and Charter One Bank. He assumed this role following the merger of First Federal of Michigan and Charter One Financial, Inc. Mr. Neu joined First Federal of Michigan in 1985 as chief financial officer, and was elected to the board of directors in 1992. Mr. Neu possesses a comprehensive knowledge of our bank markets, has led numerous bank acquisitions and

 

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integrations, as well as has extensive knowledge of the banking industry. His knowledge and experience, as well as his financial acumen, make him a valued member of the board and the board’s Audit Committee and Capital Planning Committee.

 

David L. Porteous

Attorney, McCurdy, Wotila & Porteous, a Professional Corporation

Director Since 2003

Age 58

 

Mr. Porteous has practiced law for over 30 years with a focus on corporate and municipal law and government relations. He has been a partner with McCurdy, Wotila & Porteous since January 2008 and prior to joining that firm managed his own law practice for over 20 years. Mr. Porteous is a recognized authority on economic development and has served on the board of directors of the Michigan Economic Development Corporation (MEDC), the Michigan Economic Growth Authority (MEGA) (where he was chairman of the executive committee), the Michigan Strategic Fund (where he was chairman), the Michigan Chamber of Commerce, and the Alliance for Health in Grand Rapids, Michigan. Mr. Porteous is a former director of the Federal Home Loan Bank of Indianapolis where he also chaired the audit committee. He also was on the board of trustees of Michigan State University for over 8 years and was chairman of the board from 2003 to 2006 and was a member of its finance and audit committees. Mr. Porteous has been a director of Jackson National Life Insurance of New York since 2002, and currently serves as a member of the audit committee. Mr. Porteous has an extensive legal background and possesses valuable experience in corporate and finance related matters as well as an extensive knowledge of Huntington’s markets. These attributes make him an effective lead director and chairman of the Nominating and Corporate Governance Committee. Mr. Porteous also serves on the Compensation Committee and the Executive Committee.

 

Kathleen H. Ransier

Partner, Vorys, Sater, Seymour and Pease LLP

Director Since 2003

Age 63

 

Ms. Ransier is a partner in the Columbus office of Vorys, Sater, Seymour and Pease LLP where she practices with the corporate group. An attorney for almost 40 years, Ms. Ransier’s practice includes transactional, commercial real estate, business organization, non-profit and business development. Ms. Ransier served as special counsel for the Ohio Attorney General from 1976 to 1994. She has served as special counsel for the Franklin County Probate Court from 1985 to 1990 and has been appointed to boards and commissions by The Supreme Court of Ohio. She is a member of the board of directors of The Ohio State University Alumni Association, chair of the Columbus Regional Airport Authority, a member of the Supreme Court of Ohio Commission on professionalism and chair of the Greater Columbus Arts Council. Ms. Ransier is very active in numerous professional, academic, cultural, social, community and civic organizations. Ms. Ransier brings analytical skills and a broad range of expertise in law and regulation to the board, and her substantial community involvement serves her well as chair of the board’s Community Development Committee. Ms. Ransier also serves on the Compensation Committee.

 

William R. Robertson

Retired Managing Partner, Kirtland Capital Partners

Director Since 2009

Age 69

 

Mr. Robertson is the retired managing partner of Kirtland Capital Partners, Cleveland, Ohio, which he joined in 1997. Previously, Mr. Robertson served as president and director of National City Corporation, where he was appointed president in 1995. At National City, Mr. Robertson oversaw corporate operations and information services as the organization consolidated acquired companies to a single system. He also managed a number of administrative functions, including corporate human resources, audit, legal, and marketing communications. As the senior trust executive for a 10-year period, he also assumed responsibility for its reorganization and the formation of the private client group. Previously, he served as executive vice president (1982-1986) and chief financial officer (1982-1988). Mr. Robertson is also on the boards of Hartland & Co. and Brush Engineered Materials, Inc. Mr. Robertson brings extensive executive and financial industry experience to the board and the Risk Oversight Committee, as well as knowledge of one of our largest markets, Cleveland. Mr. Robertson also serves on the Compensation Committee.

 

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Stephen D. Steinour

Chairman, President and Chief Executive Officer,

Huntington Bancshares Incorporated and The Huntington National Bank

Director Since 2009

Age 52

 

Mr. Steinour has served as our chairman, president and chief executive officer, and has also served in these roles for The Huntington National Bank, since January 2009. Before joining Huntington, Mr. Steinour was with Citizens Financial Group in Providence, Rhode Island, from 1992 to 2008, where he served in various executive roles, with responsibilities for credit, risk management, wholesale and regional banking, consumer lending, technology and operations among others. He was named president in 2005 and chief executive officer in 2007. Mr. Steinour joined Cross Harbor Capital partners in Boston in 2008 where he served as a managing partner and a member of the investment committee until joining Huntington in 2009. Mr. Steinour is a trustee of the National Constitution Center and the Eisenhower Fellowships, is a member of the Columbus Partnership and serves as a trustee of the Columbus Downtown Development Corporation. Mr. Steinour is a member of the board of directors of Exelon Corporation and a trustee of Liberty Property Trust. Mr. Steinour has more than 30 years of experience in all aspects of banking. In addition to being our chief executive officer, he brings extensive leadership as well as broad knowledge of the banking industry to the board. Mr. Steinour is a member of the board’s Executive Committee.

 

In addition to the nominees listed above, director Wm. J. Lhota has served on the board for more than 20 years. As noted, Mr. Lhota is retiring at this annual meeting. Mr. Lhota’s biographical information, experience, and qualifications are set forth below.

 

Wm. J. Lhota

President and Chief Executive Officer,

Central Ohio Transit Authority

Director Since 1990

Age 71

 

Mr. Lhota has served as president and chief executive officer of the Central Ohio Transit Authority (COTA), the public transportation provider in central Ohio, since September 2004. Following retirement from American Electric Power (AEP) in December 2001, as a senior executive, he formed LHOTA SERVICES in January 2002. LHOTA SERVICES was a sole proprietor business focusing on arbitration, mediation, energy consulting, as well as consulting, teaching and lecturing on business and engineering ethics. At retirement from AEP, Mr. Lhota was president — Energy Delivery, American Electric Power and executive vice president, American Electric Power Service Corporation. He spent 37 years at AEP serving in numerous management positions at Ohio Power Company and Columbus Southern Power, both subsidiaries of AEP in addition to the AEP Service Corporation. Mr. Lhota created and managed AEP’s original corporate compliance program, and has extensive experience in ethics. Throughout his career, Mr. Lhota has had extensive experience in public policy and labor relations. He has a Bachelor’s Degree in Civil Engineering and he also earned a Master’s Degree in Management from the Massachusetts Institute of Technology. He is a registered professional engineer and surveyor in Ohio. He is a member of the board of directors for the National Institute for Engineering Ethics (NIEE), and a past chair and member of the NSPE Board of Ethical Review. He is past chair and current board member of the Columbus Regional Airport Authority and a board member of Experience Columbus. Other service includes past director and chair of the Audit Committee for Green Mountain Energy. Mr. Lhota’s extensive business experience and ethics expertise contribute to his effectiveness as a director and chair of the Risk Oversight Committee. Mr. Lhota also serves on the Community Development Committee.

 

Corporate Governance

 

Board Meetings and Committee Information

 

Our board of directors held a total of 11 regular and special meetings in 2010. We believe that regular attendance of meetings is of utmost importance, and we encourage our directors to attend the annual shareholders meetings and at least 75% of all regularly scheduled board and committee meetings. During 2010, each director attended greater than 75% of the meetings of the full board of directors and the committees on which he or she served. Fourteen directors attended the 2010 annual meeting of shareholders.

 

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Our board of directors has separate standing Audit, Compensation, and Nominating & Corporate Governance Committees, as well as standing Capital Planning, Community Development, Executive, and Risk Oversight Committees. From time to time the board of directors may appoint ad hoc committees. All board members receive copies of committee reports and materials. In addition, all board members are welcome to attend any meetings of the standing committees. Each standing committee has a separate written charter. We have posted current copies of the committee charters on the Investor Relations pages of our website at www.huntington.com. Information about the board’s standing committees, including committee members as of January 31, 2010, is set forth below.

 

 

 

The total number of meetings for each of the Audit Committee and the Risk Oversight Committee include five joint meetings of both committees.

 

Audit Committee  The Audit Committee oversees the integrity of the consolidated financial statements, including policies, procedures, and practices regarding the preparation of financial statements, the financial reporting process, disclosures, and the internal control over financial reporting. The Audit Committee also provides assistance to the board in overseeing the internal audit division and the independent registered public accounting firm’s qualifications and independence; compliance with our Financial Code of Ethics for the chief executive officer and senior financial officers; and compliance with corporate securities trading policies.

 

The board of directors has determined that David P. Lauer, chairman of the Audit Committee, and Richard W. Neu each qualifies as an “audit committee financial expert” as the term is defined in the rules of the Securities and Exchange Commission (SEC). The board’s designation of Messrs. Lauer and Neu as audit committee financial experts does not impose any duties, obligations or liabilities on them that are greater than the duties, obligations and liabilities imposed on the other members of the Audit Committee. The SEC has determined that a person who is identified as an “audit committee financial expert” will not be deemed an expert for any purpose as a result of such designation. Each member of the Audit Committee qualifies as an “independent director” as the term is defined in the Nasdaq Stock Market Marketplace Rules.

 

Report of the Audit Committee

 

A primary responsibility of the Audit Committee is to oversee the integrity of Huntington’s consolidated financial statements. In carrying out its duties, the Audit Committee has reviewed and discussed the audited consolidated financial statements for the year ended December 31, 2010 with Huntington management and with Huntington’s independent registered public accounting firm, Deloitte & Touche LLP. This discussion included the selection, application and disclosure of critical accounting policies. The Audit Committee has also reviewed with Deloitte & Touche LLP its judgment as to the quality, not just the acceptability, of Huntington’s accounting principles and such other matters required to be discussed under auditing standards generally accepted in the United States, including the Statement on Auditing Standards No. 61, as amended, Communication with Audit Committees (AICPA, Professional Standards, Vol. 1. AU section 380), and as adopted by the Public Company Accounting Oversight Board in Rule 3200T.

 

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In addition, the Audit Committee has reviewed the written disclosures and the letter from Deloitte & Touche LLP required by the Public Company Accounting Oversight Board in Rule 3526 regarding Deloitte & Touche LLP’s communications with the Audit Committee concerning independence, and has discussed with Deloitte & Touche LLP its independence from Huntington. Based on this review and discussion, and a review of the services provided by Deloitte & Touche LLP during 2010, the Audit Committee believes that the services provided by Deloitte & Touche LLP in 2010 are compatible with, and do not impair, Deloitte & Touche LLP’s independence.

 

Based on these reviews and discussions, the Audit Committee recommended to the board of directors that the audited consolidated financial statements be included in Huntington’s Annual Report on Form 10-K for the year 2010 for filing with the SEC.

 

Audit Committee

 

David P. Lauer, Chairman

Ann B. Crane

D. James Hilliker

Richard W. Neu

 

Compensation Committee  The Compensation Committee reviews and approves Huntington’s goals and objectives with respect to the compensation of the chief executive officer and other executive management. The Compensation Committee evaluates the performance of the chief executive officer and other executive management in light of such goals and objectives, and sets their compensation levels based on such evaluation. The Compensation Committee advises the board of directors with respect to compensation for service by non-employee directors on the board of directors and its committees. The Compensation Committee also makes recommendations to the board of directors with respect to Huntington’s incentive compensation plans and equity-based plans, oversees the activities of the individuals and committees responsible for administering these plans, and discharges any responsibility imposed on the Compensation Committee by any of these plans. In addition, the Compensation Committee assists the board of directors in fulfillment of the duties and responsibilities delegated to the board under our retirement plans.

 

Procedures for Determining Executive and Director Compensation; Compensation Consultant

 

The Compensation Committee has the resources and authority appropriate to discharge its duties and responsibilities, including the authority to select, retain, terminate and approve fees and other retention terms of advisors, including legal counsel and other advisors. During 2010, the Compensation Committee engaged a new independent consultant through Pearl Meyers & Partners, LLC, to provide advice with respect to the amount and form of executive and director compensation. The consultant reports directly to the Compensation Committee.

 

We design our executive and director compensation programs through the combined effort of our management, the Compensation Committee and the third-party compensation consultant. Our management, including the chief executive officer, may make recommendations to the Compensation Committee with respect to the amount and form of executive and director compensation. In addition, our chief executive officer and chief financial officer make recommendations to the Compensation Committee when it sets specific financial measures and goals for determining incentive compensation. Our chief executive officer also makes recommendations to the Compensation Committee regarding the performance and compensation of his direct reports, which include the executive officers. Our human resources management and executive management also have direct access to the consultant on an as needed basis to request information and analysis for use by the Compensation Committee.

 

The Compensation Committee pre-approves all services provided by the outside compensation consultant. Pre-approval may be general or specific as agreed upon with management. The Compensation Committee may delegate pre-approval authority to a member of the Compensation Committee. The decisions of any Committee member to whom pre-approval authority is delegated must be presented to the full Committee at its next scheduled meeting.

 

Under the engagement entered into in 2010, the compensation consultant performed a comprehensive review and assessment of the competitiveness and effectiveness of our current executive compensation practices. This included review of our selected peer group and the gathering of peer data for each senior executive officer position. Following analysis, the compensation consultant provided the findings and recommendations to the Compensation Committee and worked with the Compensation Committee to articulate an updated and refined executive compensation philosophy. The compensation consultant also reviewed, analyzed and made recommendations with respect to our director compensation. In addition, the compensation consultant frequently attends meetings of the

 

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Compensation Committee, provides updates on emerging trends and best practices, and is available as needed for expert guidance and support. During 2010 the compensation consultant did not provide any services in addition to advice and recommendation on the amounts and form of executive and director compensation.

 

The Compensation Committee may delegate all or a portion of its duties and responsibilities to a subcommittee of the Compensation Committee, or in accordance with the terms of a particular compensation plan, to a management committee. The Compensation Committee may not, however, delegate the determination of compensation for executive officers to management. From time to time, the Compensation Committee may obtain the approval of the board of directors with respect to certain executive and director compensation matters.

 

Compensation Committee Interlocks and Insider Participation

 

We have no compensation committee interlocks. In addition, no member of the Compensation Committee has served as one of our officers or employees.

 

Report of the Compensation Committee

 

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis contained in this proxy statement with management. Based on this review and discussion, the Compensation Committee recommended to the board of directors that the Compensation Discussion and Analysis be included in Huntington’s proxy statement for its 2011 annual meeting of shareholders.

 

In addition, the Compensation Committee certifies that, during 2010 (through December 22, 2010, the date we repurchased all financial assistance received under TARP):

 

 

This certification above and the narrative below are in accordance with the Interim Final Rule of the United States Treasury, TARP Standards for Compensation and Corporate Governance, issued June 15, 2009.

 

Discussion of Risk Review and Assessment

 

Overview

 

Our Chief Risk Officer (senior risk officer) has conducted four assessments of Huntington’s compensation programs since February 2009 and has reviewed and discussed the assessments and the compensation plans with the Compensation Committee. The most recent assessment with the Compensation Committee occurred on February 15, 2011 and covered all compensation plans, including the SEO compensation plans. The Compensation Committee adopted the approach recommended by the Chief Risk Officer and focused its review on incentive based compensation plans. Incentive plans were reviewed based on a “risk-adjusted approach” that took into consideration: products and services incented, average length of transactions, incentive plan operation and design, business segment financial performance results compared to business segment aggregate incentive payments paid, incentives paid as a percentage of the employee’s total compensation, commission / production plan payouts per employee, average incentives paid per employee, individual employee payouts per plan, and incentive payment totals earned by plan in 2010. Certain incentive plans received a further review based on materiality of the plans from a risk perspective — plans with the greatest perceived potential risk by their nature, plans comprised of individuals with the highest individual payouts, and plans with the highest incentive compensation expense in 2010. These plans were evaluated to understand plan operation, mitigating factors, and ensure that excessive risks were not taken to achieve a payout.

 

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The Compensation Committee believes that Huntington’s overall compensation practices for SEOs limit the ability of executive officers to benefit from taking unnecessary or excessive risks. Executive compensation guiding principles were re-designed over 2010 to better align with shareholder interests and mitigate risk. These principles include:

 

 

In addition, the Compensation Committee believes that there are sound controls around incentive plans for all employees, as described below, that effectively discourage unnecessary and excessive risk taking.

 

Risk Policy Framework

 

Our board of directors has established an overall risk tolerance of aggregate moderate to low levels of risk in the operation of the company’s business. Every business segment within Huntington aligns with the company risk policy appetite and risk management framework. Adherence to the risk tolerances is ensured by the company’s system of internal processes and validated by independent groups, including Internal Audit, Risk Management, Credit Administration, Credit Review, and to some extent, the external auditors. Segment risk officers are employed in every business segment. All material business plans must be reviewed against the risk policy framework and approved. Incentive compensation plans and performance goals are tied to the risk-assessed business plans.

 

In addition to the overarching risk policy framework which limits risks, there are controls around employee incentive plans (including the SEO plans) that effectively discourage and limit unnecessary and excessive risks of the plans. All employee incentive plans allow for management discretion (or Compensation Committee discretion in the case of the SEO plans) to reduce or eliminate any award. Every incentive plan is documented using a standard template and is reviewed annually by a design team which consists of representatives from the business segment, Finance, Compensation, Risk Management, and any other group deemed to be appropriate, with final approval by the appropriate executive officer. All incentive plans contain language specifically addressing management’s ability to adjust, eliminate and/or recoup incentive awards based on performance, including effective risk management.

 

As further described below, the Compensation Committee reviews and approves all SEO plans, award opportunities and performance goals. Further, incentive plans are audited regularly by internal auditors and periodically by our independent registered accounting firm.

 

SEO Compensation Plans

 

The Compensation Committee believes that Huntington’s standard compensation programs for executives do not encourage unnecessary and excessive risk. As discussed in further detail in the Compensation Discussion and Analysis below, the standard incentive compensation plans for SEOs, without the impact of TARP restrictions, consist of: annual cash incentives under the Management Incentive Plan, long-term incentives under the Second Amended 2007 Stock and Long-Term Incentive Plan in the form of equity awards (stock options and restricted stock units), and long-term performance awards payable in stock and cash. Annual incentive awards and long-term incentive awards are closely linked to the company’s financial performance compared with Huntington’s strategic plans for each plan year or plan cycle. The opportunity to earn annual incentive awards in cash and long-term awards in a combination of cash and stock provides a mix of variable compensation that integrates the company’s short-term and long-term goals.

 

Compensation decisions for the named executive officers for 2010 were made within the confines of the TARP requirements. The principal components of compensation for executive officers who were subject to the TARP restrictions in 2010 were base salary, stock salary, and long-term restricted stock units (RSUs) that qualify under TARP.

 

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The Compensation Committee approves all incentive compensation paid to the executive officers, including the SEOs. The Compensation Committee confers with the Audit Committee as necessary when confirming achievement of performance goals.

 

Combined with the company’s stock ownership requirements for executives, the Compensation Committee believes that the company’s current compensation practices for SEOs do not encourage unnecessary or excessive risks that threaten the value of Huntington.

 

Employee Compensation Plans

 

In addition to the incentive plans in which the SEOs participate, Huntington has 26 business unit incentive plans which reward measurable performance across Huntington’s four major business segments: Retail and Business Banking; Commercial Banking; Auto Finance and Commercial Real Estate; and Wealth Advisors, Government Finance and Home Lending. The Compensation Committee believes that the features of these incentive compensation plans, alone and/or combined with the systems of controls in place, do not encourage unnecessary or excessive risk and do not encourage the manipulation of reported earnings to enhance the compensation of any employee. Plans include a balanced portfolio of performance measures. Pay mix is balanced between base and incentives for non-commission employees with equity opportunities at more senior levels to reward long term performance over a long term horizon. Mitigating features for commission plans include controls on the business. For example, mortgage lenders are subject to an underwriting approval process for all mortgages that independently sanctions and monitors activities and mortgage portfolios on an on-going basis. In addition, persons having compliance, risk, credit quality, quality assurance and finance roles are not compensated on the same results as the business teams they support. Instead, their incentives are tied to corporate goals under the Management Incentive Plan. All business unit incentive plans contain language specifically addressing Huntington’s ability to reduce, eliminate and / or recoup incentive awards based on the corporately established risk elements as well as any other unique business segment risks. In addition, Huntington may reduce, eliminate or recoup incentive awards if it is determined that any earnings manipulation or unnecessary or excessive risk was taken, that, had it not, would have resulted in either a smaller or no payout.

 

In light of the significant level of oversight and controls surrounding incentive plans, and the significant amounts that would be required to impact Huntington’s reported earnings, the Compensation Committee believes that the incentive plans for employees, including SEOs, do not contain any features that would encourage the manipulation of reported earnings to enhance the compensation of any employee.

 

Compensation Committee

 

John B. Gerlach, Jr., Chairman

Don M. Casto III

David L. Porteous

Kathleen H. Ransier

William R. Robertson

 

Nominating and Corporate Governance Committee  The Nominating and Corporate Governance Committee’s primary responsibilities are to annually review the composition of the board of directors to assure that the appropriate knowledge, skills, and experience are represented, in the committee’s judgment, and to assure that the composition of the board of directors complies with applicable laws and regulations; review the qualifications of persons recommended for board of directors membership, including persons recommended by shareholders; discuss with the board of directors standards to be applied in making determinations as to the independence of directors; and review annually the effectiveness of the board of directors, including but not limited to, considering the size and desired skills of the board of directors and the performance of individual directors as well as collective performance of the board of directors. The Nominating and Corporate Governance Committee reviews and approves related party transactions. Other primary responsibilities of the Nominating and Corporate Governance Committee include reviewing and making appropriate changes to the Corporate Governance Guidelines and the Code of Business Conduct and Ethics for Huntington’s directors, officers and employees.

 

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Other Standing Committees

 

The Capital Planning Committee oversees our company’s capital management and planning processes, reviews strategies for achieving financial objectives, and reviews financial performance results as they relate to capital management and planning.

 

The Community Development Committee’s principal role is to promote our mission of local involvement and leadership in the communities where we are located and where our employees work. This committee will consider matters relating to community development and involvement, philanthropy, government affairs and diversity. This committee also has responsibility for monitoring our commitments pursuant to the Community Reinvestment Act (CRA).

 

The Executive Committee considers matters brought before it by the chief executive officer. This committee also considers matters and takes action that may require the attention of the board of directors or the exercise of the powers or authority of the board of directors in the intervals between meetings of the board of directors.

 

The Risk Oversight Committee assists the board of directors in overseeing our enterprise-wide risks, including credit, market, operational, compliance and fiduciary risks. Towards this end, the Risk Oversight Committee monitors the level and trend of key risks, management’s compliance with board-established risk tolerances and our risk policy framework. The Risk Oversight Committee also monitors whether material new initiatives have been appropriately analyzed and approved, and reviews all regulatory findings directed to the attention of the board of directors and the adequacy of management’s response.

 

Corporate Governance Guidelines, Policies and Procedures

 

Our board of directors has a corporate governance program which includes Corporate Governance Guidelines and a Code of Business Conduct and Ethics. The Corporate Governance Guidelines are attached as an exhibit to the charter for the Nominating and Corporate Governance Committee. The Code of Business Conduct and Ethics applies to all of our employees and, where applicable, to our directors, and to employees and directors of our affiliates. Our employees serving as chief executive officer, chief financial officer, corporate controller, and principal accounting officer are also bound by a Financial Code of Ethics for Chief Executive Officer and Senior Financial Officers. The Code of Business Conduct and Ethics and the Financial Code of Ethics for Chief Executive Officer and Senior Financial Officers are posted on the Investor Relations pages of Huntington’s website at www.huntington.com.

 

Shareholders who wish to send communications to the board of directors may do so by following the procedure set forth on the Investor Relations pages of Huntington’s website at www.huntington.com.

 

Director Nomination Process

 

Our board of directors believes that one of its most important responsibilities is identifying, evaluating and selecting candidates for the board. The Nominating and Corporate Governance Committee reviews the qualifications of potential director candidates and makes recommendation to the full board. The factors considered by the committee and the board in its review of potential candidates include whether the candidate:

 

 

The board also believes that board membership should reflect the diversity of the company’s markets. At least annually the Nominating and Corporate Governance Committee reviews the composition of the board to assure that the appropriate knowledge, skills and experience are represented, in the Committee’s judgment and in order to comply with applicable laws and regulations. From time to time the Nominating and Corporate Governance Committee will identify additional selection criteria for board membership, taking into consideration the current board composition and whether appropriate knowledge, skills, and experience are represented. There are no other specific additional criteria at this time.

 

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Ms. Crane and Mr. Elliott have been nominated for election by the shareholders for the first time. Both were recommended by the chief executive officer and non-management directors. Shareholders may recommend director candidates for consideration by the Nominating and Corporate Governance Committee by sending a written notice to the Secretary at Huntington Bancshares Incorporated, Huntington Center, 41 South High Street, Columbus, Ohio 43287. The notice should indicate the name, age, and address of the person recommended, the person’s principal occupation or employment for the last five years, other public company boards on which the person serves, whether the person would qualify as independent as the term is defined under the Marketplace Rules of the Nasdaq Stock Market, and the class and number of shares of Huntington securities owned by the person. The Nominating and Corporate Governance Committee may require additional information to determine the qualifications of the person recommended. The notice should also state the name and address of, and the class and number of shares of our securities owned by, the person or persons making the recommendation. There have been no material changes to the shareholder recommendation process since we last disclosed this item.

 

Independence of Directors

 

Our board of directors and the Nominating and Corporate Governance Committee have reviewed and evaluated transactions and relationships with board members to determine the independence of each of the members. The board and the Nominating and Corporate Governance Committee have determined that a majority of the board’s members are “independent directors” as the term is defined in the Nasdaq Stock Market Marketplace Rules. The directors determined to be independent under this definition are: Don M. Casto III, Ann B. Crane, Steven G. Elliott, John B. Gerlach, Jr., D. James Hilliker, David. P. Lauer, Jonathan A. Levy, Wm. J. Lhota, Gerard P. Mastroianni, Richard W. Neu, David L. Porteous, Kathleen H. Ransier, and William R. Robertson. The board of directors has determined that each member of the Audit, Compensation, and Nominating and Corporate Governance Committees is independent under such definition and that the members of the Audit Committee are independent under the additional, more stringent requirements of the Nasdaq Stock Market applicable to audit committee members. The board of directors does not believe that any of its non-employee members has relationships with us that would interfere with the exercise of independent judgment in carrying out his or her responsibilities as director.

 

In making the independence determinations for each of the directors, the board of directors took into consideration the transactions disclosed in this proxy statement. In addition, the board of directors considered that the directors and their family members are customers of our affiliated financial and lending institutions. Many of the directors have one or more transactions, relationships or arrangements where Huntington’s affiliated financial and lending institutions, in the ordinary course of business, act as depository of funds, lender or trustee, or provide similar services. In addition, directors may also be affiliated with entities which are customers of our affiliated financial and lending institutions and which enter into transactions with such affiliates in the ordinary course of business.

 

The Board’s Leadership Structure

 

Our chief executive officer, Stephen D. Steinour, serves as chairman of the board. We also have an independent lead director, David L. Porteous, who has served as lead director since the board created the position in November 2007. The board believes that having a combined chief executive officer and chairman along with an independent lead director provides an efficient and effective leadership structure.

 

As set forth in our Corporate Governance Guidelines, the responsibilities of the lead director include:

 

 

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The board believes that having an independent lead director performing these duties effectively complements and counterbalances the role of the combined chairman / chief executive officer. The table below shows the interaction of the roles of the chairman / chief executive officer and the lead director.

 

 

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In addition to having a strong lead director, other factors also contribute to the board’s comfort with Mr. Steinour serving in the combined roles of chairman and chief executive officer. These factors include our strong corporate governance practices, our board’s independence, and the accountability of the chief executive officer to the board. Moreover, there is regular reporting by senior management to the board of directors as further described under the Board’s Role in Risk Oversight below. The board has also considered our leadership structure in light of the company’s size, the nature of its business, the regulatory framework in which it operates, and its peers and determined that the board’s leadership structure is appropriate for our company at this time.

 

The Board’s Role in Risk Oversight

 

The board of directors has responsibility for risk oversight and has established an aggregate risk appetite of moderate to low levels of risk. The board has established the Risk Oversight Committee to assist the board in:

 

 

The board has established key risk indicators (KRIs) which are the basis for our risk limit framework. The Risk Oversight Committee reviews and approves the definitions for the KRIs and the threshold limits for the KRIs. The committee also reviews the KRI positions and management’s analysis on an on-going basis.

 

The duties and responsibilities of the Risk Oversight Committee include biennial review and approval of:

 

 

The Risk Oversight Committee also reviews and approves the annual budget for the risk management function, and separately reviews and approves the annual budget for the credit review function. The committee has the authority to direct management to develop and implement policies and procedures, and take any appropriate actions to manage or mitigate risk.

 

Members of senior management, including representatives of Credit Review, Risk Management, and Finance, report regularly to the Risk Oversight Committee on risk issues including credit metrics, compliance matters, and market, operational, strategic and reputational risk matters. In addition, the chief auditor reports directly to the Audit Committee. The Risk Oversight Committee regularly meets jointly with the Audit Committee to review the provision for loan losses and to review our periodic reports before filing with the SEC. The committee also meets periodically in separate executive sessions with our chief risk officer and our chief credit officer and may meet with any other members of executive management.

 

The Risk Oversight Committee has the authority to request any reports or information from management and is empowered to investigate any matter. The committee has the authority to engage independent counsel and other advisors as it deems necessary. All members of the Risk Oversight Committee must be financially literate. Two of the committee members, Steven G. Elliott and William R. Robertson, have significant financial institution expertise. The committee meets as often as necessary, but not less than quarterly. During 2010, the committee met on a monthly basis.

 

Review, Approval or Ratification of Transactions with Related Persons

 

The Nominating and Corporate Governance Committee of the board of directors oversees our Related Party Transactions Review and Approval Policy, referred to as the Policy. This written Policy covers “related party transactions”, including any financial transaction, arrangement or relationship or any series of similar transactions, arrangements or relationships, either currently proposed or since the beginning of the last fiscal year in which we were or will be a participant, involves an amount exceeding $120,000 and in which a director, nominee for director, executive officer or his or her immediate family member has or will have a direct or indirect material interest. The Policy requires our senior management and directors to notify the general counsel of any existing or potential “related party transactions.” Our general counsel reviews each reported transaction, arrangement or relationship that constitutes a “related party transaction” with the

 

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Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee determines whether or not “related party transactions” are fair and reasonable for us. The Nominating and Corporate Governance Committee also determines whether any “related party transaction” in which a director has an interest impairs the director’s independence. Approved “related party transactions” are subject to on-going review by our management on at least an annual basis. Loans to directors and executive officers and their related interests made and approved pursuant to the terms of Federal Reserve Board Regulation O are deemed approved under this Policy. Any of these loans that become subject to specific disclosure in our annual proxy statement will be reviewed by the Nominating and Corporate Governance Committee at that time. The Nominating and Corporate Governance Committee would also consider and review any transactions with a shareholder having beneficial ownership of more than 5% of Huntington’s voting securities in accordance with the Related Party Transaction Review and Approval Policy.

 

Indebtedness of Management

 

Many of our directors and executive officers and their immediate family members are customers of our affiliated financial and lending institutions in the ordinary course of business. In addition, our directors and executive officers also may be affiliated with entities which are customers of our affiliated financial and lending institutions in the ordinary course of business. Loan transactions with directors, executive officers and their immediate family members and affiliates have been made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other customers otherwise not affiliated with us. Such loans also have not involved more than the normal risk of collectibility or presented other unfavorable features.

 

Certain Other Transactions

 

Our subsidiary, The Huntington National Bank, leases office space in Columbus, Ohio from a partnership of which the mother of director D. James Hilliker and her revocable trust are the partners. The current lease term ends on April 30, 2011, and the parties have agreed to continue the lease on a month-to-month basis on the same terms. The monthly rental is $4,500. As of January 1, 2011, the aggregate rental amount payable through April 30, 2011 is $18,000.

 

The Huntington National Bank also leases a banking office in Alliance, Ohio from a limited liability company owned by director Gerard P. Mastroianni, his siblings and a family trust. The current term of this lease ends September 30, 2012. The Huntington National Bank currently pays $4,650 per month for rent including parking. As of January 1, 2011, the aggregate rental amount payable through the end of the current lease term is $97,650. Huntington has options to renew this lease for three additional five-year terms through September 30, 2027. The rental amount for each renewal period will be adjusted for increases in the Consumer Price Index with a cap of 10%.

 

Huntington Mezzanine Opportunities Inc., one of our wholly-owned subsidies, established a private corporate mezzanine investment fund in 2002 which provides financing in transaction amounts of up to $10 million to assist middle market companies primarily in the Midwest with growth or acquisition strategies. Stonehenge Mezzanine Partners LLC, as its sole purpose, serves as the asset manager of the fund. Under the investment management agreement with Huntington Mezzanine Opportunities Inc., Stonehenge Mezzanine Partners LLC receives a quarterly management fee equal to the greater of a fixed amount or a set percentage of the mezzanine loan balances. Following the origination period under the agreement (which ended in 2008), the minimum quarterly management fee is equal to $62,500. Stonehenge Mezzanine Partners LLC is also eligible to receive a percentage of profits based on the performance of the investments. In 2008 Huntington Mezzanine Opportunities Inc. established a second private corporate mezzanine investment fund which operates substantially the same as the initial fund described above. Stonehenge Mezzanine Partners II LLC, an affiliate of Stonehenge Mezzanine Partners LLC, serves as the asset manager of the second fund and was entitled to quarterly management fees of $125,000, through 2010. During 2010, Stonehenge Mezzanine Partners LLC and Stonehenge Mezzanine Partners II LLC collectively received management fees from Huntington Mezzanine Opportunities, Inc. of $1,046,504 and collectively earned $1,047,316 as a percentage of profits. Our director Michael J. Endres has a 12.56667% equity interest in Stonehenge Mezzanine Partners LLC and a 12.5% equity interest in Stonehenge Mezzanine Partners II LLC.

 

The Huntington National Bank has a $10 million commitment for an equity investment in the Stonehenge Opportunity Fund II, LP, a $150 million investment fund, which was organized on September 30, 2004. This fund’s origination period ended in 2010. As of December 31, 2010, $6.06 million of the $10 million commitment has been funded. The remaining $3.94 million commitment is limited to fund follow-on investments in existing portfolio companies and fund expenses. The Huntington National Bank also has a commitment of the lesser of $10 million or 10% of the fund balance for an equity investment in the Stonehenge Opportunity Fund III, LP, a $250 million investment fund, which was organized on July 15, 2010. As of December 31, 2010, the commitment is $8.5 million, of which $0.51 million has been funded.

 

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Each of the Stonehenge Opportunity Fund II, LP and the Stonehenge Opportunity Fund III, LP operate as a “Small Business Investment Company” licensed by the Small Business Administration. Each of these funds seeks to generate long-term capital appreciation by investing in equity and, in certain cases, mezzanine securities of a diverse portfolio of companies across a variety of industries. Our management determined that the investment would provide a cost effective means to participate in financing small businesses, provide a means of obtaining lending or investment credits under the Community Reinvestment Act and generally be favorable to us. Each of the funds is managed by Stonehenge Partners, Inc., an investment firm of which Michael J. Endres is a principal and holds a 9.8% equity interest. These funds pay to Stonehenge Partners, Inc. management fees not to exceed on an annual basis 2.00% of the aggregate of private capital commitments and Small Business Administration debentures of the respective fund. In addition, Stonehenge Partners, Inc. is the controlling entity of Stonehenge Equity Partners, LLC, which serves as managing member of each of the funds.

 

In connection with three putative derivative lawsuits filed between January 16, 2008, and April 17, 2008, against certain of our current or former officers and directors in connection with our acquisition of Sky Financial Group, Inc., certain transactions between us and Franklin Credit Management Corporation, and the financial disclosures relating to such transactions, we paid $250,228 in legal fees during 2010 for indemnification or advance of expenses of our directors pursuant to our charter and the laws of the State of Maryland. One action was dismissed on September 23, 2009, and the plaintiff’s appeal was dismissed on January 12, 2010. Another action was dismissed on April 29, 2010, and an agreed order to dismiss the third action was entered on October 8, 2010.

 

Ownership of Voting Stock

 

The table below sets forth the beneficial ownership of Huntington common stock by each of our directors, nominees for director, executive officers named in the Summary Compensation Table, and the directors and all executive officers as a group, as of January 31, 2011.

 

 

 

 

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As of December 31, 2010, we knew of no person who was the beneficial owner of more than 5% of our outstanding shares of common stock, except as follows:

 

 

 

 

In addition, as of December 31, 2010, Mr. Benhase owned 800 shares, and our executive officers as a group owned 900 shares, of Class C Preferred Stock, $25.00 par value, issued by Huntington Preferred Capital, Inc., one of our subsidiaries, which collectively was less than 1% of the Class C Preferred Stock outstanding.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our officers, directors, and persons who are beneficial owners of more than ten percent of Huntington common stock to file reports of ownership and changes in ownership with the SEC. Reporting persons are required by SEC regulations to furnish us with copies of all Section 16(a) forms filed by them. To the best of our knowledge, and following a review of the copies of Section 16(a) forms received, we believe that during 2010 all filing requirements applicable for reporting persons were met.

 

Compensation of Executive Officers

 

Compensation Discussion and Analysis

 

This Compensation Discussion and Analysis focuses on the compensation for 2010 for the named executive officers whose compensation is detailed in the Summary Compensation 2010 Table below. The named executive officers are the chief executive officer, the chief financial officer and the three most highly compensated other executive officers serving as of December 31, 2010.

 

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Executive Summary

 

Our Key Business Accomplishments

 

After embarking on a significant effort in the prior year to reposition the company for growth and improved financial performance, Huntington’s senior leadership team delivered on its promises to shareholders and reported impressive results in 2010. Stephen Steinour, hired as our new Chairman, Chief Executive Officer and President in January 2009 worked quickly to expand and strengthen the executive leadership team. With several new experienced hires, and the development and implementation of a series of strategic initiatives, as well as a focus to aggressively address our credit issues, we entered 2010 positioned well to begin delivering on those promises. Key accomplishments in 2010 included:

 

 

While 2011 will continue to present economic and industry challenges, we are pleased with our progress during 2010 and believe we are well-positioned to continue growth in the upcoming years.

 

2010 Compensation

 

The principal components of compensation for the named executive officers in 2010 were base salary, stock salary and restricted stock units. TARP restrictions in 2010 limited our alternatives for providing performance-based and competitive compensation opportunities to our named executive officers and other key employees. Although the named executive officers were not eligible to earn cash or other performance based incentives, the stock based compensation was consistent with our philosophy to provide compensation that reflects our commitment to creating long-term value for shareholders.

 

Aligning Our Compensation Program

 

Despite TARP restrictions for 2010, our Compensation Committee, with strong support from our CEO, undertook a significant initiative to redesign our executive compensation philosophy, program, and policies to better align with our pay-for-performance culture. Our goal was to roll out a new program in 2011 (following our TARP repurchase) reflecting “best practices” that reinforced our objectives to:

 

 

This new philosophy and set of objectives resulted in the following program changes for 2011:

 

 

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Below we show our 2011 target direct pay mix for the chairman, president and CEO and other named executive officers. Over 70% of our pay is based on short and long-term incentive pay:

 

2011 Target Direct Compensation Pay Mix

 

 

 

We believe these policies and requirements are leading industry procedures, and significantly align management with shareholder long-term interests. Going forward, the Compensation Committee will continue to monitor our compensation programs and practice to ensure we maintain the alignment.

 

CEO Compensation and Performance

 

Mr. Steinour has led our turnaround and success since his hire in 2009. While it is challenging to show a multi-year perspective of pay-and-performance alignment due to his short tenure and compliance with TARP-related limitations, the Committee is confident in the current pay-and-performance alignment for the CEO, based on the following:

 

 

Below is a more detailed summary of our new philosophy and compensation programs and decisions in 2010.

 

Philosophy and Objectives of Our Compensation Program

 

The Compensation Committee developed and approved the new executive compensation philosophy during 2010 to be implemented following repurchase of TARP capital, which occurred in December 2010. Below is a summary of our new program effective 2011:

 

Overall, our new philosophy is built around two primary guiding principles:

 

 

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Total Compensation Philosophy — Key Design Elements

 

Our total compensation program is designed to achieve multiple objectives:

 

Balance — Our program is designed to provide a total compensation package that considers multiple perspectives. Below is how we manage balance in our total compensation program:

 

 

Risk-Appropriate — While our approach is performance-based, we appreciate the need to measure and reward our success without extending beyond our aggregate moderate-to-low risk appetite. Our programs, policies and practices are all designed to reflect sound risk management practices.

 

Market Positioning — We set individual compensation elements to be competitive in the market-place as well as to reflect our own performance against objectives. Market data provided by the Committee’s independent consultant is provided as reference for determining our salaries and incentive opportunities and assessing our pay-performance relationships.

 

Performance Variability — Total compensation is expected to vary each year and evolve over the long-term to reflect our performance relative to our peers and industry with corresponding return to our shareholders. We also aim to provide meaningful differentiation in our rewards for high performers. We target top quartile performance relative to our industry peers over the long term.

 

Internal Equity — While overall compensation policies generally apply to all executives, we recognize the need to differentiate compensation opportunities by role to reflect internal equity. Base salaries and incentive targets are the primary means for differentiating compensation to reflect each executive’s role and scope of responsibility. For example, Mr. Steinour has a higher base salary and higher potential award opportunities due to his responsibilities as chief executive officer. As chief executive officer, he is also held to a higher stock ownership guideline, reflecting his increased stake in our performance. Differences in compensation can also reflect different levels of performance.

 

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Shareholder Alignment — A significant portion of our total compensation is stock-based and long-term in focus. We also require our executives to own and hold significant stock to ensure alignment with our shareholders.

 

The Compensation Committee will regularly monitor our success relative to our continued ability to meet these objectives.

 

Factors Used in Determining Executive Compensation

 

A key outcome of the compensation philosophy initiative was the development of a rigorous and systematic evaluation process that the Committee will use in the determination of executive compensation programs and actions. The following provides a summary of the factors that the Committee might consider in the decision making process. No one factor plays a primary role; rather the Compensation Committee and management will consider all these points of reference when making decisions. It is important to note that while these factors had less influence on 2010 decisions given the TARP compensation limitations, the Committee developed a framework that will be used for assessing ongoing compensation decisions.

 

 

Market Referencing

 

The Compensation Committee regularly reviews peer/industry information in regard to levels of compensation, performance, and other key data that might provide reference for decision making. In the spring of 2010, the Committee engaged Pearl Meyers & Partners, LLC to conduct a comprehensive assessment of market compensation and compare Huntington’s pay and performance relative to peers. The information and analysis provided to the Committee served as a reference for making pay decisions such as base salary and defining pay opportunities for 2011, such as short-term incentive targets and pay mix.

 

The compensation consultant used multiple data sources in conducting the review. A key source of information was a peer group of comparative organizations similar in asset size. The peer banks for 2010 were recommended by the independent compensation consultant and approved by the Compensation Committee in July 2010.

 

The process for determining the 2010 peers began with the selection of U.S. based publicly traded banks with assets as of December 31, 2009, ranging from approximately one-half to approximately three times ours. Banks with a significantly different business mix and those under foreign or private ownership were eliminated from the group. The resulting group consisted of 11 reasonably-comparable banks with assets ranging from $23 billion to $142 billion. These “Primary Peers” represent the most appropriate market comparators for Huntington in terms of size and mix of businesses. Three larger banks were selected as “Reference Peers” to provide a frame of reference only; they were not used in setting pay levels or program targets. The “Reference Peers” ranged in assets from $166 billion to $270 billion.

 

The chart below ranks the peer banks in order of descending asset size as of December 31, 2009.

 

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Peer Banks Utilized During 2010

 

 

The compensation consultant included other industry databases and surveys as appropriate to supplement the peer group. When using survey data, data for groups of participants that fell closest to our asset size was used when available. If data was not available for comparable asset size, data representing the average of all participating companies was used.

 

Compensation Components

 

Our compensation programs for executives consist of four primary components: base salary, annual incentive awards, long-term incentive awards, and benefits.

 

As noted, all our named executive officers were TARP Covered Employees (defined below) for 2010. As a result, the principal components of compensation for Named Executive Officers were base salary, stock salary, and restricted stock units (RSUs) that qualify under TARP.

 

As part of the executive compensation philosophy review, we articulated the stated purpose, performance orientation (where applicable), and focus of each element. Below is a summary of the key items of our compensation program.

 

Base Salary

 

We provide fixed compensation in the form of base salaries that reflects the value / contribution for performing the associated job responsibilities. In support of our focus to attract and retain top talent, our philosophy is to pay base salaries that are within a competitive range of market practice. Individual pay will vary within the range depending on each executive’s role, performance, experience, and contribution. Salaries provide the foundation off which incentives and other select benefits are paid.

 

Salaries are intended to represent a reasonable amount of “fixed” compensation compared to performance-based compensation. Experienced, high performing executives should be paid at or above the peer median while executives developing in their role (for example, recently promoted) will be paid at- or below-market median.

 

Stock Salary

 

“Stock salary” was a critical element of compensation permitted under TARP that allowed us to accomplish the following:

 

 

This component was not intended to become a permanent element of compensation. The Compensation Committee retained the discretion, without the executive’s consent, to terminate, modify, or suspend this compensation structure at anytime.

 

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Under this program, increased base salary amounts were paid in shares of common stock each semi-monthly pay period. The shares were immediately vested as of the pay date and are not subject to any requirement of future service. The shares were, however, awarded subject to restrictions on transfer, sale, and disposition. Shares of stock salary will become transferable on June 30, 2011, since we repurchased all of our TARP funds on December 22, 2010.

 

Annual Cash Incentive Award (Management Incentive Plan)

 

Due to the TARP restrictions, the named executive officers were not eligible to receive annual cash incentive awards and thus did not participate in the 2010 Management Incentive Plan (MIP). That said, the Plan was in effect for our officers who were not subject to the TARP restrictions and is described below.

 

The objective of our Management Incentive Plan is to motivate and reward executives for achieving (or exceeding) annual financial, strategic, and operational goals that ultimately support sustained long-term profitable growth of the company and value creation for shareholders. Annual incentives reflect a balanced approach to rewarding performance that ensures sound risk management. Incentives paid reflect company, unit, and / or individual performance on key short-term strategic, financial, and operational measures.

 

Each participant has an annual target incentive opportunity, expressed as a percent of base salary reflective of the role and competitive market practice. Actual awards are determined based on performance at the end of the year relative to threshold, target, and maximum performance levels. The level of achievement determines the ultimate award earned. Threshold performance results in one half the targeted award while superior performance can receive up to two times the target award. We interpolate between the threshold, target, and maximum goals to ensure sound incentive compensation arrangements and appropriate pay for performance alignment. It is the intent of the Compensation Committee that maximum awards are only paid for truly exceptional performance and goals are set accordingly. The Management Incentive Plan allows for awards to be earned under each plan criterion, independent of the other criteria.

 

It is expected that all executive officers will be eligible to participate in the Management Incentive Plan again beginning in 2011. In order to maintain the deductibility of awards under the Management Incentive Plan, we are asking shareholders to approve an updated plan at this meeting. See Proposal to Approve the Management Incentive Plan for Covered Officers below.

 

Long-Term Incentive Compensation

 

The primary objective of the long-term incentive component is to reward executives for long-term, sustained performance that is aligned with shareholder interests. Another purpose of our long-term incentive is to support ownership and retention goals, as well as to hold colleagues accountable for enhancing stockholder value. The ultimate award is based on a combination of company and individual performance, and grants under this program are not a guarantee or entitlement. Once granted, the awards vest with the awards’ ultimate value contingent on our future stock price performance.

 

Our equity awards program for senior management typically consists of a combination of restricted stock units, referred to as RSUs, and stock options. In addition, we have historically had a long-term incentive plan payable in combination of cash and stock, which rewards performance over periods longer than one year for certain key executives. We suspended this plan in 2009 due to TARP, although there remained one outstanding award cycle in 2010.

 

For 2010, executive officers who were not subject to the TARP restrictions were eligible to earn equity awards in the form of restricted stock units and stock options. We were prohibited from awarding stock options to the TARP Covered Employees, including all of our named executives, during 2010. TARP Covered Employees were eligible to receive restricted stock units as permitted by TARP (see below).

 

Below is a summary of the various long-term incentive components:

 

 

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The performance criteria approved by the Compensation Committee for the 2008 — 2010 cycle were tied to specific / absolute goals for the performance cycle. Measures were defined as: average annual growth in EPS, average annual efficiency ratio, and revenue growth. The former chief executive officer and the chief financial officer proposed that these criteria were the best objective measures of our performance for the three-year period, taking into consideration the economic outlook for our markets and the expected relative performance of peers over the same cycle.

 

Awards under this program can only be paid if performance is at or above threshold levels for the performance measures. This did not occur so no awards were paid for the 2008 — 2010 cycle.

 

For our post TARP program, we will have a significant portion of executive total compensation weighted on long-term/equity compensation.

 

Executive Benefits

 

Executive officers participate in the same broad-based benefit programs generally available to all colleagues. These benefits consist of two qualified retirement plans (a defined contribution plan and a defined benefit plan) and a variety of health and welfare benefits plans.

 

Certain other benefits are offered to executive officers. We target these benefits to be within typical market practice and as needed to help us attract and retain talent. Executive benefits and other compensation are designed to represent a modest portion of total compensation. Following is a list of the other benefits and compensation elements offered to our executives during 2010.

 

 

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For the chief executive officer, we provide security monitoring of his personal residence.

 

 

Other Compensation Philosophies

 

Strengthened Stock Ownership Guidelines

 

The requirement to own Huntington stock is a critical foundation of our philosophy and is intended to align senior management’s goals with those of the shareholders. Increased stock ownership also reinforces senior management’s commitment to the company, in the eyes of the investing public, and colleagues. The Compensation Committee first established stock ownership guidelines for key executives in 2006 and for directors in 2009.

 

Effective in 2011, the Compensation Committee strengthened the guidelines for executives by increasing the levels of stock ownership and adding holding requirements for equity awards. Under the enhanced guidelines, the multiple for the chief executive officer was increased from 5 to 6 times base salary and the multiple for the other named executive officers was increased from 2 to 3 times base salary. To calculate the number of shares required, the multiple is divided by the prior 52 week average stock price. The requirements for the Named Executive Officers under the new guidelines are set forth below.

 

Executive officers have 5 years to meet the guidelines. If guidelines are not met by the applicable date, the affected officer will be required to defer at least 50% of any annual bonus earned and invest the deferral in stock.

 

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Shares held in our benefits programs, including deferred compensation, and shares owned outside these plans will be counted for purposes of meeting ownership guidelines.

 

The Compensation Committee may modify or adjust the ownership targets and time frames established for compliance under the stock ownership guidelines, on an individual or aggregate basis, as may be necessary or desirable in the Compensation Committee’s discretion based on events or circumstances.

 

Retention of Stock

 

Based on the recommendation of the Chief Executive Officer, the Compensation Committee has implemented a new holding period requirement. Executive officers will be required to hold a portion of the net shares received upon the exercise of a stock option or the release of an RSU or RSA award. This new policy applies to exercises and releases of awards granted beginning in 2011. The named executive officers must hold 50% of the net shares received until retirement. There are certain exceptions that include estate planning, economic hardship situations, and involuntary termination not for cause.

 

Recoupment/Clawback Policies

 

We support the concept of clawbacks and have included such provisions in all incentive plans. For senior executive officers our recoupment and clawback policies include the following:

 

 

In addition, section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act now requires new listing standards related to recovery of executive compensation. The board of directors will review its recoupment policies in light of these new standards when they are adopted by NASDAQ, and as other rules and best practices develop.

 

Tax and Accounting Considerations

 

We have worked to balance our compensation philosophy with the goal of achieving maximum deductibility under Internal Revenue Code Section 162(m) for performance-based compensation. Our Management Incentive Plan and our Amended 2007 Plan have been structured so that awards under these plans may qualify as performance-based compensation deductible for federal income tax purposes under Internal Revenue Code Section 162(m). Our ability,

 

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however, to take a deduction for executive compensation under the Internal Revenue Code has been limited due to our participation in TARP. As a condition to participate in TARP we agreed to be subject to a $500,000 annual deduction limit under IRC Section 162(m). Since we have repurchased TARP, we are asking the shareholders to approve an updated and revised Management Incentive Plan for Covered Officers at this annual meeting applicable for 2011.

 

Huntington also takes into consideration Internal Revenue Code Section 409A with respect to non-qualified deferred compensation programs. In addition, Huntington considers ASC 718, “Compensation — Stock Compensation” in administering its equity compensation program.

 

How Compensation for 2010 was Determined

 

All compensation decisions for 2010 were made within the confines of TARP compensation requirements.

 

Clarifying the 2010 TARP Restrictions

 

Because we were subject to TARP restrictions through December 22, 2010, our alternatives for providing market performance-based and competitive compensation opportunities to key colleagues was limited. The TARP Rules restricted compensation for our senior executive officers (“SEOs”, generally the five “named executive officers” identified in the proxy statement, and our 20 next most highly compensated colleagues). We refer to these colleagues as the “TARP Covered Employees”. All of the named executive officers in this proxy statement were TARP Covered Employees in 2010.

 

Although our executive compensation program historically included a mix of base salary, annual incentives, long-term incentives, and benefits, the TARP rules prohibited incentive / bonus payments. As such, we were unable to pay annual cash incentive awards or grant stock options to many of our executive officers. And, due to complexities of compliance under TARP, we also suspended the multi-year performance award component of our long-term incentive program beginning in 2009. In short, the TARP rules made it necessary for us to modify the compensation components for certain executive officers using TARP appropriate components such as salary and stock during our participation (through December 2010). The principal components of compensation for executive officers who were TARP Covered Employees in 2010 were:

 

 

Although our tools were limited and our compensation was generally held below market levels for the TARP period ending in December 2010, our philosophy remained essentially the same. For 2011, we will continue to focus on rewarding our executives in line with company and individual performance in alignment with shareholder results.

 

Base Salary:

 

Due to the number of new hires in 2009 and the impact of the TARP restrictions, 2010 total compensation for members of the executive team varied widely. Recent new hires were positioned more competitively than those executives hired before 2009. In order to recognize individual performance, align with the market, and address internal equity resulting from a gap between newly hired executives and legacy executives, the Compensation Committee approved salary increases for some of the longer-term executives. The salary increases were approved in July for Mr. Kimble, Ms. Navarro, Mr. Dunlap and Mr. Benhase, as detailed below.

 

The amount of increase for each was recommended by Mr. Steinour based on his evaluation of each executive’s performance, experience and contribution, and in consideration of internal pay equity and market data provided by the independent consultant. The Committee reviewed recommended salary adjustments for each executive to ensure that any changes to salary did not compromise the competitiveness of the overall compensation arrangement. They also reviewed each individual to understand performance and contribution to the company.

 

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The Compensation Committee did not increase the base salary for Mr. Steinour, which was set in 2009 and was determined to be still competitive.

 

 

The executive leadership team has determined to forgo base salary increases in 2011.

 

Stock Salary:

 

To address the impact of the TARP restrictions on our executive compensation programs, the Compensation Committee approved temporary salary increases in 2010 for certain TARP Covered Employees, payable in shares of common stock. Each of the named executive officers participated in this “stock salary” program in 2010.

 

The Compensation Committee approved stock salary as a component of compensation toward the end of 2009 when we were in the midst of a significant effort to reposition the company for growth and improved performance while facing one of the most challenging economic environments in many decades. Members of our leadership team were contributing substantial time and effort to the benefit of the company. At the same time, the TARP rules limited our alternatives for providing performance-based and market competitive compensation opportunities for key colleagues. Because it was critical for us to retain key talent, the Compensation Committee worked with Watson Wyatt & Company, the former independent compensation consultant, to develop a stock salary program to bring the total compensation for executive officers more in line with market opportunity and ensure our executives’ interests remained in line with our shareholders. Mr. Steinour recommended stock salary for each of the other named executive officers. The Compensation Committee approved temporary stock salary increases for Mr. Kimble, Ms. Navarro, Mr. Dunlap and Mr. Benhase in December 2009, to be effective January 1, 2010. The Compensation Committee subsequently approved stock salary for Mr. Steinour in January 2010, retroactive to January 1. The amount of stock salary approved for each of the named executive officers was set to ensure reasonably competitive total compensation for the role, based on market data, and provide appropriate parity of internal relationships between TARP and non-TARP covered executives.

 

Stock salary was discontinued effective with the first pay period following repurchase of TARP on December 22, 2010.

 

Annual Cash Incentive:

 

None of the named executive officers received an annual cash incentive award for 2010 due to the TARP restrictions.

 

For those executive officers who were eligible, the corporate MIP goals (and their respective weights) for 2010 were pre-tax pre-provision earnings (50%), core deposit growth (20%), and net charge-offs (30%). The Chief Executive Officer and the Chief Financial Officer recommended these criteria and the Compensation Committee approved them as important indicators of our performance for 2010.

 

Our actual performance for all three goals in 2010 was at plan threshold or greater, and as a result an award pool was funded. Executive officers who were not TARP Covered Employees for 2010 received cash awards. If not prohibited by TARP, the named executive officers would have been eligible to receive awards for 2010.

 

Long-Term Incentive Compensation:

 

During 2010 each of the named executive officers received long-term restricted stock units pursuant to the limits in the TARP rules as their only long-term incentive awards. The Compensation Committee approved a grant of TARP RSUs for each of the named executive officers equal in value to one-half of the officer’s annual salary (cash base salary plus stock salary). The Compensation Committee approved these TARP RSU grants for the named executive officers (other than the Chief Executive Officer) in July when it considered annual equity awards for other officers and colleagues. The number of TARP RSUs was determined by dividing the value of the award by the fair market value (the closing price) of a share on July 26, 2010, the date of grant. The Compensation Committee approved an award of

 

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TARP RSUs to the Chief Executive Officer on October 25, 2010 to align better with the Committee’s timing for reviewing performance and results for the year. These TARP RSUs vest two years from the date of grant (the later of the date we repaid TARP funds or two years from the grant date). Upon vesting the TARP RSUs will be paid in shares. The Compensation Committee also approved the accumulation of dividends, which will be paid in cash when the underlying TARP RSUs are paid.

 

None of the named executive officers received a stock option award in 2010 due to the TARP restrictions.

 

As the long-term incentive program has been suspended since 2009, a new cycle was not begun in 2010. Each of the named executive officers was a participant in the cycle 2008 — 2010 cycle (Mr. Steinour on a pro-rated basis relative to the portion of the cycle following his joining the company); however, no awards were earned under this cycle.

 

Retention Grant:

 

Finally, Mr. Kimble, Ms. Navarro, Mr. Dunlap and Mr. Benhase each earned cash retention payments on December 31, 2010. These payments were made under a retention payment arrangement approved by the board of directors in January 2008 to encourage the continued employment of certain executive officers. The retention awards became payable to the participating executives who remained continuously employed through December 31, 2010.

 

A Preview of our Compensation Philosophy for 2011 and Beyond

 

In conclusion, our focus for 2010 was building a stronger foundation for our business success and preparing a similarly strong foundation for our compensation policies and programs for 2011 and beyond. Building on our primary philosophy of pay-for-performance, we defined compensation opportunities that are heavily dependent on company, business segment, and individual performance over the long term with consideration for achieving and maintaining an aggregate moderate-to-low risk profile.

 

Going forward, our 2011 program will include the following:

 

 

 

 

Our goal is simple — to achieve and sustain superior performance over the long term while maintaining our aggregate moderate-to-low risk profile. With this philosophy and these guidelines in mind our compensation plans are designed to ensure that only when this goal is met, will executives earn commensurate pay.

 

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Compensation Tables

 

The following table sets forth the compensation paid by us and by our subsidiaries for each of the last three fiscal years ended December 31, 2010, to our principal executive officer, principal financial officer, and the three other most highly compensated executive officers serving at the end of 2010.

 

SUMMARY COMPENSATION 2010

 

 

 

 

 

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All Other Compensation

 

 

 

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GRANTS OF PLAN-BASED AWARDS 2010