Stock Compensation

12 Months Ended

Dec. 31, 2011

Stock Compensation [Abstract]

Stock Compensation

3. Stock Compensation

Effective January 1, 2006, the Company adopted ASC 718 using the modified prospective method. Under this method, the Company recognizes compensation costs based on grant-date fair value for all share-based awards granted, modified or settled after January 1, 2006, as well as for any awards that were granted prior to the adoption for which requisite service has not been provided as of January 1, 2006. The Company did not grant any share-based awards prior to January 31, 2007. ASC 718 requires the measurement and recognition of compensation expense for all stock-based payment awards made to employees and directors including employee stock options and other forms of equity compensation based on estimated fair values. The Company estimates the grant-date fair value of stock options using the Black-Scholes option-pricing model. For stock options, the Company uses the simplified method to determine the expected term of the option as the Company does not have enough history as a public company to estimate an expected term. Expected volatility used to value stock options is based on the Company’s historical volatility. The fair value of the restricted stock awards is calculated as the market value of the Company’s Class A common stock on the date of grant. The Company also has restricted stock awards that are accounted for as liability awards and require remeasurement to fair value at the end of each reporting period. The Company’s awards are subject to graded or cliff vesting. Compensation expense is adjusted for estimated forfeitures and is recognized on a straight-line basis over the requisite service period of the award. Forfeiture assumptions for all stock-based payment awards are evaluated on a quarterly basis and updated as necessary. A summary of the cost of the awards granted during the years ended December 31, 2011 and 2010 is provided below.

Omnibus Incentive Compensation Plan

Prior to the effective date of the initial public offering, the stockholder of HFF, Inc. and the Board of Directors adopted the HFF, Inc. 2006 Omnibus Incentive Compensation Plan (the “Plan”). The Plan authorizes the grant of deferred stock, restricted stock, stock options, stock appreciation rights, stock units, stock purchase rights and cash-based awards. Upon the effective date of the registration statement, grants were awarded under the Plan to certain employees and non-employee members of the board of directors. The Plan imposes limits on the awards that may be made to any individual during a calendar year. The number of shares available for awards under the terms of the Plan is 3,500,000 (subject to stock splits, stock dividends and similar transactions). For a full copy of the Plan, see Exhibit 10.9 to the Registration Statement on Form S-1 filed with the SEC on January 8, 2007.

The stock compensation cost that has been charged against income for the years ended December 31, 2011, 2010 and 2009, was $2.1 million, $1.0 million and $1.1 million, respectively, which is recorded in “Personnel” expenses in the consolidated statements of income. At December 31, 2011, there was approximately $3.0 million of unrecognized compensation cost related to share based awards.

The fair value of stock options is estimated on the grant date using a Black-Scholes option-pricing model. The following table presents the weighted average assumptions for the year ended December 31, 2011:

Dividend yield	0.0	%
Expected volatility	63.9	%
Risk-free interest rate	3.2	%
Expected life (in years)	6.2

	Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Balance at January 1, 2009		28,044		$	15.85		11.3 years	$	248
Granted		20,728			4.35		13.0 years		60
Exercised		—			—		—		—
Forfeited or expired		(4,167	)		18.00		—		(42	)
Balance at December 31, 2009		44,605		$	10.31		11.4 years	$	266
Granted		12,319			7.58		13.0 years		60
Exercised		—			—		—		—
Forfeited or expired		(5,338	)		17.41		—		(52	)
Balance at December 31, 2010		51,586		$	8.92		11.0 years	$	274
Granted		—			—		—		—
Exercised		—			—		—		—
Forfeited or expired		—			—		—		—
Balance at December 31, 2011		51,586		$	8.92		10.0 years	$	274

A summary of option activity and related information during 2009, 2010 and 2011 was as follows:

	Options			Weighted Average Exercise Price
Nonvested at January 1, 2009		20,319		$	15.14
Granted		20,728			4.35
Vested		(9,347	)		15.85
Forfeited or expired		(1,389	)		18.00
Nonvested at December 31, 2009		30,311		$	7.41
Granted		12,319			7.58
Vested		(14,869	)		10.31
Forfeited or expired		—			—
Nonvested at December 31, 2010		27,761		$	5.93
Granted		—			—
Vested		(12,639	)		5.73
Forfeited or expired		—			—
Nonvested at December 31, 2011		15,122		$	6.10

The weighted average grant date fair value of options granted during the years ended December 31, 2011 and 2010 was $0 and $30,000. No options were exercised during either of the years ended December 31, 2011 and 2010. The option exercises will be settled through the issuance of new shares of Class A common stock.

A summary of restricted stock units (“RSU”) activity and related information during the period was as follows:

	RSU’s with no vesting period			RSU’s with graded or cliff vesting period			Total
Balance at January 1, 2009		47,730			137,502			185,232
Granted		161,282			—			161,282
Converted to common stock		(127,604	)		(44,795	)		(172,399	)
Forfeited or expired		—			(2,083	)		(2,083	)
Balance at December 31, 2009		81,408			90,624			172,032
Granted		55,565			456,029			511,594
Converted to common stock		(58,170	)		(44,097	)		(102,267	)
Forfeited or expired		—			—			—
Balance at December 31, 2010		78,803			502,556			581,359
Granted		12,030			1,804			13,834
Converted to common stock		—			(23,265	)		(23,265	)
Forfeited or expired		—			—			—
Balance at December 31, 2011		90,833			481,095			571,928

As of December 31, 2011, there were 571,928 RSU’s outstanding, of which 392,700 units are treated as liability awards, which requires the remeasurement of fair value at the end of each reporting period until settlement. The liability awards were granted on December 14, 2010 with a cliff vesting on March 1, 2014. The fair value of vested RSU’s was $0.9 million and $0.8 million at December 31, 2011 and December 31, 2010, respectively. The RSU exercises will be settled through the issuance of new shares of Class A common stock.

The weighted average remaining contractual term of the nonvested restricted stock units is 1.9 years as of December 31, 2011.

On March 1, 2012, the board of directors for the Company granted 236,897 restricted stock units with a fair value of $3.4 million in connection with the 2011 office and firm profit participation plans and other 2011 bonuses. 66,311 of these restricted stock units will vest in 2012.