Huntington National Bank 2011 Annual Report Download - page 117

Income Taxes
The provision for income taxes in the 2011 fourth quarter was $42.0 million and $35.0 million in the 2010
fourth quarter. The effective tax rate in the 2011 fourth quarter was 24.9% compared to 22.2% in the 2010 fourth
quarter. At December 31, 2011 and 2010 we had a deferred tax asset of $364.8 million and $538.3 million,
respectively. Based on both positive and negative evidence and our level of forecasted future taxable income,
there was no impairment of the deferred tax asset at December 31, 2011 and 2010. The total disallowed deferred
tax asset for regulatory capital purposes decreased to $39.1 million at December 31, 2011 from $161.3 million at
December 31, 2010.
Credit Quality
Credit quality performance in the 2011 fourth quarter reflected continued improvement in the overall loan
portfolio relating to NCO activity, as well as in key credit quality metrics, including a 30% decline in NPAs and
a 30% decline in the level of Criticized commercial loans compared to the year-ago quarter.
NCOs
Total NCOs for the 2011 fourth quarter were $83.9 million, or an annualized 0.85% of average total loans
and leases. NCOs in the year-ago quarter were $172.3 million, or an annualized 1.82%.
Total C&I NCOs for the 2011 fourth quarter were $10.9 million, or an annualized 0.31%, down from $59.1
million, or an annualized 1.85% of related loans, in the year-ago quarter. Total CRE NCOs for the 2011 fourth
quarter were $28.4 million, or an annualized 1.91%, down from $44.9 million, or an annualized 2.64% in the
year-ago quarter. These declines reflected improvement in the overall credit quality of the portfolio.
Total consumer NCOs in the current quarter were $44.6 million, or an annualized 0.92%, down from $68.3
million, or an annualized 1.50% of average total consumer loans in the year-ago quarter.
Residential mortgage NCOs were $9.7 million, or an annualized 0.77% of related average balances, an
decrease when compared with $26.8 million, or an annualized 2.42% in the year-ago quarter and were consistent
with our expectations for a continued downward trend.
Home equity NCOs in the 2011 fourth quarter were $23.4 million, or an annualized 1.15%. This represented
a decline from $29.2 million, or an annualized 1.51%, in the year-ago quarter and was consistent with our
expectations for continued improvement.
Automobile loan and lease NCOs were $4.2 million, or an annualized 0.30%, down from $7.0 million, or an
annualized 0.51%, in the year-ago quarter. The relatively low level of NCOs in the current quarter reflected the
continued high credit quality of originations and a strong resale market for used automobiles.
NPAs and NALs
Total NALs were $541.1 million at December 31, 2011, and represented 1.39% of total loans and leases.
This was down $236.9 million, or 30%, from $777.9 million, or 2.04%, of total loans and leases at the end of the
year ago period. This decrease primarily reflected a decline in commercial NALs as a result of problem loan
resolution activity, including payoff. We continue to focus on early recognition of risks through our on-going
portfolio management processes. The decline in commercial NALs was partially offset by an increase in
consumer NALs. These increases reflected the current weak economic conditions and the continued decline of
residential real estate property values. Both home equity and residential mortgage NALs have been written down
to net realizable value, less anticipated selling costs, which substantially limits any significant future risk of loss.
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