Huntington National Bank 2011 Annual Report Download - page 32

candidates or make acquisitions on favorable terms. We incur risks and challenges associated with the integration
of acquired institutions in a timely and efficient manner, and we cannot guarantee that we will be successful in
retaining existing customer relationships or achieving anticipated operating efficiencies.
Huntington is under continuous threat of loss due to cyber-attacks especially as we continue to expand
customer capabilities to utilize internet and other remote channels to transact business. Two of the most
significant cyber–attack risks that we face are e-fraud and loss of sensitive customer data. Loss from e-fraud
occurs when cybercriminals breach and extract funds directly from customer or our accounts. The attempts to
breach sensitive customer data, such as account numbers and social security numbers, are less frequent but could
present significant reputational, legal and/or regulatory costs to us if successful. Our risk and exposure to these
matters remains heightened because of the evolving nature and complexity of these threats from cybercriminals
and hackers, our plans to continue to provide internet banking and mobile banking channels, and our plans to
develop additional remote connectivity solutions to serve our customers.
3. We are subject to routine on-going tax examinations by the IRS and by various other jurisdictions,
including the states of Ohio, Kentucky, Indiana, Michigan, Pennsylvania, West Virginia and Illinois.
The IRS has proposed various adjustments to our previously filed tax returns. It is possible that the
ultimate resolution of all proposed and future adjustments, if unfavorable, may be materially adverse
to the results of operations in the period it occurs.
The calculation of our provision for federal income taxes is complex and requires the use of estimates and
judgments. In the ordinary course of business, we operate in various taxing jurisdictions and are subject to
income and nonincome taxes. The effective tax rate is based in part on our interpretation of the relevant current
tax laws. From time-to-time, we engage in business transactions that may have an effect on our tax liabilities.
During 2011, we entered into discussions with the Appeals Division of the IRS. It is possible that the
ultimate resolution of the proposed adjustments, if unfavorable, may result in penalties and interest. Such
adjustments, including any penalties and interest, may be material to our results of operations in the period such
adjustments occur and increase our effective tax rate. In the third quarter 2011, the IRS began its examination of
our 2008 and 2009 consolidated federal income tax returns. Various state and other jurisdictions remain open to
examination, including Kentucky, Indiana, Michigan, Pennsylvania, West Virginia and Illinois. (For further
discussion, see Note 17 of the Notes to Consolidated Financial Statements.)
4. Failure to maintain effective internal controls over financial reporting in the future could impair our
ability to accurately and timely report our financial results or prevent fraud, resulting in loss of
investor confidence and adversely affecting our business and stock price.
Effective internal controls over financial reporting are necessary to provide reliable financial reports and
prevent fraud. As a financial holding company, we are subject to regulation that focuses on effective internal
controls and procedures. Such controls and procedures are modified, supplemented, and changed from
time-to-time as necessitated by our growth and in reaction to external events and developments. Any failure to
maintain, in the future, an effective internal control environment could impact our ability to report our financial
results on an accurate and timely basis, which could result in regulatory actions, loss of investor confidence, and
adversely impact our business and stock price.
Compliance Risks:
1. Bank regulators and other regulations, including proposed Basel capital standards and Federal
Reserve guidelines, may require higher capital levels, impacting our ability to pay common stock
dividends or repurchase our common stock.
Federal banking regulators continually monitor the capital position of banks and bank holding companies. In
July 2009, the Basel Committee on Bank Supervision published a set of international guidelines for determining
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