Huntington National Bank 2012 Annual Report Download - page 3

TO FELLOW OWNERS AND FRIENDS:
I am pleased to report 2012 was a year of significant accomplishment, and through the dedication of our
more than 11,000 colleagues, we achieved three of the six long-term financial goals that we established in 2010.
We are focused on executing our strategic plan to position Huntington for consistent long-term profitable growth,
demonstrated this past year by the 12% increase in tangible book value per common share to $5.78. Our “Fair
Play” approach to banking, coupled with our effective Optimal Customer Relationship (OCR) cross-sell process,
allowed us to meaningfully grow the balance sheet, continue to dramatically increase the number of customer
relationships, and positioned us significantly closer to our goal of being THE Bank of the Midwest. We remain
diligent with respect to maintaining our aggregate moderate-to-low risk profile. We continue to invest in our risk
infrastructure, and for the third year in a row, we decreased nonaccrual loans by at least 25%, while finishing the
year with our provision for credit losses at the low end of our long-term expected range.
During 2012, we were able to return more of our capital to shareholders. The full year declared dividend
increased by 60% to $0.16 per common share. Dividends, coupled with $148 million in share repurchases,
equated to the Company paying out just under 50% of its net income available to common shares. This represents
a significant increase from the 12% of net income paid out in 2011. Our capital levels remain healthy, and as we
look forward, our top capital priorities are to grow the core franchise and support the dividend.
The continued improvement in profitability, efficiency, credit, and capital demonstrated how Huntington
colleagues have risen to the challenges of the current banking environment. Expectations for each member of the
Huntington team remain high, as their execution of our long-term strategy is paramount to our future success. Let
me begin by offering a progress report on several key areas of our strategy. I will then provide a recap of 2012
performance and our expectations for 2013.
Strategies Overcoming Economic Headwinds
The banking industry has been severely affected by a struggling economic recovery, the prolonged low level
of interest rates, and a regulatory environment with unprecedented changes and new requirements. Our strategies
uniquely provide opportunities to counter many of these industry headwinds directly.
We continue to see positive trends within our Midwest markets relative to the broader United States.
Nevertheless, broad based customer sentiment began to change in late 2012, due to increased concerns regarding
the U.S. economy. While some businesses are hesitant to invest given the current uncertainty in the economy, we
believe our differentiated approach to banking, combined with investing in our franchise through enhanced
convenience, products and services, will drive growth and improvement of our long-term profitability.
The low interest rate environment, coupled with a relatively flat yield curve experienced for the last several
years, is a direct reflection of the uncertainty and volatility of the national and global economy. It also put
unrelenting pressure on our net interest margin (NIM). We were able to expand our NIM by three basis points
through our focus on our relationship-based sales approach. This approach, coupled with our deeply embedded
risk process, resulted in higher quality and more consistent revenue. An example of this can be seen within our
commercial loan portfolio, where loan yields declined only five basis points from fourth quarter of 2011 to fourth
quarter 2012, as we made a conscious decision to forego some growth due to highly competitive pricing. Equally
important are our funding costs. The 12% growth in consumer households and 9% growth in commercial
relationships experienced in 2012 start with each customer’s primary checking account. With each new
relationship, we improve the quality of our deposits and the Huntington franchise.
Near historically-low interest rates negatively impacted many parts of our business. However, the
investments we have made over the last two years added over $50 million of pre-tax income during 2012, and
several areas experienced record performance. Our mortgage group had a record year while assisting over 60,000
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