Huntington National Bank 2007 Annual Report Download - page 59

Capital
Capital is managed both at the Bank and on a consolidated basis. Capital levels are maintained based on regulatory capital
requirements and the economic capital required to support credit, market, liquidity, and operational risks inherent in our business,
and to provide the flexibility needed for future growth and new business opportunities. We place significant emphasis on the
maintenance of a strong capital position, which promotes investor confidence, provides access to the national markets under
favorable terms, and enhances business growth and acquisition opportunities. The importance of managing capital is also
recognized and we continually strive to maintain an appropriate balance between capital adequacy and providing attractive returns
to shareholders.
Shareholders’ equity totaled $5.9 billion at December 31, 2007. This balance represented an increase from $3.0 billion at
December 31, 2006, mostly merger-related.
There were no share repurchases during 2007, and no share repurchases are anticipated for 2008. Under the current authorization
announced April 20, 2006, there are currently 3.9 million shares remaining available.
During 2007, Huntington Capital III, a trust formed by us, issued $250 million of enhanced trust preferred securities. The
securities were secured by junior subordinated notes from the parent company. The enhanced trust preferred securities have a
coupon of 6.65% for the first ten years and a floating rate thereafter. They also have a scheduled maturity date of 2037, and may
be called, at our discretion, at the 10th and 20th anniversaries of the issuance of the notes. In accordance with FIN 46R, the trust
is not consolidated in our balance sheet; the junior subordinated notes issued by the parent company represent the obligation
reflected in our balance sheet. The junior subordinate notes issued to this trust qualify as Tier 1 regulatory capital for Huntington.
Our total risk-weighted assets, Tier 1 leverage, Tier 1 risk-based capital, and total risk-based capital ratios for the past five years are
shown in Table 33 and are well in excess of minimum levels established for “well capitalized” institutions of 5.00%, 6.00%, and
10.00%, respectively. The decrease in the tangible equity to assets ratio from December 31, 2006, primarily reflected the impact of
the Sky Financial acquisition, an increase to our intangibles, and the negative impact to equity from the 2007 fourth quarter’s net
loss. We anticipate that this ratio will increase over time. The decrease in the tangible equity to risk-weighted asset ratio from
December 31, 2006, was also primarily merger-related.
Table 33 — Capital Adequacy
(in millions of dollars)
“Well-
Capitalized”
Minimums 2007 2006 2005 2004 2003
At December 31,
Total risk-weighted assets $46,044 $31,155 $29,599 $29,542 $28,164
Ratios:
Tier 1 leverage ratio 5.00% 6.77% 8.00% 8.34% 8.42% 7.98%
Tier 1 risk-based capital ratio 6.00 7.51 8.93 9.13 9.08 8.53
Total risk-based capital ratio 10.00 10.85 12.79 12.42 12.48 11.95
Tangible equity ratio / asset ratio
(1)
5.08 6.93 7.19 7.18 6.80
Tangible equity / risk-weighted assets ratio 5.67 7.72 7.91 7.87 7.31
(1) Tangible equity (total equity less goodwill and other intangible assets) divided by tangible assets (total assets less goodwill and other intangible assets). Other intangible assets are net of deferred
tax.
The Bank is primarily supervised and regulated by the Office of the Comptroller of the Currency, which establishes regulatory
capital guidelines for banks similar to those established for bank holding companies by the Federal Reserve Board. We intend to
maintain the Bank’s risk-based capital ratios at levels at which the Bank would be considered “well capitalized” by regulators. At
December 31, 2007, the Bank had Tier 1 and total risk-based capital in excess of the minimum level required to be considered
“well capitalized” of $293.4 million and $77.1 million, respectively.
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MANAGEMENT’S DISCUSSION AND ANALYSIS HUNTINGTON BANCSHARES INCORPORATED