Huntington National Bank 2008 Annual Report Download - page 67

Stock is nonvoting and may be convertible at any time, at the option of the holder, into 83.668 shares of Huntington common
stock.
As shown in Table 42, our consolidated tangible equity to assets ratio was 7.66% at December 31, 2008, an increase from 5.08% at
December 31, 2007. The 258 basis point increase from December 31, 2007, primarily reflected an increase in shareholder’ equity
largely due to the issuance of Series A Preferred Stock during the 2008 second quarter, and the issuance of Series B Preferred Stock
during the 2008 fourth quarter as a result of our participation in the TARP voluntary CPP. (See “Risk Factors” included in Item 1A
of our 2008 Form 10-K for the year ended December 31, 2008).
Table 42 — Capital Adequacy
“Well-
Capitalized”
Minimums 2008 2007 2006 2005 2004
At December 31,
Total risk-weighted assets (in millions) Consolidated $46,994 $46,044 $31,155 $29,599 $29,542
Bank 46,477 45,731 30,779 29,243 29,093
Ratios:
Tier 1 leverage ratio
(1)
Consolidated 5.00% 9.82% 6.77% 8.00% 8.34% 8.42%
Bank 5.00 5.99 5.99 5.81 6.21 5.66
Tier 1 risk-based capital ratio
(1)
Consolidated 6.00 10.72 7.51 8.93 9.13 9.08
Bank 6.00 6.44 6.64 6.47 6.82 6.08
Total risk-based capital ratio
(1)
Consolidated 10.00 13.91 10.85 12.79 12.42 12.48
Bank 10.00 10.71 10.17 10.44 10.56 10.16
Tangible equity / asset ratio
(2)
Consolidated 7.72 5.08 6.93 7.19 7.18
Tangible common equity / asset ratio
(3)
Consolidated 4.04 5.08 6.93 7.19 7.18
Tangible equity / risk-weighted assets ratio Consolidated 8.38 5.67 7.72 7.91 7.87
Average equity / average asset ratio Consolidated 12.85 11.40 10.70 11.40 11.50
(1) Based on an interim decision by the banking agencies on December 14, 2006, we have excluded the impact of adopting Statement 158 from the regulatory capital calculations.
(2) 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, and calculated assuming a 35% tax rate.
(3) Tangible common equity (total common 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, and calculated assuming a 35% tax rate.
The Bank is primarily supervised and regulated by the Office of the Comptroller of the Currency (OCC), which establishes
regulatory capital guidelines for banks similar to those established for bank holding companies by the Federal Reserve Board. We
intend to maintain both the parent company’s and the Bank’s risk-based capital ratios at levels at which each would be considered
“well-capitalized” by regulators. Regulatory capital ratios are the primary metrics used by regulators in assessing the “safety and
soundness” of banks. At December 31, 2008, the Bank had Tier 1 and Total risk-based capital in excess of the minimum level
required to be considered “well-capitalized” of $0.2 billion and $0.3 billion, respectively; and the parent company had Tier 1 and
Total risk-based capital in excess of the minimum level required to be considered “well-capitalized” of $2.2 billion and $1.8 billion,
respectively. The parent company has the ability to provide additional capital to the Bank.
Our tangible common equity (TCE) ratio at 2008 year-end was 4.04%, down from 5.08% at 2007 year-end. In recent months,
equity markets have increased their focus on the absolute level of TCE ratios. This focus is not done within a “safety and
soundness” context, as that is reflected through our regulatory capital ratios, but rather is more centered in stock price valuation
analysis. Being mindful of this, certain actions, including selective asset sales and other reduction strategies, are under various
stages of consideration and implementation to reduce the size of our balance sheet with the intent of providing additional support
to our TCE ratio.
Our participation in the TARP voluntary CPP (see “Risk Factors” included in Item 1A of our 2008 Form 10-K for the year ended
December 31, 2008) increased our Tier 1 leverage ratio, Tier 1 risk-based capital ratio, and total risk-based capital ratio by
approximately three percentage points.
Shareholders’ equity totaled $7.2 billion at December 31, 2008. This represented an increase compared with $5.9 billion at
December 31, 2007, primarily reflecting the previously discussed issuances of Series A Preferred Stock and Series B Preferred Stock
in 2008.
Additionally, to accelerate the building of capital and to lower the cost of issuing the aforementioned securities, we reduced our
quarterly common stock dividend to $0.1325 per common share, effective with the dividend paid July 1, 2008. The quarterly
common stock dividend was further reduced to $0.01 per common share, effective with the dividend to be paid April 1, 2009.
No shares were repurchased during 2008. At the end of the period, 3.9 million shares were available for repurchase under the 2006
Repurchase Program for the year-ended December 31, 2008; however, on February 18, 2009, the 2006 Repurchase Program was
terminated. Additionally, as a condition to participate in the TARP, we may not repurchase any additional shares without prior
approval from the Department of Treasury.
65
Management’s Discussion and Analysis Huntington Bancshares Incorporated