Huntington National Bank 2009 Annual Report Download

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2009 ANNUAL REPORT

Table of contents

  • Page 1
    2009 ANNUAL REPORT

  • Page 2
    ...: HBAN) is a $52 billion regional bank holding company headquartered in Columbus, Ohio, and has served the financial needs of its customers for more than 144 years. Huntington's principal markets are Indiana, Kentucky, Michigan, Ohio, Pennsylvania, and West Virginia. Nearly 11,000 colleagues provide...

  • Page 3
    ...impairment charges related to the acquisitions of Sky Financial and Unizan through which we issued stock. Accounting rules require we evaluate at least annually if the value of this asset has diminished. You will recall our stock price ended 2008 at $7.66 per share. But during the 2009 first quarter...

  • Page 4
    ... Bank, located in Macomb County in Michigan, in an FDIC-related transaction. Such transactions not only help build core deposits and add new customers, they can be earnings and/or capital accretive. 2010 Outlook Since early 2009, we stated that a key objective was to return Huntington to profitable...

  • Page 5
    Throughout last year, customer loyalty and faith in the company remained high. Retail and commercial customer bases grew. We worked hard to assist borrowers under stress. Through countless hours of community service, we sent a message that our communities could count on us. By building capital and ...

  • Page 6
    ... to Item 1A "Risk Factors" in Huntington's Form 10-K for the year ending December 31, 2009, for a listing of risk factors. All forward-looking statements included in this release are based on information available at the time of the release. Huntington assumes no obligation to update any forward...

  • Page 7
    ... No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such...

  • Page 8
    ... Corporate Governance ...Item 11. Executive Compensation ...Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ...Item 13. Certain Relationships and Related Transactions, and Director Independence ...Item 14. Principal Accounting Fees and Services...

  • Page 9
    ... and headquartered in Columbus, Ohio. Through our subsidiaries, we provide full-service commercial and consumer banking services, mortgage banking services, automobile financing, equipment leasing, investment management, trust services, brokerage services, customized insurance service programs, and...

  • Page 10
    ... control the money supply and credit availability in order to influence the economy. Holding Company Structure We have one national bank subsidiary and numerous non-bank subsidiaries. Exhibit 21.1 of this report lists all of our subsidiaries. The Bank is subject to affiliate transaction restrictions...

  • Page 11
    ... 14, 2008. Participating companies must adopt certain standards for executive compensation, including (a) prohibiting "golden parachute" payments as defined in EESA to senior Executive Officers; (b) requiring recovery of any compensation paid to senior Executive Officers based on criteria that is...

  • Page 12
    ... of the plan include making bank capital injections, creating a public-private investment fund to buy troubled assets, establishing guidelines for loan modification programs and expanding the Federal Reserve lending program. During the course of 2009, the Treasury Department announced numerous...

  • Page 13
    ... for risk taking by senior executive officers. • Requirement of recovery of any compensation paid based on inaccurate financial information. • Prohibition on "Golden Parachute Payments". • Prohibition on compensation plans that would encourage manipulation of reported earnings to enhance the...

  • Page 14
    ... that insured banks and bank holding companies should generally only pay dividends out of current operating earnings. As previously described, the CPP limits our ability to increase dividends to shareholders. FDIC Insurance With the enactment in February 2006 of the Federal Deposit Insurance Reform...

  • Page 15
    ...also prepaid an estimated insurance assessment of $325 million on December 30, 2009. The Bank continues to be required to make payments for the servicing of obligations of the Financing Corporation (FICO) that were issued in connection with the resolution of savings and loan associations, so long as...

  • Page 16
    ... that must incorporate market risk exposure into their risk-based capital requirements may also have a third tier of capital in the form of restricted short-term subordinated debt. These tiers are: • "Tier 1", or core capital, includes total equity plus qualifying capital securities and minority...

  • Page 17
    ..., including payment of a cash dividend or paying any management fee to its holding company, if the depository institution would be "under-capitalized" after such payment. "Under-capitalized" institutions are subject to growth limitations and are required by the appropriate federal banking agency to...

  • Page 18
    ... Credit Transactions Act of 2003, our customers may also opt out of information sharing between and among us and our affiliates. We are also subject, in connection with our lending and leasing activities, to numerous federal and state laws aimed at protecting consumers, including the Home Mortgage...

  • Page 19
    ...customers changes materially, or if the allowance for loan losses is not adequate, our business, financial condition, liquidity, capital, and results of operations could be materially adversely affected. All of our loan portfolios, particularly our construction and commercial real estate (CRE) loans...

  • Page 20
    ... of the assets securing our loans to them may increase our credit risk. Our commercial portfolio, as well as our real estate-related consumer portfolios, have continued to be negatively affected by the ongoing reduction in real estate values and reduced levels of sales and leasing activities. Our...

  • Page 21
    ... securities, including our subordinated debt, trust-preferred securities, and preferred shares, in open market transactions, privately negotiated transactions, or public offers for cash or common shares, as well as issuing additional shares of common stock in public or private transactions in order...

  • Page 22
    ... in securitizations, mortgage and non-mortgage servicing rights and assets under management. A portion of our earnings results from transactional income. Examples of transactional income include trust income, brokerage income, gain on sales of loans and other real estate owned. This type of income...

  • Page 23
    ...our subordinated debt, trust preferred securities and preferred shares in privately negotiated or open market transactions for cash or common shares. This could adversely affect our liquidity position. For further discussion, see the "Liquidity Risk" section. The OCC has imposed dividend payment and...

  • Page 24
    ...years, less any required transfers to surplus or a fund for the retirement of any preferred securities. We do not anticipate that the holding company will receive dividends from the Bank during 2010, as we build the Bank's regulatory capital levels above our already "well-capitalized" level. Payment...

  • Page 25
    ...Regulation E regarding overdraft fees, which becomes effective for new accounts on July 1, 2010, and for existing accounts on August 15, 2010. This rule generally prohibits financial institutions from charging overdraft fees for ATM and one-time debit card transactions that overdraw consumer deposit...

  • Page 26
    ... Notes to Consolidated Financial Statements, certain putative class actions and shareholder derivative actions were filed against Huntington, certain affiliated committees, and / or certain of its current or former officers and directors. At this time, it is not possible for management to assess the...

  • Page 27
    ... and Business Banking and Private Financial Group business segments. The Auto Finance and Dealer Services business segment is located in the Northland operations center. Of these properties, we own the thirteen-story and twelve-story office buildings, and the Business Service Center in Columbus and...

  • Page 28
    ...of Security Holders Not Applicable. PART II Item 5: Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities The common stock of Huntington Bancshares Incorporated is traded on the NASDAQ Stock Market under the symbol "HBAN". The stock is listed as...

  • Page 29
    ... $ Interest expense...813,855 Net interest income ...1,424,287 Provision for credit losses ...2,074,671 Net interest income after provision for credit losses ...(650,384) Service charges on deposit accounts ...302,799 Automobile operating lease income ...51,810 Securities (losses) gains ...(10,249...

  • Page 30
    ... expense...Net interest margin(3) ...Return on average total assets ...Return on average total shareholders' equity ...Return on average tangible shareholders' equity(4) ...Efficiency ratio(5) ...Dividend payout ratio ...Average shareholders' equity to average assets ...Effective tax rate (benefit...

  • Page 31
    ... leasing, investment management, trust services, brokerage services, customized insurance service program, and other financial products and services. Our over 600 banking offices are located in Indiana, Kentucky, Michigan, Ohio, Pennsylvania, and West Virginia. We also offer retail and commercial...

  • Page 32
    ...loan and lease customers or other counterparties not being able to meet their financial obligations under agreed upon terms, (2) market risk, which is the risk of loss due to changes in the market value of assets and liabilities due to changes in market interest rates, foreign exchange rates, equity...

  • Page 33
    ... losses), which would have negatively impacted 2009 net loss by approximately $23.9 million, or $0.04 per common share. Additionally, in 2007, we established a specific reserve of $115.3 million associated with our loans to Franklin Credit Management Corporation (Franklin). At December 31, 2008, our...

  • Page 34
    ... agency securities, and money market mutual funds which generally have quoted prices. Consist of U.S. Government and agency mortgage-backed securities and municipal securities for which an active market is not available. Third-party pricing services provide a fair value estimate based upon trades...

  • Page 35
    ... via equity funds (holding both private and publicly-traded equity securities), directly in companies as a minority interest investor, and directly in companies in conjunction with our mezzanine lending activities. These investments do not have readily observable prices. Fair value is based upon...

  • Page 36
    ... generally consisted of trust-preferred securities and subordinated debt securities issued by banks, bank holding companies, and insurance companies. A full cash flow analysis was used to estimate fair values and assess impairment for each security within this portfolio. Impairment was calculated as...

  • Page 37
    .... An internal forecast was developed by considering several long-term key business drivers such as anticipated loan and deposit growth. The long-term growth rate used in determining the terminal value was estimated at 2.5%. The discount rate of 14% was estimated based on the Capital Asset Pricing...

  • Page 38
    ... discount rate. The marks on our outstanding debt and deposits were based upon observable trades or modeled prices using current yield curves and market spreads. The valuation of the loan portfolio indicated discounts in the ranges of 9%-24%, depending upon the loan type. The estimated fair value of...

  • Page 39
    ... 31, 2009, Franklin owned a portfolio of loans secured by first- and second-liens on 1-4 family residential properties. These loans generally fell outside the underwriting standards of the Federal National Mortgage Association ("FNMA" or "Fannie Mae") and the Federal Home Loan Mortgage Corporation...

  • Page 40
    ...are valued at quoted net asset value (NAV). Huntington common stock is traded on a national securities exchange and is valued at the last reported sales price. The discount rate and expected return on plan assets used to determine the benefit obligation and pension expense for December 31, 2009, are...

  • Page 41
    ...loan relationship with Franklin. This relationship is discussed in greater detail in the "Commercial Credit" and "Critical Accounting Policies and Use of Significant Estimates" sections of this report. Unizan Financial Corp. (Unizan) The merger with Unizan was completed on March 1, 2006. At the time...

  • Page 42
    ... time. Unizan For average loans and leases, as well as core average deposits, balances as of the acquisition date were pro-rated to the post-merger period being used in the comparison. For example, to estimate the impact on 2006 first quarter average balances, one-third of the closing date balance...

  • Page 43
    ... income after provision for credit losses ...Service charges on deposit accounts Brokerage and insurance income ...Mortgage banking income ...Trust services ...Electronic banking ...Bank owned life insurance income . Automobile operating lease income . Securities (losses) gains ...Other ...1,424...

  • Page 44
    ... our commercial real estate (CRE) portfolios, particularly the single family home builder and retail properties segments. Commercial and industrial (C&I) NALs also increased significantly, particularly the segments related to businesses that support residential development. In many cases, loans were...

  • Page 45
    ... growth into our investment securities portfolio during the current year. Our preference would be to use this cash to generate higher-margin loans; however, given the continued economic uncertainty, many of our customers, especially businesses, are waiting for further signs of economic recovery...

  • Page 46
    .... Automobile operating lease income, brokerage and insurance income, and electronic banking income increased, however, trust services income declined reflecting the impact of lower market values on asset management revenues. Expenses were well controlled, with our efficiency ratio improving to...

  • Page 47
    ... located within the "Critical Accounting Policies and Use of Significant Estimates" section for additional information). • During the 2009 second quarter, a pretax goodwill impairment of $4.2 million ($0.01 per common share) was recorded relating to the sale of a small payments-related business...

  • Page 48
    ... integration and post-merger restructuring activities, most notably employee retention bonuses, outside programming services related to systems conversions, and marketing expenses related to customer retention initiatives. These net merger costs were $21.8 million ($0.04 per common share) in 2008...

  • Page 49
    ... EPS(3) Franklin relationship restructuring(4) ...Net gain on early extinguishment of debt...Gain related to sale of Visa» stock ...Deferred tax valuation allowance benefit(4) ...Goodwill impairment ...FDIC special assessment ...Preferred stock conversion deemed dividend ...Visa» indemnification...

  • Page 50
    ...) from Previous Year Due to Volume Yield/ Rate Total Loans and direct financing leases ...$(130.2) Investment securities ...84.4 Other earning assets...(42.1) Total interest income from earning assets . . Deposits ...Short-term borrowings ...Federal Home Loan Bank advances ...Subordinated notes and...

  • Page 51
    ...real estate ...Total commercial ...Automobile loans and leases ...Home equity ...Residential mortgage ...Other consumer ...Total consumer ...Total loans ...Deposits Demand deposits - noninterest-bearing ...Demand deposits - interest-bearing ...Money market deposits ...Savings and other domestic time...

  • Page 52
    ... earning assets, and to average loans and leases, was primarily merger-related. The following table details the estimated merger-related impacts on our reported loans and deposits: Table 8 - Average Loans/Leases and Deposits - Estimated Merger-Related Impacts - 2008 vs. 2007 Twelve Months Ended...

  • Page 53
    ... primarily other domestic time deposits of $250,000 or more reflecting increases in commercial and public fund deposits. Changes from the prior year also reflected customers transferring funds from lower rate to higher rate accounts such as certificates of deposit as short-term rates had fallen. 45

  • Page 54
    ... 2.6 11,637 Total core deposits ...Other domestic time deposits of $250,000 or more . Brokered time deposits and negotiable CDs ...Deposits in foreign offices ...Total deposits ...Short-term borrowings ...Federal Home Loan Bank advances ...Subordinated notes and other long-term ...debt ...34,914 841...

  • Page 55
    ... Brokered time deposits and negotiable CDs ...Deposits in foreign offices ...Total deposits ...Short-term borrowings ...Federal Home Loan Bank advances ...Subordinated notes and other long-term debt ... Total interest-bearing liabilities ...Net interest income ...Net interest rate spread ...Impact...

  • Page 56
    ... regions and within the single family home builder segment of our CRE portfolio. The following table details the Franklin-related impact to the provision for credit losses for each of the past three years. Table 10 - Provision for Credit Losses - Franklin-Related Impact 2009 (In millions) 2008 2007...

  • Page 57
    ... from 2008 2009 (In thousands) Amount Percent 2008 Change from 2007 Amount Percent 2007 Service charges on deposit accounts ...Brokerage and insurance income ...Mortgage banking income ...Trust services ...Electronic banking ...Bank owned life insurance income ...Automobile operating lease income...

  • Page 58
    ... secondary marketing ...Servicing fees...Amortization of capitalized servicing(1) ...Other mortgage banking income ...Sub-total ...MSR valuation adjustment(1) ...Net trading losses related to MSR hedging ...Total mortgage banking income . . Mortgage originations ...Average trading account securities...

  • Page 59
    ... increased transaction volumes and additional third-party processing fees. Partially offset by: • $22.3 million, or 18%, decline in trust services income, reflecting the impact of reduced market values on asset management revenues, as well as lower yields on proprietary money market funds. 2008...

  • Page 60
    .... • $33.3 million, or 79%, decline in mortgage banking income primarily reflecting the negative impact in MSR valuation, net of hedging. • $9.5 million, or 7%, decline in trust services income reflecting the impact of lower market values on asset management revenues. Partially offset by: • $46...

  • Page 61
    ... recorded in the 2009 second quarter, and was related to the sale of a small paymentsrelated business in July 2009. (See "Goodwill" discussion located within the Critical Account Policies and Use of Significant Estimates" for additional information). • $91.4 million increase in deposit and other...

  • Page 62
    ... 14%, increase in outside data processing and other services, primarily reflecting portfolio servicing fees paid to Franklin resulting from the 2009 first quarter restructuring of this relationship. • $12.1 million, or 39%, increase in automobile operating lease expense, primarily reflecting a 21...

  • Page 63
    ..., tax-advantaged investments and general business credits. The tax benefit in 2009 was impacted by the pretax loss combined with the favorable impacts of the Franklin restructuring (see "Franklin Loans Restructuring Transaction" discussion located within the "Critical Accounting Policies and Use of...

  • Page 64
    ...to retail and commercial customers with existing or expandable relationships within our primary banking markets. We continue to add new borrowers that meet our targeted risk and profitability profile. The checks and balances in the credit process and the independence of the credit administration and...

  • Page 65
    ... lending includes both home equity loans and lines-of-credit. This type of lending, which is secured by a first- or second- mortgage on the borrower's residence, allows customers to borrow against the equity in their home. Real estate market values as of the time the loan or line is granted directly...

  • Page 66
    ...and leases, operating lease assets, and securitized loans. Commercial Credit 2009 COMMERCIAL LOAN PORTFOLIO REVIEWS AND ACTIONS In the 2009 first quarter, we restructured our commercial loan relationship with Franklin by taking control of the underlying mortgage loan collateral, and transferring the...

  • Page 67
    ... profitability may arise, resulting in a reclassification to a core designation. Additional information regarding the designation can be found in the "Core and Noncore Portfolios" section located within the "Commercial Real Estate" section. Also, during the 2009 fourth quarter, we conducted a review...

  • Page 68
    ... and Commercial Real Estate Loan and Lease Detail 2009 (In millions) 2008 At December 31, 2007 2006 2005 Commercial and industrial loans ...Franklin ...Dealer floor plan loans ...Equipment direct financing leases ...Commercial and industrial loans and leases ...Commercial real estate loans ...Total...

  • Page 69
    ... at December 31, 2009. Table 18 - Commercial Real Estate Loans by Property Type and Property Location At December 31, 2009 Ohio (In millions) Michigan Pennsylvania Indiana Kentucky Florida West Virginia Other Total Amount % Retail properties ...$ 866 Multi family ...810 Office ...576 Industrial and...

  • Page 70
    ...-type specific policies such as LTV, debt service coverage ratios, and pre-leasing requirements, as applicable. Generally, we: (a) limit our loans to 80% of the appraised value of the commercial real estate, (b) require net operating cash flows to be 125% of required interest and principal payments...

  • Page 71
    ... 2009, portfolio reviews resulted in reclassifications of certain CRE loans to C&I loans. These net reclassifications totaled $1.4 billion, and were primarily associated with: (a) loans to businesses secured by the real estate and buildings that house their operations as these owner-occupied loans...

  • Page 72
    ...Commercial Real Estate Loans by Property Type and Property Location At December 31, 2009 Ohio (In millions) West Michigan Pennsylvania Indiana Kentucky Florida Virginia Other Total Amount % Core portfolio: Retail properties ...Multi family ...Office ...Industrial and warehouse ...Single family home...

  • Page 73
    ... limits, ongoing loan level reviews, recourse requirements, and continuous portfolio risk management activities. Our origination policies for this portfolio include loan product-type specific policies such as loan-to-value (LTV), and debt service coverage ratios, as applicable. C&I borrowers have...

  • Page 74
    ...) At December 31, 2009 2008 Nonaccrual Loans Amount Industry Classification: Services...Finance, insurance, and real estate ...Manufacturing ...Retail trade - auto dealers ...Retail trade - other than auto dealers ...Contractors and construction ...Transportation, communications, and utilities...

  • Page 75
    ... letters of credit to companies related to the automotive industry since December 31, 2009. The automobile industry supplier exposure is embedded primarily in our C&I portfolio within the Commercial Banking segment, while the dealer exposure is originated and managed within the AFDS business segment...

  • Page 76
    ... Transaction" discussion located within the "Critical Accounting Policies and Use of Significant Estimates" section.) As a result of the March 31, 2009, restructuring, on a consolidated basis, the $650.2 million nonaccrual commercial loan to Franklin at December 31, 2008, was no longer reported...

  • Page 77
    ...EQUITY PORTFOLIO Our home equity portfolio (loans and lines-of-credit) consists of both first and second mortgage loans with underwriting criteria based on minimum credit scores, debt-to-income ratios, and LTV ratios. We offer closed-end home equity loans with a fixed interest rate and level monthly...

  • Page 78
    ...this type of transaction in future periods based on market conditions. A majority of the loans in our loan portfolio have adjustable rates. Our adjustable-rate mortgages (ARMs) are primarily residential mortgages that have a fixed-rate for the first 3 to 5 years and then adjust annually. These loans...

  • Page 79
    ... a variety of purposes including investing, asset and liability management, mortgage banking, and for trading activities. As a result, we are exposed to credit risk, or the risk of loss if the counterparty fails to perform according to the terms of our contract or agreement. We minimize counterparty...

  • Page 80
    ...ASSETS (NPAs) (This section should be read in conjunction with Significant Items 2 and 3 and the "Franklin Loans Restructuring Transaction" discussion located with the "Critical Accounting Policies and Use of Significant Estimates" section.) NPAs consist of (a) NALs, which represent loans and leases...

  • Page 81
    ... at the lower of cost or fair value less costs to sell. (4) Other NPAs represent certain investment securities backed by mortgage loans to borrowers with lower FICO scores. (5) NPAs divided by the sum of loans and leases, impaired loans held-for-sale, net other real estate, and other NPAs. 73

  • Page 82
    ... 31, 2007 2006 2005 Accruing loans and leases past due 90 days or more Commercial and industrial ...Commercial real estate ...Residential mortgage (excluding loans guaranteed by the U.S. government ...Home equity ...Other loans and leases ...Total, excl. loans guaranteed by the U.S. government...

  • Page 83
    ...41,092.0 3.66% 2.11 December 31, 2009 2008 (In millions) Nonperforming assets Franklin...$ 338.5 Non-Franklin ...1,719.6 Total ...$ 2,058.1 Total loans and leases ...$36,790.7 Total other real estate, net ...140.1 Impaired loans held for sale ...1.0 Total ...Franklin...36,931.8 338.5 $ 650.2 986...

  • Page 84
    ... the sale of residential mortgage NALs during 2009. Our efforts to proactively address existing issues with loss mitigation and loan modification transactions have helped to reduce the inflow of new residential mortgage NALs. All residential mortgage NALs have been written down to current value less...

  • Page 85
    ... 2009 (In thousands) 2008 At December 31, 2007 2006 2005 Nonperforming assets, beginning of year . . New nonperforming assets...Franklin impact, net(1) ...Acquired nonperforming assets ...Returns to accruing status ...Loan and lease losses ...OREO losses ...Payments ...Sales ...Nonperforming assets...

  • Page 86
    ... to absorb related NCOs due to the 2009 first quarter Franklin restructuring (see "Franklin Loan Restructuring Transaction" discussion located within the "Critical Accounting Policies and Use of Significant Estimates" section). On a combined basis, the ACL as a percent of total loans and leases at...

  • Page 87
    ... lease charge-offs Commercial: Other commercial and industrial ...Commercial and industrial...Construction...Commercial ...Commercial real estate ...Total commercial ...Consumer: Automobile loans ...Automobile leases...Automobile loans and leases . Home equity ...Residential mortgage ...Other loans...

  • Page 88
    2009 (In thousands) Year Ended December 31, 2008 2007 2006 2005 Net loan and lease charge-offs ...Provision for loan and lease losses ...Economic reserve transfer ...Allowance for assets sold and securitized ...Allowance for loans transferred to held for sale AULC, beginning of year ...Acquired ...

  • Page 89
    ... down to fair value as a part of the restructuring agreement on March 31, 2009, and we do not expect any significant additional charge-offs. (See "Franklin Loan Restructuring Transaction" discussion located within the "Critical Accounting Policies and Use of Significant Estimates" section.) As we...

  • Page 90
    ... loan and lease type Commercial: Commercial and industrial ...Construction ...Commercial ...Commercial real estate ...Total commercial ...Consumer: Automobile loans ...Automobile leases ...Automobile loans and leases...Home equity ...Residential mortgage ...Other loans ...Total consumer ...Total net...

  • Page 91
    ... NCOs across all of our loan and lease portfolios compared with normalized levels. We believe that 2009 represented the peak for credit losses in this cycle. Total commercial NCOs during 2009 were $1,170.3 million, or an annualized 5.25% of average related balances, compared with $594.9 million, or...

  • Page 92
    ... by lower housing prices, and the general weak market conditions. While 2009 NCOs were higher compared with prior years, there continued to be a declining trend throughout 2009 in the early-stage delinquency level in the home equity line-of-credit portfolio, supporting our longer-term positive view...

  • Page 93
    ...-downs based primarily on fair value, issuer-specific factors and results, and our intent to hold such investments. Our investment securities portfolio is evaluated in light of established asset/liability management objectives, and changing market conditions that could affect the profitability of...

  • Page 94
    ... ...1-5 years ...6-10 years ...Over 10 years ... Total municipal securities ... Total private label CMO ... Total asset-backed securities ...Other Under 1 year ...1-5 years ...6-10 years ...Non-marketable equity securities ...Marketable equity securities ...Total other ...Total investment securities...

  • Page 95
    ... the "Investment Securities" section located within the "Critical Accounting Policies and Use of Significant Estimates" section for additional information). The following table presents the credit ratings for our Alt-A, pooled-trust-preferred, and private label CMO securities as of December 31, 2009...

  • Page 96
    ... value is net of recorded credit impairment. (2) For purposes of comparability, the lowest credit rating expressed is equivalent to Fitch ratings even where lowest rating is based on another nationally recognized credit rating agency. (3) Includes both banks and/or insurance companies. (4) Excess...

  • Page 97
    ... value analysis. An income simulation analysis is used to measure the sensitivity of forecasted net interest income to changes in market rates over a one-year time period. Although bank owned life insurance, automobile operating lease assets, and excess cash balances held at the Federal Reserve Bank...

  • Page 98
    ... impact of LIBOR-based interest rates rising or falling faster than the prime rate. The simulations for evaluating short-term interest rate risk exposure are scenarios that model gradual "+/Ϫ100" and "+/Ϫ200" basis point parallel shifts in market interest rates over the next 12-month period beyond...

  • Page 99
    ... regarding deposit pricing, mortgage asset prepayments, and implied forward yield curves. The remainder of the change in EVE at risk for the "+200" basis points scenario was primarily related to a change in market rates throughout the year as longer-term interest rates implied by the current yield...

  • Page 100
    ...and reported to the MRC. From time to time, we invest in various investments with equity risk. Such investments include investment funds that buy and sell publicly traded securities, investment funds that hold securities of private companies, direct equity or venture capital investments in companies...

  • Page 101
    ... of concern, and establish specific funding strategies. This group works closely with the Risk Management Committee and the HBI Communication Team in order to identify issues that may require a more proactive communication plan to shareholders, employees, and customers regarding specific events or...

  • Page 102
    ... account balance. This program provides our customers with additional deposit insurance coverage, and is in addition to and separate from the $250,000 coverage available under the FDIC's general deposit insurance rules. At December 31, 2009, noninterest-bearing transaction account balances exceeding...

  • Page 103
    ... sale of national market certificates of deposit, (f) the relatively shorter-term structure of our commercial loans (see Table 46 below) and automobile loans, and (g) the issuance of common and preferred stock. At December 31, 2009, we believe that the Bank had sufficient liquidity to meet its cash...

  • Page 104
    .... The parent company obtains funding to meet obligations from dividends received from direct subsidiaries, net taxes collected from subsidiaries included in the federal consolidated tax return, fees for services provided to subsidiaries, and the issuance of debt securities. At December 31, 2009, the...

  • Page 105
    ... the Notes to the Consolidated Financial Statements for additional information regarding the Series B Preferred Stock issuance). Based on a regulatory dividend limitation, the Bank could not have declared and paid a dividend to the parent company at December 31, 2009, without regulatory approval. We...

  • Page 106
    ...credit ratings for the parent company and the Bank are as follows: Table 47 - Credit Ratings Senior Unsecured Notes December 31, 2009 Subordinated Short-Term Notes Outlook Huntington Bancshares Incorporated Moody's Investor Service ...Standard and Poor's ...Fitch Ratings ...The Huntington National...

  • Page 107
    ...) 1 to 3 Years December 31, 2009 3 to 5 More Than Years 5 Years Total Deposits without a stated maturity ...Certificates of deposit and other time deposits ...Federal Home Loan Bank advances . . Short-term borrowings ...Other long-term debt...Subordinated notes ...Operating lease obligations...

  • Page 108
    ... by our internal SCAP analysis. On that same date (September 17, 2009), we announced a new $350 million common stock offering as favorable market conditions and investor interest presented an opportunity to continue to build common equity efficiently to the long-term benefit of our shareholders. On...

  • Page 109
    ......Discretionary equity issuance #2 ...Conversion of preferred stock ...Common stock offering ...Gain on cash tender offer of certain trust preferred securities ...Gain related to Visa stock ...Total 2009 Second Quarter ...Discretionary equity issuance #3 ...Common stock offering ...Total 2009 Third...

  • Page 110
    ...(3) Based on an interim decision by the banking agencies on December 14, 2006, we have excluded the impact of adopting ASC Topic 715, "Compensation - Retirement Benefits", from the regulatory capital calculations. As shown in the above table, our consolidated TCE ratio was 5.92% at December 31, 2009...

  • Page 111
    ... of our municipal securities portfolio, as well as mortgage loans. Regulatory Capital Regulatory capital ratios are the primary metrics used by regulators in assessing the "safety and soundness" of banks. We intend to maintain both the company's and the Bank's risk-based capital ratios at levels at...

  • Page 112
    ... net of fees and associated interest rate swaps. The Bank's risk-weighted assets declined compared with December 31, 2008, as both loans outstanding and unfunded loan commitments decreased. At December 31, 2009, the Bank had Tier 1 and Total risk-based capital in excess of the minimum level required...

  • Page 113
    ... book value per share also declined as a result of the issuance of 305.7 million common shares in 2009, through two common stock offerings and three discretionary equity issuance programs, at an average net proceeds of $3.71 per share. BUSINESS SEGMENT DISCUSSION Overview This section reviews...

  • Page 114
    ... assets, liabilities, and equity not directly assigned or allocated to one of the five business segments. Assets include investment securities, bank owned life insurance, and the loans and OREO properties acquired through the 2009 first quarter Franklin restructuring. The financial impact associated...

  • Page 115
    ... located in "Critical Accounting Policies and Use of Significant Estimates" section for additional information. Average Loans/Leases and Deposits by Business Segment The segregation of total average loans and leases and total average deposits by business segment for the year ended December 31, 2009...

  • Page 116
    ... home equity loans and lines-of-credit, first mortgage loans, direct installment loans, small business loans, personal and business deposit products, treasury management products, as well as sales of investment and insurance services. At December 31, 2009, Retail and Business Banking accounted...

  • Page 117
    ... fair value prior to sale, (b) a more conservative position regarding the timing of loss recognition in our residential mortgage portfolio, and (c) the higher unemployment rate, particularly in our Michigan and northern Ohio markets. The overall economic slowdown also impacted our commercial loan...

  • Page 118
    ... allocated equity, resulting in a higher funding credit. The $1.0 billion decline in total average loans and leases reflected $0.7 billion decrease in average residential mortgages, resulting from the impact of loan sales. Although mortgage originations increased 39%, the majority of our fixed-rate...

  • Page 119
    ... credit exposures and sales revenues compared with our Retail and Business Banking customers. Commercial Banking products include commercial loans, international trade, cash management, leasing, interest rate protection products, capital market alternatives, 401(k) plans, and mezzanine investment...

  • Page 120
    ... in public fund deposit balances resulting from a managed decline in this product. Also, throughout 2009, a migration of money-market account, time deposit, and other sweep product balances into demand deposit accounts occurred due to lower market rates and the increased FDIC insurance coverage...

  • Page 121
    ...or other customers with real estate project financing needs within our primary banking markets. Commercial Real Estate products and services include CRE loans, cash management, interest rate protection products, and capital market alternatives. Commercial Real Estate bankers personally deliver these...

  • Page 122
    ... total loans and average total deposits from the prior year. Auto Finance and Dealer Services (AFDS) (This section should be read in conjunction with the "Automotive Industry" discussion located within the "Commercial Credit" section.) Objectives, Strategies, and Priorities Our AFDS business segment...

  • Page 123
    ... through its finance department, general manager, and owner. An underwriter who understands each local region makes loan decisions, though we prioritize maintaining pricing discipline over market share. Table 58 - Key Performance Indicators for Auto Finance and Dealer Services (AFDS) 2009 (In...

  • Page 124
    ... insurance, and private banking products and services including credit and lending activities. PFG also focuses on financial solutions for corporate and institutional customers that include investment banking, sales and trading of securities, and interest rate risk management products. To serve high...

  • Page 125
    ... money market mutual funds. The new deposit products are: (a) the Huntington Conservative Deposit Account (HCDA), (b) the Huntington Protected Deposit Account (HPDA), and (c) the Bank Deposit Sweep Product (BDSP). These three accounts had balances in excess of $1.2 billion at December 31, 2009...

  • Page 126
    ...actions taken during 2009 (see "Commercial Loan Portfolio Review and Actions" section located within the "Commercial Credit" section for additional information), and (c) a 119 basis point increase in total NCOs. The increase in NCOs included a significant increase in residential mortgage charge-offs...

  • Page 127
    ...Average Loans/Leases - 2009 Fourth Quarter vs. 2008 Fourth Quarter Fourth Quarter 2009 2008 (In millions) Change Amount Percent Average Loans/Leases Commercial and industrial ...Commercial real estate ...Total commercial ...Automobile loans and leases ...Home equity ...Residential mortgage ...Other...

  • Page 128
    ... residential mortgages reflected the impact of loan sales, as well as the continued refinance of portfolio loans and the related increased sale of fixed-rate originations, partially offset by additions related to the 2009 first quarter Franklin restructuring. Average home equity loans were little...

  • Page 129
    ... 2009 2008 (In thousands) Change Amount Percent Service charges on deposit accounts ...$ 76,757 Brokerage and insurance income ...32,173 24,618 Mortgage banking income ...Trust services ...27,275 Electronic banking ...25,173 Bank owned life insurance income ...14,055 Automobile operating lease...

  • Page 130
    ...outside data processing and other services, primarily reflecting portfolio servicing fees now paid to Franklin resulting from the first quarter restructuring of this relationship. • $3.3 million, or 14%, increase in net occupancy expenses, as the year-ago quarter reflected property asset valuation...

  • Page 131
    ...in that order. Based on the portfolio management processes, including charge-off activity over the past two and one half years, the credit issues in the single family homebuilder portfolio have been substantially addressed. The retail property portfolio remains more susceptible to the ongoing market...

  • Page 132
    ... in the early-stage delinquency level in the home equity line-of-credit portfolio, supporting our longer-term positive view for home equity portfolio performance. The higher losses resulted from a significant increase in loss mitigation activity and short sales. We continue to believe that our more...

  • Page 133
    ... for several consecutive years and some of these customers no longer have the capital base to withstand protracted stress and, therefore, may not be able to comply with the original terms of their credit agreements. In the 2009 fourth quarter, the provision for credit losses exceeded net charge-offs...

  • Page 134
    ... First Common stock price, per share High(4)...$ Low(4) ...Close ...Average closing price ...Return on average total assets ...Return on average total shareholders' equity ...Return on average tangible shareholders' equity(5) ...Efficiency ratio(6) ...Effective tax rate (benefit)...Margin analysis...

  • Page 135
    ...Cash dividends declared ...Common stock price, per share High(4) ...Low(4) ...Close ...Average closing price ...Return on average total assets ...Return on average total shareholders' equity ...Return on average tangible shareholders' equity(5) ...Efficiency ratio(6) ...Effective tax rate (benefit...

  • Page 136
    ... banking agencies on December 14, 2006, Huntington has excluded the impact of adopting ASC Topic 715, "Compensation - Retirement Benefits", from the regulatory capital calculations. (9) Tangible common equity (total common equity less goodwill and other intangible assets) divided by tangible assets...

  • Page 137
    ... financial statements in conformity with accounting principles generally accepted in the United States. Huntington's management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2009. In making this assessment, Management used the criteria set...

  • Page 138
    ... is to express an opinion on the Company's internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain...

  • Page 139
    ...PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of Huntington Bancshares Incorporated Columbus, Ohio We have audited the accompanying consolidated balance sheets of Huntington Bancshares Incorporated and subsidiaries (the "Company") as of December 31, 2009 and 2008, and the related...

  • Page 140
    ... bearing deposits in banks ...Trading account securities ...Loans held for sale ...Investment securities ...Loans and leases: Commercial and industrial loans and leases . Commercial real estate loans ...Automobile loans ...Automobile leases ...Home equity loans ...Residential mortgage loans...Other...

  • Page 141
    ... per share amounts) Interest and fee income Loans and leases Taxable ...Tax-exempt ...Investment securities Taxable ...Tax-exempt ...Other ...Total interest income ...Interest expense Deposits ...Short-term borrowings ...Federal Home Loan Bank advances ...Subordinated notes and other long-term debt...

  • Page 142
    ... of Preferred Series A stock ...Amortization of discount ...Cash dividends declared: Common ($0.04 per share) ...Preferred Series B ($50.00 per share) ...Preferred Series A ($85.00 per share) . . Recognition of the fair value of share-based compensation ...Other share-based compensation activity...

  • Page 143
    ... to common stock ...Amortization of discount ...Cash dividends declared: Common ($0.6625 per share) ...Preferred Class B ($6.528 per share) ...Preferred Series A ($62.097 per share) ...Recognition of the fair value of share-based compensation ...Other share-based compensation activity . . Other...

  • Page 144
    ...-retirement obligations, net of tax of ($22,710) ...Total comprehensive income ...Assignment of $0.01 par value per share for each share of Common Stock...Cash dividends declared ($1.06 per share) . . Shares issued pursuant to acquisition ...Recognition of the fair value of share-based compensation...

  • Page 145
    ... of operating lease assets ...Purchases of premises and equipment ...Proceeds from sales of other real estate ...Other, net...Net cash used for investing activities ...Financing activities Increase (decrease) in deposits ...Decrease in short-term borrowings ...Proceeds from issuance of subordinated...

  • Page 146
    ... in Florida; and Mortgage Banking offices in Maryland and New Jersey. Huntington Insurance offers retail and commercial insurance agency services in Ohio, Pennsylvania, Michigan, Indiana, and West Virginia. International banking services are available through the headquarters office in Columbus and...

  • Page 147
    ...-marketable equity securities include stock acquired for regulatory purposes, such as Federal Home Loan Bank stock and Federal Reserve Bank stock. These securities are generally accounted for at cost and are included in investment securities. Loans and Leases - Loans and direct financing leases for...

  • Page 148
    ... information regarding product life cycle, product upgrades, as well as insight into competing products are obtained through relationships with industry contacts and are factored into residual value estimates where applicable. Commercial and industrial loans and commercial real estate loans...

  • Page 149
    ... of the review, Huntington made the following enhancements: • Current market conditions, such as higher vacancy rates and lower rents, have driven commercial real estate values lower and caused loss given default (LGD) experience to rise significantly over the past year. Management believes that...

  • Page 150
    ... mortgage loan servicing rights (MSRs) are subsequently carried at either fair value or amortized cost, and are included in other assets. To determine the fair value of MSRs, Huntington uses a option adjusted spread cash flow analysis incorporating market implied forward interest rates to estimate...

  • Page 151
    ... interest rate lock commitments are carried at fair value on the consolidated balance sheet with changes in fair value reflected in mortgage banking revenue. Huntington also uses certain derivative financial instruments to offset changes in value of its residential mortgage loan servicing assets...

  • Page 152
    ... uses the fair value recognition concept relating to its sharebased compensation plans. Compensation expense is recognized based on the fair value of unvested stock options and awards over the requisite service period. Segment Results - Accounting policies for the lines of business are the same...

  • Page 153
    ...limited exceptions. The guidance requires prospective application for business combinations consummated in fiscal years beginning on or after December 15, 2008. The Franklin restructuring transaction described in Note 5 and the Warren Bank transaction described in Note 4 was accounted for under this...

  • Page 154
    ... sale treatment criteria. ASC Topic 715 - Compensation - Retirement Benefits (FSP FAS 132R-1, Employers' Disclosures about Postretirement Benefit Plan Assets) (ASC 715). This accounting guidance was originally issued in December 2008 and is now included in ASC 715. The guidance requires additional...

  • Page 155
    ...real estate loans were pledged to secure advances from the Federal Home Loan Bank. Huntington's loan and lease portfolio includes lease financing receivables consisting of direct financing leases on equipment, which are included in commercial and industrial loans, and on automobiles. Net investments...

  • Page 156
    ... loans in the loan and lease portfolio at December 31, 2009. Franklin Credit Management relationship Franklin Credit Management Corporation (Franklin) is a specialty consumer finance company primarily engaged in servicing residential mortgage loans. At December 31, 2008, Huntington's total loans...

  • Page 157
    ... the next three years of expected collections, respectively. Principal and interest cash flows were estimated to be received for a limited time for non delinquent loans. Limited value was assigned to all secondlien mortgages because, after considering the house price depreciation rates above, little...

  • Page 158
    ..., 2009, Huntington had $857.4 million of loans to single family homebuilders, including loans made to both middle market and small business homebuilders. Such loans represented 2% of total loans and leases. Of this portfolio, 67% were to finance projects currently under construction, 15% to finance...

  • Page 159
    ... Party Transactions Huntington has made loans to its officers, directors, and their associates. These loans were made in the ordinary course of business under normal credit terms, including interest rate and collateralization, and do not represent more than the normal risk of collection. These loans...

  • Page 160
    ...Gains Fair Value December 31, 2008 U.S. Treasury ...Federal Agencies Mortgage-backed securities ...TLGP securities ...Other agencies ...Total U.S. Government backed securities ...Municipal securities ...Private label CMO ...Asset backed securities ...Other securities ...Total investment securities...

  • Page 161
    ... Reserve Bank stock. Other securities also include corporate debt and marketable equity securities. At December 31, 2009 and 2008, Huntington did not have any material equity positions in Federal National Mortgage Association (FNMA or Fannie Mae) and the Federal Home Loan Mortgage Corporation (FHLMC...

  • Page 162
    ... of trust-preferred securities and subordinated debt securities issued by banks, bank holding companies, and insurance companies. A full cash flow analysis was used to estimate fair values and assess impairment for each security within this portfolio. We engaged a third party specialist with...

  • Page 163
    ... other investment securities with unrealized losses and all non-marketable securities for impairment and concluded no additional other-than-temporary impairment is required. 7. LOAN SALES AND SECURITIZATIONS Residential Mortgage Loans For the years ended December 31, 2009, 2008, and 2007, Huntington...

  • Page 164
    ... of year ...New servicing assets created ...Amortization and other ...Carrying value, end of year ...Fair value, end of year ... $ - 40,452 (2,287) $38,165 $43,769 $- - - $- $- MSRs do not trade in an active, open market with readily observable prices. While sales of MSRs occur, the precise terms...

  • Page 165
    ... consolidated statement of income and recorded a $19.5 million servicing asset in accrued income and other assets associated with this transaction. Automobile loan servicing rights are accounted for under the amortization method. A servicing asset is established at fair value at the time of the sale...

  • Page 166
    ... in Fair Value Due to 10% 20% Adverse Adverse Change Change Actual (In thousands) Monthly prepayment rate (ABS curve) ...Expected cumulative credit losses ...Discount rate...Certain cash flows received from the securitization trusts during 2009 were: Servicing fees received ...Other cash flows on...

  • Page 167
    ... was divided into Retail and Business Banking, Commercial Banking, and Commercial Real Estate segments. Regional Banking goodwill was assigned to the new reporting units affected using a relative fair value allocation. Auto Finance and Dealer Services (AFDS), Private Financial Group (PFG), and...

  • Page 168
    line of business for the years ended December 31, 2009 and 2008, including the reallocation noted above, was as follows: Regional Banking (In thousands) Retail & Business Banking Commercial Commercial Real Estate Banking PFG Treasury/ Other Huntington Consolidated Balance, January 1, 2008 ......

  • Page 169
    At December 31, 2009 and 2008, Huntington's other intangible assets consisted of the following: Gross Carrying Amount (In thousands) Accumulated Amortization Net Carrying Value December 31, 2009 Core deposit intangible ...$376,846 Customer relationship ...104,574 Other ...26,465 Total other ...

  • Page 170
    ... HOME LOAN BANK ADVANCES Huntington's long-term advances from the Federal Home Loan Bank had weighted average interest rates of 0.88% and 1.23% at December 31, 2009 and 2008, respectively. These advances, which predominantly had variable interest rates, were collateralized by qualifying real estate...

  • Page 171
    ... + 3.25. (5) Variable effective rate at December 31, 2009, based on three month LIBOR + 1.40. (6) The junior subordinated debentures due 2067 are subordinate to all other junior subordinated debentures. Amounts above are reported net of unamortized discounts and adjustments related to hedging with...

  • Page 172
    ... in net income ...Net change in unrealized holding gains (losses) on equity securities available for sale ...Unrealized gains and losses on derivatives used in cash flow hedging relationships arising during the period . . Change in pension and post-retirement benefit plan assets and liabilities...

  • Page 173
    ... in net income ...Net change in unrealized holding (losses) gains on equity securities available for sale ...Unrealized gains and losses on derivatives used in cash flow hedging relationships arising during the period ...Change in pension and post-retirement benefit plan assets and liabilities...

  • Page 174
    ... new shares of common stock worth a total of $345.8 million. Sales of the common shares were made through ordinary brokers' transactions on the NASDAQ Global Select Market or otherwise at the prevailing market prices. Conversion of Convertible Preferred Stock In 2008, Huntington completed the public...

  • Page 175
    ... Convertible Preferred Stock. A company that participates in the TARP must adopt certain standards for executive compensation, including (a) prohibiting "golden parachute" payments as defined in the Emergency Economic Stabilization Act of 2008 (EESA) to senior executive officers; (b) requiring...

  • Page 176
    ... of the Company's convertible preferred stock. Where the effect of this conversion would be dilutive, net (loss) income available to common shareholders is adjusted by the associated preferred dividends. The calculation of basic and diluted (loss) earnings per share for each of the three years ended...

  • Page 177
    ... share-based compensation plans. These plans provide for the granting of stock options and other awards to officers, directors, and other employees. Compensation costs are included in personnel costs on the condensed consolidated statements of income. Stock options are granted at the closing market...

  • Page 178
    ...cash dividends during the vesting period and are subject to certain service restrictions. The fair value of the restricted stock units and awards is the closing market price of the Company's common stock on the date of award. The following table summarizes the status of Huntington's restricted stock...

  • Page 179
    ...31, 2009, the Company believes there are adequate authorized shares to satisfy anticipated stock option exercises in 2010. On January 14, 2009, Huntington announced that Stephen D. Steinour, has been elected Chairman, President and Chief Executive Officer. In connection with his employment agreement...

  • Page 180
    ...Gross increases for tax positions taken during the current year ...Unrecognized tax benefits at end of year...Federal benefit for state and local positions ...Net deferred tax asset (liability) ... $ - 10,750 6,464 17,214 (3,763) $13,451 The company recognizes interest and penalties on income tax...

  • Page 181
    ... (the Plan or Retirement Plan), a noncontributory defined benefit pension plan covering substantially all employees hired or rehired prior to January 1, 2010. The Plan provides benefits based upon length of service and compensation levels. The funding policy of Huntington is to contribute an annual...

  • Page 182
    ...plan. For any employee retiring on or after January 1, 1993, post-retirement health-care benefits are based upon the employee's number of months of service and are limited to the actual cost of coverage. Life insurance benefits are a percentage of the employee's base salary at the time of retirement...

  • Page 183
    ...60,433 Benefits paid are net of retiree contributions collected by Huntington. The actual contributions received in 2009 by Huntington for the retiree medical program were $3.1 million. The following table reconciles the beginning and ending balances of the fair value of Plan assets at the December...

  • Page 184
    ... shows the components of net periodic benefit cost recognized in the three years ended December 31, 2009: 2009 (In thousands) Pension Benefits 2008 2007 Post-Retirement Benefits 2009 2008 2007 Service cost ...$ 23,692 Interest cost ...28,036 Expected return on plan assets . . (41,960) Amortization...

  • Page 185
    ... Huntington National Bank, as trustee, held all Plan assets. The Plan assets consisted of investments in a variety of Huntington mutual funds and Huntington common stock as follows: Fair Value 2009 (In thousands) 2008 Cash ...Cash equivalents: Huntington funds - money market ...Other...Fixed income...

  • Page 186
    ... for 2010 to the Plan. However, Huntington may choose to make a contribution to the Plan up to the maximum deductible limit in the 2010 plan year. Expected contributions for 2010 to the post-retirement benefit plan are $3.8 million. The assumed health-care cost trend rate has an effect on...

  • Page 187
    ... (In thousands) 2009 Tax (Expense) Benefit After-tax Balance, beginning of year ...$(251,655) Impact of change in measurement date ...- Net actuarial (loss) gain: Amounts arising during the year ...(6,155) Amortization included in net periodic benefit costs ...14,153 Prior service cost: Amounts...

  • Page 188
    ... types. At December 31, 2009, mortgage loans held for sale had an aggregate fair value of $459.7 million and an aggregate outstanding principal balance of $453.9 million. Interest income on these loans is recorded in interest and fees on loans and leases. Included in mortgage banking income were net...

  • Page 189
    ... via equity funds (holding both private and publicly-traded equity securities), directly in companies as a minority interest investor, and directly in companies in conjunction with our mezzanine lending activities. These investments do not have readily observable prices. Fair value is based upon...

  • Page 190
    ... Value Measurements at Reporting Date Using Level 1 Level 2 Level 3 (In thousands) Netting Adjustments(1) Total 2009 Assets Mortgage loans held for sale ...$ - 56,009 Trading account securities ...Investment securities ...3,111,845 Mortgage servicing rights ...- Derivative assets ...7,711 Equity...

  • Page 191
    Mortgage Servicing Rights (In thousands) Derivative Instruments Level 3 Fair Value Measurements Year Ended December 31, 2009 Investment Securities Pooled Alt-A TrustPrivate MortgagePreferred Label CMO Backed Other Equity Investments Balance, beginning of year ...Total gains/losses: Included in ...

  • Page 192
    Mortgage Servicing Rights (In thousands) Derivative Instruments Level 3 Fair Value Measurements Year Ended December 31, 2008 Investment Securities Pooled Alt-A Private TrustMortgagePreferred Label CMO Backed Other Equity Investments Balance, beginning of year . . $207,894 Total gains/losses: ...

  • Page 193
    ... the provision for credit losses. Other real estate owned properties are valued based on appraisals and third party price opinions, less estimated selling costs. During 2009 and 2008, Huntington recorded $140.1 million and $122.5 million, respectively of OREO assets at fair value. Losses of $93...

  • Page 194
    ... Value Financial Assets: Cash and short-term assets ...Trading account securities...Loans held for sale ...Investment securities ...Net loans and direct financing leases ...Derivatives ...Financial Liabilities: Deposits ...Short-term borrowings ...Federal Home Loan Bank advances...Other long term...

  • Page 195
    ... with transactions occurring in the market place. Deposits Demand deposits, savings accounts, and money market deposits are, by definition, equal to the amount payable on demand. The fair values of fixed-rate time deposits are estimated by discounting cash flows using interest rates currently being...

  • Page 196
    ... table presents additional information about the interest rate swaps and caps used in Huntington's asset and liability management activities at December 31, 2009: Notional Value (In thousands) Average Maturity (Years) Fair Value Weighted-Average Rate Receive Pay Asset conversion swaps - receive...

  • Page 197
    ... rate contracts Loans ...$(68,365) $54,887 $ FHLB Advances ...Deposits ...Subordinated notes ...1,338 326 101 2,394 2,842 (101) - Interest and fee income - loans and leases Interest expense - FHLB Advances Interest expense - deposits Interest expense - subordinated notes and other long term...

  • Page 198
    ... in cash flow hedging relationships Interest rate contracts Loans...FHLB Deposits ...Derivatives used in trading activities $ (274) $(1,134) 16,638 (792) 3,821 783 - 9 Various derivative financial instruments are offered to enable customers to meet their financing and investing objectives...

  • Page 199
    ...in the consolidated balance sheet are as follows: December 31, 2009 Franklin 2009 Trust (In thousands) 2008 Trust 2006 Trust 2000 Trust Total Assets Cash ...Loans and leases ...Allowance for loan and lease losses ...Net loans and leases ...Accrued income and other assets ...Total assets ... $ - 443...

  • Page 200
    ... not consolidated within Huntington's balance sheet. A list of trust preferred securities outstanding at December 31, 2009 follows: Principal Amount of Subordinated Note/ Debenture Issued to Trust (1) (In thousands) Investment in Unconsolidated Subsidiary Huntington Capital I ...Huntington Capital...

  • Page 201
    ... deferred and Huntington's ability to pay dividends on its common stock will be restricted. Periodic cash payments and payments upon liquidation or redemption with respect to trust securities are guaranteed by Huntington to the extent of funds held by the trusts. The guarantee ranks subordinate and...

  • Page 202
    ... relating to its mortgage banking business to hedge the exposures from commitments to make new residential mortgage loans with existing customers and from mortgage loans classified as held for sale. At December 31, 2009 and 2008, Huntington had commitments to sell residential real estate loans...

  • Page 203
    ... the Employee Retirement Income Security Act (ERISA) relating to Huntington stock being offered as an investment alternative for participants in the Plan and seeking money damages and equitable relief. On February 9, 2009, the court entered an order dismissing with prejudice the consolidated lawsuit...

  • Page 204
    ...2008, the average balance of these deposits were $1.4 billion and $44.8 million, respectively. Under current Federal Reserve regulations, the Bank is limited as to the amount and type of loans it may make to the parent company and non-bank subsidiaries. At December 31, 2009, the Bank could lend $478...

  • Page 205
    ... The parent company condensed financial statements, which include transactions with subsidiaries, are as follows. Balance Sheets (In thousands) December 31, 2009 2008 ASSETS Cash and cash equivalents(1) ...Due from The Huntington National Bank(2) ...Due from non-bank subsidiaries ...Investment in...

  • Page 206
    Statements of Income (In thousands) Year Ended December 31, 2009 2008 2007 Income Dividends from The Huntington National Bank ...Non-bank subsidiaries ...Interest from The Huntington National Bank ...Non-bank subsidiaries ...Management fees from subsidiaries ...Other ... ...$ ... - 70,600 51,620 ...

  • Page 207
    ... Banking line of business, which through March 31, 2009, had been managed geographically, is now managed on a product segment approach. The five distinct segments are: Retail and Business Banking, Commercial Banking, Commercial Real Estate, Auto Finance and Dealer Services (AFDS), and the Private...

  • Page 208
    ... home equity loans and lines of credit, first mortgage loans, direct installment loans, small business loans, personal and business deposit products, treasury management products, as well as sales of investment and insurance services. At December 31, 2009, Retail and Business Banking accounted...

  • Page 209
    ... performance of the business segments. During 2009, Huntington implemented a full-allocation methodology, where all Treasury/Other expenses, except those related to servicing Franklin assets, reported "Significant Items" (excluding the goodwill impairment), and a small residual of other unallocated...

  • Page 210
    ...operating basis financial information reconciled to Huntington's 2009, 2008, and 2007 reported results by line of business: Income Statements (In thousands ) Retail & Business Banking Commercial Commercial Real Estate Former Regional Banking AFDS PFG Treasury/ Other Huntington Consolidated 2009 Net...

  • Page 211
    ......Provision for credit losses ...Non-interest income ...Non-interest expense...Loss before income taxes ...Benefit for income taxes ...Net loss income ...Dividends on preferred shares ...Net loss applicable to common shares ...Net loss per common share - Basic ...Net loss per common share - Diluted...

  • Page 212
    ... reports that it files or submits under the Act is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Huntington...

  • Page 213
    ... Beneficial Owners and Management and Related Stockholder Matters Information required by this item is set forth under the caption "Proposal to Approve Huntington's Second Amended and Restated 2007 Stock and Long Term Incentive Plan" and in a table entitled "Equity Compensation Plans Information" of...

  • Page 214
    ... Senior Executive Vice President Chief Financial Officer (Principal Financial Officer) By: /s/ David S. Anderson David S. Anderson Executive Vice President Controller (Principal Accounting Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed...

  • Page 215
    ...this Annual Report on Form 10-K, information on those web sites is not part of this report. You also should be able to inspect reports, proxy statements, and other information about us at the offices of the NASDAQ National Market at 33 Whitehall Street, New York, New York. Exhibit Number SEC File or...

  • Page 216
    ... 2007 Annual Report on Form 10-K for the year ended December 31, 2005 Quarterly Report on Form 10-Q for the quarter ended September 30, 2009. Current Report on Form 8-K dated November 14, 2008. 001-34073 10.3 10.9 33-10546 4(a) 10.10 10.11 * Deferred Compensation Plan and Trust for Huntington...

  • Page 217
    ... Stock Unit Grant Notice with six month vesting * Restricted Stock Unit Deferral Agreement * Director Deferred Stock Award Notice * Huntington Bancshares Incorporated 2007 Stock and Long-Term Incentive Plan * First Amendment to the 2007 Stock and Long-Term Incentive Plan Current Report on Form...

  • Page 218
    ... and Chief Executive Officer, Central Ohio Transit Authority Joined Board: 1990 COMMITTEES (1) Audit (2) Capital Planning (3) Community Development (4) Compensation (5) Executive (6) Nominating and Corporate Governance (7) Risk Oversight (1)(2) Gene E. Little(1) Retired Senior Vice President and...

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    ..., New York, New York Fitch Ratings, New York, New York CUSTOMER CONTACTS Corporate Headquarters Home Lending (614) 480-8300 (800) 562-6871 Customer Service Center Private Financial Group (800) 480-BANK (2265) (800) 544-8347 Business Direct Capital Markets (800) 480-2001 (888) 480-3160 Auto Finance...

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    HUNTINGTON BANCSHARES INCORPORATED Huntington Center 41 South High Street Columbus, Ohio 43287 (614) 480-8300 huntington.com ® Member FDIC. and Huntington® are federally registered service marks of Huntington Bancshares Incorporated. © 2010 Huntington Bancshares Incorporated. 03010AR