Huntington National Bank 2009 Annual Report Download - page 3

T
OO
UR
S
HAREH
O
LDER
S
AND FRIEND
S,
This past
y
ear was undoubtedl
y
the most challen
g
in
g
we have faced in decades. Below, I summarize wha
t
was clearl
y
disappointin
g
financial performance. This reflected the industr
y
-wide ne
g
ative effects of the wors
t
econom
i
cenv
i
ronment s
i
nce t
h
e 1930s
,
w
hi
c
h
some
h
ave c
h
aracter
i
ze
d
as t
h
e “Great Recess
i
on.” It a
l
s
o
reflected the adverse impact from some historical choices we made, particularl
y
our lar
g
e concentration i
n
commercial real estate loans
.
With the extraordinar
y
commitment and hard work b
y
our collea
g
ues, there is much reason for optimis
m
as we move
i
nto 2010. I
b
e
li
eve t
h
e worst
i
s
b
e
hi
n
d
us un
l
ess t
h
e econom
y
ta
k
es a s
ig
n
ifi
cant an
df
urt
h
e
r
d
ownturn t
hi
s
y
ear. We expect to return to report
i
n
g
quarter
ly
pro
fi
ts at some t
i
me
i
n 2010.
2009 F
i
n
a
n
cia
lP
e
r
fo
rm
a
n
ce
R
eview
We reported a net loss of
$
3,094.2 million, or
$
6.14 per common share, for 2009, compared with a full
-
y
ear 2008 net loss of
$
113.8 million, or
$
0.44 per common share. The 2009 loss reflected two items
:
$2,606.9 million in noncash
g
oodwill impairment char
g
es and $2,074.7 million in provision for credit losses
.
Goo
d
w
ill i
s a nonearn
i
n
g
asset t
h
at represents t
h
e accumu
l
ate
d
prem
i
ums pa
id f
or past acqu
i
s
i
t
i
ons. Most
of the $2,606.9 million in
g
oodwill impairment char
g
es related to the acquisitions of Sk
y
Financial and Uniza
n
t
h
roug
h
w
hi
c
h
we
i
ssue
d
stoc
k
. Account
i
ng ru
l
es requ
i
re we eva
l
uate at
l
east annua
ll
y
if
t
h
eva
l
ue o
f
t
hi
s asset
has diminished. You will recall our stock price ended 2008 at
$
7.66 per share. But durin
g
the 2009 first
q
uarter, our stock
p
rice declined 78% to $1.66. Given this decline, as well as its lower absolute dollar amount
,
an updated anal
y
sis of the fair value of our reportin
g
units was performed, and the results indicated that ou
r
g
oo
d
w
ill
was
i
mpa
i
re
d
.W
hil
et
hi
s
i
mpa
i
rment c
h
ar
g
ere
d
uce
d
reporte
d
net
i
ncome, equ
i
t
y
,an
d
tota
l
assets,
it
h
a
d
no
i
mpact on
k
e
y
re
g
u
l
ator
y
cap
i
ta
l
rat
i
os. As a noncas
h
c
h
ar
g
e,
i
t
h
a
d
no a
ff
ect on our
li
qu
idi
t
y.
Our 2009 prov
i
s
i
on
f
or cre
di
t
l
osses was a
l
most
d
ou
bl
et
h
at o
f
2008. T
hi
sre
fl
ecte
d high
er net c
h
ar
g
e-o
ffs
as we continued to address issues in our loan portfolio. We also needed to stren
g
then our reserves
g
iven hi
g
her
levels of nonperformin
g
assets. The
g
ood news is that over the second half of the
y
ear, the
g
rowth rate i
n
p
roblem credits slowed. And in the fourth
q
uarter, the inflow of new nonaccrual loans declined 4
5
% from th
e
level in the third
q
uarter. Our allowance for credit losses at December 31, 2009, re
p
resented 4.1
6
% of tota
l
loans and leases, a si
g
nificant increase from 2.30% at the end of 2008. Our allowance for credit losses wa
s
8
0% of the amount of nonaccrual loans, up from
6
3% at the end of 2008. We expect 2009 will represent thi
s
cre
di
tc
y
c
l
e’s pea
ki
nt
h
e
l
eve
l
o
f
nonper
f
orm
i
n
g
assets, net c
h
ar
g
e-o
ff
s, an
d
prov
i
s
i
on
f
or cre
di
t
l
osses
.
In a
ddi
t
i
on to a
dd
ress
i
n
g
cre
di
t qua
li
t
yi
ssues, we ma
d
es
ig
n
ifi
cant pro
g
ress
i
not
h
er
k
e
y
areas. We
g
re
w
revenues w
hil
e contro
lli
n
g
expenses. Core
d
epos
i
ts
i
ncrease
d
.L
i
qu
idi
t
yi
mprove
d
s
ig
n
ifi
cant
ly
. Cap
i
ta
l
wa
s
stren
g
thened
.
Full
y
-taxable equivalent revenue increased $182.4 million, or 8%, last
y
ear. This was challen
g
in
g
in tha
t
avera
g
e total loan and leases declined $2.3 billion, or 6%, reflectin
g
low demand due to the weakene
d
econom
i
cenv
i
ronment, as we
ll
as e
l
evate
d
net c
h
ar
g
e-o
ff
s. Part o
f
t
hi
s
i
mpact on avera
g
e tota
l
earn
i
n
g
s asset
s
was miti
g
ated b
y
a
$
1.7 billion, or 38%, increase in avera
g
e total investment securities, as cash from ou
r
stron
g
deposit
g
rowth and capital actions throu
g
hout the
y
ear was deplo
y
ed. Noninterest income increased
,
pr
i
mar
ily
re
fl
ect
i
n
g
t
h
e com
bi
nat
i
on o
fl
ower secur
i
t
i
es
l
osses an
d high
er mort
g
a
g
e
b
an
ki
n
gi
ncome.
While total noninterest expense increased $2,556.1 million, excludin
g
the $2,606.9 million of
g
oodwill
impairment, it declined
$
50.8 million, or 3%, includin
g
an
$
83.1 million, or 11%, decline in personnel costs.
A real success stor
y
last
y
ear was the
$
2.9 billion, or 9%, increase in avera
g
e total core deposits
.
Important
ly
,t
h
em
i
xo
f
our core
d
epos
i
ts a
l
so
i
mprove
d
as t
hi
s
g
rowt
h
was
i
n
l
ower cost
d
eman
dd
epos
i
ts an
d
mone
y
market accounts. The
g
rowth in deposits contributed to a si
g
nificant increase in balance sheet liquidit
y
in several wa
y
s. It permitted the repa
y
ment of hi
g
her cost short-term debt and FHLB advances. As noted
a
b
ove,
i
t perm
i
tte
d
t
h
e purc
h
ase o
fi
nvestment secur
i
t
i
es. B
y
t
h
een
d
o
f
t
h
e
y
ear, our
l
oan-to-
d
epos
i
t rat
i
owa
s
91%, muc
hi
mprove
df
rom 108% at t
h
een
d
o
f
2008. Last
ly
,t
h
e
high
er re
l
at
i
ve
l
eve
l
o
f
core
d
epos
i
t
f
un
di
n
g
contributed to increased balance sheet stabilit
y
.
1