Huntington National Bank 2009 Annual Report Download - page 45

nonperformin
g
assets (NPAs) in the 2009 fourth quarter compared with the prior quarter, providin
g
a basis of
ex
p
ectation for lower levels of NPAs and NCOs in 2010 com
p
ared with 2009
.
At the be
g
innin
g
of 2009, we viewed our hi
g
hest-risk loan portfolios to be Franklin, as well as the sin
g
l
e
f
am
ily h
ome
b
u
ild
er an
d
reta
il
propert
i
es se
g
ments o
f
our CRE port
f
o
li
o. Dur
i
n
g
2009, we
b
e
li
eve t
h
at w
e
h
ave su
b
stant
i
a
lly
a
dd
resse
d
t
h
e cre
di
t
i
ssues w
i
t
hi
n our Fran
kli
n port
f
o
li
oan
d
our s
i
n
gl
e
f
am
ily h
ome
b
u
ild
e
r
portfolio se
g
ment, and we do not expect an
y
additional material credit impact to these portfolios. However, th
e
CRE port
f
o
li
o rema
i
ns stresse
d
, part
i
cu
l
ar
ly
t
h
e reta
il
propert
i
es se
g
ment. We cont
i
nue to wor
k
w
i
t
h
t
h
e
b
orrowers
i
nt
hi
sse
g
ment to reso
l
ve t
h
e cre
di
t
i
ssues
.
Another ke
y
ob
j
ective for 2009 was to stren
g
then our capital position in order to withstand potential
f
uture cre
di
t
l
osses s
h
ou
ld
t
h
e econom
i
cenv
i
ronment cont
i
nue to
d
eter
i
orate. Dur
i
n
g
2009, we ra
i
se
d
$
1.7 billion of capital, includin
g$
1.3 billion of common equit
y
. This increase in capital substantiall
y
stren
g
thened all of our period-end capital ratios compared with the
y
ear-a
g
o period. Our tan
g
ible-to-commo
n
equit
y
(TCE) ratio increased to 5.92% from 4.04%, and our Tier 1 common equit
y
ratio increased to 6.69%
from
5
.
05
%
.
Our per
i
o
d
-en
dli
qu
idi
t
y
pos
i
t
i
on stren
g
t
h
ene
d
compare
d
w
i
t
h
t
h
een
d
o
f
2008 as avera
g
e core
d
epos
i
t
s
g
rew $2.9 billion, or 9%, thus reducin
g
our reliance on noncore fundin
g
. Additionall
y
, we anticipate continue
d
g
rowth in core deposits for 2010. Also, period-end total cash and due from banks was
$
1.5 billion, compare
d
with
$
0.8 billion at the end of 2008, and our period-end unpled
g
ed investment securities increased
$
4.1 billio
n
compared with the end of last
y
ear. We redeplo
y
ed a portion of the cash
g
enerated from our capital raisin
g
act
i
ons an
d
our core
d
epos
i
t
g
rowt
hi
nto our
i
nvestment secur
i
t
i
es port
f
o
li
o
d
ur
i
n
g
t
h
e current
y
ear. Ou
r
pre
f
erence wou
ld b
e to use t
hi
s cas
h
to
g
enerate
high
er-mar
gi
n
l
oans;
h
owever,
gi
ven t
h
e cont
i
nue
d
econom
ic
uncerta
i
nt
y
, man
y
o
f
our customers, espec
i
a
lly b
us
i
nesses, are wa
i
t
i
n
gf
or
f
urt
h
er s
ig
ns o
f
econom
i
c recover
y
before borrowin
g
funds.
Full
y
-taxable net interest income in 2009 declined
$
116.2 million, or 7%, compared with 2008. The
decline primaril
y
reflected a 14 basis point decline in the net interest mar
g
in, as well as a $1.7 billion, or 4%
,
decline in avera
g
e earnin
g
assets that reflected a $2.3 billion, or 6%, decline in total avera
g
e loans. W
e
ant
i
c
i
pate t
h
at t
h
e net
i
nterest mar
gi
nw
ill i
mprove
d
ur
i
n
g
2010, an
d
we ant
i
c
i
pate t
h
at
l
oan
g
rowt
h
w
ill be
flat, or increase sli
g
htl
y
, in 2010
.
Noninterest income in 2009 increased
$
298.5 million, or 42%, com
p
ared with 2008. This increas
e
consisted of a
$
187.1 million im
p
rovement in securities losses and a
$
57.3 million im
p
rovement in MS
R
valuation ad
j
ustments net of hed
g
in
g
. After ad
j
ustin
g
for these items, overall noninterest income performance
was mixed for the
y
ear. Electronic bankin
g
income increased $9.9 million, or 11%, includin
g
additional third-
part
y
processin
g
fees, however, service char
g
es on deposit accounts declined
$
5.3 million, or 2%, reflectin
g
l
ower consumer nonsu
ffi
c
i
ent
f
un
d
san
d
over
d
ra
f
t
f
ees. We ex
p
ect t
h
at
f
ee
i
ncome
i
n 2010 w
ill b
e
fl
at, or
decrease sli
g
htl
y
, compared with 2009. Althou
g
h we expect
g
rowth in trust services income, as well a
s
b
ro
k
era
g
ean
di
nsurance revenue an
d
cap
i
ta
l
mar
k
et
f
ees, t
h
at
g
rowt
h
cou
ld b
eo
ff
set
by d
ec
li
nes
i
n serv
i
c
e
c
h
ar
g
es on
d
epos
i
t accounts revenue re
l
ate
d
to
l
ower nonsu
ffi
c
i
ent
f
un
d
san
d
over
d
ra
f
t
f
ees
.
Noninterest ex
p
ense in 2009 increased $2,556.1 million com
p
ared with 2008. This increase consisted o
f
2009
g
oodwill impairment char
g
es totalin
g$
2,606.9 million, partiall
y
offset b
y
additional
g
ains of
$
123.9 mil
-
li
on re
l
ate
d
to t
h
e ear
ly
ext
i
n
g
u
i
s
h
ment o
fd
e
b
t. A
f
ter a
dj
ust
i
n
gf
or t
h
ese
i
tems, non
i
nterest expense
i
ncrease
d
$73.1 million. Primar
y
contributors to the increase were a $91.4 million increase in deposit and othe
r
insurance expense, and a
$
60.4 million increase in OREO and foreclosure expense, representin
g
hi
g
her level
s
of problem assets, as well as loss miti
g
ation activities. These increases were partiall
y
offset b
y
an
$
83.1 mil
-
lion, or 11%, decline in personnel costs, reflectin
g
a decline in salaries, and lower benefits and commission
expense. Full-time equivalent staff declined 6% from the comparable
y
ear-a
g
o period. For 2010, expenses wil
l
rema
i
nwe
ll
-contro
ll
e
d
,
b
ut are expecte
d
to
i
ncrease, re
fl
ect
i
n
gi
nvestments
i
n
g
rowt
h
,an
d
t
h
e
i
mp
l
ementat
i
on
o
fk
e
y
strate
gi
c
i
n
i
t
i
at
i
ves.
37