Huntington National Bank 2010 Annual Report Download - page 23

There are restrictions on our ability to pay dividends.
Dividends from the Bank to the parent company are the primary source of funds for payment of dividends
to our shareholders. However, there are statutory limits on the amount of dividends that the Bank can pay to
us without regulatory approval. The Bank may not, without prior regulatory approval, pay a dividend in an
amount greater than its undivided profits. In addition, the prior approval of the OCC is required for the
payment of a dividend by a national bank if the total of all dividends declared in a calendar year would exceed
the total of its net income for the year combined with its retained net income for the two preceding years. As
a result, for the year ended December 31, 2010, the Bank did not pay any cash dividends to us. At
December 31, 2010, the Bank could not have declared and paid any dividends to the parent company without
regulatory approval.
Since the first quarter of 2008, the Bank has requested and received OCC approval each quarter to pay
periodic dividends to shareholders outside the Bank’s consolidated group on preferred and common stock of
its REIT and capital financing subsidiaries to the extent necessary to maintain their REIT status. A wholly-
owned nonbank subsidiary of the parent company owns a portion of the preferred shares of the REIT and
capital financing subsidiaries. Outside of the REIT and capital financing subsidiary dividends, we do not
anticipate that the Bank will declare dividends during 2011.
If, in the opinion of the applicable regulatory authority, a bank under its jurisdiction is engaged in, or is
about to engage in, an unsafe or unsound practice, such authority may require, after notice and hearing, that
such bank cease and desist from such practice. Depending on the financial condition of the Bank, the
applicable regulatory authority might deem us to be engaged in an unsafe or unsound practice if the Bank
were to pay dividends. The Federal Reserve and the OCC have issued policy statements that provide that
insured banks and bank holding companies should generally only pay dividends out of current operating
earnings.
The amount and timing of payments for FDIC Deposit Insurance are changing.
In late 2008, under the assessment regime that was applicable prior to the Dodd-Frank Act, the FDIC
raised assessment rates for the first quarter of 2009 by a uniform 7 basis points of adjusted domestic deposits,
resulting in a range between 12 and 50 basis points, depending upon the risk category. At the same time, the
FDIC proposed further changes in the assessment system beginning in the second quarter of 2009. As amended
in a final rule issued in March 2009, the changes, commencing April 1, 2009, set a five-year target of 1.15%
for the designated reserve ratio, and set base assessment rates between 12 and 45 basis points of adjusted
domestic deposits, depending on the risk category. In addition to these changes in the basic assessment regime,
the FDIC, in an interim rule also issued in March 2009, imposed a 20 basis point emergency special
assessment on deposits of insured institutions as of June 30, 2009, to be collected on September 30, 2009. In
May 2009, the FDIC imposed a further special assessment on insured institutions of five basis points on their
June 30, 2009 assets minus Tier 1 capital, also payable September 30, 2009. And in November 2009, the
FDIC required all insured institutions to prepay, on December 30, 2009, slightly over three years of estimated
insurance assessments.
With the enactment of the Dodd-Frank Act, major changes were introduced to the FDIC deposit insurance
system. Under the Dodd-Frank Act, the FDIC now has until the end of September 2020 to bring its reserve
ratio to the new statutory minimum of 1.35%. New rules amending the deposit insurance assessment
regulations under the requirements of the Dodd-Frank Act have been adopted, including a final rule
designating 2% as the designated reserve ratio and a final rule extending temporary unlimited deposit
insurance to noninterest bearing transaction accounts maintained in connection with lawyers’ trust accounts.
On February 7, 2011, the FDIC adopted regulations effective for the 2011 second quarter assessment and
payable in September 2011, which outline significant changes in the risk-based premiums approach for banks
with over $10 billion of assets and creates a “Scorecard” system. The “Scorecard” system uses a performance
score and loss severity score, which aggregate to an initial base assessment rate. The assessment base also
changes from deposits to an institution’s average total assets minus its average tangible equity. We are
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