Huntington National Bank 2010 Annual Report Download - page 31

Operational Risks:
1. The resolution of significant pending litigation, if unfavorable, could have a material adverse affect
on our results of operations for a particular period.
We face legal risks in our businesses, and the volume of claims and amount of damages and penalties
claimed in litigation and regulatory proceedings against financial institutions remain high. Substantial legal
liability against us could have material adverse financial effects or cause significant reputational harm to us,
which in turn could seriously harm our business prospects. As more fully described in Note 22 of the Notes to
Consolidated Financial Statements, certain putative class actions and shareholder derivative actions were filed
against us, certain affiliated committees, and/or certain of our current or former officers and directors. These
cases allege violations of the securities laws, breaches of fiduciary duty, waste of corporate assets, abuse of
control, gross mismanagement, unjust enrichment, and violations of Employment Retirement Income Security
Act (ERISA) laws in connection with our acquisition of Sky Financial, the transactions between Franklin and
us, and the financial and other disclosures related to these transactions. Although no assurance can be given,
based on information currently available, consultation with counsel, and available insurance coverage, we
believe that the eventual outcome of these claims against us will not, individually or in the aggregate, have a
material adverse effect on our consolidated financial position or results of operations. However, it is possible
that the ultimate resolution of these matters, if unfavorable, may be material to the results of operations for a
particular reporting period.
2. We face significant operational risks which could lead to expensive litigation and loss of confidence
by our customers, regulators, and capital markets.
We are exposed to many types of operational risks, including reputational risk, legal and compliance risk,
the risk of fraud or theft by employees or outsiders, unauthorized transactions by employees or outsiders, or
operational errors by employees, including clerical or record-keeping errors or those resulting from faulty or
disabled computer or telecommunications systems. In addition, today’s threats to customer information and
information systems are complex, more wide spread, continually emerging, and increasing at a rapid pace.
Although we establish and maintain systems of internal operational controls that provide us with timely and
accurate information about our level of operational risks, continue to invest in better tools and processes in all
key areas, and monitor threats with increased rigor and focus, these operational risks could lead to expensive
litigation and loss of confidence by our customers, regulators, and the capital markets.
Moreover, negative public opinion can result from our actual or alleged conduct in any number of
activities, including lending practices, corporate governance, and acquisitions and from actions taken by
government regulators and community organizations in response to those activities. Negative public opinion
can adversely affect our ability to attract and retain customers and can also expose us to litigation and
regulatory action. Relative to acquisitions, we cannot predict if, or when, we will be able to identify and
attract acquisition candidates or make acquisitions on favorable terms. We incur risks and challenges
associated with the integration of acquired institutions in a timely and efficient manner, and we cannot
guarantee that we will be successful in retaining existing customer relationships or achieving anticipated
operating efficiencies.
3. We are subject to routine on-going tax examinations by the IRS and by various other jurisdictions,
including the states of Ohio, Kentucky, Indiana, Michigan, Pennsylvania, West Virginia and Illinois.
The IRS, Ohio, and Kentucky have proposed various adjustments to our previously filed tax returns.
It is possible that the ultimate resolution of all proposed and future adjustments, if unfavorable, may
be materially adverse to the results of operations in the period it occurs.
The calculation of our provision for federal income taxes is complex and requires the use of estimates
and judgments. In the ordinary course of business, we operate in various taxing jurisdictions and are subject to
income and nonincome taxes. The effective tax rate is based in part on our interpretation of the relevant
current tax laws. We believe the aggregate liabilities related to taxes are appropriately reflected in the
Consolidated Financial Statements.
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