Huntington National Bank 2010 Annual Report Download - page 39

•Additional Disclosures — Provides comments on important matters including forward-looking state-
ments, critical accounting policies and use of significant estimates, recent accounting pronouncements
and developments, and acquisitions.
A reading of each section is important to understand fully the nature of our financial performance and
prospects.
EXECUTIVE OVERVIEW
2010 Financial Performance Review
In 2010, we reported net income of $312.3 million, or $0.19 per common share (see Table 1). The current
year included a nonrecurring reduction of $0.08 per common share for the deemed dividend resulting from the
repurchase of $1.4 billion in TARP Capital. This compared with a net loss of $3,094.2 million, or $6.14 per
common share, for 2009.
The 2009 loss primarily reflected two items: $2,606.9 million in noncash goodwill impairment charges
and $2,074.7 million in provision for credit losses. Most of the $2,606.9 million in goodwill impairment
charges related to the acquisitions of Sky Financial and Unizan. While this impairment charge reduced
reported net income, equity, and total assets, it had no impact on key regulatory capital ratios. As a noncash
charge, it had no affect on our liquidity. The provision for credit losses reflected higher net charge-offs as we
addressed issues in our loan portfolio. We also strengthened our allowance for credit losses because of higher
levels of nonperforming assets.
Fully-taxable equivalent net interest income was $1.6 billion in 2010, up $0.2 billion, or 14%, from 2009.
The increase primarily reflected the favorable impact of the increase in net interest margin to 3.44% from
3.11% and, to a lesser degree, a 3% increase in average total earning assets. A significant portion of the
increase in the net interest margin reflected a shift in our deposit mix from higher-cost time deposits to lower-
cost transaction-based accounts. Additionally, we grew our average core deposits $3.1 billion, or 9%, from
2009. Although average total earning assets increased only slightly compared with 2009, this change reflected
a $2.9 billion, or 45%, increase in average total investment securities, partially offset by a $1.4 billion, or 4%,
decline in average total loans and leases. The change in average loan balances from the prior year reflected
our strategy to reduce our CRE exposure as average CRE loans declined $1.9 billion, or 21%, from 2009.
Average C&I loans declined $0.7 billion, or 5%, for the full year. Average automobile loans and leases
increased $1.3 billion, or 38%, from 2009, reflecting the consolidation of a $0.8 billion automobile loan
securitization on January 1, 2010. These changes in loan and investment securities balances from the prior
year reflected the execution of our balance sheet management strategy, and not a change in standards for
making loans or for investing in securities.
Noninterest income was $1.0 billion in 2010, a slight increase compared with 2009. The increase in
noninterest income was primarily a result of an increase in mortgage banking income, reflecting an increase in
origination and secondary marketing income as loan originations and loan sales were substantially higher, and
MSR hedging. This was partially offset by a decline in service charges on deposit accounts, which was due to
a decline in personal NSF / OD service charges. The decline reflected our implementation of changes to
Regulation E and the introduction of our Fair Play banking philosophy. As part of this philosophy, we
voluntarily reduced certain NSF / OD fees and implemented our 24-Hour Grace
TM
overdraft policy. The goal
of our Fair Play banking philosophy is to introduce more customer-friendly fee structures with the objective of
accelerating the acquisition and retention of customers.
Noninterest expense was $1.7 billion in 2010, a decrease of $2.4 billion, or 59%, compared with 2009.
The decrease in noninterest expense was primarily due to goodwill impairment in the year-ago period. The
decline also reflected a decrease in OREO and foreclosure expense from lower OREO losses. Further, there
was a decline in deposit and other insurance expense, primarily due to a $23.6 million FDIC insurance special
assessment in 2009, partially offset by continued growth in total deposits and higher FDIC insurance costs in
the current period as premium rates increased. The decline was partially offset by a 2009 benefit from a gain
on the early extinguishment of debt, and 2010 increases in personnel costs, reflecting a combination of factors
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