Huntington National Bank 2010 Annual Report Download - page 40

including higher salaries due to a 10% increase in full-time equivalent staff in support of strategic initiatives,
higher sales commissions, and retirement fund and 401(k) plan expenses.
Credit quality performance continued to show strong improvement as our NPAs and NCOs declined and
reserve coverage increased. This improvement reflected the benefits of our focused actions taken in 2009 to
address credit-related issues. Compared with the prior year, NPAs declined 59%. NCOs were $874.5 million,
or an annualized 2.35% of average total loans and leases, down from $1,476.6 million, or 3.82%, in 2009.
While the ACL as a percentage of loans and leases was 3.39%, down from 4.16% at December 31, 2009, the
ACL as a percentage of total NALs increased to 166% from 80%.
In December 2010, we successfully completed multiple capital actions, particularly improving our then
relatively low level of common equity. We sold $920.0 million of common stock in a public offering and
issued $300.0 million of subordinated debt. On December 22, 2010, these proceeds, along with other available
funds, were used to complete the repurchase of our $1.4 billion of TARP Capital we issued to the Treasury
under its TARP CPP. Subsequently, on January 19, 2011, we exited our TARP-related relationship with the
Treasury by repurchasing the warrant we had issued to the Treasury as part of the TARP CPP for $49.1 million.
The warrant had entitled the Treasury to purchase 23.6 million common shares of stock.
At December 31, 2010, our regulatory Tier 1 and Total risk-based capital were $2.4 billion and
$1.9 billion, respectively, above the Well-capitalized regulatory thresholds. Our tangible common equity ratio
improved 164 basis points to 7.56% and our Tier 1 common risk-based capital ratio improved 253 basis points
to 9.29% from December 31, 2009.
Business Overview
General
Our general business objectives are: (1) grow revenue and profitability, (2) grow key fee businesses
(existing and new), (3) improve credit quality, including lower NCOs and NPAs, (4) improve cross-sell and
share-of-wallet across all business segments, (5) reduce CRE noncore exposure, and (6) continue to improve
our overall management of risk.
As further described below, our main challenge to accomplishing our primary objectives results from an
economy, that while more stable than a year ago, remains fragile. This impairs our ability to grow loans as
customers continue to reduce their debt and / or remain cautious about increasing debt until they have a higher
degree of confidence in a meaningful sustainable economic recovery. However, growth in our automobile loan
portfolio continued with 2010 originations of $3.4 billion, an increase of $1.8 billion compared to 2009.
Strong growth in originations reflected increases in all of our markets, as well as the recent expansion of our
automobile lending business into Eastern Pennsylvania and five New England states. We expect our growth in
the newly entered markets to become more evident over time as we further develop our dealership base.
Although our residential real estate portfolio declined slightly from 2009, our mortgage originations increased
$214 million, or 4%, from the prior year. Our CRE portfolio declined throughout the year as a result of our
on-going strategy to reduce our CRE exposure. The decline was primarily a result of continuing paydowns in
the noncore CRE portfolio.
We face strong competition from other banks and financial service firms in our markets. As such, we
have placed strategic emphasis on, and continue to develop and expand resources devoted to, improving cross-
sell performance with our core customer base. One example of this emphasis was our recent agreement with
Giant Eagle supermarkets to be its exclusive in-store bank in Ohio. During the 2010 fourth quarter, we opened
four such in-store branches. When fully implemented, the partnership will give us an additional 100 branches,
which in the aggregate will be nearly 500 branches in Ohio, providing us with the largest branch presence
among Ohio banks, based on current data. In-store branches have a strong record for checking account
acquisition and are expected to increase the number of households served and drive revenue. Additionally, it
will give customers the convenience of operating seven days per week and extended hours banking.
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