Huntington National Bank 2012 Annual Report Download - page 47

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x$17.6 million, or 20%, decrease in professional services, reflecting lower legal costs as collection activities declined and
consulting expenses.
x$9.7 gain on the early extinguishment of debt related to the exchange of certain trust preferred securities.
Provision for Income Taxes
(This section should be read in conjunction with Significant Items 1 and 5, and Note 17 of the Notes to Consolidated Financial
Statements.)
2012 versus 2011
The provision for income taxes was $184.1 million for 2012 compared with a provision for income taxes of $164.6 million in
2011. Both years included the benefits from tax-exempt income, tax-advantaged investments, and general business credits. In prior
periods, we established a full valuation allowance against state deferred tax assets and state net operating loss carryforwards based on
the uncertainty of forecasted state taxable income expected in applicable jurisdictions in order to utilize the state deferred tax asset and
net operating loss carryforwards. Based on current analysis of both positive and negative evidence and projected forecasted state
taxable income, we believe that it is more likely than not that a portion of the state deferred tax asset and state net operating loss
carryforwards will be realized. As a result of this analysis, a net $21.3 million reduction in the 2012 provision for income taxes was
recorded. At December 31, 2012, a valuation allowance of $61.8 million remained for certain state deferred tax assets and state net
operating loss carryforwards totaling $94.5 million that are not expected to be realized within the carryforward periods.
At December 31, 2012, we had a net deferred tax asset of $203.9 million. Based on both positive and negative evidence and our
level of forecasted future taxable income, we determined that no impairment existed to the net deferred tax asset at December 31,
2012. For regulatory capital purposes, there was no disallowed net deferred tax asset at December 31, 2012, compared to a total
disallowed net deferred tax asset of $39.1 million at December 31, 2011.
We file income tax returns with the IRS and various state, city, and foreign jurisdictions. Federal income tax audits have been
completed for tax years through 2009. We have appealed certain proposed adjustments resulting from the IRS examination of our
2006 and 2007 tax returns. In addition, we will appeal certain proposed adjustments resulting from the IRS examination of our 2008
and 2009 tax returns. We believe our positions related to such proposed adjustments are correct and supported by applicable statutes,
regulations, and judicial authority, and intend to vigorously defend them. During 2011, we entered into discussions with the Appeals
Division of the IRS for the 2006 and 2007 tax returns. It is possible the ultimate resolution of the proposed adjustments, if
unfavorable, may be material to the results of operations in the period it occurs. Nevertheless, although no assurances can be given, we
believe that the resolution of these examinations will not, individually or in the aggregate, have a material adverse impact on our
consolidated financial position. Various state and other jurisdictions remain open to examination, including Kentucky, Indiana,
Michigan, Pennsylvania, West Virginia and Illinois.
2011 versus 2010
The provision for income taxes was $164.6 million for 2011 compared with a provision of $40.0 million in 2010. Both years
included the benefits from tax-exempt income, tax-advantaged investments, and general business credits. In 2010, we entered into an
asset monetization transaction that generated a tax benefit of $63.6 million. Also, in 2010, undistributed previously reported earnings
of a foreign subsidiary of $142.3 million were distributed and an additional $49.8 million of tax expense was recorded. During 2010,
a $43.6 million net tax benefit was recognized, primarily reflecting the increase in the net deferred tax asset relating to the assets
acquired from the March 31, 2009 Franklin restructuring.
RISK MANAGEMENT AND CAPITAL
Risk awareness, identification and assessment, reporting, and active management are key elements in overall risk management.
We manage risk to an aggregate moderate-to-low risk profile through a control framework and by monitoring and responding to
identified potential risks. Controls include, among others, effective segregation of duties, access, authorization and reconciliation
procedures, as well as staff education and a disciplined assessment process.
We identify primary risks, and the sources of those risks, within each business unit. We utilize Risk and Control Self-
Assessments (RCSA) to identify exposure risks. Through this RCSA process, we continually assess the effectiveness of controls
associated with the identified risks, regularly monitor risk profiles and material exposure to losses, and identify stress events and
scenarios to which we may be exposed. Our chief risk officer is responsible for ensuring that appropriate systems of controls are in
place for managing and monitoring risk across the Company. Potential risk concerns are shared with the Risk Management
Committee, Risk Oversight Committee, and the board of directors, as appropriate. Our internal audit department performs on-going
independent reviews of the risk management process and ensures the adequacy of documentation. The results of these reviews are
reported regularly to the audit committee and board of directors.