Huntington National Bank 2013 Annual Report Download - page 3

TO FELLOW OWNERS AND FRIENDS:
I am pleased to report 2013 was a year of solid performance as the dynamic efforts of our approximately
11,000 colleagues allowed the Company to perform at a high level despite the challenging operating
environment. Their efforts resulted in a return on average assets (ROA) of 1.13%. Last year was the second
consecutive year that the ROA was within our targeted range of 1.10%-1.35% and placed Huntington in the top
third of ROAs for the largest 100 banks in the United States.
For the last several years, we have been focused on executing our strategic plan, which along with our
building a strong risk and credit culture, positions Huntington for consistent long-term profitability, for the third
year in a row with a return on tangible common equity of 13%. Delivering these steady returns has allowed the
Company to continue to execute on its capital priorities: (1) Grow the core franchise. We increased both
consumer and commercial relationships by at least 6% and accelerated loan growth. (2) Support the dividend. We
increased the dividend by 19% while staying below the regulators’ targeted dividend payout ratio of 30%. (3) All
other opportunistic uses. We repurchased over 16 million shares, announced the acquisition of Camco Financial,
and redeemed $50 million of very high cost preferred securities. Our capital levels remain strong, and as we look
forward, disciplined capital management remains a top priority.
For the last several years, I have been writing about some of the specifics around the difficult operating
environment: interest rates impact on net interest margin (NIM), ever-increasing regulation, and a tepid economy
delivering limited growth. None of those materially changed in 2013; if anything, the overall environment
became more difficult as the prolonged effects of growing industry wide capital levels chasing limited customers
resulted in some banks moving away from what we would consider disciplined standards. The commitment of
our colleagues, combined with our Fair Play banking philosophy, allows us to take this environment and turn it
into an advantage. Customers, whether it is our more than 1.3 million consumer checking households or
160 thousand commercial checking relationships, see our passion about doing the right thing, and time and time
again, they tell us that is why they chose Huntington as their primary financial relationship.
The economy at the start of the year was considerably less vibrant than we had hoped. Consumers and
businesses were unsure about how the actions in Washington D.C. would impact them, and that caused them to
pause. At that point, we were already resizing and changing the timing of our investments. It soon became clear
that if we were to do the right thing for our shareholders, additional action would be needed. Some of the more
noticeable actions we took included refining the branch network after three years of net additions and rightsizing
the mortgage business to reflect declining volumes. We made investments around Continuous Improvement,
which has resulted in hundreds of small changes in process improvement that will continue as we strive to reach
all of our long-term goals.
The improvements in our efficiency ratio, credit quality, and capital levels demonstrated how Huntington
colleagues have risen to meet the challenges of the current banking environment. Let me offer a recap of 2013
performance and then our expectations for 2014.
Net income for 2013 was $639 million, which was relatively unchanged from the prior year, and earnings
per common share increased to $0.72, an increase of $0.01 from the prior year. Fully taxable equivalent total
revenue decreased $99 million, or 3%, from 2012; noninterest income decreased $100 million, or 9%; and net
interest income increased $1 million, or less than 1%, since the prior year.
The net interest income increase reflected the impact of 4% loan growth, a 5 basis point decrease in the fully
taxable equivalent net interest margin (NIM) to 3.36%, as well as a 7% reduction in other earnings assets, the
majority of which were loans held for sale.
The loan growth reflected an increase in two areas that have been significant areas of focus of our strategic
plan, Commercial and Industrial (C&I) and automobile loans. Average C&I loans experienced little change in
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