Huntington National Bank 2014 Annual Report Download - page 48

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Provision for Income Taxes
(This section should be read in conjunction with Significant Item 5, and Note 15 of the Notes to Consolidated Financial Statements.)
2014 versus 2013
The provision for income taxes was $220.6 million for 2014 compared with a provision for income taxes of $227.5 million in 2013.
Both years included the benefits from tax-exempt income, tax-advantaged investments, general business credits, and the change in
accounting for investments in qualified affordable housing projects. In 2014, a $26.9 million reduction in the 2014 provision for federal
income taxes was recorded for the portion of federal deferred tax assets related to capital loss carryforwards that are more likely than not
to be realized compared to a $93.3 million increase in 2013. In 2014, a $7.4 million reduction in the 2014 provision for state income
taxes, net of federal, was recorded for the portion of state deferred tax assets and state net operating loss carryforwards that are more
likely than not to be realized, compared to a $6.0 million reduction in 2013. At December 31, 2014, we had a net federal deferred tax
asset of $72.1 million and a net state deferred tax asset of $45.3 million. For regulatory capital purposes, there was no disallowed net
deferred tax asset at December 31, 2014 and December 31, 2013.
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. In the first quarter of 2013, the IRS began an examination of our 2010 and 2011 consolidated
federal income tax returns. Certain proposed adjustments resulting from the IRS examination of our 2005 through 2009 tax returns
have been settled with the IRS Appeals Office, subject to final approval by the Joint Committee on Taxation of the U.S. Congress.
Various state and other jurisdictions remain open to examination, including Ohio, Kentucky, Indiana, Michigan, Pennsylvania, West
Virginia and Illinois.
2013 versus 2012
The provision for income taxes was $227.5 million for 2013 compared with a provision for income taxes of $202.3 million in 2012.
Both years included the benefits from tax-exempt income, tax-advantaged investments, general business credits, and the change in
accounting for investments in qualified affordable housing projects. In 2013, a $93.3 million increase in the 2013 provision for federal
income taxes was recorded for the portion of federal capital loss carryforward deferred tax asset that are more likely than not to be
realized compared to $3.0 million in 2012. In 2013, a $6.0 million reduction in the 2013 provision for state income taxes, net of federal,
was recorded for the portion of state deferred tax assets and state net operating loss carryforwards that are more likely than not to be
realized, compared to a $21.3 million reduction in 2012.
RISK MANAGEMENT AND CAPITAL
A comprehensive discussion of risk management and capital matters affecting us can be found in the Risk Governance section
included in Item 1A and the Regulatory Matters section of Item 1 of this Form 10-K.
Some of the more significant processes used to manage and control credit, market, liquidity, operational, and compliance risks are
described in the following paragraphs.
Credit Risk
Credit risk is the risk of financial loss if a counterparty is not able to meet the agreed upon terms of the financial obligation. The
majority of our credit risk is associated with lending activities, as the acceptance and management of credit risk is central to profitable
lending. We also have credit risk associated with our AFS and HTM securities portfolios (see Note 4 and Note 5 of the Notes to
Consolidated Financial Statements). We engage with other financial counterparties for a variety of purposes including investing,
asset and liability management, mortgage banking, and trading activities. While there is credit risk associated with derivative activity,
we believe this exposure is minimal.
We continue to focus on the identification, monitoring, and managing of our credit risk. In addition to the traditional credit risk
mitigation strategies of credit policies and processes, market risk management activities, and portfolio diversification, we use
additional quantitative measurement capabilities utilizing external data sources, enhanced use of modeling technology, and internal
stress testing processes. Our portfolio management resources demonstrate our commitment to maintaining an aggregate moderate-to-
low risk profile. In our efforts to continue to identify risk mitigation techniques, we have focused on product design features,
origination policies, and treatment strategies for delinquent or stressed borrowers.