UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
QUARTERLY PERIOD ENDED September 30, 2011
Commission File Number 1-34073
Huntington Bancshares Incorporated
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Maryland
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31-0724920 |
(State or other jurisdiction of
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(I.R.S. Employer |
incorporation or organization)
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Identification No.) |
41 South High Street, Columbus, Ohio 43287
Registrants telephone number (614) 480-8300
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2)
has been subject to such filing requirements for the past 90 days.
þ Yes o No
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files). þ Yes o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
(Check one):
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Large accelerated filer þ
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Accelerated filer o
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Non-accelerated filer o
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Smaller reporting company o |
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(Do not check if a smaller reporting company) |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).
o Yes þ No
There were 864,074,883 shares of Registrants common stock ($0.01 par value) outstanding on
September 30, 2011.
HUNTINGTON BANCSHARES INCORPORATED
INDEX
2
Glossary of Acronyms and Terms
The following listing provides a comprehensive reference of common acronyms and terms used
throughout the document:
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2010 Form 10-K
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Annual Report on Form 10-K for the year ended December 31, 2010 |
ABL
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Asset Based Lending |
ACL
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Allowance for Credit Losses |
AFCRE
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Automobile Finance and Commercial Real Estate |
ALCO
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Asset & Liability Management Committee |
ALLL
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Allowance for Loan and Lease Losses |
ARM
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Adjustable Rate Mortgage |
ARRA
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American Recovery and Reinvestment Act of 2009 |
ASC
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Accounting Standards Codification |
ASU
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Accounting Standards Update |
ATM
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Automated Teller Machine |
AULC
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Allowance for Unfunded Loan Commitments |
AVM
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Automated Valuation Methodology |
C&I
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Commercial and Industrial |
CDARS
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Certificate of Deposit Account Registry Service |
CDO
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Collateralized Debt Obligations |
CDs
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Certificates of Deposit |
CFPB
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Bureau of Consumer Financial Protection |
CMO
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Collateralized Mortgage Obligations |
CPP
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Capital Purchase Program |
CRE
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Commercial Real Estate |
DDA
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Demand Deposit Account |
DIF
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Deposit Insurance Fund |
Dodd-Frank Act
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Dodd-Frank Wall Street Reform and Consumer Protection Act |
EESA
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Emergency Economic Stabilization Act of 2008 |
EPS
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Earnings Per Share |
ERISA
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Employee Retirement Income Security Act |
EVE
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Economic Value of Equity |
FASB
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Financial Accounting Standards Board |
FDIC
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Federal Deposit Insurance Corporation |
FDICIA
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Federal Deposit Insurance Corporation Improvement Act of 1991 |
FFIEC
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Federal Financial Institutions Examination Council |
FHA
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Federal Housing Administration |
FHFA
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Federal Housing Finance Agency |
FHLB
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Federal Home Loan Bank |
FHLMC
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Federal Home Loan Mortgage Corporation |
FICA
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Federal Insurance Contributions Act |
FICO
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Fair Isaac Corporation |
FOMC
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Federal Open Market Committee |
FNMA
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Federal National Mortgage Association |
Franklin
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Franklin Credit Management Corporation |
FRB
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Federal Reserve Bank |
FSP
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Financial Stability Plan |
FTE
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Fully-Taxable Equivalent |
3
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FTP
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Funds Transfer Pricing |
GAAP
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Generally Accepted Accounting Principles in the United States of America |
GSIFI
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Globally Systemically Important Financial Institution |
GSE
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Government Sponsored Enterprise |
HASP
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Homeowner Affordability and Stability Plan |
HCER Act
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Health Care and Education Reconciliation Act of 2010 |
IPO
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Initial Public Offering |
IRS
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Internal Revenue Service |
ISE
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Interest Sensitive Earnings |
LIBOR
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London Interbank Offered Rate |
LGD
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Loss-Given-Default |
LTV
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Loan to Value |
MD&A
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Managements Discussion and Analysis of Financial Condition and Results of Operations |
MRC
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Market Risk Committee |
MSA
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Metropolitan Statistical Area |
MSR
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Mortgage Servicing Rights |
NALs
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Nonaccrual Loans |
NAV
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Net Asset Value |
NCO
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Net Charge-off |
NPAs
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Nonperforming Assets |
NSF / OD
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Nonsufficient Funds and Overdraft |
OCC
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Office of the Comptroller of the Currency |
OCI
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Other Comprehensive Income (Loss) |
OCR
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Optimal Customer Relationship |
OLEM
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Other Loans Especially Mentioned |
OREO
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Other Real Estate Owned |
OTTI
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Other-Than-Temporary Impairment |
PD
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Probability-Of-Default |
Plan
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Huntington Bancshares Retirement Plan |
Reg E
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Regulation E, of the Electronic Fund Transfer Act |
REIT
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Real Estate Investment Trust |
SAD
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Special Assets Division |
SBA
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Small Business Administration |
SEC
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Securities and Exchange Commission |
SERP
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Supplemental Executive Retirement Plan |
SIFIs
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Systemically Important Financial Institutions |
Sky Financial
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Sky Financial Group, Inc. |
SRIP
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Supplemental Retirement Income Plan |
Sky Trust
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Sky Bank and Sky Trust, National Association |
TAGP
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Transaction Account Guarantee Program |
TARP
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Troubled Asset Relief Program |
TARP Capital
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Series B Preferred Stock |
TCE
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Tangible Common Equity |
TDR
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Troubled Debt Restructured Loan |
TLGP
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Temporary Liquidity Guarantee Program |
Treasury
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U.S. Department of the Treasury |
4
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UCS
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Uniform Classification System |
Unizan
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Unizan Financial Corp. |
UPB
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Unpaid Principal Balance |
USDA
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U.S. Department of Agriculture |
VA
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U.S. Department of Veteran Affairs |
VIE
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Variable Interest Entity |
WGH
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Wealth Advisors, Government Finance, and Home Lending |
5
PART I. FINANCIAL INFORMATION
When we refer to we, our, and us in this report, we mean Huntington Bancshares
Incorporated and our consolidated subsidiaries, unless the context indicates that we refer only to
the parent company, Huntington Bancshares Incorporated. When we refer to the Bank in this
report, we mean our only bank subsidiary, The Huntington National Bank, and its subsidiaries.
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Item 2: |
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Managements Discussion and Analysis of Financial Condition and Results of Operations |
INTRODUCTION
We are a multi-state diversified regional bank holding company organized under Maryland law in
1966 and headquartered in Columbus, Ohio. Through the Bank, we have 145 years of servicing the
financial needs of our customers. Through our subsidiaries, we provide full-service commercial and
consumer banking services, mortgage banking services, automobile financing, equipment leasing,
investment management, trust services, brokerage services, customized insurance service programs,
and other financial products and services. Our over 600 banking offices are located in Indiana,
Kentucky, Michigan, Ohio, Pennsylvania, and West Virginia. Selected financial services and other
activities are also conducted in various other states. International banking services are
available through the headquarters office in Columbus, Ohio and a limited purpose office located in
the Cayman Islands and another limited purpose office located in Hong Kong. Our foreign banking
activities, in total or with any individual country, are not significant.
This MD&A provides information we believe necessary for understanding our financial condition,
changes in financial condition, results of operations, and cash flows. The MD&A included in our
2010 Form 10-K should be read in conjunction with this MD&A as this discussion provides only
material updates to the 2010 Form 10-K. This MD&A should also be read in conjunction with the
financial statements, notes and other information contained in this report.
Our discussion is divided into key segments:
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Executive Overview - Provides a summary of our current financial performance, and
business overview, including our thoughts on the impact of the economy, legislative and
regulatory initiatives, and recent industry developments. This section also provides our
outlook regarding our expectations for the remainder of 2011. |
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Discussion of Results of Operations - Reviews financial performance from a consolidated
Company perspective. It also includes a Significant Items section that summarizes key
issues helpful for understanding performance trends. Key consolidated average balance sheet
and income statement trends are also discussed in this section. |
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Risk Management and Capital - Discusses credit, market, liquidity, operational, and
compliance risks, including how these are managed, as well as performance trends. It also
includes a discussion of liquidity policies, how we obtain funding, and related
performance. In addition, there is a discussion of guarantees and / or commitments made for
items such as standby letters of credit and commitments to sell loans, and a discussion
that reviews the adequacy of capital, including regulatory capital requirements. |
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Business Segment Discussion - Provides an overview of financial performance for each of
our major business segments and provides additional discussion of trends underlying
consolidated financial performance. |
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Additional Disclosures - Provides comments on important matters including
forward-looking statements, 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.
6
EXECUTIVE OVERVIEW
Summary of 2011 Third Quarter Results
For the quarter, we reported net income of $143.4 million, or $0.16 per common share, compared
with $145.9 million, or $0.16 per common share, in the prior quarter (see Table 1).
Fully-taxable equivalent net interest income was $410.1 million for the quarter, up $3.0
million, or 1%, from the prior quarter. The increase reflected the benefit of a 2% (6% annualized)
increase in average earning assets, partially offset by a 6 basis point decline in the
fully-taxable equivalent net interest margin to 3.34% from 3.40%.
The provision for credit losses in the 2011 third quarter was $43.6 million, up $7.8 million,
or 22%, from the prior quarter. This reflected the combination of strong loan growth and the
expectation of a weaker and prolonged economic recovery. These were partially offset by the
benefits of an end-of-period decline of 8% in nonaccrual loans and a 4% decline in total Criticized
commercial loans.
Total noninterest income increased $2.8 million, or 1%, from the prior quarter. This included
an increase in other income of $15.1 million, or 33%, reflecting a $15.5 million gain on sale from
the automobile securitization and a $2.8 million increase in market-related gains and capital
markets income, which was partially offset by a $5.8 million decline in SBA servicing income.
Service charges on deposit accounts and electronic banking income increased $4.5 million, or 7%,
and $1.0 million, or 3%, respectively, primarily driven by new account growth. These benefits were
partially offset by an $11.0 million decline in mortgage banking income, primarily driven by a
negative $13.9 million linked quarter change in the net MSR valuation, the majority of which
occurred over the last two weeks of the quarter.
Noninterest expense increased $10.7 million, or 2%. Personnel costs increased $8.3 million,
or 4%, due to higher salary, severance, and healthcare costs. Outside data processing and other
services increased $5.7 million, or 13%, primarily due to costs associated with a conversion to a
new debit card processor.
The period end ACL as a percentage of total loans and leases decreased to 2.71% from 2.84%.
However, the ACL as a percentage of period end NALs increased to 187% from 181%. Net charge-offs
were $90.6 million, or an annualized 0.92% of average total loans and leases, down 7% from $97.5
million, or 1.01%, in the prior quarter. Credit quality continued its expected improvement. Even
so, many of these performance metrics remain elevated compared with historical performance. We
expect to see continued declines in nonaccrual loans and net charge-offs going forward.
Business Overview
General
Our general business objectives are: (1) grow revenue and profitability, (2) improve
cross-sell and share-of-wallet across all business segments, (3) grow key fee businesses (existing
and new), (4) improve credit quality, including lower NCOs and NALs, (5) reduce noncore CRE
exposure, and (6) continue to improve our overall management of risk.
Throughout last year, and continuing into this year, we are taking advantage of what we view
as an opportunity to make significant investments in strategic initiatives to position us for more
profitable and sustainable long-term growth. This includes implementing our Fair Play banking
philosophy, value proposition for our consumer customers, increasing share-of-wallet, investing in
expanding existing business, and launching new businesses.
Our emphasis on cross-sell, coupled with customers increasingly being attracted by the
benefits offered through our Fair Play banking philosophy is having a positive effect. The
number of consumer checking account households grew at a 10.8% annualized rate for the first three
quarters of 2011. These new households are not just focused around single service. We have been
able to continue to grow our share of wallet with new and existing customers. Almost 73% of our
consumer customers now have four or more products or services. On the commercial side, we also saw
an increase with commercial relationships growing for the first nine months at an 8.6% annualized
rate.
Economy
Wavering business and consumer confidence, U.S. debt and fiscal uncertainties, and slow
economic growth remain challenges to the operating environment. Consumer sentiment has dropped to
the lowest level since the recessionary period in 2008. Elevated housing inventories continue to
present a near-term drag; however housing affordability is near record highs on historically low
mortgage rates and lower home prices.
7
Legislative and Regulatory
Regulatory reforms continue to be adopted which impose additional restrictions on current
business practices. Recent actions affecting us included the Federal Reserves maturity extension
program, and the rules and regulations that have been issued pursuant to the Dodd-Frank Act.
Federal Reserve Maturity Extension Program Under the maturity extension program announced on
September 21, 2011, the Federal Reserve intends to sell $400 billion of shorter-term Treasury
securities by the end of 2012 and use the proceeds to buy longer-term securities. This will extend
the average maturity of the securities in the Federal Reserves portfolio. By reducing the supply
of longer-term securities in the market, it is the FOMCs intention to put downward pressure on
longer-term interest rates, including rates on financial assets that investors consider to be close
substitutes for longer-term Treasury securities. Further, it is their objective that the reduction
in longer-term interest rates, in turn, will contribute to a broad easing in financial market
conditions that will provide additional stimulus to support the economic recovery. We do not
anticipate that this recent announcement will have a material impact on our current securities
portfolio or future investment strategy. However, it could cause our net interest margin to drop
modestly.
Resolution Plan The FRB and FDIC issued final regulations as required by section 165 of the
Dodd-Frank Act regarding resolution plans, also referred to as living wills. Insured depository
institutions with $50 billion or more in total assets must submit to the FDIC a plan whereby the
institution can be resolved by the FDIC, in the event of failure, in a manner that ensures
depositors will receive access to insured funds within the required timeframes and generally
ensures an orderly liquidation of the institution. Additionally, bank holding companies with
assets of $50 billion or more are required to submit to the FRB and the FDIC a plan that, in the
event of material financial distress or failure, establishes the rapid and orderly liquidation of
the company under the bankruptcy code and in a way that would not pose systemic risk to the
financial system of the United States. The regulations allow for a tier approach for complying
with the requirements based on materiality of the institution. Currently, we are required to
submit resolution plans as prescribed by December 31, 2013.
Durbin Amendment The Durbin Amendment to the Dodd-Frank Act instructed the Federal Reserve to
establish the rate merchants pay banks for electronic clearing of debit card transactions (i.e.,
the interchange rate). The Federal Reserve recently issued its final rule establishing standards
for debit card interchange fees and prohibiting network exclusivity arrangements and routing
restrictions. The final rule establishes standards for assessing whether debit card interchange
fees received by debit card issuers are reasonable and proportional to the costs incurred by
issuers for electronic debit transactions. Under the final rule, the maximum permissible
interchange fee that an issuer may receive for an electronic debit transaction will be the sum of
21 cents per transaction, 1 cent fraud prevention adjustment, and 5 basis points multiplied by the
value of the transaction. This provision regarding debit card interchange fees became effective on
October 1, 2011. Based on the final rule, we expect our 2011 fourth quarter electronic banking
income to decline from the 2011 third quarter level by approximately 50%, or $16 million.
Recent Industry Developments
Recent industry events and related supervisory guidance brought about by the continued weak
housing market have caused us to evaluate certain aspects of our mortgage operations. This
included a review of our foreclosure documentation, MSR valuation, and representation and warranty
reserve level. Additionally, we are evaluating potential impacts from recent announcements of the
enhanced Home Affordable Refinance Program (HARP) and by PMI Mortgage Insurance Co. (PMI).
Foreclosure Documentation On June 30, 2011, the OCC issued OCC Bulletin 2011-29 clarifying their
expectations for the oversight and management of mortgage foreclosure activities by national banks
and directing national banks to perform a self-assessment no later than September 30, 2011. We
believe that, with the self-assessments we have performed and will continue to perform, we are in
compliance with the OCC expectation for self-assessment.
Mortgage Servicing Rights MSR fair values are estimated based on residential mortgage servicing
revenue in excess of estimated market costs to service the underlying loans. Historically, the
estimated market cost to service has been stable. Due to changes in the regulatory environment
related to loan servicing and foreclosure activities, costs to service may potentially increase,
however the potential impact on the market costs to service remains uncertain. Certain large
residential mortgage loan servicers entered into consent orders with banking regulators in April
2011, which require the servicers to remedy deficiencies and unsafe or unsound practices and to
enhance residential mortgage servicing and foreclosure processes. It is unclear what impact this
may ultimately have on market costs to service.
Representation and Warranty Reserve We primarily conduct our loan sale and securitization
activity with FNMA and FHLMC. In connection with these and other sale and securitization
transactions, we make representations and warranties that the loans meet certain criteria, such as
collateral type and underwriting standards. We may be required to repurchase individual loans and
/ or indemnify these organizations against losses due to material breaches of these representations
and warranties. At September 30, 2011, we had a reserve for such losses of $23.9 million, which is
included in accrued expenses and other liabilities.
8
Home Affordable Refinance Program The FHFA has announced changes to the Home Affordable
Refinance Program designed to attract more borrowers with FNMA and FHLMC backed mortgages that can
benefit from refinancing their residential mortgage loans under current low interest rates. The
new operational details are to be issued by November 15, 2011. We do not expect the impact to be
material.
PMI Mortgage Insurance Co. (PMI) On August 19, 2011, PMI informed its customers that it was
required to stop writing new commitments and we stopped doing new business with PMI at that time.
On October 24, 2011, PMI informed all policyholders, insured parties, and servicers of loans
insured by PMI that the Director of the Arizona Department of Insurance (Director) obtained an
Order Directing Full and Exclusive Possession and Control of Insurer (the Order) with respect to
PMI. Effective October 24, 2011, and pursuant to the Order, instead of a moratorium on claims
payments, the Director instituted a partial claims payment plan. Claim payments will be made at
50%, with the remaining amount deferred as a policyholder claim. PMI has not been a significant
provider of mortgage insurance for loans in our portfolio. We utilize a number of insurance
providers, limiting our risk associated with any one provider. We do not expect the exposure
associated with our owned residential mortgage portfolio to have a material impact on our results
of operations or financial position.
Expectations
The lack of prospects for meaningful economic improvement, higher interest rates, and wider
spreads between short-term and long-term interest rates for the foreseeable future is a challenge.
For example, broad-based loan growth, as well as growth in certain fee income activities, is
expected to be less than would otherwise be the case in an expanding economy, even though growth in
certain portfolios and activities is anticipated. Further, a period of prolonged low interest
rates is expected to put pressure on our net interest margin. This would reflect more compression
in loan and investment securities yields relative to any declines in deposit and funding rates. In
addition, deposit inflows over and above any reinvestment opportunities at appropriate risk
adjusted spreads means we may elect to curtail deposit growth, typically an engine of revenue
growth. These revenue headwinds are magnified by the continued fragility of business and consumer
confidence that is expected to continue the postponement of borrowing and investment decisions.
Nevertheless, our success in growing and deepening relationships presents us with an opportunity to
selectively expand revenue, while maintaining disciplined loan and deposit pricing, as well as
conservative credit underwriting.
Net interest income is expected to continue to show very modest improvement from the third
quarter level. The momentum we are seeing in loan and low cost deposit growth is expected to
continue, yet the benefits will be mostly offset by pressure on the net interest margin due to the
expected continued mix shift to higher quality loans and lower securities reinvestment rates that
reflect the low absolute level and shape of the yield curve. If the current interest rate
environment, which has partially resulted from the Federal Reserve Maturity Extension Program
Operation Twist, remains unchanged through 2012, it could cause our net interest margin to drop
modestly below our long-term range of 3.30% to 3.75%. Our C&I portfolio is expected to continue to
show meaningful growth with much of this reflecting the positive impact from strategic initiatives
to expand our commercial lending expertise into areas like specialty banking, asset based lending,
and equipment financing, in addition to our long-standing continued support of middle market and
small business lending. For automobile loans, we expect to see strong growth from September 30,
2011 balances. Residential mortgages are expected to show modest growth, with CRE continuing to
experience modest declines.
We again anticipate the increase in total core deposits to match that of loans, reflecting
continued growth in consumer households and commercial relationships. Further, we expect the shift
toward low and no cost demand deposits and money market accounts will continue.
Noninterest income is expected to show a modest decline in the 2011 fourth quarter, primarily
due to an anticipated 50%, or $16 million, decline in electronic banking income from the third
quarter, given the newly mandated lower interchange fee structure implemented October 1, 2011. We
expect to see continued growth of service charge income commensurate with customer growth and
increased product penetration. Mortgage banking income should increase as the third quarters
sizable MSR impairment is not expected to repeat. We also anticipate continued growth in the
contribution from other key fee income activities including capital markets, treasury management
services, and brokerage, reflecting the impact of our cross-sell and product penetration
initiatives throughout the company as well as the positive impact from strategic initiatives.
Expense levels are expected to modestly decline in coming quarters though strategic actions
like the current debit card conversion may cause short-term fluctuations.
Nonaccrual loans and net charge-offs are expected to continue to decline. Provision for
credit losses should remain near current levels, yet there could be some volatility given the
uncertain and uneven nature of the economic recovery.
We anticipate the effective tax rate for the foreseeable future to be in the range of 24% to
27%.
9
DISCUSSION OF RESULTS OF OPERATIONS
This section provides a review of financial performance from a consolidated perspective. It
also includes a Significant Items section that summarizes key issues important for a complete
understanding of performance trends. Key Unaudited Condensed Consolidated Balance Sheet and
Statement of Income trends are discussed. All earnings per share data are reported on a diluted
basis. For additional insight on financial performance, please read this section in conjunction
with the Business Segment Discussion.
10
Table 1 Selected Quarterly Income Statement Data (1)
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2011 |
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2010 |
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(dollar amounts in thousands, except per share amounts) |
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Third |
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Second |
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First |
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Fourth |
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Third |
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Interest income |
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$ |
490,996 |
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$ |
492,137 |
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$ |
501,877 |
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$ |
528,291 |
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$ |
534,669 |
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Interest expense |
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84,518 |
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|
88,800 |
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|
97,547 |
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112,997 |
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124,707 |
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Net interest income |
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406,478 |
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403,337 |
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404,330 |
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415,294 |
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409,962 |
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Provision for credit losses |
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43,586 |
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35,797 |
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49,385 |
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86,973 |
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119,160 |
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Net interest income after provision for credit losses |
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362,892 |
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367,540 |
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354,945 |
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328,321 |
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290,802 |
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Service charges on deposit accounts |
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65,184 |
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60,675 |
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54,324 |
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55,810 |
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65,932 |
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Mortgage banking income |
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12,791 |
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23,835 |
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22,684 |
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53,169 |
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52,045 |
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Trust services |
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29,473 |
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30,392 |
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30,742 |
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29,394 |
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26,997 |
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Electronic banking |
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32,714 |
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31,728 |
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28,786 |
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28,900 |
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28,090 |
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Insurance income |
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17,220 |
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16,399 |
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17,945 |
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19,678 |
|
|
|
19,801 |
|
Brokerage income |
|
|
20,349 |
|
|
|
20,819 |
|
|
|
20,511 |
|
|
|
16,953 |
|
|
|
16,575 |
|
Bank owned life insurance income |
|
|
15,644 |
|
|
|
17,602 |
|
|
|
14,819 |
|
|
|
16,113 |
|
|
|
14,091 |
|
Automobile operating lease income |
|
|
5,890 |
|
|
|
7,307 |
|
|
|
8,847 |
|
|
|
10,463 |
|
|
|
11,356 |
|
Securities gains (losses) |
|
|
(1,350 |
) |
|
|
1,507 |
|
|
|
40 |
|
|
|
(103 |
) |
|
|
(296 |
) |
Other income |
|
|
60,644 |
|
|
|
45,503 |
|
|
|
38,247 |
|
|
|
33,843 |
|
|
|
32,552 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest income |
|
|
258,559 |
|
|
|
255,767 |
|
|
|
236,945 |
|
|
|
264,220 |
|
|
|
267,143 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personnel costs |
|
|
226,835 |
|
|
|
218,570 |
|
|
|
219,028 |
|
|
|
212,184 |
|
|
|
208,272 |
|
Outside data processing and other services |
|
|
49,602 |
|
|
|
43,889 |
|
|
|
40,282 |
|
|
|
40,943 |
|
|
|
38,553 |
|
Net occupancy |
|
|
26,967 |
|
|
|
26,885 |
|
|
|
28,436 |
|
|
|
26,670 |
|
|
|
26,718 |
|
Deposit and other insurance expense |
|
|
17,492 |
|
|
|
23,823 |
|
|
|
17,896 |
|
|
|
23,320 |
|
|
|
23,406 |
|
Professional services |
|
|
20,281 |
|
|
|
20,080 |
|
|
|
13,465 |
|
|
|
21,021 |
|
|
|
20,672 |
|
Equipment |
|
|
22,262 |
|
|
|
21,921 |
|
|
|
22,477 |
|
|
|
22,060 |
|
|
|
21,651 |
|
Marketing |
|
|
22,251 |
|
|
|
20,102 |
|
|
|
16,895 |
|
|
|
16,168 |
|
|
|
20,921 |
|
Amortization of intangibles |
|
|
13,387 |
|
|
|
13,386 |
|
|
|
13,370 |
|
|
|
15,046 |
|
|
|
15,145 |
|
OREO and foreclosure expense |
|
|
4,668 |
|
|
|
4,398 |
|
|
|
3,931 |
|
|
|
10,502 |
|
|
|
12,047 |
|
Automobile operating lease expense |
|
|
4,386 |
|
|
|
5,434 |
|
|
|
6,836 |
|
|
|
8,142 |
|
|
|
9,159 |
|
Other expense |
|
|
30,987 |
|
|
|
29,921 |
|
|
|
48,083 |
|
|
|
38,537 |
|
|
|
30,765 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest expense |
|
|
439,118 |
|
|
|
428,409 |
|
|
|
430,699 |
|
|
|
434,593 |
|
|
|
427,309 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
182,333 |
|
|
|
194,898 |
|
|
|
161,191 |
|
|
|
157,948 |
|
|
|
130,636 |
|
Provision for income taxes |
|
|
38,942 |
|
|
|
48,980 |
|
|
|
34,745 |
|
|
|
35,048 |
|
|
|
29,690 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
143,391 |
|
|
$ |
145,918 |
|
|
$ |
126,446 |
|
|
$ |
122,900 |
|
|
$ |
100,946 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends on preferred shares |
|
|
7,703 |
|
|
|
7,704 |
|
|
|
7,703 |
|
|
|
83,754 |
|
|
|
29,495 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income applicable to common shares |
|
$ |
135,688 |
|
|
$ |
138,214 |
|
|
$ |
118,743 |
|
|
$ |
39,146 |
|
|
$ |
71,451 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average common shares basic |
|
|
863,911 |
|
|
|
863,358 |
|
|
|
863,359 |
|
|
|
757,924 |
|
|
|
716,911 |
|
Average common shares diluted (2) |
|
|
867,633 |
|
|
|
867,469 |
|
|
|
867,237 |
|
|
|
760,582 |
|
|
|
719,567 |
|
|
Net income per common share basic |
|
$ |
0.16 |
|
|
$ |
0.16 |
|
|
$ |
0.14 |
|
|
$ |
0.05 |
|
|
$ |
0.10 |
|
Net income per common share diluted |
|
|
0.16 |
|
|
|
0.16 |
|
|
|
0.14 |
|
|
|
0.05 |
|
|
|
0.10 |
|
Cash dividends declared per common share |
|
|
0.04 |
|
|
|
0.01 |
|
|
|
0.01 |
|
|
|
0.01 |
|
|
|
0.01 |
|
|
Return on average total assets |
|
|
1.05 |
% |
|
|
1.11 |
% |
|
|
0.96 |
% |
|
|
0.90 |
% |
|
|
0.76 |
% |
Return on average common shareholders equity |
|
|
10.8 |
|
|
|
11.6 |
|
|
|
10.3 |
|
|
|
3.8 |
|
|
|
7.4 |
|
Return on average tangible common shareholders equity (3) |
|
|
13.0 |
|
|
|
13.3 |
|
|
|
12.7 |
|
|
|
5.6 |
|
|
|
10.0 |
|
Net interest margin (4) |
|
|
3.34 |
|
|
|
3.40 |
|
|
|
3.42 |
|
|
|
3.37 |
|
|
|
3.45 |
|
Efficiency ratio (5) |
|
|
63.5 |
|
|
|
62.7 |
|
|
|
64.7 |
|
|
|
61.4 |
|
|
|
60.6 |
|
Effective tax rate |
|
|
21.4 |
|
|
|
25.1 |
|
|
|
21.6 |
|
|
|
22.2 |
|
|
|
22.7 |
|
Revenue FTE |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
$ |
406,478 |
|
|
$ |
403,337 |
|
|
$ |
404,330 |
|
|
$ |
415,294 |
|
|
$ |
409,962 |
|
FTE adjustment |
|
|
3,658 |
|
|
|
3,834 |
|
|
|
3,945 |
|
|
|
3,708 |
|
|
|
2,631 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income (4) |
|
|
410,136 |
|
|
|
407,171 |
|
|
|
408,275 |
|
|
|
419,002 |
|
|
|
412,593 |
|
Noninterest income |
|
|
258,559 |
|
|
|
255,767 |
|
|
|
236,945 |
|
|
|
264,220 |
|
|
|
267,143 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue (4) |
|
$ |
668,695 |
|
|
$ |
662,938 |
|
|
$ |
645,220 |
|
|
$ |
683,222 |
|
|
$ |
679,736 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Comparisons for presented periods are impacted by a number of factors. Refer
to Significant Items. |
|
(2) |
|
For periods presented prior to their repurchase, the impact of the convertible
preferred stock issued in 2008 and the warrants issued to the U.S. Department of the Treasury in
2008 related to Huntingtons participation in the voluntary Capital Purchase Program was excluded
from the diluted share calculation because the result was more than basic earnings per common share
(anti-dilutive) for those periods. The convertible preferred stock and warrants were repurchased
in December 2010 and January 2011, respectively. |
11
|
|
|
(3) |
|
Net income excluding expense for amortization of intangibles for the period divided
by average tangible common shareholders equity. Average tangible common shareholders equity
equals average total common shareholders equity less average intangible assets and goodwill.
Expense for amortization of intangibles and average intangible assets are net of deferred tax
liability, and calculated assuming a 35% tax rate. |
|
(4) |
|
On a fully-taxable equivalent (FTE) basis assuming a 35% tax rate. |
|
(5) |
|
Noninterest expense less amortization of intangibles and goodwill impairment
divided by the sum of FTE net interest income and noninterest income excluding securities gains
(losses). |
12
Table 2 Selected Year to Date Income Statement Data(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
|
Change |
|
(dollar amounts in thousands, except per share amounts) |
|
2011 |
|
|
2010 |
|
|
Amount |
|
|
Percent |
|
Interest income |
|
$ |
1,485,010 |
|
|
$ |
1,617,101 |
|
|
$ |
(132,091 |
) |
|
|
(8 |
)% |
Interest expense |
|
|
270,865 |
|
|
|
413,590 |
|
|
|
(142,725 |
) |
|
|
(35 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
1,214,145 |
|
|
|
1,203,511 |
|
|
|
10,634 |
|
|
|
1 |
|
Provision for credit losses |
|
|
128,768 |
|
|
|
547,574 |
|
|
|
(418,806 |
) |
|
|
(76 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for credit losses |
|
|
1,085,377 |
|
|
|
655,937 |
|
|
|
429,440 |
|
|
|
65 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service charges on deposit accounts |
|
|
180,183 |
|
|
|
211,205 |
|
|
|
(31,022 |
) |
|
|
(15 |
) |
Mortgage banking income |
|
|
59,310 |
|
|
|
122,613 |
|
|
|
(63,303 |
) |
|
|
(52 |
) |
Trust services |
|
|
90,607 |
|
|
|
83,161 |
|
|
|
7,446 |
|
|
|
9 |
|
Electronic banking |
|
|
93,228 |
|
|
|
81,334 |
|
|
|
11,894 |
|
|
|
15 |
|
Insurance income |
|
|
51,564 |
|
|
|
56,735 |
|
|
|
(5,171 |
) |
|
|
(9 |
) |
Brokerage income |
|
|
61,679 |
|
|
|
51,901 |
|
|
|
9,778 |
|
|
|
19 |
|
Bank owned life insurance income |
|
|
48,065 |
|
|
|
44,953 |
|
|
|
3,112 |
|
|
|
7 |
|
Automobile operating lease income |
|
|
22,044 |
|
|
|
35,501 |
|
|
|
(13,457 |
) |
|
|
(38 |
) |
Securities gains (losses) |
|
|
197 |
|
|
|
(171 |
) |
|
|
368 |
|
|
|
N.R. |
|
Other income |
|
|
144,394 |
|
|
|
90,406 |
|
|
|
53,988 |
|
|
|
60 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest income |
|
|
751,271 |
|
|
|
777,638 |
|
|
|
(26,367 |
) |
|
|
(3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Personnel costs |
|
|
664,433 |
|
|
|
586,789 |
|
|
|
77,644 |
|
|
|
13 |
|
Outside data processing and other services |
|
|
133,773 |
|
|
|
118,305 |
|
|
|
15,468 |
|
|
|
13 |
|
Net occupancy |
|
|
82,288 |
|
|
|
81,192 |
|
|
|
1,096 |
|
|
|
1 |
|
Deposit and other insurance expense |
|
|
59,211 |
|
|
|
74,228 |
|
|
|
(15,017 |
) |
|
|
(20 |
) |
Professional services |
|
|
53,826 |
|
|
|
67,757 |
|
|
|
(13,931 |
) |
|
|
(21 |
) |
Equipment |
|
|
66,660 |
|
|
|
63,860 |
|
|
|
2,800 |
|
|
|
4 |
|
Marketing |
|
|
59,248 |
|
|
|
49,756 |
|
|
|
9,492 |
|
|
|
19 |
|
Amortization of intangibles |
|
|
40,143 |
|
|
|
45,432 |
|
|
|
(5,289 |
) |
|
|
(12 |
) |
OREO and foreclosure expense |
|
|
12,997 |
|
|
|
28,547 |
|
|
|
(15,550 |
) |
|
|
(54 |
) |
Automobile operating lease expense |
|
|
16,656 |
|
|
|
28,892 |
|
|
|
(12,236 |
) |
|
|
(42 |
) |
Other expense |
|
|
108,991 |
|
|
|
94,455 |
|
|
|
14,536 |
|
|
|
15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest expense |
|
|
1,298,226 |
|
|
|
1,239,213 |
|
|
|
59,013 |
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
538,422 |
|
|
|
194,362 |
|
|
|
344,060 |
|
|
|
177 |
|
Provision for income taxes |
|
|
122,667 |
|
|
|
4,915 |
|
|
|
117,752 |
|
|
|
2,396 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
415,755 |
|
|
$ |
189,447 |
|
|
$ |
226,308 |
|
|
|
119 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared on preferred shares |
|
|
23,110 |
|
|
|
88,278 |
|
|
|
(65,168 |
) |
|
|
(74 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income applicable to common shares |
|
$ |
392,645 |
|
|
$ |
101,169 |
|
|
$ |
291,476 |
|
|
|
288 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Average common shares basic |
|
|
863,542 |
|
|
|
716,604 |
|
|
|
146,938 |
|
|
|
21 |
% |
Average common shares diluted (2) |
|
|
867,446 |
|
|
|
719,182 |
|
|
|
148,264 |
|
|
|
21 |
|
Per common share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share basic |
|
$ |
0.45 |
|
|
$ |
0.14 |
|
|
$ |
0.31 |
|
|
|
221 |
% |
Net income per common share diluted |
|
|
0.45 |
|
|
|
0.14 |
|
|
|
0.31 |
|
|
|
221 |
|
Cash dividends declared |
|
|
0.06 |
|
|
|
0.03 |
|
|
|
0.03 |
|
|
|
100 |
|
Return on average total assets |
|
|
1.04 |
% |
|
|
0.49 |
% |
|
|
0.55 |
% |
|
|
112 |
% |
Return on average common shareholders equity |
|
|
10.9 |
|
|
|
3.6 |
|
|
|
7.3 |
|
|
|
203 |
|
Return on average tangible common shareholders equity (3) |
|
|
13.2 |
|
|
|
5.6 |
|
|
|
7.6 |
|
|
|
136 |
|
Net interest margin (4) |
|
|
3.39 |
|
|
|
3.46 |
|
|
|
(0.07 |
) |
|
|
(2 |
) |
Efficiency ratio (5) |
|
|
63.6 |
|
|
|
60.0 |
|
|
|
3.6 |
|
|
|
6 |
|
Effective tax rate |
|
|
22.8 |
|
|
|
2.5 |
|
|
|
20.3 |
|
|
|
812 |
|
Revenue FTE |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
$ |
1,214,145 |
|
|
$ |
1,203,511 |
|
|
$ |
10,634 |
|
|
|
1 |
% |
FTE adjustment |
|
|
11,437 |
|
|
|
7,369 |
|
|
|
4,068 |
|
|
|
55 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income (4) |
|
|
1,225,582 |
|
|
|
1,210,880 |
|
|
|
14,702 |
|
|
|
1 |
|
Noninterest income |
|
|
751,271 |
|
|
|
777,638 |
|
|
|
(26,367 |
) |
|
|
(3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue (4) |
|
$ |
1,976,853 |
|
|
$ |
1,988,518 |
|
|
$ |
(11,665 |
) |
|
|
(1) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N.R. |
|
- Not relevant, as denominator of calculation is a loss in prior period compared with income
in current period. |
|
(1) |
|
Comparisons for presented periods are impacted by a number of factors. Refer
to Significant Items. |
13
|
|
|
(2) |
|
For all periods presented, the impact of the convertible preferred stock issued in
2008 and the warrants issued to the U.S. Department of the Treasury in 2008 related to Huntingtons
participation in the voluntary Capital Purchase Program was excluded from the diluted share
calculation because the result was more than basic earnings per common share (anti-dilutive) for
the periods. The convertible preferred stock and warrants were repurchased in December 2010 and
January 2011, respectively. |
|
(3) |
|
Net income excluding expense for amortization of intangibles for the period divided
by average tangible common shareholders equity. Average tangible common shareholders equity
equals average total common shareholders equity less average intangible assets and goodwill.
Expense for amortization of intangibles and average intangible assets are net of deferred tax
liability, and calculated assuming a 35% tax rate. |
|
(4) |
|
On a fully-taxable equivalent (FTE) basis assuming a 35% tax rate. |
|
(5) |
|
Noninterest expense less amortization of intangibles and goodwill impairment
divided by the sum of FTE net interest income and noninterest income excluding securities gains
(losses). |
Significant Items
Definition of Significant Items
From time-to-time, revenue, expenses, or taxes, are impacted by items judged by us to be
outside of ordinary banking activities and / or by items that, while they may be associated with
ordinary banking activities, are so unusually large that their outsized impact is believed by us at
that time to be infrequent or short-term in nature. We refer to such items as Significant Items.
Most often, these Significant Items result from factors originating outside the company; e.g.,
regulatory actions / assessments, windfall gains, changes in accounting principles, one-time tax
assessments / refunds, litigation actions, etc. In other cases, they may result from our decisions
associated with significant corporate actions out of the ordinary course of business; e.g., merger
/ restructuring charges, recapitalization actions, goodwill impairment, etc.
Even though certain revenue and expense items are naturally subject to more volatility than
others due to changes in market and economic environment conditions, as a general rule volatility
alone does not define a Significant Item. For example, changes in the provision for credit losses,
gains / losses from investment activities, asset valuation writedowns, etc., reflect ordinary
banking activities and are, therefore, typically excluded from consideration as a Significant Item.
We believe the disclosure of Significant Items provides a better understanding of our
performance and trends to ascertain which of such items, if any, to include or exclude from an
analysis of our performance; i.e., within the context of determining how that performance differed
from expectations, as well as how, if at all, to adjust estimates of future performance
accordingly. To this end, we adopted a practice of listing Significant Items in our external
disclosure documents (e.g., earnings press releases, investor presentations, Forms 10-Q and 10-K).
Significant Items for any particular period are not intended to be a complete list of items
that may materially impact current or future period performance.
Significant Items Influencing Financial Performance Comparisons
Earnings comparisons were impacted by the Significant Items summarized below.
|
1. |
|
Litigation Reserve. During the 2011 first quarter, $17.0 million of additions to
litigation reserves were recorded as other noninterest expense. This resulted in a negative
impact of $0.01 per common share. |
|
2. |
|
Franklin Relationship. Our relationship with Franklin was acquired in the Sky Financial
acquisition in 2007. Significant events relating to this relationship following the
acquisition, and the impacts of those events on our reported results were as follows: |
|
|
|
On March 31, 2009, we restructured our relationship with Franklin. During the 2010
first quarter, a $38.2 million ($0.05 per common share) 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 restructuring. |
|
|
|
|
During the 2010 second quarter, the remaining portfolio of Franklin-related loans
($333.0 million of residential mortgages, and $64.7 million of home equity loans) was
transferred to loans held for sale. At the time of the transfer, the
loans were marked to the lower of cost or fair value, less costs to sell, of $323.4
million, resulting in $75.5 million of charge-offs, and the provision for credit losses
commensurately increased $75.5 million ($0.07 per common share). |
14
The following table reflects the earnings impact of the above-mentioned significant items for
periods affected by this Results of Operations discussion:
Table 3 Significant Items Influencing Earnings Performance Comparison
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
(dollar amounts in thousands, except per |
|
September 30, 2011 |
|
|
June 30, 2011 |
|
|
September 30, 2010 |
|
share amounts) |
|
After-tax |
|
|
EPS |
|
|
After-tax |
|
|
EPS |
|
|
After-tax |
|
|
EPS |
|
Net income |
|
$ |
143,391 |
|
|
|
|
|
|
$ |
145,918 |
|
|
|
|
|
|
$ |
100,946 |
|
|
|
|
|
Earnings per share, after-tax |
|
|
|
|
|
$ |
0.16 |
|
|
|
|
|
|
$ |
0.16 |
|
|
|
|
|
|
$ |
0.10 |
|
Change from prior quarter $ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.02 |
|
|
|
|
|
|
|
0.07 |
|
Change from prior quarter % |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
14.3 |
% |
|
|
|
|
|
|
233.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change from year-ago $ |
|
|
|
|
|
$ |
0.06 |
|
|
|
|
|
|
$ |
0.13 |
|
|
|
|
|
|
$ |
0.43 |
|
Change from year-ago % |
|
|
|
|
|
|
60 |
% |
|
|
|
|
|
|
433 |
% |
|
|
|
|
|
|
N.R. |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
|
|
September 30, 2011 |
|
|
September 30, 2010 |
|
(dollar amounts in thousands) |
|
After-tax |
|
|
EPS |
|
|
After-tax |
|
|
EPS |
|
Net income |
|
$ |
415,755 |
|
|
|
|
|
|
$ |
189,447 |
|
|
|
|
|
Earnings per share, after-tax |
|
|
|
|
|
$ |
0.45 |
|
|
|
|
|
|
$ |
0.14 |
|
Change from a year-ago $ |
|
|
|
|
|
|
0.31 |
|
|
|
|
|
|
|
6.22 |
|
Change from a year-ago % |
|
|
|
|
|
|
221 |
% |
|
|
|
|
|
|
N.R. |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Significant Items - favorable (unfavorable) impact: |
|
Earnings (1) |
|
|
EPS |
|
|
Earnings (1) |
|
|
EPS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Franklin-related loans transferred to held for sale |
|
$ |
|
|
|
$ |
|
|
|
$ |
(75,500 |
) |
|
$ |
(0.07 |
) |
Net tax benefit recognized (2) |
|
|
|
|
|
|
|
|
|
|
38,222 |
|
|
|
0.05 |
|
Litigation reserves addition |
|
|
(17,028 |
) |
|
|
(0.01 |
) |
|
|
|
|
|
|
|
|
|
|
|
N.R. |
|
- Not relevant, as denominator of calculation is a loss in prior period compared with income
in current period. |
|
(1) |
|
Pretax unless otherwise noted. |
|
(2) |
|
After-tax. |
Pretax, Pre-provision Income Trends
One non-GAAP performance measurement that we believe is useful in analyzing our underlying
performance trends is pretax, pre-provision income. This is the level of pretax earnings adjusted
to exclude the impact of: (a) provision expense, (b) investment securities gains/losses, which are
excluded because securities market valuations may become particularly volatile in times of economic
stress, (c) amortization of intangibles expense, which is excluded because the return on tangible
common equity is a key measurement we use to gauge performance trends, and (d) certain other items
identified by us (see Significant Items) that we believe may distort our underlying performance
trends.
15
The following table reflects pretax, pre-provision income for each of the past five quarters:
Table 4 Pretax, Pre-provision Income (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011 |
|
|
2010 |
|
(dollar amounts in thousands) |
|
Third |
|
|
Second |
|
|
First |
|
|
Fourth |
|
|
Third |
|
|
Income before income taxes |
|
$ |
182,333 |
|
|
$ |
194,898 |
|
|
$ |
161,191 |
|
|
$ |
157,948 |
|
|
$ |
130,636 |
|
Add: Provision for credit losses |
|
|
43,586 |
|
|
|
35,797 |
|
|
|
49,385 |
|
|
|
86,973 |
|
|
|
119,160 |
|
Less: Securities gains (losses) |
|
|
(1,350 |
) |
|
|
1,507 |
|
|
|
40 |
|
|
|
(103 |
) |
|
|
(296 |
) |
Add: Amortization of intangibles |
|
|
13,387 |
|
|
|
13,386 |
|
|
|
13,370 |
|
|
|
15,046 |
|
|
|
15,145 |
|
Less: Litigation reserves addition |
|
|
|
|
|
|
|
|
|
|
(17,028 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total pretax, pre-provision income |
|
$ |
240,656 |
|
|
$ |
242,574 |
|
|
$ |
240,934 |
|
|
$ |
260,070 |
|
|
$ |
265,237 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in total pretax, pre-provision income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior quarter change amount |
|
$ |
(1,918 |
) |
|
$ |
1,640 |
|
|
$ |
(19,136 |
) |
|
$ |
(5,167 |
) |
|
$ |
(5,237 |
) |
Prior quarter change percent |
|
|
(1) |
% |
|
|
1 |
% |
|
|
(7) |
% |
|
|
(2) |
% |
|
|
(2) |
% |
|
|
|
(1) |
|
Pretax, pre-provision income is a non-GAAP financial measure. Any ratio utilizing this
financial measure is also non-GAAP. This financial measure has been included as it is
considered to be an important metric with which to analyze and evaluate our results of
operations and financial strength. Other companies may calculate this financial measure
differently. |
Pretax, pre-provision income was $240.7 million in the 2011 third quarter, down $1.9
million, or 1%, from the prior quarter. As discussed in the sections that follow, the decrease
primarily reflected the negative impact from a lower net interest margin percentage and higher
noninterest expense as compared to the prior quarter.
Net Interest Income / Average Balance Sheet
The following table details the change in our average loans / leases and deposits:
Table 5 Average Loans/Leases and Deposits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third Quarter |
|
|
Second Quarter |
|
|
3Q11 vs 3Q10 |
|
|
3Q11 vs 2Q11 |
|
(dollar amounts in millions) |
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
Amount |
|
|
Percent |
|
|
Amount |
|
|
Percent |
|
Loans/Leases |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial |
|
$ |
13,664 |
|
|
$ |
12,393 |
|
|
$ |
13,370 |
|
|
$ |
1,271 |
|
|
|
10 |
% |
|
$ |
294 |
|
|
|
2 |
% |
Commercial real estate |
|
|
6,111 |
|
|
|
7,073 |
|
|
|
6,233 |
|
|
|
(962 |
) |
|
|
(14 |
) |
|
|
(122 |
) |
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial |
|
|
19,775 |
|
|
|
19,466 |
|
|
|
19,603 |
|
|
|
309 |
|
|
|
2 |
|
|
|
172 |
|
|
|
1 |
|
Automobile |
|
|
6,211 |
|
|
|
5,140 |
|
|
|
5,954 |
|
|
|
1,071 |
|
|
|
21 |
|
|
|
257 |
|
|
|
4 |
|
Home equity |
|
|
8,002 |
|
|
|
7,567 |
|
|
|
7,874 |
|
|
|
435 |
|
|
|
6 |
|
|
|
128 |
|
|
|
2 |
|
Residential mortgage |
|
|
4,788 |
|
|
|
4,389 |
|
|
|
4,566 |
|
|
|
399 |
|
|
|
9 |
|
|
|
222 |
|
|
|
5 |
|
Other loans |
|
|
521 |
|
|
|
653 |
|
|
|
538 |
|
|
|
(132 |
) |
|
|
(20 |
) |
|
|
(17 |
) |
|
|
(3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer |
|
|
19,522 |
|
|
|
17,749 |
|
|
|
18,932 |
|
|
|
1,773 |
|
|
|
10 |
|
|
|
590 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans and leases |
|
$ |
39,297 |
|
|
$ |
37,215 |
|
|
$ |
38,535 |
|
|
$ |
2,082 |
|
|
|
6 |
% |
|
$ |
762 |
|
|
|
2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposits noninterest-bearing |
|
$ |
8,719 |
|
|
$ |
6,768 |
|
|
$ |
7,806 |
|
|
$ |
1,951 |
|
|
|
29 |
% |
|
$ |
913 |
|
|
|
12 |
% |
Demand deposits interest-bearing |
|
|
5,573 |
|
|
|
5,319 |
|
|
|
5,565 |
|
|
|
254 |
|
|
|
5 |
|
|
|
8 |
|
|
|
|
|
Money market deposits |
|
|
13,321 |
|
|
|
12,336 |
|
|
|
12,879 |
|
|
|
985 |
|
|
|
8 |
|
|
|
442 |
|
|
|
3 |
|
Savings and other domestic time
deposits |
|
|
4,752 |
|
|
|
4,639 |
|
|
|
4,778 |
|
|
|
113 |
|
|
|
2 |
|
|
|
(26 |
) |
|
|
(1 |
) |
Core certificates of deposit |
|
|
7,592 |
|
|
|
8,948 |
|
|
|
8,079 |
|
|
|
(1,356 |
) |
|
|
(15 |
) |
|
|
(487 |
) |
|
|
(6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total core deposits |
|
|
39,957 |
|
|
|
38,010 |
|
|
|
39,107 |
|
|
|
1,947 |
|
|
|
5 |
|
|
|
850 |
|
|
|
2 |
|
Other deposits |
|
|
2,321 |
|
|
|
2,636 |
|
|
|
2,147 |
|
|
|
(315 |
) |
|
|
(12 |
) |
|
|
174 |
|
|
|
8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits |
|
$ |
42,278 |
|
|
$ |
40,646 |
|
|
$ |
41,254 |
|
|
$ |
1,632 |
|
|
|
4 |
% |
|
$ |
1,024 |
|
|
|
2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
2011 Third Quarter versus 2010 Third Quarter
Fully-taxable equivalent net interest income decreased $2.5 million, or 1%, from the year-ago
quarter. This reflected the benefit of a $1.3 billion, or 3%, increase in average total earning
assets partially offset by an 11 basis point decline in the net interest margin. The increase in
average earning assets reflected:
|
|
|
$2.1 billion, or 6%, increase in average total loans and leases. |
Partially offset by:
|
|
|
$0.3 billion, or 3%, decrease in average total available-for-sale and other securities
and held-to-maturity securities. |
|
|
|
$0.4 billion, or 64%, decrease in average loans held for sale. |
The 11 basis point decline in the net interest margin reflected a reduction in derivatives
income, lower loan and securities yields, partially offset by the positive impacts of increases in
low cost deposits and improved deposit pricing.
The $2.1 billion, or 6%, increase in average total loans and leases primarily reflected:
|
|
|
$1.3 billion, or 10%, growth in the average C&I portfolio reflected a combination of
factors. This included the benefits from our strategic initiatives including a focus on
large corporate, asset based lending, and equipment finance. In addition, we continued to
see growth in more traditional middle-market, business banking, and automobile floorplan
loans. This growth was evident despite line utilization rates that remained well below
historical norms. |
|
|
|
$1.1 billion, or 21%, increase in the average automobile portfolio. Automobile lending
is a core competency and continues to be an area of targeted growth. The growth from the
year-ago quarter exhibited further penetration within our historical geographic footprint,
as well as the positive impacts of our expansion into Eastern Pennsylvania and five New
England states. Origination quality remained high as measured by all of our internal
quality metrics. |
|
|
|
$0.4 billion, or 9%, increase in average residential mortgages. |
|
|
|
$0.4 billion, or 6%, increase in average home equity loans. |
Partially offset by:
|
|
|
$1.0 billion, or 14%, decrease in the average CRE portfolio, reflecting the continued
execution of our plan to reduce the total CRE exposure, primarily in the noncore CRE
portfolio. This reduction is expected to continue, reflecting the combined impact of
amortization, pay downs, refinancing, and restructures. |
The $1.6 billion, or 4%, increase in average total deposits from the year-ago quarter reflected:
|
|
|
$1.9 billion, or 5%, growth in average total core deposits. The drivers of this change
were a $2.2 billion, or 18%, growth in average total demand deposits, and a $1.0 billion,
or 8%, growth in average money market deposits. Partially offset by $1.4 billion, or 15%,
decline in average core certificates of deposit. |
Partially offset by:
|
|
|
$0.3 billion, or 44%, decline in average other domestic deposits of $250,000 or more,
reflecting a strategy of reducing such noncore funding. |
2011 Third Quarter versus 2011 Second Quarter
FTE net interest income increased $3.0 million, or 1%, from the 2011 second quarter. This
reflected a $0.8 billion, or 2%, increase in average earning assets partially offset by a 6 basis
point decline in the FTE net interest margin. The increase in average earning assets reflected:
|
|
|
$0.8 billion, or 2%, increase in average total loans and leases. |
The
6 basis point decline in the net interest margin reflected a reduction in
derivatives income and lower loan yields, partially offset by the positive impact of increases in
low cost deposits and improved deposit pricing.
17
The $0.8 billion, or 2% (8% annualized), increase in average total loans and leases reflected:
|
|
|
$0.3 billion, or 2% (9% annualized), growth in the average C&I portfolio. The growth in
the C&I portfolio during the third quarter came from several business lines including large
corporate, equipment finance, business banking, and middle market. C&I utilization rates
were little changed from the end of the prior quarter. |
|
|
|
$0.3 billion, or 4% (17% annualized), growth in the average automobile portfolio. In
September, the bank completed a $1.0 billion securitization of automobile loans. We
continued to originate very high quality loans with attractive returns. We focus on
larger, multi-franchised, well-capitalized dealers that are rarely reliant on the success
of one franchise to generate profitability. While the used car market remained very
strong, we increased our originations of new vehicle loans, which reflected a reduced level
of manufacturer captive finance company incentive programs due to lower new vehicle
inventory levels in the market. |
|
|
|
$0.2 billion, or 5% (19% annualized), growth in residential mortgages as the bank
experienced the continuation of a year-long trend of customer preferences shifting to
shorter-term and variable rate mortgages. |
Partially offset by:
|
|
|
$0.1 billion, or 2% (8% annualized), decline in the average CRE portfolio, primarily as
a result of our on-going strategy to reduce our exposure to the commercial real estate
market. We were successful in reducing exposure across virtually all of the CRE project
types that we actively manage via our concentration management process. The decline in the
noncore CRE portfolio accounted for the vast majority of the decline in the total CRE
portfolio. The noncore CRE portfolio declines reflected paydowns, refinancing, and NCOs.
The core CRE portfolio continued to exhibit high quality characteristics with minimal
downgrade or NCO activity. |
The $1.0 billion, or 2% (10% annualized), increase in average total deposits from the 2011 second
quarter reflected:
|
|
|
$0.9 billion, or 7% (28% annualized), increase in total demand deposits. This was
driven primarily by growth in commercial and consumer noninterest-bearing demand deposits.
Commercial demand deposit growth reflected, in part, temporary deposits from several large
relationships. |
|
|
|
$0.4 billion, or 3% (14% annualized), increase in average money market deposits. |
Partially offset by:
|
|
|
$0.5 billion, or 6% (24% annualized), decrease in core certificates of deposits. |
Tables 6 and 7 reflect quarterly average balance sheets and rates earned and paid on
interest-earning assets and interest-bearing liabilities.
18
Table 6 Consolidated Quarterly Average Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Balances |
|
|
Change |
|
|
|
2011 |
|
|
2010 |
|
|
3Q11 vs. 3Q10 |
|
(dollar amounts in millions) |
|
Third |
|
|
Second |
|
|
First |
|
|
Fourth |
|
|
Third |
|
|
Amount |
|
|
Percent |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing deposits in banks |
|
$ |
164 |
|
|
$ |
131 |
|
|
$ |
130 |
|
|
$ |
218 |
|
|
$ |
282 |
|
|
$ |
(118 |
) |
|
|
(42) |
% |
Trading account securities |
|
|
92 |
|
|
|
112 |
|
|
|
144 |
|
|
|
297 |
|
|
|
110 |
|
|
|
(18 |
) |
|
|
(16 |
) |
Federal
funds sold and securities purchased under resale agreement |
|
|
|
|
|
|
21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans held for sale |
|
|
237 |
|
|
|
181 |
|
|
|
420 |
|
|
|
779 |
|
|
|
663 |
|
|
|
(426 |
) |
|
|
(64 |
) |
Available-for-sale and other securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable |
|
|
7,902 |
|
|
|
8,428 |
|
|
|
9,108 |
|
|
|
9,747 |
|
|
|
8,876 |
|
|
|
(974 |
) |
|
|
(11 |
) |
Tax-exempt |
|
|
421 |
|
|
|
436 |
|
|
|
445 |
|
|
|
449 |
|
|
|
365 |
|
|
|
56 |
|
|
|
15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available-for-sale and other securities |
|
|
8,323 |
|
|
|
8,864 |
|
|
|
9,553 |
|
|
|
10,196 |
|
|
|
9,241 |
|
|
|
(918 |
) |
|
|
(10 |
) |
Held-to-maturity securities taxable |
|
|
665 |
|
|
|
174 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
665 |
|
|
|
|
|
Loans and leases: (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial |
|
|
13,664 |
|
|
|
13,370 |
|
|
|
13,121 |
|
|
|
12,767 |
|
|
|
12,393 |
|
|
|
1,271 |
|
|
|
10 |
|
Commercial real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction |
|
|
670 |
|
|
|
554 |
|
|
|
611 |
|
|
|
716 |
|
|
|
989 |
|
|
|
(319 |
) |
|
|
(32 |
) |
Commercial |
|
|
5,441 |
|
|
|
5,679 |
|
|
|
5,913 |
|
|
|
6,082 |
|
|
|
6,084 |
|
|
|
(643 |
) |
|
|
(11 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate |
|
|
6,111 |
|
|
|
6,233 |
|
|
|
6,524 |
|
|
|
6,798 |
|
|
|
7,073 |
|
|
|
(962 |
) |
|
|
(14 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial |
|
|
19,775 |
|
|
|
19,603 |
|
|
|
19,645 |
|
|
|
19,565 |
|
|
|
19,466 |
|
|
|
309 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automobile |
|
|
6,211 |
|
|
|
5,954 |
|
|
|
5,701 |
|
|
|
5,520 |
|
|
|
5,140 |
|
|
|
1,071 |
|
|
|
21 |
|
Home equity |
|
|
8,002 |
|
|
|
7,874 |
|
|
|
7,728 |
|
|
|
7,709 |
|
|
|
7,567 |
|
|
|
435 |
|
|
|
6 |
|
Residential mortgage |
|
|
4,788 |
|
|
|
4,566 |
|
|
|
4,465 |
|
|
|
4,430 |
|
|
|
4,389 |
|
|
|
399 |
|
|
|
9 |
|
Other consumer |
|
|
521 |
|
|
|
538 |
|
|
|
559 |
|
|
|
576 |
|
|
|
653 |
|
|
|
(132 |
) |
|
|
(20 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer |
|
|
19,522 |
|
|
|
18,932 |
|
|
|
18,453 |
|
|
|
18,235 |
|
|
|
17,749 |
|
|
|
1,773 |
|
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans and leases |
|
|
39,297 |
|
|
|
38,535 |
|
|
|
38,098 |
|
|
|
37,800 |
|
|
|
37,215 |
|
|
|
2,082 |
|
|
|
6 |
|
Allowance for loan and lease losses |
|
|
(1,066 |
) |
|
|
(1,128 |
) |
|
|
(1,231 |
) |
|
|
(1,323 |
) |
|
|
(1,384 |
) |
|
|
318 |
|
|
|
(23 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loans and leases |
|
|
38,231 |
|
|
|
37,407 |
|
|
|
36,867 |
|
|
|
36,477 |
|
|
|
35,831 |
|
|
|
2,400 |
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total earning assets |
|
|
48,778 |
|
|
|
48,018 |
|
|
|
48,345 |
|
|
|
49,290 |
|
|
|
47,511 |
|
|
|
1,267 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks |
|
|
1,700 |
|
|
|
1,068 |
|
|
|
1,299 |
|
|
|
1,187 |
|
|
|
1,618 |
|
|
|
82 |
|
|
|
5 |
|
Intangible assets |
|
|
639 |
|
|
|
652 |
|
|
|
665 |
|
|
|
679 |
|
|
|
695 |
|
|
|
(56 |
) |
|
|
(8 |
) |
All other assets |
|
|
4,142 |
|
|
|
4,160 |
|
|
|
4,291 |
|
|
|
4,313 |
|
|
|
4,277 |
|
|
|
(135 |
) |
|
|
(3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
54,193 |
|
|
$ |
52,770 |
|
|
$ |
53,369 |
|
|
$ |
54,146 |
|
|
$ |
52,717 |
|
|
$ |
1,476 |
|
|
|
3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposits noninterest-bearing |
|
$ |
8,719 |
|
|
$ |
7,806 |
|
|
$ |
7,333 |
|
|
$ |
7,188 |
|
|
$ |
6,768 |
|
|
$ |
1,951 |
|
|
|
29 |
% |
Demand deposits interest-bearing |
|
|
5,573 |
|
|
|
5,565 |
|
|
|
5,357 |
|
|
|
5,317 |
|
|
|
5,319 |
|
|
|
254 |
|
|
|
5 |
|
Money market deposits |
|
|
13,321 |
|
|
|
12,879 |
|
|
|
13,492 |
|
|
|
13,158 |
|
|
|
12,336 |
|
|
|
985 |
|
|
|
8 |
|
Savings and other domestic deposits |
|
|
4,752 |
|
|
|
4,778 |
|
|
|
4,701 |
|
|
|
4,640 |
|
|
|
4,639 |
|
|
|
113 |
|
|
|
2 |
|
Core certificates of deposit |
|
|
7,592 |
|
|
|
8,079 |
|
|
|
8,391 |
|
|
|
8,646 |
|
|
|
8,948 |
|
|
|
(1,356 |
) |
|
|
(15 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total core deposits |
|
|
39,957 |
|
|
|
39,107 |
|
|
|
39,274 |
|
|
|
38,949 |
|
|
|
38,010 |
|
|
|
1,947 |
|
|
|
5 |
|
Other domestic time deposits of $250,000 or more |
|
|
387 |
|
|
|
467 |
|
|
|
606 |
|
|
|
737 |
|
|
|
690 |
|
|
|
(303 |
) |
|
|
(44 |
) |
Brokered deposits and negotiable CDs |
|
|
1,533 |
|
|
|
1,333 |
|
|
|
1,410 |
|
|
|
1,575 |
|
|
|
1,495 |
|
|
|
38 |
|
|
|
3 |
|
Deposits in foreign offices |
|
|
401 |
|
|
|
347 |
|
|
|
374 |
|
|
|
443 |
|
|
|
451 |
|
|
|
(50 |
) |
|
|
(11 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits |
|
|
42,278 |
|
|
|
41,254 |
|
|
|
41,664 |
|
|
|
41,704 |
|
|
|
40,646 |
|
|
|
1,632 |
|
|
|
4 |
|
Short-term borrowings |
|
|
2,251 |
|
|
|
2,112 |
|
|
|
2,134 |
|
|
|
2,134 |
|
|
|
1,739 |
|
|
|
512 |
|
|
|
29 |
|
Federal Home Loan Bank advances |
|
|
285 |
|
|
|
97 |
|
|
|
30 |
|
|
|
112 |
|
|
|
188 |
|
|
|
97 |
|
|
|
52 |
|
Subordinated notes and other long-term debt |
|
|
3,030 |
|
|
|
3,249 |
|
|
|
3,525 |
|
|
|
3,558 |
|
|
|
3,672 |
|
|
|
(642 |
) |
|
|
(17 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities |
|
|
39,125 |
|
|
|
38,906 |
|
|
|
40,020 |
|
|
|
40,320 |
|
|
|
39,477 |
|
|
|
(352 |
) |
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All other liabilities |
|
|
1,017 |
|
|
|
913 |
|
|
|
994 |
|
|
|
993 |
|
|
|
952 |
|
|
|
65 |
|
|
|
7 |
|
Shareholders equity |
|
|
5,332 |
|
|
|
5,145 |
|
|
|
5,022 |
|
|
|
5,645 |
|
|
|
5,520 |
|
|
|
(188 |
) |
|
|
(3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity |
|
$ |
54,193 |
|
|
$ |
52,770 |
|
|
$ |
53,369 |
|
|
$ |
54,146 |
|
|
$ |
52,717 |
|
|
$ |
1,476 |
|
|
|
3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
For purposes of this analysis, NALs are reflected in the average balances of loans. |
19
Table 7 Consolidated Quarterly Net Interest Margin Analysis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Rates (2) |
|
|
|
2011 |
|
|
2010 |
|
Fully-taxable equivalent basis (1) |
|
Third |
|
|
Second |
|
|
First |
|
|
Fourth |
|
|
Third |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing deposits in banks |
|
|
0.04 |
% |
|
|
0.22 |
% |
|
|
0.11 |
% |
|
|
0.63 |
% |
|
|
0.21 |
% |
Trading account securities |
|
|
1.41 |
|
|
|
1.59 |
|
|
|
1.37 |
|
|
|
1.98 |
|
|
|
1.20 |
|
Federal funds sold and securities purchased under
resale agreement |
|
|
|
|
|
|
0.09 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans held for sale |
|
|
4.46 |
|
|
|
4.97 |
|
|
|
4.08 |
|
|
|
4.01 |
|
|
|
5.75 |
|
Available-for-sale and other securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable |
|
|
2.43 |
|
|
|
2.59 |
|
|
|
2.53 |
|
|
|
2.42 |
|
|
|
2.77 |
|
Tax-exempt |
|
|
4.17 |
|
|
|
4.02 |
|
|
|
4.70 |
|
|
|
4.59 |
|
|
|
4.70 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available-for-sale and other securities |
|
|
2.52 |
|
|
|
2.66 |
|
|
|
2.63 |
|
|
|
2.52 |
|
|
|
2.84 |
|
Held-to-maturity securities taxable |
|
|
3.04 |
|
|
|
2.96 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and leases: (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial |
|
|
4.13 |
|
|
|
4.31 |
|
|
|
4.57 |
|
|
|
4.94 |
|
|
|
5.14 |
|
Commercial real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction |
|
|
3.87 |
|
|
|
3.37 |
|
|
|
3.36 |
|
|
|
3.07 |
|
|
|
2.83 |
|
Commercial |
|
|
3.91 |
|
|
|
3.90 |
|
|
|
3.93 |
|
|
|
3.92 |
|
|
|
3.91 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate |
|
|
3.91 |
|
|
|
3.84 |
|
|
|
3.88 |
|
|
|
3.83 |
|
|
|
3.76 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial |
|
|
4.06 |
|
|
|
4.16 |
|
|
|
4.34 |
|
|
|
4.56 |
|
|
|
4.64 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automobile |
|
|
4.89 |
|
|
|
5.06 |
|
|
|
5.22 |
|
|
|
5.46 |
|
|
|
5.79 |
|
Home equity |
|
|
4.45 |
|
|
|
4.49 |
|
|
|
4.54 |
|
|
|
4.64 |
|
|
|
4.74 |
|
Residential mortgage |
|
|
4.47 |
|
|
|
4.62 |
|
|
|
4.76 |
|
|
|
4.82 |
|
|
|
4.97 |
|
Other consumer |
|
|
7.57 |
|
|
|
7.76 |
|
|
|
7.85 |
|
|
|
7.92 |
|
|
|
7.10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer |
|
|
4.68 |
|
|
|
4.79 |
|
|
|
4.90 |
|
|
|
5.04 |
|
|
|
5.19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans and leases |
|
|
4.37 |
|
|
|
4.47 |
|
|
|
4.61 |
|
|
|
4.79 |
|
|
|
4.90 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total earning assets |
|
|
4.02 |
% |
|
|
4.14 |
% |
|
|
4.24 |
% |
|
|
4.29 |
% |
|
|
4.49 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposits noninterest-bearing |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
Demand deposits interest-bearing |
|
|
0.10 |
|
|
|
0.09 |
|
|
|
0.09 |
|
|
|
0.13 |
|
|
|
0.17 |
|
Money market deposits |
|
|
0.41 |
|
|
|
0.40 |
|
|
|
0.50 |
|
|
|
0.77 |
|
|
|
0.86 |
|
Savings and other domestic deposits |
|
|
0.69 |
|
|
|
0.74 |
|
|
|
0.81 |
|
|
|
0.90 |
|
|
|
0.99 |
|
Core certificates of deposit |
|
|
1.95 |
|
|
|
2.04 |
|
|
|
2.07 |
|
|
|
2.11 |
|
|
|
2.31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total core deposits |
|
|
0.77 |
|
|
|
0.82 |
|
|
|
0.89 |
|
|
|
1.05 |
|
|
|
1.18 |
|
Other domestic time deposits of $250,000 or more |
|
|
0.93 |
|
|
|
1.01 |
|
|
|
1.08 |
|
|
|
1.21 |
|
|
|
1.28 |
|
Brokered deposits and negotiable CDs |
|
|
0.77 |
|
|
|
0.89 |
|
|
|
1.11 |
|
|
|
1.53 |
|
|
|
2.21 |
|
Deposits in foreign offices |
|
|
0.26 |
|
|
|
0.26 |
|
|
|
0.20 |
|
|
|
0.17 |
|
|
|
0.22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits |
|
|
0.77 |
|
|
|
0.82 |
|
|
|
0.90 |
|
|
|
1.06 |
|
|
|
1.21 |
|
Short-term borrowings |
|
|
0.16 |
|
|
|
0.16 |
|
|
|
0.18 |
|
|
|
0.20 |
|
|
|
0.22 |
|
Federal Home Loan Bank advances |
|
|
0.32 |
|
|
|
0.88 |
|
|
|
2.98 |
|
|
|
0.95 |
|
|
|
1.25 |
|
Subordinated notes and other long-term debt |
|
|
2.43 |
|
|
|
2.39 |
|
|
|
2.34 |
|
|
|
2.15 |
|
|
|
2.15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities |
|
|
0.86 |
% |
|
|
0.91 |
% |
|
|
0.99 |
% |
|
|
1.11 |
% |
|
|
1.25 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest rate spread |
|
|
3.11 |
% |
|
|
3.19 |
% |
|
|
3.21 |
% |
|
|
3.16 |
% |
|
|
3.24 |
% |
Impact of noninterest-bearing funds on margin |
|
|
0.23 |
|
|
|
0.21 |
|
|
|
0.21 |
|
|
|
0.21 |
|
|
|
0.21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin |
|
|
3.34 |
% |
|
|
3.40 |
% |
|
|
3.42 |
% |
|
|
3.37 |
% |
|
|
3.45 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
FTE yields are calculated assuming a 35% tax rate. |
|
(2) |
|
Loan and lease and deposit average rates include impact of applicable derivatives,
non-deferrable fees, and amortized deferred fees. |
|
(3) |
|
For purposes of this analysis, NALs are reflected in the average balances of loans. |
20
Table 8 Consolidated YTD Average Balance Sheets and Net Interest Margin Analysis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
YTD Average Balances |
|
|
YTD Average Rates (2) |
|
Fully-taxable equivalent basis (1) |
|
Nine Months Ended September 30, |
|
|
Change |
|
|
Nine Months Ended September 30, |
|
(dollar amounts in millions) |
|
2011 |
|
|
2010 |
|
|
Amount |
|
|
Percent |
|
|
2011 |
|
|
2010 |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing deposits in banks |
|
$ |
141 |
|
|
$ |
313 |
|
|
$ |
(172 |
) |
|
|
(55) |
% |
|
|
0.12 |
% |
|
|
0.20 |
% |
Trading account securities |
|
|
116 |
|
|
|
111 |
|
|
|
5 |
|
|
|
5 |
|
|
|
1.46 |
|
|
|
1.68 |
|
Federal
funds sold and securities purchased under resale agreement |
|
|
7 |
|
|
|
|
|
|
|
7 |
|
|
|
|
|
|
|
0.09 |
|
|
|
|
|
Loans held for sale |
|
|
279 |
|
|
|
445 |
|
|
|
(166 |
) |
|
|
(37 |
) |
|
|
4.39 |
|
|
|
5.36 |
|
Available-for-sale and other securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable |
|
|
8,475 |
|
|
|
8,428 |
|
|
|
47 |
|
|
|
1 |
|
|
|
2.52 |
|
|
|
2.85 |
|
Tax-exempt |
|
|
434 |
|
|
|
399 |
|
|
|
35 |
|
|
|
9 |
|
|
|
4.30 |
|
|
|
4.56 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available-for-sale and other securities |
|
|
8,909 |
|
|
|
8,827 |
|
|
|
82 |
|
|
|
1 |
|
|
|
2.61 |
|
|
|
2.93 |
|
Total held-to-maturity securities |
|
|
282 |
|
|
|
|
|
|
|
282 |
|
|
|
|
|
|
|
3.00 |
|
|
|
|
|
Loans and leases: (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial |
|
|
13,387 |
|
|
|
12,317 |
|
|
|
1,070 |
|
|
|
9 |
|
|
|
4.33 |
|
|
|
5.35 |
|
Commercial real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction |
|
|
612 |
|
|
|
1,224 |
|
|
|
(612 |
) |
|
|
(50 |
) |
|
|
3.55 |
|
|
|
2.69 |
|
Commercial |
|
|
5,676 |
|
|
|
6,145 |
|
|
|
(469 |
) |
|
|
(8 |
) |
|
|
3.91 |
|
|
|
3.73 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate |
|
|
6,288 |
|
|
|
7,369 |
|
|
|
(1,081 |
) |
|
|
(15 |
) |
|
|
3.88 |
|
|
|
3.56 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial |
|
|
19,675 |
|
|
|
19,686 |
|
|
|
(11 |
) |
|
|
|
|
|
|
4.19 |
|
|
|
4.68 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automobile |
|
|
5,958 |
|
|
|
4,678 |
|
|
|
1,280 |
|
|
|
27 |
|
|
|
5.05 |
|
|
|
6.27 |
|
Home equity |
|
|
7,869 |
|
|
|
7,550 |
|
|
|
319 |
|
|
|
4 |
|
|
|
4.49 |
|
|
|
5.20 |
|
Residential mortgage |
|
|
4,607 |
|
|
|
4,491 |
|
|
|
116 |
|
|
|
3 |
|
|
|
4.61 |
|
|
|
4.85 |
|
Other consumer |
|
|
539 |
|
|
|
690 |
|
|
|
(151 |
) |
|
|
(22 |
) |
|
|
7.73 |
|
|
|
6.98 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer |
|
|
18,973 |
|
|
|
17,409 |
|
|
|
1,564 |
|
|
|
9 |
|
|
|
4.79 |
|
|
|
5.46 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans and leases |
|
|
38,648 |
|
|
|
37,095 |
|
|
|
1,553 |
|
|
|
4 |
|
|
|
4.48 |
|
|
|
5.05 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan and lease losses |
|
|
(1,141 |
) |
|
|
(1,466 |
) |
|
|
325 |
|
|
|
(22 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loans and leases |
|
|
37,507 |
|
|
|
35,629 |
|
|
|
1,878 |
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total earning assets |
|
|
48,382 |
|
|
|
46,791 |
|
|
|
1,591 |
|
|
|
3 |
|
|
|
4.14 |
% |
|
|
4.64 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks |
|
|
1,358 |
|
|
|
1,629 |
|
|
|
(271 |
) |
|
|
(17 |
) |
|
|
|
|
|
|
|
|
Intangible assets |
|
|
652 |
|
|
|
709 |
|
|
|
(57 |
) |
|
|
(8 |
) |
|
|
|
|
|
|
|
|
All other assets |
|
|
4,196 |
|
|
|
4,381 |
|
|
|
(185 |
) |
|
|
(4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
53,447 |
|
|
$ |
52,044 |
|
|
$ |
1,403 |
|
|
|
3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposits noninterest-bearing |
|
$ |
7,958 |
|
|
$ |
6,748 |
|
|
$ |
1,210 |
|
|
|
18 |
% |
|
|
|
% |
|
|
|
% |
Demand deposits interest-bearing |
|
|
5,499 |
|
|
|
5,667 |
|
|
|
(168 |
) |
|
|
(3 |
) |
|
|
0.10 |
|
|
|
0.20 |
|
Money market deposits |
|
|
13,230 |
|
|
|
11,267 |
|
|
|
1,963 |
|
|
|
17 |
|
|
|
0.44 |
|
|
|
0.92 |
|
Savings and other domestic deposits |
|
|
4,744 |
|
|
|
4,643 |
|
|
|
101 |
|
|
|
2 |
|
|
|
0.75 |
|
|
|
1.08 |
|
Core certificates of deposit |
|
|
8,017 |
|
|
|
9,371 |
|
|
|
(1,354 |
) |
|
|
(14 |
) |
|
|
2.02 |
|
|
|
2.65 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total core deposits |
|
|
39,448 |
|
|
|
37,696 |
|
|
|
1,752 |
|
|
|
5 |
|
|
|
0.83 |
|
|
|
1.34 |
|
Other domestic time deposits of $250,000 or more |
|
|
486 |
|
|
|
683 |
|
|
|
(197 |
) |
|
|
(29 |
) |
|
|
1.02 |
|
|
|
1.36 |
|
Brokered deposits and negotiable CDs |
|
|
1,426 |
|
|
|
1,613 |
|
|
|
(187 |
) |
|
|
(12 |
) |
|
|
0.92 |
|
|
|
2.43 |
|
Deposits in foreign offices |
|
|
374 |
|
|
|
421 |
|
|
|
(47 |
) |
|
|
(11 |
) |
|
|
0.24 |
|
|
|
0.20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits |
|
|
41,734 |
|
|
|
40,413 |
|
|
|
1,321 |
|
|
|
3 |
|
|
|
0.83 |
|
|
|
1.38 |
|
Short-term borrowings |
|
|
2,166 |
|
|
|
1,214 |
|
|
|
952 |
|
|
|
78 |
|
|
|
0.17 |
|
|
|
0.21 |
|
Federal Home Loan Bank advances |
|
|
138 |
|
|
|
193 |
|
|
|
(55 |
) |
|
|
(28 |
) |
|
|
0.64 |
|
|
|
1.94 |
|
Subordinated notes and other long-term debt |
|
|
3,266 |
|
|
|
3,855 |
|
|
|
(589 |
) |
|
|
(15 |
) |
|
|
2.38 |
|
|
|
2.15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities |
|
|
39,346 |
|
|
|
38,927 |
|
|
|
419 |
|
|
|
1 |
|
|
|
0.92 |
|
|
|
1.42 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All other liabilities |
|
|
975 |
|
|
|
941 |
|
|
|
34 |
|
|
|
4 |
|
|
|
|
|
|
|
|
|
Shareholders equity |
|
|
5,168 |
|
|
|
5,428 |
|
|
|
(260 |
) |
|
|
(5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity |
|
$ |
53,447 |
|
|
$ |
52,044 |
|
|
$ |
1,403 |
|
|
|
3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest rate spread |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.17 |
|
|
|
3.22 |
|
Impact of noninterest-bearing funds on margin |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.22 |
|
|
|
0.24 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.39 |
% |
|
|
3.46 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
|
|
|
(1) |
|
FTE yields are calculated assuming a 35% tax rate. |
|
(2) |
|
Loan, lease, and deposit average rates include the impact of applicable derivatives,
non-deferrable fees, and amortized deferred fees. |
|
(3) |
|
For purposes of this analysis, nonaccrual loans are reflected in the average balances of loans. |
2011 First Nine Months versus 2010 First Nine Months
Fully-taxable equivalent net interest income for the nine-month period of 2011 increased $14.7
million, or 1%, from the comparable year-ago period. This reflected the benefit of a 3% increase
in average total earning assets partially offset by a decrease in the net interest margin to 3.39%
from 3.46%. The increase in average earning assets reflected a combination of factors including:
|
|
|
$1.6 billion, or 4%, increase in average total loans and leases. |
|
|
|
$0.4 billion, or 4%, increase in average total available-for-sale and other and
held-to-maturity securities. |
The 7 basis point decrease in the net interest margin reflected reduction in derivatives
income, lower loan and securities yields, partially offset by the positive impact of increases in
low cost deposits and improved deposit pricing.
The following table details the change in our reported loans and deposits:
Table 9 Average Loans/Leases and Deposits 2011 First Nine Months vs. 2010 First Nine Months
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
|
Change |
|
(dollar amounts in millions) |
|
2011 |
|
|
2010 |
|
|
Amount |
|
|
Percent |
|
Loans/Leases |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial |
|
$ |
13,387 |
|
|
$ |
12,317 |
|
|
$ |
1,070 |
|
|
|
9 |
% |
Commercial real estate |
|
|
6,288 |
|
|
|
7,369 |
|
|
|
(1,081 |
) |
|
|
(15 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial |
|
|
19,675 |
|
|
|
19,686 |
|
|
|
(11 |
) |
|
|
|
|
Automobile |
|
|
5,958 |
|
|
|
4,678 |
|
|
|
1,280 |
|
|
|
27 |
|
Home equity |
|
|
7,869 |
|
|
|
7,550 |
|
|
|
319 |
|
|
|
4 |
|
Residential mortgage |
|
|
4,607 |
|
|
|
4,491 |
|
|
|
116 |
|
|
|
3 |
|
Other consumer |
|
|
539 |
|
|
|
690 |
|
|
|
(151 |
) |
|
|
(22 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer |
|
|
18,973 |
|
|
|
17,409 |
|
|
|
1,564 |
|
|
|
9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans and leases |
|
$ |
38,648 |
|
|
$ |
37,095 |
|
|
$ |
1,553 |
|
|
|
4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposits noninterest-bearing |
|
$ |
7,958 |
|
|
$ |
6,748 |
|
|
$ |
1,210 |
|
|
|
18 |
% |
Demand deposits interest-bearing |
|
|
5,499 |
|
|
|
5,667 |
|
|
|
(168 |
) |
|
|
(3 |
) |
Money market deposits |
|
|
13,230 |
|
|
|
11,267 |
|
|
|
1,963 |
|
|
|
17 |
|
Savings and other domestic deposits |
|
|
4,744 |
|
|
|
4,643 |
|
|
|
101 |
|
|
|
2 |
|
Core certificates of deposit |
|
|
8,017 |
|
|
|
9,371 |
|
|
|
(1,354 |
) |
|
|
(14 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total core deposits |
|
|
39,448 |
|
|
|
37,696 |
|
|
|
1,752 |
|
|
|
5 |
|
Other deposits |
|
|
2,286 |
|
|
|
2,717 |
|
|
|
(431 |
) |
|
|
(16 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits |
|
$ |
41,734 |
|
|
$ |
40,413 |
|
|
$ |
1,321 |
|
|
|
3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
The $1.6 billion, or 4%, increase in average total loans and leases primarily reflected:
|
|
|
$1.3 billion, or 27%, increase in the average automobile portfolio. Automobile lending
is a core competency and continued area of growth. The growth from the year-ago period
exhibited further penetration within our historical geographic footprint, as well as the
positive impact of our expansion into Eastern Pennsylvania and selected New England states.
Origination quality remained high. |
|
|
|
$1.1 billion, or 9%, increase in the average C&I portfolio. Growth from the year-ago
period reflected the benefits from our strategic initiatives including large corporate,
asset based lending, business banking, automobile floor plan lending, and equipment
finance. Traditional middle-market loans continued to grow despite line utilization rates
that remain well below historical norms. |
|
|
|
$0.3 billion, or 4%, increase in the average home equity portfolio, reflecting higher
originations and continued slower runoff. |
22
Partially offset by:
|
|
|
$1.1 billion, or 15%, decrease in the average CRE portfolio reflecting the continued
execution of our plan to reduce the CRE exposure, primarily in the noncore CRE portfolio.
This reduction is expected to continue through 2011, reflecting normal amortization,
paydowns, and refinancing. |
The $1.3 billion, or 3%, increase in average total deposits reflected:
|
|
|
$1.8 billion, or 5%, growth in average total core deposits. The drivers of this change
were a $2.0 billion, or 17%, growth in average money market deposits, and a $1.2 billion,
or 18%, growth in average noninterest-bearing demand deposits. These increases were
partially offset by a $1.4 billion, or 14%, decline in average core certificates of
deposit. |
Partially offset by:
|
|
|
$0.4 billion, or 16%, decline in other deposits including a $0.2 billion, or 29%,
decrease in other domestic time deposits of $250,000 or more, and a $0.2 billion, or 12%,
decline in average brokered deposits and negotiable CDs, reflecting a strategy of reducing
such noncore funding. |
23
Provision for Credit Losses
(This section should be read in conjunction with Significant Item 2 and the Credit Risk section.)
The provision for credit losses is the expense necessary to maintain the ALLL and the AULC at
levels appropriate to absorb our estimate of inherent credit losses in the loan and lease portfolio
and the portfolio of unfunded loan commitments and letters-of-credit.
The provision for credit losses for the 2011 third quarter was $43.6 million, an increase of
$7.8 million, or 22%, from the prior quarter, reflecting the combination of strong loan growth and
the expectation of a weaker and prolonged economic recovery. These factors were partially offset
by a combination of lower NCOs and commercial Criticized loans. The reduction in commercial
Criticized loans reflected the resolution of problem credits for which reserves had been previously
established. The current quarters provision for credit losses was $47.0 million less than total
NCOs.
Compared to the year-ago quarter, provision for credit losses declined $75.6 million, or 63%.
The provision for credit losses for the first nine-month period of 2011 was $128.8 million, down
$418.8 million, or 76%, from the year-ago period. These declines reflected the combination of
lower NCOs and commercial Criticized loans as noted above. The provision for credit losses for the
first nine-month period of 2011 was $224.4 million less than total NCOs (see Credit Quality
discussion).
Noninterest Income
The following table reflects noninterest income for each of the past five quarters:
Table 10 Noninterest Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011 |
|
|
2010 |
|
|
|
3Q11 vs 3Q10 |
|
|
3Q11 vs 2Q11 |
|
(dollar amounts in thousands) |
|
Third |
|
|
Second |
|
|
First |
|
|
Fourth |
|
|
Third |
|
|
|
Amount |
|
|
Percent |
|
|
Amount |
|
|
Percent |
|
Service charges on
deposit accounts |
|
$ |
65,184 |
|
|
$ |
60,675 |
|
|
$ |
54,324 |
|
|
$ |
55,810 |
|
|
$ |
65,932 |
|
|
|
$ |
(748 |
) |
|
|
(1 |
)% |
|
$ |
4,509 |
|
|
|
7 |
% |
Mortgage banking income |
|
|
12,791 |
|
|
|
23,835 |
|
|
|
22,684 |
|
|
|
53,169 |
|
|
|
52,045 |
|
|
|
|
(39,254 |
) |
|
|
(75 |
) |
|
|
(11,044 |
) |
|
|
(46 |
) |
Trust services |
|
|
29,473 |
|
|
|
30,392 |
|
|
|
30,742 |
|
|
|
29,394 |
|
|
|
26,997 |
|
|
|
|
2,476 |
|
|
|
9 |
|
|
|
(919 |
) |
|
|
(3 |
) |
Electronic banking |
|
|
32,714 |
|
|
|
31,728 |
|
|
|
28,786 |
|
|
|
28,900 |
|
|
|
28,090 |
|
|
|
|
4,624 |
|
|
|
16 |
|
|
|
986 |
|
|
|
3 |
|
Insurance income |
|
|
17,220 |
|
|
|
16,399 |
|
|
|
17,945 |
|
|
|
19,678 |
|
|
|
19,801 |
|
|
|
|
(2,581 |
) |
|
|
(13 |
) |
|
|
821 |
|
|
|
5 |
|
Brokerage income |
|
|
20,349 |
|
|
|
20,819 |
|
|
|
20,511 |
|
|
|
16,953 |
|
|
|
16,575 |
|
|
|
|
3,774 |
|
|
|
23 |
|
|
|
(470 |
) |
|
|
(2 |
) |
Bank owned life
insurance income |
|
|
15,644 |
|
|
|
17,602 |
|
|
|
14,819 |
|
|
|
16,113 |
|
|
|
14,091 |
|
|
|
|
1,553 |
|
|
|
11 |
|
|
|
(1,958 |
) |
|
|
(11 |
) |
Automobile operating
lease income |
|
|
5,890 |
|
|
|
7,307 |
|
|
|
8,847 |
|
|
|
10,463 |
|
|
|
11,356 |
|
|
|
|
(5,466 |
) |
|
|
(48 |
) |
|
|
(1,417 |
) |
|
|
(19 |
) |
Securities gains (losses) |
|
|
(1,350 |
) |
|
|
1,507 |
|
|
|
40 |
|
|
|
(103 |
) |
|
|
(296 |
) |
|
|
|
(1,054 |
) |
|
|
356 |
|
|
|
(2,857 |
) |
|
|
(190 |
) |
Other income |
|
|
60,644 |
|
|
|
45,503 |
|
|
|
38,247 |
|
|
|
33,843 |
|
|
|
32,552 |
|
|
|
|
28,092 |
|
|
|
86 |
|
|
|
15,141 |
|
|
|
33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest income |
|
$ |
258,559 |
|
|
$ |
255,767 |
|
|
$ |
236,945 |
|
|
$ |
264,220 |
|
|
$ |
267,143 |
|
|
|
$ |
(8,584 |
) |
|
|
(3 |
)% |
|
$ |
2,792 |
|
|
|
1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011 Third Quarter versus 2010 Third Quarter
The $8.6 million, or 3%, decrease in total noninterest income from the year-ago quarter reflected:
|
|
|
$39.3 million, or 75%, decrease in mortgage banking income. This primarily reflected a
$21.4 million decrease in net MSR activity and a $20.2 million, or 56%, decrease in
origination and secondary marketing income, as originations decreased 41% from the year-ago
quarter. |
|
|
|
$5.5 million, or 48%, decline in automobile operating lease income reflecting the impact
of a declining portfolio as a result of having exited that business in 2008. |
Partially offset by:
|
|
|
$28.1 million, or 86%, increase in other income, of which $15.5 million related to the
automobile loan securitization. Also contributing to the growth were increases totaling
$6.4 million from the sale of interest rate protection products and capital markets
activities. |
|
|
|
$4.6 million, or 16%, increase in electronic banking income, reflecting an increase in
debit card transaction volume and new account growth. |
|
|
|
$3.8 million, or 23%, increase in brokerage income, primarily reflecting increased sales
of investment products. |
24
2011 Third Quarter versus 2011 Second Quarter
The $2.8 million, or 1%, increase in total noninterest income from the prior quarter reflected:
|
|
|
$15.1 million, or 33%, increase in other income, reflecting a $15.5 million automobile
loan securitization gain on sale, $2.8 million higher market-related gains and capital
markets income; partially offset by a $5.8 million reduction in SBA-related servicing
income. |
|
|
|
$4.5 million, or 7%, increase in service charges on deposit accounts, primarily
reflecting an increase in personal services charges, mostly due to strong customer growth. |
Partially offset by:
|
|
|
$11.0 million, or 46%, decline in mortgage banking income reflecting a $13.9 million
decrease in net MSR activity, partially offset by a $4.1 million, or 36%, increase in
origination and secondary marketing income. |
|
|
|
$1.4 million securities loss in the current period compared with a $1.5 million
securities gain in the second quarter. |
2011 First Nine Months versus 2010 First Nine Months
Noninterest income for the first nine-month period of 2011 decreased $26.4 million, or 3%,
from the comparable year-ago period.
Table 11 Noninterest Income 2011 First Nine Months vs. 2010 First Nine Months
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
|
Change |
|
(dollar amounts in thousands) |
|
2011 |
|
|
2010 |
|
|
Amount |
|
|
Percent |
|
Service charges on
deposit accounts |
|
$ |
180,183 |
|
|
$ |
211,205 |
|
|
$ |
(31,022 |
) |
|
|
(15) |
% |
Mortgage banking income |
|
|
59,310 |
|
|
|
122,613 |
|
|
|
(63,303 |
) |
|
|
(52 |
) |
Trust services |
|
|
90,607 |
|
|
|
83,161 |
|
|
|
7,446 |
|
|
|
9 |
|
Electronic banking |
|
|
93,228 |
|
|
|
81,334 |
|
|
|
11,894 |
|
|
|
15 |
|
Insurance income |
|
|
51,564 |
|
|
|
56,735 |
|
|
|
(5,171 |
) |
|
|
(9 |
) |
Brokerage income |
|
|
61,679 |
|
|
|
51,901 |
|
|
|
9,778 |
|
|
|
19 |
|
Bank owned life
insurance income |
|
|
48,065 |
|
|
|
44,953 |
|
|
|
3,112 |
|
|
|
7 |
|
Automobile operating
lease income |
|
|
22,044 |
|
|
|
35,501 |
|
|
|
(13,457 |
) |
|
|
(38 |
) |
Securities gains (losses) |
|
|
197 |
|
|
|
(171 |
) |
|
|
368 |
|
|
|
N.R. |
|
Other income |
|
|
144,394 |
|
|
|
90,406 |
|
|
|
53,988 |
|
|
|
60 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest income |
|
$ |
751,271 |
|
|
$ |
777,638 |
|
|
$ |
(26,367 |
) |
|
|
(3) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N.R. |
|
- Not relevant, as denominator of calculation is a loss in prior period compared with income
in current period. |
The $26.4 million, or 3%, decrease in total noninterest income reflected:
|
|
|
$63.3 million, or 52%, decrease in mortgage banking income. This primarily reflected a
$46.2 million decrease in net MSR activity and a $22.2 million, or 32%, decrease in
origination and secondary marketing income, as originations decreased 23% from the year-ago
period. |
|
|
|
$31.0 million, or 15%, decline in service charges on deposit accounts, reflecting lower
personal service charges due to the implementation of the amendment to Reg E and our Fair
Play consumer banking initiatives. |
|
|
|
$13.5 million, or 38%, decline in automobile operating lease income reflecting the
impact of a declining portfolio as a result of having exited that business in 2008. |
Partially offset by:
|
|
|
$54.0 million, or 60%, increase in other income, of which $19.3 million was associated
with SBA-related loan fees and gains from SBA loan sales, and a $15.5 million automobile
loan securitization gain on sale. Also contributing to the growth were increases totaling
$13.4 million from the sale of interest rate protection products and capital markets
activities. |
|
|
|
$11.9 million, or 15%, increase in electronic banking income, reflecting an increase in
debit card transaction volume and new
account growth. |
25
|
|
|
$9.8 million, or 19%, increase in brokerage income, primarily reflecting increased sales
of investment products. |
|
|
|
$7.4 million, or 9%, increase in trust services income, due to a $0.8 billion increase
in assets under management. This increase reflected improved market values and net growth
in accounts. |
|
|
|
For additional information regarding noninterest income, see the Legislative and Regulatory
section located within the Executive Overview. |
Noninterest Expense
(This section should be read in conjunction with Significant Item 1.)
The following table reflects noninterest expense for each of the past five quarters:
Table 12 Noninterest Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011 |
|
|
2010 |
|
|
|
3Q11 vs 3Q10 |
|
|
3Q11 vs 2Q11 |
|
(dollar amounts in thousands) |
|
Third |
|
|
Second |
|
|
First |
|
|
Fourth |
|
|
Third |
|
|
|
Amount |
|
|
Percent |
|
|
Amount |
|
|
Percent |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personnel costs |
|
$ |
226,835 |
|
|
$ |
218,570 |
|
|
$ |
219,028 |
|
|
$ |
212,184 |
|
|
$ |
208,272 |
|
|
|
$ |
18,563 |
|
|
|
9 |
% |
|
$ |
8,265 |
|
|
|
4 |
% |
Outside data processing and
other services |
|
|
49,602 |
|
|
|
43,889 |
|
|
|
40,282 |
|
|
|
40,943 |
|
|
|
38,553 |
|
|
|
|
11,049 |
|
|
|
29 |
|
|
|
5,713 |
|
|
|
13 |
|
Net occupancy |
|
|
26,967 |
|
|
|
26,885 |
|
|
|
28,436 |
|
|
|
26,670 |
|
|
|
26,718 |
|
|
|
|
249 |
|
|
|
1 |
|
|
|
82 |
|
|
|
|
|
Deposit and other insurance
expense |
|
|
17,492 |
|
|
|
23,823 |
|
|
|
17,896 |
|
|
|
23,320 |
|
|
|
23,406 |
|
|
|
|
(5,914 |
) |
|
|
(25 |
) |
|
|
(6,331 |
) |
|
|
(27 |
) |
Professional services |
|
|
20,281 |
|
|
|
20,080 |
|
|
|
13,465 |
|
|
|
21,021 |
|
|
|
20,672 |
|
|
|
|
(391 |
) |
|
|
(2 |
) |
|
|
201 |
|
|
|
1 |
|
Equipment |
|
|
22,262 |
|
|
|
21,921 |
|
|
|
22,477 |
|
|
|
22,060 |
|
|
|
21,651 |
|
|
|
|
611 |
|
|
|
3 |
|
|
|
341 |
|
|
|
2 |
|
Marketing |
|
|
22,251 |
|
|
|
20,102 |
|
|
|
16,895 |
|
|
|
16,168 |
|
|
|
20,921 |
|
|
|
|
1,330 |
|
|
|
6 |
|
|
|
2,149 |
|
|
|
11 |
|
Amortization of intangibles |
|
|
13,387 |
|
|
|
13,386 |
|
|
|
13,370 |
|
|
|
15,046 |
|
|
|
15,145 |
|
|
|
|
(1,758 |
) |
|
|
(12 |
) |
|
|
1 |
|
|
|
|
|
OREO and foreclosure expense |
|
|
4,668 |
|
|
|
4,398 |
|
|
|
3,931 |
|
|
|
10,502 |
|
|
|
12,047 |
|
|
|
|
(7,379 |
) |
|
|
(61 |
) |
|
|
270 |
|
|
|
6 |
|
Automobile operating lease
expense |
|
|
4,386 |
|
|
|
5,434 |
|
|
|
6,836 |
|
|
|
8,142 |
|
|
|
9,159 |
|
|
|
|
(4,773 |
) |
|
|
(52 |
) |
|
|
(1,048 |
) |
|
|
(19 |
) |
Other expense |
|
|
30,987 |
|
|
|
29,921 |
|
|
|
48,083 |
|
|
|
38,537 |
|
|
|
30,765 |
|
|
|
|
222 |
|
|
|
1 |
|
|
|
1,066 |
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest expense |
|
$ |
439,118 |
|
|
$ |
428,409 |
|
|
$ |
430,699 |
|
|
$ |
434,593 |
|
|
$ |
427,309 |
|
|
|
$ |
11,809 |
|
|
|
3 |
% |
|
$ |
10,709 |
|
|
|
2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of employees (full-time equivalent), at
period-end |
|
|
11,473 |
|
|
|
11,457 |
|
|
|
11,319 |
|
|
|
11,341 |
|
|
|
11,279 |
|
|
|
|
194 |
|
|
|
2 |
% |
|
|
16 |
|
|
|
|
% |
2011 Third Quarter versus 2010 Third Quarter
The $11.8 million, or 3%, increase in total noninterest expense from the year-ago quarter
reflected:
|
|
|
$18.6 million, or 9%, increase in personnel costs, primarily reflecting a 2% increase in
full-time equivalent staff in support of strategic initiatives, as well as higher
benefit-related expenses, including $4.2 million of healthcare related costs. |
|
|
|
$11.0 million, or 29%, increase in outside data processing and other service, reflecting
the costs associated with the conversion to a new debit card processor and outside services
supporting increased regulations. |
Partially offset by:
|
|
|
$7.4 million, or 61%, decrease in OREO and foreclosure expense. |
|
|
|
$5.9 million, or 25%, decline in deposit and other insurance expenses. |
|
|
|
$4.8 million, or 52%, decline in automobile operating lease expense as that portfolio
continued to run-off having exited that business in 2008. |
2011 Third Quarter versus 2011 Second Quarter
The $10.7 million, or 2%, increase in total noninterest expense from the prior quarter reflected:
|
|
|
$8.3 million, or 4%, increase in personnel costs, primarily reflecting higher salaries,
severance, and healthcare costs. |
|
|
|
$5.7 million, or 13%, increase in outside data processing and other services, reflecting
the costs associated with the conversion to a new debit card processor and the
implementation of strategic initiatives. |
26
Partially offset by:
|
|
|
$6.3 million, or 27%, decline in deposit and other insurance expenses. |
2011 First Nine Months versus 2010 First Nine Months
Noninterest expense for the first nine-month period of 2011 increased $59.0 million, or 5%,
from the comparable year-ago period.
Table 13 Noninterest Expense 2011 First Nine Months vs. 2010 First Nine Months
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
|
Change |
|
(dollar amounts in thousands) |
|
2011 |
|
|
2010 |
|
|
Amount |
|
|
Percent |
|
Personnel costs |
|
$ |
664,433 |
|
|
$ |
586,789 |
|
|
$ |
77,644 |
|
|
|
13 |
% |
Outside data processing and other services |
|
|
133,773 |
|
|
|
118,305 |
|
|
|
15,468 |
|
|
|
13 |
|
Net occupancy |
|
|
82,288 |
|
|
|
81,192 |
|
|
|
1,096 |
|
|
|
1 |
|
Deposit and other insurance expense |
|
|
59,211 |
|
|
|
74,228 |
|
|
|
(15,017 |
) |
|
|
(20 |
) |
Professional services |
|
|
53,826 |
|
|
|
67,757 |
|
|
|
(13,931 |
) |
|
|
(21 |
) |
Equipment |
|
|
66,660 |
|
|
|
63,860 |
|
|
|
2,800 |
|
|
|
4 |
|
Marketing |
|
|
59,248 |
|
|
|
49,756 |
|
|
|
9,492 |
|
|
|
19 |
|
Amortization of intangibles |
|
|
40,143 |
|
|
|
45,432 |
|
|
|
(5,289 |
) |
|
|
(12 |
) |
OREO and foreclosure expense |
|
|
12,997 |
|
|
|
28,547 |
|
|
|
(15,550 |
) |
|
|
(54 |
) |
Automobile operating lease expense |
|
|
16,656 |
|
|
|
28,892 |
|
|
|
(12,236 |
) |
|
|
(42 |
) |
Other expense |
|
|
108,991 |
|
|
|
94,455 |
|
|
|
14,536 |
|
|
|
15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest expense |
|
$ |
1,298,226 |
|
|
$ |
1,239,213 |
|
|
$ |
59,013 |
|
|
|
5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
The $59.0 million, or 5%, increase in total noninterest expense reflected:
|
|
|
$77.6 million, or 13%, increase in personnel costs, primarily reflecting an increase in
full-time equivalent staff in support of strategic initiatives, as well as higher benefit
related expenses, including the reinstatement of our 401(k) plan matching contribution in
May of 2010. |
|
|
|
$15.5 million, or 13%, increase in outside data processing and other service, reflecting
the costs associated with the conversion to a new debit card processor and the
implementation of strategic initiatives. |
|
|
|
$14.5 million, or 15%, increase in other expense, primarily reflecting the 2011 first
quarter $17.0 million addition to litigation reserves (see Significant Items). |
|
|
|
$9.5 million, or 19%, increase in marketing expense, reflecting higher advertising
costs. |
Partially offset by:
|
|
|
$15.6 million, or 54%, decline in OREO and foreclosure expenses as OREO balances
declined 69% in the current period. |
|
|
|
$15.0 million, or 20%, decrease in deposit and other insurance expenses. |
|
|
|
$13.9 million, or 21%, decrease in professional services, reflecting lower legal costs,
as collection activities declined, and consulting expenses. |
|
|
|
$12.2 million, or 42%, decline in automobile operating lease expense as that portfolio
continued to run-off having exited that business in 2008. |
27
Provision for Income Taxes
(This section should be read in conjunction with Significant Item 2.)
The provision for income taxes in the 2011 third quarter was $38.9 million. This compared with
a provision for income taxes of $49.0 million in the 2011 second quarter and a provision for income
taxes of $29.7 million in the 2010 third quarter. All three quarters included the benefits from
tax-exempt income, tax-advantaged investments, and general business credits. At September 30,
2011, we had a net deferred tax asset of $364.2 million. Based on both positive and negative
evidence and our level of forecasted future taxable income, there was no impairment to the deferred
tax asset at September 30, 2011. The total disallowed deferred tax asset for regulatory capital
purposes decreased to $19.4 million at September 30, 2011 compared to the total disallowed deferred
tax asset of $48.2 million at June 30, 2011.
The IRS completed audits of our consolidated federal income tax returns for tax years through
2007. In the third quarter 2011, the IRS began its examination of our 2008 and 2009 consolidated
federal income tax returns. The IRS, various states, and other jurisdictions remain open to
examination, including Kentucky, Indiana, Michigan, Pennsylvania, West Virginia and Illinois. The
IRS has proposed adjustments to our previously filed tax returns. We believe our tax positions
related to such proposed adjustments are correct and supported by applicable statutes, regulations,
and judicial authority, and intend to vigorously defend them. 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. However, although no assurance can be given, we believe the
resolution of these examinations will not, individually or in the aggregate, have a material
adverse impact on our consolidated financial position.
28
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. We
believe that our primary risk exposures are credit, market, liquidity, operational, and compliance
oriented. More information on risk can be found in the Risk Factors section included in Item 1A of
our 2010 Form 10-K and subsequent filings with the SEC. Additionally, the MD&A included in our
2010 Form 10-K should be read in conjunction with this MD&A as this discussion provides only
material updates to the 2010 Form 10-K. Our definition, philosophy, and approach to risk
management have not materially changed from the discussion presented in the 2010 Form 10-K.
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 available-for-sale and other investment and
held-to-maturity securities portfolios (see Note 4 and Note 5 of the Notes to the Unaudited
Condensed Consolidated Financial Statements). We engage with other financial counterparties for a
variety of purposes including investing, asset and liability management, mortgage banking and for
trading activities. Given the current level of global financial issues, we believe it is important
to provide clarity around our exposure in this specific area. While there is credit risk
associated with derivative activity, we believe this exposure is minimal. The significant change
in the economic conditions and the resulting changes in borrower behavior over the past several
years resulted in our continuing 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 added more
quantitative measurement capabilities utilizing external data sources, enhanced use of modeling
technology, and internal stress testing processes. The continued expansion of our portfolio
management resources demonstrates our commitment to maintaining an aggregate moderate-to-low risk
profile.
Loan and Lease Credit Exposure Mix
At September 30, 2011, our loans and leases totaled $39.0 billion, representing a $0.9
billion, or 2%, increase compared to $38.1 billion at December 31, 2010, primarily reflecting
growth in the C&I, residential mortgage, and home equity portfolios. The automobile portfolio was
little changed reflecting the 2011 third quarter automobile securitization (see Automobile
Portfolio discussion). The CRE portfolio continued to decline reflecting our planned strategy to
reduce our CRE exposure.
At September 30, 2011, commercial loans and leases totaled $19.9 billion, and represented 51%
of our total credit exposure. Our commercial portfolio is diversified along product type, customer
size, and geography within our footprint and is comprised of the following (see Commercial Credit
discussion):
C&I C&I loans and leases are made to commercial customers for use in normal business
operations to finance working capital needs, equipment purchases, or other projects. The majority
of these borrowers are customers doing business within our geographic regions. C&I loans and
leases are generally underwritten individually and secured with the assets of the company and/or
the personal guarantee of the business owners. The financing of owner occupied facilities is
considered a C&I loan even though there is improved real estate as collateral. This treatment is a
function of the credit decision process, which focuses on cash flow from operations of the business
to repay the debt. The operation, sale, rental, or refinancing of the real estate is not
considered the primary repayment source for these types of loans. As we look to grow our C&I
portfolio, we have further developed our ABL capabilities by adding experienced ABL professionals
to take advantage of market opportunities resulting in better leveraging of the manufacturing base
in our primary markets. Also, our Equipment Finance area is targeting larger equipment financings
in the manufacturing sector in addition to our core products. We also expanded our large corporate
banking group with sufficient resources to ensure we appropriately recognize and manage the risks
associated with these types of lending.
CRE CRE loans consist of loans for income-producing real estate properties, real estate
investment trusts, and real estate developers. We mitigate our risk on these loans by requiring
collateral values that exceed the loan amount and underwriting the loan with projected cash flow in
excess of the debt service requirement. These loans are made to finance properties such as
apartment buildings, office and industrial buildings, and retail shopping centers, and are repaid
through cash flows related to the operation, sale, or refinance of the property.
Construction CRE Construction CRE loans are loans to individuals, companies, or developers
used for the construction of a commercial or residential property for which repayment will be
generated by the sale or permanent financing of the property. Our construction CRE portfolio
primarily consists of retail, residential (land, single family, and condominiums), office, and
warehouse product types. Generally, these loans are for construction projects that have been
presold or preleased, or have secured permanent financing, as well as loans to real estate
companies with significant equity invested in each project. These loans are underwritten and
managed by a specialized real estate lending group that actively monitors the construction
phase and manages the loan disbursements according to the predetermined construction schedule.
29
Total consumer loans and leases were $19.1 billion at September 30, 2011, and represented 49%
of our total loan and lease credit exposure. The consumer portfolio was primarily diversified
among home equity loans and lines-of-credit, residential mortgages, and automobile loans and leases
(see Consumer Credit discussion).
Automobile Automobile loans and leases are primarily comprised of loans made through
automotive dealerships and include exposure in selected states outside of our primary banking
markets. No state outside of our primary banking markets represented more than 3% of our total
automobile portfolio at September 30, 2011.
Home equity Home equity lending includes both home equity loans and lines-of-credit. This
type of lending, which is secured by a first-lien or second-lien on the borrowers residence,
allows customers to borrow against the equity in their home. Given the current low interest rate
environment, many borrowers have utilized the line-of-credit home equity product as the primary
source of financing their home. As a result, the proportion of the home equity portfolio secured
by a first-lien has increased significantly over the past three years, positively impacting the
portfolios risk profile. The credit risk profile is substantially reduced when we hold a
first-lien position. During the first nine-month period of 2011, more than 65% of our home equity
portfolio originations were secured by a first-lien mortgage. The first-lien position combined
with continued high average FICO scores significantly reduces the PD associated with these loans.
The combination provides a strong base when assessing the expected future performance of this
portfolio. Real estate market values at the time of origination directly affect the amount of
credit extended and, in the event of default, subsequent changes in these values impact the
severity of losses. We actively manage the extension of credit and the amount of credit extended
through a combination of criteria including financial position, debt-to-income policies and LTV
policy limits.
Residential mortgage Residential mortgage loans represent loans to consumers for the
purchase or refinance of a residence. These loans are generally financed over a 15-year to 30-year
term, and in most cases, are extended to borrowers to finance their primary residence. Generally,
our practice is to sell a significant portion of our fixed-rate originations in the secondary
market. As such, the majority of the loans in our portfolio are ARMs. These ARMs primarily
consist of a fixed-rate of interest for the first 3 to 5 years, and then adjust annually. These
loans comprised approximately 53% of our total residential mortgage loan portfolio at September 30,
2011. We are subject to repurchase risk associated with residential mortgage loans sold in the
secondary market. This activity has increased recently reflecting the overall market conditions
and GSE activity and an appropriate level of allowance has been established to address the
repurchase risk inherent in the portfolio (refer to the Operational Risk section for additional
discussion).
Other consumer This portfolio primarily consists of consumer loans not secured by real
estate or automobiles, including personal unsecured loans.
Table 14 Loan and Lease Portfolio Composition
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011 |
|
|
2010 |
|
(dollar amounts in millions) |
|
September 30, |
|
|
June 30, |
|
|
March 31, |
|
|
December 31, |
|
|
September 30, |
|
Commercial:(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial |
|
$ |
13,939 |
|
|
|
36 |
% |
|
$ |
13,544 |
|
|
|
34 |
% |
|
$ |
13,299 |
|
|
|
35 |
% |
|
$ |
13,063 |
|
|
|
34 |
% |
|
$ |
12,425 |
|
|
|
33 |
% |
Commercial real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction |
|
|
520 |
|
|
|
1 |
|
|
|
591 |
|
|
|
2 |
|
|
|
587 |
|
|
|
2 |
|
|
|
650 |
|
|
|
2 |
|
|
|
738 |
|
|
|
2 |
|
Commercial |
|
|
5,414 |
|
|
|
14 |
|
|
|
5,573 |
|
|
|
14 |
|
|
|
5,711 |
|
|
|
15 |
|
|
|
6,001 |
|
|
|
16 |
|
|
|
6,174 |
|
|
|
16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial real estate |
|
|
5,934 |
|
|
|
15 |
|
|
|
6,164 |
|
|
|
16 |
|
|
|
6,298 |
|
|
|
17 |
|
|
|
6,651 |
|
|
|
18 |
|
|
|
6,912 |
|
|
|
18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial |
|
|
19,873 |
|
|
|
51 |
|
|
|
19,708 |
|
|
|
50 |
|
|
|
19,597 |
|
|
|
52 |
|
|
|
19,714 |
|
|
|
52 |
|
|
|
19,337 |
|
|
|
51 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automobile |
|
|
5,558 |
|
|
|
14 |
|
|
|
6,190 |
|
|
|
16 |
|
|
|
5,802 |
|
|
|
15 |
|
|
|
5,614 |
|
|
|
15 |
|
|
|
5,385 |
|
|
|
14 |
|
Home equity |
|
|
8,079 |
|
|
|
21 |
|
|
|
7,952 |
|
|
|
20 |
|
|
|
7,784 |
|
|
|
20 |
|
|
|
7,713 |
|
|
|
20 |
|
|
|
7,690 |
|
|
|
21 |
|
Residential mortgage |
|
|
4,986 |
|
|
|
13 |
|
|
|
4,751 |
|
|
|
12 |
|
|
|
4,517 |
|
|
|
12 |
|
|
|
4,500 |
|
|
|
12 |
|
|
|
4,511 |
|
|
|
12 |
|
Other consumer |
|
|
516 |
|
|
|
1 |
|
|
|
525 |
|
|
|
2 |
|
|
|
546 |
|
|
|
1 |
|
|
|
566 |
|
|
|
1 |
|
|
|
578 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer |
|
|
19,139 |
|
|
|
49 |
|
|
|
19,418 |
|
|
|
50 |
|
|
|
18,649 |
|
|
|
48 |
|
|
|
18,393 |
|
|
|
48 |
|
|
|
18,164 |
|
|
|
49 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans and leases |
|
$ |
39,012 |
|
|
|
100 |
% |
|
$ |
39,126 |
|
|
|
100 |
% |
|
$ |
38,246 |
|
|
|
100 |
% |
|
$ |
38,107 |
|
|
|
100 |
% |
|
$ |
37,501 |
|
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
There were no commercial loans outstanding that would be considered a concentration of lending
to a particular industry or group of industries. |
30
The table below provides our total loan and lease portfolio segregated by the type of
collateral securing the loan or lease:
Table 15 Loan and Lease Portfolio by Collateral Type
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011 |
|
|
2010 |
|
(dollar amounts in millions) |
|
September 30, |
|
|
June 30, |
|
|
March 31, |
|
|
December 31, |
|
|
September 30, |
|
Secured loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate commercial |
|
$ |
9,554 |
|
|
|
24 |
% |
|
$ |
9,781 |
|
|
|
25 |
% |
|
$ |
9,931 |
|
|
|
26 |
% |
|
$ |
10,389 |
|
|
|
27 |
% |
|
$ |
10,516 |
|
|
|
28 |
% |
Real estate consumer |
|
|
13,065 |
|
|
|
33 |
|
|
|
12,703 |
|
|
|
32 |
|
|
|
12,300 |
|
|
|
32 |
|
|
|
12,214 |
|
|
|
32 |
|
|
|
12,201 |
|
|
|
33 |
|
Vehicles |
|
|
6,898 |
|
|
|
18 |
|
|
|
7,594 |
|
|
|
19 |
|
|
|
7,333 |
|
|
|
19 |
|
|
|
7,134 |
|
|
|
19 |
|
|
|
6,652 |
|
|
|
18 |
|
Receivables/Inventory |
|
|
4,297 |
|
|
|
11 |
|
|
|
4,171 |
|
|
|
11 |
|
|
|
3,819 |
|
|
|
10 |
|
|
|
3,763 |
|
|
|
10 |
|
|
|
3,524 |
|
|
|
9 |
|
Machinery/Equipment |
|
|
1,864 |
|
|
|
5 |
|
|
|
1,784 |
|
|
|
5 |
|
|
|
1,787 |
|
|
|
5 |
|
|
|
1,766 |
|
|
|
5 |
|
|
|
1,763 |
|
|
|
5 |
|
Securities/Deposits |
|
|
805 |
|
|
|
2 |
|
|
|
802 |
|
|
|
2 |
|
|
|
778 |
|
|
|
2 |
|
|
|
734 |
|
|
|
2 |
|
|
|
730 |
|
|
|
2 |
|
Other |
|
|
1,103 |
|
|
|
3 |
|
|
|
1,095 |
|
|
|
3 |
|
|
|
1,139 |
|
|
|
3 |
|
|
|
990 |
|
|
|
2 |
|
|
|
1,097 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total secured loans and leases |
|
|
37,586 |
|
|
|
96 |
|
|
|
37,930 |
|
|
|
97 |
|
|
|
37,087 |
|
|
|
97 |
|
|
|
36,990 |
|
|
|
97 |
|
|
|
36,483 |
|
|
|
97 |
|
Unsecured loans and leases |
|
|
1,426 |
|
|
|
4 |
|
|
|
1,196 |
|
|
|
3 |
|
|
|
1,159 |
|
|
|
3 |
|
|
|
1,117 |
|
|
|
3 |
|
|
|
1,018 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans and leases |
|
$ |
39,012 |
|
|
|
100 |
% |
|
$ |
39,126 |
|
|
|
100 |
% |
|
$ |
38,246 |
|
|
|
100 |
% |
|
$ |
38,107 |
|
|
|
100 |
% |
|
$ |
37,501 |
|
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Credit
In commercial lending, on-going credit management is dependent on the type and nature of the
loan. We monitor all significant exposures on an on-going basis. All commercial credit extensions
are assigned internal risk ratings reflecting the borrowers PD and LGD (severity of loss). This
two-dimensional rating methodology provides granularity in the portfolio management process. The PD
is rated and applied at the borrower level. The LGD is rated and applied based on the specific type
of credit extension and the quality and lien position associated with the underlying collateral.
The internal risk ratings are assessed at origination and updated at each periodic monitoring
event. There is also extensive macro portfolio management analysis on an on-going basis. As an
example, the retail properties class of the CRE portfolio and manufacturing loans within the C&I
portfolio have each received more frequent evaluation at the individual loan level given the weak
environment and our portfolio composition. We continually review and adjust our risk-rating
criteria based on actual experience, which provides us with the current risk level in the portfolio
and is the basis for determining an appropriate allowance amount for this portfolio.
Our Credit Review group performs testing to provide an independent review and assessment of
the quality and / or risk of new loan originations. This group is part of our Risk Management
area, and conducts portfolio reviews on a risk-based cycle to evaluate individual loans, validate
risk ratings, as well as test the consistency of credit processes. Similarly, to provide
consistent oversight, a centralized portfolio management team monitors and reports on the
performance of small business loans, which are included within the commercial loan portfolio.
Our standardized loan grading system considers many components that directly correlate to loan
quality and likelihood of repayment, one of which is guarantor support. On an annual basis, or
more frequently if warranted, we consider, among other things, the guarantors reputation and
creditworthiness, along with various key financial metrics such as liquidity and net worth. Our
assessment of the guarantors credit strength is reflected in our risk ratings for such loans. The
risk rating is directly tied to, and an integral component of, our allowance for loan loss
methodology. When our assessment of the guarantors credit strength demonstrates an inherent
capacity to perform, we will seek repayment from the guarantor as part of the collection process
and have successfully negotiated repayment from guarantors as part of our overall credit risk
management process. When a loan goes to impaired status, viable guarantor support is considered in
the determination of the recognition of a loan loss.
Substantially all loans categorized as Classified (see Note 3 of Notes to Unaudited Condensed
Consolidated Financial Statements) are managed by our SAD. The SAD is a specialized group of
credit professionals that handle the day-to-day management of workouts, commercial recoveries, and
problem loan sales. Its responsibilities include developing and implementing action plans,
assessing risk ratings, and determining the adequacy of the allowance, the accrual status, and the
ultimate collectability of the Classified loan portfolio.
Our commercial portfolio is diversified by product type, customer size, and geography
throughout our footprint. No outstanding commercial loans and leases comprised an industry or
geographic concentration of lending. Certain segments of our commercial portfolio are discussed in
further detail below.
31
C&I PORTFOLIO
We manage the risks inherent in this portfolio through origination policies, concentration
limits, on-going loan level reviews and portfolio level reviews, recourse requirements, and
continuous portfolio risk management activities. Our origination policies for this portfolio
include loan product-type specific policies such as LTV and debt service coverage ratios, as
applicable.
While C&I borrowers have been challenged by the weak economy, problem loans have trended
downward, reflecting a combination of proactive risk identification as well as some relative
improvement in the economic conditions. Nevertheless, some borrowers may no longer have sufficient
capital to withstand the extended stress. As a result, these borrowers may not be able to comply
with the original terms of their credit agreements. We continue to focus attention on the
portfolio management process to proactively identify borrowers that may be facing financial
difficulty and to assess all potential solutions. The impact of the economic environment is
further evidenced by the level of line-of-credit activity, as borrowers continued to maintain
relatively low utilization percentages.
As shown in the following table, C&I loans and leases totaled $13.9 billion at September 30,
2011:
Table 16 Commercial and Industrial Loans and Leases by Class
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2011 |
|
|
|
Commitments |
|
|
Loans Outstanding |
|
(dollar amounts in millions) |
|
Amount |
|
|
Percent |
|
|
Amount |
|
|
Percent |
|
Class: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied |
|
$ |
4,390 |
|
|
|
21 |
% |
|
$ |
3,978 |
|
|
|
29 |
% |
Other commercial and industrial |
|
|
17,020 |
|
|
|
79 |
|
|
|
9,961 |
|
|
|
71 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
21,410 |
|
|
|
100 |
% |
|
$ |
13,939 |
|
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
The difference in the composition between the commitments and loans and leases
outstanding in the other commercial and industrial class results from a significant amount of
working capital lines-of-credit and businesses have reduced these borrowings. The funding
percentage associated with the lines-of-credit has been a significant indicator of credit quality.
Generally, borrowers that fully utilize their line-of-credit consistently, over time, have a higher
risk profile. The overall funding rate on the commercial lines-of-credit has declined compared to
pre-2008 levels as borrowers have limited their borrowing and focused on maintaining high liquidity
and reducing debt. Line-of-credit utilization is one of many credit risk factors we utilize in
assessing the credit risk portfolio of individual borrowers and the overall portfolio.
CRE PORTFOLIO
We manage the risks inherent in this portfolio specific to CRE lending, focusing on the
quality of the developer, and the specifics associated with each project. Generally, we: (1)
limit our loans to 80% of the appraised value of the commercial real estate, (2) require net
operating cash flows to be 125% of required interest and principal payments, and (3) if the
commercial real estate is nonowner occupied, require that at least 50% of the space of the project
be preleased. Additionally, we established a limit to our CRE exposure of no more than our amount
of Tier 1 Capital plus the ACL. We have been actively reducing our CRE exposure during the past
three years, and our CRE exposure was below this established limit at September 30, 2011.
Each CRE loan is classified as either core or noncore. We separated the CRE portfolio into
these categories in order to provide more clarity around our portfolio management strategies and to
provide an additional level of transparency. We believe segregating the noncore CRE from core CRE
improves our ability to understand the nature, performance prospects, and problem resolution
opportunities, thus allowing us to continue to deal proactively with any emerging credit issues.
A CRE loan is generally considered core when the borrower is an experienced, well-capitalized
developer in our Midwest footprint, and has either an established meaningful relationship with us
that generates an acceptable return on capital or demonstrates the prospect of becoming one. The
core CRE portfolio was $3.9 billion at September 30, 2011, representing 65% of total CRE loans.
The performance of the core portfolio met our expectations based on the consistency of the asset
quality metrics within the portfolio. Based on our extensive project level assessment process,
including forward-looking collateral valuations, we continue to believe the credit quality of the
core portfolio is stable.
A CRE loan is generally considered noncore based on the lack of a substantive relationship
outside of the loan product, with no immediate prospects for meeting the core relationship
criteria. The noncore CRE portfolio declined from $2.6 billion at December 31, 2010, to $2.1
billion at September 30, 2011, and represented 35% of total CRE loans. Of the loans in the noncore
portfolio at September 30, 2011, 66% were categorized as Pass, 95% had guarantors, 99% were
secured, and 95% were located within our geographic footprint. However, it is within the noncore
portfolio where most of the credit quality challenges exist. For example, $0.2 billion, or 11%, of
related outstanding balances, are classified as NALs. SAD administered $0.9 billion, or 44%, of
total noncore CRE loans at September 30, 2011. We expect to exit the majority of noncore CRE
relationships over time through normal repayments and refinancings, possible sales should
economically attractive opportunities arise, or the reclassification to a core CRE relationship if
it expands to meet the core criteria.
32
The table below provides a segregation of the CRE portfolio as of September 30, 2011:
Table 17 Core Commercial Real Estate Loans by Property Type and Property Location
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
West |
|
|
|
|
|
|
|
|
|
|
(dollar amounts in millions) |
|
Ohio |
|
|
Michigan |
|
|
Pennsylvania |
|
|
Indiana |
|
|
Kentucky |
|
|
Florida |
|
|
Virginia |
|
|
Other |
|
|
Total |
|
|
% |
|
Core portfolio: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail properties |
|
$ |
505 |
|
|
$ |
64 |
|
|
$ |
69 |
|
|
$ |
84 |
|
|
$ |
9 |
|
|
$ |
39 |
|
|
$ |
29 |
|
|
$ |
363 |
|
|
$ |
1,162 |
|
|
|
20 |
% |
Office |
|
|
337 |
|
|
|
105 |
|
|
|
93 |
|
|
|
17 |
|
|
|
11 |
|
|
|
|
|
|
|
39 |
|
|
|
56 |
|
|
|
658 |
|
|
|
11 |
|
Multi family |
|
|
217 |
|
|
|
91 |
|
|
|
66 |
|
|
|
35 |
|
|
|
28 |
|
|
|
1 |
|
|
|
27 |
|
|
|
56 |
|
|
|
521 |
|
|
|
9 |
|
Industrial and warehouse |
|
|
222 |
|
|
|
66 |
|
|
|
21 |
|
|
|
49 |
|
|
|
3 |
|
|
|
2 |
|
|
|
5 |
|
|
|
82 |
|
|
|
450 |
|
|
|
8 |
|
Other commercial real
estate |
|
|
701 |
|
|
|
121 |
|
|
|
37 |
|
|
|
38 |
|
|
|
|
|
|
|
19 |
|
|
|
53 |
|
|
|
111 |
|
|
|
1,080 |
|
|
|
18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total core portfolio |
|
|
1,982 |
|
|
|
447 |
|
|
|
286 |
|
|
|
223 |
|
|
|
51 |
|
|
|
61 |
|
|
|
153 |
|
|
|
668 |
|
|
|
3,871 |
|
|
|
65 |
|
Total noncore portfolio |
|
|
1,149 |
|
|
|
350 |
|
|
|
123 |
|
|
|
173 |
|
|
|
28 |
|
|
|
100 |
|
|
|
40 |
|
|
|
100 |
|
|
|
2,063 |
|
|
|
35 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
3,131 |
|
|
$ |
797 |
|
|
$ |
409 |
|
|
$ |
396 |
|
|
$ |
79 |
|
|
$ |
161 |
|
|
$ |
193 |
|
|
$ |
768 |
|
|
$ |
5,934 |
|
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit quality data regarding the ACL and NALs, segregated by core CRE loans and noncore
CRE loans, is presented in the following table:
Table 18 Commercial Real Estate Core vs. Noncore Portfolios
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2011 |
|
|
|
Ending |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonaccrual |
|
(dollar amounts in millions) |
|
Balance |
|
|
Prior NCOs |
|
|
ACL $ |
|
|
ACL % |
|
|
Credit Mark (1) |
|
|
Loans |
|
Total core |
|
$ |
3,871 |
|
|
$ |
16 |
|
|
$ |
122 |
|
|
|
3.15 |
% |
|
|
3.55 |
% |
|
$ |
25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncore SAD (2) |
|
|
910 |
|
|
|
286 |
|
|
|
213 |
|
|
|
23.41 |
|
|
|
41.72 |
|
|
|
202 |
|
Noncore Other |
|
|
1,153 |
|
|
|
14 |
|
|
|
89 |
|
|
|
7.72 |
|
|
|
8.83 |
|
|
|
30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noncore |
|
|
2,063 |
|
|
|
300 |
|
|
|
302 |
|
|
|
14.64 |
|
|
|
25.48 |
|
|
|
232 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial real estate |
|
$ |
5,934 |
|
|
$ |
316 |
|
|
$ |
424 |
|
|
|
7.15 |
% |
|
|
11.84 |
% |
|
$ |
257 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010 |
|
Total core |
|
$ |
4,042 |
|
|
$ |
5 |
|
|
$ |
160 |
|
|
|
3.96 |
% |
|
|
4.08 |
% |
|
$ |
16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncore SAD (2) |
|
|
1,400 |
|
|
|
379 |
|
|
|
329 |
|
|
|
23.50 |
|
|
|
39.80 |
|
|
|
307 |
|
Noncore Other |
|
|
1,209 |
|
|
|
5 |
|
|
|
105 |
|
|
|
8.68 |
|
|
|
9.06 |
|
|
|
41 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noncore |
|
|
2,609 |
|
|
|
384 |
|
|
|
434 |
|
|
|
16.63 |
|
|
|
27.33 |
|
|
|
348 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial real estate |
|
$ |
6,651 |
|
|
$ |
389 |
|
|
$ |
594 |
|
|
|
8.93 |
% |
|
|
13.96 |
% |
|
$ |
364 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Calculated as (Prior NCOs + ACL $) / (Ending Balance + Prior NCOs). |
|
(2) |
|
Noncore loans managed by SAD, the area responsible for managing loans and relationships designated as Classified Loans. |
As shown in the above table, the ending balance of the CRE portfolio at September 30,
2011, declined $0.7 billion, or 11%, compared with December 31, 2010. Of this decline, 68%
occurred in the noncore segment of the portfolio administered by the SAD, and was a result of
payoffs and NCOs as we actively focus on the noncore portfolio to reduce our overall CRE exposure.
This reduction demonstrates our continued commitment to achieving a materially lower risk profile
in the CRE portfolio, consistent with our overall objective of maintaining an aggregate
moderate-to-low risk profile. We anticipate further significant declines in the noncore segment,
consistent with our strategy to continue to reduce our overall CRE exposure. The reduction in the
core segment is a result of normal portfolio attrition combined with limited origination activity.
We will continue to support our core developer customers as appropriate, however, we do not believe
that significant additional CRE activity is appropriate given our current exposure in CRE lending
and the current economic conditions.
33
Also as shown above, substantial reserves for the noncore portfolio have been established. At
September 30, 2011, the ACL related to the noncore portfolio was 14.64%, and 23.41% related to the
SAD managed noncore portfolio. The combination of the existing ACL and prior NCOs represents the
total credit actions taken on each segment of the portfolio. From this data, we calculate a credit
mark that provides a consistent measurement of the cumulative credit actions taken against a
specific portfolio segment. The 41.72% Credit Mark associated with the SAD-managed noncore
portfolio is an indicator of the aggressive portfolio management strategy employed for this
portfolio.
Retail Properties
Our portfolio of total CRE loans secured by retail properties totaled $1.6 billion, or
approximately 4%, of total loans and leases, at September 30, 2011. Loans within this portfolio
segment declined $0.1 billion, or 6%, from $1.8 billion at December 31, 2010. Credit approval in
this portfolio segment is generally dependent on preleasing requirements, and net operating income
from the project must cover debt service by specified percentages when the loan is fully funded.
The weakness of the economic environment in our geographic regions continued to impact the
projects that secure the loans in this portfolio class. Lower occupancy rates, reduced rental
rates, and the expectation these levels will remain stressed for the foreseeable future may
adversely affect some of our borrowers ability to repay these loans. We have increased the level
of credit risk management activity on this portfolio segment, and we analyze our retail property
loans in detail by combining property type, geographic location, and other data, to assess and
manage our credit risks. We review the majority of this portfolio segment on a monthly basis.
Consumer Credit
Consumer credit approvals are based on, among other factors, the financial strength and
payment history of the borrower, type of exposure, and the transaction structure. We make
extensive use of portfolio assessment models to continuously monitor the quality of the portfolio,
which may result in changes to future origination strategies. The on-going analysis and review
process results in a determination of an appropriate allowance for our consumer loan and lease
portfolio.
AUTOMOBILE PORTFOLIO
Our strategy in the automobile portfolio continued to focus on high quality borrowers as
measured by both FICO and internal custom scores, combined with appropriate LTVs, terms, and a
reasonable level of profitability. Our strategy and operational capabilities allow us to
appropriately manage the origination quality across the entire portfolio, including our newer
markets. Although increased origination volume and the expansion into new markets can be
associated with increased risk levels, we believe our strategy and operational capabilities
significantly mitigate these risks.
We have continued to consistently execute our value proposition while taking advantage of
market opportunities that allow us to grow our automobile loan portfolio. The significant growth
in the portfolio over the past two years was accomplished while maintaining our consistently high
credit quality metrics. As we further execute our strategies and take advantage of these
opportunities, we are developing alternative plans to address any growth in excess of our
established portfolio concentration limits, including both securitizations and loan sales.
During the 2011 third quarter, we transferred automobile loans totaling $1.0 billion to a
trust in a securitization transaction. The securitization qualified for sale accounting. As a
result of this transaction, we recognized a $15.5 million gain on sale which is reflected in other
noninterest income and recorded a $16.0 million servicing asset which is reflected in accrued
income and other assets.
RESIDENTIAL-SECURED PORTFOLIOS
The properties securing our residential mortgage and home equity portfolios are primarily
located within our footprint. The continued stress on home prices has caused the performance in
these portfolios to remain weaker than historical levels. We continue to evaluate all of our
policies and processes associated with managing these portfolios to provide as much clarity as
possible.
In the 2011 first quarter, we accelerated the timing of charge-off recognition in our
residential mortgage portfolio. In addition, we established an immediate charge-off process
regardless of the delinquency status for short sale situations. Both of these policy changes
resulted in accelerated recognition of residential mortgage charge-offs totaling $6.8 million in
the 2011 first quarter. Further, in the 2011 second quarter, we implemented a policy change
regarding the placement of loans on nonaccrual status in both our home equity and residential
mortgage portfolios. This policy change resulted in accelerated placement of loans on nonaccrual
status totaling $6.7 million in the home equity portfolio and $8.0 million in the residential
mortgage portfolio.
34
Table 19 Selected Home Equity and Residential Mortgage
Portfolio Data
(dollar amounts in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home Equity |
|
|
Residential Mortgage |
|
|
|
Secured by first-lien |
|
|
Secured by second-lien |
|
|
|
|
|
|
09/30/11 |
|
|
12/31/10 |
|
|
09/30/11 |
|
|
12/31/10 |
|
|
09/30/11 |
|
|
12/31/10 |
|
Ending balance |
|
$ |
3,589 |
|
|
$ |
3,041 |
|
|
$ |
4,490 |
|
|
$ |
4,672 |
|
|
$ |
4,986 |
|
|
$ |
4,500 |
|
Portfolio weighted average LTV ratio(1) |
|
|
71 |
% |
|
|
70 |
% |
|
|
80 |
% |
|
|
80 |
% |
|
|
78 |
% |
|
|
77 |
% |
Portfolio weighted average FICO score(2) |
|
|
749 |
|
|
|
745 |
|
|
|
734 |
|
|
|
733 |
|
|
|
731 |
|
|
|
721 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home Equity |
|
|
Residential Mortgage (3) |
|
|
|
Secured by first-lien |
|
|
Secured by second-lien |
|
|
|
|
|
|
Nine Months Ended September 30, |
|
|
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
Originations |
|
$ |
1,392 |
|
|
$ |
922 |
|
|
$ |
630 |
|
|
$ |
523 |
|
|
$ |
1,102 |
|
|
$ |
1,179 |
|
Origination weighted average LTV ratio(1) |
|
|
71 |
% |
|
|
69 |
% |
|
|
82 |
% |
|
|
79 |
% |
|
|
84 |
% |
|
|
81 |
% |
Origination weighted average FICO
score(2) |
|
|
768 |
|
|
|
767 |
|
|
|
759 |
|
|
|
756 |
|
|
|
758 |
|
|
|
760 |
|
|
|
|
(1) |
|
The LTV ratios for home equity loans and home equity lines-of-credit are cumulative and
reflect the balance of any senior loans. LTV ratios reflect collateral values at the time of
loan origination. |
|
(2) |
|
Portfolio weighted average FICO scores reflect currently updated customer credit scores
whereas origination weighted average FICO scores reflect the customer credit scores at the
time of loan origination. |
|
(3) |
|
Represents only owned-portfolio originations. |
Home Equity Portfolio
Our home equity portfolio (loans and lines-of-credit) consists of both first-lien and
second-lien mortgage loans with underwriting criteria based on minimum credit scores,
debt-to-income ratios, and LTV ratios. We offer closed-end home equity loans which are generally
fixed-rate with principal and interest payments, and variable-rate interest-only home equity
lines-of-credit which do not require payment of principal during the 10-year revolving period of
the line-of-credit. Applications are underwritten centrally in conjunction with an automated
underwriting system.
At September 30, 2011, approximately 44% of our home equity portfolio was secured by
first-lien mortgages. The credit risk profile is substantially reduced when we hold a first-lien
position. During the first nine-month period of 2011, more than 65% of our home equity portfolio
originations were secured by a first-lien mortgage. We focus on high quality borrowers primarily
located within our footprint. The majority of our home equity line-of-credit borrowers
consistently pay more than the minimum payment required in any given month. Additionally, since we
focus on developing complete relationships with our customers, many of our home equity borrowers
are utilizing other products and services. The combination of high quality borrowers as measured
by financial condition, FICO score, and the lien position status provide a high degree of
confidence regarding the performance of the 2009-2011 originations.
Within the home equity line-of-credit portfolio, the standard product is a 10-year
interest-only draw period with a balloon payment and represents a majority of the line-of-credit
portfolio at September 30, 2011. As previously discussed, a significant portion of recent
originations are secured by first-liens on the property as high quality borrowers take advantage of
the low variable-rates available with a line-of-credit. If the current 30-year fixed-rate declines
substantially from its already low level, we would anticipate some portion of these first-lien
line-of-credit borrowers to refinance to a more traditional mortgage at a fixed-rate.
We believe we have underwritten credit conservatively within this portfolio. We have not
originated home equity loans or lines-of-credit with an LTV at origination greater than 100%,
except for infrequent situations with high quality borrowers. However, continued declines in
housing prices have decreased the value of the collateral for this portfolio and have caused a
portion of the portfolio to have an LTV greater than 100%. These higher LTV ratios are directly
correlated with borrower payment patterns and are a particular focus of our Loss Mitigation and
Home Saver groups.
35
We obtain a property valuation for every loan or line-of-credit. The type of property
valuation obtained is based on a series of credit parameters, and ranges from an AVM to a complete
walkthrough appraisal. While we believe an AVM estimate is an appropriate valuation source for a
portion of our home equity lending activities, we continue to re-evaluate all of our policies on an
on-going basis, specifically related to the December 2010 FFIEC guidelines regarding property
valuation. The intent of these guidelines is to ensure complete independence in the requesting and
review of real estate valuations associated with loan decisions. We are committed to appropriate
valuations for all of our real estate lending, and do not anticipate significant impacts to our
loan decision process as a result of these guidelines. We update values as appropriate, and in
compliance with applicable regulations, for loans identified as higher risk. Loans are identified
as higher risk based on performance indicators and the updated values are utilized to facilitate
our portfolio management processes, as well as our workout and loss mitigation functions.
We continue to make origination policy adjustments based on our assessment of an appropriate
risk profile, as well as industry actions. In addition to origination policy adjustments, we take
actions, as necessary, to manage the risk profile of this portfolio.
Residential Mortgage Portfolio
We focus on higher quality borrowers and underwrite all applications centrally. We do not
originate residential mortgages that allow negative amortization or allow the borrower multiple
payment options.
All residential mortgages are originated based on a completed full appraisal during the credit
underwriting process. We update values on a regular basis in compliance with applicable
regulations to facilitate our portfolio management, as well as our workout and loss mitigation
functions.
A majority of the loans in our portfolio have adjustable rates. These ARMs comprised
approximately 53% of our total residential mortgage loan portfolio at September 30, 2011. At
September 30, 2011, ARM loans that were expected to have rates reset totaled $1.5 billion through
2014. These loans scheduled to reset are primarily associated with loans originated subsequent to
2007, and as such, are not subject to the most significant declines in value. Given the quality of
our borrowers and the relatively low current interest rates, we believe that we have a relatively
limited exposure to ARM reset risk. Nonetheless, we have taken actions to mitigate our risk
exposure. We initiate borrower contact at least six months prior to the interest rate resetting,
and have been successful in converting many ARMs to fixed-rate loans through this process. Our ARM
portfolio has performed substantially better than the fixed-rate portfolio in part due to this
proactive management process. Additionally, when borrowers are experiencing payment difficulties,
loans may be reunderwritten based on the borrowers ability to repay the loan.
Several government actions were enacted that impacted the residential mortgage portfolio,
including various refinance programs which positively affected the availability of credit for the
industry. We are utilizing these programs to enhance our existing strategy of working closely with
our customers.
Financial Institution Exposure Risk
In the normal course of business, we engage with other financial institutions for a variety of
purposes resulting from ordinary banking activities such as payment processing, transactions
entered into for risk management purposes (see Note 14 of the Notes to Unaudited Condensed
Consolidated Financial Statements), and for investment diversification. As a result, we are
exposed to credit risk, or risk of loss, if the other financial institution fails to perform
according to the terms of our contract or agreement.
Current European credit pressures have increased concerns about correlated adverse effects
upon financial institutions. Specifically, there has been heightened emphasis on direct credit
exposure to certain sovereigns, in particular, Greece, Ireland, Portugal, Spain and Italy, as well
as to financial institutions headquartered in those countries. We conduct significant due
diligence on each financial institution prior to approval as a counterparty. Our Treasury Credit
Risk group within Credit Administration is responsible for the initial risk assessment as well as
on-going monitoring. We actively manage the level of exposure to each financial institution, with
regular assessment of the exposure limits by our Credit Policy and Strategy Committee. We believe
our overall exposure to financial institution exposure risk, including direct credit exposure to
any of these sovereigns and their banks, is not significant. Nonetheless, we minimize this risk
through increased frequency and degree of monitoring of each contract or agreement as we manage the
risk exposure on a real-time basis over the course of each day.
Credit Quality
We believe the most meaningful way to assess overall credit quality performance is through an
analysis of credit quality performance ratios. This approach forms the basis of most of the
discussion in the sections immediately following: NPAs and NALs, TDRs, ACL, and NCOs. In addition,
we utilize delinquency rates, risk distribution and migration patterns, and product segmentation in
the analysis of our credit quality performance.
36
Credit quality performance in the 2011 third quarter reflected a continued improvement in the
levels of our NCOs, NALs, and commercial Criticized assets. Although the commercial Criticized
asset levels continued to decline, there was an increase in new commercial Criticized asset inflows
compared to the prior quarter. The inflow of new commercial Criticized assets was across all
business segments and included one large relationship. We do not believe the increase in this
current quarters commercial Criticized assets to be either an indication of a future increase in
the overall level of commercial Criticized loans or a widespread deterioration in commercial credit
performance. Also, our ACL coverage ratios improved compared to the prior quarter. Specifically,
our ACL as a percentage of NALs improved to 187% at September 30, 2011 compared with 181% at June
30, 2011 and 166% at December 31, 2010.
NPAs, NALs, AND TDRs
NPAs and NALs
(This section should be read in conjunction with Note 3 of the Notes to Unaudited Condensed
Consolidated Financial Statements.)
NPAs consist of (1) NALs, which represent loans and leases no longer accruing interest, (2)
impaired loans held for sale, (3) OREO properties, and (4) other NPAs. Any loan in our portfolio
may be placed on nonaccrual status prior to the policies described below when collection of
principal or interest is in doubt.
C&I and CRE loans are placed on nonaccrual status at no greater than 90-days past due. With
the exception of residential mortgage loans guaranteed by government organizations which continue
to accrue interest, residential mortgage loans are placed on nonaccrual status at 150-days past
due. First-lien and second-lien home equity loans are placed on nonaccrual status at 150-days past
due and 120-days past due, respectively. Automobile and other consumer loans are not placed on
nonaccrual status, but are generally charged-off when the loan is 120-days past due. When interest
accruals are suspended, accrued interest income is reversed with current year accruals charged to
earnings and prior year amounts generally charged-off as a credit loss. When, in our judgment, the
borrowers ability to make required interest and principal payments has resumed and collectability
is no longer in doubt, the loan or lease is returned to accrual status.
37
The following table reflects period-end NALs and NPAs detail for each of the last five
quarters:
Table 20 Nonaccrual Loans and Leases and Nonperforming Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011 |
|
|
2010 |
|
(dollar amounts in thousands) |
|
September 30, |
|
|
June 30, |
|
|
March 31, |
|
|
December 31, |
|
|
September 30, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonaccrual loans and leases: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial |
|
$ |
209,632 |
|
|
$ |
229,327 |
|
|
$ |
260,397 |
|
|
$ |
346,720 |
|
|
$ |
398,353 |
|
Commercial real estate |
|
|
257,086 |
|
|
|
291,500 |
|
|
|
305,793 |
|
|
|
363,692 |
|
|
|
478,754 |
|
Residential mortgage |
|
|
61,129 |
|
|
|
59,853 |
|
|
|
44,812 |
|
|
|
45,010 |
|
|
|
82,984 |
|
Home equity |
|
|
37,156 |
|
|
|
33,545 |
|
|
|
25,255 |
|
|
|
22,526 |
|
|
|
21,689 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total nonaccrual loans and leases |
|
|
565,003 |
|
|
|
614,225 |
|
|
|
636,257 |
|
|
|
777,948 |
|
|
|
981,780 |
|
Other real estate owned, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
|
|
18,588 |
|
|
|
20,803 |
|
|
|
28,668 |
|
|
|
31,649 |
|
|
|
65,775 |
|
Commercial |
|
|
19,418 |
|
|
|
17,909 |
|
|
|
25,961 |
|
|
|
35,155 |
|
|
|
57,309 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other real estate owned, net |
|
|
38,006 |
|
|
|
38,712 |
|
|
|
54,629 |
|
|
|
66,804 |
|
|
|
123,084 |
|
Other nonperforming assets(1) |
|
|
10,972 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total nonperforming assets |
|
$ |
613,981 |
|
|
$ |
652,937 |
|
|
$ |
690,886 |
|
|
$ |
844,752 |
|
|
$ |
1,104,864 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonaccrual loans as a % of total loans and leases |
|
|
1.45 |
% |
|
|
1.57 |
% |
|
|
1.66 |
% |
|
|
2.04 |
% |
|
|
2.62 |
% |
Nonperforming assets ratio(2) |
|
|
1.57 |
|
|
|
1.67 |
|
|
|
1.80 |
|
|
|
2.21 |
|
|
|
2.94 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming Franklin assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Home equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OREO |
|
|
534 |
|
|
|
883 |
|
|
|
5,971 |
|
|
|
9,477 |
|
|
|
15,330 |
|
Impaired loans held for sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total nonperforming Franklin assets |
|
$ |
534 |
|
|
$ |
883 |
|
|
$ |
5,971 |
|
|
$ |
9,477 |
|
|
$ |
15,330 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Other nonperforming assets represent an investment security backed by a municipal bond. |
|
(2) |
|
This ratio is calculated as nonperforming assets divided by the sum of loans and leases, other
nonperforming assets, and net other real estate. |
The $39.0 million, or 6%, decline in NPAs compared with June 30, 2011, primarily
reflected:
|
|
|
$34.4 million, or 12%, decline in CRE NALs, reflecting both NCO activity and problem
credit resolutions, including borrower payments and payoffs. We continue to focus on early
recognition of risks through our on-going portfolio management processes. |
|
|
|
$19.7 million, or 9%, decline in C&I NALs, reflecting both NCO activity and problem
credit resolutions, including payoffs. The decline was associated with loans throughout
our footprint, with no specific industry concentration. |
Partially offset by:
|
|
|
$11.0 million increase in other NPAs reflecting an investment security backed by a
municipal bond. |
|
|
|
$3.6 million, or 11%, increase in home equity NALs, primarily reflecting the current
weak economic conditions and the continued decline of residential real estate property
values. Home equity NALs have been written down to net realizable value, less anticipated
selling costs, which substantially limits any significant future risk of loss. |
As part of our loss mitigation process, we reunderwrite, modify, or restructure loans when
borrowers are experiencing payment difficulties, based on the borrowers ability to repay the loan.
38
Compared with December 31, 2010, NPAs decreased $230.8 million, or 27%, primarily reflecting:
|
|
|
$137.1 million, or 40%, decline in C&I NALs, reflecting both NCO activity and problem
credit resolutions, including payoffs. The decline was associated with loans throughout
our footprint, with no specific geographic concentration. From an industry perspective,
improvement in the manufacturing-related segment accounted for a significant portion of the
decrease. |
|
|
|
$106.6 million, or 29%, decline in CRE NALs, reflecting both NCO activity and problem
credit resolutions, including borrower payments and payoffs. This decline was a direct
result of our on-going proactive management of these credits by our SAD. |
|
|
|
$28.8 million, or 43%, decrease in OREO properties, reflecting lower inflow levels
combined with aggressive sales activities. |
Partially offset by:
|
|
|
$16.1 million, or 36%, increase in residential mortgage NALs, reflecting the current
weak economic conditions and the continued decline in residential real estate property
values, as well as a change in our nonaccrual policy (see Consumer Credit section). |
|
|
|
$14.6 million, or 65%, increase in home equity NALs, also reflecting the current weak
economic conditions and the continued decline in residential real estate property values,
as well as a change in our nonaccrual policy (see Consumer Credit section). |
|
|
|
$11.0 million increase in other NPAs reflecting an investment security backed by a
municipal bond. |
NPA activity for each of the past five quarters was as follows:
Table 21- Nonperforming Asset Activity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011 |
|
|
2010 |
|
(dollar amounts in thousands) |
|
Third |
|
|
Second |
|
|
First |
|
|
Fourth |
|
|
Third |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming assets, beginning of period |
|
$ |
652,937 |
|
|
$ |
690,886 |
|
|
$ |
844,752 |
|
|
$ |
1,104,864 |
|
|
$ |
1,582,702 |
|
New nonperforming assets |
|
|
153,626 |
|
|
|
210,255 |
|
|
|
192,044 |
|
|
|
237,802 |
|
|
|
278,388 |
|
Franklin-related impact, net |
|
|
(349 |
) |
|
|
(5,088 |
) |
|
|
(3,506 |
) |
|
|
(5,853 |
) |
|
|
(251,412 |
) |
Returns to accruing status |
|
|
(25,794 |
) |
|
|
(68,429 |
) |
|
|
(70,886 |
) |
|
|
(100,051 |
) |
|
|
(111,168 |
) |
Loan and lease losses |
|
|
(79,992 |
) |
|
|
(74,945 |
) |
|
|
(128,730 |
) |
|
|
(126,047 |
) |
|
|
(151,013 |
) |
Other real estate owned gains (losses) |
|
|
(242 |
) |
|
|
388 |
|
|
|
1,492 |
|
|
|
(5,117 |
) |
|
|
(5,302 |
) |
Payments |
|
|
(76,510 |
) |
|
|
(73,009 |
) |
|
|
(87,041 |
) |
|
|
(191,296 |
) |
|
|
(210,612 |
) |
Sales |
|
|
(9,695 |
) |
|
|
(27,121 |
) |
|
|
(57,239 |
) |
|
|
(69,550 |
) |
|
|
(26,719 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming assets, end of period |
|
$ |
613,981 |
|
|
$ |
652,937 |
|
|
$ |
690,886 |
|
|
$ |
844,752 |
|
|
$ |
1,104,864 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As discussed previously, residential mortgage loans are placed on nonaccrual status at
150-days past due, with the exception of residential mortgage loans guaranteed by government
organizations which continue to accrue interest, and first-lien and second-lien home equity loans
and lines-of-credit are placed on nonaccrual status at 150-days past due and 120-days past due,
respectively.
39
The following table reflects period-end accruing loans and leases 90 days or more past due for
each of the last five quarters:
Table 22 Accruing Past Due Loans and Leases
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011 |
|
|
2010 |
|
(dollar amounts in thousands) |
|
September 30, |
|
|
June 30, |
|
|
March 31, |
|
|
December 31, |
|
|
September 30, |
|
Accruing loans and leases past due 90 days or more: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Residential mortgage (excluding loans guaranteed
by the U.S. government) |
|
|
32,850 |
|
|
|
33,975 |
|
|
|
41,858 |
|
|
|
53,983 |
|
|
|
56,803 |
|
Home equity |
|
|
20,420 |
|
|
|
17,451 |
|
|
|
24,130 |
|
|
|
23,497 |
|
|
|
27,160 |
|
Other consumer |
|
|
7,755 |
|
|
|
6,227 |
|
|
|
7,578 |
|
|
|
10,177 |
|
|
|
11,423 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total, excl. loans guaranteed by the U.S. government |
|
|
61,025 |
|
|
|
57,653 |
|
|
|
73,566 |
|
|
|
87,657 |
|
|
|
95,386 |
|
Add: loans guaranteed by the U.S. government |
|
|
84,413 |
|
|
|
76,979 |
|
|
|
94,440 |
|
|
|
98,288 |
|
|
|
94,249 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total accruing loans and leases past due 90 days
or more, including loans guaranteed by the
U.S. government |
|
$ |
145,438 |
|
|
$ |
134,632 |
|
|
$ |
168,006 |
|
|
$ |
185,945 |
|
|
$ |
189,635 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios: (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excluding loans guaranteed by the U.S. government,
as a percent of total loans and leases |
|
|
0.16 |
% |
|
|
0.15 |
% |
|
|
0.19 |
% |
|
|
0.23 |
% |
|
|
0.25 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guaranteed by the U.S. government, as a percent of
total loans and leases |
|
|
0.21 |
|
|
|
0.19 |
|
|
|
0.25 |
|
|
|
0.26 |
|
|
|
0.26 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Including loans guaranteed by the U.S. government,
as a percent of total loans and leases |
|
|
0.37 |
|
|
|
0.34 |
|
|
|
0.44 |
|
|
|
0.49 |
|
|
|
0.51 |
|
|
|
|
(1) |
|
Ratios are calculated as a percentage of related loans and leases. |
Loans guaranteed by the U.S. government accrue interest at the rate guaranteed by the
government agency. We are reimbursed from the government agency for reasonable expenses incurred
in servicing loans. The FHA reimburses us for 66% of expenses, and the VA reimburses us at a
maximum percentage of guarantee which is established for each individual loan. We have not
experienced either material losses in excess of guarantees caps or significant delays or rejected
claims from the related government entity.
The over 90-day delinquency ratio for total loans not guaranteed by a U.S. government agency
was 0.16% at September 30, 2011, representing an 7 basis point decline compared with December 31,
2010. This decline reflected the sale of certain loans in this category.
TDR Loans
(This section should be read in conjunction with Note 3 of the Notes to Unaudited Condensed
Consolidated Financial Statements.)
TDRs are modified loans in which a concession is provided to a borrower experiencing financial
difficulties. TDRs can be classified as either accrual or nonaccrual loans. Nonaccrual TDRs are
included in NALs whereas accruing TDRs are excluded from NALs as it is probable that all
contractual principal and interest due under the restructured terms will be collected.
40
The table below presents our accruing and nonaccruing TDRs at period-end for each of the past
five quarters:
Table 23 Accruing and Nonaccruing Troubled Debt Restructured Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011 |
|
|
2010 |
|
(dollar amounts in thousands) |
|
September 30, |
|
|
June 30, |
|
|
March 31, |
|
|
December 31, |
|
|
September 30, |
|
Troubled debt restructured loans accruing: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage |
|
$ |
304,365 |
|
|
$ |
313,772 |
|
|
$ |
333,492 |
|
|
$ |
328,411 |
|
|
$ |
304,356 |
|
Other consumer(1) |
|
|
89,596 |
|
|
|
75,036 |
|
|
|
78,488 |
|
|
|
76,586 |
|
|
|
73,210 |
|
Commercial |
|
|
321,598 |
|
|
|
240,126 |
|
|
|
206,462 |
|
|
|
222,632 |
|
|
|
157,971 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total troubled debt restructured loans accruing |
|
|
715,559 |
|
|
|
628,934 |
|
|
|
618,442 |
|
|
|
627,629 |
|
|
|
535,537 |
|
|
Troubled debt restructured loans nonaccruing: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage |
|
|
20,877 |
|
|
|
14,378 |
|
|
|
8,523 |
|
|
|
5,789 |
|
|
|
10,581 |
|
Other consumer(1) |
|
|
279 |
|
|
|
140 |
|
|
|
14 |
|
|
|
|
|
|
|
|
|
Commercial |
|
|
74,264 |
|
|
|
77,745 |
|
|
|
37,858 |
|
|
|
33,462 |
|
|
|
33,236 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total troubled debt restructured loans
nonaccruing |
|
|
95,420 |
|
|
|
92,263 |
|
|
|
46,395 |
|
|
|
39,251 |
|
|
|
43,817 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total troubled debt restructured loans |
|
$ |
810,979 |
|
|
$ |
721,197 |
|
|
$ |
664,837 |
|
|
$ |
666,880 |
|
|
$ |
579,354 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes automobile, home equity, and other consumer TDRs. |
TDRs primarily reflect our loss mitigation efforts to proactively work with borrowers having
difficulty making their payments. Within commercial accruing TDRs, $40.1 million of the increase
from the prior quarter reflected a change based on clarifying language in the FASBs ASU 2011-02
Receivables (Topic 310), A Creditors Determination of Whether a Restructuring Is a Troubled Debt
Restructuring, related to when a TDR designation is removed.
ACL
(This section should be read in conjunction with Note 3 of the Notes to Unaudited Condensed
Consolidated Financial Statements.)
We maintain two reserves, both of which in our judgment are appropriate to absorb credit
losses inherent in our loan and lease portfolio: the ALLL and the AULC. Combined, these reserves
comprise the total ACL. Our Credit Administration group is responsible for developing the
methodology assumptions and estimates used in the calculation, as well as determining the
appropriateness of the ACL. The ALLL represents the estimate of losses inherent in the loan
portfolio at the reported date. Additions to the ALLL result from recording provision expense for
loan losses or increased risk levels resulting from loan risk-rating downgrades, while reductions
reflect charge-offs, recoveries, decreased risk levels resulting from loan risk-rating upgrades, or
the sale of loans. The AULC is determined by applying the transaction reserve process to the
unfunded portion of the loan exposures adjusted by an applicable funding expectation.
A provision for credit losses is recorded to adjust the ACL to the level we have determined to
be appropriate to absorb credit losses inherent in our loan and lease portfolio. The provision for
credit losses in the 2011 third quarter was $43.6 million, compared with $35.8 million in the prior
quarter and $119.2 million in the year-ago quarter. (See Provision for Credit Losses discussion).
We regularly evaluate the appropriateness of the ACL by performing on-going evaluations of the
loan and lease portfolio, including such factors as the differing economic risks associated with
each loan category, the financial condition of specific borrowers, the level of delinquent loans,
the value of any collateral and, where applicable, the existence of any guarantees or other
documented support. We evaluate the impact of changes in interest rates and overall economic
conditions on the ability of borrowers to meet their financial obligations when quantifying our
exposure to credit losses and assessing the appropriateness of our ACL at each reporting date. In
addition to general economic conditions and the other factors described above, we also consider the
impact of declining residential real estate values and the diversification of CRE loans,
particularly loans secured by retail properties.
Our ACL evaluation process includes the on-going assessment of credit quality metrics, and a
comparison of certain ACL benchmarks to current performance. While the total ACL balance has
declined in recent quarters, all of the relevant benchmarks improved as a result of the asset
quality improvement. The coverage ratios of NALs, Criticized, and Classified loans have
significantly improved in recent quarters despite the decline in the ACL level. For example, the
ACL coverage ratio associated with NALs was 187% at September 30, 2011, compared with 166% at
December 31, 2010 and 140% at September 30, 2010.
41
The table below reflects activity in the ALLL and the AULC for each of the last five quarters:
Table 24 Quarterly Allowance for Credit Losses Analysis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011 |
|
|
2010 |
|
(dollar amounts in thousands) |
|
Third |
|
|
Second |
|
|
First |
|
|
Fourth |
|
|
Third |
|
Allowance for loan and lease losses,
beginning of period |
|
$ |
1,071,126 |
|
|
$ |
1,133,226 |
|
|
$ |
1,249,008 |
|
|
$ |
1,336,352 |
|
|
$ |
1,402,160 |
|
Loan and lease losses |
|
|
(115,899 |
) |
|
|
(128,701 |
) |
|
|
(199,007 |
) |
|
|
(205,587 |
) |
|
|
(221,144 |
) |
Recoveries of loans previously charged-off |
|
|
25,344 |
|
|
|
31,167 |
|
|
|
33,924 |
|
|
|
33,336 |
|
|
|
36,630 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loan and lease losses |
|
|
(90,555 |
) |
|
|
(97,534 |
) |
|
|
(165,083 |
) |
|
|
(172,251 |
) |
|
|
(184,514 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loan and lease losses |
|
|
45,867 |
|
|
|
36,948 |
|
|
|
49,301 |
|
|
|
84,907 |
|
|
|
118,788 |
|
Allowance for assets sold |
|
|
(6,728 |
) |
|
|
(1,514 |
) |
|
|
|
|
|
|
|
|
|
|
(82 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan and lease losses, end of period |
|
$ |
1,019,710 |
|
|
$ |
1,071,126 |
|
|
$ |
1,133,226 |
|
|
$ |
1,249,008 |
|
|
$ |
1,336,352 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for unfunded loan commitments
and letters of credit, beginning of period |
|
$ |
41,060 |
|
|
$ |
42,211 |
|
|
$ |
42,127 |
|
|
$ |
40,061 |
|
|
$ |
39,689 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for (reduction in) unfunded loan
commitments and letters of credit losses |
|
|
(2,281 |
) |
|
|
(1,151 |
) |
|
|
84 |
|
|
|
2,066 |
|
|
|
372 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for unfunded loan commitments
and letters of credit, end of period |
|
$ |
38,779 |
|
|
$ |
41,060 |
|
|
$ |
42,211 |
|
|
$ |
42,127 |
|
|
$ |
40,061 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total allowance for credit losses, end of period |
|
$ |
1,058,489 |
|
|
$ |
1,112,186 |
|
|
$ |
1,175,437 |
|
|
$ |
1,291,135 |
|
|
$ |
1,376,413 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan and lease losses as % of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans and leases |
|
|
2.61 |
% |
|
|
2.74 |
% |
|
|
2.96 |
% |
|
|
3.28 |
% |
|
|
3.56 |
% |
Nonaccrual loans and leases |
|
|
180 |
|
|
|
174 |
|
|
|
178 |
|
|
|
161 |
|
|
|
136 |
|
Nonperforming assets |
|
|
166 |
|
|
|
164 |
|
|
|
164 |
|
|
|
148 |
|
|
|
121 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total allowance for credit losses as % of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans and leases |
|
|
2.71 |
% |
|
|
2.84 |
% |
|
|
3.07 |
% |
|
|
3.39 |
% |
|
|
3.67 |
% |
Nonaccrual loans and leases |
|
|
187 |
|
|
|
181 |
|
|
|
185 |
|
|
|
166 |
|
|
|
140 |
|
Nonperforming assets |
|
|
172 |
|
|
|
170 |
|
|
|
170 |
|
|
|
153 |
|
|
|
125 |
|
The table below reflects the allocation of our ACL among our various loan categories
during each of the past five quarters:
Table 25 Allocation of Allowance for Credit Losses (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011 |
|
|
2010 |
|
(dollar amounts in thousands) |
|
September 30, |
|
|
June 30, |
|
|
March 31, |
|
|
December 31, |
|
|
September 30, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and
industrial |
|
$ |
285,254 |
|
|
|
36 |
% |
|
$ |
281,016 |
|
|
|
35 |
% |
|
$ |
299,564 |
|
|
|
35 |
% |
|
$ |
340,614 |
|
|
|
34 |
% |
|
$ |
353,431 |
|
|
|
33 |
% |
Commercial real
estate |
|
|
418,895 |
|
|
|
15 |
|
|
|
463,874 |
|
|
|
16 |
|
|
|
511,068 |
|
|
|
17 |
|
|
|
588,251 |
|
|
|
18 |
|
|
|
654,219 |
|
|
|
18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial |
|
|
704,149 |
|
|
|
51 |
|
|
|
744,890 |
|
|
|
51 |
|
|
|
810,632 |
|
|
|
52 |
|
|
|
928,865 |
|
|
|
52 |
|
|
|
1,007,650 |
|
|
|
51 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automobile |
|
|
49,402 |
|
|
|
14 |
|
|
|
55,428 |
|
|
|
16 |
|
|
|
50,862 |
|
|
|
15 |
|
|
|
49,488 |
|
|
|
15 |
|
|
|
44,505 |
|
|
|
14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity |
|
|
139,616 |
|
|
|
21 |
|
|
|
146,444 |
|
|
|
20 |
|
|
|
149,370 |
|
|
|
20 |
|
|
|
150,630 |
|
|
|
20 |
|
|
|
154,323 |
|
|
|
21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage |
|
|
98,974 |
|
|
|
13 |
|
|
|
98,992 |
|
|
|
12 |
|
|
|
96,741 |
|
|
|
12 |
|
|
|
93,289 |
|
|
|
12 |
|
|
|
93,407 |
|
|
|
12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other consumer |
|
|
27,569 |
|
|
|
1 |
|
|
|
25,372 |
|
|
|
1 |
|
|
|
25,621 |
|
|
|
1 |
|
|
|
26,736 |
|
|
|
1 |
|
|
|
36,467 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer |
|
|
315,561 |
|
|
|
49 |
|
|
|
326,236 |
|
|
|
49 |
|
|
|
322,594 |
|
|
|
48 |
|
|
|
320,143 |
|
|
|
48 |
|
|
|
328,702 |
|
|
|
49 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total allowance for loan and lease
losses |
|
|
1,019,710 |
|
|
|
100 |
% |
|
|
1,071,126 |
|
|
|
100 |
% |
|
|
1,133,226 |
|
|
|
100 |
% |
|
|
1,249,008 |
|
|
|
100 |
% |
|
|
1,336,352 |
|
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for unfunded loan
commitments |
|
|
38,779 |
|
|
|
|
|
|
|
41,060 |
|
|
|
|
|
|
|
42,211 |
|
|
|
|
|
|
|
42,127 |
|
|
|
|
|
|
|
40,061 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total allowance for credit losses |
|
$ |
1,058,489 |
|
|
|
|
|
|
$ |
1,112,186 |
|
|
|
|
|
|
$ |
1,175,437 |
|
|
|
|
|
|
$ |
1,291,135 |
|
|
|
|
|
|
$ |
1,376,413 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Percentages represent the percentage of each loan and lease category to total loans and leases. |
42
The reduction in the ALLL, compared with both June 30, 2011, and December 31, 2010,
reflected declines in the ALLL in both the commercial and consumer portfolios.
The decline in the commercial-related ALLL reflected NCOs on loans with specific reserves, and
an overall reduction in the level of commercial Criticized loans. Commercial Criticized loans are
commercial loans rated as OLEM, Substandard, Doubtful, or Loss. As shown in the table below,
commercial Criticized loans declined $88.1 million from June 30, 2011, and $783.4 million from
December 31, 2010, reflecting significant upgrade and payment activity.
Table 26 Criticized Commercial Loan Activity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011 |
|
|
2010 |
|
(dollar amounts in thousands) |
|
Third |
|
|
Second |
|
|
First |
|
|
Fourth |
|
|
Third |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Criticized commercial loans, beginning of period |
|
$ |
2,379,150 |
|
|
$ |
2,660,792 |
|
|
$ |
3,074,481 |
|
|
$ |
3,637,533 |
|
|
$ |
4,106,602 |
|
New additions / increases |
|
|
357,057 |
|
|
|
250,422 |
|
|
|
169,884 |
|
|
|
289,850 |
|
|
|
407,514 |
|
Advances |
|
|
46,148 |
|
|
|
44,442 |
|
|
|
61,516 |
|
|
|
52,282 |
|
|
|
75,386 |
|
Upgrades to Pass |
|
|
(252,388 |
) |
|
|
(271,698 |
) |
|
|
(238,518 |
) |
|
|
(382,713 |
) |
|
|
(391,316 |
) |
Payments |
|
|
(180,845 |
) |
|
|
(231,819 |
) |
|
|
(294,564 |
) |
|
|
(401,302 |
) |
|
|
(408,698 |
) |
Loan losses |
|
|
(58,035 |
) |
|
|
(72,989 |
) |
|
|
(112,008 |
) |
|
|
(121,169 |
) |
|
|
(151,955 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Criticized commercial loans, end of period |
|
$ |
2,291,088 |
|
|
$ |
2,379,150 |
|
|
$ |
2,660,792 |
|
|
$ |
3,074,481 |
|
|
$ |
3,637,533 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The decline in the consumer-related ALLL primarily reflected the impact of the 2011 third
quarter automobile securitization (see Automobile Portfolio discussion) as well as a decrease in
the home equity-related ALLL as a result of lower delinquency levels, partially offset by an
increase in the mortgage-related ALLL as a result of increased residential mortgage-related
balances.
The entire loan and lease portfolio has shown steadily improving credit quality trends
throughout 2010 and 2011. The ACL to total loans declined to 2.71% at September 30, 2011 compared
to 3.39% at December 31, 2010. We believe the decline in the ratio is appropriate given the
continued improvement in the risk profile of our loan portfolio. Further, we believe that early
identification of problem loans and aggressive action plans for these problem loans, combined with
originating high quality new loans will contribute to continued improvement in our key credit
quality metrics. However, the continued weakness in the residential real estate market and the
overall economic conditions remained stressed, and additional risks emerged during the first
nine-month period of 2011. These additional risks included the European banking sector stress, the
continued budget issues in local governments, flat domestic economic growth, and the variety of
policy proposals regarding job growth, debt management, and domestic tax policy. Continued high
unemployment, among other factors, has slowed any significant recovery. In the near-term, we
anticipate a continued high unemployment rate and the concern around the U.S. and local government
budget issues will continue to negatively impact the financial condition of some of our retail and
commercial borrowers. The pronounced downturn in the residential real estate market that began in
early 2007 has resulted in significantly lower residential real estate values. We have significant
exposure to loans secured by residential real estate and continue to be an active lender in our
communities. The impact of the downturn in real estate values has had a significant impact on some
of our borrowers as evidenced by the higher delinquencies and NCOs since late 2007. We do not
anticipate any meaningful economic improvement in the near-term. All of these factors are
impacting consumer confidence, as well as business investments and acquisitions. Given the
combination of these noted factors, we believe that our ACL is appropriate and its coverage level
is reflective of the quality of our portfolio and the current operating environment.
43
The table below reflects activity in the ALLL and AULC for the first nine-month periods ended
September 30, 2011 and 2010.
Table 27 Year to Date Allowance for Credit Losses Analysis
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
(dollar amounts in thousands) |
|
2011 |
|
|
2010 |
|
|
|
|
|
|
|
|
|
|
Allowance for loan and lease losses,
beginning of period |
|
$ |
1,249,008 |
|
|
$ |
1,482,479 |
|
Loan and lease losses |
|
|
(443,607 |
) |
|
|
(798,320 |
) |
Recoveries of loans previously charged-off |
|
|
90,435 |
|
|
|
96,097 |
|
|
|
|
|
|
|
|
Net loan and lease losses |
|
|
(353,172 |
) |
|
|
(702,223 |
) |
Provision for loan and lease losses |
|
|
132,116 |
|
|
|
556,392 |
|
Allowance for assets sold |
|
|
(8,242 |
) |
|
|
(296 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan and lease losses, end of period |
|
$ |
1,019,710 |
|
|
$ |
1,336,352 |
|
|
|
|
|
|
|
|
Allowance for unfunded loan commitments
and letters of credit, beginning of period |
|
$ |
42,127 |
|
|
$ |
48,879 |
|
Provision for (reduction in) unfunded loan commitments
and letters of credit losses |
|
|
(3,348 |
) |
|
|
(8,818 |
) |
|
|
|
|
|
|
|
Allowance for unfunded loan commitments
and letters of credit, end of period |
|
$ |
38,779 |
|
|
$ |
40,061 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total allowance for credit losses |
|
$ |
1,058,489 |
|
|
$ |
1,376,413 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan and lease losses as % of: |
|
|
|
|
|
|
|
|
Total loans and leases |
|
|
2.61 |
% |
|
|
3.56 |
% |
Nonaccrual loans and leases |
|
|
180 |
|
|
|
136 |
|
Nonperforming assets |
|
|
166 |
|
|
|
121 |
|
|
|
|
|
|
|
|
|
|
Total allowance for credit losses as % of: |
|
|
|
|
|
|
|
|
Total loans and leases |
|
|
2.71 |
% |
|
|
3.67 |
% |
Nonaccrual loans and leases |
|
|
187 |
|
|
|
140 |
|
Nonperforming assets |
|
|
172 |
|
|
|
125 |
|
NCOs
(This section should be read in conjunction with Significant Item 2 and the Franklin-related
Impacts section.)
Any loan in any portfolio may be charged-off prior to the policies described below if a loss
confirming event has occurred. Loss confirming events include, but are not limited to, bankruptcy
(unsecured), continued delinquency, foreclosure, or receipt of an asset valuation indicating a
collateral deficiency and that asset is the sole source of repayment.
C&I and CRE loans are either charged-off or written down to net realizable value at 90-days
past due. Automobile loans and other consumer loans are charged-off at 120-days past due.
First-lien and second-lien home equity loans are charged-off to the estimated fair value of the
collateral at 150-days past due and 120-days past due, respectively. Residential mortgages are
charged-off to the estimated fair value of the collateral at 150-days past due.
44
The following table reflects NCO detail for each of the last five quarters:
Table 28 Quarterly Net Charge-off Analysis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011 |
|
|
2010 |
|
(dollar amounts in thousands) |
|
Third |
|
|
Second |
|
|
First |
|
|
Fourth |
|
|
Third |
|
Net charge-offs by loan and lease type: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial |
|
$ |
17,891 |
|
|
$ |
18,704 |
|
|
$ |
42,191 |
|
|
$ |
59,124 |
|
|
$ |
62,241 |
|
Commercial real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction |
|
|
1,450 |
|
|
|
4,145 |
|
|
|
28,400 |
|
|
|
11,084 |
|
|
|
17,936 |
|
Commercial |
|
|
22,990 |
|
|
|
23,450 |
|
|
|
39,283 |
|
|
|
33,787 |
|
|
|
45,725 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate |
|
|
24,440 |
|
|
|
27,595 |
|
|
|
67,683 |
|
|
|
44,871 |
|
|
|
63,661 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial |
|
|
42,331 |
|
|
|
46,299 |
|
|
|
109,874 |
|
|
|
103,995 |
|
|
|
125,902 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automobile |
|
|
3,863 |
|
|
|
2,255 |
|
|
|
4,712 |
|
|
|
7,035 |
|
|
|
5,570 |
|
Home equity |
|
|
26,222 |
|
|
|
25,441 |
|
|
|
26,715 |
|
|
|
29,175 |
|
|
|
27,827 |
|
Residential mortgage(1) |
|
|
11,562 |
|
|
|
16,455 |
|
|
|
18,932 |
|
|
|
26,775 |
|
|
|
18,961 |
|
Other consumer |
|
|
6,577 |
|
|
|
7,084 |
|
|
|
4,850 |
|
|
|
5,271 |
|
|
|
6,254 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer |
|
|
48,224 |
|
|
|
51,235 |
|
|
|
55,209 |
|
|
|
68,256 |
|
|
|
58,612 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net charge-offs |
|
$ |
90,555 |
|
|
$ |
97,534 |
|
|
$ |
165,083 |
|
|
$ |
172,251 |
|
|
$ |
184,514 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net charge-offs annualized percentages: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial |
|
|
0.52 |
% |
|
|
0.56 |
% |
|
|
1.29 |
% |
|
|
1.85 |
% |
|
|
2.01 |
% |
Commercial real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction |
|
|
0.87 |
|
|
|
2.99 |
|
|
|
18.59 |
|
|
|
6.19 |
|
|
|
7.25 |
|
Commercial |
|
|
1.69 |
|
|
|
1.65 |
|
|
|
2.66 |
|
|
|
2.22 |
|
|
|
3.01 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate |
|
|
1.60 |
|
|
|
1.77 |
|
|
|
4.15 |
|
|
|
2.64 |
|
|
|
3.60 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial |
|
|
0.86 |
|
|
|
0.94 |
|
|
|
2.24 |
|
|
|
2.13 |
|
|
|
2.59 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automobile |
|
|
0.25 |
|
|
|
0.15 |
|
|
|
0.33 |
|
|
|
0.51 |
|
|
|
0.43 |
|
Home equity |
|
|
1.31 |
|
|
|
1.29 |
|
|
|
1.38 |
|
|
|
1.51 |
|
|
|
1.47 |
|
Residential mortgage(1) |
|
|
0.97 |
|
|
|
1.44 |
|
|
|
1.70 |
|
|
|
2.42 |
|
|
|
1.73 |
|
Other consumer |
|
|
5.05 |
|
|
|
5.27 |
|
|
|
3.47 |
|
|
|
3.66 |
|
|
|
3.83 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer |
|
|
0.99 |
|
|
|
1.08 |
|
|
|
1.20 |
|
|
|
1.50 |
|
|
|
1.32 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net charge-offs as a % of average loans |
|
|
0.92 |
% |
|
|
1.01 |
% |
|
|
1.73 |
% |
|
|
1.82 |
% |
|
|
1.98 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The 2010 fourth quarter included net charge-offs of $16,389 thousand related to the sale
of certain underperforming residential mortgage loans. |
In assessing NCO trends, it is helpful to understand the process of how these loans are
treated as they deteriorate over time. The ALLL established at origination is consistent with the
level of risk associated with the original underwriting. As a part of our normal portfolio
management process for commercial loans, the loan is periodically reviewed and the ALLL is
increased or decreased as warranted. If the quality of a loan has deteriorated, it migrates to a
lower quality risk rating, requiring a higher ALLL amount. Charge-offs, if necessary, are
generally recognized in a period after the specific ALLL was established. If the previously
established ALLL exceeds that needed to satisfactorily resolve the problem loan, a reduction in the
overall level of the ALLL could be recognized. In summary, if loan quality deteriorates, the
typical credit sequence would be periods of ALLL building, followed by periods of higher NCOs as
the previously established ALLL is utilized. Additionally, an increase in the ALLL either precedes
or is in conjunction with increases in NALs. When a loan is classified as NAL, it is evaluated
for specific ALLL or charge-off. As a result, an increase in NALs does not necessarily result in
an increase in the ALLL or an expectation of higher future NCOs.
Residential mortgage NCO annualized percentages generally are greater than those of the home
equity portfolio. The NCO annualized percentage in the home equity portfolio is the result of a
higher quality customer base as measured by FICO distribution and a substantial portion of the
growth is represented by first-lien positions. Additionally, we accelerated the charge-off policy
associated with the residential mortgage portfolio in 2010 which shortened the maximum timeframe to
charge-off and, during 2011, have executed two NPL sales in the residential mortgage portfolio with
resulting charge-offs.
45
2011 Third Quarter versus 2011 Second Quarter
C&I NCOs declined $0.8 million, or 4%. CRE NCOs decreased $3.2 million, or 11%. These
declines were evident across our geographic footprint and generally associated with small
relationships. The performance of both portfolios was consistent with our expectations. Based on
asset quality trends, we continue to anticipate this lower level of CRE NCOs in future quarters.
Automobile NCOs increased $1.6 million, or 71%. The current quarters performance was
consistent with our expectations. The prior quarters NCOs were historically low reflecting a
combination of low delinquency levels and a strong resale market for used vehicles.
Home equity NCOs increased $0.8 million, or 3%. Although the performance of this portfolio
continues to be impacted by the weakened overall economy and the continued decline in home values,
this slight increase was consistent with our expectations. We continue to manage the default rate
through focused delinquency monitoring as essentially all defaults for second-lien home equity
loans incur significant losses reflecting the reduction of equity associated with the collateral
property.
Residential mortgage NCOs declined $4.9 million, or 30%, consistent with our expectations for
a continued downward trend in this portfolio.
46
The following table reflects NCO activity for the first nine-month periods ended September 30,
2011 and 2010:
Table 29 Year to Date Net Charge-off Analysis
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
(dollar amounts in thousands) |
|
2011 |
|
|
2010 |
|
Net charge-offs by loan and lease type: |
|
|
|
|
|
|
|
|
Commercial: |
|
|
|
|
|
|
|
|
Commercial and industrial |
|
$ |
78,786 |
|
|
$ |
195,808 |
|
Commercial real estate: |
|
|
|
|
|
|
|
|
Construction |
|
|
33,995 |
|
|
|
97,924 |
|
Commercial |
|
|
85,723 |
|
|
|
132,767 |
|
|
|
|
|
|
|
|
Commercial real estate |
|
|
119,718 |
|
|
|
230,691 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial |
|
|
198,504 |
|
|
|
426,499 |
|
|
|
|
|
|
|
|
Consumer: |
|
|
|
|
|
|
|
|
Automobile |
|
|
10,830 |
|
|
|
19,537 |
|
Home equity(1) |
|
|
78,378 |
|
|
|
110,198 |
|
Residential mortgage(2) |
|
|
46,949 |
|
|
|
126,120 |
|
Other loans |
|
|
18,511 |
|
|
|
19,869 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer |
|
|
154,668 |
|
|
|
275,724 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net charge-offs |
|
$ |
353,172 |
|
|
$ |
702,223 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net charge-offs annualized percentages: |
|
|
|
|
|
|
|
|
Commercial: |
|
|
|
|
|
|
|
|
Commercial and industrial |
|
|
0.78 |
% |
|
|
2.12 |
% |
Commercial real estate: |
|
|
|
|
|
|
|
|
Construction |
|
|
7.41 |
|
|
|
10.67 |
|
Commercial |
|
|
2.01 |
|
|
|
2.88 |
|
|
|
|
|
|
|
|
Commercial real estate |
|
|
2.54 |
|
|
|
4.17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial |
|
|
1.35 |
|
|
|
2.89 |
|
|
|
|
|
|
|
|
Consumer: |
|
|
|
|
|
|
|
|
Automobile |
|
|
0.24 |
|
|
|
0.56 |
|
Home equity(1) |
|
|
1.33 |
|
|
|
1.95 |
|
Residential mortgage(2) |
|
|
1.36 |
|
|
|
3.74 |
|
Other loans |
|
|
4.58 |
|
|
|
3.84 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer |
|
|
1.09 |
|
|
|
2.11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net charge-offs as a % of average loans |
|
|
1.22 |
% |
|
|
2.52 |
% |
|
|
|
|
|
|
|
|
|
|
(1) |
|
The 2010 first nine-month period included net charge-offs totaling $14,678 thousand associated
with the transfer of Franklin-related home equity loans to loans held for sale and $6,143 thousand
of other Franklin-related net charge-offs. |
|
(2) |
|
The 2010 first nine-month period included net charge-offs totaling $60,822 thousand associated
with the transfer of Franklin-related residential mortgage loans to loans held for sale and $14,914
thousand of other Franklin-related net charge-offs. |
2011 First Nine Months versus 2010 First Nine Months
C&I NCOs decreased $117.0 million, or 60%. CRE NCOs decreased $111.0 million, or 48%. These
declines primarily reflected significant credit quality improvement in the underlying portfolio as
well as our on-going proactive credit management practices.
Automobile NCOs decreased $8.7 million, or 45%, reflected our consistent high quality
origination profile, as well as a stronger market for used automobiles. This focus on origination
quality has been the primary driver for the improvement in this portfolio in the current period
compared with the year-ago period.
Home equity NCOs declined $31.8 million, or 29%. The first nine-month period of 2010 included
$20.7 million of Franklin-related NCOs compared with no Franklin-related NCOs in the current
period. Excluding the Franklin-related impacts, home equity NCOs decreased $11.1 million compared
with the first nine-month period of 2010. Although the performance of this portfolio continued to
be impacted by the overall weak economic conditions and the continued decline of residential real
estate property values, the performance was consistent with our expectations for the portfolio.
47
Residential mortgage NCOs declined $79.2 million, or 63%. The first nine-month period of 2010
included $75.7 million of Franklin-related net charge-offs, and the first nine-month period of 2011
included Franklin-related net recoveries of $2.5 million. Excluding the Franklin impacts,
residential mortgage NCOs decreased $1.0 million compared with the first nine-month period of 2010.
Additionally, the first nine-month period of 2011 included $6.8 million of NCOs related to a
change in loss recognition policy (see Consumer Credit section). Excluding these impacts,
performance was consistent with our expectations for a continued downward trend in this portfolio.
Market Risk
Market risk represents the risk of loss due to changes in market values of assets and
liabilities. We incur market risk in the normal course of business through exposures to market
interest rates, foreign exchange rates, equity prices, credit spreads, and expected lease residual
values. We have identified two primary sources of market risk: interest rate risk and price risk.
Interest Rate Risk
OVERVIEW
Interest rate risk is the risk to earnings and value arising from changes in market interest
rates. Interest rate risk arises from timing differences in the repricings and maturities of
interest-earning assets and interest-bearing liabilities (reprice risk), changes in the expected
maturities of assets and liabilities arising from embedded options, such as borrowers ability to
prepay residential mortgage loans at any time and depositors ability to redeem certificates of
deposit before maturity (option risk), changes in the shape of the yield curve where interest rates
increase or decrease in a non-parallel fashion (yield curve risk), and changes in spread
relationships between different yield curves, such as U.S. Treasuries and LIBOR (basis risk).
INCOME SIMULATION AND ECONOMIC VALUE ANALYSIS
Interest rate risk measurement is performed monthly. Two broad approaches to modeling
interest rate risk are employed: income simulation and economic value analysis. An income
simulation analysis is used to measure the sensitivity of forecasted ISE to changes in market rates
over a one-year time period. Although bank owned life insurance, automobile operating lease
assets, and excess cash balances held at the Federal Reserve Bank are classified as
noninterest-earning assets, and the net revenue from these assets is recorded in noninterest income
and noninterest expense, these portfolios are included in the interest sensitivity analysis because
they have attributes similar to interest-earning assets. EVE analysis is used to measure the
sensitivity of the values of period-end assets and liabilities to changes in market interest rates.
EVE analysis serves as a complement to ISE analysis as it provides risk exposure estimates for
time periods beyond the one-year simulation period.
The models used for these measurements take into account prepayment speeds on mortgage loans,
mortgage-backed securities, and consumer installment loans, as well as cash flows of other assets
and liabilities. Balance sheet growth assumptions are also considered in the ISE analysis. The
models include the effects of derivatives, such as interest rate swaps, caps, floors, and other
types of interest rate options.
The baseline scenario for ISE analysis, with which all other scenarios are compared, is based
on market interest rates implied by the prevailing yield curve as of the period-end. Alternative
interest rate scenarios are then compared with the baseline scenario. These alternative interest
rate scenarios include parallel rate shifts on both a gradual and an immediate basis, movements in
interest rates that alter the shape of the yield curve (e.g., flatter or steeper yield curve), and
no changes in current interest rates for the entire measurement period. Scenarios are also
developed to measure short-term repricing risks, such as the impact of LIBOR-based interest rates
rising or falling faster than the prime rate.
The simulations for evaluating short-term interest rate risk exposure are scenarios that model
gradual +/-100 and +/-200 basis points parallel shifts in market interest rates over the next
one-year period beyond the interest rate change implied by the current yield curve. We assumed
market interest rates would not fall below 0% over the next one-year period for the scenarios that
used the -100 and -200 basis points parallel shift in market interest rates. The table below shows
the results of the scenarios as of September 30, 2011, and December 31, 2010. All of the positions
were within the board of directors policy limits as of September 30, 2011.
48
Table 30 Interest Sensitive Earnings at Risk
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Sensitive Earnings at Risk (%) |
|
Basis point change scenario |
|
|
-200 |
|
|
|
-100 |
|
|
|
+100 |
|
|
|
+200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Board policy limits |
|
|
-4.0 |
% |
|
|
-2.0 |
% |
|
|
-2.0 |
% |
|
|
-4.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2011 |
|
|
-2.1 |
|
|
|
-1.3 |
|
|
|
1.1 |
|
|
|
2.2 |
|
December 31, 2010 |
|
|
-3.2 |
|
|
|
-1.8 |
|
|
|
0.3 |
|
|
|
0.0 |
|
The ISE at risk reported as of September 30, 2011, for the +200 basis points scenario shows a
significant change to an asset sensitive near-term interest rate risk position compared with
December 31, 2010. The ALCOs strategy is to be near-term asset-sensitive to a rising rate
scenario. The primary factors contributing to this change are the 2011 first quarter termination
of $4.5 billion of interest rate swaps maturing through
June 2012, offset slightly by $1.8 billion
of interest rate swaps executed in the 2011 second and third quarters, and the impact of lower
interest rates on mortgage asset prepayments.
The following table shows the income sensitivity of select portfolios to changes in market
interest rates. A portfolio with 100% sensitivity would indicate that interest income and expense
will change with the same magnitude and direction as interest rates. A portfolio with 0%
sensitivity is insensitive to changes in interest rates. For the +200 basis points scenario, total
interest-sensitive income is 36.8% sensitive to changes in market interest rates, while total
interest-sensitive expense is 40.2% sensitive to changes in market interest rates. However, net
interest income at risk for the +200 basis points scenario has an asset-sensitive near-term
interest rate risk position because of the larger base of total interest-sensitive income relative
to total interest-sensitive expense.
Table 31 Interest Income/Expense Sensitivity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of |
|
|
Percent Change in Interest Income/Expense for a Given |
|
|
|
Total Earning |
|
|
Change in Interest Rates |
|
|
|
Assets (1) |
|
|
Over / (Under) Base Case Parallel Ramp |
|
Basis point change scenario |
|
|
|
|
|
|
-200 |
|
|
|
-100 |
|
|
|
+100 |
|
|
|
+200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans |
|
|
80 |
% |
|
|
-16.2 |
% |
|
|
-25.3 |
% |
|
|
37.9 |
% |
|
|
39.4 |
% |
Total investments and other earning assets |
|
|
20 |
|
|
|
-17.8 |
|
|
|
-22.1 |
|
|
|
32.5 |
|
|
|
30.2 |
|
Total interest sensitive income |
|
|
|
|
|
|
-16.0 |
|
|
|
-24.0 |
|
|
|
36.1 |
|
|
|
36.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing deposits |
|
|
71 |
|
|
|
-11.5 |
|
|
|
-18.9 |
|
|
|
35.5 |
|
|
|
36.5 |
|
Total borrowings |
|
|
11 |
|
|
|
-21.0 |
|
|
|
-37.6 |
|
|
|
62.7 |
|
|
|
66.0 |
|
Total interest-sensitive expense |
|
|
|
|
|
|
-12.7 |
|
|
|
-21.2 |
|
|
|
38.9 |
|
|
|
40.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
At September 30, 2011. |
The primary simulations for EVE at risk assume immediate +/-100 and +/-200 basis points
parallel shifts in market interest rates beyond the interest rate change implied by the current
yield curve. The table below outlines the September 30, 2011, results compared with December 31,
2010. All of the positions were within the board of directors policy limits.
Table 32 Economic Value of Equity at Risk
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Economic Value of Equity at Risk (%) |
|
Basis point change scenario |
|
|
-200 |
|
|
|
-100 |
|
|
|
+100 |
|
|
|
+200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Board policy limits |
|
|
-12.0 |
% |
|
|
-5.0 |
% |
|
|
-5.0 |
% |
|
|
-12.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2011 |
|
|
-4.2 |
|
|
|
-0.7 |
|
|
|
-1.0 |
|
|
|
-3.3 |
|
December 31, 2010 |
|
|
-0.5 |
|
|
|
1.3 |
|
|
|
-4.0 |
|
|
|
-8.9 |
|
The EVE at risk reported as of September 30, 2011, for the +200 basis points scenario shows a
change to a lower long-term liability sensitive position compared with December 31, 2010. The
primary factors contributing to this change are the impact of lower interest rates on mortgage
asset prepayments, the growth in low-cost deposits, and the 2011 first quarter termination of $4.5
billion of interest rate swaps maturing through June 2012,
offset slightly by $1.8 billion of
interest rate swaps executed in the 2011 second and third quarters.
The following table shows the economic value sensitivity of select portfolios to changes in
market interest rates. The change in economic value for each portfolio is measured as the percent
change from the base economic value for that portfolio. For the +200 basis points scenario, total
net tangible assets decreased in value 3.1% to changes in market interest rates, while total net
tangible liabilities increased in value 3.1% to changes in market interest rates.
49
Table 33 Economic Value Sensitivity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of |
|
|
|
|
|
|
Total Net |
|
|
Percent Change in Economic Value for a Given |
|
|
|
Tangible |
|
|
Change in Interest Rates |
|
|
|
Assets (1) |
|
|
Over / (Under) Base Case Parallel Shocks |
|
Basis point change scenario |
|
|
|
|
|
|
-200 |
|
|
|
-100 |
|
|
|
+100 |
|
|
|
+200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans |
|
|
71 |
% |
|
|
0.9 |
% |
|
|
0.8 |
% |
|
|
-1.3 |
% |
|
|
-2.6 |
% |
Total investments and other earning assets |
|
|
18 |
|
|
|
2.0 |
|
|
|
2.0 |
|
|
|
-2.8 |
|
|
|
-5.9 |
|
Total net tangible assets (2) |
|
|
|
|
|
|
1.1 |
|
|
|
1.0 |
|
|
|
-1.5 |
|
|
|
-3.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits |
|
|
79 |
|
|
|
-2.1 |
|
|
|
-1.4 |
|
|
|
1.7 |
|
|
|
3.3 |
|
Total borrowings |
|
|
9 |
|
|
|
-1.1 |
|
|
|
-0.8 |
|
|
|
0.8 |
|
|
|
1.6 |
|
Total net tangible liabilities (3) |
|
|
|
|
|
|
-2.0 |
|
|
|
-1.3 |
|
|
|
1.6 |
|
|
|
3.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
At September 30, 2011. |
|
(2) |
|
Tangible assets excluding ALLL. |
|
(3) |
|
Tangible liabilities excluding AULC. |
MSRs
(This section should be read in conjunction with Note 6 of Notes to Unaudited Condensed
Consolidated Financial Statements.)
At September 30, 2011, we had a total of $145.3 million of capitalized MSRs representing the
right to service $16.1 billion in mortgage loans. Of this $145.3 million, $73.8 million was
recorded using the fair value method, and $71.5 million was recorded using the amortization method.
MSR fair values are very sensitive to movements in interest rates as expected future net
servicing income depends on the projected outstanding principal balances of the underlying loans,
which can be greatly reduced by prepayments. Prepayments usually increase when mortgage interest
rates decline and decrease when mortgage interest rates rise. We have employed strategies to
reduce the risk of MSR fair value changes or impairment to MSRs recorded using the amortization
method. In addition, we engage a third party to provide valuation tools and assistance with our
strategies with the objective to decrease the volatility from MSR fair value changes or impairment
to MSRs recorded using the amortization method. However, volatile changes in interest rates can
diminish the effectiveness of these hedges. We typically report MSR fair value adjustments net of
hedge-related trading activity in the mortgage banking income category of noninterest income.
Changes in fair value between reporting dates are recorded as an increase or a decrease in mortgage
banking income. We report MSRs recorded using the amortization method at the lower of cost or fair
value and these MSRs generally relate to loans originated with historically low interest rates,
resulting in a lower probability of prepayments and, ultimately, impairment. MSR assets are
included in other assets in the Unaudited Condensed Consolidated Financial Statements.
Price Risk
Price risk represents the risk of loss arising from adverse movements in the prices of
financial instruments that are carried at fair value and are subject to fair value accounting. We
have price risk from trading securities, securities owned by our broker-dealer subsidiaries,
foreign exchange positions, equity investments, investments in securities backed by mortgage loans,
and marketable equity securities held by our insurance subsidiaries. We have established loss
limits on the trading portfolio, on the amount of foreign exchange exposure that can be maintained,
and on the amount of marketable equity securities that can be held by the insurance subsidiaries.
Liquidity Risk
Liquidity risk is the risk of loss due to the possibility that funds may not be available to
satisfy current or future commitments resulting from external macro market issues, investor and
customer perception of financial strength, and events unrelated to us, such as war, terrorism, or
financial institution market specific issues. We manage liquidity risk at both the Bank and the
parent company.
50
Bank Liquidity and Sources of Liquidity
Our primary sources of funding for the Bank are retail and commercial core deposits. At
September 30, 2011, these core deposits funded 74% of total assets. At September 30, 2011, total
core deposits represented 94% of total deposits, an increase from 93% at December 31, 2010.
Core deposits are comprised of interest-bearing and noninterest-bearing demand deposits, money
market deposits, savings and other domestic deposits, consumer certificates of deposit both over
and under $250,000, and nonconsumer certificates of deposit less than $250,000. Noncore deposits
consist of brokered money market deposits and certificates of deposit, foreign time deposits, and
other domestic deposits of $250,000 or more comprised primarily of public fund certificates of
deposit more than $250,000.
Core deposits may increase our need for liquidity as certificates of deposit mature or are
withdrawn before maturity and as nonmaturity deposits, such as checking and savings account
balances, are withdrawn.
Demand deposit overdrafts that have been reclassified as loan balances were $14.0 million,
$13.1 million, and $13.1 million at September 30, 2011, December 31, 2010, and September 30, 2010,
respectively.
Other domestic time deposits of $250,000 or more and brokered deposits and negotiable CDs
totaled $2.0 billion, $2.2 billion, and $2.3 billion at September 30, 2011, December 31, 2010, and
September 30, 2010, respectively.
The following tables reflect deposit composition and short-term borrowings detail for each of
the past five quarters:
Table 34 Deposit Composition
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011 |
|
|
2010 |
|
(dollar amounts in millions) |
|
September 30, |
|
|
June 30, |
|
|
March 31, |
|
|
December 31, |
|
|
September 30, |
|
By Type |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposits -
noninterest-bearing |
|
$ |
9,502 |
|
|
|
22 |
% |
|
$ |
8,210 |
|
|
|
20 |
% |
|
$ |
7,597 |
|
|
|
18 |
% |
|
$ |
7,217 |
|
|
|
17 |
% |
|
$ |
6,926 |
|
|
|
17 |
% |
Demand deposits interest-bearing |
|
|
5,763 |
|
|
|
13 |
|
|
|
5,642 |
|
|
|
14 |
|
|
|
5,532 |
|
|
|
13 |
|
|
|
5,469 |
|
|
|
13 |
|
|
|
5,347 |
|
|
|
13 |
|
Money market deposits |
|
|
13,759 |
|
|
|
32 |
|
|
|
12,643 |
|
|
|
31 |
|
|
|
13,105 |
|
|
|
32 |
|
|
|
13,410 |
|
|
|
32 |
|
|
|
12,679 |
|
|
|
31 |
|
Savings and other domestic
deposits |
|
|
4,711 |
|
|
|
11 |
|
|
|
4,752 |
|
|
|
11 |
|
|
|
4,762 |
|
|
|
12 |
|
|
|
4,643 |
|
|
|
11 |
|
|
|
4,613 |
|
|
|
11 |
|
Core certificates of deposit |
|
|
7,084 |
|
|
|
16 |
|
|
|
7,936 |
|
|
|
19 |
|
|
|
8,208 |
|
|
|
20 |
|
|
|
8,525 |
|
|
|
20 |
|
|
|
8,765 |
|
|
|
21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total core deposits |
|
|
40,819 |
|
|
|
94 |
|
|
|
39,183 |
|
|
|
95 |
|
|
|
39,204 |
|
|
|
95 |
|
|
|
39,264 |
|
|
|
93 |
|
|
|
38,330 |
|
|
|
93 |
|
Other domestic deposits of $250,000
or more |
|
|
421 |
|
|
|
1 |
|
|
|
436 |
|
|
|
1 |
|
|
|
531 |
|
|
|
1 |
|
|
|
675 |
|
|
|
2 |
|
|
|
730 |
|
|
|
2 |
|
Brokered deposits and negotiable CDs |
|
|
1,535 |
|
|
|
4 |
|
|
|
1,486 |
|
|
|
4 |
|
|
|
1,253 |
|
|
|
3 |
|
|
|
1,532 |
|
|
|
4 |
|
|
|
1,576 |
|
|
|
4 |
|
Deposits in foreign offices |
|
|
445 |
|
|
|
1 |
|
|
|
297 |
|
|
|
|
|
|
|
378 |
|
|
|
1 |
|
|
|
383 |
|
|
|
1 |
|
|
|
436 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits |
|
$ |
43,220 |
|
|
|
100 |
% |
|
$ |
41,402 |
|
|
|
100 |
% |
|
$ |
41,366 |
|
|
|
100 |
% |
|
$ |
41,854 |
|
|
|
100 |
% |
|
$ |
41,072 |
|
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total core deposits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
$ |
15,526 |
|
|
|
38 |
% |
|
$ |
13,541 |
|
|
|
35 |
% |
|
$ |
12,785 |
|
|
|
33 |
% |
|
$ |
12,476 |
|
|
|
32 |
% |
|
$ |
12,262 |
|
|
|
32 |
% |
Consumer |
|
|
25,293 |
|
|
|
62 |
|
|
|
25,642 |
|
|
|
65 |
|
|
|
26,419 |
|
|
|
67 |
|
|
|
26,788 |
|
|
|
68 |
|
|
|
26,068 |
|
|
|
68 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total core deposits |
|
$ |
40,819 |
|
|
|
100 |
% |
|
$ |
39,183 |
|
|
|
100 |
% |
|
$ |
39,204 |
|
|
|
100 |
% |
|
$ |
39,264 |
|
|
|
100 |
% |
|
$ |
38,330 |
|
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
51
Table 35 Federal Funds Purchased and Repurchase Agreements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011 |
|
|
2010 |
|
(dollar amounts in millions) |
|
September 30, |
|
|
June 30, |
|
|
March 31, |
|
|
December 31, |
|
|
September 30, |
|
Balance at period-end |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal Funds purchased
and securities sold under
agreements to repurchase |
|
$ |
2,201 |
|
|
$ |
1,983 |
|
|
$ |
2,017 |
|
|
$ |
1,966 |
|
|
$ |
1,773 |
|
Other short-term borrowings |
|
|
24 |
|
|
|
40 |
|
|
|
34 |
|
|
|
75 |
|
|
|
86 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average interest rate at period-end |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal Funds purchased
and securities sold under
agreements to repurchase |
|
|
0.16 |
% |
|
|
0.15 |
% |
|
|
0.17 |
% |
|
|
0.19 |
% |
|
|
0.22 |
% |
Other short-term borrowings |
|
|
1.01 |
|
|
|
0.69 |
|
|
|
0.92 |
|
|
|
0.53 |
|
|
|
0.40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum amount outstanding at month-end
during the period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal Funds purchased
and securities sold under
agreements to repurchase |
|
$ |
2,431 |
|
|
$ |
2,361 |
|
|
$ |
2,091 |
|
|
$ |
2,084 |
|
|
$ |
1,773 |
|
Other short-term borrowings |
|
|
53 |
|
|
|
50 |
|
|
|
86 |
|
|
|
108 |
|
|
|
99 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average amount outstanding during the period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal Funds purchased
and securities sold under
agreements to repurchase |
|
$ |
2,200 |
|
|
$ |
2,067 |
|
|
$ |
2,064 |
|
|
$ |
2,045 |
|
|
$ |
1,645 |
|
Other short-term borrowings |
|
|
51 |
|
|
|
45 |
|
|
|
69 |
|
|
|
89 |
|
|
|
94 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average interest rate during the period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal Funds purchased
and securities sold under
agreements to repurchase |
|
|
0.16 |
% |
|
|
0.15 |
% |
|
|
0.17 |
% |
|
|
0.19 |
% |
|
|
0.21 |
% |
Other short-term borrowings |
|
|
0.56 |
|
|
|
0.58 |
|
|
|
0.52 |
|
|
|
0.38 |
|
|
|
0.35 |
|
To the extent we are unable to obtain sufficient liquidity through core deposits, we may
meet our liquidity needs through sources of wholesale funding. These sources include other
domestic time deposits of $250,000 or more, brokered deposits and negotiable CDs, deposits in
foreign offices, short-term borrowings, FHLB advances, other long-term debt, and subordinated
notes. At September 30, 2011, total wholesale funding was $7.6 billion, a decrease from $8.4
billion at December 31, 2010. There are no maturities of Bank
obligations until 2012, when debt maturities of $664.9 million
are payable.
The Bank also has access to the Federal Reserves discount window. These borrowings are
secured by commercial loans and home equity lines-of-credit. The Bank is also a member of the
FHLB, and as such, has access to advances from this facility. These advances are generally secured
by residential mortgages, other mortgage-related loans, and available-for-sale securities.
Information regarding amounts pledged, for the ability to borrow if necessary, and the unused
borrowing capacity at both the Federal Reserve Bank and the FHLB, is outlined in the following
table:
Table 36 Federal Reserve and FHLB Borrowing Capacity
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
December 31, |
|
(dollar amounts in billions) |
|
2011 |
|
|
2010 |
|
Loans and securities pledged: |
|
|
|
|
|
|
|
|
Federal Reserve Bank |
|
$ |
10.2 |
|
|
$ |
9.7 |
|
FHLB |
|
|
7.9 |
|
|
|
7.8 |
|
|
|
|
|
|
|
|
Total loans and securities pledged |
|
$ |
18.1 |
|
|
$ |
17.5 |
|
|
|
|
|
|
|
|
|
|
Total unused borrowing capacity at Federal Reserve Bank and FHLB |
|
$ |
9.8 |
|
|
$ |
8.8 |
|
We can also obtain funding through other methods including: (1) purchasing federal funds,
(2) selling securities under repurchase agreements, (3) the sale or maturity of investment
securities, (4) the sale or securitization of loans, (5) the sale of national market certificates
of deposit, (6) paydowns and/or securitization arising from the relatively shorter-term structure
of our commercial loans and automobile loans, and (7) the issuance of common and preferred stock.
During the 2011 third quarter, Huntington transferred automobile loans totaling $1.0 billion
to a trust in a securitization transaction. The securitization qualified for sale accounting. Net
proceeds of $1.0 billion from the transaction will be used for general corporate purposes,
including repayment of other long-term debt.
At September 30, 2011, we believe the Bank has sufficient liquidity to meet its cash flow
obligations for the foreseeable future.
52
Parent Company Liquidity
The parent companys funding requirements consist primarily of dividends to shareholders, debt
service, income taxes, operating expenses, funding of nonbank subsidiaries, repurchases of our
stock, and acquisitions. The parent company obtains funding to meet obligations from interest
received from the Bank, interest and dividends received from direct subsidiaries, net taxes
collected from subsidiaries included in the federal consolidated tax return, fees for services
provided to subsidiaries, and the issuance of debt securities.
At September 30, 2011, December 31, 2010, and September 30, 2010, the parent company had $0.7
billion, $0.6 billion and $0.9 billion, respectively, in cash and cash equivalents. The decrease
from September 30, 2010, primarily reflected the repurchase of our TARP Capital in the 2010 fourth
quarter, along with dividend payments on our common and preferred stock, partially offset by the
net impact of the equity and debt public offerings. Appropriate limits and guidelines are in place
to ensure the parent company has sufficient cash to meet operating expenses and other commitments
over the next 12 months without relying on subsidiaries or capital markets for funding.
During the 2010 fourth quarter, we completed a public offering and sale of 146.0 million
shares of common stock at a price of $6.30 per share, or $920.0 million in aggregate gross
proceeds. Also during the 2010 fourth quarter, we completed the public offering and sale of $300.0
million aggregate principal amount of 7.00% Subordinated Notes due 2020. We used the net proceeds
from these transactions to repurchase our TARP Capital. On January 19, 2011, we repurchased the
warrant we had issued to the Treasury at an agreed upon purchase price of $49.1 million. The
warrant had entitled the Treasury to purchase 23.6 million shares of common stock.
On October 20, 2011, we announced that the board of directors had declared a quarterly common
stock cash dividend of $0.04 per common share. The dividend is payable on January 3, 2012, to
shareholders of record on December 20, 2011. Based on the dividend increase to $0.04 per common
share, cash demands required for common stock dividends are estimated to be approximately $34.6
million per quarter. Based on the current dividend, cash demands required for Series A Preferred
Stock are estimated to be approximately $7.7 million per quarter.
Based on a regulatory dividend limitation, the Bank could not have declared and paid a
dividend to the parent company at September 30, 2011, without regulatory approval. We do not
anticipate that the Bank will need to request regulatory approval to pay dividends in the near
future. To help meet any additional liquidity needs, we have an open-ended, automatic shelf
registration statement filed and effective with the SEC, which permits us to issue an unspecified
amount of debt or equity securities.
With the exception of the common and preferred dividends previously discussed, the parent
company does not have any significant cash demands. There are no maturities of parent company
obligations until 2013, when a debt maturity of $50.0 million is payable. It is our policy
to keep operating cash on hand at the parent company to satisfy any cash demands for the next 12
months.
We sponsor a non-contributory defined benefit pension plan covering substantially all employees hired or rehired
prior to January 1, 2010. The Plan provides benefits based upon length of service and compensation levels. Our policy
is to contribute an annual amount that is at least equal to the
minimum funding requirements. The Bank and other subsidiaries fund approximately 90% of pension contributions. There is no required
minimum contribution for 2011, although we contributed $50 million in March 2011 and anticipate contributing an
additional $40 million in the 2011 fourth quarter. Funding requirements are calculated annually as of the end of the
year and are heavily dependent on the value of our pension plan assets and the interest rate used to discount plan
obligations. To the extent that the low interest rate environment continues, including as a result of the Federal Reserve Maturity Extension
Program Operation Twist, or the pension plan does not earn the expected asset return
rates, annual pension contribution requirements in future years could increase and such increases
could be significant. However, any additional pension contributions
are not expected to significantly impact liquidity.
Considering the factors discussed above, and other analyses that we have performed, we believe
the parent company has sufficient liquidity to meet its cash flow obligations for the foreseeable
future.
53
Off-Balance Sheet Arrangements
In the normal course of business, we enter into various off-balance sheet arrangements. These
arrangements include financial guarantees contained in standby letters-of-credit issued by the Bank
and commitments by the Bank to sell mortgage loans.
Standby letters-of-credit are conditional commitments issued to guarantee the performance of a
customer to a third party. These guarantees are primarily issued to support public and private
borrowing arrangements, including commercial paper, bond financing, and similar transactions. Most
of these arrangements mature within two years and are expected to expire without being drawn upon.
Standby letters-of-credit are included in the determination of the amount of risk-based capital
that the parent company and the Bank are required to hold.
Through our credit process, we monitor the credit risks of outstanding standby
letters-of-credit. When it is probable that a standby letter of credit will be drawn and not
repaid in full, losses are recognized in the provision for credit losses. At September 30, 2011,
we had $0.5 billion of standby letters-of-credit outstanding, of which 80% were collateralized.
Included in this $0.5 billion are letters-of-credit issued by the Bank that support securities that
were issued by our customers and remarketed by The Huntington Investment Company, our broker-dealer
subsidiary.
We enter into forward contracts relating to the mortgage banking business to hedge the
exposures we have from commitments to extend new residential mortgage loans to our customers and
from our mortgage loans held for sale. At September 30, 2011, December 31, 2010, and September 30,
2010, we had commitments to sell residential real estate loans of $673.5 million, $998.7 million,
and $1,254.4 million, respectively. These contracts mature in less than one year.
We do not believe that off-balance sheet arrangements will have a material impact on our
liquidity or capital resources.
Operational Risk
As with all companies, we are subject to operational risk. Operational risk is the risk of
loss due to human error; inadequate or failed internal systems and controls; violations of, or
noncompliance with, laws, rules, regulations, prescribed practices, or ethical standards; and
external influences such as market conditions, fraudulent activities, disasters, and security
risks. We continuously strive to strengthen our system of internal controls to ensure compliance
with laws, rules, and regulations, and to improve the oversight of our operational risk.
To mitigate operational risks, we have established a senior management Operational Risk
Committee and a senior management Legal, Regulatory, and Compliance Committee. The
responsibilities of these committees, among other duties, include establishing and maintaining
management information systems to monitor material risks and to identify potential concerns, risks,
or trends that may have a significant impact and ensuring that recommendations are developed to
address the identified issues. Both of these committees report any significant findings and
recommendations to the Risk Management Committee. Additionally, potential concerns may be
escalated to our Board Risk Oversight Committee, as appropriate.
The goal of this framework is to implement effective operational risk techniques and
strategies, minimize operational and fraud losses, and enhance our overall performance.
Representation and Warranty Reserve
We primarily conduct our loan sale and securitization activity with FNMA and FHLMC. In
connection with these and other securitization transactions, we make certain representations and
warranties that the loans meet certain criteria, such as collateral type and underwriting
standards. We may be required to repurchase individual loans and / or indemnify these
organizations against losses due to a loan not meeting the established criteria. We have a reserve
for such losses, which is included in accrued expenses and other liabilities. The reserves were
estimated based on historical and expected repurchase activity, average loss rates, and current
economic trends. The level of mortgage loan repurchase losses depends upon economic factors,
investor demand strategies and other external conditions containing a level of uncertainty and risk
that may change over the life of the underlying loans. We do not believe we have sufficient
information to estimate the range of reasonably possible loss related to representation and
warranty exposure.
54
The table below reflects activity in the representations and warranties reserve:
Table 37 Summary of Reserve for Representations and Warranties on Mortgage Loans Serviced for
Others
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011 |
|
|
2010 |
|
(dollar amounts in thousands) |
|
Third |
|
|
Second |
|
|
First |
|
|
Fourth |
|
|
Third |
|
Reserve for representations and warranties, beginning of period |
|
$ |
24,496 |
|
|
$ |
23,785 |
|
|
$ |
20,170 |
|
|
$ |
18,026 |
|
|
$ |
10,519 |
|
Assumed reserve for representations and warranties |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,000 |
|
Reserve charges |
|
|
(3,340 |
) |
|
|
(365 |
) |
|
|
(270 |
) |
|
|
(4,242 |
) |
|
|
(1,787 |
) |
Provision for representations and warranties |
|
|
2,697 |
|
|
|
1,076 |
|
|
|
3,885 |
|
|
|
6,386 |
|
|
|
2,294 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve for representations and warranties, end of period |
|
$ |
23,853 |
|
|
$ |
24,496 |
|
|
$ |
23,785 |
|
|
$ |
20,170 |
|
|
$ |
18,026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table 38 Mortgage Loan Repurchase Statistics
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011 |
|
|
2010 |
|
(dollar amounts in thousands) |
|
Third |
|
|
Second |
|
|
First |
|
|
Fourth |
|
|
Third |
|
Number of loans sold |
|
|
3,877 |
|
|
|
3,875 |
|
|
|
8,933 |
|
|
|
10,314 |
|
|
|
6,944 |
|
|
Amount of loans sold (UPB) |
|
$ |
529,722 |
|
|
$ |
512,069 |
|
|
$ |
1,313,994 |
|
|
$ |
1,577,879 |
|
|
$ |
1,043,024 |
|
|
Number of loans repurchased |
|
|
43 |
|
|
|
36 |
|
|
|
15 |
|
|
|
71 |
|
|
|
118 |
|
|
Amount of loans repurchased (UPB) |
|
$ |
7,325 |
|
|
$ |
4,755 |
|
|
$ |
2,343 |
|
|
$ |
13,198 |
|
|
$ |
15,356 |
|
|
Number of claims received |
|
|
96 |
|
|
|
130 |
|
|
|
118 |
|
|
|
105 |
|
|
|
108 |
|
|
Successful dispute rate (1) |
|
|
27 |
% |
|
|
49 |
% |
|
|
86 |
% |
|
|
21 |
% |
|
|
36 |
% |
|
Number of make whole payments |
|
|
38 |
|
|
|
8 |
|
|
|
6 |
|
|
|
44 |
|
|
|
19 |
|
|
Amount of make whole payments |
|
$ |
3,392 |
|
|
$ |
445 |
|
|
$ |
560 |
|
|
$ |
3,835 |
|
|
$ |
1,444 |
|
|
|
|
(1) |
|
Successful disputes are a percent of close out requests. Process changes in
2011 significantly decreased close out requests inflating this ratio. |
Process changes in 2011 increased the number of make whole payment request disputes
and significantly decreased close outs of make whole requests. The related reserves were increased
to account for the delay in close out requests.
Foreclosure Documentation
Compared to the high volume servicers, we service a relatively low volume of residential
mortgage foreclosures, with approximately 4,100 foreclosure cases as of September 30, 2011, in
states that require foreclosures to proceed through the courts. We have reviewed and are
continuing to review our residential foreclosure process. We have not found any evidence suggesting
that any foreclosure by the Bank should not have proceeded. We have and are strengthening our
processes and controls to ensure that our foreclosure processes do not have the deficiencies
identified in those institutions which are the subject of the consent orders between the high
volume servicers and their respective federal regulators.
Compliance Risk
Financial institutions are subject to several laws, rules, and regulations emanating at both
the federal and state levels. These broad-based mandates include, but are not limited to,
expectations on anti-money laundering, lending limits, client privacy, fair lending, community
reinvestment, and other important areas. Recently, the volume and complexity of regulatory changes
have added to the overall compliance risk. We have invested in various resources to help ensure we
meet expectations, and we have a team of compliance experts dedicated to ensuring our conformance.
We require training for our colleagues for several broad-based laws and regulations. For example,
all of our colleagues are expected to pass courses on anti-money laundering and customer privacy.
Those colleagues who are engaged in lending activities must also take training related to flood
disaster protection, equal credit opportunity, fair lending, and / or a variety of other courses
related to the extension of credit. We set a high standard of expectation for adherence to
compliance management and seek to continuously enhance our performance.
Capital
Capital is managed both at the Bank and on a consolidated basis. Capital levels are maintained
based on regulatory capital requirements and the economic capital required to support credit,
market, liquidity, and operational risks inherent in our business, and to provide the flexibility
needed for future growth and new business opportunities. Shareholders equity totaled $5.4
billion at September 30, 2011, an increase of $0.4 billion, or 8%, from December 31, 2010,
primarily reflecting an increase in retained earnings. We believe our current level of capital is
adequate.
55
TARP Capital
As discussed in our 2010 Form 10-K, we fully exited our TARP relationship during the 2011
first quarter by repurchasing for $49.1 million the ten-year warrant we had issued to the Treasury
as part of the TARP. Refer to the 2010 Form 10-K for a complete discussion regarding the issuing
and repayment of our TARP Capital.
Capital Adequacy
The following table presents risk-weighted assets and other financial data necessary to
calculate certain financial ratios that we use to measure capital adequacy:
Table 39 Capital Adequacy
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011 |
|
|
2010 |
|
(dollar amounts in millions) |
|
September 30, |
|
|
June 30, |
|
|
March 31, |
|
|
December 31, |
|
|
September 30, |
|
Consolidated capital calculations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shareholders equity |
|
$ |
5,037 |
|
|
$ |
4,890 |
|
|
$ |
4,676 |
|
|
$ |
4,618 |
|
|
$ |
3,867 |
|
Preferred shareholders equity |
|
|
363 |
|
|
|
363 |
|
|
|
363 |
|
|
|
363 |
|
|
|
1,700 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity |
|
|
5,400 |
|
|
|
5,253 |
|
|
|
5,039 |
|
|
|
4,981 |
|
|
|
5,567 |
|
Goodwill |
|
|
(444 |
) |
|
|
(444 |
) |
|
|
(444 |
) |
|
|
(444 |
) |
|
|
(444 |
) |
Other intangible assets |
|
|
(188 |
) |
|
|
(202 |
) |
|
|
(215 |
) |
|
|
(229 |
) |
|
|
(244 |
) |
Other intangible assets
deferred tax liability (1) |
|
|
66 |
|
|
|
71 |
|
|
|
75 |
|
|
|
80 |
|
|
|
85 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total tangible equity (2) |
|
|
4,834 |
|
|
|
4,678 |
|
|
|
4,455 |
|
|
|
4,388 |
|
|
|
4,964 |
|
Preferred shareholders equity |
|
|
(363 |
) |
|
|
(363 |
) |
|
|
(363 |
) |
|
|
(363 |
) |
|
|
(1,700 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total tangible common equity (2) |
|
$ |
4,471 |
|
|
$ |
4,315 |
|
|
$ |
4,092 |
|
|
$ |
4,025 |
|
|
$ |
3,264 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
54,979 |
|
|
$ |
53,050 |
|
|
$ |
52,949 |
|
|
$ |
53,820 |
|
|
$ |
53,247 |
|
Goodwill |
|
|
(444 |
) |
|
|
(444 |
) |
|
|
(444 |
) |
|
|
(444 |
) |
|
|
(444 |
) |
Other intangible assets |
|
|
(188 |
) |
|
|
(202 |
) |
|
|
(215 |
) |
|
|
(229 |
) |
|
|
(244 |
) |
Other intangible assets
deferred tax liability (1) |
|
|
66 |
|
|
|
71 |
|
|
|
75 |
|
|
|
80 |
|
|
|
85 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total tangible assets (2) |
|
$ |
54,413 |
|
|
$ |
52,475 |
|
|
$ |
52,365 |
|
|
$ |
53,227 |
|
|
$ |
52,644 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 capital |
|
$ |
5,488 |
|
|
$ |
5,352 |
|
|
$ |
5,179 |
|
|
$ |
5,022 |
|
|
$ |
5,480 |
|
Preferred shareholders equity |
|
|
(363 |
) |
|
|
(363 |
) |
|
|
(363 |
) |
|
|
(363 |
) |
|
|
(1,700 |
) |
Trust-preferred securities |
|
|
(565 |
) |
|
|
(565 |
) |
|
|
(570 |
) |
|
|
(570 |
) |
|
|
(570 |
) |
REIT-preferred stock |
|
|
(50 |
) |
|
|
(50 |
) |
|
|
(50 |
) |
|
|
(50 |
) |
|
|
(50 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 common equity (2) |
|
$ |
4,510 |
|
|
$ |
4,374 |
|
|
$ |
4,196 |
|
|
$ |
4,039 |
|
|
$ |
3,160 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk-weighted assets (RWA) |
|
$ |
44,376 |
|
|
$ |
44,080 |
|
|
$ |
43,024 |
|
|
$ |
43,471 |
|
|
$ |
42,759 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 common equity / RWA ratio (2) |
|
|
10.17 |
% |
|
|
9.92 |
% |
|
|
9.75 |
% |
|
|
9.29 |
% |
|
|
7.39 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible equity / tangible asset ratio (2) |
|
|
8.88 |
|
|
|
8.91 |
|
|
|
8.51 |
|
|
|
8.24 |
|
|
|
9.43 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible common equity / tangible asset ratio (2) |
|
|
8.22 |
|
|
|
8.22 |
|
|
|
7.81 |
|
|
|
7.56 |
|
|
|
6.20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible common equity / RWA ratio (2) |
|
|
10.08 |
|
|
|
9.79 |
|
|
|
9.51 |
|
|
|
9.26 |
|
|
|
7.63 |
|
|
|
|
(1) |
|
Other intangible assets are net of deferred tax liability, and calculated assuming a 35% tax
rate. |
|
(2) |
|
Tangible equity, Tier 1 common equity, tangible common equity, and tangible assets are non-GAAP
financial measures. Additionally, any ratios utilizing these financial measures are also non-GAAP.
These financial measures have been included as they are considered to be critical metrics with
which to analyze and evaluate financial condition and capital strength. Other companies may
calculate these financial measures differently. |
Capital continued to strengthen as period-end capital ratios improved compared to
December 31, 2010. Our Tier 1 common risk-based ratio improved 88 basis points to 10.17% at
September 30, 2011 compared to 9.29% at December 31, 2010. This increase primarily reflected the
combination of an increase in retained earnings and a reduction in the disallowed tax deferred
asset.
The Tier 1 common risk-based ratio is the metric that has gained prominence with regulators.
The recent international banking Basel III accord sets this ratio minimum at 7.0% with an
additional buffer of up to 2.5% for a GSIFI. While we are not a GSIFI, the Dodd-Frank Act requires
that any bank with assets over $50.0 billion would be subject to additional scrutiny. U.S.
regulators have identified such qualifying banks as SIFIs. With $55 billion in assets at September
30, 2011, we are at the lower range of the SIFI group. Although we do not know at this time how
much, if any, our required buffer will be, we believe that our current period-end capital ratios
are well positioned.
56
Regulatory Capital
Regulatory capital ratios are the primary metrics used by regulators in assessing the safety
and soundness of banks. We intend to maintain both our and the Banks risk-based capital ratios at
levels at which both would be considered Well-capitalized by regulators. The Bank is primarily
supervised and regulated by the OCC, which establishes regulatory capital guidelines for banks
similar to those established for bank holding companies by the Federal Reserve Board.
Regulatory capital primarily consists of Tier 1 capital and Tier 2 capital. The sum of Tier 1
capital and Tier 2 capital equals our total risk-based capital. The following table reflects
changes and activity to the various components utilized in the calculation of our consolidated Tier
1, Tier 2, and total risk-based capital amounts during the first nine-month period of 2011.
Table 40 Consolidated Regulatory Capital Activity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 Capital |
|
|
|
Common |
|
|
Preferred |
|
|
|
|
|
|
Disallowed |
|
|
Disallowed |
|
|
Total |
|
|
|
Shareholders |
|
|
Shareholders |
|
|
Qualifying |
|
|
Goodwill & |
|
|
Other |
|
|
Tier 1 |
|
(dollar amounts in millions) |
|
Equity (1) |
|
|
Equity |
|
|
Core Capital (2) |
|
|
Intangible assets |
|
|
Adjustments (net) |
|
|
Capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2010 |
|
$ |
4,815 |
|
|
$ |
363 |
|
|
$ |
620 |
|
|
$ |
(607 |
) |
|
$ |
(169 |
) |
|
$ |
5,022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings |
|
|
416 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
416 |
|
Changes to disallowed adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39 |
|
|
|
(13 |
) |
|
|
26 |
|
Dividends |
|
|
(75 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(75 |
) |
Repurchase of TARP Capital warrant |
|
|
(49 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(49 |
) |
Repurchase of qualifying trust
preferred securities |
|
|
|
|
|
|
|
|
|
|
(5 |
) |
|
|
|
|
|
|
|
|
|
|
(5 |
) |
Disallowance of deferred tax assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
142 |
|
|
|
142 |
|
Other |
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2011 |
|
$ |
5,118 |
|
|
$ |
363 |
|
|
$ |
615 |
|
|
$ |
(568 |
) |
|
$ |
(40 |
) |
|
$ |
5,488 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total risk-based capital |
|
|
|
|
|
|
|
Qualifying |
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
Qualifying |
|
|
Subordinated |
|
|
|
|
|
|
Tier 1 Capital |
|
|
risk-based |
|
|
|
ACL |
|
|
Debt |
|
|
Tier 2 Capital |
|
|
(from above) |
|
|
capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2010 |
|
$ |
552 |
|
|
$ |
711 |
|
|
$ |
1,263 |
|
|
$ |
5,022 |
|
|
$ |
6,285 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in qualifying subordinated
debt |
|
|
|
|
|
|
(56 |
) |
|
|
(56 |
) |
|
|
|
|
|
|
(56 |
) |
Change in qualifying ACL |
|
|
9 |
|
|
|
|
|
|
|
9 |
|
|
|
|
|
|
|
9 |
|
Changes to Tier 1 Capital (see
above) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
466 |
|
|
|
466 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2011 |
|
$ |
561 |
|
|
$ |
655 |
|
|
$ |
1,216 |
|
|
$ |
5,488 |
|
|
$ |
6,704 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Excludes accumulated other comprehensive income and minority interest. |
|
(2) |
|
Includes minority interest. |
57
The following table presents our regulatory capital ratios at both the consolidated and
Bank levels for each of the past five quarters:
Table 41 Regulatory Capital Ratios
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011 |
|
|
2010 |
|
|
|
|
|
|
|
September 30, |
|
|
June 30, |
|
|
March 31, |
|
|
December 31, |
|
|
September 30, |
|
Total risk-weighted assets (in
millions) |
|
Consolidated |
|
$ |
44,376 |
|
|
$ |
44,080 |
|
|
$ |
43,024 |
|
|
$ |
43,471 |
|
|
$ |
42,759 |
|
|
|
Bank |
|
|
44,242 |
|
|
|
43,907 |
|
|
|
42,750 |
|
|
|
43,281 |
|
|
|
42,503 |
|
Tier 1 leverage ratio |
|
Consolidated |
|
|
10.24 |
% |
|
|
10.25 |
% |
|
|
9.80 |
% |
|
|
9.41 |
% |
|
|
10.54 |
% |
|
|
Bank |
|
|
7.79 |
|
|
|
7.62 |
|
|
|
7.23 |
|
|
|
6.97 |
|
|
|
6.85 |
|
Tier 1 risk-based capital ratio |
|
Consolidated |
|
|
12.37 |
|
|
|
12.14 |
|
|
|
12.04 |
|
|
|
11.55 |
|
|
|
12.82 |
|
|
|
Bank |
|
|
9.40 |
|
|
|
9.01 |
|
|
|
8.87 |
|
|
|
8.51 |
|
|
|
8.28 |
|
Total risk-based capital ratio |
|
Consolidated |
|
|
15.11 |
|
|
|
14.89 |
|
|
|
14.85 |
|
|
|
14.46 |
|
|
|
15.08 |
|
|
|
Bank |
|
|
13.54 |
|
|
|
13.17 |
|
|
|
13.11 |
|
|
|
12.82 |
|
|
|
12.69 |
|
The increase in our consolidated Tier 1 risk-based capital ratios compared with December
31, 2010 primarily reflected earnings from the first nine-month period of 2011 and a reduction in
the disallowed deferred tax asset, partially offset by an increase in risk-weighted assets and the
negative impact related to the payment of dividends and the repurchase of the TARP warrants.
At September 30, 2011, our Tier 1 and total risk-based capital in excess of the minimum level
required to be considered Well-capitalized were $2.8 billion and $2.3 billion, respectively. The
Bank had Tier 1 and total risk-based capital in excess of the minimum level required to be
considered Well-capitalized of $1.5 billion and $1.6 billion, respectively, at September 30, 2011.
Other Capital Matters
On October 20, 2011, our board of directors declared a quarterly cash dividend of $0.04 per
common share, payable in January 2012. A $0.04 per common share cash dividend was also declared on
July 21, 2011. The $0.04 cash dividend per common share represented an increase from a cash
dividend of $0.01 per common share that had been declared for several quarters prior to these
declarations.
On October 20, 2011, our board of directors also declared a quarterly cash dividend on our
8.50% Series A Non-Cumulative Perpetual Convertible Preferred Stock of $21.25 per share. The
dividend is payable January 17, 2012, to share holders of record on January 1, 2012.
We consider disciplined capital management as a key objective, with dividends representing one
component. Our strong capital ratios and expectations for continued earnings growth positions us
to continue to actively explore additional capital management opportunities.
During the 2012 first quarter, we will be participating, for the first time, in the Federal
Reserves Comprehensive Capital Analysis and Review (CCAR). The Federal Reserve will evaluate our
capital plan based on our risk profile and the strength of our internal capital assessment process
under regulatory capital standards currently applicable and in accordance with our plans to address
proposed revisions to the regulatory capital framework as set forth in Basel III and relevant
provisions of the Dodd-Frank Act. The Federal Reserves evaluation will take into consideration any
capital distribution plans, such as plans to increase common stock dividends or to reinstate common
stock repurchase programs.
58
BUSINESS SEGMENT DISCUSSION
Overview
We have four major business segments: Retail and Business Banking; Regional and Commercial
Banking; Automobile Finance and Commercial Real Estate; and Wealth Advisors, Government Finance,
and Home Lending. A Treasury / Other function also includes our insurance business and other
unallocated assets, liabilities, revenue, and expenses. While this section reviews financial
performance from a business segment perspective, it should be read in conjunction with the
Discussion of Results of Operations, Note 18 of the Notes to Unaudited Condensed Consolidated
Financial Statements, and other sections for a full understanding of our consolidated financial
performance.
Business segment results are determined based upon our management reporting system, which
assigns balance sheet and income statement items to each of the business segments. The process is
designed around our organizational and management structure and, accordingly, the results derived
are not necessarily comparable with similar information published by other financial institutions.
Funds Transfer Pricing
We use an active and centralized FTP methodology to attribute appropriate net interest income
to the business segments. The intent of the FTP methodology is to eliminate all interest rate risk
from the business segments by providing matched duration funding of assets and liabilities. The
result is to centralize the financial impact, management, and reporting of interest rate and
liquidity risk in the Treasury / Other function where it can be centrally monitored and managed.
The Treasury / Other function charges (credits) an internal cost of funds for assets held in (or
pays for funding provided by) each business segment. The FTP rate is based on prevailing market
interest rates for comparable duration assets (or liabilities), and includes an estimate for the
cost of liquidity (liquidity premium). Deposits of an indeterminate maturity receive an FTP credit
based on a combination of vintage-based average lives and replicating portfolio pool rates. Other
assets, liabilities, and capital are charged (credited) with a four-year moving average FTP rate.
The denominator in the net interest margin calculation has been modified to add the amount of net
funds provided by each business segment for all periods presented.
Optimal Customer Relationship (OCR)
Our OCR initiative is a cross-business segment strategy designed to increase overall customer
profitability and retention by deepening product and service penetration. We believe this can be
accomplished by taking our broad array of services and products and delivering them through a
rigorous and disciplined sales management process that is consistent across all business segments
and regions. It is also supported by robust sales and cross-referral technology.
OCR was introduced in late 2009. To date much of the effort has been spent on defining
processes, sales training, and systems development to fully capture and measure OCR performance
metrics. This quarter, we are introducing OCR-related metrics for commercial relationships, which
complements the previously disclosed consumer OCR-related metrics.
Consumer OCR Performance
For consumer OCR performance there are three key performance metrics: (1) the number of
checking account households, (2) the number of services penetration per consumer checking account
household, and (3) the revenue generated.
The growth in consumer checking account number of households is a result of both new sales of
checking accounts and improved retention of existing checking account households. The overall
objective is to grow the number of households, along with an increase in product penetration.
We use the checking account since it typically represents the primary banking relationship
product. Further, in our definition of a checking account household, we only count a product or
service once. We believe this is a better metric in that consumer behavior and loyalty are driven
more by the variety of products used rather than just the number of products. For example, a
household that has one checking account and one mortgage, we count as having two services. A
household with four checking accounts, we count as having one service. The household relationship
utilizing two services is viewed to be more profitable and loyal, even though it has a smaller
number of accounts. The overall objective, therefore, is to decrease the percentage of 1-3
services per consumer checking account household, while increasing the percentage of those with 4
or more services.
59
The following table presents consumer checking account household OCR metrics:
Table 42 Consumer Checking Household OCR Cross-sell Report
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011 |
|
|
2010 |
|
|
|
Third |
|
|
Second |
|
|
First |
|
|
Fourth |
|
|
Third |
|
Number of households |
|
|
1,073,708 |
|
|
|
1,042,424 |
|
|
|
1,015,951 |
|
|
|
993,272 |
|
|
|
980,167 |
|
Product Penetration by Number of
Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Service |
|
|
4.4 |
% |
|
|
4.5 |
% |
|
|
4.9 |
% |
|
|
5.3 |
% |
|
|
5.5 |
% |
2-3 Services |
|
|
22.8 |
|
|
|
24.2 |
|
|
|
24.6 |
|
|
|
25.3 |
|
|
|
26.0 |
|
4+ Services |
|
|
72.8 |
|
|
|
71.3 |
|
|
|
70.5 |
|
|
|
69.4 |
|
|
|
68.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue (in millions) |
|
$ |
251.9 |
|
|
$ |
260.0 |
|
|
$ |
248.6 |
|
|
$ |
240.3 |
|
|
$ |
239.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our emphasis on cross-sell, coupled with customers increasingly being attracted by the
benefits offered through our Fair Play banking philosophy with programs such as 24-Hour Grace® on
overdrafts and more recently the launch of Asterisk-Free Checking, are having a positive effect.
The percent of consumer households with over four products at the end of the 2011 third quarter was
72.8%, up from 69.4% at the end of last year. For the first nine-month period of 2011, consumer
checking account households grew at a 10.8% annualized rate, up from an annualized 6.8% in 2010.
Total consumer checking account household revenue in the 2011 third quarter was $251.9 million,
down $8.1 million, or 3%, from the 2011 second quarter. This was primarily driven by a decline in
the FTP related net interest income on average deposits and lower average balances of core
certificates of deposit. Total consumer checking account household revenue was up $12.3 million,
or 5%, from the year-ago quarter.
Commercial OCR Performance
For commercial OCR performance there are three key performance metrics: (1) the number of
commercial relationships, (2) the number of services penetration per commercial relationship, and
(3) the revenue generated.
The growth in the number of commercial relationships is a result of both new sales of checking
accounts and improved retention of existing commercial accounts. The overall objective is to grow
the number of relationships, along with an increase in product service distribution.
The commercial relationship is defined as a business banking or commercial banking customer
with a checking account relationship. We use this metric because we believe that the checking
account anchors a business relationship and creates the opportunity to increase our cross-sell.
The following table presents commercial relationship OCR metrics:
Table 43 Commercial Relationship OCR Cross-sell Report
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011 |
|
|
2010 |
|
|
|
Third |
|
|
Second |
|
|
First |
|
|
Fourth |
|
|
Third |
|
Commercial Relationships |
|
|
135,826 |
|
|
|
133,165 |
|
|
|
130,240 |
|
|
|
127,596 |
|
|
|
126,569 |
|
Product Penetration by Number of
Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Service |
|
|
29.7 |
% |
|
|
30.7 |
% |
|
|
32.1 |
% |
|
|
32.9 |
% |
|
|
33.8 |
% |
2-3 Services |
|
|
41.1 |
|
|
|
42.6 |
|
|
|
42.5 |
|
|
|
42.9 |
|
|
|
43.1 |
|
4+ Services |
|
|
29.2 |
|
|
|
26.7 |
|
|
|
25.4 |
|
|
|
24.2 |
|
|
|
23.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue (in millions) |
|
$ |
175.5 |
|
|
$ |
166.6 |
|
|
$ |
157.7 |
|
|
$ |
160.8 |
|
|
$ |
151.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60
By focusing on targeted relationships we are able to achieve higher product service
distribution among our commercial relationships. Our expanded product offerings allow us to focus
not only on the credit driven relationship, but leverage these relationships to generate a deeper
share of wallet. The percent of commercial relationships with over four products at the end of the
2011 third quarter was 29.2%, up from 24.2% at the end of last year. For the first nine-month
period of 2011, commercial relationships grew at a 8.6% annualized rate. Total commercial
relationship revenue in the 2011 third quarter was $175.5 million, up $8.9 million, or 5%, from the
2011 second quarter, and $23.6 million, or 16%, higher than the year-ago quarter.
Revenue Sharing
Revenue is recorded in the business segment responsible for the related product or service.
Fee sharing is recorded to allocate portions of such revenue to other business segments involved in
selling to, or providing service to, customers. Results of operations for the business segments
reflect these fee sharing allocations.
Expense Allocation
The management accounting process that develops the business segment reporting utilizes
various estimates and allocation methodologies to measure the performance of the business segments.
Expenses are allocated to business segments using a two-phase approach. The first phase consists
of measuring and assigning unit costs (activity-based costs) to activities related to product
origination and servicing. These activity-based costs are then extended, based on volumes, with
the resulting amount allocated to business segments that own the related products. The second
phase consists of the allocation of overhead costs to all four business segments from Treasury /
Other. We utilize a full-allocation methodology, where all Treasury / Other expenses, except those
related to our insurance business, reported Significant Items (except for the goodwill impairment),
and a small amount of other residual unallocated expenses, are allocated to the four business
segments.
Treasury / Other
The Treasury / Other function includes revenue and expense related to our insurance business,
and assets, liabilities, and equity not directly assigned or allocated to one of the four business
segments. Assets include investment securities and bank owned life insurance. The financial
impact associated with our FTP methodology, as described above, is also included.
Net interest income includes the impact of administering our investment securities portfolios
and the net impact of derivatives used to hedge interest rate sensitivity. Noninterest income
includes insurance income, miscellaneous fee income not allocated to other business segments, such
as bank owned life insurance income and any investment security and trading asset gains or losses.
Noninterest expense includes any insurance-related expenses, as well as certain corporate
administrative, merger, and other miscellaneous expenses not allocated to other business segments.
The provision for income taxes for the business segments is calculated at a statutory 35% tax rate,
though our overall effective tax rate is lower. As a result, Treasury / Other reflects a credit
for income taxes representing the difference between the lower actual effective tax rate and the
statutory tax rate used to allocate income taxes to the business segments.
Net Income by Business Segment
We reported net income of $415.8 million during the first nine-month period of 2011. This
compared with net income of $189.4 million during the first nine-month period of 2010. The
segregation of net income by business segment for the first nine-month period of 2011 and 2010 is
presented in the following table:
Table 44 Net Income by Business Segment
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
|
|
September 30, |
|
(dollar amounts in thousands) |
|
2011 |
|
|
2010 |
|
Retail and Business Banking |
|
$ |
139,245 |
|
|
$ |
76,393 |
|
Regional and Commercial Banking |
|
|
69,744 |
|
|
|
41,138 |
|
AFCRE |
|
|
151,968 |
|
|
|
(7,060 |
) |
WGH |
|
|
18,115 |
|
|
|
38,764 |
|
Treasury/Other |
|
|
36,683 |
|
|
|
40,212 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net income |
|
$ |
415,755 |
|
|
$ |
189,447 |
|
|
|
|
|
|
|
|
61
Average Loans/Leases and Deposits by Business Segment
The segregation of total average loans and leases and total average deposits by business
segment for the first nine-month period of 2011, is presented in the following table:
Table 45 Average Loans/Leases and Deposits by Business Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2011 |
|
|
|
|
|
|
|
Regional and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail and |
|
|
Commercial |
|
|
|
|
|
|
|
|
|
|
Treasury / |
|
|
|
|
(dollar amounts in millions) |
|
Business Banking |
|
|
Banking |
|
|
AFCRE |
|
|
WGH |
|
|
Other |
|
|
TOTAL |
|
Average Loans/Leases |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial |
|
$ |
3,039 |
|
|
$ |
7,763 |
|
|
$ |
1,739 |
|
|
$ |
765 |
|
|
$ |
81 |
|
|
$ |
13,387 |
|
Commercial real estate |
|
|
442 |
|
|
|
347 |
|
|
|
5,325 |
|
|
|
174 |
|
|
|
|
|
|
|
6,288 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial |
|
|
3,481 |
|
|
|
8,110 |
|
|
|
7,064 |
|
|
|
939 |
|
|
|
81 |
|
|
|
19,675 |
|
Automobile |
|
|
|
|
|
|
|
|
|
|
5,957 |
|
|
|
|
|
|
|
1 |
|
|
|
5,958 |
|
Home equity |
|
|
7,043 |
|
|
|
12 |
|
|
|
1 |
|
|
|
791 |
|
|
|
22 |
|
|
|
7,869 |
|
Residential mortgage |
|
|
1,032 |
|
|
|
5 |
|
|
|
|
|
|
|
3,566 |
|
|
|
4 |
|
|
|
4,607 |
|
Other consumer |
|
|
397 |
|
|
|
5 |
|
|
|
128 |
|
|
|
42 |
|
|
|
(33 |
) |
|
|
539 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer |
|
|
8,472 |
|
|
|
22 |
|
|
|
6,086 |
|
|
|
4,399 |
|
|
|
(6 |
) |
|
|
18,973 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans and leases |
|
$ |
11,953 |
|
|
$ |
8,132 |
|
|
$ |
13,150 |
|
|
$ |
5,338 |
|
|
$ |
75 |
|
|
$ |
38,648 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Deposits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposits
noninterest-bearing |
|
$ |
3,748 |
|
|
$ |
2,059 |
|
|
$ |
421 |
|
|
$ |
1,565 |
|
|
$ |
165 |
|
|
$ |
7,958 |
|
Demand deposits interest-bearing |
|
|
4,459 |
|
|
|
94 |
|
|
|
44 |
|
|
|
897 |
|
|
|
5 |
|
|
|
5,499 |
|
Money market deposits |
|
|
7,923 |
|
|
|
1,273 |
|
|
|
248 |
|
|
|
3,784 |
|
|
|
2 |
|
|
|
13,230 |
|
Savings and other domestic deposits |
|
|
4,579 |
|
|
|
13 |
|
|
|
13 |
|
|
|
140 |
|
|
|
(1 |
) |
|
|
4,744 |
|
Core certificates of deposit |
|
|
7,835 |
|
|
|
28 |
|
|
|
3 |
|
|
|
146 |
|
|
|
5 |
|
|
|
8,017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total core deposits |
|
|
28,544 |
|
|
|
3,467 |
|
|
|
729 |
|
|
|
6,532 |
|
|
|
176 |
|
|
|
39,448 |
|
Other deposits |
|
|
190 |
|
|
|
217 |
|
|
|
53 |
|
|
|
1,171 |
|
|
|
655 |
|
|
|
2,286 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits |
|
$ |
28,734 |
|
|
$ |
3,684 |
|
|
$ |
782 |
|
|
$ |
7,703 |
|
|
$ |
831 |
|
|
$ |
41,734 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
62
Retail and Business Banking
Table 46 Key Performance Indicators for Retail and Business Banking
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
|
Change |
|
(dollar amounts in thousands unless otherwise noted) |
|
2011 |
|
|
2010 |
|
|
Amount |
|
|
Percent |
|
Net interest income |
|
$ |
702,666 |
|
|
$ |
637,863 |
|
|
$ |
64,803 |
|
|
|
10 |
% |
Provision for credit losses |
|
|
94,825 |
|
|
|
150,320 |
|
|
|
(55,495 |
) |
|
|
(37 |
) |
Noninterest income |
|
|
311,598 |
|
|
|
300,444 |
|
|
|
11,154 |
|
|
|
4 |
|
Noninterest expense |
|
|
705,216 |
|
|
|
670,458 |
|
|
|
34,758 |
|
|
|
5 |
|
Provision for income taxes |
|
|
74,978 |
|
|
|
41,136 |
|
|
|
33,842 |
|
|
|
82 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
139,245 |
|
|
$ |
76,393 |
|
|
$ |
62,852 |
|
|
|
82 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of employees (full-time equivalent) |
|
|
5,649 |
|
|
|
5,421 |
|
|
|
228 |
|
|
|
4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total average assets (in millions) |
|
$ |
13,345 |
|
|
$ |
13,165 |
|
|
$ |
180 |
|
|
|
1 |
|
Total average loans/leases (in millions) |
|
|
11,953 |
|
|
|
11,801 |
|
|
|
152 |
|
|
|
1 |
|
Total average deposits (in millions) |
|
|
28,734 |
|
|
|
28,615 |
|
|
|
119 |
|
|
|
|
|
Net interest margin |
|
|
3.25 |
% |
|
|
2.96 |
% |
|
|
0.29 |
|
|
|
10 |
|
NCOs |
|
$ |
125,360 |
|
|
$ |
239,083 |
|
|
$ |
(113,723 |
) |
|
|
(48 |
) |
NCOs as a % of average loans and leases |
|
|
1.40 |
% |
|
|
2.70 |
% |
|
|
(1.30 |
) |
|
|
(48 |
) |
Return on average common equity |
|
|
13.1 |
|
|
|
7.1 |
|
|
|
6.0 |
|
|
|
85 |
|
eop End of Period.
2011 First Nine Months vs. 2010 First Nine Months
Retail and Business Banking reported net income of $139.2 million for the first nine-month
period of 2011. This was an increase of $62.9 million, or 82%, compared with the year-ago period.
Results for the current year continued to be positively impacted by an increase in the number
of households and improved product penetration, along with loan and deposit balance growth, plus
deposit spread management. The household and relationship growth for both consumer and small
business customers has come from an increase in direct mail and media, plus improvements in sales
execution. The retail deposit strategy is focused on increased checking balances and improved
deposit margin on the remaining deposit portfolio through reductions in CD balances and increased
money market and savings balances. This strategy has improved deposit spreads by 27 basis points
when compared to the year-ago period. Provision for credit losses for the first nine-month period
was lower than the year-ago period as loan credit quality benefitted from aggressive account
management and disciplined centralized underwriting both in consumer and small business. Finally,
loan balances are up 1% over the year-ago period even though $187 million of SBA loans were sold
during 2011. The loan portfolio has also had a 10 basis point improvement in the portfolio spread.
The increase in net income reflected a combination of factors including:
|
|
|
$64.8 million, or 10%, increase in net interest income. |
|
|
|
$55.5 million, or 37%, decline in the provision of credit losses. |
Partially offset by:
|
|
|
$34.8 million, or 5%, increase in noninterest expense. |
The increase in net interest income from the year-ago period reflected:
|
|
|
$0.2 billion, or 1%, increase in total average loans and leases. |
|
|
|
27 basis point increase in our deposit spread. |
63
Partially offset by:
|
|
|
$9.9 million of lower equity funding related to lower rate environment. |
The increase in total average loans and leases from the year-ago period reflected:
|
|
|
$266 million, or 4%, increase in the consumer portfolio. |
|
|
|
$102 million, or 3%, increase in our C&I (Business Banking) portfolio. |
Partially offset by:
|
|
|
$149 million, or 13%, decrease in the residential portfolio reflecting the continued
strategy of originating residential real estate for sale and not to hold in the portfolio. |
|
|
|
$143 million increase in sales of SBA loans involving $13.7 million in additional gains. |
|
|
|
$95 million, or 18%, decrease in the CRE portfolio reflecting our commitment to reduce
exposure to CRE loans. |
The increase in total average deposits from the year-ago period reflected:
|
|
|
$0.6 billion, or 8%, increase in money market deposits. |
|
|
|
$0.5 billion, or 16%, increase in noninterest-bearing demand deposits. |
|
|
|
$0.3 billion, or 7%, increase in interest-bearing demand deposits. |
Partially offset by:
|
|
|
$1.3 billion, or 15% decrease in core certificates of deposit. |
The decrease in the provision for credit losses from the year-ago period reflected:
|
|
|
$92.2 million, or 49%, decrease in consumer NCOs and a $21.6 million, or 42%, decrease
in commercial NCOs. Expressed as an annualized percentage of related average balance,
total NCOs decreased to 1.40% in the first nine-month period of 2011 from 2.70% in the
year-ago period. The overall decline in NCOs was the result of improved credit quality of
the portfolio. |
The increase in noninterest income from the year-ago period reflected:
|
|
|
$24.9 million, or 122%, increase in other income, which is primarily related to gains on
sale of SBA loans and loan fees. |
|
|
|
$11.7 million, or 15%, increase in electronic banking income, which reflected higher
activation rates on new and existing cards coupled with higher transaction volumes. |
|
|
|
$2.5 million, or 6%, increase in fee sharing income due to an increase in brokerage
income driven by increased sales in structured investment products. |
Partially offset by:
|
|
|
$28.5 million, or 17%, decrease in deposit service charge income due to an amendment to
Reg E relating to certain overdraft fees and the launch of Huntingtons 24-Hour
Grace® feature on all consumer checking accounts in September 2010. |
64
The increase in noninterest expense from the year-ago period reflected:
|
|
|
$20.0 million, or 10%, increase in personnel costs, which represent a 4% increase in
full-time equivalent employees in support of strategic initiatives, such as the
introduction of the in-store branches during the 2010 fourth quarter and the first
nine-month period of 2011, as well as expanded Saturday hours in traditional branches. |
|
|
|
$6.7 million, or 2%, increase in other expenses, primarily due to a $4.0 million
increase in services expense related to the increase in debit card processes and conversion
expenses, $3.7 million increase in Building and Equipment associated with the rebrand and
refurbishment effort of the branch and ATM network, and a $3.3 million increase in FDIC
expense due to higher balances. This was offset by a $2.9 million decrease in OREO loss
expenses. |
|
|
|
$8.1 million, or 20%, increase in marketing expenses, which primarily reflected a
greater focus on direct mail and advertising. Our brand advertising did not start until
June 2010; therefore 2011 is a more normalized run rate. |
65
Regional and Commercial Banking
Table 47 Key Performance Indicators for Regional and Commercial Banking
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
|
Change |
|
(dollar amounts in thousands unless otherwise noted) |
|
2011 |
|
|
2010 |
|
|
Amount |
|
|
Percent |
|
Net interest income |
|
$ |
178,787 |
|
|
$ |
155,686 |
|
|
$ |
23,101 |
|
|
|
15 |
% |
Provision for credit losses |
|
|
23,957 |
|
|
|
57,607 |
|
|
|
(33,650 |
) |
|
|
(58 |
) |
Noninterest income |
|
|
94,657 |
|
|
|
80,667 |
|
|
|
13,990 |
|
|
|
17 |
|
Noninterest expense |
|
|
142,189 |
|
|
|
115,457 |
|
|
|
26,732 |
|
|
|
23 |
|
Provision for income taxes |
|
|
37,554 |
|
|
|
22,151 |
|
|
|
15,403 |
|
|
|
70 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
69,744 |
|
|
$ |
41,138 |
|
|
$ |
28,606 |
|
|
|
70 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of employees (full-time equivalent) |
|
|
662 |
|
|
|
516 |
|
|
|
146 |
|
|
|
28 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total average assets (in millions) |
|
$ |
9,062 |
|
|
$ |
8,127 |
|
|
$ |
935 |
|
|
|
12 |
|
Total average loans/leases (in millions) |
|
|
8,132 |
|
|
|
7,333 |
|
|
|
799 |
|
|
|
11 |
|
Total average deposits (in millions) |
|
|
3,684 |
|
|
|
3,074 |
|
|
|
610 |
|
|
|
20 |
|
Net interest margin |
|
|
2.95 |
% |
|
|
2.83 |
% |
|
|
0.12 |
|
|
|
4 |
|
NCOs |
|
$ |
38,619 |
|
|
$ |
28,415 |
|
|
$ |
10,204 |
|
|
|
36 |
|
NCOs as a % of average loans and leases |
|
|
0.63 |
% |
|
|
0.52 |
% |
|
|
0.11 |
|
|
|
21 |
|
Return on average common equity |
|
|
13.2 |
|
|
|
8.2 |
|
|
|
5.0 |
|
|
|
61 |
|
2011 First Nine Months vs. 2010 First Nine Months
Regional and Commercial Banking reported net income of $69.7 million for the first nine-month
period of 2011. This was an increase of $28.6 million, or 70%, compared with the year-ago period.
Contributing to the increase in net income was growth in both net interest income and
noninterest income due to the successful execution of our strategic initiatives. In addition,
current year results continue to reflect significant improvement in provision for credit losses,
resulting from the proactive treatment of problem credits and an improved credit environment.
Significant investments have been made in our sales process, which entails robust customer
relationship planning, as well as a renewed investment in technology, including a referral tracking
system and new customer relationship management system. These investments have resulted in a 28%
increase in loan originations in the first nine-month period of 2011 compared to the year-ago
period. Additionally, the Commercial Relationship Manager sales teams were focused on the
importance of deposit relationships as well as partnering with Treasury Management to deliver
customer-focused liquidity management solutions.
The increase in net income reflected a combination of factors including:
|
|
|
$23.1 million, or 15%, increase in net interest income. |
|
|
|
$14.0 million, or 17%, increase in noninterest income. |
|
|
|
$33.7 million, or 58%, decline in the provision of credit losses. |
Partially offset by:
|
|
|
$26.7 million, or 23%, increase in noninterest expense, due to our strategic initiatives
investments. |
66
The increase in net interest income from the year-ago period reflected:
|
|
|
$0.8 billion, or 11%, increase in total average loans and leases. |
|
|
|
$0.7 billion, or 24%, increase in average core deposits. |
|
|
|
12 basis point increase in the net interest margin due to a 46 basis point increase in
the commercial loan spread. The commercial loan spread increase reflected lower cost of
funds on our renewals. In addition, as the liquidity position of the Bank improved in 2010,
the liquidity premium was lowered for new and renewed loans. |
The increase in total average loans and leases from the year-ago period reflected:
|
|
|
$0.4 billion, or 10%, increase in the core middle market loan portfolio average balance.
The majority of this growth was due to marketing efforts and community development within
our Michigan and Cleveland markets. |
|
|
|
$0.4 billion, or 62%, increase in the large corporate portfolio average balance due to
establishing relationships with targeted prospects within our footprint. |
|
|
|
$0.2 billion, or 20%, increase in the equipment finance portfolio average balance which
reflected our focus on developing vertical strategies in business aircraft, rail industry,
lender finance and syndications. |
The increase in total average deposits from the year-ago period reflected:
|
|
|
$0.7 billion, or 24%, increase in average core deposits reflected a $0.5 billion
increase in average money market deposits. |
|
|
|
Strategic initiatives to deepen customer relationships, new and innovative product
offerings, pricing discipline, and sales and retention initiatives. |
|
|
|
Targeted money market promotions and sales campaigns for loans and other products. They
served as an effective door opener to drive success in ultimately obtaining operating
accounts supported with treasury management solutions to promote customer retention. |
|
|
|
Best practices from each region were shared and institutionalized. |
|
|
|
A money desk was created to assist commercial bankers with tailored solutions for
customers having large dollar depository needs. This additional support and expertise
provided additional value and helped our bankers win relationships and encouraged their
expanded prospecting efforts. |
The decrease in the provision for credit losses from the year-ago period reflected:
|
|
|
Improved credit quality of the portfolio. |
Partially offset by:
|
|
|
$10.2 million increase in NCOs. Expressed as a percentage of related average balance,
NCOs increased to 0.63% in the first nine-month period of 2011 from 0.52% in the year-ago
period. The increase in NCOs was the result of proactive treatment of problem credits in
the portfolio. |
The increase in noninterest income from the year-ago period reflected:
|
|
|
$13.7 million, or 35%, increase in other income resulting primarily from increased sales
of customer interest rate derivatives. |
|
|
|
$4.4 million, or 216%, increase in brokerage income primarily due to the transfer of our
institutional sales business to our business segment from WGH during the nine-month period
of 2011. |
|
|
|
$3.4 million, or 85%, increase in capital markets income resulting from strategic
investments made over the last year in these types of products and services. |
Partially offset by:
|
|
|
$2.1 million, or 6%, decrease in deposit service charge income resulting primarily from
completed strategic exits. |
|
|
|
$1.9 million, or 46%, decrease in operating lease income as lease originations were
structured as direct finance leases beginning in the 2009 second quarter. |
67
The increase in noninterest expense from the year-ago period reflected:
|
|
|
$22.0 million, or 48%, increase in personnel costs, which represent a 28% increase in
FTE employees. This increase in personnel is attributable to our strategic investments in
our core footprint markets, vertical strategies, and product capabilities. |
|
|
|
$6.1 million, or 9%, increase in other expenses, which reflect expanded marketing
efforts and community development. |
Partially offset by:
|
|
|
$1.4 million, or 42%, decrease in operating lease expense. |
68
Automobile Finance and Commercial Real Estate
Table 48 Key Performance Indicators for Automobile Finance and Commercial Real Estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
|
Change |
|
(dollar amounts in thousands unless otherwise noted) |
|
2011 |
|
|
2010 |
|
|
Amount |
|
|
Percent |
|
Net interest income |
|
$ |
271,510 |
|
|
$ |
247,319 |
|
|
$ |
24,191 |
|
|
|
10 |
% |
Provision for credit losses |
|
|
(30,050 |
) |
|
|
202,440 |
|
|
|
(232,490 |
) |
|
|
115 |
|
Noninterest income |
|
|
57,886 |
|
|
|
58,625 |
|
|
|
(739 |
) |
|
|
(1 |
) |
Noninterest expense |
|
|
125,649 |
|
|
|
114,366 |
|
|
|
11,283 |
|
|
|
10 |
|
Provision (benefit) for income taxes |
|
|
81,829 |
|
|
|
(3,802 |
) |
|
|
85,631 |
|
|
|
N.R. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
151,968 |
|
|
$ |
(7,060 |
) |
|
$ |
159,028 |
|
|
|
N.R. |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of employees (full-time equivalent) |
|
|
273 |
|
|
|
267 |
|
|
|
6 |
|
|
|
2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total average assets (in millions) |
|
$ |
13,157 |
|
|
$ |
12,803 |
|
|
$ |
354 |
|
|
|
3 |
|
Total average loans/leases (in millions) |
|
|
13,150 |
|
|
|
12,931 |
|
|
|
219 |
|
|
|
2 |
|
Total average deposits (in millions) |
|
|
782 |
|
|
|
673 |
|
|
|
109 |
|
|
|
16 |
|
Net interest margin |
|
|
2.70 |
% |
|
|
2.50 |
% |
|
|
0.20 |
|
|
|
8 |
|
NCOs |
|
$ |
124,877 |
|
|
$ |
291,565 |
|
|
$ |
(166,688 |
) |
|
|
(57 |
) |
NCOs as a % of average loans and leases |
|
|
1.27 |
% |
|
|
3.01 |
% |
|
|
(1.74 |
) |
|
|
(58 |
) |
Return on average common equity |
|
|
29.3 |
|
|
|
(1.1 |
) |
|
|
30.4 |
|
|
|
N.R. |
|
N.R. Not relevant, as denominator of calculation is a loss in prior period compared with income
in current period.
2011 First Nine Months vs. 2010 First Nine Months
AFCRE reported net income of $152.0 million for the first nine-month period of 2011. This was
an increase of $159.0 million compared with the year-ago period.
Results for the current year continued to be significantly and positively impacted by lower
provisions for credit losses due to reductions in required reserve levels as the underlying credit
quality of the portfolios continued to improve and / or stabilize. This was in contrast to the
year-ago period, which included higher provisions for credit losses in order to increase reserves
due to economic and CRE-related weaknesses in our markets. Also contributing to the increase in net
income was growth in net interest income. This primarily reflected the benefit of a higher net
interest margin due to improved risk-based pricing. Growth in average total loans and leases
reflected the positive impact of an increase in auto finance loan production, which is on pace to
exceed the record production levels reached in 2010, partially offset by the planned continued
reduction in our CRE exposure.
The increase in net income reflected a combination of factors including:
|
|
|
$24.2 million, or 10%, increase in net interest income. |
|
|
|
$232.5 million, or 115%, decline in the provision of credit losses. |
Partially offset by:
|
|
|
$11.3 million, or 10%, increase in noninterest expense. |
The increase in net interest income from the year-ago period reflected:
|
|
|
20 basis point increase in the net interest margin. This increase primarily reflected
the continuation of a risk-based pricing strategy in the CRE portfolio that began in early
2009 and has resulted in improved spreads on CRE loan renewals as well as new business
originated. |
|
|
|
$0.2 billion, or 2%, increase in total average loans and leases. |
69
The increase in total average loans and leases from the year-ago period reflected:
|
|
|
$1.3 billion, or 27%, increase in the average consumer automobile portfolio. This
increase resulted from continued strong origination levels. Total production for the first
nine months of 2011 was $2.8 billion compared to $2.6 billion for the year-ago period.
Contributing to this increase was the positive impact of our expansion into eastern
Pennsylvania and New England. |
Partially offset by:
|
|
|
$1.0 billion, or 13%, decrease in our average commercial portfolio. This decrease
primarily reflected a $1.1 billion decrease in CRE loans offset, in part, by a $0.3 billion
increase in automobile floor plan loans. The decline in CRE loans continued to reflect our
managed reduction of this overall exposure, particularly in the noncore portfolio. |
The increase in total average deposits from the year-ago period reflected:
|
|
|
$92 million, or 14%, increase in average core deposits reflecting our commitment to
strengthening relationships with core customers and prospects as well as new commercial
automobile dealer relationships developed in 2010 and 2011. |
The decrease in the provision for credit losses from the year-ago period reflected:
|
|
|
$157.3 million, or 58%, decrease in commercial NCOs. Expressed as a percentage of
related average balances, commercial NCOs decreased to 1.27% in the first nine months of
2011 from 3.01% in the year-ago period. |
|
|
|
$8.7 million, or 45%, decrease in indirect automobile-related NCOs. As a percentage of
related average balances, indirect automobile-related NCOs were 0.24% in the first nine
months of 2011 compared to 0.56% in the year-ago period. This decrease reflected our
consistent focus on high credit quality of originations combined with a very strong resale
market for used vehicles. |
|
|
|
A reduction in required reserve levels, primarily due to lower levels of commercial NALs
which totaled $255 million at September 30, 2011, down 50% compared to September 30, 2010. |
The decrease in noninterest income from the year-ago period reflected:
|
|
|
$13.5 million, or 38%, decrease in operating lease income resulting from the continued
runoff of that portfolio as we exited that business at the end of 2008. |
Partially offset by:
|
|
|
$12.4 million, or 59%, increase in other income which reflected a $15.5 million gain on
securitization and sale of $1.0 billion of indirect auto loans, partially offset by a $3.1
million decrease in net gains resulting from valuation adjustments of certain loans and
associated notes payable that are recorded at fair value. |
The increase in noninterest expense from the year-ago period reflected:
|
|
|
$19.0 million, or 28%, increase in other expenses, primarily reflecting a $15.8 million
increase in allocated costs associated with higher production and other activity levels. In
addition, other expense in the year-ago period was reduced by $3.7 million of OREO-related
gains. There were no comparable OREO gains in the current nine-month period. |
|
|
|
$4.6 million, or 26%, increase in personnel costs, which primarily related to higher
origination related activities, including automobile lending market expansion and additions
to the CRE team to support our core CRE customers. |
Partially offset by:
|
|
|
$12.2 million, or 42%, decrease in operating lease expense resulting from the continued
runoff of that portfolio. |
70
Wealth Advisors, Government Finance, and Home Lending
Table 49 Key Performance Indicators for Wealth Advisors, Government Finance, and Home Lending
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
|
Change |
|
(dollar amounts in thousands unless otherwise noted) |
|
2011 |
|
|
2010 |
|
|
Amount |
|
|
Percent |
|
Net interest income |
|
$ |
145,614 |
|
|
$ |
120,511 |
|
|
$ |
25,103 |
|
|
|
21 |
% |
Provision for credit losses |
|
|
40,036 |
|
|
|
45,700 |
|
|
|
(5,664 |
) |
|
|
(12 |
) |
Noninterest income |
|
|
187,443 |
|
|
|
246,704 |
|
|
|
(59,261 |
) |
|
|
(24 |
) |
Noninterest expense |
|
|
265,151 |
|
|
|
261,876 |
|
|
|
3,275 |
|
|
|
1 |
|
Provision for income taxes |
|
|
9,755 |
|
|
|
20,875 |
|
|
|
(11,120 |
) |
|
|
(53 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
18,115 |
|
|
$ |
38,764 |
|
|
$ |
(20,649 |
) |
|
|
(53 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of employees (full-time equivalent) |
|
|
2,041 |
|
|
|
2,223 |
|
|
|
(182 |
) |
|
|
(8 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total average assets (in millions) |
|
$ |
6,633 |
|
|
$ |
6,161 |
|
|
$ |
472 |
|
|
|
8 |
|
Total average loans/leases (in millions) |
|
|
5,338 |
|
|
|
4,752 |
|
|
|
586 |
|
|
|
12 |
|
Total average deposits (in millions) |
|
|
7,703 |
|
|
|
6,874 |
|
|
|
829 |
|
|
|
12 |
|
Net interest margin |
|
|
2.17 |
% |
|
|
2.22 |
% |
|
|
(0.05 |
) |
|
|
(2 |
) |
NCOs |
|
$ |
48,002 |
|
|
$ |
51,789 |
|
|
$ |
(3,787 |
) |
|
|
(7 |
) |
NCOs as a % of average loans and leases |
|
|
1.20 |
% |
|
|
1.45 |
% |
|
|
(0.25 |
) |
|
|
(17 |
) |
Return on average common equity |
|
|
3.6 |
|
|
|
8.7 |
|
|
|
(5.1 |
) |
|
|
(59 |
) |
Mortgage banking origination volume (in millions) |
|
$ |
2,797 |
|
|
$ |
3,649 |
|
|
$ |
(852 |
) |
|
|
(23 |
) |
Noninterest income shared with other business segments(1) |
|
$ |
31,295 |
|
|
$ |
31,363 |
|
|
$ |
(68 |
) |
|
|
|
|
Total assets under management (in billions) eop |
|
|
14.4 |
|
|
|
13.6 |
|
|
|
0.8 |
|
|
|
6 |
|
Total trust assets (in billions) eop |
|
|
58.6 |
|
|
|
58.9 |
|
|
|
(0.3 |
) |
|
|
(1 |
) |
|
|
|
(1) |
|
Amount is not included in noninterest income reported above. |
|
|
|
eop End of Period. |
2011 First Nine Months vs. 2010 First Nine Months
WGH reported net income of $18.1 million for the first nine-month period of 2011. This was a
decrease of $20.7 million, or 53%, compared with the year-ago period.
Results for the current year were impacted by a decrease in mortgage banking revenue which
reflected a decline in originations and the impact of net MSR activity. The other businesses
within the WGH segment experienced significant growth, with increased revenues for the nine-month
period in 2011 when compared to the year-ago period. As a result of improved credit quality in the
portfolio, NCO activity has decreased in 2011 when compared to the same period in 2010. A focus on
structured investment sales increased brokerage commissions and, despite market value declines in
assets under management in the third quarter of 2011, trust income increased in the first
nine-month period of 2011 when compared to the year-ago period.
The decrease in net income reflected a combination of factors including:
|
|
|
$59.3 million, or 24%, decrease in noninterest income. |
Partially offset by:
|
|
|
$25.1 million, or 21%, increase in net interest income. |
|
|
|
$5.7 million, or 12%, decrease in the provision for credit losses. |
71
The increase in net interest income from the year-ago period reflected:
|
|
|
$0.6 billion, or 12%, increase in average total loans and leases. |
|
|
|
$0.8 billion, or 12%, increase in average total deposits. |
Partially offset by:
|
|
|
5 basis point decrease in the net interest margin. |
The increase in total average loans and leases from the year-ago period reflected:
|
|
|
$0.5 billion, or 15%, increase in the residential mortgage portfolio driven by
historically low interest rates. |
The increase in average total deposits from the year-ago period reflected:
|
|
|
$0.9 billion, or 30%, increase in money market deposits. |
Partially offset by:
|
|
|
$0.4 billion, or 32%, decrease in interest-bearing demand deposits. |
The decrease in the provision for credit losses from the year-ago period reflected:
|
|
|
$3.8 million, or 7%, decrease in NCOs. Expressed as an annualized percentage of related
average balance, NCOs decreased to 1.20% in the first nine-month period of 2011 from 1.45%
in the year-ago period. The overall decline in NCOs was the result of improved credit
quality of the portfolio. |
The decrease in noninterest income from the year-ago period reflected:
|
|
|
$64.6 million, or 60%, decrease in mortgage banking income due primarily to a $46.2
million decline in the net impact of MSR hedging. |
|
|
|
$1.7 million, or 19%, decrease in insurance-related income which reflected lower sales
of wealth transfer products in 2011. |
Partially offset by:
|
|
|
$7.4 million, or 9%, increase in trust service income reflecting a $0.8 billion increase
in assets under management and growth in new accounts. |
|
|
|
$2.9 million, or 9%, increase in brokerage income. Brokerage commissions increased $8.3
million, or 18%. The increase in retail brokerage commissions reflected improved sales of
structured investment products. Institutional brokerage was transferred to the Commercial
segment and the amount reported in WGH declined by $3.0 million. The first nine-month
period of 2011 also included $2.4 million of higher commissions shared with other segments. |
The increase in noninterest expense from the year-ago period reflected:
|
|
|
$8.1 million, or 6%, increase in personnel costs, which reflected higher benefit-related
expenses as well as higher sales commissions. |
Partially offset by:
|
|
|
$4.8 million, or 4%, decrease in other expenses, which reflected primarily lower
expenses allocated from other segments. |
72
ADDITIONAL DISCLOSURES
Forward-Looking Statements
This report, including MD&A, contains certain forward-looking statements, including certain
plans, expectations, goals, projections, and statements, which are subject to numerous assumptions,
risks, and uncertainties. Statements that do not describe historical or current facts, including
statements about beliefs and expectations, are forward-looking statements. Forward-looking
statements may be identified by words such as expect, anticipate, believe, intend, estimate, plan,
target, goal, or similar expressions, or future or conditional verbs such as will, may, might,
should, would, could, or similar variations. The forward-looking statements are intended to be
subject to the safe harbor provided by Section 27A of the Securities Act of 1933, Section 21E of
the Securities Exchange Act of 1934, and the Private Securities Litigation Reform Act of 1995.
While there is no assurance that any list of risks and uncertainties or risk factors is
complete, below are certain factors which could cause actual results to differ materially from
those contained or implied in the forward-looking statements: (1) worsening of credit quality
performance due to a number of factors such as the underlying value of the collateral could prove
less valuable than otherwise assumed and assumed cash flows may be worse than expected; (2) changes
in economic conditions; (3) movements in interest rates; (4) competitive pressures on product
pricing and services; (5) success, impact, and timing of our business strategies, including market
acceptance of any new products or services introduced to implement our Fair Play banking
philosophy; (6) changes in accounting policies and principles and the accuracy of our assumptions
and estimates used to prepare our financial statements; (7) extended disruption of vital
infrastructure; (8) the final outcome of significant litigation; (9) the nature, extent, and timing
of governmental actions and reforms, including the Dodd-Frank Act, as well as future regulations
which will be adopted by the relevant regulatory agencies, including the CFPB, to implement the
Dodd-Frank Acts provisions; and (10) the outcome of judicial and regulatory decisions regarding
practices in the residential mortgage industry, including among other things the processes followed
for foreclosing residential mortgages. Additional factors that could cause results to differ
materially from those described above can be found in our 2010 Annual Report on Form 10-K, and
documents subsequently filed by us with the Securities and Exchange Commission.
All forward-looking statements speak only as of the date they are made and are based on
information available at that time. We assume no obligation to update forward-looking statements to
reflect circumstances or events that occur after the date the forward-looking statements were made
or to reflect the occurrence of unanticipated events except as required by federal securities laws.
As forward-looking statements involve significant risks and uncertainties, caution should be
exercised against placing undue reliance on such statements.
Risk Factors
Information on risk is discussed in the Risk Factors section included in Item 1A of our 2010
Form 10-K. Additional information regarding risk factors can also be found in the Risk Management
and Capital discussion of this report.
Critical Accounting Policies and Use of Significant Estimates
Our financial statements are prepared in accordance with GAAP. The preparation of financial
statements in conformity with GAAP requires us to establish critical accounting policies and make
accounting estimates, assumptions, and judgments that affect amounts recorded and reported in our
financial statements. Note 1 of Notes to Consolidated Financial Statements included in our 2010
Form 10-K as supplemented by this report lists significant accounting policies we use in the
development and presentation of our financial statements. This MD&A, the significant accounting
policies, and other financial statement disclosures identify and address key variables and other
qualitative and quantitative factors necessary for an understanding and evaluation of our company,
financial position, results of operations, and cash flows.
An accounting estimate requires assumptions about uncertain matters that could have a material
effect on the financial statements if a different amount within a range of estimates were used or
if estimates changed from period to period. Estimates are made under facts and circumstances at a
point in time, and changes in those facts and circumstances could produce results that
significantly differ from when those estimates were made.
Our most significant accounting estimates relate to our ACL, fair value measurements, and
income taxes and deferred tax assets. These significant accounting estimates and their related
application are discussed in our 2010 Form 10-K.
73
Fair Value Measurements
The fair value of a financial instrument is defined as the amount at which the instrument
could be exchanged in a current transaction between willing parties, other than in a forced or
liquidation sale. Assets and liabilities carried at fair value inherently
result in a higher degree of financial statement volatility. We estimate the fair value of a
financial instrument using a variety of valuation methods. Where financial instruments are
actively traded and have quoted market prices, quoted market prices are used for fair value. We
characterize active markets as those where transaction volumes are sufficient to provide objective
pricing information, with reasonably narrow bid/ask spreads, and where received quoted prices do
not vary widely. When the financial instruments are not actively traded, other observable market
inputs, such as quoted prices of securities with similar characteristics, may be used, if
available, to determine fair value. Inactive markets are characterized by low transaction volumes,
price quotations that vary substantially among market participants, or in which minimal information
is released publicly. When observable market prices do not exist, we estimate fair value primarily
by using cash flow and other financial modeling methods. Our valuation methods consider factors
such as liquidity and concentration concerns and, for the derivatives portfolio, counterparty
credit risk. Other factors such as model assumptions, market dislocations, and unexpected
correlations can affect estimates of fair value. Changes in these underlying factors, assumptions,
or estimates in any of these areas could materially impact the amount of revenue or loss recorded.
The FASB ASC Topic 820, Fair Value Measurements, establishes a framework for measuring the
fair value of financial instruments that considers the attributes specific to particular assets or
liabilities and establishes a three-level hierarchy for determining fair value based on the
transparency of inputs to each valuation as of the fair value measurement date. The three levels
are defined as follows:
|
|
|
Level 1 quoted prices (unadjusted) for identical assets or liabilities in
active markets. |
|
|
|
Level 2 inputs include quoted prices for similar assets and liabilities in
active markets, quoted prices of identical or similar assets or liabilities in
markets that are not active, and inputs that are observable for the asset or
liability, either directly or indirectly, for substantially the full term of the
financial instrument. |
|
|
|
Level 3 inputs that are unobservable and significant to the fair value
measurement. Financial instruments are considered Level 3 when values are
determined using pricing models, discounted cash flow methodologies, or similar
techniques, and at least one significant model assumption or input is unobservable. |
At the end of each quarter, we assess the valuation hierarchy for each asset or liability
measured. As necessary, assets or liabilities may be transferred within hierarchy levels due to
changes in availability of observable market inputs at the measurement date. The fair values
measured at each level of the fair value hierarchy, as well as additional discussion regarding fair
value measurements, can be found in Note 13 of the Notes to the Unaudited Condensed Consolidated
Financial Statements.
Below is a brief description of how fair value is determined for categories that have
unobservable inputs.
Available-for-sale securities
Consist of certain asset-backed securities, pooled-trust-preferred securities, private-label
CMOs, and municipal securities for which fair value is estimated. Assumptions used to determine
the fair value of these securities have greater subjectivity due to the lack of observable market
transactions. Generally, there are only limited trades of similar instruments and a discounted
cash flow approach is used to determine fair value.
MSRs
MSRs do not trade in an active, open market with readily observable prices. Although sales of
MSRs do occur, the precise terms and conditions typically are not readily available. Fair value is
determined on an income approach model based upon month-end interest rate curve and prepayment
assumptions.
Automobile loans
Effective January 1, 2010, we consolidated an automobile loan securitization that previously
had been accounted for as an off-balance sheet transaction. We elected to account for the
automobile loan receivables and the associated notes payable at fair value per guidance supplied in
ASC 825, Financial Instruments.
The key assumptions used to determine the fair value of the automobile loan receivables
included a projection of expected losses and prepayment of the underlying loans in the portfolio
and a market assumption of interest rate spreads. Certain interest rates are available from
similarly traded securities while other interest rates are developed internally based on similar
asset-backed security transactions in the market. The associated notes payable are valued based
upon interest rates for similar financial instruments.
Recent Accounting Pronouncements and Developments
Note 2 to the Unaudited Condensed Consolidated Financial Statements discusses new accounting
pronouncements adopted during 2011 and the expected impact of accounting pronouncements recently
issued but not yet required to be adopted. To the extent the
adoption of new accounting standards materially affect financial condition, results of
operations, or liquidity, the impacts are discussed in the applicable section of this MD&A and the
Notes to Unaudited Condensed Consolidated Financial Statements.
74
Franklin-Related Impacts
NCOS
The following table reflects the Franklin-related impact to NCOs for the first nine-month
periods of 2011 and 2010:
Table 50 Year to Date Net Charge-off Analysis Franklin-Related Impact
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
|
|
September 30, |
|
(dollar amounts in millions) |
|
2011 |
|
|
2010 |
|
Total home equity net charge-offs (recoveries): |
|
|
|
|
|
|
|
|
Franklin |
|
$ |
|
|
|
$ |
20.7 |
|
Non-Franklin |
|
|
78.4 |
|
|
|
89.5 |
|
|
|
|
|
|
|
|
Total |
|
$ |
78.4 |
|
|
$ |
110.2 |
|
|
|
|
|
|
|
|
Total home equity net charge-offs annualized percentages: |
|
|
|
|
|
|
|
|
Total |
|
|
1.33 |
% |
|
|
1.95 |
% |
Non-Franklin |
|
|
1.33 |
|
|
|
1.59 |
|
|
|
|
|
|
|
|
|
|
Total residential mortgage net charge-offs (recoveries): |
|
|
|
|
|
|
|
|
Franklin |
|
$ |
(2.5 |
) |
|
$ |
75.7 |
|
Non-Franklin |
|
|
49.4 |
|
|
|
50.4 |
|
|
|
|
|
|
|
|
Total |
|
$ |
46.9 |
|
|
$ |
126.1 |
|
|
|
|
|
|
|
|
Total residential mortgage net charge-offs annualized percentages: |
|
|
|
|
|
|
|
|
Total |
|
|
1.36 |
% |
|
|
3.74 |
% |
Non-Franklin |
|
|
1.43 |
|
|
|
1.58 |
|
|
|
|
|
|
|
|
|
|
Total consumer net charge-offs (recoveries): |
|
|
|
|
|
|
|
|
Franklin |
|
$ |
(2.5 |
) |
|
$ |
96.6 |
|
Non-Franklin |
|
|
157.2 |
|
|
|
179.1 |
|
|
|
|
|
|
|
|
Total |
|
$ |
154.7 |
|
|
$ |
275.7 |
|
|
|
|
|
|
|
|
Total consumer net charge-offs annualized percentages: |
|
|
|
|
|
|
|
|
Total |
|
|
1.09 |
% |
|
|
2.11 |
% |
Non-Franklin |
|
|
1.11 |
|
|
|
1.39 |
|
|
|
|
|
|
|
|
|
|
Total net charge-offs (recoveries): |
|
|
|
|
|
|
|
|
Franklin |
|
$ |
(2.5 |
) |
|
$ |
91.5 |
|
Non-Franklin |
|
|
355.7 |
|
|
|
610.7 |
|
|
|
|
|
|
|
|
Total |
|
$ |
353.2 |
|
|
$ |
702.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net charge-offs annualized percentages: |
|
|
|
|
|
|
|
|
Total |
|
|
1.22 |
% |
|
|
2.52 |
% |
Non-Franklin |
|
|
1.23 |
|
|
|
2.21 |
|
75
|
|
|
Item 1: |
|
Financial Statements |
Huntington Bancshares Incorporated
Condensed Consolidated Balance Sheets
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011 |
|
|
2010 |
|
(dollar amounts in thousands, except number of shares) |
|
September 30, |
|
|
December 31, |
|
|
September 30, |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks |
|
$ |
2,190,276 |
|
|
$ |
847,888 |
|
|
$ |
1,139,226 |
|
Interest-bearing deposits in banks |
|
|
105,454 |
|
|
|
135,038 |
|
|
|
274,240 |
|
Trading account securities |
|
|
85,711 |
|
|
|
185,404 |
|
|
|
138,677 |
|
Loans held for sale
(includes $331,883, $754,117 and $699,001 respectively, measured at fair value) (1) |
|
|
334,606 |
|
|
|
793,285 |
|
|
|
744,439 |
|
Available-for-sale and other securities |
|
|
8,713,530 |
|
|
|
9,895,244 |
|
|
|
9,723,558 |
|
Held-to-maturity securities |
|
|
658,250 |
|
|
|
|
|
|
|
|
|
Loans and leases (includes $344,529, $522,717 and $590,223 respectively, measured at fair value) (2) |
|
|
39,011,894 |
|
|
|
38,106,507 |
|
|
|
37,500,587 |
|
Allowance for loan and lease losses |
|
|
(1,019,710 |
) |
|
|
(1,249,008 |
) |
|
|
(1,336,352 |
) |
|
|
|
|
|
|
|
|
|
|
Net loans and leases |
|
|
37,992,184 |
|
|
|
36,857,499 |
|
|
|
36,164,235 |
|
|
|
|
|
|
|
|
|
|
|
Bank owned life insurance |
|
|
1,494,251 |
|
|
|
1,458,224 |
|
|
|
1,450,335 |
|
Premises and equipment |
|
|
543,324 |
|
|
|
491,602 |
|
|
|
489,349 |
|
Goodwill |
|
|
444,268 |
|
|
|
444,268 |
|
|
|
444,268 |
|
Other intangible assets |
|
|
188,477 |
|
|
|
228,620 |
|
|
|
243,666 |
|
Accrued income and other assets |
|
|
2,228,376 |
|
|
|
2,482,570 |
|
|
|
2,434,783 |
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
54,978,707 |
|
|
$ |
53,819,642 |
|
|
$ |
53,246,776 |
|
|
|
|
|
|
|
|
|
|
|
Liabilities and shareholders equity |
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
$ |
43,219,727 |
|
|
$ |
41,853,898 |
|
|
$ |
41,072,371 |
|
Short-term borrowings |
|
|
2,224,986 |
|
|
|
2,040,732 |
|
|
|
1,859,134 |
|
Federal Home Loan Bank advances |
|
|
14,157 |
|
|
|
172,519 |
|
|
|
23,643 |
|
Other long-term debt (includes $173,045, $356,089 and $422,294 respectively, measured at fair value) (2) |
|
|
1,421,518 |
|
|
|
2,144,092 |
|
|
|
2,393,071 |
|
Subordinated notes |
|
|
1,537,293 |
|
|
|
1,497,216 |
|
|
|
1,202,568 |
|
Accrued expenses and other liabilities |
|
|
1,160,547 |
|
|
|
1,130,643 |
|
|
|
1,128,586 |
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
49,578,228 |
|
|
|
48,839,100 |
|
|
|
47,679,373 |
|
|
|
|
|
|
|
|
|
|
|
Shareholders equity |
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock authorized 6,617,808 shares; |
|
|
|
|
|
|
|
|
|
|
|
|
5.00% Series B Non-voting, Cumulative Preferred Stock, par value
of $0.01 and liquidation value per share of $1,000 |
|
|
|
|
|
|
|
|
|
|
1,337,749 |
|
8.50% Series A Non-cumulative Perpetual Convertible Preferred
Stock, par value of $0.01 and liquidation value per share of $1,000 |
|
|
362,507 |
|
|
|
362,507 |
|
|
|
362,507 |
|
Common stock |
|
|
8,652 |
|
|
|
8,642 |
|
|
|
7,180 |
|
Capital surplus |
|
|
7,594,090 |
|
|
|
7,630,093 |
|
|
|
6,743,724 |
|
Less treasury shares, at cost |
|
|
(10,161 |
) |
|
|
(8,771 |
) |
|
|
(8,969 |
) |
Accumulated other comprehensive loss |
|
|
(80,404 |
) |
|
|
(197,496 |
) |
|
|
(28,396 |
) |
Retained (deficit) earnings |
|
|
(2,474,205 |
) |
|
|
(2,814,433 |
) |
|
|
(2,846,392 |
) |
|
|
|
|
|
|
|
|
|
|
Total shareholders equity |
|
|
5,400,479 |
|
|
|
4,980,542 |
|
|
|
5,567,403 |
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity |
|
$ |
54,978,707 |
|
|
$ |
53,819,642 |
|
|
$ |
53,246,776 |
|
|
|
|
|
|
|
|
|
|
|
Common shares authorized (par value of $0.01) |
|
|
1,500,000,000 |
|
|
|
1,500,000,000 |
|
|
|
1,500,000,000 |
|
Common shares issued |
|
|
865,204,511 |
|
|
|
864,195,369 |
|
|
|
718,015,276 |
|
Common shares outstanding |
|
|
864,074,883 |
|
|
|
863,319,435 |
|
|
|
717,132,197 |
|
Treasury shares outstanding |
|
|
1,129,628 |
|
|
|
875,934 |
|
|
|
883,079 |
|
Preferred shares issued |
|
|
1,967,071 |
|
|
|
1,967,071 |
|
|
|
1,967,071 |
|
Preferred shares outstanding |
|
|
362,507 |
|
|
|
362,507 |
|
|
|
1,760,578 |
|
|
|
|
(1) |
|
Amounts represent loans for which Huntington has elected the fair value option. |
|
(2) |
|
Amounts represent certain assets and liabilities of a consolidated VIE for which Huntington has
elected the fair value option. |
See Notes to Unaudited Condensed Consolidated Financial Statements
76
Huntington Bancshares Incorporated
Condensed Consolidated Statements of Income
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
(dollar amounts in thousands, except per share amounts) |
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
Interest and fee income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and leases |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable |
|
$ |
430,032 |
|
|
$ |
458,792 |
|
|
$ |
1,292,259 |
|
|
$ |
1,405,181 |
|
Tax-exempt |
|
|
2,756 |
|
|
|
1,806 |
|
|
|
8,487 |
|
|
|
3,821 |
|
Available-for-sale and other securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable |
|
|
47,947 |
|
|
|
61,438 |
|
|
|
160,201 |
|
|
|
180,039 |
|
Tax-exempt |
|
|
2,321 |
|
|
|
2,725 |
|
|
|
7,517 |
|
|
|
8,675 |
|
Held-to-maturity securities taxable |
|
|
5,059 |
|
|
|
|
|
|
|
6,346 |
|
|
|
|
|
Other |
|
|
2,881 |
|
|
|
9,908 |
|
|
|
10,200 |
|
|
|
19,385 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income |
|
|
490,996 |
|
|
|
534,669 |
|
|
|
1,485,010 |
|
|
|
1,617,101 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
|
64,985 |
|
|
|
103,380 |
|
|
|
209,085 |
|
|
|
346,504 |
|
Short-term borrowings |
|
|
932 |
|
|
|
945 |
|
|
|
2,737 |
|
|
|
1,936 |
|
Federal Home Loan Bank advances |
|
|
234 |
|
|
|
601 |
|
|
|
669 |
|
|
|
2,848 |
|
Subordinated notes and other long-term debt |
|
|
18,367 |
|
|
|
19,781 |
|
|
|
58,374 |
|
|
|
62,302 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense |
|
|
84,518 |
|
|
|
124,707 |
|
|
|
270,865 |
|
|
|
413,590 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
406,478 |
|
|
|
409,962 |
|
|
|
1,214,145 |
|
|
|
1,203,511 |
|
Provision for credit losses |
|
|
43,586 |
|
|
|
119,160 |
|
|
|
128,768 |
|
|
|
547,574 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for credit losses |
|
|
362,892 |
|
|
|
290,802 |
|
|
|
1,085,377 |
|
|
|
655,937 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service charges on deposit accounts |
|
|
65,184 |
|
|
|
65,932 |
|
|
|
180,183 |
|
|
|
211,205 |
|
Mortgage banking income |
|
|
12,791 |
|
|
|
52,045 |
|
|
|
59,310 |
|
|
|
122,613 |
|
Trust services income |
|
|
29,473 |
|
|
|
26,997 |
|
|
|
90,607 |
|
|
|
83,161 |
|
Electronic banking income |
|
|
32,714 |
|
|
|
28,090 |
|
|
|
93,228 |
|
|
|
81,334 |
|
Insurance income |
|
|
17,220 |
|
|
|
19,801 |
|
|
|
51,564 |
|
|
|
56,735 |
|
Brokerage income |
|
|
20,349 |
|
|
|
16,575 |
|
|
|
61,679 |
|
|
|
51,901 |
|
Bank owned life insurance income |
|
|
15,644 |
|
|
|
14,091 |
|
|
|
48,065 |
|
|
|
44,953 |
|
Automobile operating lease income |
|
|
5,890 |
|
|
|
11,356 |
|
|
|
22,044 |
|
|
|
35,501 |
|
Net gains on sales of investment securities |
|
|
14 |
|
|
|
2,421 |
|
|
|
5,908 |
|
|
|
11,831 |
|
Impairment losses on investment securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment recoveries (losses) on investment securities |
|
|
(5,726 |
) |
|
|
27,775 |
|
|
|
5,368 |
|
|
|
24,568 |
|
Noncredit-related (recoveries) losses on securities not expected
to be sold (recognized in other comprehensive income) |
|
|
4,362 |
|
|
|
(30,492 |
) |
|
|
(11,079 |
) |
|
|
(36,570 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net impairment losses on investment securities |
|
|
(1,364 |
) |
|
|
(2,717 |
) |
|
|
(5,711 |
) |
|
|
(12,002 |
) |
Other income |
|
|
60,644 |
|
|
|
32,552 |
|
|
|
144,394 |
|
|
|
90,406 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest income |
|
|
258,559 |
|
|
|
267,143 |
|
|
|
751,271 |
|
|
|
777,638 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personnel costs |
|
|
226,835 |
|
|
|
208,272 |
|
|
|
664,433 |
|
|
|
586,789 |
|
Outside data processing and other services |
|
|
49,602 |
|
|
|
38,553 |
|
|
|
133,773 |
|
|
|
118,305 |
|
Net occupancy |
|
|
26,967 |
|
|
|
26,718 |
|
|
|
82,288 |
|
|
|
81,192 |
|
Deposit and other insurance expense |
|
|
17,492 |
|
|
|
23,406 |
|
|
|
59,211 |
|
|
|
74,228 |
|
Professional services |
|
|
20,281 |
|
|
|
20,672 |
|
|
|
53,826 |
|
|
|
67,757 |
|
Equipment |
|
|
22,262 |
|
|
|
21,651 |
|
|
|
66,660 |
|
|
|
63,860 |
|
Marketing |
|
|
22,251 |
|
|
|
20,921 |
|
|
|
59,248 |
|
|
|
49,756 |
|
Amortization of intangibles |
|
|
13,387 |
|
|
|
15,145 |
|
|
|
40,143 |
|
|
|
45,432 |
|
OREO and foreclosure expense |
|
|
4,668 |
|
|
|
12,047 |
|
|
|
12,997 |
|
|
|
28,547 |
|
Automobile operating lease expense |
|
|
4,386 |
|
|
|
9,159 |
|
|
|
16,656 |
|
|
|
28,892 |
|
Other expense |
|
|
30,987 |
|
|
|
30,765 |
|
|
|
108,991 |
|
|
|
94,455 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest expense |
|
|
439,118 |
|
|
|
427,309 |
|
|
|
1,298,226 |
|
|
|
1,239,213 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
182,333 |
|
|
|
130,636 |
|
|
|
538,422 |
|
|
|
194,362 |
|
Provision for income taxes |
|
|
38,942 |
|
|
|
29,690 |
|
|
|
122,667 |
|
|
|
4,915 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
143,391 |
|
|
|
100,946 |
|
|
|
415,755 |
|
|
|
189,447 |
|
Dividends on preferred shares |
|
|
7,703 |
|
|
|
29,495 |
|
|
|
23,110 |
|
|
|
88,278 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income applicable to common shares |
|
$ |
135,688 |
|
|
$ |
71,451 |
|
|
$ |
392,645 |
|
|
$ |
101,169 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average common shares basic |
|
|
863,911 |
|
|
|
716,911 |
|
|
|
863,542 |
|
|
|
716,604 |
|
Average common shares diluted |
|
|
867,633 |
|
|
|
719,567 |
|
|
|
867,446 |
|
|
|
719,182 |
|
Per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income basic |
|
$ |
0.16 |
|
|
$ |
0.10 |
|
|
$ |
0.45 |
|
|
$ |
0.14 |
|
Net income diluted |
|
|
0.16 |
|
|
|
0.10 |
|
|
|
0.45 |
|
|
|
0.14 |
|
Cash dividends declared |
|
|
0.04 |
|
|
|
0.01 |
|
|
|
0.06 |
|
|
|
0.03 |
|
See Notes to Unaudited Condensed Consolidated Financial Statements
77
Huntington Bancshares Incorporated
Condensed Consolidated Statements of Changes in Shareholders Equity
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
Preferred Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
Retained |
|
|
|
|
|
|
Series B |
|
|
Series A |
|
|
Common Stock |
|
|
Capital |
|
|
Treasury Stock |
|
|
Comprehensive |
|
|
Earnings |
|
|
|
|
(All amounts in thousands, except for per share amounts) |
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Surplus |
|
|
Shares |
|
|
Amount |
|
|
Loss |
|
|
(Deficit) |
|
|
Total |
|
Nine Months Ended September 30, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of period |
|
|
1,398 |
|
|
$ |
1,325,008 |
|
|
|
363 |
|
|
$ |
362,507 |
|
|
|
716,741 |
|
|
$ |
7,167 |
|
|
$ |
6,731,796 |
|
|
|
(980 |
) |
|
$ |
(11,465 |
) |
|
$ |
(156,985 |
) |
|
$ |
(2,922,026 |
) |
|
$ |
5,336,002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative effect of change in accounting
principle for consolidation of variable
interest entities, net of tax of
$3,980 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,249 |
) |
|
|
(3,462 |
) |
|
|
(7,711 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of period as adjusted |
|
|
1,398 |
|
|
$ |
1,325,008 |
|
|
|
363 |
|
|
$ |
362,507 |
|
|
|
716,741 |
|
|
$ |
7,167 |
|
|
$ |
6,731,796 |
|
|
|
(980 |
) |
|
$ |
(11,465 |
) |
|
|
(161,234 |
) |
|
$ |
(2,925,488 |
) |
|
$ |
5,328,291 |
|
Comprehensive Income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
189,447 |
|
|
|
189,447 |
|
Noncredit-related impairment recoveries
(losses) on debt securities not expected
to be sold |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,771 |
|
|
|
|
|
|
|
23,771 |
|
Unrealized net gains (losses) on
available-for-sale and other
securities
arising during the period, net of
reclassification for net realized
gains |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
88,428 |
|
|
|
|
|
|
|
88,428 |
|
Unrealized gains (losses) on cash flow
hedging derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,141 |
|
|
|
|
|
|
|
17,141 |
|
Change in accumulated unrealized
losses for pension and other post-
retirement obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,498 |
|
|
|
|
|
|
|
3,498 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
322,285 |
|
Issuance of common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
537 |
|
|
|
5 |
|
|
|
2,264 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,269 |
|
Preferred Series B stock discount accretion |
|
|
|
|
|
|
12,741 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12,741 |
) |
|
|
|
|
Cash dividends declared: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common ($0.03 per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(21,505 |
) |
|
|
(21,505 |
) |
Preferred Series B ($37.50 per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(52,427 |
) |
|
|
(52,427 |
) |
Preferred Series A ($63.75 per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(23,110 |
) |
|
|
(23,110 |
) |
Recognition of the fair value of
share-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3 |
|
|
|
11,410 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,413 |
|
Other share-based compensation activity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
737 |
|
|
|
5 |
|
|
|
457 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(525 |
) |
|
|
(63 |
) |
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,203 |
) |
|
|
97 |
|
|
|
2,496 |
|
|
|
|
|
|
|
(43 |
) |
|
|
250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of period |
|
|
1,398 |
|
|
$ |
1,337,749 |
|
|
|
363 |
|
|
$ |
362,507 |
|
|
|
718,015 |
|
|
$ |
7,180 |
|
|
$ |
6,743,724 |
|
|
|
(883 |
) |
|
$ |
(8,969 |
) |
|
$ |
(28,396 |
) |
|
$ |
(2,846,392 |
) |
|
$ |
5,567,403 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of period |
|
|
|
|
|
$ |
|
|
|
|
363 |
|
|
$ |
362,507 |
|
|
|
864,195 |
|
|
$ |
8,642 |
|
|
$ |
7,630,093 |
|
|
|
(876 |
) |
|
$ |
(8,771 |
) |
|
$ |
(197,496 |
) |
|
$ |
(2,814,433 |
) |
|
$ |
4,980,542 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
415,755 |
|
|
|
415,755 |
|
Noncredit-related impairment recoveries
(losses) on debt securities not expected
to be sold |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,201 |
|
|
|
|
|
|
|
7,201 |
|
Unrealized net gains (losses) on
available-for-sale and other
securities
arising during the period, net of
reclassification for net realized
gains |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
85,906 |
|
|
|
|
|
|
|
85,906 |
|
Unrealized gains (losses) on cash flow
hedging derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,183 |
|
|
|
|
|
|
|
16,183 |
|
Change in accumulated unrealized
losses for pension and other post-
retirement obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,802 |
|
|
|
|
|
|
|
7,802 |
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
532,847 |
|
Repurchase of warrants convertible to
common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(49,100 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(49,100 |
) |
Cash dividends declared: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common ($0.06 per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(51,869 |
) |
|
|
(51,869 |
) |
Preferred Series A ($63.75 per share) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(23,110 |
) |
|
|
(23,110 |
) |
Recognition of the fair value of
share-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,986 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,986 |
|
Other share-based compensation activity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,010 |
|
|
|
10 |
|
|
|
(552 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(279 |
) |
|
|
(821 |
) |
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(337 |
) |
|
|
(254 |
) |
|
|
(1,390 |
) |
|
|
|
|
|
|
(269 |
) |
|
|
(1,996 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of period |
|
|
|
|
|
$ |
|
|
|
|
363 |
|
|
$ |
362,507 |
|
|
|
865,205 |
|
|
$ |
8,652 |
|
|
$ |
7,594,090 |
|
|
|
(1,130 |
) |
|
$ |
(10,161 |
) |
|
$ |
(80,404 |
) |
|
$ |
(2,474,205 |
) |
|
$ |
5,400,479 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Unaudited Condensed Consolidated Financial Statements
78
Huntington Bancshares Incorporated
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
|
|
September 30, |
|
(dollar amounts in thousands) |
|
2011 |
|
|
2010 |
|
Operating activities |
|
|
|
|
|
|
|
|
Net income |
|
$ |
415,755 |
|
|
$ |
189,447 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Provision for credit losses |
|
|
128,768 |
|
|
|
547,574 |
|
Depreciation and amortization |
|
|
213,084 |
|
|
|
209,070 |
|
Change in current and deferred income taxes |
|
|
54,280 |
|
|
|
175,715 |
|
Net sales (purchases) of trading account securities |
|
|
99,693 |
|
|
|
(55,020 |
) |
Originations of loans held for sale |
|
|
(1,697,186 |
) |
|
|
(2,468,265 |
) |
Principal payments on and proceeds from loans held for sale |
|
|
2,121,284 |
|
|
|
2,213,303 |
|
Securities (gains) losses |
|
|
(197 |
) |
|
|
171 |
|
Other, net |
|
|
51,233 |
|
|
|
54,121 |
|
|
|
|
|
|
|
|
Net cash provided by (used for) operating activities |
|
|
1,386,714 |
|
|
|
866,116 |
|
|
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
|
|
|
Increase (decrease) in interest bearing deposits in banks |
|
|
45,052 |
|
|
|
22,754 |
|
Proceeds from: |
|
|
|
|
|
|
|
|
Maturities and calls of available-for-sale and other securities |
|
|
1,596,552 |
|
|
|
2,639,403 |
|
Maturities of held-to-maturity securities |
|
|
14,238 |
|
|
|
|
|
Sales of available-for-sale and other securities |
|
|
2,804,769 |
|
|
|
3,120,777 |
|
Purchases of available-for-sale and other securities |
|
|
(3,578,931 |
) |
|
|
(6,610,248 |
) |
Purchases of held-to-maturity securities |
|
|
(204,188 |
) |
|
|
|
|
Net proceeds from sales of loans |
|
|
1,493,056 |
|
|
|
685,592 |
|
Net loan and lease activity, excluding sales |
|
|
(2,725,678 |
) |
|
|
(1,744,418 |
) |
Proceeds from sale of operating lease assets |
|
|
50,461 |
|
|
|
17,585 |
|
Purchases of premises and equipment |
|
|
(102,431 |
) |
|
|
(45,951 |
) |
Proceeds from sales of other real estate |
|
|
48,901 |
|
|
|
78,073 |
|
Other, net |
|
|
(59,763 |
) |
|
|
1,917 |
|
|
|
|
|
|
|
|
Net cash provided by (used for) investing activities |
|
|
(617,962 |
) |
|
|
(1,834,516 |
) |
|
|
|
|
|
|
|
Financing activities |
|
|
|
|
|
|
|
|
Increase (decrease) in deposits |
|
|
1,358,146 |
|
|
|
563,474 |
|
Increase (decrease) in short-term borrowings |
|
|
193,901 |
|
|
|
893,501 |
|
Maturity/redemption of subordinated notes |
|
|
(5,000 |
) |
|
|
(83,870 |
) |
Proceeds from Federal Home Loan Bank advances |
|
|
200,000 |
|
|
|
450,000 |
|
Maturity/redemption of Federal Home Loan Bank advances |
|
|
(358,509 |
) |
|
|
(595,536 |
) |
Maturity/redemption of long-term debt |
|
|
(714,942 |
) |
|
|
(544,250 |
) |
Repurchase of Warrant to the Treasury |
|
|
(49,100 |
) |
|
|
|
|
Dividends paid on preferred stock |
|
|
(23,110 |
) |
|
|
(75,537 |
) |
Dividends paid on common stock |
|
|
(27,042 |
) |
|
|
(21,437 |
) |
Other, net |
|
|
(708 |
) |
|
|
(63 |
) |
|
|
|
|
|
|
|
Net cash provided by (used for) financing activities |
|
|
573,636 |
|
|
|
586,282 |
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents |
|
|
1,342,388 |
|
|
|
(382,118 |
) |
Cash and cash equivalents at beginning of period |
|
|
847,888 |
|
|
|
1,521,344 |
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
2,190,276 |
|
|
$ |
1,139,226 |
|
|
|
|
|
|
|
|
Supplemental disclosures: |
|
|
|
|
|
|
|
|
Income taxes paid (refunded) |
|
$ |
68,366 |
|
|
$ |
(148,518 |
) |
Interest paid |
|
|
276,915 |
|
|
|
435,272 |
|
Non-cash activities |
|
|
|
|
|
|
|
|
Dividends accrued, paid in subsequent quarter |
|
|
40,742 |
|
|
|
23,373 |
|
See Notes to Unaudited Condensed Consolidated Financial Statements.
79
Huntington Bancshares Incorporated
Notes to Unaudited Condensed Consolidated Financial Statements
1. BASIS OF PRESENTATION
The accompanying Unaudited Condensed Consolidated Financial Statements of Huntington reflect
all adjustments consisting of normal recurring accruals which are, in the opinion of Management,
necessary for a fair presentation of the consolidated financial position, the results of
operations, and cash flows for the periods presented. These Unaudited Condensed Consolidated
Financial Statements have been prepared according to the rules and regulations of the SEC and,
therefore, certain information and footnote disclosures normally included in financial statements
prepared in accordance with GAAP have been omitted. The Notes to Consolidated Financial Statements
appearing in Huntingtons 2010 Form 10-K, which include descriptions of significant accounting
policies, as updated by the information contained in this report, should be read in conjunction
with these interim financial statements.
For statement of cash flows purposes, cash and cash equivalents are defined as the sum of
Cash and due from banks which includes amounts on deposit with the Federal Reserve and Federal
funds sold and securities purchased under resale agreements.
In conjunction with applicable accounting standards, all material subsequent events have been
either recognized in the Unaudited Condensed Consolidated Financial Statements or disclosed in the
Notes to Unaudited Condensed Consolidated Financial Statements.
2. ACCOUNTING STANDARDS UPDATE
Accounting Standards Update (ASU) 2010-6 Fair Value Measurements and Disclosures (Topic 820):
Improving Disclosures about Fair Value Measurements. The ASU amends Subtopic 820-10 with new
disclosure requirements and clarification of existing disclosure requirements. New disclosures
include the amount of significant transfers in and out of levels 1 and 2 fair value measurements
and the reasons for the transfers. In addition, the reconciliation for level 3 activity is
required on a gross rather than net basis. The ASU provides additional guidance related to the
level of disaggregation in determining classes of assets and liabilities and disclosures about
inputs and valuation techniques. The amendments are effective for annual or interim reporting
periods beginning after December 15, 2009, except for the requirement to provide the reconciliation
for level 3 activity on a gross basis which is effective for annual or interim reporting periods
beginning after December 15, 2010 (See Note 13).
ASU 2010-20 Receivables (Topic 310): Disclosures about the Credit Quality of Financing
Receivables and the Allowance for Credit Losses. The ASU requires expanded disclosure about the
credit quality of the loan portfolio in the notes to financial statements, such as aging
information and credit quality indicators. Both new and existing disclosures must be disaggregated
by portfolio segment or class. The disaggregation of information is based on how the lender
develops its ACL and how it manages its credit exposure. The disclosures related to period-end
balances are effective for annual or interim reporting periods ending after December 15, 2010, and
were first included in the 2010 Form 10-K. The disclosures of activity that occurs during the
reporting period are effective for annual or interim reporting periods beginning after December 15,
2010 (See Note 3).
ASU 2011-02 Receivables (Topic 310), A Creditors Determination of Whether a Restructuring Is a
Troubled Debt Restructuring. The ASU amends Subtopic 310-40 to clarify existing guidance related to
a creditors evaluation of whether a restructuring of debt is considered a TDR. The amendments add
additional clarity in determining whether a creditor has granted a concession and whether a debtor
is experiencing financial difficulties. The updated guidance and related disclosure requirements
are effective for financial statements issued for the first interim or annual period beginning on
or after June 15, 2011, and should be applied retroactively to the beginning of the annual period
of adoption (See Note 3). The amendment did not have a material impact on Huntingtons Condensed
Consolidated Financial Statements.
ASU 2011-03 Transfers and Servicing (Topic 860), Reconsideration of Effective Control for
Repurchase Agreements. The ASU amends Topic 860 to remove from the assessment of effective control
(1) the criterion requiring the transferor to have the ability to repurchase or redeem the
financial assets on substantially the agreed terms, even in the event of default by the transferee,
and (2) the collateral maintenance implementation guidance related to that criterion. The updated
guidance and requirements are effective for financial statements issued for the first interim or
annual period beginning after December 15, 2011, and should be applied prospectively to
transactions or modifications of existing transactions that occur on or after the effective date.
Early adoption is not permitted. Management does not believe the amendment will have a material
impact on Huntingtons Condensed Consolidated Financial Statements.
80
ASU 2011-04 Fair Value Measurement (Topic 820), Amendments to Achieve Common Fair Value
Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. The ASU amends Topic 820 to add
both additional clarifications to existing fair value measurement and disclosure requirements and
changes to existing principles and disclosure guidance. Clarifications were made to the relevancy
of the highest and best use valuation concept, measurement of an instrument classified in an
entitys
shareholders equity and disclosure of quantitative information about the unobservable inputs for
level 3 fair value measurements. Changes to existing principles and disclosures included
measurement of financial instruments managed within a portfolio, the application of premiums and
discounts in fair value measurement, and additional disclosures related to fair value measurements.
The updated guidance and requirements are effective for financial statements issued for the first
interim or annual period beginning after December 15, 2011, and should be applied prospectively.
Early adoption is permitted. Management does not believe the principle amendments will have a
material impact on Huntingtons Condensed Consolidated Financial Statements.
ASU 2011-05 Other Comprehensive Income (Topic 220), Presentation of Comprehensive Income. The
ASU amends Topic 220 to require an entity the option to present the total of comprehensive income,
the components of net income, and the components of other comprehensive income either in a single
continuous statement of comprehensive income or in two separate but consecutive statements. An
entity is also required to present on the face of the financial statements reclassification
adjustments for items that are reclassified from other comprehensive income to net income in the
statement(s) where the components of net income and the components of other comprehensive income
are presented. The amendments do not change items that must be reported in other comprehensive
income or when an item of other comprehensive income must be reclassified to net income, only the
format for presentation. The updated guidance and requirements are effective for financial
statements issued for the fiscal years, and the interim periods within those years, beginning after
December 15, 2011. The amendments should be applied retrospectively. On October 21, 2011, the
FASB exposed a proposed deferral of the requirement that companies present reclassification
adjustments for each component of OCI in both net income and OCI on the face of the financial
statements. Early adoption is permitted. Management is currently evaluating the impact of the
guidance on Huntingtons Condensed Consolidated Financial Statements.
ASU 2011-08 IntangiblesGoodwill and Other (Topic 350): Testing Goodwill for Impairment. The
ASU amends Topic 350 to permit an entity the option to first assess qualitative factors to
determine whether it is more likely than not (50% threshold) that the fair value of a reporting
unit is less than its carrying amount as a basis for determining whether it is necessary to perform
the two-step goodwill impairment test. The amendments are effective for annual and interim
goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early
adoption is permitted, including for annual and interim goodwill impairment tests performed as of a
date before September 15, 2011, if an entitys financial statements for the most recent annual or
interim period have not yet been issued. Management has decided to adopt the ASU as of September
30, 2011 (See Note 7).
3. LOANS / LEASES AND ALLOWANCE FOR CREDIT LOSSES
Loan and Lease Portfolio Composition
The following table provides a detail listing of Huntingtons loan and lease portfolio at
September 30, 2011, December 31, 2010, and September 30, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
December 31, |
|
|
September 30, |
|
(dollar amounts in thousands) |
|
2011 |
|
|
2010 |
|
|
2010 |
|
Loans and leases: |
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial |
|
$ |
13,938,885 |
|
|
$ |
13,063,293 |
|
|
$ |
12,424,529 |
|
Commercial real estate |
|
|
5,934,444 |
|
|
|
6,651,156 |
|
|
|
6,912,573 |
|
Automobile |
|
|
5,558,415 |
|
|
|
5,614,711 |
|
|
|
5,385,196 |
|
Home equity |
|
|
8,078,887 |
|
|
|
7,713,154 |
|
|
|
7,689,420 |
|
Residential mortgage |
|
|
4,986,023 |
|
|
|
4,500,366 |
|
|
|
4,511,272 |
|
Other consumer |
|
|
515,240 |
|
|
|
563,827 |
|
|
|
577,597 |
|
|
|
|
|
|
|
|
|
|
|
Loans and leases |
|
|
39,011,894 |
|
|
|
38,106,507 |
|
|
|
37,500,587 |
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan and lease losses |
|
|
(1,019,710 |
) |
|
|
(1,249,008 |
) |
|
|
(1,336,352 |
) |
|
|
|
|
|
|
|
|
|
|
Net loans and leases |
|
$ |
37,992,184 |
|
|
$ |
36,857,499 |
|
|
$ |
36,164,235 |
|
|
|
|
|
|
|
|
|
|
|
As shown in the table above, the primary loan and lease portfolios are: C&I, CRE, automobile,
home equity, residential mortgage, and other consumer. For ACL purposes, these portfolios are
further disaggregated into classes. The classes within the C&I portfolio are: owner occupied and
other C&I. The classes within the CRE portfolio are: retail properties, multi family, office,
industrial and warehouse, and other CRE. The classes within the home equity portfolio are:
first-lien loans and second-lien loans. The automobile, residential mortgage, and other consumer
portfolios are not further segregated into classes.
Pledged Loans and Leases
The Bank has access to the Federal Reserves discount window and advances from the FHLB
Cincinnati. As of September 30, 2011, these borrowings and advances are secured by $18.1 billion
of loans and securities.
81
Loan Purchases and Sales
The following table summarizes significant portfolio loan purchase and sale activity for the
nine-month period ended September 30, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
|
Commercial |
|
|
|
|
|
|
Home |
|
|
Residential |
|
|
Other |
|
|
|
|
(dollar amounts in thousands) |
|
and Industrial |
|
|
Real Estate |
|
|
Automobile |
|
|
Equity |
|
|
Mortgage |
|
|
Consumer |
|
|
Total |
|
Portfolio loans purchased during
the: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three-month period
ended September 30,
2011 |
|
$ |
|
|
|
$ |
|
|
|
$ |
59,578 |
(1) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
59,578 |
|
Nine-month period
ended September 30,
2011 |
|
|
|
|
|
|
|
|
|
|
59,578 |
(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
59,578 |
|
|
|
|
|
|
|
|
|
|
Portfolio loans sold or transferred
to loans held for sale during the: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three-month period
ended September 30,
2011 |
|
|
48,530 |
|
|
|
|
|
|
|
1,000,033 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,048,563 |
|
Nine-month period
ended September 30,
2011 |
|
|
204,012 |
|
|
|
56,123 |
|
|
|
1,000,033 |
|
|
|
|
|
|
|
170,757 |
|
|
|
|
|
|
|
1,430,925 |
|
|
|
|
(1) |
|
Reflected the purchase of $59.6 million of automobile loans as a result of exercising a clean-up call option related to loans previously
sold under Huntingtons automobile loan sale program. |
NALs and Past Due Loans
Loans are considered past due when the contractual amounts due with respect to principal and
interest are not received within 30 days of the contractual due date.
Any loan in any portfolio may be placed on nonaccrual status prior to the policies described
below when collection of principal or interest is in doubt.
All classes within the C&I and CRE portfolios are placed on nonaccrual status at no greater
than 90-days past due. Residential mortgage loans are placed on nonaccrual status at 150-days past
due, with the exception of residential mortgages guaranteed by government organizations which
continue to accrue interest. First-lien and second-lien home equity portfolio are placed on
nonaccrual status at 150-days past due and 120-days past due, respectively. Automobile and other
consumer loans are not placed on nonaccrual status, but are generally charged-off when the loan is
120-days past due. For all classes within all loan portfolios, when a loan is placed on nonaccrual
status, any accrued interest income is reversed with current year accruals charged to interest
income, and prior year amounts charged-off as a credit loss.
For all classes within all loan portfolios, cash receipts received on NALs are applied
entirely against principal until the loan or lease has been collected in full, after which time any
additional cash receipts are recognized as interest income.
Regarding all classes within all portfolios, when, in Managements judgment, the borrowers
ability to make required principal and interest payments resumes and collectability is no longer in
doubt, and the loan has been brought current with respect to principal and interest, the loan or
lease is returned to accrual status. For these loans that have been returned to accrual status,
cash receipts are applied according to the contractual terms of the loan.
82
The following table presents NALs by loan class:
|
|
|
|
|
|
|
|
|
|
|
2011 |
|
|
2010 |
|
(dollar amounts in thousands) |
|
September 30, |
|
|
December 31, |
|
|
|
|
|
|
|
|
Commercial and industrial: |
|
|
|
|
|
|
|
|
Owner occupied |
|
$ |
98,998 |
|
|
$ |
138,822 |
|
Other commercial and industrial |
|
|
110,634 |
|
|
|
207,898 |
|
|
|
|
|
|
|
|
Total commercial and industrial |
|
|
209,632 |
|
|
|
346,720 |
|
|
|
|
|
|
|
|
|
|
Commercial real estate: |
|
|
|
|
|
|
|
|
Retail properties |
|
|
51,342 |
|
|
|
96,644 |
|
Multi family |
|
|
38,301 |
|
|
|
44,819 |
|
Office |
|
|
37,010 |
|
|
|
47,950 |
|
Industrial and warehouse |
|
|
49,102 |
|
|
|
39,770 |
|
Other commercial real estate |
|
|
81,331 |
|
|
|
134,509 |
|
|
|
|
|
|
|
|
Total commercial real estate |
|
|
257,086 |
|
|
|
363,692 |
|
|
|
|
|
|
|
|
|
|
Automobile |
|
|
|
|
|
|
|
|
Home equity: |
|
|
|
|
|
|
|
|
Secured by first-lien |
|
|
17,771 |
|
|
|
10,658 |
|
Secured by second-lien |
|
|
19,385 |
|
|
|
11,868 |
|
Residential mortgage |
|
|
61,129 |
|
|
|
45,010 |
|
Other consumer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total nonaccrual loans |
|
$ |
565,003 |
|
|
$ |
777,948 |
|
|
|
|
|
|
|
|
83
The following table presents an aging analysis of loans and leases, including past due loans,
by loan class: (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90 or more |
|
|
|
Past Due |
|
|
|
|
|
|
Total Loans |
|
|
days past due |
|
(dollar amounts in thousands) |
|
30-59 Days |
|
|
60-89 Days |
|
|
90 or more days |
|
|
Total |
|
|
Current |
|
|
and Leases |
|
|
and accruing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied |
|
$ |
16,165 |
|
|
$ |
7,883 |
|
|
$ |
63,265 |
|
|
$ |
87,313 |
|
|
$ |
3,890,718 |
|
|
$ |
3,978,031 |
|
|
$ |
|
|
Other commercial and
industrial |
|
|
16,426 |
|
|
|
7,776 |
|
|
|
63,410 |
|
|
|
87,612 |
|
|
|
9,873,242 |
|
|
|
9,960,854 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial and industrial |
|
$ |
32,591 |
|
|
$ |
15,659 |
|
|
$ |
126,675 |
|
|
$ |
174,925 |
|
|
$ |
13,763,960 |
|
|
$ |
13,938,885 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail properties |
|
$ |
9,160 |
|
|
$ |
8,919 |
|
|
$ |
33,148 |
|
|
$ |
51,227 |
|
|
$ |
1,597,313 |
|
|
$ |
1,648,540 |
|
|
$ |
|
|
Multi family |
|
|
7,884 |
|
|
|
1,181 |
|
|
|
27,229 |
|
|
|
36,294 |
|
|
|
968,020 |
|
|
|
1,004,314 |
|
|
|
|
|
Office |
|
|
1,252 |
|
|
|
706 |
|
|
|
31,729 |
|
|
|
33,687 |
|
|
|
977,554 |
|
|
|
1,011,241 |
|
|
|
|
|
Industrial and
warehouse |
|
|
2,775 |
|
|
|
1,175 |
|
|
|
25,384 |
|
|
|
29,334 |
|
|
|
704,663 |
|
|
|
733,997 |
|
|
|
|
|
Other commercial
real estate |
|
|
12,862 |
|
|
|
13,166 |
|
|
|
59,853 |
|
|
|
85,881 |
|
|
|
1,450,471 |
|
|
|
1,536,352 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial real estate |
|
$ |
33,933 |
|
|
$ |
25,147 |
|
|
$ |
177,343 |
|
|
$ |
236,423 |
|
|
$ |
5,698,021 |
|
|
$ |
5,934,444 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automobile |
|
$ |
38,866 |
|
|
|
9,699 |
|
|
$ |
5,722 |
|
|
$ |
54,287 |
|
|
$ |
5,504,128 |
|
|
$ |
5,558,415 |
|
|
$ |
5,722 |
|
Home equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured by first-lien |
|
|
20,043 |
|
|
|
8,972 |
|
|
|
27,333 |
|
|
|
56,348 |
|
|
|
3,532,416 |
|
|
|
3,588,764 |
|
|
|
9,561 |
|
Secured by
second-lien |
|
|
29,642 |
|
|
|
15,108 |
|
|
|
30,243 |
|
|
|
74,993 |
|
|
|
4,415,130 |
|
|
|
4,490,123 |
|
|
|
10,859 |
|
Residential mortgage |
|
|
144,074 |
|
|
|
46,791 |
|
|
|
172,435 |
|
|
|
363,300 |
|
|
|
4,622,723 |
|
|
|
4,986,023 |
|
|
|
117,263 |
(2) |
Other consumer |
|
|
6,455 |
|
|
|
1,972 |
|
|
|
2,033 |
|
|
|
10,460 |
|
|
|
504,780 |
|
|
|
515,240 |
|
|
|
2,033 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90 or more |
|
|
|
Past Due |
|
|
|
|
|
|
Total Loans |
|
|
days past due |
|
(dollar amounts in thousands) |
|
30-59 Days |
|
|
60-89 Days |
|
|
90 or more days |
|
|
Total |
|
|
Current |
|
|
and Leases |
|
|
and accruing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied |
|
$ |
16,393 |
|
|
$ |
9,084 |
|
|
$ |
80,114 |
|
|
$ |
105,591 |
|
|
$ |
3,717,872 |
|
|
$ |
3,823,463 |
|
|
$ |
|
|
Other commercial and
industrial |
|
|
34,723 |
|
|
|
35,698 |
|
|
|
110,491 |
|
|
|
180,912 |
|
|
|
9,058,918 |
|
|
|
9,239,830 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial and industrial |
|
$ |
51,116 |
|
|
$ |
44,782 |
|
|
$ |
190,605 |
|
|
$ |
286,503 |
|
|
$ |
12,776,790 |
|
|
$ |
13,063,293 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail properties |
|
$ |
23,726 |
|
|
$ |
694 |
|
|
$ |
72,856 |
|
|
$ |
97,276 |
|
|
$ |
1,664,941 |
|
|
$ |
1,762,217 |
|
|
$ |
|
|
Multi family |
|
|
8,993 |
|
|
|
8,227 |
|
|
|
31,519 |
|
|
|
48,739 |
|
|
|
1,072,877 |
|
|
|
1,121,616 |
|
|
|
|
|
Office |
|
|
20,888 |
|
|
|
6,032 |
|
|
|
36,401 |
|
|
|
63,321 |
|
|
|
1,059,806 |
|
|
|
1,123,127 |
|
|
|
|
|
Industrial and
warehouse |
|
|
4,073 |
|
|
|
7,782 |
|
|
|
13,006 |
|
|
|
24,861 |
|
|
|
828,091 |
|
|
|
852,952 |
|
|
|
|
|
Other commercial
real estate |
|
|
45,792 |
|
|
|
9,243 |
|
|
|
91,718 |
|
|
|
146,753 |
|
|
|
1,644,491 |
|
|
|
1,791,244 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial real estate |
|
$ |
103,472 |
|
|
$ |
31,978 |
|
|
$ |
245,500 |
|
|
$ |
380,950 |
|
|
$ |
6,270,206 |
|
|
$ |
6,651,156 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automobile |
|
$ |
47,981 |
|
|
$ |
12,246 |
|
|
$ |
7,721 |
|
|
$ |
67,948 |
|
|
$ |
5,546,763 |
|
|
$ |
5,614,711 |
|
|
$ |
7,721 |
|
Home equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured by first-lien |
|
|
14,810 |
|
|
|
8,166 |
|
|
|
18,630 |
|
|
|
41,606 |
|
|
|
2,999,146 |
|
|
|
3,040,752 |
|
|
|
7,972 |
|
Secured by
second-lien |
|
|
36,488 |
|
|
|
16,551 |
|
|
|
27,392 |
|
|
|
80,431 |
|
|
|
4,591,971 |
|
|
|
4,672,402 |
|
|
|
15,525 |
|
Residential mortgage |
|
|
115,290 |
|
|
|
57,580 |
|
|
|
197,280 |
|
|
|
370,150 |
|
|
|
4,130,216 |
|
|
|
4,500,366 |
|
|
|
152,271 |
(3) |
Other consumer |
|
|
7,204 |
|
|
|
2,280 |
|
|
|
2,456 |
|
|
|
11,940 |
|
|
|
551,887 |
|
|
|
563,827 |
|
|
|
2,456 |
|
|
|
|
(1) |
|
NALs are included in this aging analysis based on the loans past due status. |
|
(2) |
|
Includes $84,413 thousand guaranteed by the U.S. government. |
|
(3) |
|
Includes $98,288 thousand guaranteed by the U.S. government. |
84
Allowance for Credit Losses
Huntington maintains two reserves, both of which reflect Managements judgment regarding the
appropriate level necessary to absorb credit losses inherent in our loan and lease portfolio: the
ALLL and the AULC. Combined, these reserves comprise the total ACL. The determination of the ACL
requires significant estimates, including the timing and amounts of expected future cash flows on
impaired loans and leases, consideration of current economic conditions, and historical loss
experience pertaining to pools of homogeneous loans and leases, all of which may be susceptible to
change.
The appropriateness of the ACL is based on Managements current judgments about the credit
quality of the loan portfolio. These judgments consider on-going evaluations of the loan and lease
portfolio, including such factors as the differing economic risks associated with each loan
category, the financial condition of specific borrowers, the level of delinquent loans, the value
of any collateral and, where applicable, the existence of any guarantees or other documented
support. Further, Management evaluates the impact of changes in interest rates and overall economic
conditions on the ability of borrowers to meet their financial obligations when quantifying our
exposure to credit losses and assessing the appropriateness of our ACL at each reporting date. In
addition to general economic conditions and the other factors described above, additional factors
also considered include: the impact of declining residential real estate values; the
diversification of CRE loans, particularly loans secured by retail properties; and the amount of
C&I loans to businesses in areas of Ohio and Michigan that have historically experienced less
economic growth compared with other footprint markets. Also, the ACL assessment includes the
on-going assessment of credit quality metrics, and a comparison of certain ACL benchmarks to
current performance. Managements determinations regarding the appropriateness of the ACL are
reviewed and approved by the Companys board of directors.
The ACL is increased through a provision for credit losses that is charged to earnings, based
on Managements quarterly evaluation of the factors previously mentioned, and is reduced by
charge-offs, net of recoveries, and the ACL associated with securitized or sold loans.
The ALLL consists of two components: (1) the transaction reserve, which includes specific
reserves related to loans considered to be impaired and loans involved in troubled debt
restructurings, and (2) the general reserve. The transaction reserve component includes both (1)
an estimate of loss based on pools of commercial and consumer loans and leases with similar
characteristics and (2) an estimate of loss based on an impairment review of each C&I and CRE loan
greater than $1 million. For the C&I and CRE portfolios, the estimate of loss based on pools of
loans and leases with similar characteristics is made by applying a PD factor and a LGD factor to
each individual loan based on a continuously updated loan grade, using a standardized loan grading
system. The PD factor and an LGD factor are determined for each loan grade using statistical
models based on historical performance data. The PD factor considers on-going reviews of the
financial performance of the specific borrower, including cash flow, debt-service coverage ratio,
earnings power, debt level, and equity position, in conjunction with an assessment of the
borrowers industry and future prospects. The LGD factor considers analysis of the type of
collateral and the relative LTV ratio. These reserve factors are developed based on credit
migration models that track historical movements of loans between loan ratings over time and a
combination of long-term average loss experience of our own portfolio and external industry data
using a 24-month calculation period.
In the case of more homogeneous portfolios, such as automobile loans, home equity loans, and
residential mortgage loans, the determination of the transaction reserve also incorporates PD and
LGD factors, however, the estimate of loss is based on pools of loans and leases with similar
characteristics. The PD factor considers current credit scores unless the account is delinquent,
in which case a higher PD factor is used. The credit score provides a basis for understanding the
borrowers past and current payment performance, and this information is used to estimate expected
losses over the subsequent 12-month period. The performance of first-lien loans ahead of our
second-lien loans is available to use as part of our updated score process. The LGD factor
considers analysis of the type of collateral and the relative LTV ratio. Credit scores, models,
analyses, and other factors used to determine both the PD and LGD factors are updated frequently to
capture the recent behavioral characteristics of the subject portfolios, as well as any changes in
loss mitigation or credit origination strategies, and adjustments to the reserve factors are made
as needed.
The general reserve consists of economic reserve and risk-profile reserve components. The
economic reserve component considers the potential impact of changing market and economic
conditions on portfolio performance. The risk-profile component considers items unique to our
structure, policies, processes, and portfolio composition, as well as qualitative measurements and
assessments of the loan portfolios including, but not limited to, management quality,
concentrations, portfolio composition, industry comparisons, and internal review functions.
The estimate for the AULC is determined using the same procedures and methodologies as used
for the ALLL. The loss factors used in the AULC are the same as the loss factors used in the ALLL
while also considering a historical utilization of unused commitments. The AULC is reflected in
accrued expenses and other liabilities in the Unaudited Condensed Consolidated Balance Sheet.
85
The following table presents ALLL and AULC activity by portfolio segment for the three-month
and nine-month periods ended September 30, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
|
Commercial |
|
|
|
|
|
|
Home |
|
|
Residential |
|
|
Other |
|
|
|
|
(dollar amounts in thousands) |
|
and Industrial |
|
|
Real Estate |
|
|
Automobile |
|
|
Equity |
|
|
Mortgage |
|
|
Consumer |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three-month period ended September 30, 2011: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ALLL balance, beginning of period |
|
$ |
281,016 |
|
|
$ |
463,874 |
|
|
$ |
55,428 |
|
|
$ |
146,444 |
|
|
$ |
98,992 |
|
|
$ |
25,372 |
|
|
$ |
1,071,126 |
|
Loan charge-offs |
|
|
(28,624 |
) |
|
|
(29,621 |
) |
|
|
(8,087 |
) |
|
|
(27,916 |
) |
|
|
(13,422 |
) |
|
|
(8,229 |
) |
|
|
(115,899 |
) |
Recoveries of loans
previously
charged-off |
|
|
10,733 |
|
|
|
5,181 |
|
|
|
4,224 |
|
|
|
1,694 |
|
|
|
1,860 |
|
|
|
1,652 |
|
|
|
25,344 |
|
Provision for loan
and lease losses |
|
|
22,129 |
|
|
|
(20,539 |
) |
|
|
4,565 |
|
|
|
19,394 |
|
|
|
11,544 |
|
|
|
8,774 |
|
|
|
45,867 |
|
Allowance for loans
sold or transferred
to loans held for
sale |
|
|
|
|
|
|
|
|
|
|
(6,728 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,728 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ALLL balance, end of period |
|
$ |
285,254 |
|
|
$ |
418,895 |
|
|
$ |
49,402 |
|
|
$ |
139,616 |
|
|
$ |
98,974 |
|
|
$ |
27,569 |
|
|
$ |
1,019,710 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AULC balance, beginning of period |
|
$ |
31,341 |
|
|
$ |
6,632 |
|
|
$ |
|
|
|
$ |
2,249 |
|
|
$ |
1 |
|
|
$ |
837 |
|
|
$ |
41,060 |
|
Provision for
unfunded loan
commitments and
letters of credit |
|
|
(882 |
) |
|
|
(1,316 |
) |
|
|
|
|
|
|
(67 |
) |
|
|
|
|
|
|
(16 |
) |
|
|
(2,281 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AULC balance, end of period |
|
$ |
30,459 |
|
|
$ |
5,316 |
|
|
$ |
|
|
|
$ |
2,182 |
|
|
$ |
1 |
|
|
$ |
821 |
|
|
$ |
38,779 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ACL balance, end of period |
|
$ |
315,713 |
|
|
$ |
424,211 |
|
|
$ |
49,402 |
|
|
$ |
141,798 |
|
|
$ |
98,975 |
|
|
$ |
28,390 |
|
|
$ |
1,058,489 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine-month period ended September 30, 2011: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ALLL balance, beginning of period |
|
$ |
340,614 |
|
|
$ |
588,251 |
|
|
$ |
49,488 |
|
|
$ |
150,630 |
|
|
$ |
93,289 |
|
|
$ |
26,736 |
|
|
$ |
1,249,008 |
|
Loan charge-offs |
|
|
(110,590 |
) |
|
|
(146,991 |
) |
|
|
(24,939 |
) |
|
|
(83,598 |
) |
|
|
(53,773 |
) |
|
|
(23,716 |
) |
|
|
(443,607 |
) |
Recoveries of loans
previously
charged-off |
|
|
31,804 |
|
|
|
27,273 |
|
|
|
14,109 |
|
|
|
5,220 |
|
|
|
6,824 |
|
|
|
5,205 |
|
|
|
90,435 |
|
Provision for loan
and lease losses |
|
|
23,426 |
|
|
|
(49,638 |
) |
|
|
17,472 |
|
|
|
67,364 |
|
|
|
54,148 |
|
|
|
19,344 |
|
|
|
132,116 |
|
Allowance for loans
sold or transferred
to loans held for
sale |
|
|
|
|
|
|
|
|
|
|
(6,728 |
) |
|
|
|
|
|
|
(1,514 |
) |
|
|
|
|
|
|
(8,242 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ALLL balance, end of period |
|
$ |
285,254 |
|
|
$ |
418,895 |
|
|
$ |
49,402 |
|
|
$ |
139,616 |
|
|
$ |
98,974 |
|
|
$ |
27,569 |
|
|
$ |
1,019,710 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AULC balance, beginning of period |
|
$ |
32,726 |
|
|
$ |
6,158 |
|
|
$ |
|
|
|
$ |
2,348 |
|
|
$ |
1 |
|
|
$ |
894 |
|
|
$ |
42,127 |
|
Provision for
unfunded loan
commitments and
letters of credit |
|
|
(2,267 |
) |
|
|
(842 |
) |
|
|
|
|
|
|
(166 |
) |
|
|
|
|
|
|
(73 |
) |
|
|
(3,348 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AULC balance, end of period |
|
$ |
30,459 |
|
|
$ |
5,316 |
|
|
$ |
|
|
|
$ |
2,182 |
|
|
$ |
1 |
|
|
$ |
821 |
|
|
$ |
38,779 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ACL balance, end of period |
|
$ |
315,713 |
|
|
$ |
424,211 |
|
|
$ |
49,402 |
|
|
$ |
141,798 |
|
|
$ |
98,975 |
|
|
$ |
28,390 |
|
|
$ |
1,058,489 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Any loan in any portfolio may be charged-off prior to the policies described below if a loss
confirming event has occurred. Loss confirming events include, but are not limited to, bankruptcy
(unsecured), continued delinquency, foreclosure, or receipt of an asset valuation indicating a
collateral deficiency and that asset is the sole source of repayment.
C&I and CRE loans are either charged-off or written down to net realizable value at 90-days
past due. Automobile loans and other consumer loans are charged-off at 120-days past due.
First-lien and second-lien home equity loans are charged-off to the
estimated fair value of the collateral at 150-days past due and 120-days past due,
respectively. Residential mortgages are charged-off to the estimated fair value of the collateral
at 150-days past due.
86
Credit Quality Indicators
To facilitate the monitoring of credit quality for C&I and CRE loans, and for purposes of
determining an appropriate ACL level for these loans, Huntington utilizes the following categories
of credit grades:
Pass = Higher quality loans that do not fit any of the other categories described below.
OLEM = Potentially weak loans. The credit risk may be relatively minor yet represent a risk
given certain specific circumstances. If the potential weaknesses are not monitored or
mitigated, the loan may weaken or inadequately protect Huntingtons position in the future.
Substandard = Inadequately protected loans by the borrowers ability to repay, equity, and/or
the collateral pledged to secure the loan. These loans have identified weaknesses that could
hinder normal repayment or collection of the debt. It is likely Huntington will sustain some
loss if any identified weaknesses are not mitigated.
Doubtful = Loans that have all of the weaknesses inherent in those loans classified as
Substandard, with the added elements of the full collection of the loan is improbable and
that the possibility of loss is high.
The categories above, which are derived from standard regulatory rating definitions, are
assigned upon initial approval of the loan or lease and subsequently updated as appropriate.
Commercial loans categorized as OLEM, Substandard, or Doubtful are considered Criticized
loans. Commercial loans categorized as Substandard or Doubtful are also considered Classified
loans.
For all classes within all consumer loan portfolios, each loan is assigned a specific PD
factor that is generally based on the borrowers most recent credit bureau score (FICO), which we
update quarterly. A FICO credit bureau score is a credit score developed by Fair Isaac Corporation
based on data provided by the credit bureaus. The FICO credit bureau score is widely accepted as
the standard measure of consumer credit risk used by lenders, regulators, rating agencies, and
consumers. The higher the FICO credit bureau score, the higher likelihood of repayment and
therefore, an indicator of lower credit risk.
87
The following table presents loan and lease balances by credit quality indicator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2011 |
|
|
|
Credit Risk Profile by UCS classification |
|
(dollar amounts in thousands) |
|
Pass |
|
|
OLEM |
|
|
Substandard |
|
|
Doubtful |
|
|
Total |
|
Commercial and industrial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied |
|
$ |
3,531,028 |
|
|
$ |
108,665 |
|
|
$ |
337,037 |
|
|
$ |
1,301 |
|
|
$ |
3,978,031 |
|
Other commercial and
industrial |
|
|
9,318,615 |
|
|
|
204,594 |
|
|
|
432,760 |
|
|
|
4,885 |
|
|
|
9,960,854 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial and industrial |
|
$ |
12,849,643 |
|
|
$ |
313,259 |
|
|
$ |
769,797 |
|
|
$ |
6,186 |
|
|
$ |
13,938,885 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail properties |
|
$ |
1,303,839 |
|
|
$ |
133,512 |
|
|
$ |
211,189 |
|
|
$ |
|
|
|
$ |
1,648,540 |
|
Multi family |
|
|
849,886 |
|
|
|
52,630 |
|
|
|
101,548 |
|
|
|
250 |
|
|
|
1,004,314 |
|
Office |
|
|
849,981 |
|
|
|
91,098 |
|
|
|
70,034 |
|
|
|
128 |
|
|
|
1,011,241 |
|
Industrial and warehouse |
|
|
634,183 |
|
|
|
26,074 |
|
|
|
73,740 |
|
|
|
|
|
|
|
733,997 |
|
Other commercial real estate |
|
|
1,094,653 |
|
|
|
107,116 |
|
|
|
333,876 |
|
|
|
707 |
|
|
|
1,536,352 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial real estate |
|
$ |
4,732,542 |
|
|
$ |
410,430 |
|
|
$ |
790,387 |
|
|
$ |
1,085 |
|
|
$ |
5,934,444 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit Risk Profile by FICO score (1) |
|
|
|
750+ |
|
|
650-749 |
|
|
<650 |
|
|
Other (2) |
|
|
Total |
|
Automobile |
|
$ |
2,552,438 |
|
|
$ |
2,200,114 |
|
|
$ |
697,307 |
|
|
$ |
108,556 |
|
|
$ |
5,558,415 |
|
Home equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured by first-lien |
|
|
2,039,431 |
|
|
|
1,219,344 |
|
|
|
318,745 |
|
|
|
11,244 |
|
|
|
3,588,764 |
|
Secured by second-lien |
|
|
2,168,899 |
|
|
|
1,686,926 |
|
|
|
633,704 |
|
|
|
594 |
|
|
|
4,490,123 |
|
Residential mortgage |
|
|
2,301,637 |
|
|
|
1,731,554 |
|
|
|
718,477 |
|
|
|
234,355 |
|
|
|
4,986,023 |
|
Other consumer |
|
|
196,729 |
|
|
|
212,512 |
|
|
|
84,725 |
|
|
|
21,274 |
|
|
|
515,240 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010 |
|
|
|
Credit Risk Profile by UCS classification |
|
(dollar amounts in thousands) |
|
Pass |
|
|
OLEM |
|
|
Substandard |
|
|
Doubtful |
|
|
Total |
|
Commercial and industrial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied |
|
$ |
3,265,266 |
|
|
$ |
159,398 |
|
|
$ |
392,969 |
|
|
$ |
5,830 |
|
|
$ |
3,823,463 |
|
Other commercial and
industrial |
|
|
8,434,969 |
|
|
|
264,679 |
|
|
|
524,867 |
|
|
|
15,315 |
|
|
|
9,239,830 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial and industrial |
|
$ |
11,700,235 |
|
|
$ |
424,077 |
|
|
$ |
917,836 |
|
|
$ |
21,145 |
|
|
$ |
13,063,293 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail properties |
|
$ |
1,283,667 |
|
|
$ |
128,067 |
|
|
$ |
350,478 |
|
|
$ |
5 |
|
|
$ |
1,762,217 |
|
Multi family |
|
|
898,935 |
|
|
|
78,577 |
|
|
|
143,689 |
|
|
|
415 |
|
|
|
1,121,616 |
|
Office |
|
|
867,970 |
|
|
|
122,173 |
|
|
|
132,833 |
|
|
|
151 |
|
|
|
1,123,127 |
|
Industrial and warehouse |
|
|
668,452 |
|
|
|
72,177 |
|
|
|
112,323 |
|
|
|
|
|
|
|
852,952 |
|
Other commercial real estate |
|
|
1,220,708 |
|
|
|
88,288 |
|
|
|
481,136 |
|
|
|
1,112 |
|
|
|
1,791,244 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial real estate |
|
$ |
4,939,732 |
|
|
$ |
489,282 |
|
|
$ |
1,220,459 |
|
|
$ |
1,683 |
|
|
$ |
6,651,156 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit Risk Profile by FICO score (1) |
|
|
|
750+ |
|
|
650-749 |
|
|
<650 |
|
|
Other (2) |
|
|
Total |
|
Automobile |
|
$ |
2,516,130 |
|
|
$ |
2,267,363 |
|
|
$ |
724,584 |
|
|
$ |
106,634 |
|
|
$ |
5,614,711 |
|
Home equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured by first-lien |
|
|
1,643,792 |
|
|
|
1,082,143 |
|
|
|
313,961 |
|
|
|
856 |
|
|
|
3,040,752 |
|
Secured by second-lien |
|
|
2,224,545 |
|
|
|
1,768,450 |
|
|
|
678,738 |
|
|
|
669 |
|
|
|
4,672,402 |
|
Residential mortgage |
|
|
1,978,843 |
|
|
|
1,580,266 |
|
|
|
795,676 |
|
|
|
145,581 |
|
|
|
4,500,366 |
|
Other consumer |
|
|
206,952 |
|
|
|
234,558 |
|
|
|
102,254 |
|
|
|
20,063 |
|
|
|
563,827 |
|
|
|
|
(1) |
|
Reflects currently updated customer credit scores. |
|
(2) |
|
Reflects deferred fees and costs, loans in process, loans to legal entities, etc. |
88
Impaired Loans
For all classes within the C&I and CRE portfolios, all loans with an outstanding balance of $1
million or greater are evaluated on a quarterly basis for impairment. Generally, consumer loans
within any class are not individually evaluated on a regular basis for impairment.
Once a loan has been identified for an assessment of impairment, the loan is considered
impaired when, based on current information and events, it is probable that all amounts due
according to the contractual terms of the loan agreement will not be collected. This determination
requires significant judgment and use of estimates, and the eventual outcome may differ
significantly from those estimates.
When a loan in any class has been determined to be impaired, the amount of the impairment is
measured using the present value of expected future cash flows discounted at the loans effective
interest rate or, as a practical expedient, the observable market price of the loan, or the fair
value of the collateral if the loan is collateral dependent. When the present value of expected
future cash flows is used, the effective interest rate is the original contractual interest rate of
the loan adjusted for any premium or discount. When the contractual interest rate is variable, the
effective interest rate of the loan changes over time. A specific reserve is established as a
component of the ALLL when a loan has been determined to be impaired. Subsequent to the initial
measurement of impairment, if there is a significant change to the impaired loans expected future
cash flows, or if actual cash flows are significantly different from the cash flows previously
estimated, Huntington recalculates the impairment and appropriately adjusts the specific reserve.
Similarly, if Huntington measures impairment based on the observable market price of an impaired
loan or the fair value of the collateral of an impaired collateral dependent loan, Huntington will
adjust the specific reserve.
When a loan within any class is impaired, the accrual of interest income is discontinued
unless the receipt of principal and interest is no longer in doubt. Interest income on TDRs is
accrued when all principal and interest is expected to be collected under the post-modification
terms. Cash receipts received on nonaccruing impaired loans within any class are generally applied
entirely against principal until the loan has been collected in full, after which time any
additional cash receipts are recognized as interest income. Cash receipts received on accruing
impaired loans within any class are applied in the same manner as accruing loans that are not
considered impaired.
89
The following table presents summarized data for impaired loans and the related ALLL by
portfolio segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
|
Commercial |
|
|
|
|
|
|
|
|
|
|
Residential |
|
|
Other |
|
|
|
|
|
|
and Industrial |
|
|
Real Estate |
|
|
Automobile |
|
|
Home Equity |
|
|
Mortgage |
|
|
Consumer |
|
|
Total |
|
ALLL at September 30, 2011: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollar amounts in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portion of ending balance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to
loans individually
evaluated for
impairment |
|
$ |
31,249 |
|
|
$ |
61,472 |
|
|
$ |
1,344 |
|
|
$ |
1,610 |
|
|
$ |
14,757 |
|
|
$ |
311 |
|
|
$ |
110,743 |
|
Attributable to
loans collectively
evaluated for
impairment |
|
|
254,005 |
|
|
|
357,423 |
|
|
|
48,058 |
|
|
|
138,006 |
|
|
|
84,217 |
|
|
|
27,258 |
|
|
|
908,967 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total ALLL balance at September 30,
2011 |
|
$ |
285,254 |
|
|
$ |
418,895 |
|
|
$ |
49,402 |
|
|
$ |
139,616 |
|
|
$ |
98,974 |
|
|
$ |
27,569 |
|
|
$ |
1,019,710 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ALLL associated with portfolio loans
acquired with deteriorated credit
quality |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Loans and Leases at September 30, 2011: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollar amounts in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portion of loans and leases at
September 30, 2011: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually
evaluated for
impairment |
|
|
161,939 |
|
|
|
400,952 |
|
|
|
37,371 |
|
|
|
47,877 |
|
|
|
325,242 |
|
|
|
4,626 |
|
|
|
978,007 |
|
Collectively
evaluated for
impairment |
|
|
13,776,946 |
|
|
|
5,533,492 |
|
|
|
5,521,044 |
|
|
|
8,031,010 |
|
|
|
4,660,781 |
|
|
|
510,614 |
|
|
|
38,033,887 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans evaluated for impairment |
|
$ |
13,938,885 |
|
|
$ |
5,934,444 |
|
|
$ |
5,558,415 |
|
|
$ |
8,078,887 |
|
|
$ |
4,986,023 |
|
|
$ |
515,240 |
|
|
$ |
39,011,894 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio loans acquired with
deteriorated credit quality |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and |
|
|
Commercial |
|
|
|
|
|
|
|
|
|
|
Residential |
|
|
Other |
|
|
|
|
|
|
Industrial |
|
|
Real Estate |
|
|
Automobile |
|
|
Home Equity |
|
|
Mortgage |
|
|
Consumer |
|
|
Total |
|
ALLL at December 31, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollar amounts in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portion of ALLL balance at December
31, 2010: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to
loans individually
evaluated for
impairment |
|
$ |
63,307 |
|
|
$ |
65,130 |
|
|
$ |
1,477 |
|
|
$ |
1,498 |
|
|
$ |
11,780 |
|
|
$ |
668 |
|
|
$ |
143,860 |
|
Attributable to
loans collectively
evaluated for
impairment |
|
|
277,307 |
|
|
|
523,121 |
|
|
|
48,011 |
|
|
|
149,132 |
|
|
|
81,509 |
|
|
|
26,068 |
|
|
|
1,105,148 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ALLL balance at December 31, 2010: |
|
$ |
340,614 |
|
|
$ |
588,251 |
|
|
$ |
49,488 |
|
|
$ |
150,630 |
|
|
$ |
93,289 |
|
|
$ |
26,736 |
|
|
$ |
1,249,008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ALLL associated with portfolio
loans acquired with deteriorated
credit quality |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and Leases at December 31, 2010: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollar amounts in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portion of loans and leases at
December 31, 2010: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually
evaluated for
impairment |
|
|
198,120 |
|
|
|
310,668 |
|
|
|
29,764 |
|
|
|
37,257 |
|
|
|
334,207 |
|
|
|
9,565 |
|
|
|
919,581 |
|
Collectively
evaluated for
impairment |
|
|
12,865,173 |
|
|
|
6,340,488 |
|
|
|
5,584,947 |
|
|
|
7,675,897 |
|
|
|
4,166,159 |
|
|
|
554,262 |
|
|
|
37,186,926 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans evaluated for impairment |
|
$ |
13,063,293 |
|
|
$ |
6,651,156 |
|
|
$ |
5,614,711 |
|
|
$ |
7,713,154 |
|
|
$ |
4,500,366 |
|
|
$ |
563,827 |
|
|
$ |
38,106,507 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio loans acquired with
deteriorated credit quality |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
91
The following tables present detailed impaired loan information by class: (1), (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, 2011 |
|
|
September 30, 2011 |
|
|
September 30, 2011 |
|
|
|
|
|
|
|
Unpaid |
|
|
|
|
|
|
|
|
|
|
Interest |
|
|
|
|
|
|
Interest |
|
|
|
Ending |
|
|
Principal |
|
|
Related |
|
|
Average |
|
|
Income |
|
|
Average |
|
|
Income |
|
(dollar amounts in thousands) |
|
Balance |
|
|
Balance (5) |
|
|
Allowance |
|
|
Balance |
|
|
Recognized |
|
|
Balance |
|
|
Recognized |
|
With no related allowance recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied |
|
$ |
10,105 |
|
|
$ |
14,456 |
|
|
$ |
|
|
|
$ |
4,284 |
|
|
$ |
122 |
|
|
$ |
7,121 |
|
|
$ |
139 |
|
Other commercial and
industrial |
|
|
3,782 |
|
|
|
6,165 |
|
|
|
|
|
|
|
3,324 |
|
|
|
37 |
|
|
|
6,102 |
|
|
|
162 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial and industrial |
|
$ |
13,887 |
|
|
$ |
20,621 |
|
|
$ |
|
|
|
$ |
7,608 |
|
|
$ |
159 |
|
|
$ |
13,223 |
|
|
$ |
301 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail properties |
|
$ |
43,746 |
|
|
$ |
55,370 |
|
|
$ |
|
|
|
$ |
29,895 |
|
|
$ |
348 |
|
|
$ |
21,158 |
|
|
$ |
362 |
|
Multi family |
|
|
21,156 |
|
|
|
21,345 |
|
|
|
|
|
|
|
16,187 |
|
|
|
188 |
|
|
|
12,951 |
|
|
|
499 |
|
Office |
|
|
1,105 |
|
|
|
1,431 |
|
|
|
|
|
|
|
1,542 |
|
|
|
|
|
|
|
1,804 |
|
|
|
|
|
Industrial and warehouse |
|
|
1,866 |
|
|
|
2,908 |
|
|
|
|
|
|
|
3,098 |
|
|
|
36 |
|
|
|
2,755 |
|
|
|
41 |
|
Other commercial real
estate |
|
|
23,032 |
|
|
|
42,611 |
|
|
|
|
|
|
|
27,559 |
|
|
|
251 |
|
|
|
25,988 |
|
|
|
609 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial real estate |
|
$ |
90,905 |
|
|
$ |
123,665 |
|
|
$ |
|
|
|
$ |
78,281 |
|
|
$ |
823 |
|
|
$ |
64,656 |
|
|
$ |
1,511 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automobile |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Home equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured by first-lien |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured by second-lien |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other consumer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial: (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied |
|
$ |
40,311 |
|
|
$ |
58,925 |
|
|
$ |
5,891 |
|
|
$ |
49,354 |
|
|
$ |
499 |
|
|
$ |
56,747 |
|
|
$ |
1,362 |
|
Other commercial and
industrial |
|
|
107,741 |
|
|
|
138,751 |
|
|
|
25,358 |
|
|
|
102,193 |
|
|
|
946 |
|
|
|
99,629 |
|
|
|
2,246 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial and industrial |
|
$ |
148,052 |
|
|
$ |
197,676 |
|
|
$ |
31,249 |
|
|
$ |
151,547 |
|
|
$ |
1,445 |
|
|
$ |
156,376 |
|
|
$ |
3,608 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate: (4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail properties |
|
$ |
118,010 |
|
|
$ |
146,923 |
|
|
$ |
29,030 |
|
|
$ |
99,018 |
|
|
$ |
863 |
|
|
$ |
96,231 |
|
|
$ |
1,975 |
|
Multi family |
|
|
22,365 |
|
|
|
29,085 |
|
|
|
4,170 |
|
|
|
23,943 |
|
|
|
130 |
|
|
|
29,348 |
|
|
|
625 |
|
Office |
|
|
24,863 |
|
|
|
41,496 |
|
|
|
3,490 |
|
|
|
25,061 |
|
|
|
53 |
|
|
|
27,716 |
|
|
|
197 |
|
Industrial and warehouse |
|
|
50,423 |
|
|
|
61,563 |
|
|
|
7,141 |
|
|
|
54,345 |
|
|
|
166 |
|
|
|
44,649 |
|
|
|
588 |
|
Other commercial real
estate |
|
|
94,386 |
|
|
|
131,350 |
|
|
|
17,641 |
|
|
|
107,635 |
|
|
|
873 |
|
|
|
85,949 |
|
|
|
1,510 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial real estate |
|
$ |
310,047 |
|
|
$ |
410,417 |
|
|
$ |
61,472 |
|
|
$ |
310,002 |
|
|
$ |
2,085 |
|
|
$ |
283,893 |
|
|
$ |
4,895 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automobile |
|
$ |
37,371 |
|
|
$ |
37,371 |
|
|
$ |
1,344 |
|
|
$ |
33,215 |
|
|
$ |
847 |
|
|
$ |
31,451 |
|
|
$ |
2,154 |
|
Home equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured by first-lien |
|
|
32,681 |
|
|
|
32,681 |
|
|
|
638 |
|
|
|
27,758 |
|
|
|
354 |
|
|
|
24,734 |
|
|
|
816 |
|
Secured by second-lien |
|
|
15,196 |
|
|
|
15,196 |
|
|
|
972 |
|
|
|
14,714 |
|
|
|
187 |
|
|
|
15,746 |
|
|
|
550 |
|
Residential mortgage |
|
|
325,242 |
|
|
|
347,843 |
|
|
|
14,757 |
|
|
|
329,685 |
|
|
|
3,038 |
|
|
|
335,400 |
|
|
|
9,848 |
|
Other consumer |
|
|
4,626 |
|
|
|
4,626 |
|
|
|
311 |
|
|
|
6,768 |
|
|
|
41 |
|
|
|
8,068 |
|
|
|
373 |
|
92
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010 |
|
|
|
|
|
|
|
Unpaid |
|
|
|
|
|
|
Ending |
|
|
Principal |
|
|
Related |
|
(dollar amounts in thousands) |
|
Balance |
|
|
Balance (5) |
|
|
Allowance |
|
With no related allowance recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial: |
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied |
|
$ |
13,750 |
|
|
$ |
26,603 |
|
|
$ |
|
|
Other commercial and
industrial |
|
|
11,127 |
|
|
|
22,688 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial and industrial |
|
$ |
24,877 |
|
|
$ |
49,291 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
Retail properties |
|
$ |
31,972 |
|
|
$ |
67,487 |
|
|
$ |
|
|
Multi family |
|
|
5,058 |
|
|
|
5,675 |
|
|
|
|
|
Office |
|
|
2,270 |
|
|
|
3,562 |
|
|
|
|
|
Industrial and warehouse |
|
|
3,305 |
|
|
|
6,912 |
|
|
|
|
|
Other commercial real estate |
|
|
26,807 |
|
|
|
58,996 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial real estate |
|
$ |
69,412 |
|
|
$ |
142,632 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automobile |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Home equity: |
|
|
|
|
|
|
|
|
|
|
|
|
Secured by first-lien |
|
|
|
|
|
|
|
|
|
|
|
|
Secured by second-lien |
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage |
|
|
|
|
|
|
|
|
|
|
|
|
Other consumer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial: |
|
|
|
|
|
|
|
|
|
|
|
|
Owner occupied |
|
$ |
63,951 |
|
|
$ |
85,279 |
|
|
$ |
14,322 |
|
Other commercial and
industrial |
|
|
109,292 |
|
|
|
154,424 |
|
|
|
48,986 |
|
|
|
|
|
|
|
|
|
|
|
Total commercial and industrial |
|
$ |
173,243 |
|
|
$ |
239,703 |
|
|
$ |
63,308 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
Retail properties |
|
$ |
74,732 |
|
|
$ |
120,051 |
|
|
$ |
14,846 |
|
Multi family |
|
|
38,758 |
|
|
|
39,299 |
|
|
|
7,760 |
|
Office |
|
|
26,595 |
|
|
|
31,261 |
|
|
|
9,466 |
|
Industrial and warehouse |
|
|
34,588 |
|
|
|
44,168 |
|
|
|
10,453 |
|
Other commercial real estate |
|
|
66,583 |
|
|
|
104,485 |
|
|
|
22,604 |
|
|
|
|
|
|
|
|
|
|
|
Total commercial real estate |
|
$ |
241,256 |
|
|
$ |
339,264 |
|
|
$ |
65,129 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automobile |
|
$ |
29,764 |
|
|
$ |
29,764 |
|
|
$ |
1,477 |
|
Home equity: |
|
|
|
|
|
|
|
|
|
|
|
|
Secured by first-lien |
|
|
20,553 |
|
|
|
20,675 |
|
|
|
511 |
|
Secured by second-lien |
|
|
16,704 |
|
|
|
17,060 |
|
|
|
987 |
|
Residential mortgage |
|
|
334,207 |
|
|
|
347,571 |
|
|
|
11,780 |
|
Other consumer |
|
|
9,565 |
|
|
|
9,565 |
|
|
|
668 |
|
|
|
|
(1) |
|
These tables do not include loans fully charged-off. |
|
(2) |
|
All automobile, home equity, residential mortgage, and other consumer impaired loans included
in the tables below are considered impaired due to their status as a TDR. |
|
(3) |
|
At September 30, 2011, $32,685 thousand of the $148,052 thousand commercial and industrial
loans with an allowance recorded were considered impaired due to their status as a TDR. |
|
(4) |
|
At September 30, 2011, $26,916 thousand of the $310,047 thousand commercial real estate loans
with an allowance recorded were considered impaired due to their status as a TDR. |
|
(5) |
|
The differences between the ending balance and the unpaid principal balance amounts represent
partial charge-offs. |
93
TDR Loans
TDRs are modified loans where a concession was provided to a borrower experiencing financial
difficulties. Loan modifications are considered TDRs when the concessions provided are not
available to the borrower through either normal channels or other sources. However, not all loan
modifications are TDRs.
TDR Concession Types
The Companys standards relating to loan modifications consider, among other factors, minimum
verified income requirements, cash flow analysis, and collateral valuations. Each potential loan
modification is reviewed individually and the terms of the loan are modified to meet a borrowers
specific circumstances at a point in time. All loan modifications, including those classified as
TDRs, are reviewed and approved. The types of concessions provided to borrowers include:
|
|
|
Interest rate reduction: A reduction of the stated interest rate to a nonmarket rate
for the remaining original life of the debt. |
|
|
|
Amortization or maturity date change beyond what the collateral supports, including any
of the following: |
|
(1) |
|
Lengthens the amortization period of the amortized principal beyond
market terms. This concession reduces the minimum monthly payment and increases
the amount of the balloon payment at then end of the term of the loan. Principal
is generally not forgiven. |
|
(2) |
|
Reduces the amount of loan principal to be amortized. This concession
also reduces the minimum monthly payment and increases the amount of the balloon
payment at the end of the term of the loan. Principal is generally not forgiven. |
|
(3) |
|
Extends the maturity date or dates of the debt beyond what the
collateral supports. This concession generally applies to loans without a balloon
payment at the end of the term of the loan. |
|
|
|
Other: A concession that is not categorized as one of the concessions described above.
These concessions include, but are not limited to: principal forgiveness, collateral
concessions, covenant concessions, and reduction of accrued interest. Principal
forgiveness may result from any TDR modification of any concession type. However, the
aggregate amount of principal forgiven as a result of loans modified as TDRs during the
three-month and nine-month periods ended September 30, 2011, was not significant. |
TDRs by Loan Type
Following is a description of TDRs by the different loan types:
Commercial loan TDRs Commercial accruing TDRs often result from loans
receiving a concession with terms that are not considered a market transaction to
Huntington. The TDR remains in accruing status as long as the customer is less than 90
days past due on payments per the restructured loan terms and no loss is expected.
Commercial nonaccrual TDRs result from either: (1) an accruing commercial TDR
being placed on nonaccrual status, or (2) a workout where an existing commercial NAL is
restructured and a concession was given. At times, these workouts restructure the NAL
so that two or more new notes are created. The primary note is underwritten based upon
our normal underwriting standards and is sized so projected cash flows are sufficient
to repay contractual principal and interest. The terms on the secondary note(s) vary
by situation, and may include notes that defer principal and interest payments until
after the primary note is repaid. Creating two or more notes often allows the borrower
to continue a project or weather a temporary economic downturn and allows Huntington to
right-size a loan based upon the current expectations for a borrowers or projects
performance. Additionally, if a charge-off was taken as part of the restructuring, the
TDR status is not considered for removal. The TDR status on commercial loans is
considered for removal if the loan is subsequently modified at market terms.
Residential Mortgage loan TDRs Residential mortgage TDRs represent loan
modifications associated with traditional first-lien mortgage loans in which a
concession has been provided to the borrower. The primary concessions given to
residential mortgage borrowers are amortization or maturity date changes and interest
rate reductions. Residential mortgages identified as TDRs involve borrowers unable to
refinance their mortgages through the Companys normal mortgage origination channels or
through other independent sources. Some, but not all, of the loans may be delinquent.
Other Consumer loan TDRs Generally, these are TDRs associated with home
equity borrowings and automobile loans. The Company may make similar interest rate,
term, and principal concessions as with residential mortgage loan TDRs.
94
TDR Impact on Credit Quality
Huntingtons ALLL is largely driven by updated risk ratings assigned to commercial loans,
updated borrower credit scores on consumer loans, and borrower delinquency history in both the
commercial and consumer portfolios. As such, the provision for credit losses is impacted primarily
by changes in borrower payment performance rather than the TDR classification. TDRs can be
classified as either accrual or nonaccrual loans. Nonaccrual TDRs are included in NALs whereas
accruing TDRs are excluded from NALs as it is probable that all contractual principal and interest
due under the restructured terms will be collected.
Commercial loan TDRs In instances where the bank substantiates that it will
collect its outstanding balance in full, the note is considered for return to accrual status upon
the borrower sustaining sufficient cash flows for a six-month period of time. This six-month
period could extend before or after the restructure date. If a charge-off was taken as part of the
restructuring, any interest or principal payments received on that note are applied to first reduce
the banks outstanding book balance and then to recoveries of charged-off principal, unpaid
interest, and/or fee expenses.
Residential Mortgage and Other Consumer loan TDRs Modified loans identified as TDRs
are aggregated into pools for analysis. Cash flows and weighted average interest rates are used to
calculate impairment at the pooled-loan level. Once the loans are aggregated into the pool, they
continue to be classified as TDRs until contractually repaid or charged-off.
Residential mortgage loans not guaranteed by a U.S. government agency such as the FHA, VA, and
the USDA, including TDR loans, are reported as accrual or nonaccrual based upon delinquency status.
Nonaccrual TDRs are those that are greater than 150-days contractually past due. Loans guaranteed
by U.S. government organizations continue to accrue interest upon delinquency.
95
The following table presents new TDR activity by class for the three-month and
nine-month periods ended September 30, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New Troubled Debt Restructurings During The |
|
|
|
Three-Month Period Ended September 30, 2011 |
|
|
|
|
|
|
|
Post-modification |
|
|
Net change in |
|
|
|
Number of |
|
|
Outstanding |
|
|
ALLL resulting |
|
(dollar amounts in thousands) |
|
Contracts |
|
|
Balance (1) |
|
|
from modification |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
C&I Owner occupied: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate reduction |
|
|
3 |
|
|
$ |
638 |
|
|
$ |
(68 |
) |
Amortization or maturity date change |
|
|
16 |
|
|
|
11,023 |
|
|
|
(1,085 |
) |
Other |
|
|
2 |
|
|
|
729 |
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
Total C&I Owner occupied |
|
|
21 |
|
|
$ |
12,390 |
|
|
$ |
(1,154 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
C&I Other commercial and industrial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate reduction |
|
|
6 |
|
|
$ |
18,292 |
|
|
$ |
1,225 |
|
Amortization or maturity date change |
|
|
11 |
|
|
|
2,175 |
|
|
|
13 |
|
Other |
|
|
2 |
|
|
|
3,027 |
|
|
|
64 |
|
|
|
|
|
|
|
|
|
|
|
Total C&I Other commercial and industrial |
|
|
19 |
|
|
$ |
23,494 |
|
|
$ |
1,302 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CRE Retail properties: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate reduction |
|
|
2 |
|
|
$ |
19,883 |
|
|
$ |
5,603 |
|
Amortization or maturity date change |
|
|
7 |
|
|
|
17,984 |
|
|
|
1,012 |
|
Other |
|
|
1 |
|
|
|
2,595 |
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
Total CRE Retail properties |
|
|
10 |
|
|
$ |
40,462 |
|
|
$ |
6,620 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CRE Multi family: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate reduction |
|
|
4 |
|
|
$ |
1,275 |
|
|
$ |
103 |
|
Amortization or maturity date change |
|
|
1 |
|
|
|
1,066 |
|
|
|
(51 |
) |
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total CRE Multi family |
|
|
5 |
|
|
$ |
2,341 |
|
|
$ |
52 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CRE Office: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate reduction |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
Amortization or maturity date change |
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total CRE Office |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CRE Industrial and warehouse: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate reduction |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
Amortization or maturity date change |
|
|
2 |
|
|
|
229 |
|
|
|
(2 |
) |
Other |
|
|
1 |
|
|
|
2,147 |
|
|
|
(145 |
) |
|
|
|
|
|
|
|
|
|
|
Total CRE Industrial and Warehouse |
|
|
3 |
|
|
$ |
2,376 |
|
|
$ |
(147 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
CRE Other commercial real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate reduction |
|
|
10 |
|
|
$ |
7,834 |
|
|
$ |
(374 |
) |
Amortization or maturity date change |
|
|
12 |
|
|
|
31,470 |
|
|
|
(365 |
) |
Other |
|
|
2 |
|
|
|
2,492 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total CRE Other commercial real estate |
|
|
24 |
|
|
$ |
41,796 |
|
|
$ |
(739 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Automobile: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate reduction |
|
|
12 |
|
|
$ |
147 |
|
|
$ |
3 |
|
Amortization or maturity date change |
|
|
822 |
|
|
|
7,687 |
|
|
|
(68 |
) |
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Automobile |
|
|
834 |
|
|
$ |
7,834 |
|
|
$ |
(65 |
) |
96
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New Troubled Debt Restructurings During The |
|
|
|
Three-Month Period Ended September 30, 2011 |
|
|
|
|
|
|
|
Post-modification |
|
|
Net change in |
|
|
|
Number of |
|
|
Outstanding |
|
|
ALLL resulting |
|
(dollar amounts in thousands) |
|
Contracts |
|
|
Balance (1) |
|
|
from modification |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate reduction |
|
|
2 |
|
|
$ |
181 |
|
|
$ |
|
|
Amortization or maturity date change |
|
|
164 |
|
|
|
22,120 |
|
|
|
649 |
|
Other |
|
|
5 |
|
|
|
600 |
|
|
|
33 |
|
|
|
|
|
|
|
|
|
|
|
Total Residential mortgage |
|
|
171 |
|
|
$ |
22,901 |
|
|
$ |
682 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First-lien home equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate reduction |
|
|
48 |
|
|
$ |
5,857 |
|
|
$ |
1,016 |
|
Amortization or maturity date change |
|
|
49 |
|
|
|
5,820 |
|
|
|
111 |
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total First-lien home equity |
|
|
97 |
|
|
$ |
11,677 |
|
|
$ |
1,127 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second-lien home equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate reduction |
|
|
55 |
|
|
$ |
2,992 |
|
|
$ |
22 |
|
Amortization or maturity date change |
|
|
44 |
|
|
|
1,631 |
|
|
|
40 |
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Second-lien home equity |
|
|
99 |
|
|
$ |
4,623 |
|
|
$ |
62 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate reduction |
|
|
6 |
|
|
$ |
561 |
|
|
$ |
48 |
|
Amortization or maturity date change |
|
|
50 |
|
|
|
348 |
|
|
|
(18 |
) |
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other consumer |
|
|
56 |
|
|
$ |
909 |
|
|
$ |
30 |
|
97
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New Troubled Debt Restructurings During The |
|
|
|
Nine-Month Period Ended September 30, 2011 |
|
|
|
|
|
|
|
Post-modification |
|
|
Net change in |
|
|
|
Number of |
|
|
Outstanding |
|
|
ALLL resulting |
|
(dollar amounts in thousands) |
|
Contracts |
|
|
Balance (1) |
|
|
from modification |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
C&I Owner occupied: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate reduction |
|
|
27 |
|
|
$ |
12,240 |
|
|
$ |
(749 |
) |
Amortization or maturity date change |
|
|
35 |
|
|
|
19,294 |
|
|
|
(1,733 |
) |
Other |
|
|
4 |
|
|
|
3,072 |
|
|
|
243 |
|
|
|
|
|
|
|
|
|
|
|
Total C&I Owner occupied |
|
|
66 |
|
|
$ |
34,606 |
|
|
$ |
(2,239 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
C&I Other commercial and industrial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate reduction |
|
|
18 |
|
|
$ |
21,382 |
|
|
$ |
1,067 |
|
Amortization or maturity date change |
|
|
41 |
|
|
|
23,145 |
|
|
|
(2,651 |
) |
Other |
|
|
17 |
|
|
|
25,421 |
|
|
|
(3,020 |
) |
|
|
|
|
|
|
|
|
|
|
Total C&I Other commercial and industrial |
|
|
76 |
|
|
$ |
69,948 |
|
|
$ |
(4,604 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
CRE Retail properties: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate reduction |
|
|
8 |
|
|
$ |
46,534 |
|
|
$ |
4,359 |
|
Amortization or maturity date change |
|
|
14 |
|
|
|
25,689 |
|
|
|
1,858 |
|
Other |
|
|
6 |
|
|
|
14,253 |
|
|
|
(1,974 |
) |
|
|
|
|
|
|
|
|
|
|
Total CRE Retail properties |
|
|
28 |
|
|
$ |
86,476 |
|
|
$ |
4,243 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CRE Multi family: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate reduction |
|
|
10 |
|
|
$ |
4,378 |
|
|
$ |
(9 |
) |
Amortization or maturity date change |
|
|
5 |
|
|
|
2,256 |
|
|
|
25 |
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total CRE Multi family |
|
|
15 |
|
|
$ |
6,634 |
|
|
$ |
16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CRE Office: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate reduction |
|
|
3 |
|
|
$ |
1,505 |
|
|
$ |
259 |
|
Amortization or maturity date change |
|
|
2 |
|
|
|
1,238 |
|
|
|
97 |
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total CRE Office |
|
|
5 |
|
|
$ |
2,743 |
|
|
$ |
356 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CRE Industrial and warehouse: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate reduction |
|
|
1 |
|
|
$ |
2,165 |
|
|
$ |
(299 |
) |
Amortization or maturity date change |
|
|
6 |
|
|
|
19,300 |
|
|
|
(5,446 |
) |
Other |
|
|
1 |
|
|
|
2,147 |
|
|
|
(145 |
) |
|
|
|
|
|
|
|
|
|
|
Total CRE Industrial and Warehouse |
|
|
8 |
|
|
$ |
23,612 |
|
|
$ |
(5,890 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
CRE Other commercial real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate reduction |
|
|
15 |
|
|
$ |
17,893 |
|
|
$ |
(1,180 |
) |
Amortization or maturity date change |
|
|
48 |
|
|
|
103,120 |
|
|
|
(3,602 |
) |
Other |
|
|
5 |
|
|
|
8,199 |
|
|
|
32 |
|
|
|
|
|
|
|
|
|
|
|
Total CRE Other commercial real estate |
|
|
68 |
|
|
$ |
129,212 |
|
|
$ |
(4,750 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Automobile: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate reduction |
|
|
14 |
|
|
$ |
186 |
|
|
$ |
3 |
|
Amortization or maturity date change |
|
|
1,534 |
|
|
|
13,832 |
|
|
|
(113 |
) |
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Automobile |
|
|
1,548 |
|
|
$ |
14,018 |
|
|
$ |
(110 |
) |
98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New Troubled Debt Restructurings During The |
|
|
|
Nine-Month Period Ended September 30, 2011 |
|
|
|
|
|
|
|
Post-modification |
|
|
Net change in |
|
|
|
Number of |
|
|
Outstanding |
|
|
ALLL resulting |
|
(dollar amounts in thousands) |
|
Contracts |
|
|
Balance (1) |
|
|
from modification |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate reduction |
|
|
8 |
|
|
$ |
6,604 |
|
|
$ |
(589 |
) |
Amortization or maturity date change |
|
|
499 |
|
|
|
67,351 |
|
|
|
2,289 |
|
Other |
|
|
18 |
|
|
|
3,555 |
|
|
|
115 |
|
|
|
|
|
|
|
|
|
|
|
Total Residential mortgage |
|
|
525 |
|
|
$ |
77,510 |
|
|
$ |
1,815 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First-lien home equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate reduction |
|
|
95 |
|
|
$ |
11,836 |
|
|
$ |
1,899 |
|
Amortization or maturity date change |
|
|
75 |
|
|
|
9,073 |
|
|
|
587 |
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total First-lien home equity |
|
|
170 |
|
|
$ |
20,909 |
|
|
$ |
2,486 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second-lien home equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate reduction |
|
|
109 |
|
|
$ |
5,480 |
|
|
$ |
287 |
|
Amortization or maturity date change |
|
|
89 |
|
|
|
2,975 |
|
|
|
59 |
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Second-lien home equity |
|
|
198 |
|
|
$ |
8,455 |
|
|
$ |
346 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate reduction |
|
|
11 |
|
|
$ |
837 |
|
|
$ |
73 |
|
Amortization or maturity date change |
|
|
57 |
|
|
|
363 |
|
|
|
(19 |
) |
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other consumer |
|
|
68 |
|
|
$ |
1,200 |
|
|
$ |
54 |
|
|
|
|
(1) |
|
Post-modification balances approximate pre-modification balances. The aggregate amount of charge-offs
as a result of a restructuring are not significant. |
All classes within the C&I and CRE portfolios are considered as redefaulted at
90-days past due. Automobile loans and other consumer loans are considered as redefaulted
at 120-days past due. Residential mortgage loans are considered as redefaulted at 150-days
past due. The first-lien and second-lien home equity portfolios are considered as
redefaulted at 150-days past due and 120-days past due, respectively.
The following table presents TDRs modified within the previous twelve months that
have subsequently redefaulted during the three-month and nine-month periods ended
September 30, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Troubled Debt Restructurings Within The Previous Twelve Months |
|
|
|
That Have Subsequently Defaulted During The (1) |
|
|
|
Three-month period ended |
|
|
Nine-month period ended |
|
|
|
September 30, 2011 |
|
|
September 30, 2011 |
|
|
|
Number of |
|
|
Ending |
|
|
Number of |
|
|
Ending |
|
(dollar amounts in thousands) |
|
Contracts |
|
|
Balance |
|
|
Contracts |
|
|
Balance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
C&I Owner occupied: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate reduction |
|
|
|
|
|
$ |
|
|
|
|
9 |
|
|
$ |
3,850 |
|
Amortization or maturity date change |
|
|
3 |
|
|
|
3,224 |
|
|
|
7 |
|
|
|
4,072 |
|
Other |
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
2,352 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total C&I Owner occupied |
|
|
3 |
|
|
$ |
3,224 |
|
|
|
18 |
|
|
$ |
10,274 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
C&I Other commercial and industrial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate reduction |
|
|
|
|
|
$ |
|
|
|
|
1 |
|
|
$ |
193 |
|
Amortization or maturity date change |
|
|
2 |
|
|
|
9,300 |
|
|
|
6 |
|
|
|
9,932 |
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total C&I Other commercial and industrial |
|
|
2 |
|
|
$ |
9,300 |
|
|
|
7 |
|
|
$ |
10,125 |
|
99
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Troubled Debt Restructurings Within The Previous Twelve Months |
|
|
|
That Have Subsequently Defaulted During The (1) |
|
|
|
Three-month period ended |
|
|
Nine-month period ended |
|
|
|
September 30, 2011 |
|
|
September 30, 2011 |
|
|
|
Number of |
|
|
Ending |
|
|
Number of |
|
|
Ending |
|
(dollar amounts in thousands) |
|
Contracts |
|
|
Balance |
|
|
Contracts |
|
|
Balance |
|
|
|
|
|
|
|
|
|
|
CRE Retail Properties: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate reduction |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
Amortization or maturity date change |
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
796 |
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total CRE Retail properties |
|
|
|
|
|
$ |
|
|
|
|
1 |
|
|
$ |
796 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CRE Multi family: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate reduction |
|
|
2 |
|
|
$ |
812 |
|
|
|
4 |
|
|
$ |
1,180 |
|
Amortization or maturity date change |
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
465 |
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total CRE Multi family |
|
|
2 |
|
|
$ |
812 |
|
|
|
6 |
|
|
$ |
1,645 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CRE Office: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate reduction |
|
|
|
|
|
$ |
|
|
|
|
1 |
|
|
$ |
116 |
|
Amortization or maturity date change |
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
334 |
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total CRE Office |
|
|
|
|
|
$ |
|
|
|
|
2 |
|
|
$ |
450 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CRE Industrial and Warehouse: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate reduction |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
Amortization or maturity date change |
|
|
2 |
|
|
|
229 |
|
|
|
7 |
|
|
|
2,581 |
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total CRE Industrial and Warehouse |
|
|
2 |
|
|
$ |
229 |
|
|
|
7 |
|
|
$ |
2,581 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CRE Other commercial real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate reduction |
|
|
2 |
|
|
$ |
132 |
|
|
|
7 |
|
|
$ |
2,214 |
|
Amortization or maturity date change |
|
|
|
|
|
|
|
|
|
|
10 |
|
|
|
2,037 |
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total CRE Other commercial real estate |
|
|
2 |
|
|
$ |
132 |
|
|
|
17 |
|
|
$ |
4,251 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automobile: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate reduction |
|
|
|
|
|
$ |
|
|
|
|
1 |
|
|
$ |
|
(2) |
Amortization or maturity date change |
|
|
41 |
|
|
|
|
(2) |
|
|
112 |
|
|
|
|
(2) |
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Automobile |
|
|
41 |
|
|
$ |
|
(2) |
|
|
113 |
|
|
$ |
|
(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate reduction |
|
|
1 |
|
|
$ |
65 |
|
|
|
2 |
|
|
$ |
221 |
|
Amortization or maturity date change |
|
|
22 |
|
|
|
2,276 |
|
|
|
51 |
|
|
|
5,544 |
|
Other |
|
|
1 |
|
|
|
149 |
|
|
|
5 |
|
|
|
757 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Residential mortgage |
|
|
24 |
|
|
$ |
2,490 |
|
|
|
58 |
|
|
$ |
6,522 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First-lien home equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate reduction |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
Amortization or maturity date change |
|
|
|
|
|
|
|
|
|
|
3 |
|
|
|
121 |
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total First-lien home equity |
|
|
|
|
|
$ |
|
|
|
|
3 |
|
|
$ |
121 |
|
100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Troubled Debt Restructurings Within The Previous Twelve Months |
|
|
|
That Have Subsequently Defaulted During The (1) |
|
|
|
Three-month period ended |
|
|
Nine-month period ended |
|
|
|
September 30, 2011 |
|
|
September 30, 2011 |
|
|
|
Number of |
|
|
Ending |
|
|
Number of |
|
|
Ending |
|
(dollar amounts in thousands) |
|
Contracts |
|
|
Balance |
|
|
Contracts |
|
|
Balance |
|
|
|
|
|
|
|
|
|
|
Second-lien home equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate reduction |
|
|
|
|
|
$ |
|
|
|
|
2 |
|
|
$ |
153 |
|
Amortization or maturity date change |
|
|
|
|
|
|
|
|
|
|
5 |
|
|
|
249 |
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Second-lien home equity |
|
|
|
|
|
$ |
|
|
|
|
7 |
|
|
$ |
402 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate reduction |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
Amortization or maturity date change |
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
11 |
(3) |
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other consumer |
|
|
|
|
|
$ |
|
|
|
|
2 |
|
|
$ |
11 |
|
|
|
|
(1) |
|
Subsequent default is defined as a payment redefault within 12 months of the restructuring date. |
|
(2) |
|
Automobile loans are charged-off at time of subsequent default. During the three-month period ended September 30, 2011, $220 thousand of total
automobile loans were charged-off at the time of subsequent redefault. During the nine-month period ended September 30, 2011, $813 thousand of total
automobile loans were charged-off at the time of subsequent default. |
|
(3) |
|
Other consumer loans are charged-off at time of subsequent default. During the nine-month period ended September 30, 2011, $11 thousand of total other
consumer loans were charged-off at the time of subsequent default. |
101
4. AVAILABLE-FOR-SALE AND OTHER SECURITIES
Listed below are the contractual maturities (under 1 year, 1-5 years, 6-10 years, and over 10
years) of available-for-sale and other securities at September 30, 2011, December 31, 2010, and
September 30, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2011 |
|
|
December 31, 2010 |
|
|
September 30, 2010 |
|
|
|
Amortized |
|
|
|
|
|
|
Amortized |
|
|
|
|
|
|
Amortized |
|
|
|
|
(dollar amounts in thousands) |
|
Cost |
|
|
Fair Value |
|
|
Cost |
|
|
Fair Value |
|
|
Cost |
|
|
Fair Value |
|
U.S. Treasury: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Under 1 year |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
49,998 |
|
|
$ |
50,334 |
|
1-5 years |
|
|
51,939 |
|
|
|
52,793 |
|
|
|
52,425 |
|
|
|
51,781 |
|
|
|
|
|
|
|
|
|
6-10 years |
|
|
510 |
|
|
|
528 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over 10 years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total U.S. Treasury |
|
|
52,449 |
|
|
|
53,321 |
|
|
|
52,425 |
|
|
|
51,781 |
|
|
|
49,998 |
|
|
|
50,334 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal agencies: mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Under 1 year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1-5 years |
|
|
227,117 |
|
|
|
227,885 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6-10 years |
|
|
406,019 |
|
|
|
416,966 |
|
|
|
656,176 |
|
|
|
664,793 |
|
|
|
715,725 |
|
|
|
731,869 |
|
Over 10 years |
|
|
3,699,665 |
|
|
|
3,790,395 |
|
|
|
4,077,655 |
|
|
|
4,089,611 |
|
|
|
3,825,377 |
|
|
|
3,951,671 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Federal agencies: mortgage-backed securities |
|
|
4,332,801 |
|
|
|
4,435,246 |
|
|
|
4,733,831 |
|
|
|
4,754,404 |
|
|
|
4,541,102 |
|
|
|
4,683,540 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TLGP securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Under 1 year |
|
|
105,267 |
|
|
|
105,537 |
|
|
|
156,450 |
|
|
|
157,931 |
|
|
|
50,148 |
|
|
|
50,564 |
|
1-5 years |
|
|
|
|
|
|
|
|
|
|
25,230 |
|
|
|
25,536 |
|
|
|
527,581 |
|
|
|
530,350 |
|
6-10 years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over 10 years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total TLGP securities |
|
|
105,267 |
|
|
|
105,537 |
|
|
|
181,680 |
|
|
|
183,467 |
|
|
|
577,729 |
|
|
|
580,914 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other agencies: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Under 1 year |
|
|
101,509 |
|
|
|
102,056 |
|
|
|
158,273 |
|
|
|
159,288 |
|
|
|
114,396 |
|
|
|
115,200 |
|
1-5 years |
|
|
1,012,874 |
|
|
|
1,022,914 |
|
|
|
1,898,867 |
|
|
|
1,885,230 |
|
|
|
1,890,250 |
|
|
|
1,903,181 |
|
6-10 years |
|
|
12,138 |
|
|
|
12,984 |
|
|
|
13,082 |
|
|
|
13,359 |
|
|
|
13,232 |
|
|
|
13,794 |
|
Over 10 years |
|
|
|
|
|
|
|
|
|
|
500 |
|
|
|
499 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other agencies |
|
|
1,126,521 |
|
|
|
1,137,954 |
|
|
|
2,070,722 |
|
|
|
2,058,376 |
|
|
|
2,017,878 |
|
|
|
2,032,175 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total U.S. Government backed agencies |
|
|
5,617,038 |
|
|
|
5,732,058 |
|
|
|
7,038,658 |
|
|
|
7,048,028 |
|
|
|
7,186,707 |
|
|
|
7,346,963 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Under 1 year |
|
|
855 |
|
|
|
855 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1-5 years |
|
|
182,875 |
|
|
|
186,856 |
|
|
|
149,151 |
|
|
|
148,587 |
|
|
|
61,488 |
|
|
|
63,329 |
|
6-10 years |
|
|
105,874 |
|
|
|
110,165 |
|
|
|
124,552 |
|
|
|
125,656 |
|
|
|
67,297 |
|
|
|
70,466 |
|
Over 10 years |
|
|
112,787 |
|
|
|
115,513 |
|
|
|
182,341 |
|
|
|
181,472 |
|
|
|
230,485 |
|
|
|
234,077 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total municipal securities |
|
|
402,391 |
|
|
|
413,389 |
|
|
|
456,044 |
|
|
|
455,715 |
|
|
|
359,270 |
|
|
|
367,872 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private-label CMO: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Under 1 year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1-5 years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6-10 years |
|
|
12,791 |
|
|
|
12,883 |
|
|
|
10,429 |
|
|
|
10,887 |
|
|
|
13,004 |
|
|
|
13,424 |
|
Over 10 years |
|
|
77,618 |
|
|
|
66,017 |
|
|
|
124,080 |
|
|
|
111,038 |
|
|
|
282,639 |
|
|
|
262,800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total private-label CMO |
|
|
90,409 |
|
|
|
78,900 |
|
|
|
134,509 |
|
|
|
121,925 |
|
|
|
295,643 |
|
|
|
276,224 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Under 1 year |
|
|
|
|
|
|
|
|
|
|
19,669 |
|
|
|
19,694 |
|
|
|
40,000 |
|
|
|
40,115 |
|
1-5 years |
|
|
631,103 |
|
|
|
635,556 |
|
|
|
697,001 |
|
|
|
700,749 |
|
|
|
657,980 |
|
|
|
664,940 |
|
6-10 years |
|
|
165,722 |
|
|
|
167,483 |
|
|
|
323,411 |
|
|
|
323,995 |
|
|
|
273,246 |
|
|
|
274,611 |
|
Over 10 years |
|
|
287,945 |
|
|
|
153,019 |
|
|
|
301,326 |
|
|
|
162,684 |
|
|
|
349,527 |
|
|
|
197,958 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total asset-backed securities (1) |
|
|
1,084,770 |
|
|
|
956,058 |
|
|
|
1,341,407 |
|
|
|
1,207,122 |
|
|
|
1,320,753 |
|
|
|
1,177,624 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Covered bonds: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Under 1 year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1-5 years |
|
|
698,671 |
|
|
|
703,630 |
|
|
|
379,711 |
|
|
|
367,209 |
|
|
|
150,391 |
|
|
|
151,310 |
|
6-10 years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over 10 years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total covered bonds |
|
|
698,671 |
|
|
|
703,630 |
|
|
|
379,711 |
|
|
|
367,209 |
|
|
|
150,391 |
|
|
|
151,310 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Under 1 year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1-5 years |
|
|
459,098 |
|
|
|
454,852 |
|
|
|
329,988 |
|
|
|
323,389 |
|
|
|
30,000 |
|
|
|
30,154 |
|
6-10 years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over 10 years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total corporate debt |
|
|
459,098 |
|
|
|
454,852 |
|
|
|
329,988 |
|
|
|
323,389 |
|
|
|
30,000 |
|
|
|
30,154 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Under 1 year |
|
|
750 |
|
|
|
750 |
|
|
|
800 |
|
|
|
802 |
|
|
|
300 |
|
|
|
305 |
|
1-5 years |
|
|
8,216 |
|
|
|
8,411 |
|
|
|
7,810 |
|
|
|
8,009 |
|
|
|
7,486 |
|
|
|
7,715 |
|
6-10 years |
|
|
912 |
|
|
|
966 |
|
|
|
1,007 |
|
|
|
1,037 |
|
|
|
1,205 |
|
|
|
1,336 |
|
Over 10 years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-marketable equity securities |
|
|
310,280 |
|
|
|
310,280 |
|
|
|
308,722 |
|
|
|
308,722 |
|
|
|
310,142 |
|
|
|
310,142 |
|
Marketable equity securities |
|
|
55,039 |
|
|
|
54,236 |
|
|
|
53,944 |
|
|
|
53,286 |
|
|
|
54,649 |
|
|
|
53,913 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other |
|
|
375,197 |
|
|
|
374,643 |
|
|
|
372,283 |
|
|
|
371,856 |
|
|
|
373,782 |
|
|
|
373,411 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available-for-sale and other securities |
|
$ |
8,727,574 |
|
|
$ |
8,713,530 |
|
|
$ |
10,052,600 |
|
|
$ |
9,895,244 |
|
|
$ |
9,716,546 |
|
|
$ |
9,723,558 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Amounts at September 30, 2011, December 31, 2010, and September 30, 2010 include automobile asset backed securities with a fair value of $189 million, $509 million and $564 million, respectively,
which meet the eligibility requirements for the Term Asset-Backed Securities Loan Facility, or TALF, administered by the Federal Reserve Bank of New York. |
102
Other securities at September 30, 2011, December 31, 2010, and September 30, 2010 include
$165.6 million of stock issued by the FHLB of Cincinnati, $29.3 million, $37.4 million, and $45.7
million, respectively, of stock issued by the FHLB of Indianapolis, and $115.4 million, $105.7
million and $98.9 million, respectively, of Federal Reserve Bank stock. Other securities also
include corporate debt and marketable equity securities. Non-marketable equity securities are
valued at amortized cost. At September 30, 2011, December 31, 2010, and September 30, 2010,
Huntington did not have any material equity positions in FNMA or FHLMC.
The following tables provide amortized cost, fair value, and gross unrealized gains and losses
recognized in accumulated other comprehensive income by investment category at September 30, 2011,
December 31, 2010, and September 30, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized |
|
|
|
|
|
|
Amortized |
|
|
Gross |
|
|
Gross |
|
|
Fair |
|
(dollar amounts in thousands) |
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Value |
|
September 30, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury |
|
$ |
52,449 |
|
|
$ |
872 |
|
|
$ |
|
|
|
$ |
53,321 |
|
Federal agencies: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities |
|
|
4,332,801 |
|
|
|
104,884 |
|
|
|
(2,439 |
) |
|
|
4,435,246 |
|
TLGP securities |
|
|
105,267 |
|
|
|
270 |
|
|
|
|
|
|
|
105,537 |
|
Other agencies |
|
|
1,126,521 |
|
|
|
11,505 |
|
|
|
(72 |
) |
|
|
1,137,954 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total U.S. Government
backed securities |
|
|
5,617,038 |
|
|
|
117,531 |
|
|
|
(2,511 |
) |
|
|
5,732,058 |
|
Municipal securities |
|
|
402,391 |
|
|
|
11,023 |
|
|
|
(25 |
) |
|
|
413,389 |
|
Private-label CMO |
|
|
90,409 |
|
|
|
745 |
|
|
|
(12,254 |
) |
|
|
78,900 |
|
Asset-backed securities |
|
|
1,084,770 |
|
|
|
6,306 |
|
|
|
(135,018 |
) |
|
|
956,058 |
|
Covered bonds |
|
|
698,671 |
|
|
|
8,203 |
|
|
|
(3,244 |
) |
|
|
703,630 |
|
Corporate debt |
|
|
459,098 |
|
|
|
347 |
|
|
|
(4,593 |
) |
|
|
454,852 |
|
Other securities |
|
|
375,197 |
|
|
|
448 |
|
|
|
(1,002 |
) |
|
|
374,643 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available-for-sale and other securities |
|
$ |
8,727,574 |
|
|
$ |
144,603 |
|
|
$ |
(158,647 |
) |
|
$ |
8,713,530 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized |
|
|
|
|
|
|
Amortized |
|
|
Gross |
|
|
Gross |
|
|
Fair |
|
(dollar amounts in thousands) |
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Value |
|
December 31, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury |
|
$ |
52,425 |
|
|
$ |
|
|
|
$ |
(644 |
) |
|
$ |
51,781 |
|
Federal agencies: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities |
|
|
4,733,831 |
|
|
|
71,901 |
|
|
|
(51,328 |
) |
|
|
4,754,404 |
|
TLGP securities |
|
|
181,680 |
|
|
|
1,787 |
|
|
|
|
|
|
|
183,467 |
|
Other agencies |
|
|
2,070,722 |
|
|
|
4,874 |
|
|
|
(17,220 |
) |
|
|
2,058,376 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total U.S. Government
backed securities |
|
|
7,038,658 |
|
|
|
78,562 |
|
|
|
(69,192 |
) |
|
|
7,048,028 |
|
Municipal securities |
|
|
456,044 |
|
|
|
6,154 |
|
|
|
(6,483 |
) |
|
|
455,715 |
|
Private-label CMO |
|
|
134,509 |
|
|
|
1,236 |
|
|
|
(13,820 |
) |
|
|
121,925 |
|
Asset-backed securities |
|
|
1,341,407 |
|
|
|
6,563 |
|
|
|
(140,848 |
) |
|
|
1,207,122 |
|
Covered bonds |
|
|
379,711 |
|
|
|
|
|
|
|
(12,502 |
) |
|
|
367,209 |
|
Corporate debt |
|
|
329,988 |
|
|
|
24 |
|
|
|
(6,623 |
) |
|
|
323,389 |
|
Other securities |
|
|
372,283 |
|
|
|
364 |
|
|
|
(791 |
) |
|
|
371,856 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available-for-sale and other securities |
|
$ |
10,052,600 |
|
|
$ |
92,903 |
|
|
$ |
(250,259 |
) |
|
$ |
9,895,244 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
103
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized |
|
|
|
|
|
|
Amortized |
|
|
Gross |
|
|
Gross |
|
|
Fair |
|
(dollar amounts in thousands) |
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Value |
|
September 30, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury |
|
$ |
49,998 |
|
|
$ |
336 |
|
|
$ |
|
|
|
$ |
50,334 |
|
Federal agencies: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities |
|
|
4,541,102 |
|
|
|
142,537 |
|
|
|
(99 |
) |
|
|
4,683,540 |
|
TLGP securities |
|
|
577,729 |
|
|
|
3,185 |
|
|
|
|
|
|
|
580,914 |
|
Other agencies |
|
|
2,017,878 |
|
|
|
14,420 |
|
|
|
(123 |
) |
|
|
2,032,175 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total U.S. Government
backed securities |
|
|
7,186,707 |
|
|
|
160,478 |
|
|
|
(222 |
) |
|
|
7,346,963 |
|
Municipal securities |
|
|
359,270 |
|
|
|
8,776 |
|
|
|
(174 |
) |
|
|
367,872 |
|
Private-label CMO |
|
|
295,643 |
|
|
|
1,177 |
|
|
|
(20,596 |
) |
|
|
276,224 |
|
Asset-backed securities |
|
|
1,320,753 |
|
|
|
8,928 |
|
|
|
(152,057 |
) |
|
|
1,177,624 |
|
Covered bonds |
|
|
150,391 |
|
|
|
929 |
|
|
|
(10 |
) |
|
|
151,310 |
|
Corporate debt |
|
|
30,000 |
|
|
|
154 |
|
|
|
|
|
|
|
30,154 |
|
Other securities |
|
|
373,782 |
|
|
|
439 |
|
|
|
(810 |
) |
|
|
373,411 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available-for-sale and other securities |
|
$ |
9,716,546 |
|
|
$ |
180,881 |
|
|
$ |
(173,869 |
) |
|
$ |
9,723,558 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following tables provide detail on investment securities with unrealized losses aggregated
by investment category and length of time the individual securities have been in a continuous loss
position, at September 30, 2011, December 31, 2010, and September 30, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 12 Months |
|
|
Over 12 Months |
|
|
Total |
|
|
|
Fair |
|
|
Unrealized |
|
|
Fair |
|
|
Unrealized |
|
|
Fair |
|
|
Unrealized |
|
(dollar amounts in thousands) |
|
Value |
|
|
Losses |
|
|
Value |
|
|
Losses |
|
|
Value |
|
|
Losses |
|
September 30, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Federal agencies: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities |
|
|
386,727 |
|
|
|
(2,439 |
) |
|
|
|
|
|
|
|
|
|
|
386,727 |
|
|
|
(2,439 |
) |
TLGP securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other agencies |
|
|
151,404 |
|
|
|
(67 |
) |
|
|
1,902 |
|
|
|
(5 |
) |
|
|
153,306 |
|
|
|
(72 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total U.S. Government
backed securities |
|
|
538,131 |
|
|
|
(2,506 |
) |
|
|
1,902 |
|
|
|
(5 |
) |
|
|
540,033 |
|
|
|
(2,511 |
) |
Municipal securities |
|
|
3,508 |
|
|
|
(6 |
) |
|
|
3,801 |
|
|
|
(19 |
) |
|
|
7,309 |
|
|
|
(25 |
) |
Private-label CMO |
|
|
13,309 |
|
|
|
(86 |
) |
|
|
53,934 |
|
|
|
(12,168 |
) |
|
|
67,243 |
|
|
|
(12,254 |
) |
Asset-backed securities |
|
|
92,200 |
|
|
|
(93 |
) |
|
|
143,709 |
|
|
|
(134,925 |
) |
|
|
235,909 |
|
|
|
(135,018 |
) |
Covered bonds |
|
|
214,939 |
|
|
|
(3,244 |
) |
|
|
|
|
|
|
|
|
|
|
214,939 |
|
|
|
(3,244 |
) |
Corporate debt |
|
|
394,000 |
|
|
|
(4,593 |
) |
|
|
|
|
|
|
|
|
|
|
394,000 |
|
|
|
(4,593 |
) |
Other securities |
|
|
2,208 |
|
|
|
(118 |
) |
|
|
2,118 |
|
|
|
(884 |
) |
|
|
4,326 |
|
|
|
(1,002 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total temporarily impaired securities |
|
$ |
1,258,295 |
|
|
$ |
(10,646 |
) |
|
$ |
205,464 |
|
|
$ |
(148,001 |
) |
|
$ |
1,463,759 |
|
|
$ |
(158,647 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
104
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 12 Months |
|
|
Over 12 Months |
|
|
Total |
|
|
|
Fair |
|
|
Unrealized |
|
|
Fair |
|
|
Unrealized |
|
|
Fair |
|
|
Unrealized |
|
(dollar amounts in thousands) |
|
Value |
|
|
Losses |
|
|
Value |
|
|
Losses |
|
|
Value |
|
|
Losses |
|
December 31, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury |
|
$ |
51,781 |
|
|
$ |
(644 |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
51,781 |
|
|
$ |
(644 |
) |
Federal agencies: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities |
|
|
1,424,431 |
|
|
|
(51,328 |
) |
|
|
|
|
|
|
|
|
|
|
1,424,431 |
|
|
|
(51,328 |
) |
TLGP securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other agencies |
|
|
1,217,074 |
|
|
|
(17,134 |
) |
|
|
4,771 |
|
|
|
(86 |
) |
|
|
1,221,845 |
|
|
|
(17,220 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total U.S. Government
backed securities |
|
|
2,693,286 |
|
|
|
(69,106 |
) |
|
|
4,771 |
|
|
|
(86 |
) |
|
|
2,698,057 |
|
|
|
(69,192 |
) |
Municipal securities |
|
|
201,370 |
|
|
|
(6,363 |
) |
|
|
3,700 |
|
|
|
(120 |
) |
|
|
205,070 |
|
|
|
(6,483 |
) |
Private-label CMO |
|
|
|
|
|
|
|
|
|
|
85,617 |
|
|
|
(13,820 |
) |
|
|
85,617 |
|
|
|
(13,820 |
) |
Asset-backed securities |
|
|
214,983 |
|
|
|
(2,129 |
) |
|
|
146,866 |
|
|
|
(138,719 |
) |
|
|
361,849 |
|
|
|
(140,848 |
) |
Covered bonds |
|
|
367,209 |
|
|
|
(12,502 |
) |
|
|
|
|
|
|
|
|
|
|
367,209 |
|
|
|
(12,502 |
) |
Corporate debt |
|
|
288,660 |
|
|
|
(6,623 |
) |
|
|
|
|
|
|
|
|
|
|
288,660 |
|
|
|
(6,623 |
) |
Other securities |
|
|
|
|
|
|
|
|
|
|
41,218 |
|
|
|
(791 |
) |
|
|
41,218 |
|
|
|
(791 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total temporarily impaired securities |
|
$ |
3,765,508 |
|
|
$ |
(96,723 |
) |
|
$ |
282,172 |
|
|
$ |
(153,536 |
) |
|
$ |
4,047,680 |
|
|
$ |
(250,259 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 12 Months |
|
|
Over 12 Months |
|
|
Total |
|
|
|
Fair |
|
|
Unrealized |
|
|
Fair |
|
|
Unrealized |
|
|
Fair |
|
|
Unrealized |
|
(dollar amounts in thousands) |
|
Value |
|
|
Losses |
|
|
Value |
|
|
Losses |
|
|
Value |
|
|
Losses |
|
September 30, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Federal agencies: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities |
|
|
49,491 |
|
|
|
(99 |
) |
|
|
|
|
|
|
|
|
|
|
49,491 |
|
|
|
(99 |
) |
TLGP securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other agencies |
|
|
249,879 |
|
|
|
(121 |
) |
|
|
502 |
|
|
|
(2 |
) |
|
|
250,381 |
|
|
|
(123 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total U.S. Government
backed securities |
|
|
299,370 |
|
|
|
(220 |
) |
|
|
502 |
|
|
|
(2 |
) |
|
|
299,872 |
|
|
|
(222 |
) |
Municipal securities |
|
|
23,621 |
|
|
|
(168 |
) |
|
|
3,814 |
|
|
|
(6 |
) |
|
|
27,435 |
|
|
|
(174 |
) |
Private-label CMO |
|
|
|
|
|
|
|
|
|
|
172,450 |
|
|
|
(20,596 |
) |
|
|
172,450 |
|
|
|
(20,596 |
) |
Asset-backed securities |
|
|
79,753 |
|
|
|
(391 |
) |
|
|
179,729 |
|
|
|
(151,666 |
) |
|
|
259,482 |
|
|
|
(152,057 |
) |
Covered bonds |
|
|
25,335 |
|
|
|
(10 |
) |
|
|
|
|
|
|
|
|
|
|
25,335 |
|
|
|
(10 |
) |
Corporate debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other securities |
|
|
39,164 |
|
|
|
(635 |
) |
|
|
459 |
|
|
|
(175 |
) |
|
|
39,623 |
|
|
|
(810 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total temporarily impaired securities |
|
$ |
467,243 |
|
|
$ |
(1,424 |
) |
|
$ |
356,954 |
|
|
$ |
(172,445 |
) |
|
$ |
824,197 |
|
|
$ |
(173,869 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table is a summary of realized securities gains and losses for the three-month
and nine-month periods ended September 30, 2011 and 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
(dollar amounts in thousands) |
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
Gross gains on sales of securities |
|
$ |
174 |
|
|
$ |
7,930 |
|
|
$ |
16,532 |
|
|
$ |
22,811 |
|
Gross (losses) on sales of securities |
|
|
(160 |
) |
|
|
(5,509 |
) |
|
|
(10,624 |
) |
|
|
(10,980 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gain on sales of securities |
|
|
14 |
|
|
|
2,421 |
|
|
|
5,908 |
|
|
|
11,831 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other-than-temporary impairment recorded |
|
|
(1,364 |
) |
|
|
(2,717 |
) |
|
|
(5,711 |
) |
|
|
(12,002 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities gain (loss) |
|
$ |
(1,350 |
) |
|
$ |
(296 |
) |
|
$ |
197 |
|
|
$ |
(171 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Alt-A Mortgage-Backed, Pooled-Trust-Preferred, and Private-Label CMO Securities
Our three highest risk segments of our investment portfolio are the Alt-A mortgage-backed,
pooled-trust-preferred, and private-label CMO portfolios. The Alt-A mortgage-backed securities and
pooled-trust-preferred securities are in the asset-backed securities portfolio. The performance of
the underlying securities in each of these segments continued to reflect the economic environment.
Each of these securities in these three segments is subjected to a rigorous review of its projected
cash flows. These reviews are supported with analysis from independent third parties.
105
The following table presents the credit ratings for our Alt-A mortgage-backed,
pooled-trust-preferred, and private label CMO securities as of September 30, 2011:
Credit Ratings of Selected Investment Securities (1)
(dollar amounts in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized |
|
|
|
|
|
|
Average Credit Rating of Fair Value Amount |
|
|
|
Cost |
|
|
Fair Value |
|
|
AAA |
|
|
AA +/- |
|
|
A +/- |
|
|
BBB +/- |
|
|
<BBB- |
|
Private-label CMO securities |
|
$ |
90,409 |
|
|
$ |
78,900 |
|
|
$ |
1,698 |
|
|
$ |
|
|
|
$ |
24,068 |
|
|
$ |
7,758 |
|
|
$ |
45,376 |
|
Alt-A mortgage-backed securities |
|
|
59,534 |
|
|
|
51,578 |
|
|
|
|
|
|
|
24,446 |
|
|
|
9,310 |
|
|
|
|
|
|
|
17,822 |
|
Pooled-trust-preferred securities |
|
|
228,411 |
|
|
|
101,441 |
|
|
|
|
|
|
|
|
|
|
|
25,373 |
|
|
|
|
|
|
|
76,068 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total at September 30, 2011 |
|
$ |
378,354 |
|
|
$ |
231,919 |
|
|
$ |
1,698 |
|
|
$ |
24,446 |
|
|
$ |
58,751 |
|
|
$ |
7,758 |
|
|
$ |
139,266 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total at December 31, 2010 |
|
$ |
435,835 |
|
|
$ |
284,608 |
|
|
$ |
41,238 |
|
|
$ |
33,880 |
|
|
$ |
29,691 |
|
|
$ |
15,145 |
|
|
$ |
164,654 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Credit ratings reflect the lowest current rating assigned by a nationally recognized credit rating agency. |
Negative changes to the above credit ratings would generally result in an increase of our
risk-weighted assets, and a reduction to our regulatory capital ratios.
The following table summarizes the relevant characteristics of our pooled-trust-preferred
securities portfolio at September 30, 2011. Each security is part of a pool of issuers and supports
a more senior tranche of securities except for the I-Pre TSL II, MM Comm II and MM Comm III
securities which are the most senior class.
Trust Preferred Securities Data
September 30, 2011
(dollar amounts in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferrals |
|
|
Expected |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and |
|
|
Defaults |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
# of Issuers |
|
Defaults |
|
|
as a % of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lowest |
|
Currently |
|
as a % of |
|
|
Remaining |
|
|
|
|
|
|
|
|
|
|
Amortized |
|
|
Fair |
|
|
Unrealized |
|
|
Credit |
|
Performing/ |
|
Original |
|
|
Performing |
|
|
Excess |
|
Deal Name |
|
Par Value |
|
|
Cost |
|
|
Value |
|
|
Loss |
|
|
Rating (2) |
|
Remaining (3) |
|
Collateral |
|
|
Collateral |
|
|
Subordination (4) |
|
Alesco II (1) |
|
$ |
41,646 |
|
|
$ |
31,540 |
|
|
$ |
9,570 |
|
|
$ |
(21,970 |
) |
|
C |
|
31/37 |
|
|
14 |
% |
|
|
17 |
% |
|
|
|
% |
Alesco IV (1) |
|
|
20,964 |
|
|
|
8,243 |
|
|
|
354 |
|
|
|
(7,889 |
) |
|
C |
|
31/42 |
|
|
17 |
|
|
|
27 |
|
|
|
|
|
ICONS |
|
|
20,000 |
|
|
|
20,000 |
|
|
|
12,530 |
|
|
|
(7,470 |
) |
|
BB |
|
26/27 |
|
|
3 |
|
|
|
18 |
|
|
|
53 |
|
I-Pre TSL II |
|
|
36,657 |
|
|
|
36,559 |
|
|
|
25,373 |
|
|
|
(11,186 |
) |
|
A |
|
27/28 |
|
|
3 |
|
|
|
11 |
|
|
|
74 |
|
MM Comm II |
|
|
20,970 |
|
|
|
20,041 |
|
|
|
19,712 |
|
|
|
(329 |
) |
|
BB |
|
4/7 |
|
|
5 |
|
|
|
2 |
|
|
|
17 |
|
MM Comm III |
|
|
11,081 |
|
|
|
10,587 |
|
|
|
7,597 |
|
|
|
(2,990 |
) |
|
CC |
|
6/11 |
|
|
7 |
|
|
|
10 |
|
|
|
22 |
|
Pre TSL IX (1) |
|
|
5,000 |
|
|
|
3,955 |
|
|
|
1,272 |
|
|
|
(2,683 |
) |
|
C |
|
33/48 |
|
|
27 |
|
|
|
22 |
|
|
|
|
|
Pre TSL X (1) |
|
|
17,774 |
|
|
|
9,915 |
|
|
|
3,036 |
|
|
|
(6,879 |
) |
|
C |
|
33/53 |
|
|
42 |
|
|
|
37 |
|
|
|
|
|
Pre TSL XI (1) |
|
|
25,426 |
|
|
|
22,667 |
|
|
|
6,669 |
|
|
|
(15,998 |
) |
|
C |
|
44/64 |
|
|
27 |
|
|
|
21 |
|
|
|
|
|
Pre TSL XIII (1) |
|
|
28,207 |
|
|
|
22,702 |
|
|
|
6,943 |
|
|
|
(15,759 |
) |
|
C |
|
44/64 |
|
|
31 |
|
|
|
21 |
|
|
|
|
|
Reg Diversified (1) |
|
|
25,500 |
|
|
|
7,296 |
|
|
|
303 |
|
|
|
(6,993 |
) |
|
D |
|
23/44 |
|
|
46 |
|
|
|
28 |
|
|
|
|
|
Soloso (1) |
|
|
12,500 |
|
|
|
3,906 |
|
|
|
506 |
|
|
|
(3,400 |
) |
|
C |
|
43/67 |
|
|
27 |
|
|
|
20 |
|
|
|
|
|
Tropic III |
|
|
31,000 |
|
|
|
31,000 |
|
|
|
7,576 |
|
|
|
(23,424 |
) |
|
CC |
|
23/44 |
|
|
42 |
|
|
|
36 |
|
|
|
20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
296,725 |
|
|
$ |
228,411 |
|
|
$ |
101,441 |
|
|
$ |
(126,970 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Security was determined to have OTTI. As such, the book value is net of recorded credit
impairment. |
|
(2) |
|
For purposes of comparability, the lowest credit rating expressed is equivalent to Fitch
ratings even where the lowest rating is based on another nationally recognized credit rating
agency. |
|
(3) |
|
Includes both banks and/or insurance companies. |
|
(4) |
|
Excess subordination percentage represents the additional defaults in excess of both current
and projected defaults that the CDO can absorb before the bond experiences credit impairment.
Excess subordinated percentage is calculated by (a) determining what percentage of defaults a deal
can experience before the bond has credit impairment, and (b) subtracting from this default
breakage percentage both total current and expected future default percentages. |
106
Security Impairment
Huntington evaluates its available-for-sale securities portfolio on a quarterly basis for
indicators of OTTI. Huntington assesses whether OTTI has occurred when the fair value of a debt
security is less than the amortized cost basis at period-end. Management reviews the amount of
unrealized loss, the length of time the security has been in an unrealized loss position, the
credit rating history, market trends of similar security classes, time remaining to maturity, and
the source of both interest and principal
payments to identify securities which could potentially be impaired. OTTI is considered to
have occurred; (1) if Huntington intends to sell the security; (2) if it is more likely than not
Huntington will be required to sell the security before recovery of its amortized cost basis; or
(3) the present value of the expected cash flows is not sufficient to recover all contractually
required principal and interest payments.
For securities that Huntington does not expect to sell or it is not more likely than not to be
required to sell, the OTTI is separated into credit and noncredit components. A discounted cash
flow analysis, which includes evaluating the timing of the expected cash flows, is completed for
all debt securities subject to credit impairment. The measurement of the credit loss component is
equal to the difference between the debt securitys cost basis and the present value of its
expected future cash flows discounted at the securitys effective yield. The credit-related OTTI,
represented by the expected loss in principal, is recognized in noninterest income. The remaining
difference between the securitys fair value and the present value of future expected cash flows is
due to factors that are not credit-related and, therefore, are recognized in OCI. Huntington
believes that it will fully collect the carrying value of securities on which noncredit-related
impairment has been recognized in OCI. Noncredit-related OTTI results from other factors, including
increased liquidity spreads and extension of the security. For securities which Huntington does
expect to sell, or if it is more likely than not Huntington will be required to sell the security
before recovery of its amortized cost basis, all OTTI is recognized in earnings. Presentation of
OTTI is made in the Condensed Consolidated Statements of Income on a gross basis with a reduction
for the amount of OTTI recognized in OCI. Once an OTTI is recorded, when future cash flows can be
reasonably estimated, future cash flows are re-allocated between interest and principal cash flows
to provide for a level-yield on the security.
Huntington applied the related OTTI guidance on the debt security types listed below.
Alt-A mortgage-backed and private-label CMO securities are collateralized by
first-lien residential mortgage loans. The securities are valued by a third party specialist using
a discounted cash flow approach and proprietary pricing model. The model uses inputs such as
estimated prepayment speeds, losses, recoveries, default rates that are implied by the underlying
performance of collateral in the structure or similar structures, discount rates that are implied
by market prices for similar securities, collateral structure types, and house price depreciation /
appreciation rates that are based upon macroeconomic forecasts.
Pooled-trust-preferred securities are CDOs backed by a pool of debt securities issued
by financial institutions. The collateral generally consists of trust-preferred securities and
subordinated debt securities issued by banks, bank holding companies, and insurance companies. A
full cash flow analysis is used to estimate fair values and assess impairment for each security
within this portfolio. We engaged a third party specialist with direct industry experience in
pooled-trust-preferred securities valuations to provide assistance in estimating the fair value and
expected cash flows for each security in this portfolio. Relying on cash flows is necessary because
there was a lack of observable transactions in the market and many of the original sponsors or
dealers for these securities are no longer able to provide a fair value that is compliant with ASC
820.
For the three-month and nine-month periods ended September 30, 2011 and 2010, the following
tables summarize by debt security type, total OTTI losses, unrealized OTTI losses included in OCI,
and OTTI recognized in the Unaudited Condensed Consolidated Statements of Income for securities
evaluated for impairment as described above.
107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
|
|
Alt-A |
|
|
Pooled- |
|
|
Private- |
|
|
|
|
(dollar amounts in thousands) |
|
Mortgage-backed |
|
|
trust-preferred |
|
|
label CMO |
|
|
Total |
|
2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total OTTI recoveries (losses) (unrealized and
realized) |
|
$ |
(339 |
) |
|
$ |
(4,497 |
) |
|
$ |
(890 |
) |
|
$ |
(5,726 |
) |
Unrealized OTTI
(recoveries) losses
recognized in OCI |
|
|
208 |
|
|
|
4,293 |
|
|
|
(139 |
) |
|
|
4,362 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net impairment losses recognized in earnings |
|
$ |
(131 |
) |
|
$ |
(204 |
) |
|
$ |
(1,029 |
) |
|
$ |
(1,364 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total OTTI recoveries (losses) (unrealized and
realized) |
|
$ |
1,112 |
|
|
$ |
18,877 |
|
|
$ |
7,786 |
|
|
$ |
27,775 |
|
Unrealized OTTI
(recoveries) losses
recognized in OCI |
|
|
(1,472 |
) |
|
|
(19,075 |
) |
|
|
(9,945 |
) |
|
|
(30,492 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net impairment losses recognized in earnings |
|
$ |
(360 |
) |
|
$ |
(198 |
) |
|
$ |
(2,159 |
) |
|
$ |
(2,717 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
|
|
Alt-A |
|
|
Pooled- |
|
|
Private- |
|
|
|
|
(dollar amounts in thousands) |
|
Mortgage-backed |
|
|
trust-preferred |
|
|
label CMO |
|
|
Total |
|
2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total OTTI (losses) recoveries (unrealized and
realized) |
|
$ |
597 |
|
|
$ |
2,334 |
|
|
$ |
2,437 |
|
|
$ |
5,368 |
|
Unrealized OTTI
losses (recoveries)
recognized in OCI |
|
|
(958 |
) |
|
|
(5,744 |
) |
|
|
(4,377 |
) |
|
|
(11,079 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net impairment losses recognized in earnings |
|
$ |
(361 |
) |
|
$ |
(3,410 |
) |
|
$ |
(1,940 |
) |
|
$ |
(5,711 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total OTTI (losses) recoveries (unrealized and
realized) |
|
$ |
(3,065 |
) |
|
$ |
21,229 |
|
|
$ |
6,404 |
|
|
$ |
24,568 |
|
Unrealized OTTI
losses (recoveries)
recognized in OCI |
|
|
1,503 |
|
|
|
(24,643 |
) |
|
|
(13,430 |
) |
|
|
(36,570 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net impairment losses recognized in earnings |
|
$ |
(1,562 |
) |
|
$ |
(3,414 |
) |
|
$ |
(7,026 |
) |
|
$ |
(12,002 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table rolls forward the unrealized OTTI recognized in OCI on debt securities
held by Huntington for the three-month and nine-month periods ended September 30, 2011 and 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
(dollar amounts in thousands) |
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
Balance, beginning of period |
|
$ |
85,397 |
|
|
$ |
118,330 |
|
|
$ |
100,838 |
|
|
$ |
124,408 |
|
Reductions from sales of securities with credit impairment |
|
|
|
|
|
|
(9,223 |
) |
|
|
(1,053 |
) |
|
|
(9,223 |
) |
Noncredit impairment on securities not previously
considered credit impaired |
|
|
|
|
|
|
675 |
|
|
|
|
|
|
|
9,584 |
|
Change due to improvement in expected cash flows |
|
|
(425 |
) |
|
|
(27,997 |
) |
|
|
(16,466 |
) |
|
|
(45,657 |
) |
Additional noncredit impairment on securities with
previous credit impairment |
|
|
4,787 |
|
|
|
6,053 |
|
|
|
6,440 |
|
|
|
8,726 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of period |
|
$ |
89,759 |
|
|
$ |
87,838 |
|
|
$ |
89,759 |
|
|
$ |
87,838 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table rolls forward the OTTI recognized in earnings on debt securities held by
Huntington for the three-month and nine-month periods ended September 30, 2011 and 2010 as follows.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
(dollar amounts in thousands) |
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
Balance, beginning of period |
|
$ |
54,402 |
|
|
$ |
58,612 |
|
|
$ |
54,536 |
|
|
$ |
53,801 |
|
Reductions from sales |
|
|
|
|
|
|
(7,845 |
) |
|
|
(4,481 |
) |
|
|
(12,319 |
) |
Credit losses not previously recognized |
|
|
26 |
|
|
|
99 |
|
|
|
26 |
|
|
|
1,656 |
|
Additional credit losses |
|
|
1,338 |
|
|
|
2,618 |
|
|
|
5,685 |
|
|
|
10,346 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of period |
|
$ |
55,766 |
|
|
$ |
53,484 |
|
|
$ |
55,766 |
|
|
$ |
53,484 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
108
The fair values of these assets have been impacted by various market conditions. The
unrealized losses were primarily the result of wider liquidity spreads on asset-backed securities
and increased market volatility on nonagency mortgage and asset-backed
securities that are collateralized by certain mortgage loans. In addition, the expected
average lives of the asset-backed securities backed by trust-preferred securities have been
extended, due to changes in the expectations of when the underlying securities would be repaid. The
contractual terms and / or cash flows of the investments do not permit the issuer to settle the
securities at a price less than the amortized cost. Huntington does not intend to sell, nor does it
believe it will be required to sell these securities until the fair value is recovered, which may
be maturity and, therefore, does not consider them to be other-than-temporarily impaired at
September 30, 2011.
As of September 30, 2011, Management has evaluated all other investment securities with
unrealized losses and all non-marketable securities for impairment and concluded no additional OTTI
is required.
5. HELD-TO-MATURITY SECURITIES
These are debt securities that Huntington has the intent and ability to hold until maturity.
The debt securities are carried at amortized cost and adjusted for amortization of premiums and
accretion of discounts using the interest method.
Huntington transferred $469.1 million of federal agencies, mortgage-backed securities from the
available-for-sale securities portfolio to the held-to-maturity securities portfolio in the 2011
second quarter. The securities were reclassified at fair value at the date of transfer. At the time
of the transfer, $0.5 million of unrealized net gains were recognized in OCI. The amounts in OCI
will be recognized in earnings over the remaining life of the securities as an offset to the
adjustment of yield in a manner consistent with the amortization of the premium on the same
transferred securities, resulting in an immaterial impact on net income.
During 2011, Huntington purchased additional federal agencies, mortgage-backed
securities, which were classified directly into the held-to-maturity portfolio.
Listed below are the contractual maturities (under 1 year, 1-5 years, 6-10 years, and over 10
years) of held-to-maturity securities at September 30, 2011. There were no securities classified as
held-to-maturity at December 31, 2010 or September 30, 2010.
|
|
|
|
|
|
|
|
|
|
|
September 30, 2011 |
|
|
|
Amortized |
|
|
Fair |
|
(dollar amounts in thousands) |
|
Cost |
|
|
Value |
|
Federal agencies: mortgage-backed securities: |
|
|
|
|
|
|
|
|
Under 1 year |
|
$ |
|
|
|
$ |
|
|
1-5 years |
|
|
|
|
|
|
|
|
6-10 years |
|
|
|
|
|
|
|
|
Over 10 years |
|
|
658,250 |
|
|
|
682,897 |
|
|
|
|
|
|
|
|
Total Federal agencies: mortgage-backed securities |
|
|
658,250 |
|
|
|
682,897 |
|
|
|
|
|
|
|
|
Total U.S. Government backed agencies |
|
|
658,250 |
|
|
|
682,897 |
|
|
|
|
|
|
|
|
Total held-to-maturity securities |
|
$ |
658,250 |
|
|
$ |
682,897 |
|
|
|
|
|
|
|
|
The following table provides amortized cost, gross unrealized gains and losses, and fair value
by investment category at September 30, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized |
|
|
|
|
|
|
Amortized |
|
|
Gross |
|
|
Gross |
|
|
Fair |
|
(dollar amounts in thousands) |
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Value |
|
September 30, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal Agencies: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities |
|
$ |
658,250 |
|
|
$ |
24,647 |
|
|
$ |
|
|
|
$ |
682,897 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total U.S. Government
backed securities |
|
|
658,250 |
|
|
|
24,647 |
|
|
|
|
|
|
|
682,897 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total held-to-maturity securities |
|
$ |
658,250 |
|
|
$ |
24,647 |
|
|
$ |
|
|
|
$ |
682,897 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
109
6. LOAN SALES AND SECURITIZATIONS
Residential Mortgage Loans
The following table summarizes activity relating to residential mortgage loans sold with
servicing retained for the three-month and nine-month periods ended September 30, 2011 and 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
(dollar amounts in thousands) |
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
Residential mortgage loans sold with servicing retained |
|
$ |
515,179 |
|
|
$ |
924,494 |
|
|
$ |
2,264,697 |
|
|
$ |
2,463,509 |
|
Pretax gains resulting from above loan sales (1) |
|
|
12,737 |
|
|
|
21,842 |
|
|
|
57,982 |
|
|
|
55,266 |
|
|
|
|
(1) |
|
Recorded in other noninterest income. |
A MSR is established only when the servicing is contractually separated from the underlying
mortgage loans by sale or securitization of the loans with servicing rights retained. At the time
of initial capitalization, MSRs are recorded using either the fair value method or the amortization
method. MSRs are included in accrued income and other assets. Any increase or decrease in the fair
value of MSRs carried under the fair value method, as well as amortization or impairment of MSRs
recorded using the amortization method, is recorded as an increase or decrease in mortgage banking
income, which is included in noninterest income. When the fair value method is used, the MSR asset
is established at its fair value at initial recognition using assumptions consistent with
assumptions used to estimate the fair value of existing MSRs carried at fair value in the
portfolio.
The following tables summarize the changes in MSRs recorded using either the fair value method
or the amortization method for the three-month and nine-month periods ended September 30, 2011 and
2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
Fair Value Method: |
|
September 30, |
|
|
September 30, |
|
(dollar amounts in thousands) |
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
Fair value, beginning of period |
|
$ |
104,997 |
|
|
$ |
132,405 |
|
|
$ |
125,679 |
|
|
$ |
176,426 |
|
Change in fair value during the period due to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time decay (1) |
|
|
(1,222 |
) |
|
|
(1,088 |
) |
|
|
(3,987 |
) |
|
|
(4,295 |
) |
Payoffs (2) |
|
|
(4,614 |
) |
|
|
(9,158 |
) |
|
|
(15,013 |
) |
|
|
(22,835 |
) |
Changes in valuation inputs or assumptions (3) |
|
|
(25,337 |
) |
|
|
(10,004 |
) |
|
|
(32,855 |
) |
|
|
(37,141 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value, end of period: |
|
$ |
73,824 |
|
|
$ |
112,155 |
|
|
$ |
73,824 |
|
|
$ |
112,155 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Represents decrease in value due to passage of time, including the impact from both regularly
scheduled loan principal payments and partial loan paydowns. |
|
(2) |
|
Represents decrease in value associated with loans that paid off during the period. |
|
(3) |
|
Represents change in value resulting primarily from market-driven changes in interest rates and
prepayment spreads. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
Amortization Method: |
|
September 30, |
|
|
September 30, |
|
(dollar amounts in thousands) |
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
Carrying value, beginning of period |
|
$ |
84,742 |
|
|
$ |
46,733 |
|
|
$ |
70,516 |
|
|
$ |
38,165 |
|
New servicing assets created |
|
|
4,572 |
|
|
|
7,506 |
|
|
|
24,549 |
|
|
|
24,247 |
|
Impairment charge |
|
|
(14,057 |
) |
|
|
(2,043 |
) |
|
|
(14,057 |
) |
|
|
(6,899 |
) |
Amortization and other |
|
|
(3,804 |
) |
|
|
(2,757 |
) |
|
|
(9,555 |
) |
|
|
(6,074 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying value, end of period |
|
$ |
71,453 |
|
|
$ |
49,439 |
|
|
$ |
71,453 |
|
|
$ |
49,439 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value, end of period |
|
$ |
71,467 |
|
|
$ |
50,832 |
|
|
$ |
71,467 |
|
|
$ |
50,832 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MSRs do not trade in an active, open market with readily observable prices. While sales of
MSRs occur, the precise terms and conditions are typically not readily available. Therefore, the
fair value of MSRs is estimated using a discounted future cash flow model. The model considers
portfolio characteristics, contractually specified servicing fees and assumptions related to
prepayments, delinquency rates, late charges, other ancillary revenues, costs to service, and other
economic factors. Changes in the assumptions used may have a significant impact on the valuation of
MSRs.
110
A summary of key assumptions and the sensitivity of the MSR value at September 30, 2011, to
changes in these assumptions follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decline in fair value due to |
|
|
|
|
|
|
|
10% |
|
|
20% |
|
|
|
|
|
|
|
adverse |
|
|
adverse |
|
(dollar amounts in thousands) |
|
Actual |
|
|
change |
|
|
change |
|
Constant prepayment rate |
|
|
18.64 |
% |
|
$ |
(4,729 |
) |
|
$ |
(9,388 |
) |
Spread over forward interest rate swap rates |
|
658 |
bps |
|
|
(1,741 |
) |
|
|
(3,482 |
) |
MSR values are very sensitive to movements in interest rates as expected future net servicing
income depends on the projected outstanding principal balances of the underlying loans, which can
be greatly impacted by the level of prepayments. Huntington hedges the fair value portfolio of MSRs
against changes in value attributable to changes in interest rates through a combination of
derivative instruments and trading securities.
Total servicing fees included in mortgage banking income amounted to $12.1 million and $12.1
million for the three-month periods ended September 30, 2011 and 2010, respectively. For the
nine-month periods ending September 30, 2011 and 2010, servicing fees totaled $37.1 million and
$36.6 million, respectively.
Automobile Loans and Leases
During the 2011 third quarter, Huntington transferred automobile loans totaling $1.0 billion
to a trust in a securitization transaction and received $1.0 billion of net proceeds. The
securitization qualified for sale accounting. As a result of this transaction, Huntington
recognized a $15.5 million gain which is reflected in other noninterest income on the Condensed
Consolidated Statement of Income and recorded a $16.0 million servicing asset which is reflected in
accrued income and other assets on the Condensed Consolidated Balance Sheet.
Automobile loan servicing rights are accounted for using the amortization method. A servicing
asset is established at fair value at the time of the sale. The servicing asset is then amortized
against servicing income. Impairment, if any, is recognized when carrying value exceeds the fair
value as determined by calculating the present value of expected net future cash flows. The primary
risk characteristic for measuring servicing assets is payoff rates of the underlying loan pools.
Valuation calculations rely on the predicted payoff assumption and, if actual payoff is quicker
than expected, then future value would be impaired.
Changes in the carrying value of automobile loan servicing rights for the three-month periods
ended September 30, 2011, and 2010, and the fair value at the end of each period were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
(dollar amounts in thousands) |
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
Carrying value, beginning of period |
|
$ |
49 |
|
|
$ |
373 |
|
|
$ |
97 |
|
|
$ |
12,912 |
|
New servicing assets created |
|
|
16,039 |
|
|
|
|
|
|
|
16,039 |
|
|
|
|
|
Amortization and other (1) |
|
|
(743 |
) |
|
|
(228 |
) |
|
|
(791 |
) |
|
|
(12,767 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying value, end of period |
|
$ |
15,345 |
|
|
$ |
145 |
|
|
$ |
15,345 |
|
|
$ |
145 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value, end of period |
|
$ |
16,039 |
|
|
$ |
387 |
|
|
$ |
16,039 |
|
|
$ |
387 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The nine months ended September 30, 2010, included a $12.4 million reduction related to the
consolidation of a VIE in the 2010 first quarter. |
Huntington has retained servicing responsibilities on sold automobile loans and receives
annual servicing fees and other ancillary fees on the outstanding loan balances. Servicing income,
net of amortization of capitalized servicing assets, amounted to $0.3 million and $0.5 million for
the three-month periods ending September 30, 2011, and 2010, respectively. For the nine-month
periods ended September 30, 2011, and 2010, servicing income, net of amortization of capitalized
servicing assets, was $1.0 million and $2.1 million, respectively.
7. GOODWILL AND OTHER INTANGIBLE ASSETS
A rollforward of goodwill by business segment for the first nine-month period of 2011 was as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail & |
|
|
Regional & |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business |
|
|
Commercial |
|
|
|
|
|
|
|
|
|
|
Treasury/ |
|
|
Huntington |
|
(dollar amounts in thousands) |
|
Banking |
|
|
Banking |
|
|
AFCRE |
|
|
WGH |
|
|
Other |
|
|
Consolidated |
|
Balance, beginning of period |
|
$ |
286,824 |
|
|
$ |
16,169 |
|
|
$ |
|
|
|
$ |
98,951 |
|
|
$ |
42,324 |
|
|
$ |
444,268 |
|
Adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of period |
|
$ |
286,824 |
|
|
$ |
16,169 |
|
|
$ |
|
|
|
$ |
98,951 |
|
|
$ |
42,324 |
|
|
$ |
444,268 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
111
Goodwill is not amortized but is evaluated for impairment on an annual basis at October 1 of
each year or whenever events or changes in circumstances indicate the carrying value may not be
recoverable. No events or changes in circumstances since the October 1, 2010, annual impairment
test were noted that would indicate it was more likely than not a goodwill impairment exists.
At September 30, 2011, December 31, 2010, and September 30, 2010, Huntingtons other
intangible assets consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross |
|
|
|
|
|
|
Net |
|
|
|
Carrying |
|
|
Accumulated |
|
|
Carrying |
|
(dollar amounts in thousands) |
|
Amount |
|
|
Amortization |
|
|
Value |
|
|
|
|
|
|
|
|
|
|
September 30, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
Core deposit intangible |
|
$ |
376,846 |
|
|
$ |
(252,397 |
) |
|
$ |
124,449 |
|
Customer relationship |
|
|
104,574 |
|
|
|
(40,993 |
) |
|
|
63,581 |
|
Other |
|
|
25,164 |
|
|
|
(24,717 |
) |
|
|
447 |
|
|
|
|
|
|
|
|
|
|
|
Total other intangible assets |
|
$ |
506,584 |
|
|
$ |
(318,107 |
) |
|
$ |
188,477 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
Core deposit intangible |
|
$ |
376,846 |
|
|
$ |
(219,311 |
) |
|
$ |
157,535 |
|
Customer relationship |
|
|
104,574 |
|
|
|
(34,751 |
) |
|
|
69,823 |
|
Other |
|
|
25,164 |
|
|
|
(23,902 |
) |
|
|
1,262 |
|
|
|
|
|
|
|
|
|
|
|
Total other intangible assets |
|
$ |
506,584 |
|
|
$ |
(277,964 |
) |
|
$ |
228,620 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
Core deposit intangible |
|
$ |
376,846 |
|
|
$ |
(206,658 |
) |
|
$ |
170,188 |
|
Customer relationship |
|
|
104,574 |
|
|
|
(32,579 |
) |
|
|
71,995 |
|
Other |
|
|
25,164 |
|
|
|
(23,681 |
) |
|
|
1,483 |
|
|
|
|
|
|
|
|
|
|
|
Total other intangible assets |
|
$ |
506,584 |
|
|
$ |
(262,918 |
) |
|
$ |
243,666 |
|
|
|
|
|
|
|
|
|
|
|
The estimated amortization expense of other intangible assets for the fourth quarter of 2011
and the next five years is as follows:
|
|
|
|
|
|
|
Amortization |
|
(dollar amounts in thousands) |
|
Expense |
|
|
|
|
|
|
2011 |
|
$ |
13,188 |
|
2012 |
|
|
46,075 |
|
2013 |
|
|
40,511 |
|
2014 |
|
|
35,858 |
|
2015 |
|
|
19,758 |
|
2016 |
|
|
6,606 |
|
112
8. OTHER COMPREHENSIVE INCOME
The components of other comprehensive income for the three-month and nine-month periods ended
September 30, 2011 and 2010, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
September 30, 2011 |
|
|
|
|
|
|
|
Tax (Expense) |
|
|
|
|
(dollar amounts in thousands) |
|
Pretax |
|
|
Benefit |
|
|
After-tax |
|
Noncredit-related impairment recoveries (losses) on debt securities not expected to be sold |
|
$ |
(4,362 |
) |
|
$ |
1,527 |
|
|
$ |
(2,835 |
) |
Unrealized holding gains (losses) on available-for-sale debt securities arising during
the period |
|
|
42,832 |
|
|
|
(15,180 |
) |
|
|
27,652 |
|
Less: Reclassification adjustment for net losses (gains) included in net income |
|
|
1,350 |
|
|
|
(473 |
) |
|
|
877 |
|
|
|
|
|
|
|
|
|
|
|
Net change in unrealized holding gains (losses) on available-for-sale debt securities |
|
|
39,820 |
|
|
|
(14,126 |
) |
|
|
25,694 |
|
|
|
|
|
|
|
|
|
|
|
Net change in unrealized holding gains (losses) on available-for-sale equity securities |
|
|
(197 |
) |
|
|
69 |
|
|
|
(128 |
) |
Unrealized gains (losses) on derivatives used in cash flow hedging relationships
arising during the period |
|
|
21,494 |
|
|
|
(7,523 |
) |
|
|
13,971 |
|
Change in pension and post-retirement benefit plan assets and liabilities |
|
|
4,003 |
|
|
|
(1,401 |
) |
|
|
2,602 |
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income |
|
$ |
65,120 |
|
|
$ |
(22,981 |
) |
|
$ |
42,139 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
September 30, 2010 |
|
|
|
|
|
|
|
Tax (Expense) |
|
|
|
|
(dollar amounts in thousands) |
|
Pretax |
|
|
Benefit |
|
|
After-tax |
|
Noncredit-related impairment recoveries (losses) on debt securities not expected to be sold |
|
$ |
30,492 |
|
|
$ |
(10,672 |
) |
|
$ |
19,820 |
|
Unrealized holding gains (losses) on available-for-sale debt securities arising during
the period |
|
|
28,767 |
|
|
|
(10,276 |
) |
|
|
18,491 |
|
Less: Reclassification adjustment for net losses (gains) included in net income |
|
|
296 |
|
|
|
(104 |
) |
|
|
192 |
|
|
|
|
|
|
|
|
|
|
|
Net change in unrealized holding gains (losses) on available-for-sale debt securities |
|
|
59,555 |
|
|
|
(21,052 |
) |
|
|
38,503 |
|
|
|
|
|
|
|
|
|
|
|
Net change in unrealized holding gains (losses) on available-for-sale equity securities |
|
|
(53 |
) |
|
|
19 |
|
|
|
(34 |
) |
Unrealized gains (losses) on derivatives used in cash flow hedging relationships
arising during the period |
|
|
25,180 |
|
|
|
(8,813 |
) |
|
|
16,367 |
|
Change in pension and post-retirement benefit plan assets and liabilities |
|
|
1,794 |
|
|
|
(628 |
) |
|
|
1,166 |
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income |
|
$ |
86,476 |
|
|
$ |
(30,474 |
) |
|
$ |
56,002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
|
|
September 30, 2011 |
|
|
|
|
|
|
|
Tax (expense) |
|
|
|
|
(dollar amounts in thousands) |
|
Pretax |
|
|
Benefit |
|
|
After-tax |
|
Non credit related impairment recoveries (losses) on debt securities not expected to be sold |
|
$ |
11,079 |
|
|
$ |
(3,878 |
) |
|
$ |
7,201 |
|
Unrealized holding gains (losses) on available-for-sale debt securities arising during
the period |
|
|
132,575 |
|
|
|
(46,446 |
) |
|
|
86,129 |
|
Less: Reclassification adjustment for net losses (gains) included in net income |
|
|
(197 |
) |
|
|
69 |
|
|
|
(128 |
) |
|
|
|
|
|
|
|
|
|
|
Net change in unrealized holding gains (losses) on available-for-sale debt securities |
|
|
143,457 |
|
|
|
(50,255 |
) |
|
|
93,202 |
|
|
|
|
|
|
|
|
|
|
|
Net change in unrealized holding gains (losses) on available-for-sale equity securities |
|
|
(145 |
) |
|
|
50 |
|
|
|
(95 |
) |
Unrealized gains (losses) on derivatives used in cash flow hedging relationships
arising during the period |
|
|
24,897 |
|
|
|
(8,714 |
) |
|
|
16,183 |
|
Change in pension and post-retirement benefit plan assets and liabilities |
|
|
12,003 |
|
|
|
(4,201 |
) |
|
|
7,802 |
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income |
|
$ |
180,212 |
|
|
$ |
(63,120 |
) |
|
$ |
117,092 |
|
|
|
|
|
|
|
|
|
|
|
113
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
|
|
September 30, 2010 |
|
|
|
|
|
|
|
Tax (expense) |
|
|
|
|
(dollar amounts in thousands) |
|
Pretax |
|
|
Benefit |
|
|
After-tax |
|
Cumulative effect of change in accounting principle for consolidation of variable interest
entities |
|
$ |
(6,365 |
) |
|
$ |
2,116 |
|
|
$ |
(4,249 |
) |
Non credit related impairment recoveries (losses) on debt securities not expected to be sold |
|
|
36,570 |
|
|
|
(12,799 |
) |
|
|
23,771 |
|
Unrealized holding gains (losses) on available-for-sale debt securities arising during the
period |
|
|
137,051 |
|
|
|
(48,578 |
) |
|
|
88,473 |
|
Less: Reclassification adjustment for net losses (gains) included in net income |
|
|
171 |
|
|
|
(60 |
) |
|
|
111 |
|
|
|
|
|
|
|
|
|
|
|
Net change in unrealized holding gains (losses) on available-for-sale debt securities |
|
|
173,792 |
|
|
|
(61,437 |
) |
|
|
112,355 |
|
|
|
|
|
|
|
|
|
|
|
Net change in unrealized holding gains (losses) on available-for-sale equity securities |
|
|
(241 |
) |
|
|
85 |
|
|
|
(156 |
) |
Unrealized gains (losses) on derivatives used in cash flow hedging relationships arising
during the period |
|
|
26,371 |
|
|
|
(9,230 |
) |
|
|
17,141 |
|
Change in pension and post-retirement benefit plan assets and liabilities |
|
|
5,382 |
|
|
|
(1,884 |
) |
|
|
3,498 |
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income |
|
$ |
198,939 |
|
|
$ |
(70,350 |
) |
|
$ |
128,589 |
|
|
|
|
|
|
|
|
|
|
|
Activity in accumulated other comprehensive income, net of tax, for the nine-month
periods ended September 30, 2011 and 2010, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized |
|
|
Unrealized |
|
|
|
|
|
|
|
|
|
|
Unrealized |
|
|
gains and |
|
|
gains (losses) |
|
|
|
|
|
|
Unrealized |
|
|
gains and |
|
|
(losses) on |
|
|
for pension |
|
|
|
|
|
|
gains and |
|
|
(losses) on |
|
|
cash flow |
|
|
and other post- |
|
|
|
|
|
|
(losses) on debt |
|
|
equity |
|
|
hedging |
|
|
retirement |
|
|
|
|
(dollar amounts in thousands) |
|
securities (1) |
|
|
securities |
|
|
derivatives |
|
|
obligations |
|
|
Total |
|
Balance, December 31, 2009 |
|
$ |
(103,060 |
) |
|
$ |
(322 |
) |
|
$ |
58,865 |
|
|
$ |
(112,468 |
) |
|
$ |
(156,985 |
) |
Cumulative effect of change
in accounting principle for
consolidation of variable
interest entities |
|
|
(4,249 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,249 |
) |
Period change |
|
|
112,355 |
|
|
|
(156 |
) |
|
|
17,141 |
|
|
|
3,498 |
|
|
|
132,838 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2010 |
|
$ |
5,046 |
|
|
$ |
(478 |
) |
|
$ |
76,006 |
|
|
$ |
(108,970 |
) |
|
$ |
(28,396 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2010 |
|
$ |
(101,290 |
) |
|
$ |
(427 |
) |
|
$ |
35,710 |
|
|
$ |
(131,489 |
) |
|
$ |
(197,496 |
) |
Period change |
|
|
93,202 |
|
|
|
(95 |
) |
|
|
16,183 |
|
|
|
7,802 |
|
|
|
117,092 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2011 |
|
$ |
(8,088 |
) |
|
$ |
(522 |
) |
|
$ |
51,893 |
|
|
$ |
(123,687 |
) |
|
$ |
(80,404 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Amount at September 30, 2011 includes $0.4 million of net unrealized gains on securities
transferred from the available-for-sale securities portfolio to the held-to-maturity securities
portfolio. The net unrealized gains will be recognized in earnings over the remaining life of the
security using the effective interest method. |
9. SHAREHOLDERS EQUITY
Repurchase of Outstanding TARP Capital and Warrant to Repurchase Common Stock
In 2008, Huntington received $1.4 billion of equity capital by issuing to the Treasury 1.4
million shares of TARP Capital and a ten-year warrant to purchase up to 23.6 million shares of
Huntingtons common stock, par value $0.01 per share, at an exercise price of $8.90 per share. As
approved by the Federal Reserve Board, the Treasury, and our other banking regulators, on December
22, 2010, Huntington repurchased all 1.4 million shares of our TARP Capital held by the Treasury
totaling $1.4 billion. Huntington used the net proceeds from the issuance of common stock and
subordinated debt, as well as other funds, to redeem the TARP Capital. On January 19, 2011,
Huntington repurchased the warrant originally issued to the Treasury for a purchase price of $49.1
million.
Share Repurchase Program
Huntington did not repurchase any shares for the three-month or nine-month periods ended
September 30, 2011 and 2010.
Dividends on common stock
On October 20, 2011, Huntington announced that the board of directors had declared a quarterly
common stock cash dividend of $0.04 per common share. The dividend is payable on January 3, 2012,
to shareholders of record on December 20, 2011.
114
10. EARNINGS PER SHARE
Basic earnings per share is the amount of earnings (adjusted for dividends declared on
preferred stock) available to each share of common stock outstanding during the reporting period.
Diluted earnings per share is the amount of earnings available to each share of common stock
outstanding during the reporting period adjusted to include the effect of potentially dilutive
common shares. Potentially dilutive common shares include incremental shares issued for stock
options, restricted stock units and awards, distributions from deferred compensation plans, and the
conversion of Huntingtons convertible preferred stock. Potentially dilutive common
shares are excluded from the computation of diluted earnings per share in periods in which the
effect would be antidilutive. For diluted earnings per share, net income available to common shares
can be affected by the conversion of Huntingtons convertible preferred stock. Where the effect of
this conversion would be dilutive, net income available to common shareholders is adjusted by the
associated preferred dividends and deemed dividend. The calculation of basic and diluted earnings
per share for each of the three-month and nine-month periods ended September 30, 2011 and 2010, was
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
(dollar amounts in thousands, except per share amounts) |
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
Basic earnings per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
143,391 |
|
|
$ |
100,946 |
|
|
$ |
415,755 |
|
|
$ |
189,447 |
|
Preferred stock dividends, deemed dividend and accretion of discount |
|
|
(7,703 |
) |
|
|
(29,495 |
) |
|
|
(23,110 |
) |
|
|
(88,278 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common shareholders |
|
$ |
135,688 |
|
|
$ |
71,451 |
|
|
$ |
392,645 |
|
|
$ |
101,169 |
|
Average common shares issued and outstanding |
|
|
863,911 |
|
|
|
716,911 |
|
|
|
863,542 |
|
|
|
716,604 |
|
Basic earnings per common share |
|
$ |
0.16 |
|
|
$ |
0.10 |
|
|
$ |
0.45 |
|
|
$ |
0.14 |
|
Diluted earnings per common share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common shareholders |
|
$ |
135,688 |
|
|
$ |
71,451 |
|
|
$ |
392,645 |
|
|
$ |
101,169 |
|
Effect of assumed preferred stock conversion |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income applicable to diluted earnings per share |
|
$ |
135,688 |
|
|
$ |
71,451 |
|
|
$ |
392,645 |
|
|
$ |
101,169 |
|
Average common shares issued and outstanding |
|
|
863,911 |
|
|
|
716,911 |
|
|
|
863,542 |
|
|
|
716,604 |
|
Dilutive potential common shares: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options and restricted stock units and awards |
|
|
2,646 |
|
|
|
1,764 |
|
|
|
2,938 |
|
|
|
1,711 |
|
Shares held in deferred compensation plans |
|
|
1,076 |
|
|
|
892 |
|
|
|
966 |
|
|
|
867 |
|
Conversion of preferred stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilutive potential common shares: |
|
|
3,722 |
|
|
|
2,656 |
|
|
|
3,904 |
|
|
|
2,578 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total diluted average common shares issued and
outstanding |
|
|
867,633 |
|
|
|
719,567 |
|
|
|
867,446 |
|
|
|
719,182 |
|
Diluted earnings per common share |
|
$ |
0.16 |
|
|
$ |
0.10 |
|
|
$ |
0.45 |
|
|
$ |
0.14 |
|
Approximately 24.6 million and 19.2 million options to purchase shares of common stock
outstanding at the end of September 30, 2011 and 2010, respectively, were not included in the
computation of diluted earnings per share because the effect would be antidilutive. The weighted
average exercise price for these options was $12.57 per share and $18.06 per share at the end of
each respective period.
11. SHARE-BASED COMPENSATION
Huntington sponsors nonqualified and incentive share-based compensation plans. These plans
provide for the granting of stock options and other awards to officers, directors, and other
employees. Compensation costs are included in personnel costs on the Condensed Consolidated
Statements of Income. Stock options are granted at the closing market price on the date of the
grant. Options granted typically vest ratably over three years or when other conditions are met.
Options granted prior to May 2004 have a term of ten years. All options granted after May 2004 have
a term of seven years.
115
Huntington uses the Black-Scholes option pricing model to value share-based compensation
expense. Forfeitures are estimated at the date of grant based on historical rates and reduce the
compensation expense recognized. The risk-free interest rate is based on the U.S. Treasury yield
curve in effect at the date of grant. Expected volatility is based on the estimated volatility of
Huntingtons stock over the expected term of the option. The expected dividend yield is based on
the dividend rate and stock price at the date of the grant. The following table illustrates the
weighted-average assumptions used in the option-pricing model for options granted in the
three-month and nine-month periods ended September 30, 2011 and 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
Assumptions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk-free interest rate |
|
|
1.97 |
% |
|
|
2.14 |
% |
|
|
1.97 |
% |
|
|
2.31 |
% |
Expected dividend yield |
|
|
2.64 |
|
|
|
0.63 |
|
|
|
2.62 |
|
|
|
0.67 |
|
Expected volatility of Huntingtons common stock |
|
|
30.0 |
|
|
|
32.5 |
|
|
|
30.0 |
|
|
|
38.6 |
|
Expected option term (years) |
|
|
6.0 |
|
|
|
6.0 |
|
|
|
6.0 |
|
|
|
6.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average grant date fair value per share |
|
$ |
1.40 |
|
|
$ |
2.05 |
|
|
$ |
1.41 |
|
|
$ |
2.21 |
|
The following table illustrates total share-based compensation expense and related tax benefit
for the three-month and nine-month periods ended September 30, 2011 and 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
(dollar amounts in thousands) |
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
Share-based compensation expense |
|
$ |
6,463 |
|
|
$ |
4,525 |
|
|
$ |
13,986 |
|
|
$ |
11,413 |
|
Tax benefit |
|
|
2,182 |
|
|
|
1,584 |
|
|
|
4,815 |
|
|
|
3,995 |
|
Huntingtons stock option activity and related information for the nine-month period ended
September 30, 2011, was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
Average |
|
|
|
|
|
|
|
|
|
|
Average |
|
|
Remaining |
|
|
Aggregate |
|
|
|
|
|
|
|
Exercise |
|
|
Contractual |
|
|
Intrinsic |
|
(amounts in thousands, except years and per share amounts) |
|
Options |
|
|
Price |
|
|
Life (Years) |
|
|
Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at January 1, 2011 |
|
|
21,862 |
|
|
$ |
15.96 |
|
|
|
|
|
|
|
|
|
Granted |
|
|
10,625 |
|
|
|
6.03 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(99 |
) |
|
|
4.06 |
|
|
|
|
|
|
|
|
|
Forfeited/expired |
|
|
(4,756 |
) |
|
|
19.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at September 30, 2011 |
|
|
27,632 |
|
|
$ |
11.65 |
|
|
|
4.3 |
|
|
$ |
1,614 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and expected to vest at September 30, 2011 (1) |
|
|
26,327 |
|
|
$ |
11.94 |
|
|
|
4.2 |
|
|
$ |
1,583 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at September 30, 2011 |
|
|
14,160 |
|
|
$ |
17.15 |
|
|
|
2.3 |
|
|
$ |
959 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The number of options expected to vest includes an estimate of expected forfeitures. |
The aggregate intrinsic value represents the amount by which the fair value of underlying
stock exceeds the in-the-money option exercise price. For the nine-month period ended September
30, 2011 and September 30, 2010, cash received for the exercises of stock options was $0.4 million
and $0.2 million, respectively. The tax benefit realized from stock option exercises was less than
$0.1 million for each respective period.
Huntington also grants restricted stock units and awards. Restricted stock units and awards
are issued at no cost to the recipient, and can be settled only in shares at the end of the vesting
period. Restricted stock awards provide the holder with full voting rights and cash dividends
during the vesting period. Restricted stock units do not provide the holder with voting rights or
cash dividends during the vesting period, but do accrue a dividend equivalent that is paid upon
vesting, and are subject to certain service restrictions. The fair value of the restricted stock
units and awards is the closing market price of the Huntingtons common stock on the date of award.
116
The following table summarizes the status of Huntingtons restricted stock units and
restricted stock awards as of September 30, 2011, and activity for the nine-month period ended
September 30, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
Average |
|
|
|
Restricted |
|
|
Grant Date |
|
|
Restricted |
|
|
Grant Date |
|
|
|
Stock |
|
|
Fair Value |
|
|
Stock |
|
|
Fair Value |
|
(amounts in thousands, except per share amounts) |
|
Units |
|
|
Per Share |
|
|
Awards (1) |
|
|
Per Share |
|
Nonvested at January 1, 2011 |
|
|
5,511 |
|
|
$ |
5.78 |
|
|
|
466 |
|
|
$ |
5.24 |
|
Granted |
|
|
3,775 |
|
|
|
6.27 |
|
|
|
|
|
|
|
|
|
Vested |
|
|
(963 |
) |
|
|
5.97 |
|
|
|
(428 |
) |
|
|
5.43 |
|
Forfeited |
|
|
(258 |
) |
|
|
6.33 |
|
|
|
(13 |
) |
|
|
3.11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonvested at September 30, 2011 |
|
|
8,065 |
|
|
$ |
5.97 |
|
|
|
25 |
|
|
$ |
3.11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes restricted stock awards granted under the Second Amended and Restated 2007
Stock and Long-Term Incentive Plan to certain executives as a portion of their annual
base salary. These awards are 100% vested as of the grant date and are not subject to
any requirement of future service. However, the shares are subject to restrictions
regarding sale, transfer, pledge, or disposition until certain conditions are met. All
awards vested in the 2011 second quarter. |
The weighted-average grant date fair value of nonvested shares granted for the nine-month
periods ended September 30, 2011 and 2010, were $6.27 and $6.20, respectively. The total fair value
of awards vested was $8.7 million and $2.8 million during the nine-month periods ended September
30, 2011, and 2010, respectively. As of September 30, 2011, the total unrecognized compensation
cost related to nonvested awards was $32.2 million with a weighted-average expense recognition
period of 2.0 years.
Of the remaining 38.8 million shares of common stock authorized for issuance at September 30,
2011, 35.7 million were outstanding and 3.1 million were available for future grants. Huntington
issues shares to fulfill stock option exercises and restricted stock units from available
authorized shares. At September 30, 2011, Management believes there are adequate authorized shares
available to satisfy anticipated stock option exercises in 2011.
12. BENEFIT PLANS
Huntington sponsors the Plan, a non-contributory defined benefit pension plan covering
substantially all employees hired or rehired prior to January 1, 2010. The Plan provides benefits
based upon length of service and compensation levels. The funding policy of Huntington is to
contribute an annual amount that is at least equal to the minimum funding requirements but not more
than the amount deductible under the Internal Revenue Code. There is no required minimum
contribution for 2011, although Huntington contributed $50.0 million to the Plan in March 2011.
In addition, Huntington has an unfunded defined benefit post-retirement plan that provides
certain healthcare and life insurance benefits to retired employees who have attained the age of 55
and have at least 10 years of vesting service under this plan. For any employee retiring on or
after January 1, 1993, post-retirement healthcare benefits are based upon the employees number of
months of service and are limited to the actual cost of coverage. Life insurance benefits are a
percentage of the employees base salary at the time of retirement, with a maximum of $50,000 of
coverage. The employer paid portion of the post-retirement health and life insurance plan was
eliminated for employees retiring on and after March 1, 2010. Eligible employees retiring on and
after March 1, 2010, who elect retiree medical coverage, will pay the full cost of this coverage.
Huntington will not provide any employer paid life insurance to employees retiring on and after
March 1, 2010. Eligible employees will be able to convert or port their existing life insurance at
their own expense under the same terms that are available to all terminated employees.
The following table shows the components of net periodic benefit expense of the Plan and the
Post-Retirement Benefit Plan:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits |
|
|
Post Retirement Benefits |
|
|
|
Three Months Ended |
|
|
Three Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
(dollar amounts in thousands) |
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
Service cost |
|
$ |
5,412 |
|
|
$ |
5,051 |
|
|
$ |
|
|
|
$ |
|
|
Interest cost |
|
|
7,518 |
|
|
|
7,217 |
|
|
|
404 |
|
|
|
433 |
|
Expected return on plan assets |
|
|
(10,822 |
) |
|
|
(10,528 |
) |
|
|
|
|
|
|
|
|
Amortization of transition asset |
|
|
(1 |
) |
|
|
1 |
|
|
|
|
|
|
|
|
|
Amortization of prior service cost |
|
|
(1,442 |
) |
|
|
(1,442 |
) |
|
|
(338 |
) |
|
|
(339 |
) |
Amortization of gains |
|
|
5,873 |
|
|
|
3,748 |
|
|
|
(106 |
) |
|
|
(174 |
) |
Settlements |
|
|
1,750 |
|
|
|
3,925 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit expense |
|
$ |
8,288 |
|
|
$ |
7,972 |
|
|
$ |
(40 |
) |
|
$ |
(80 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits |
|
|
Post Retirement Benefits |
|
|
|
Nine Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
(dollar amounts in thousands) |
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
Service cost |
|
$ |
16,238 |
|
|
$ |
15,153 |
|
|
$ |
|
|
|
$ |
|
|
Interest cost |
|
|
22,554 |
|
|
|
21,651 |
|
|
|
1,214 |
|
|
|
1,299 |
|
Expected return on plan assets |
|
|
(32,468 |
) |
|
|
(31,584 |
) |
|
|
|
|
|
|
|
|
Amortization of transition asset |
|
|
(3 |
) |
|
|
5 |
|
|
|
|
|
|
|
|
|
Amortization of prior service cost |
|
|
(4,326 |
) |
|
|
(4,326 |
) |
|
|
(1,014 |
) |
|
|
(1,014 |
) |
Amortization of gains |
|
|
17,621 |
|
|
|
11,242 |
|
|
|
(318 |
) |
|
|
(525 |
) |
Settlements |
|
|
5,250 |
|
|
|
7,375 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit expense |
|
$ |
24,866 |
|
|
$ |
19,516 |
|
|
$ |
(118 |
) |
|
$ |
(240 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
The Bank, as trustee, held all Plan assets at September 30, 2011, and December 31, 2010. The
Plan assets consisted of investments in a variety of Huntington mutual funds and Huntington common
stock as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value |
|
(dollar amounts in thousands) |
|
September 30, 2011 |
|
|
December 31, 2010 |
|
|
September 30, 2010 |
|
Cash |
|
$ |
36 |
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
% |
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Huntington funds money market |
|
|
55 |
|
|
|
|
|
|
|
25 |
|
|
|
|
|
|
|
204 |
|
|
|
|
|
Fixed income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Huntington funds fixed
income funds |
|
|
173,355 |
|
|
|
37 |
|
|
|
133,330 |
|
|
|
28 |
|
|
|
134,523 |
|
|
|
30 |
|
Corporate obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,097 |
|
|
|
|
|
U.S. Government Agencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
506 |
|
|
|
|
|
Equities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Huntington funds |
|
|
264,074 |
|
|
|
56 |
|
|
|
318,155 |
|
|
|
66 |
|
|
|
293,956 |
|
|
|
64 |
|
Other equity mutual funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,029 |
|
|
|
1 |
|
Huntington common stock |
|
|
35,380 |
|
|
|
7 |
|
|
|
26,969 |
|
|
|
6 |
|
|
|
22,344 |
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets |
|
$ |
472,900 |
|
|
|
100 |
% |
|
$ |
478,479 |
|
|
|
100 |
% |
|
$ |
456,659 |
|
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments of the Plan are accounted for at cost on the trade date and are reported at fair
value. All of the Plans investments at September 30, 2011, are classified as Level 1 within the
fair value hierarchy. In general, investments of the Plan are exposed to various risks, such as
interest rate risk, credit risk, and overall market volatility. Due to the level of risk associated
with certain investments, it is reasonably possible changes in the values of investments will occur
in the near term and such changes could materially affect the amounts reported in the Plan assets.
The investment objective of the Plan is to maximize the return on Plan assets over a long time
period, while meeting the Plan obligations. At September 30, 2011, Plan assets were invested 63% in
equity investments and 37% in bonds, with an average duration of 3.6 years on bond investments.
Although it may fluctuate with market conditions, Management has targeted a long-term allocation of
Plan assets of 69% in equity investments and 31% in bond investments.
Huntington also sponsors other nonqualified retirement plans, the most significant being the
SERP and the SRIP. The SERP provides certain former officers and directors, and the SRIP provides
certain current officers and directors of Huntington and its subsidiaries with defined pension
benefits in excess of limits imposed by federal tax law.
Huntington has a defined contribution plan that is available to eligible employees. In the
2009 first quarter, the Plan was amended to eliminate employer matching contributions effective on
or after March 15, 2009. Prior to March 15, 2009, Huntington matched participant contributions, up
to the first 3% of base pay contributed to the Plan. Half of the employee contribution was matched
on the 4th and 5th percent of base pay contributed to the Plan. Effective May 1, 2010, Huntington
reinstated the employer matching contribution to the defined contribution Plan.
118
The following table shows the costs of providing the SERP, SRIP, and defined contribution
plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
(dollar amounts in millions) |
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
SERP & SRIP |
|
$ |
0.7 |
|
|
$ |
0.7 |
|
|
$ |
2.1 |
|
|
$ |
2.3 |
|
Defined contribution plan |
|
|
3.8 |
|
|
|
3.3 |
|
|
|
11.3 |
|
|
|
5.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit cost |
|
$ |
4.5 |
|
|
$ |
4.0 |
|
|
$ |
13.4 |
|
|
$ |
7.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13. FAIR VALUES OF ASSETS AND LIABILITIES
Huntington follows the fair value accounting guidance under ASC 820 and ASC 825.
Fair value is defined as the exchange price that would be received for an asset or paid to
transfer a liability (an exit price) in the principal or most advantageous market for the asset or
liability in an orderly transaction between market participants on the measurement date. A
three-level valuation hierarchy was established for disclosure of fair value measurements. The
valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or
liability as of the measurement date. The three levels are defined as follows:
Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets
or liabilities in active markets.
Level 2 inputs to the valuation methodology include quoted prices for similar assets and
liabilities in active markets, and inputs that are observable for the asset or liability, either
directly or indirectly, for substantially the full term of the financial instrument.
Level 3 inputs to the valuation methodology are unobservable and significant to the fair value
measurement.
A financial instruments categorization within the valuation hierarchy is based upon the
lowest level of input that is significant to the fair value measurement. Transfers in and out of
Level 1, 2, or 3 are recorded at fair value at the beginning of the reporting period.
Following is a description of the valuation methodologies used for instruments measured at
fair value, as well as the general classification of such instruments pursuant to the valuation
hierarchy.
Mortgage loans held for sale
Huntington elected to apply the fair value option for mortgage loans originated with the
intent to sell which are included in loans held for sale. Mortgage loans held for sale are
classified as Level 2 and are estimated using security prices for similar product types.
Available-for-sale securities and trading account securities
Securities accounted for at fair value include both the available-for-sale and trading
portfolios. Huntington uses prices obtained from third party pricing services and recent trades to
determine the fair value of securities. AFS and trading securities are classified as Level 1 using
quoted market prices (unadjusted) in active markets for identical securities that Huntington has
the ability to access at the measurement date. 1% of the positions in these portfolios are Level 1,
and consist of U.S. Treasury securities and money market mutual funds. When quoted market prices
are not available, fair values are classified as Level 2 using quoted prices for similar assets in
active markets, quoted prices of identical or similar assets in markets that are not active, and
inputs that are observable for the asset, either directly or indirectly, for substantially the full
term of the financial instrument. 95% of the positions in these portfolios are Level 2, and consist
of U.S. Government and agency debt securities, agency mortgage backed securities, asset-backed
securities, municipal securities and other securities. For both Level 1 and Level 2 securities,
management uses various methods and techniques to corroborate prices obtained from the pricing
service, including reference to dealer or other market quotes, and by reviewing valuations of
comparable instruments. If relevant market prices are limited or unavailable, valuations may
require significant management judgment or estimation to determine fair value, in which case the
fair values are classified as Level 3. 4% of our positions are Level 3, and consist of non-agency
ALT-A asset-backed securities, private-label CMO securities, pooled-trust-preferred CDO securities
and municipal securities.
119
For non-agency ALT-A asset-backed securities, private-label CMO securities, and
pooled-trust-preferred CDO securities the fair value methodology incorporates values obtained from
proprietary discounted cash flow models provided by a third party. The modeling process for the
ALT-A asset-backed securities and private-label CMO securities incorporates assumptions management
believes market participants would use to value the security under current market conditions. The
assumptions used include prepayment projections, credit loss assumptions, and discount rates, which
include a risk premium due to liquidity and uncertainty that are based on both observable and
unobservable inputs. Huntington validates the reasonableness of the assumptions by comparing the
assumptions with market information. Huntington uses the discounted cash flow analysis, in
conjunction with other relevant pricing information obtained from third party pricing services or
broker quotes to establish the fair value that management believes is representative under current
market conditions. For purposes of determining fair value at September 30, 2011, the discounted
cash
flow modeling was the predominant input. The modeling of the fair value of the
pooled-trust-preferred CDOs utilizes a similar methodology, with the probability of default (PD)
of each issuer being the most critical input. Management evaluates the PD assumptions provided to
the third party pricing service by comparing the current PD to the assumptions used the previous
quarter, actual defaults and deferrals in the current period, and trend data on certain financial
ratios of the issuers. Huntington also evaluates the assumptions related to discount rates and
prepayments. Each quarter, the Company seeks to obtain information on actual trades of securities
with similar characteristics to further support our fair value estimates and our underlying
assumptions. For purposes of determining fair value at September 30, 2011, the discounted cash flow
modeling was the predominant input.
Huntington utilizes the same processes to determine the fair value of investment securities
classified as held-to-maturity for impairment evaluation purposes.
Automobile loans
Effective January 1, 2010, Huntington consolidated an automobile loan securitization that
previously had been accounted for as an off-balance sheet transaction. As a result, Huntington
elected to account for the automobile loan receivables and the associated notes payable at fair
value per guidance supplied in ASC 825, Financial Instruments. The automobile loan receivables
are classified as Level 3. The key assumptions used to determine the fair value of the automobile
loan receivables included projections of expected losses and prepayment of the underlying loans in
the portfolio and a market assumption of interest rate spreads. Certain interest rates are
available from similarly traded securities while other interest rates are developed internally
based on similar asset-backed security transactions in the market.
MSRs
MSRs do not trade in an active market with readily observable prices. Accordingly, the fair
value of these assets is classified as Level 3. Huntington determines the fair value of MSRs using
an income approach model based upon our month-end interest rate curve and prepayment assumptions.
The model, which is operated and maintained by a third party, utilizes assumptions to estimate
future net servicing income cash flows, including estimates of time decay, payoffs, and changes in
valuation inputs and assumptions. Servicing brokers and other sources of information (e.g.
discussion with other mortgage servicers and industry surveys) are used to obtain information on
market practice and assumptions. On at least a quarterly basis, third party marks are obtained from
at least one service broker. Huntington reviews the valuation assumptions against this market data
for reasonableness and adjusts the assumptions if deemed appropriate. Any recommended change in
assumptions and / or inputs are presented for review to the Mortgage Price Risk Subcommittee for
final approval.
Derivatives
Derivatives classified as Level 1 consist of exchange traded options and forward commitments
to deliver mortgage-backed securities which are valued using quoted prices. Asset and liability
conversion swaps and options, and interest rate caps are classified as Level 2. These derivative
positions are valued using a discounted cash flow method that incorporates current market interest
rates. Derivatives classified as Level 3 consist primarily of interest rate lock agreements related
to mortgage loan commitments. The determination of fair value includes assumptions related to the
likelihood that a commitment will ultimately result in a closed loan, which is a significant
unobservable assumption.
Securitization trust notes payable
Consists of certain securitization trust notes payable related to the automobile loan
receivables measured at fair value. The notes payable are classified as Level 2 and are valued
based on interest rates for similar financial instruments.
120
Assets and Liabilities measured at fair value on a recurring basis
Assets and liabilities measured at fair value on a recurring basis at September 30, 2011,
December 31, 2010, and September 30, 2010 are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at Reporting Date Using |
|
|
Netting |
|
|
Balance at |
|
(dollar amounts in thousands) |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Adjustments (1) |
|
|
September 30, 2011 |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans held for sale |
|
$ |
|
|
|
$ |
331,883 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
331,883 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading account securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal agencies: Mortgage-backed |
|
|
|
|
|
|
6,995 |
|
|
|
|
|
|
|
|
|
|
|
6,995 |
|
Federal agencies: Other agencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal securities |
|
|
|
|
|
|
23,455 |
|
|
|
|
|
|
|
|
|
|
|
23,455 |
|
Other securities |
|
|
54,753 |
|
|
|
508 |
|
|
|
|
|
|
|
|
|
|
|
55,261 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
54,753 |
|
|
|
30,958 |
|
|
|
|
|
|
|
|
|
|
|
85,711 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale and other securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities |
|
|
53,321 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
53,321 |
|
Federal agencies: Mortgage-backed (2) |
|
|
|
|
|
|
4,435,246 |
|
|
|
|
|
|
|
|
|
|
|
4,435,246 |
|
TLGP securities |
|
|
|
|
|
|
105,537 |
|
|
|
|
|
|
|
|
|
|
|
105,537 |
|
Federal agencies: Other agencies (2) |
|
|
|
|
|
|
1,137,954 |
|
|
|
|
|
|
|
|
|
|
|
1,137,954 |
|
Municipal securities |
|
|
|
|
|
|
311,962 |
|
|
|
101,427 |
|
|
|
|
|
|
|
413,389 |
|
Private-label CMO |
|
|
|
|
|
|
|
|
|
|
78,900 |
|
|
|
|
|
|
|
78,900 |
|
Asset-backed securities |
|
|
|
|
|
|
803,039 |
|
|
|
153,019 |
|
|
|
|
|
|
|
956,058 |
|
Covered bonds |
|
|
|
|
|
|
703,630 |
|
|
|
|
|
|
|
|
|
|
|
703,630 |
|
Corporate debt |
|
|
|
|
|
|
454,852 |
|
|
|
|
|
|
|
|
|
|
|
454,852 |
|
Other securities |
|
|
54,236 |
|
|
|
10,127 |
|
|
|
|
|
|
|
|
|
|
|
64,363 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
107,557 |
|
|
|
7,962,347 |
|
|
|
333,346 |
|
|
|
|
|
|
|
8,403,250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automobile loans |
|
|
|
|
|
|
|
|
|
|
344,529 |
|
|
|
|
|
|
|
344,529 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MSRs |
|
|
|
|
|
|
|
|
|
|
73,824 |
|
|
|
|
|
|
|
73,824 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative assets |
|
|
20,581 |
|
|
|
526,890 |
|
|
|
8,963 |
|
|
|
(103,741 |
) |
|
|
452,693 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securitization trust notes payable |
|
|
|
|
|
|
173,045 |
|
|
|
|
|
|
|
|
|
|
|
173,045 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities |
|
|
29,820 |
|
|
|
265,023 |
|
|
|
1,029 |
|
|
|
|
|
|
|
295,872 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other liabilities |
|
|
2,010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at Reporting Date Using |
|
|
Netting |
|
|
Balance at |
|
(dollar amounts in thousands) |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Adjustments (1) |
|
|
December 31, 2010 |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans held for sale |
|
$ |
|
|
|
$ |
754,117 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
754,117 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading account securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities |
|
|
47,430 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47,430 |
|
Federal agencies: Mortgage-backed |
|
|
|
|
|
|
10,860 |
|
|
|
|
|
|
|
|
|
|
|
10,860 |
|
Federal agencies: Other agencies |
|
|
|
|
|
|
24,853 |
|
|
|
|
|
|
|
|
|
|
|
24,853 |
|
Municipal securities |
|
|
|
|
|
|
30,205 |
|
|
|
|
|
|
|
|
|
|
|
30,205 |
|
Other securities |
|
|
69,017 |
|
|
|
3,039 |
|
|
|
|
|
|
|
|
|
|
|
72,056 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
116,447 |
|
|
|
68,957 |
|
|
|
|
|
|
|
|
|
|
|
185,404 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale and other securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities |
|
|
51,781 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
51,781 |
|
Federal agencies: Mortgage-backed |
|
|
|
|
|
|
4,754,404 |
|
|
|
|
|
|
|
|
|
|
|
4,754,404 |
|
TLGP securities |
|
|
|
|
|
|
183,467 |
|
|
|
|
|
|
|
|
|
|
|
183,467 |
|
Federal agencies: Other agencies (3) |
|
|
|
|
|
|
2,058,376 |
|
|
|
|
|
|
|
|
|
|
|
2,058,376 |
|
Municipal securities |
|
|
|
|
|
|
305,909 |
|
|
|
149,806 |
|
|
|
|
|
|
|
455,715 |
|
Private-label CMO |
|
|
|
|
|
|
|
|
|
|
121,925 |
|
|
|
|
|
|
|
121,925 |
|
Asset-backed securities |
|
|
|
|
|
|
1,044,438 |
|
|
|
162,684 |
|
|
|
|
|
|
|
1,207,122 |
|
Covered bonds |
|
|
|
|
|
|
367,209 |
|
|
|
|
|
|
|
|
|
|
|
367,209 |
|
Corporate debt |
|
|
|
|
|
|
323,389 |
|
|
|
|
|
|
|
|
|
|
|
323,389 |
|
Other securities |
|
|
53,286 |
|
|
|
9,848 |
|
|
|
|
|
|
|
|
|
|
|
63,134 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
105,067 |
|
|
|
9,047,040 |
|
|
|
434,415 |
|
|
|
|
|
|
|
9,586,522 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automobile loans |
|
|
|
|
|
|
|
|
|
|
522,717 |
|
|
|
|
|
|
|
522,717 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MSRs |
|
|
|
|
|
|
|
|
|
|
125,679 |
|
|
|
|
|
|
|
125,679 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative assets |
|
|
23,514 |
|
|
|
390,361 |
|
|
|
2,817 |
|
|
|
(70,559 |
) |
|
|
346,133 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securitization trust notes payable |
|
|
|
|
|
|
356,089 |
|
|
|
|
|
|
|
|
|
|
|
356,089 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities |
|
|
3,990 |
|
|
|
233,399 |
|
|
|
1,851 |
|
|
|
|
|
|
|
239,240 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
121
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at Reporting Date Using |
|
|
Netting |
|
|
Balance at |
|
(dollar amounts in thousands) |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Adjustments (1) |
|
|
September 30, 2010 |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans held for sale |
|
$ |
|
|
|
$ |
699,001 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
699,001 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading account securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal agencies: Mortgage-backed |
|
|
|
|
|
|
12,731 |
|
|
|
|
|
|
|
|
|
|
|
12,731 |
|
Federal agencies: Other agencies |
|
|
|
|
|
|
24,990 |
|
|
|
|
|
|
|
|
|
|
|
24,990 |
|
Municipal securities |
|
|
|
|
|
|
33,554 |
|
|
|
|
|
|
|
|
|
|
|
33,554 |
|
Other securities |
|
|
63,105 |
|
|
|
4,297 |
|
|
|
|
|
|
|
|
|
|
|
67,402 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
63,105 |
|
|
|
75,572 |
|
|
|
|
|
|
|
|
|
|
|
138,677 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale and other securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities |
|
|
50,334 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,334 |
|
Federal agencies: Mortgage-backed |
|
|
|
|
|
|
4,683,540 |
|
|
|
|
|
|
|
|
|
|
|
4,683,540 |
|
TLGP securities |
|
|
580,914 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
580,914 |
|
Federal agencies: Other agencies |
|
|
2,001,730 |
|
|
|
30,445 |
|
|
|
|
|
|
|
|
|
|
|
2,032,175 |
|
Municipal securities |
|
|
|
|
|
|
134,582 |
|
|
|
233,290 |
|
|
|
|
|
|
|
367,872 |
|
Private-label CMO |
|
|
|
|
|
|
|
|
|
|
276,224 |
|
|
|
|
|
|
|
276,224 |
|
Asset-backed securities |
|
|
|
|
|
|
979,666 |
|
|
|
197,958 |
|
|
|
|
|
|
|
1,177,624 |
|
Covered bonds |
|
|
|
|
|
|
151,310 |
|
|
|
|
|
|
|
|
|
|
|
151,310 |
|
Corporate debt |
|
|
|
|
|
|
30,154 |
|
|
|
|
|
|
|
|
|
|
|
30,154 |
|
Other securities |
|
|
54,218 |
|
|
|
9,051 |
|
|
|
|
|
|
|
|
|
|
|
63,269 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,687,196 |
|
|
|
6,018,748 |
|
|
|
707,472 |
|
|
|
|
|
|
|
9,413,416 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automobile loans |
|
|
401,148 |
|
|
|
|
|
|
|
189,075 |
|
|
|
|
|
|
|
590,223 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MSRs |
|
|
|
|
|
|
|
|
|
|
112,155 |
|
|
|
|
|
|
|
112,155 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative assets |
|
|
980 |
|
|
|
547,784 |
|
|
|
11,745 |
|
|
|
(126,221 |
) |
|
|
434,288 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securitization trust notes payable |
|
|
422,294 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
422,294 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities |
|
|
9,044 |
|
|
|
293,741 |
|
|
|
4,018 |
|
|
|
|
|
|
|
306,803 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Amounts represent the impact of legally enforceable master netting agreements that allow the
Company to settle positive and negative positions and cash collateral held or placed with the same
counterparties. |
|
(2) |
|
During the 2011 second quarter, Huntington transferred $469.1 million of federal agencies:
mortgage-backed securities from the available-for-sale securities portfolio to the held-to-maturity
securities portfolio. These securities are valued at amortized cost and no longer classified within
the fair value hierarchy. All amounts were previously classified as Level 2 in the fair value
hierarchy. |
|
(3) |
|
Amounts were transferred from Level 1 to Level 2 in the 2010 fourth quarter due to lack of
sufficient market activity for these securities. |
122
The tables below present a rollforward of the balance sheet amounts for the three-month and
nine-month periods ended September 30, 2011 and 2010, for financial instruments measured on a
recurring basis and classified as Level 3. The classification of an item as Level 3 is based on the
significance of the unobservable inputs to the overall fair value measurement. However, Level 3
measurements may also include observable components of value that can be validated externally.
Accordingly, the gains and losses in the table below include changes in fair value due in part to
observable factors that are part of the valuation methodology.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 3 Fair Value Measurements |
|
|
|
Three Months Ended September 30, 2011 |
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative |
|
|
Municipal |
|
|
Private- |
|
|
backed |
|
|
Automobile |
|
|
Equity |
|
(dollar amounts in thousands) |
|
MSRs |
|
|
instruments |
|
|
securities |
|
|
label CMO |
|
|
securities |
|
|
loans |
|
|
investments |
|
Balance, beginning of period |
|
$ |
104,997 |
|
|
$ |
418 |
|
|
$ |
123,800 |
|
|
$ |
88,770 |
|
|
$ |
165,742 |
|
|
$ |
400,935 |
|
|
$ |
|
|
Total gains / losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in earnings |
|
|
(31,173 |
) |
|
|
7,557 |
|
|
|
|
|
|
|
(872 |
) |
|
|
(354 |
) |
|
|
(3,695 |
) |
|
|
|
|
Included in OCI |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,543 |
) |
|
|
(9,874 |
) |
|
|
|
|
|
|
|
|
Purchases |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(52,711 |
) |
|
|
|
|
Issuances |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlements |
|
|
|
|
|
|
(41 |
) |
|
|
(22,373 |
) |
|
|
(6,455 |
) |
|
|
(2,495 |
) |
|
|
|
|
|
|
|
|
Transfers in / out of Level 3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of period |
|
$ |
73,824 |
|
|
$ |
7,934 |
|
|
$ |
101,427 |
|
|
$ |
78,900 |
|
|
$ |
153,019 |
|
|
$ |
344,529 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The amount of total gains
or losses for the period
included in earnings
(or OCI) attributable
to the
change in unrealized
gains or
losses relating to
assets still
held at reporting date |
|
$ |
(31,173 |
) |
|
$ |
7,516 |
|
|
$ |
|
|
|
$ |
(2,543 |
) |
|
$ |
(9,874 |
) |
|
$ |
(3,695 |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 3 Fair Value Measurements |
|
|
|
Three Months Ended September 30, 2010 |
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative |
|
|
Municipal |
|
|
Private- |
|
|
backed |
|
|
Automobile |
|
|
Equity |
|
(dollar amounts in thousands) |
|
MSRs |
|
|
instruments |
|
|
securities |
|
|
label CMO |
|
|
securities |
|
|
loans |
|
|
investments |
|
Balance, beginning of period |
|
$ |
132,405 |
|
|
$ |
6,492 |
|
|
$ |
262,128 |
|
|
$ |
394,611 |
|
|
$ |
218,940 |
|
|
$ |
186,388 |
|
|
$ |
|
|
Total gains / losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in earnings |
|
|
(20,250 |
) |
|
|
3,872 |
|
|
|
|
|
|
|
(1,598 |
) |
|
|
(393 |
) |
|
|
4,887 |
|
|
|
|
|
Included in OCI |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,674 |
|
|
|
(5,312 |
) |
|
|
|
|
|
|
|
|
Purchases |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales |
|
|
|
|
|
|
|
|
|
|
(28,838 |
) |
|
|
(109,310 |
) |
|
|
(11,977 |
) |
|
|
|
|
|
|
|
|
Repayments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,200 |
) |
|
|
|
|
Issuances |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlements |
|
|
|
|
|
|
(1,741 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transfers in / out of Level 3 |
|
|
|
|
|
|
(896 |
) |
|
|
|
|
|
|
(20,153 |
) |
|
|
(3,300 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of period |
|
$ |
112,155 |
|
|
$ |
7,727 |
|
|
$ |
233,290 |
|
|
$ |
276,224 |
|
|
$ |
197,958 |
|
|
$ |
189,075 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The amount of total gains
or losses for the period
included in earnings
(or OCI) attributable
to the
change in unrealized
gains or
losses relating to
assets still
held at reporting date |
|
$ |
(20,250 |
) |
|
$ |
2,976 |
|
|
$ |
|
|
|
$ |
3,727 |
|
|
$ |
(5,928 |
) |
|
$ |
2,687 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
123
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 3 Fair Value Measurements |
|
|
|
Nine Months Ended September 30, 2011 |
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative |
|
|
Municipal |
|
|
Private- |
|
|
backed |
|
|
Automobile |
|
|
Equity |
|
(dollar amounts in thousands) |
|
MSRs |
|
|
instruments |
|
|
securities |
|
|
label CMO |
|
|
securities |
|
|
loans |
|
|
investments |
|
Balance, beginning of period |
|
$ |
125,679 |
|
|
$ |
966 |
|
|
$ |
149,806 |
|
|
$ |
121,925 |
|
|
$ |
162,684 |
|
|
$ |
522,717 |
|
|
$ |
|
|
Total gains / losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in earnings |
|
|
(51,855 |
) |
|
|
7,264 |
|
|
|
|
|
|
|
(1,255 |
) |
|
|
(3,615 |
) |
|
|
(5,079 |
) |
|
|
|
|
Included in OCI |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,074 |
|
|
|
3,716 |
|
|
|
|
|
|
|
|
|
Purchases |
|
|
|
|
|
|
|
|
|
|
1,760 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(20,958 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Repayments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(173,109 |
) |
|
|
|
|
Issuances |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlements |
|
|
|
|
|
|
(296 |
) |
|
|
(50,139 |
) |
|
|
(21,886 |
) |
|
|
(9,766 |
) |
|
|
|
|
|
|
|
|
Transfers in / out of Level 3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of period |
|
$ |
73,824 |
|
|
$ |
7,934 |
|
|
$ |
101,427 |
|
|
$ |
78,900 |
|
|
$ |
153,019 |
|
|
$ |
344,529 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The amount of total gains
or losses for the period
included in earnings
(or OCI) attributable
to the
change in unrealized
gains or
losses relating to
assets still
held at reporting date |
|
$ |
(51,855 |
) |
|
$ |
6,968 |
|
|
$ |
|
|
|
$ |
769 |
|
|
$ |
3,716 |
|
|
$ |
(5,079 |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 3 Fair Value Measurements |
|
|
|
Nine Months Ended September 30, 2010 |
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative |
|
|
Municipal |
|
|
Private- |
|
|
backed |
|
|
Automobile |
|
|
Equity |
|
(dollar amounts in thousands) |
|
MSRs |
|
|
instruments |
|
|
securities |
|
|
label CMO |
|
|
securities |
|
|
loans |
|
|
investments |
|
Balance, beginning of period |
|
$ |
176,427 |
|
|
$ |
(4,236 |
) |
|
$ |
11,515 |
|
|
$ |
477,319 |
|
|
$ |
407,098 |
|
|
$ |
|
|
|
$ |
25,872 |
|
Total gains / losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in earnings |
|
|
(64,272 |
) |
|
|
12,811 |
|
|
|
|
|
|
|
(5,429 |
) |
|
|
(4,888 |
) |
|
|
14,990 |
|
|
|
|
|
Included in OCI |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37,640 |
|
|
|
3,263 |
|
|
|
|
|
|
|
|
|
Purchases |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales |
|
|
|
|
|
|
|
|
|
|
(28,837 |
) |
|
|
(166,704 |
) |
|
|
(14,608 |
) |
|
|
|
|
|
|
|
|
Repayments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,934 |
) |
|
|
|
|
Issuances |
|
|
|
|
|
|
(1,741 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlements |
|
|
|
|
|
|
893 |
|
|
|
(73,025 |
) |
|
|
(66,602 |
) |
|
|
(8,834 |
) |
|
|
|
|
|
|
|
|
Transfers in / out of Level 3 (1) |
|
|
|
|
|
|
|
|
|
|
323,637 |
|
|
|
|
|
|
|
(184,073 |
) |
|
|
180,019 |
|
|
|
(25,872 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of period |
|
$ |
112,155 |
|
|
$ |
7,727 |
|
|
$ |
233,290 |
|
|
$ |
276,224 |
|
|
$ |
197,958 |
|
|
$ |
189,075 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The amount of total gains
or losses for the period
included in earnings
(or OCI) attributable
to the
change in unrealized
gains or
losses relating to
assets still
held at reporting date |
|
$ |
(64,272 |
) |
|
$ |
11,708 |
|
|
$ |
|
|
|
$ |
18,613 |
|
|
$ |
2,384 |
|
|
$ |
9,056 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Transfers in / out of Level 3 include a transfer in of $323.6 million relating to municipal securities, due to lack of observable market data,
a transfer out of $184.1 million of securities, and a transfer in of $180.0 million of loans both related to the consolidation of a 2009
automobile trust. |
124
The table below summarizes the classification of gains and losses due to changes in fair
value, recorded in earnings for Level 3 assets and liabilities for the three-month and nine-month
periods ended September 30, 2011 and 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 3 Fair Value Measurements |
|
|
|
Three Months Ended September 30, 2011 |
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative |
|
|
Municipal |
|
|
Private- |
|
|
backed |
|
|
Automobile |
|
|
Equity |
|
(dollar amounts in thousands) |
|
MSRs |
|
|
instruments |
|
|
securities |
|
|
label CMO |
|
|
securities |
|
|
loans |
|
|
investments |
|
Classification of gains and losses in earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage banking income (loss) |
|
$ |
(31,173 |
) |
|
$ |
7,101 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Securities gains (losses) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,029 |
) |
|
|
(335 |
) |
|
|
|
|
|
|
|
|
Interest and fee income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
157 |
|
|
|
(19 |
) |
|
|
(3,627 |
) |
|
|
|
|
Noninterest income |
|
|
|
|
|
|
456 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(68 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
(31,173 |
) |
|
$ |
7,557 |
|
|
$ |
|
|
|
$ |
(872 |
) |
|
$ |
(354 |
) |
|
$ |
(3,695 |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 3 Fair Value Measurements |
|
|
|
Three Months Ended September 30, 2010 |
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative |
|
|
Municipal |
|
|
Private- |
|
|
backed |
|
|
Automobile |
|
|
Equity |
|
(dollar amounts in thousands) |
|
MSRs |
|
|
instruments |
|
|
securities |
|
|
label CMO |
|
|
securities |
|
|
loans |
|
|
investments |
|
Classification of gains and losses in earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage banking income (loss) |
|
$ |
(20,250 |
) |
|
$ |
3,872 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Securities gains (losses) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,159 |
) |
|
|
(558 |
) |
|
|
|
|
|
|
|
|
Interest and fee income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
561 |
|
|
|
165 |
|
|
|
(3,533 |
) |
|
|
|
|
Noninterest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,420 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
(20,250 |
) |
|
$ |
3,872 |
|
|
$ |
|
|
|
$ |
(1,598 |
) |
|
$ |
(393 |
) |
|
$ |
4,887 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 3 Fair Value Measurements |
|
|
|
Nine Months Ended September 30, 2011 |
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative |
|
|
Municipal |
|
|
Private- |
|
|
backed |
|
|
Automobile |
|
|
Equity |
|
(dollar amounts in thousands) |
|
MSRs |
|
|
instruments |
|
|
securities |
|
|
label CMO |
|
|
securities |
|
|
loans |
|
|
investments |
|
Classification of gains and losses in earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage banking income (loss) |
|
$ |
(51,855 |
) |
|
$ |
7,763 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Securities gains (losses) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,941 |
) |
|
|
(3,771 |
) |
|
|
|
|
|
|
|
|
Interest and fee income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
686 |
|
|
|
156 |
|
|
|
(8,852 |
) |
|
|
|
|
Noninterest income |
|
|
|
|
|
|
(499 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,773 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
(51,855 |
) |
|
$ |
7,264 |
|
|
$ |
|
|
|
$ |
(1,255 |
) |
|
$ |
(3,615 |
) |
|
$ |
(5,079 |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 3 Fair Value Measurements |
|
|
|
Nine Months Ended September 30, 2010 |
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative |
|
|
Municipal |
|
|
Private- |
|
|
backed |
|
|
Automobile |
|
|
Equity |
|
(dollar amounts in thousands) |
|
MSRs |
|
|
instruments |
|
|
securities |
|
|
label CMO |
|
|
securities |
|
|
loans |
|
|
investments |
|
Classification of gains and losses in earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage banking income (loss) |
|
$ |
(64,272 |
) |
|
$ |
12,811 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Securities gains (losses) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,027 |
) |
|
|
(4,975 |
) |
|
|
|
|
|
|
|
|
Interest and fee income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,598 |
|
|
|
87 |
|
|
|
(7,933 |
) |
|
|
|
|
Noninterest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,923 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
(64,272 |
) |
|
$ |
12,811 |
|
|
$ |
|
|
|
$ |
(5,429 |
) |
|
$ |
(4,888 |
) |
|
$ |
14,990 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
125
Assets and liabilities under the fair value option
Huntington has elected the fair value option for certain loans in the held for sale portfolio.
The following table presents the fair value and aggregate principal balance of mortgage loans held
for sale under the fair value option.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
December 31, |
|
|
September 30, |
|
(dollar amounts in thousands) |
|
2011 |
|
|
2010 |
|
|
2010 |
|
Fair value |
|
$ |
331,883 |
|
|
$ |
754,117 |
|
|
$ |
699,001 |
|
Aggregate outstanding principal balance |
|
|
317,121 |
|
|
|
749,982 |
|
|
|
675,009 |
|
The following tables present the net gains (losses) from fair value changes, including net
gains (losses) associated with instrument specific credit risk for the three-month and nine-month
periods ended September 30, 2011 and 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gains (losses) from fair value changes |
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
(dollar amounts in thousands) |
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans held for sale |
|
$ |
5,823 |
|
|
$ |
2,201 |
|
|
$ |
13,725 |
|
|
$ |
13,475 |
|
Automobile loans |
|
|
(3,695 |
) |
|
|
(1,242 |
) |
|
|
(5,079 |
) |
|
|
3,055 |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securitization trust notes payable |
|
|
(2,485 |
) |
|
|
(3,929 |
) |
|
|
(6,102 |
) |
|
|
(6,142 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains (losses) included in fair value changes |
|
|
|
associated with instrument specific credit risk |
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
(dollar amounts in thousands) |
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automobile loans |
|
$ |
2,498 |
|
|
$ |
403 |
|
|
$ |
4,780 |
|
|
$ |
995 |
|
Assets and Liabilities measured at fair value on a nonrecurring basis
Certain assets and liabilities may be required to be measured at fair value on a nonrecurring
basis in periods subsequent to their initial recognition. These assets and liabilities are not
measured at fair value on an on-going basis; however, they are subject to fair value adjustments in
certain circumstances, such as when there is evidence of impairment. At September 30, 2011, assets
measured at fair value on a nonrecurring basis were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using |
|
|
|
|
|
|
|
|
|
|
Quoted Prices |
|
|
Significant |
|
|
Significant |
|
|
Total |
|
|
|
|
|
|
|
In Active |
|
|
Other |
|
|
Other |
|
|
Gains/(Losses) |
|
|
|
|
|
|
|
Markets for |
|
|
Observable |
|
|
Unobservable |
|
|
For the Nine |
|
|
|
Fair Value at |
|
|
Identical Assets |
|
|
Inputs |
|
|
Inputs |
|
|
Months Ended |
|
(dollar amounts in millions) |
|
September 30, 2011 |
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
|
September 30, 2011 |
|
Impaired loans |
|
$ |
91.0 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
91.0 |
|
|
$ |
25.5 |
|
Accrued income and other assets |
|
|
38.0 |
|
|
|
|
|
|
|
|
|
|
|
38.0 |
|
|
$ |
(1.8 |
) |
Periodically, Huntington records nonrecurring adjustments of collateral-dependent loans
measured for impairment when establishing the ACL. Such amounts are generally based on the fair
value of the underlying collateral supporting the loan. Appraisals are generally obtained to
support the fair value of the collateral and incorporate measures such as recent sales prices for
comparable properties and cost of construction. In cases where the carrying value exceeds the fair
value of the collateral less cost to sell, an impairment charge is recognized. At September 30,
2011, Huntington identified $91.0 million of impaired loans for which the fair value is recorded
based upon collateral value. For the nine-month period ended September 30, 2011, nonrecurring fair
value impairment of $25.5 million were recorded within the provision for credit losses.
126
Other real estate owned properties are initially valued based on appraisals and third party
price opinions, less estimated selling costs. At September 30, 2011, Huntington had $38.0 million
of OREO assets. For the nine-month period ended September 30, 2011, fair value losses of $1.8
million were recorded within noninterest expense.
Fair values of financial instruments
The carrying amounts and estimated fair values of Huntingtons financial instruments at
September 30, 2011, December 31, 2010, and September 30, 2010, are presented in the following
table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2011 |
|
|
December 31, 2010 |
|
|
September 30, 2010 |
|
|
|
Carrying |
|
|
Fair |
|
|
Carrying |
|
|
Fair |
|
|
Carrying |
|
|
Fair |
|
(dollar amounts in thousands) |
|
Amount |
|
|
Value |
|
|
Amount |
|
|
Value |
|
|
Amount |
|
|
Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and short-term assets |
|
$ |
2,295,730 |
|
|
$ |
2,295,730 |
|
|
$ |
982,926 |
|
|
$ |
982,926 |
|
|
$ |
1,413,466 |
|
|
$ |
1,413,466 |
|
Trading account securities |
|
|
85,711 |
|
|
|
85,711 |
|
|
|
185,404 |
|
|
|
185,404 |
|
|
|
138,677 |
|
|
|
138,677 |
|
Loans held for sale |
|
|
334,606 |
|
|
|
334,606 |
|
|
|
793,285 |
|
|
|
793,285 |
|
|
|
744,439 |
|
|
|
744,439 |
|
Available-for-sale and
other securities |
|
|
8,713,530 |
|
|
|
8,713,530 |
|
|
|
9,895,244 |
|
|
|
9,895,244 |
|
|
|
9,723,558 |
|
|
|
9,723,558 |
|
Held-to-maturity securities |
|
|
658,250 |
|
|
|
682,897 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loans and direct
financing leases |
|
|
37,992,184 |
|
|
|
36,655,676 |
|
|
|
36,857,499 |
|
|
|
35,403,910 |
|
|
|
36,164,235 |
|
|
|
34,894,220 |
|
Derivatives |
|
|
73,824 |
|
|
|
73,824 |
|
|
|
346,133 |
|
|
|
346,133 |
|
|
|
434,288 |
|
|
|
434,288 |
|
|
|
|
|
|
|
|
|
|
Financial Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
|
(43,219,727 |
) |
|
|
(43,368,155 |
) |
|
|
(41,853,898 |
) |
|
|
(41,993,567 |
) |
|
|
(41,072,371 |
) |
|
|
(41,323,675 |
) |
Short-term borrowings |
|
|
(2,224,986 |
) |
|
|
(2,200,121 |
) |
|
|
(2,040,732 |
) |
|
|
(1,982,545 |
) |
|
|
(1,859,134 |
) |
|
|
(1,854,637 |
) |
Federal Home Loan Bank
advances |
|
|
(14,157 |
) |
|
|
(14,157 |
) |
|
|
(172,519 |
) |
|
|
(172,519 |
) |
|
|
(23,643 |
) |
|
|
(23,843 |
) |
Other long-term debt |
|
|
(1,421,518 |
) |
|
|
(1,426,460 |
) |
|
|
(2,144,092 |
) |
|
|
(2,157,358 |
) |
|
|
(2,393,071 |
) |
|
|
(2,400,942 |
) |
Subordinated notes |
|
|
(1,537,293 |
) |
|
|
(1,423,105 |
) |
|
|
(1,497,216 |
) |
|
|
(1,377,851 |
) |
|
|
(1,202,568 |
) |
|
|
(1,047,875 |
) |
Derivatives |
|
|
(295,872 |
) |
|
|
(295,872 |
) |
|
|
(239,240 |
) |
|
|
(239,240 |
) |
|
|
(306,803 |
) |
|
|
(306,803 |
) |
The short-term nature of certain assets and liabilities result in their carrying value
approximating fair value. These include trading account securities, customers acceptance
liabilities, short-term borrowings, bank acceptances outstanding, FHLB advances, and cash and
short-term assets, which include cash and due from banks, interest-bearing deposits in banks, and
federal funds sold and securities purchased under resale agreements. Loan commitments and
letters-of-credit generally have short-term, variable-rate features and contain clauses that limit
Huntingtons exposure to changes in customer credit quality. Accordingly, their carrying values,
which are immaterial at the respective balance sheet dates, are reasonable estimates of fair value.
Not all the financial instruments listed in the table above are subject to the disclosure
provisions of ASC Topic 820.
Certain assets, the most significant being operating lease assets, bank owned life insurance,
and premises and equipment, do not meet the definition of a financial instrument and are excluded
from this disclosure. Similarly, mortgage and nonmortgage servicing rights, deposit base, and other
customer relationship intangibles are not considered financial instruments and are not included
above. Accordingly, this fair value information is not intended to, and does not, represent
Huntingtons underlying value. Many of the assets and liabilities subject to the disclosure
requirements are not actively traded, requiring fair values to be estimated by Management. These
estimations necessarily involve the use of judgment about a wide variety of factors, including but
not limited to, relevancy of market prices of comparable instruments, expected future cash flows,
and appropriate discount rates.
The following methods and assumptions were used by Huntington to estimate the fair value of
the remaining classes of financial instruments:
Held-to-maturity securities
Fair values are determined by using models that are based on security-specific details, as well as
relevant industry and economic factors. The most significant of these inputs are quoted market
prices, and interest rate spreads on relevant benchmark securities.
Loans and direct financing leases
Variable-rate loans that reprice frequently are based on carrying amounts, as adjusted for
estimated credit losses. The fair values for other loans and leases are estimated using discounted
cash flow analyses and employ interest rates currently being offered for loans and leases with
similar terms. The rates take into account the position of the yield curve, as well as an
adjustment for prepayment risk, operating costs, and profit. This value is also reduced by an
estimate of probable losses and the credit risk associated in the loan and
lease portfolio. The valuation of the loan portfolio reflected discounts that Huntington believed
are consistent with transactions occurring in the market place.
127
Deposits
Demand deposits, savings accounts, and money market deposits are, by definition, equal to the
amount payable on demand. The fair values of fixed-rate time deposits are estimated by discounting
cash flows using interest rates currently being offered on certificates with similar maturities.
Debt
Fixed-rate, long-term debt is based upon quoted market prices, which are inclusive of Huntingtons
credit risk. In the absence of quoted market prices, discounted cash flows using market rates for
similar debt with the same maturities are used in the determination of fair value.
14. DERIVATIVE FINANCIAL INSTRUMENTS
Derivative financial instruments are recorded in the Unaudited Condensed Consolidated Balance
Sheet as either an asset or a liability (in accrued income and other assets or accrued expenses and
other liabilities, respectively) and measured at fair value.
Derivatives used in Asset and Liability Management Activities
A variety of derivative financial instruments, principally interest rate swaps, caps, floors,
and collars are used in asset and liability management activities to protect against the risk of
adverse price or interest rate movements. These instruments provide flexibility in adjusting
Huntingtons sensitivity to changes in interest rates without exposure to loss of principal and
higher funding requirements. Huntington records derivatives at fair value, as further described in
Note 13. Collateral agreements are regularly entered into as part of the underlying derivative
agreements with Huntingtons counterparties to mitigate counterparty credit risk. At September 30,
2011, December 31, 2010, and September 30, 2010, aggregate credit risk associated with these
derivatives, net of collateral that has been pledged by the counterparty, was $38.0 million, $39.9
million, and $45.2 million, respectively. The credit risk associated with interest rate swaps is
calculated after considering master netting agreements.
At September 30, 2011, Huntington pledged $199.0 million of investment securities and cash
collateral to counterparties, while other counterparties pledged $141.7 million of investment
securities and cash collateral to Huntington to satisfy collateral netting agreements. In the event
of credit downgrades, Huntington could be required to provide $3.4 million of additional
collateral.
The following table presents the gross notional values of derivatives used in Huntingtons
asset and liability management activities at September 30, 2011, identified by the underlying
interest rate-sensitive instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value |
|
|
Cash Flow |
|
|
|
|
(dollar amounts in thousands) |
|
Hedges |
|
|
Hedges |
|
|
Total |
|
Instruments associated with: |
|
|
|
|
|
|
|
|
|
|
|
|
Loans |
|
$ |
|
|
|
$ |
7,045,000 |
|
|
$ |
7,045,000 |
|
Investment securities |
|
|
|
|
|
|
50,000 |
|
|
|
50,000 |
|
Deposits |
|
|
988,912 |
|
|
|
|
|
|
|
988,912 |
|
Subordinated notes |
|
|
598,000 |
|
|
|
|
|
|
|
598,000 |
|
Other long-term debt |
|
|
35,000 |
|
|
|
|
|
|
|
35,000 |
|
|
|
|
|
|
|
|
|
|
|
Total notional value at September 30, 2011 |
|
$ |
1,621,912 |
|
|
$ |
7,095,000 |
|
|
$ |
8,716,912 |
|
|
|
|
|
|
|
|
|
|
|
128
The following table presents additional information about the interest rate swaps used in
Huntingtons asset and liability management activities at September 30, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
Weighted-Average |
|
|
|
Notional |
|
|
Maturity |
|
|
Fair |
|
|
Rate |
|
(dollar amounts in thousands) |
|
Value |
|
|
(years) |
|
|
Value |
|
|
Receive |
|
|
Pay |
|
Asset conversion swaps receive fixed generic |
|
$ |
7,095,000 |
|
|
|
1.9 |
|
|
$ |
80,447 |
|
|
|
1.49 |
% |
|
|
0.59 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total asset conversion swaps |
|
|
7,095,000 |
|
|
|
1.9 |
|
|
|
80,447 |
|
|
|
1.49 |
|
|
|
0.59 |
|
Liability conversion swaps |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liability conversion swaps receive fixed generic |
|
|
1,591,912 |
|
|
|
3.8 |
|
|
|
115,090 |
|
|
|
2.53 |
|
|
|
0.36 |
|
Liability conversion swaps receive fixed callable |
|
|
30,000 |
|
|
|
9.0 |
|
|
|
425 |
|
|
|
2.98 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liability conversion swaps |
|
|
1,621,912 |
|
|
|
3.9 |
|
|
|
115,515 |
|
|
|
2.54 |
|
|
|
0.36 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total swap portfolio |
|
$ |
8,716,912 |
|
|
|
2.2 |
|
|
$ |
195,962 |
|
|
|
1.68 |
% |
|
|
0.55 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
These derivative financial instruments were entered into for the purpose of managing the
interest rate risk of assets and liabilities. Consequently, net amounts receivable or payable on
contracts hedging either interest earning assets or interest bearing liabilities were accrued as an
adjustment to either interest income or interest expense. The net amounts resulted in an increase
to net interest income of $27.4 million and $43.9 million for the three-month periods ended
September 30, 2011, and 2010, respectively. For the nine-month periods ended September 30, 2011 and
2010, the net amounts resulted in an increase to net interest income of $89.3 million and $150.3
million, respectively.
In connection with securitization activities, Huntington purchased interest rate caps with a
notional value totaling $0.9 billion. These purchased caps were assigned to the securitization
trust for the benefit of the security holders. Interest rate caps were also sold totaling $0.9
billion outside the securitization structure. Both the purchased and sold caps are marked to market
through income.
In connection with the sale of Huntingtons Class B Visaâ shares, Huntington
entered into a swap agreement with the purchaser of the shares. The swap agreement adjusts for
dilution in the conversion ratio of Class B shares resulting from the Visaâ
litigation. At September 30, 2011, the fair value of the swap liability of $0.9 million is an
estimate of the exposure liability based upon Huntingtons assessment of the probability-weighted
potential Visaâ litigation losses and certain fixed payments required to be made
through the term of the swap.
The following table presents the fair values at September 30, 2011, December 31, 2010, and
September 30, 2010 of Huntingtons derivatives that are designated and not designated as hedging
instruments. Amounts in the table below are presented gross without the impact of any net
collateral arrangements.
Asset derivatives included in accrued income and other assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
December 31, |
|
|
September 30, |
|
(dollar amounts in thousands) |
|
2011 |
|
|
2010 |
|
|
2010 |
|
Interest rate contracts designated as hedging instruments |
|
$ |
195,962 |
|
|
$ |
127,346 |
|
|
$ |
190,045 |
|
Interest rate contracts not designated as hedging instruments |
|
|
330,929 |
|
|
|
263,015 |
|
|
|
357,739 |
|
Foreign exchange contracts not designated as hedging instruments |
|
|
20,447 |
|
|
|
2,845 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contracts |
|
$ |
547,338 |
|
|
$ |
393,206 |
|
|
$ |
547,784 |
|
|
|
|
|
|
|
|
|
|
|
Liability derivatives included in accrued expenses and other liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
December 31, |
|
|
September 30, |
|
(dollar amounts in thousands) |
|
2011 |
|
|
2010 |
|
|
2010 |
|
Interest rate contracts designated as hedging instruments |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Interest rate contracts not designated as hedging instruments |
|
|
265,928 |
|
|
|
233,805 |
|
|
|
297,380 |
|
Foreign exchange contracts not designated as hedging instruments |
|
|
17,977 |
|
|
|
3,107 |
|
|
|
2,440 |
|
|
|
|
|
|
|
|
|
|
|
Total contracts |
|
$ |
283,905 |
|
|
$ |
236,912 |
|
|
$ |
299,820 |
|
|
|
|
|
|
|
|
|
|
|
Fair value hedges are purchased to convert deposits and subordinated and other long-term debt
from fixed-rate obligations to floating rate. The changes in fair value of the derivative are, to
the extent that the hedging relationship is effective, recorded through earnings and offset against
changes in the fair value of the hedged item.
129
The following table presents the change in fair value for derivatives designated as fair value
hedges as well as the offsetting change in fair value on the hedged item for the three-month and
nine-month periods ended September 30, 2011 and 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
(dollar amounts in thousands) |
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
Interest rate contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value of interest rate swaps hedging deposits (1) |
|
$ |
2,922 |
|
|
$ |
9,083 |
|
|
$ |
3,831 |
|
|
$ |
14,664 |
|
Change in fair value of hedged deposits (1) |
|
|
(2,870 |
) |
|
|
(9,958 |
) |
|
|
(3,949 |
) |
|
|
(14,970 |
) |
Change in fair value of interest rate swaps hedging
subordinated notes (2) |
|
|
41,170 |
|
|
|
7,817 |
|
|
|
46,407 |
|
|
|
24,178 |
|
Change in fair value of hedged subordinated notes (2) |
|
|
(41,170 |
) |
|
|
(7,817 |
) |
|
|
(46,407 |
) |
|
|
(24,178 |
) |
Change in fair value of interest rate swaps hedging other
long-term debt (2) |
|
|
2,138 |
|
|
|
1,267 |
|
|
|
2,527 |
|
|
|
3,820 |
|
Change in fair value of hedged other long-term debt (2) |
|
|
(2,138 |
) |
|
|
(1,267 |
) |
|
|
(2,527 |
) |
|
|
(3,820 |
) |
|
|
|
(1) |
|
Effective portion of the hedging relationship is recognized in Interest expense deposits in
the Unaudited Condensed Consolidated Statements of Income. Any resulting ineffective portion of the
hedging relationship is recognized in noninterest income in the Unaudited Condensed Consolidated
Statements of Income. |
|
(2) |
|
Effective portion of the hedging relationship is recognized in Interest expense subordinated
notes and other long-term debt in the Unaudited Condensed Consolidated Statements of Income. Any
resulting ineffective portion of the hedging relationship is recognized in noninterest income in
the Unaudited Condensed Consolidated Statements of Income. |
For cash flow hedges, interest rate swap contracts were entered into that pay fixed-rate
interest in exchange for the receipt of variable-rate interest without the exchange of the
contracts underlying notional amount, which effectively converts a portion of its floating-rate
debt to a fixed-rate debt. This reduces the potentially adverse impact of increases in interest
rates on future interest expense. Other LIBOR-based commercial and industrial loans as well as
investment securities were effectively converted to fixed-rate by entering into contracts that swap
certain variable-rate interest payments for fixed-rate interest payments at designated times.
To the extent these derivatives are effective in offsetting the variability of the hedged cash
flows, changes in the derivatives fair value will not be included in current earnings but are
reported as a component of OCI in the Unaudited Condensed Consolidated Statements of Shareholders
Equity. These changes in fair value will be included in earnings of future periods when earnings
are also affected by the changes in the hedged cash flows. To the extent these derivatives are not
effective, changes in their fair values are immediately included in noninterest income.
The following table presents the gains and (losses) recognized in OCI and the location in the
Unaudited Condensed Consolidated Statements of Income of gains and (losses) reclassified from OCI
into earnings for the three-month and nine-month periods ended September 30, 2011 and 2010 for
derivatives designated as effective cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of (gain) or loss |
|
|
|
Amount of gain or |
|
|
|
|
reclassified from |
|
|
|
(loss) recognized in |
|
|
|
|
accumulated OCI into |
|
|
|
OCI on derivatives |
|
|
|
|
earnings (effective |
|
|
|
(effective portion) |
|
|
|
|
portion) |
|
Derivatives in cash flow |
|
Nine Months Ended |
|
|
|
|
Nine Months Ended |
|
hedging relationships |
|
September 30, |
|
|
Location of gain or (loss) reclassified from |
|
September 30, |
|
(dollar amounts in thousands) |
|
2011 |
|
|
2010 |
|
|
accumulated OCI into earnings (effective portion) |
|
2011 |
|
|
2010 |
|
Interest rate contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans |
|
$ |
12,880 |
|
|
$ |
81,517 |
|
|
Interest and fee income - loans and leases |
|
$ |
3,776 |
|
|
$ |
(100,623 |
) |
Investment Securities |
|
|
847 |
|
|
|
|
|
|
Interest and fee income - investment securities |
|
|
|
|
|
|
|
|
FHLB Advances |
|
|
|
|
|
|
|
|
|
Interest expense - subordinated notes and other long-term debt |
|
|
|
|
|
|
2,580 |
|
Deposits |
|
|
|
|
|
|
|
|
|
Interest expense - deposits |
|
|
|
|
|
|
|
|
Subordinated notes |
|
|
|
|
|
|
|
|
|
Interest expense - subordinated notes and other long-term debt |
|
|
20 |
|
|
|
(1,264 |
) |
Other long term debt |
|
|
|
|
|
|
|
|
|
Interest expense - subordinated notes and other long-term debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
13,727 |
|
|
$ |
81,517 |
|
|
|
|
$ |
3,796 |
|
|
$ |
(99,307 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the next twelve months, Huntington expects to reclassify to earnings $35.1 million
of after-tax unrealized gains on cash flow hedging derivatives currently in OCI.
130
The following table details the gains and (losses) recognized in noninterest income on the
ineffective portion on interest rate contracts for derivatives designated as cash flow hedges for
the three-month and nine-month periods ended September 30, 2011 and 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
(dollar amounts in thousands) |
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives in cash flow hedging relationships |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans |
|
|
(261 |
) |
|
|
89 |
|
|
|
(147 |
) |
|
|
663 |
|
FHLB Advances |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives used in trading activities
Various derivative financial instruments are offered to enable customers to meet their
financing and investing objectives and for their risk management purposes. Derivative financial
instruments used in trading activities consisted predominantly of interest rate swaps, but also
included interest rate caps, floors, and futures, as well as foreign exchange options. Interest
rate options grant the option holder the right to buy or sell an underlying financial instrument
for a predetermined price before the contract expires. Interest rate futures are commitments to
either purchase or sell a financial instrument at a future date for a specified price or yield and
may be settled in cash or through delivery of the underlying financial instrument. Interest rate
caps and floors are option-based contracts that entitle the buyer to receive cash payments based on
the difference between a designated reference rate and a strike price, applied to a notional
amount. Written options, primarily caps, expose Huntington to market risk but not credit risk.
Purchased options contain both credit and market risk. The interest rate risk of these customer
derivatives is mitigated by entering into similar derivatives having offsetting terms with other
counterparties. The credit risk to these customers is evaluated and included in the calculation of
fair value.
The net fair values of these derivative financial instruments, for which the gross amounts are
included in accrued income and other assets or accrued expenses and other liabilities at September
30, 2011, December 31, 2010, and September 30, 2010, were $54.3 million, $46.3 million, and $38.8
million, respectively. The total notional values of derivative financial instruments used by
Huntington on behalf of customers, including offsetting derivatives, were $10.7 billion, $9.8
billion, and $9.4 billion at September 30, 2011, December 31, 2010, and September 30, 2010,
respectively. Huntingtons credit risks from interest rate swaps used for trading purposes were
$330.9 million, $263.0 million, and $357.7 million at the same dates, respectively.
Derivatives used in mortgage banking activities
Huntington also uses certain derivative financial instruments to offset changes in value of
its MSRs. These derivatives consist primarily of forward interest rate agreements and forward
mortgage securities. The derivative instruments used are not designated as hedges. Accordingly,
such derivatives are recorded at fair value with changes in fair value reflected in mortgage
banking income. The following table summarizes the derivative assets and liabilities used in
mortgage banking activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
December 31, |
|
|
September 30, |
|
(dollar amounts in thousands) |
|
2011 |
|
|
2010 |
|
|
2010 |
|
Derivative assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate lock agreements |
|
$ |
8,963 |
|
|
$ |
2,817 |
|
|
$ |
11,745 |
|
Forward trades and options |
|
|
134 |
|
|
|
20,669 |
|
|
|
980 |
|
|
|
|
|
|
|
|
|
|
|
Total derivative assets |
|
|
9,097 |
|
|
|
23,486 |
|
|
|
12,725 |
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate lock agreements |
|
|
(124 |
) |
|
|
(1,445 |
) |
|
|
(379 |
) |
Forward trades and options |
|
|
(11,843 |
) |
|
|
(883 |
) |
|
|
(6,604 |
) |
|
|
|
|
|
|
|
|
|
|
Total derivative liabilities |
|
|
(11,967 |
) |
|
|
(2,328 |
) |
|
|
(6,983 |
) |
|
|
|
|
|
|
|
|
|
|
Net derivative asset (liability) |
|
$ |
(2,870 |
) |
|
$ |
21,158 |
|
|
$ |
5,742 |
|
|
|
|
|
|
|
|
|
|
|
The total notional value of these derivative financial instruments at September 30, 2011,
December 31, 2010, and September 30, 2010, was $1.4 billion, $2.6 billion, and $2.8 billion,
respectively. The total notional amount at September 30, 2011, corresponds to trading assets with a
fair value of $13.2 million and trading liabilities with a fair value of $0.7 million. Total MSR
hedging gains and (losses) for the three-month periods ended September 30, 2011 and 2010, were
$30.3 million and $24.3 million, respectively, and $39.1 million and $82.5 million for the
nine-month periods ended September 30, 2011 and September 30, 2010, respectively. Included in total
MSR hedging gains and losses for the three-month periods ended September 30, 2011 and 2010 were
gains and (losses) related
to derivative instruments of $30.2 million and $24.2 million, respectively, and $39.2 million
and $81.9 million for the nine-month periods ended September 30, 2011, and September 30, 2010,
respectively. These amounts are included in mortgage banking income in the Unaudited Condensed
Consolidated Statements of Income.
131
15. VIEs
Consolidated VIEs
Consolidated VIEs at September 30, 2011, consisted of the Franklin 2009 Trust and certain loan
securitization trusts. Loan securitizations include automobile loan and lease securitization trusts
formed in 2009, 2008, and 2006. Huntington has determined the trusts are VIEs. Huntington has
concluded that it is the primary beneficiary of these trusts because it has the power to direct the
activities of the entity that most significantly affect the entitys economic performance and it
has either the obligation to absorb losses of the entity that could potentially be significant to
the VIE or the right to receive benefits from the entity that could potentially be significant to
the VIE.
The carrying amount and classification of the trusts assets and liabilities that are included
in the Unaudited Condensed Consolidated Balance Sheet are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2011 |
|
|
|
Franklin |
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollar amounts in thousands) |
|
2009 Trust |
|
|
2009 Trust |
|
|
2008 Trust |
|
|
2006 Trust |
|
|
Total |
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash |
|
$ |
|
|
|
$ |
20,095 |
|
|
$ |
14,551 |
|
|
$ |
56,132 |
|
|
$ |
90,778 |
|
Loans and leases |
|
|
|
|
|
|
344,535 |
|
|
|
164,095 |
|
|
|
810,666 |
|
|
|
1,319,296 |
|
Allowance for loan
and lease losses |
|
|
|
|
|
|
|
|
|
|
(1,444 |
) |
|
|
(7,134 |
) |
|
|
(8,578 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loans and leases |
|
|
|
|
|
|
344,535 |
|
|
|
162,651 |
|
|
|
803,532 |
|
|
|
1,310,718 |
|
Accrued income and
other assets |
|
|
1,753 |
|
|
|
1,607 |
|
|
|
667 |
|
|
|
3,145 |
|
|
|
7,172 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
1,753 |
|
|
$ |
366,237 |
|
|
$ |
177,869 |
|
|
$ |
862,809 |
|
|
$ |
1,408,668 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other long-term debt |
|
$ |
|
|
|
$ |
173,000 |
|
|
$ |
40,887 |
|
|
$ |
450,365 |
|
|
$ |
664,252 |
|
Accrued interest
and other
liabilities |
|
|
988 |
|
|
|
388 |
|
|
|
65 |
|
|
|
102 |
|
|
|
1,543 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
$ |
988 |
|
|
$ |
173,388 |
|
|
$ |
40,952 |
|
|
$ |
450,467 |
|
|
$ |
665,795 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unconsolidated VIEs
Unconsolidated VIEs at September 30, 2011, consisted of an automobile loan and lease
securitization trust formed in 2011. Huntington has concluded that it is not the primary
beneficiary of this trust because it has neither the obligation to absorb losses of the entity that
could potentially be significant to the VIE nor the right to receive benefits from the entity that
could potentially be significant to the VIE. Huntington is not required, and does not currently
intend, to provide any additional financial support to this trust. Investors and creditors only
have recourse to the assets held by the trust.
The carrying amount and classification of the trusts assets and liabilities that are not
included in the Unaudited Condensed Consolidated Balance Sheet were as follows:
|
|
|
|
|
|
|
September 30, 2011 |
|
(dollar amounts in thousands) |
|
2011 Trust |
|
Assets: |
|
|
|
|
Cash |
|
$ |
34,629 |
|
Loans and leases |
|
|
994,052 |
|
Allowance for loan
and lease losses |
|
|
|
|
|
|
|
|
Net loans and leases |
|
|
994,052 |
|
Accrued income and
other assets |
|
|
2,190 |
|
|
|
|
|
Total assets |
|
$ |
1,030,871 |
|
|
|
|
|
Liabilities: |
|
|
|
|
Other long-term debt |
|
$ |
1,000,000 |
|
Accrued interest and
other liabilities |
|
|
792 |
|
|
|
|
|
Total liabilities |
|
$ |
1,000,792 |
|
|
|
|
|
132
TRUST-PREFERRED SECURITIES
Huntington has certain wholly-owned trusts whose assets, liabilities, equity, income, and
expenses are not included within Huntingtons Unaudited Condensed Consolidated Financial
Statements. These trusts have been formed for the sole purpose of issuing trust-preferred
securities, from which the proceeds are then invested in Huntington junior subordinated debentures,
which are reflected in Huntingtons Unaudited Condensed Consolidated Balance Sheet as subordinated
notes. The trust securities are the obligations of the trusts, and as such, are not consolidated
within Huntingtons Unaudited Condensed Consolidated Financial Statements. A list of
trust-preferred securities outstanding at September 30, 2011, follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal amount of |
|
|
Investment in |
|
|
|
|
|
|
|
subordinated note/ |
|
|
unconsolidated |
|
(dollar amounts in thousands) |
|
Rate |
|
|
debenture issued to trust (1) |
|
|
subsidiary (2) |
|
Huntington Capital I |
|
|
0.95 |
%(3) |
|
$ |
138,816 |
|
|
$ |
6,186 |
|
Huntington Capital II |
|
|
0.97 |
(4) |
|
|
55,093 |
|
|
|
3,093 |
|
Huntington Capital III |
|
|
6.69 |
|
|
|
114,094 |
|
|
|
10 |
|
BancFirst Ohio Trust Preferred |
|
|
8.54 |
|
|
|
23,206 |
|
|
|
619 |
|
Sky Financial Capital Trust I |
|
|
8.56 |
|
|
|
64,264 |
|
|
|
1,856 |
|
Sky Financial Capital Trust II |
|
|
3.19 |
(5) |
|
|
30,929 |
|
|
|
929 |
|
Sky Financial Capital Trust III |
|
|
1.71 |
(6) |
|
|
77,320 |
|
|
|
2,320 |
|
Sky Financial Capital Trust IV |
|
|
1.64 |
(6) |
|
|
77,320 |
|
|
|
2,320 |
|
Prospect Trust I |
|
|
3.50 |
(7) |
|
|
6,186 |
|
|
|
186 |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
$ |
587,228 |
|
|
$ |
17,519 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Represents the principal amount of debentures issued to each trust, including unamortized
original issue discount. |
|
(2) |
|
Huntingtons investment in the unconsolidated trusts represents the only risk of loss. |
|
(3) |
|
Variable effective rate at September 30, 2011, based on three month LIBOR + 0.70. |
|
(4) |
|
Variable effective rate at September 30, 2011, based on three month LIBOR + 0.625. |
|
(5) |
|
Variable effective rate at September 30, 2011, based on three month LIBOR + 2.95. |
|
(6) |
|
Variable effective rate at September 30, 2011, based on three month LIBOR + 1.40. |
|
(7) |
|
Variable effective rate at September 30, 2011, based on three month LIBOR + 3.25. |
Each issue of the junior subordinated debentures has an interest rate equal to the
corresponding trust securities distribution rate. Huntington has the right to defer payment of
interest on the debentures at any time, or from time-to-time for a period not exceeding five years,
provided that no extension period may extend beyond the stated maturity of the related debentures.
During any such extension period, distributions to the trust securities will also be deferred and
Huntingtons ability to pay dividends on its common stock will be restricted. Periodic cash
payments and payments upon liquidation or redemption with respect to trust securities are
guaranteed by Huntington to the extent of funds held by the trusts. The guarantee ranks subordinate
and junior in right of payment to all indebtedness of the Company to the same extent as the junior
subordinated debt. The guarantee does not place a limitation on the amount of additional
indebtedness that may be incurred by Huntington.
LOW INCOME HOUSING TAX CREDIT PARTNERSHIPS
Huntington makes certain equity investments in various limited partnerships that sponsor
affordable housing projects utilizing the Low Income Housing Tax Credit (LIHTC) pursuant to Section
42 of the Internal Revenue Code. The purpose of these investments is to achieve a satisfactory
return on capital, to facilitate the sale of additional affordable housing product offerings, and
to assist in achieving goals associated with the Community Reinvestment Act. The primary activities
of the limited partnerships include the identification, development, and operation of multi family
housing that is leased to qualifying residential tenants. Generally, these types of investments are
funded through a combination of debt and equity.
Huntington does not have the power to direct the activities of these VIEs that most
significantly affect their economic performance and is not the primary beneficiary. Huntington uses
the equity method to account for the majority of its investments in these entities. These
investments are included in accrued income and other assets. At September 30, 2011, December 31,
2010, and September 30, 2010, Huntington had commitments of $345.8 million, $316.0 million, and
$269.4 million, respectively, of which $304.1 million, $260.1 million, and $238.9 million,
respectively, were funded. The unfunded portion is included in accrued expenses and other
liabilities.
133
16. COMMITMENTS AND CONTINGENT LIABILITIES
Commitments to extend credit
In the ordinary course of business, Huntington makes various commitments to extend credit that
are not reflected in the Unaudited Condensed Consolidated Financial Statements. The contractual
amounts of these financial agreements at September 30, 2011, December 31, 2010, and September 30,
2010, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
December 31, |
|
|
September 30, |
|
(dollar amounts in millions) |
|
2011 |
|
|
2010 |
|
|
2010 |
|
Contract amount represents credit risk: |
|
|
|
|
|
|
|
|
|
|
|
|
Commitments to extend credit |
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
$ |
7,471 |
|
|
$ |
5,933 |
|
|
$ |
5,854 |
|
Consumer |
|
|
5,828 |
|
|
|
5,406 |
|
|
|
5,264 |
|
Commercial real estate |
|
|
535 |
|
|
|
546 |
|
|
|
644 |
|
Standby letters of credit |
|
|
548 |
|
|
|
607 |
|
|
|
477 |
|
Commitments to extend credit generally have fixed expiration dates, are variable-rate, and
contain clauses that permit Huntington to terminate or otherwise renegotiate the contracts in the
event of a significant deterioration in the customers credit quality. These arrangements normally
require the payment of a fee by the customer, the pricing of which is based on prevailing market
conditions, credit quality, probability of funding, and other relevant factors. Since many of these
commitments are expected to expire without being drawn upon, the contract amounts are not
necessarily indicative of future cash requirements. The interest rate risk arising from these
financial instruments is insignificant as a result of their predominantly short-term, variable-rate
nature.
Standby letters-of-credit are conditional commitments issued to guarantee the performance of a
customer to a third party. These guarantees are primarily issued to support public and private
borrowing arrangements, including commercial paper, bond financing, and similar transactions. Most
of these arrangements mature within two years. The carrying amount of deferred revenue associated
with these guarantees was $1.5 million, $2.2 million, and $2.0 million at September 30, 2011,
December 31, 2010, and September 30, 2010, respectively.
Through the Companys credit process, Huntington monitors the credit risks of outstanding
standby letters-of-credit. When it is probable that a standby letter-of-credit will be drawn and
not repaid in full, losses are recognized in the provision for credit losses. At September 30,
2011, Huntington had $548 million of standby letters-of-credit outstanding, of which 80% were
collateralized. Included in this $548 million total are letters-of-credit issued by the Bank that
support securities that were issued by customers and remarketed by The Huntington Investment
Company, the Companys broker-dealer subsidiary.
Huntington uses an internal grading system to assess an estimate of loss on its loan and lease
portfolio. This same grading system is used to monitor credit risk associated with standby
letters-of-credit. Under this grading system as of September 30, 2011, approximately $84 million of
the standby letters-of-credit were rated strong with sufficient asset quality, liquidity, and good
debt capacity and coverage; approximately $396 million were rated average with acceptable asset
quality, liquidity, and modest debt capacity; and approximately $68 million were rated substandard
with negative financial trends, structural weaknesses, operating difficulties, and higher leverage.
Commercial letters-of-credit represent short-term, self-liquidating instruments that
facilitate customer trade transactions and generally have maturities of no longer than 90 days. The
goods or cargo being traded normally secures these instruments.
Commitments to sell loans
Huntington enters into forward contracts relating to its mortgage banking business to hedge
the exposures from commitments to make new residential mortgage loans with existing customers and
from mortgage loans classified as loans held for sale. At September 30, 2011, December 31, 2010,
and September 30, 2010, Huntington had commitments to sell residential real estate loans of $673.5
million, $998.7 million, and $1,254.4 million, respectively. These contracts mature in less than
one year.
Income Taxes
The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and
various state, city and foreign jurisdictions. Federal income tax audits have been completed
through 2007. In the 2011 third quarter, the IRS began its examination of our 2008 and 2009
consolidated federal income tax returns. Various state and other jurisdictions remain open to
examination for tax years 2005 and forward.
134
The IRS has proposed adjustments to the Companys previously filed tax returns. Management
believes the tax positions taken by the Company related to such proposed adjustments were correct
and supported by applicable statutes, regulations, and judicial authority, and intends to
vigorously defend them. 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. However,
although no assurance can be given, Management believes the resolution of these examinations will
not, individually or in the aggregate, have a material adverse impact on our consolidated financial
position.
Huntington accounts for uncertainties in income taxes in accordance with ASC 740, Income
Taxes. At September 30, 2011, Huntington had gross unrecognized tax benefits of $11.9 million in
income tax liability related to tax positions. Total interest accrued on the unrecognized tax
benefits amounted to $2.1 million as of September 30, 2011. Due to the complexity of some of these
uncertainties, the ultimate resolution may result in a payment that is materially different from
the current estimate of the tax liabilities. However, any ultimate settlement is not expected to be
material to the Unaudited Condensed Consolidated Financial Statements as a whole. Huntington
recognizes interest and penalties on income tax assessments or income tax refunds in the financial
statements as a component of its provision for income taxes. Huntington does not anticipate the
total amount of unrecognized tax benefits to significantly change within the next 12 months.
Litigation
The nature of Huntingtons business ordinarily results in a certain amount of claims,
litigation, investigations, and legal and administrative cases and proceedings, all of which are
considered incidental to the normal conduct of business. When the Company determines it has
meritorious defenses to the claims asserted, it vigorously defends itself. The Company will
consider settlement of cases when, in Managements judgment, it is in the best interests of both
the Company and its shareholders to do so.
On at least a quarterly basis, Huntington assesses its liabilities and contingencies in
connection with outstanding legal proceedings utilizing the latest information available. For
matters where it is probable the Company will incur a loss and the amount can be reasonably
estimated, Huntington establishes an accrual for the loss. Once established, the accrual is
adjusted as appropriate to reflect any relevant developments. For matters where a loss is not
probable or the amount of the loss cannot be estimated, no accrual is established.
In certain cases, exposure to loss exists in excess of the accrual to the extent such loss is
reasonably possible, but not probable. Management believes an estimate of the aggregate range of
reasonably possible losses, in excess of amounts accrued, for current legal proceedings is from $0
to approximately $160.0 million at September 30, 2011. For certain other cases, Management cannot
reasonably estimate the possible loss at this time. Any estimate involves significant judgment,
given the varying stages of the proceedings (including the fact that many of them are currently in
preliminary stages), the existence of multiple defendants in several of the current proceedings
whose share of liability has yet to be determined, the numerous unresolved issues in many of the
proceedings, and the inherent uncertainty of the various potential outcomes of such proceedings.
Accordingly, Managements estimate will change from time-to-time, and actual losses may be more or
less than the current estimate.
While the final outcome of legal proceedings is inherently uncertain, based on information
currently available, advice of counsel, and available insurance coverage, Management believes that
the amount it has already accrued is adequate and any incremental liability arising from the
Companys legal proceedings will not have a material adverse effect on the Companys consolidated
financial position as a whole. However, in the event of unexpected future developments, it is
possible that the ultimate resolution of these matters, if unfavorable, may be material to the
Companys consolidated financial position in a particular period.
The following supplements the discussion of certain matters previously reported in Item 3
(Legal Proceedings) of the 2010 Form 10-K for events occurring during the first nine-month period
of 2011:
The Bank is a defendant in three lawsuits, which collectively may be material, arising from
its commercial lending, depository, and equipment leasing relationships with Cyberco Holdings, Inc.
(Cyberco), based in Grand Rapids, Michigan. In November 2004, the Federal Bureau of Investigation
and the IRS raided the Cyberco facilities and Cybercos operations ceased. An equipment leasing
fraud was uncovered, whereby Cyberco sought financing from equipment lessors and financial
institutions, including the Bank, allegedly to purchase computer equipment from Teleservices Group,
Inc. (Teleservices). Cyberco created fraudulent documentation to close the financing transactions
while, in fact, no computer equipment was ever purchased or leased from Teleservices which proved
to be a shell corporation.
On June 22, 2007, a complaint in the United States District Court for the Western District of
Michigan (District Court) was filed by El Camino Resources, Ltd, ePlus Group, Inc., and Bank
Midwest, N.A., all of whom had lending relationships with Teleservices, against Cyberco and the
Bank, alleging that Cyberco defrauded plaintiffs and converted plaintiffs property through various
means in connection with the equipment leasing scheme and alleges that the Bank aided and abetted
Cyberco in committing the alleged fraud and conversion. The complaint further alleges that the
Banks actions entitle one of the plaintiffs to recover $1.9
million from the Bank as a form of unjust enrichment. In addition, plaintiffs claimed direct
damages of approximately $32.0 million and additional consequential damages in excess of $20.0
million. On July 1, 2010, the District Court issued an Opinion and Order adopting in full a federal
magistrates recommendation for summary judgment in favor of the Bank on all claims except the
unjust enrichment claim, and a partial summary judgment was entered on July 1, 2010. The Bank has
requested an opportunity to file a motion for summary judgment on the remaining unjust enrichment
claim against it. A motion for reconsideration filed by the plaintiffs regarding the partial
summary judgment was denied. Subsequently, at a pre-motion conference, the District Court, in lieu
of allowing the Bank to file a summary judgment motion, ordered the case to be tried on January 17,
2012, in a one day bench trial, and entered a scheduling order governing all pretrial conduct.
135
The Bank is also involved with the Chapter 7 bankruptcy proceedings of both Cyberco, filed on
December 9, 2004, and Teleservices, filed on January 21, 2005. The Cyberco bankruptcy trustee
commenced an adversary proceeding against the Bank on December 8, 2006, seeking over $70.0 million
he alleges was transferred to the Bank. The Bank responded with a motion to dismiss and all but the
preference claims were dismissed on January 29, 2008. The Cyberco bankruptcy trustee alleges
preferential transfers in the amount of $9.7 million. On August 11, 2011, the District Court
ordered the case to be tried in April 2012, and entered a pretrial order governing all pretrial
conduct. Subsequently, the Bank filed a motion for summary judgment based on the Cyberco trustee
seeking recovery in connection with the same alleged transfers as the Teleservices trustee in the
case described below. This motion is currently pending.
The Teleservices bankruptcy trustee filed an adversary proceeding against the Bank on January
19, 2007, seeking to avoid and recover alleged transfers that occurred in two ways: (1) checks made
payable to the Bank to be applied to Cybercos indebtedness to the Bank, and (2) deposits into
Cybercos bank accounts with the Bank. A trial was held as to only the Banks defenses in the 2010
fourth quarter. Subsequently, the trustee filed a summary judgment motion on her affirmative case,
alleging the fraudulent transfers to the Bank totaled approximately $73.0 million and seeking
judgment in that amount (which includes the $9.7 million alleged to be preferential transfers by
the Cyberco bankruptcy trustee). On March 17, 2011, the Bankruptcy Court issued an Opinion
determining the alleged transfers made to the Bank were not received in good faith from the time
period of April 30, 2004, through November 2004, and that the Bank had failed to show a lack of
knowledge of the avoidability of the alleged transfers from November 17, 2003, through April 30,
2004. The trustee then filed an amended motion for summary judgment on her affirmative case and a
hearing was held on July 1, 2011. The motion in currently pending. In accordance with the District
Courts scheduling order, the Bank filed a motion for summary judgment on September 16, 2011, and a
motion to add El Camino and the Cyberco trustee as necessary parties. These motions remain pending.
If summary judgment does not enter for either party, the case is scheduled for trial in January
2012.
In the pending bankruptcy cases of Cyberco and Teleservices, the Bank moved to substantively
consolidate the two bankruptcy estates, principally on the ground that Teleservices was the alter
ego and a mere instrumentality of Cyberco at all times. On July 2, 2010, the Bankruptcy Court
issued an Opinion denying the Banks motions for substantive consolidation of the two bankruptcy
estates. The Bank has appealed this ruling and the appeal is pending.
17. PARENT COMPANY FINANCIAL STATEMENTS
The parent company condensed financial statements, which include transactions with
subsidiaries, are as follows.
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheets |
|
September 30, |
|
|
December 31, |
|
|
September 30, |
|
(dollar amounts in thousands) |
|
2011 |
|
|
2010 |
|
|
2010 |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents (1) |
|
$ |
697,247 |
|
|
$ |
615,167 |
|
|
$ |
858,965 |
|
Due from The Huntington National Bank |
|
|
953,074 |
|
|
|
954,565 |
|
|
|
953,074 |
|
Due from non-bank subsidiaries |
|
|
197,809 |
|
|
|
225,560 |
|
|
|
246,458 |
|
Investment in The Huntington National Bank |
|
|
4,031,232 |
|
|
|
3,515,597 |
|
|
|
3,524,432 |
|
Investment in non-bank subsidiaries |
|
|
795,518 |
|
|
|
790,248 |
|
|
|
813,788 |
|
Accrued interest receivable and other assets |
|
|
126,527 |
|
|
|
110,181 |
|
|
|
167,712 |
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
6,801,407 |
|
|
$ |
6,211,318 |
|
|
$ |
6,564,429 |
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders Equity |
|
|
|
|
|
|
|
|
|
|
|
|
Short-term borrowings |
|
$ |
|
|
|
$ |
100 |
|
|
$ |
687 |
|
Long-term borrowings |
|
|
932,434 |
|
|
|
937,434 |
|
|
|
637,434 |
|
Dividends payable, accrued expenses, and other liabilities |
|
|
468,494 |
|
|
|
293,242 |
|
|
|
358,905 |
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
1,400,928 |
|
|
|
1,230,776 |
|
|
|
997,026 |
|
|
|
|
|
|
|
|
|
|
|
Shareholders equity (2) |
|
|
5,400,479 |
|
|
|
4,980,542 |
|
|
|
5,567,403 |
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity |
|
$ |
6,801,407 |
|
|
$ |
6,211,318 |
|
|
$ |
6,564,429 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes restricted cash of $125,000. |
|
(2) |
|
See Huntingtons Unaudited Condensed Consolidated Statements of Changes in Shareholders Equity. |
136
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
Statements of Income |
|
September 30, |
|
|
September 30, |
|
(dollar amounts in thousands) |
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends from |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Huntington National Bank |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Non-bank subsidiaries |
|
|
|
|
|
|
15,000 |
|
|
|
31,000 |
|
|
|
33,000 |
|
Interest from |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Huntington National Bank |
|
|
20,248 |
|
|
|
20,611 |
|
|
|
60,644 |
|
|
|
62,351 |
|
Non-bank subsidiaries |
|
|
2,007 |
|
|
|
2,873 |
|
|
|
6,962 |
|
|
|
9,322 |
|
Other |
|
|
489 |
|
|
|
461 |
|
|
|
1,529 |
|
|
|
2,537 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income |
|
|
22,744 |
|
|
|
38,945 |
|
|
|
100,135 |
|
|
|
107,210 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personnel costs |
|
|
10,251 |
|
|
|
9,751 |
|
|
|
24,581 |
|
|
|
22,769 |
|
Interest on borrowings |
|
|
8,834 |
|
|
|
6,028 |
|
|
|
26,256 |
|
|
|
17,303 |
|
Other |
|
|
14,692 |
|
|
|
11,416 |
|
|
|
34,722 |
|
|
|
37,321 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expense |
|
|
33,777 |
|
|
|
27,195 |
|
|
|
85,559 |
|
|
|
77,393 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes and equity in undistributed
net income of subsidiaries |
|
|
(11,033 |
) |
|
|
11,750 |
|
|
|
14,576 |
|
|
|
29,817 |
|
Provision (benefit) for income taxes |
|
|
(8,783 |
) |
|
|
(656 |
) |
|
|
(9,798 |
) |
|
|
15,088 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before equity in undistributed net income of subsidiaries |
|
|
(2,250 |
) |
|
|
12,406 |
|
|
|
24,374 |
|
|
|
14,729 |
|
Increase (decrease) in undistributed net income of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Huntington National Bank |
|
|
143,140 |
|
|
|
95,156 |
|
|
|
402,040 |
|
|
|
196,214 |
|
Non-bank subsidiaries |
|
|
2,501 |
|
|
|
(6,616 |
) |
|
|
(10,659 |
) |
|
|
(21,496 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
143,391 |
|
|
$ |
100,946 |
|
|
$ |
415,755 |
|
|
$ |
189,447 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
137
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
Statements of Cash Flows |
|
September 30, |
|
(dollar amounts in thousands) |
|
2011 |
|
|
2010 |
|
|
|
|
|
|
|
|
Operating activities |
|
|
|
|
|
|
|
|
Net income |
|
$ |
415,755 |
|
|
$ |
189,447 |
|
Adjustments to reconcile net income to net cash provided by operating activities |
|
|
|
|
|
|
|
|
Equity in undistributed net income of subsidiaries |
|
|
(434,018 |
) |
|
|
(192,718 |
) |
Depreciation and amortization |
|
|
549 |
|
|
|
765 |
|
Other, net |
|
|
134,089 |
|
|
|
(76,881 |
) |
|
|
|
|
|
|
|
Net cash provided by (used for) operating activities |
|
|
116,375 |
|
|
|
(79,387 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
|
|
|
Repayments from subsidiaries |
|
|
(28,415 |
) |
|
|
(384,162 |
) |
Advances to subsidiaries |
|
|
99,023 |
|
|
|
43,572 |
|
|
|
|
|
|
|
|
Net cash provided by (used for) investing activities |
|
|
70,608 |
|
|
|
(340,590 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities |
|
|
|
|
|
|
|
|
Payment of borrowings |
|
|
(5,100 |
) |
|
|
(604 |
) |
Dividends paid on preferred stock |
|
|
(23,110 |
) |
|
|
(75,537 |
) |
Dividends paid on common stock |
|
|
(27,042 |
) |
|
|
(21,437 |
) |
Redemption of Warrant to the Treasury |
|
|
(49,100 |
) |
|
|
|
|
Other, net |
|
|
(551 |
) |
|
|
(19 |
) |
|
|
|
|
|
|
|
Net cash provided by (used for) financing activities |
|
|
(104,903 |
) |
|
|
(97,597 |
) |
|
|
|
|
|
|
|
Change in cash and cash equivalents |
|
|
82,080 |
|
|
|
(517,574 |
) |
Cash and cash equivalents at beginning of period |
|
|
615,167 |
|
|
|
1,376,539 |
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
697,247 |
|
|
$ |
858,965 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure: |
|
|
|
|
|
|
|
|
Interest paid |
|
$ |
26,256 |
|
|
$ |
17,303 |
|
18. SEGMENT REPORTING
During the 2010 fourth quarter, Huntington reorganized our business segments to better align
certain business unit reporting with segment executives to accelerate cross-sell results and
provide greater focus on the execution of strategic plans. We have four major business segments:
Retail and Business Banking, Regional and Commercial Banking, Automobile Finance and Commercial
Real Estate, and Wealth Advisors, Government Finance, and Home Lending. A Treasury / Other function
includes our insurance business and other unallocated assets, liabilities, revenue, and expense.
All periods have been reclassified to conform to the current period classification.
Segment results are determined based upon the Companys management reporting system, which
assigns balance sheet and income statement items to each of the business segments. The process is
designed around the Companys organizational and management structure and, accordingly, the results
derived are not necessarily comparable with similar information published by other financial
institutions. A description of each segment and table of financial results is presented below.
Retail and Business Banking: The Retail and Business Banking segment provides a wide array of
financial products and services including but not limited to loans, deposits, investment, and
treasury management services to our consumer and small business customers. Huntington serves
customers primarily through our traditional banking network of over 600 branches as well as our
convenience branches located in grocery stores and retirement centers in Ohio, Michigan,
Pennsylvania, Indiana, West Virginia, and Kentucky. In addition to our extensive branch network,
customers can access Huntington through online banking, mobile banking, 24-hour telephone banking,
and over 1,300 ATMs.
Huntington has established a Fair Play banking philosophy and is building a reputation for
meeting the banking needs of consumers in a manner which makes them feel supported and appreciated.
In 2010, Huntington brought innovation to the checking account by providing consumers with a
24-hour grace period to correct a shortfall in an account and avoid the associated overdraft fees.
Huntington believes customers are recognizing this and other efforts as key differentiators and it
is earning us more customers and deeper relationships.
138
Business Banking is a dynamic and growing part of Huntingtons business and we are committed
to being the bank of choice for small businesses in our markets. Business Banking is defined as
companies with revenues less than $15 million and consists of approximately 130,000 businesses.
Huntington continues to develop products and services that are designed specifically to meet the
needs of small business. Huntington continues to look for ways to help companies find solutions to
their capital needs, from our program helping businesses that had struggled in the economic
downturn but are now showing several quarters of profitability, to our participation in the Small
Business Administration programs. As of September 30, 2011, the SBA reported that Huntington ranked
first in our footprint and third in the nation in the number of SBA loans originated during the SBA
fiscal year.
Regional and Commercial Banking: This segment provides a variety of banking products and services
to customers within our primary banking markets that generally have larger credit exposures and
sales revenues compared with our Retail and Business Banking customers. Huntington products in this
segment include commercial loans, international trade, treasury management, leasing, capital market
services including interest rate risk protection products, and mezzanine investment capabilities.
Regional and Commercial Banking also focuses on financial solutions for corporate and institutional
customers including investment banking, sales and trading of securities, and retirement plan
services. The Regional and Commercial Banking team has significantly expanded its equipment leasing
capabilities, as well as focused on serving the commercial banking needs of key verticals including
not-for-profit organizations, healthcare entities, and large corporations. Commercial bankers
personally deliver these products and services directly and with cross-segment product partners.
Huntington consistently strives to develop extensive relationships with clients creating defined
relationship plans which identify needs and offer solutions.
The primary focus for Regional and Commercial Banking is our ability to gain a deeper
relationship with our existing customers and to increase our market share through our unique
customer solution strategy. This includes a comprehensive cross-sell approach to capture the
untapped opportunities within our customer and prospect community. This strategy embodies a shift
from credit-only focus, to a total customer solution approach with an increasing share-of-wallet.
The Regional and Commercial Banking business model includes eleven regional markets driven by
local execution. These markets are supported by expertise in large corporate and middle market
segments, by capabilities in treasury management and equipment finance, and by vertical strategies
within the healthcare and not-for-profit industries.
The commercial portfolio includes a distribution across industries and segments which
resembles the market demographics of our footprint. A strategic focus of Regional and Commercial
Banking is to target underpenetrated markets within our footprint and capitalize on opportunities
in industries such as not-for-profit and healthcare.
In addition, Regional and Commercial Banking expanded the leadership, investment, and
capabilities for treasury management and equipment finance. With our investments in treasury
management, Huntington differentiated itself through our implementation experience and the speed at
which products and services are delivered to our customers. In equipment finance, Huntington
distinguished itself through aggressive business development and local service delivery and by
strategically aligning with our bank partners to drive market share. The increase in originations
during the current period reflected the strategic decision to enter three new markets: business
aircraft finance, rail industry finance, and lender finance.
Automobile Finance and Commercial Real Estate: This segment provides lending and other banking
products and services to customers outside of our normal retail and commercial banking segments.
Our products and services are delivered through highly specialized relationship-focused bankers and
our cross segment product partners. Huntington creates well-defined relationship plans which
identify needs where solutions are developed and customer commitments are obtained.
The Automotive Finance team services automobile dealerships, its owners, and consumers buying
automobiles through these dealerships. Huntington has provided new and used automobile financing
and dealer services throughout the Midwest since the early 1950s. This consistency in the market
and our focus on working with strong dealerships, has allowed us to actively deepen relationships
while building a strong reputation.
The Commercial Real Estate team serves professional real estate developers, and REITs.
Huntington has a clear focus on experienced, well-managed, well-capitalized top tier real estate
developers who are capable of operating in all economic phases of the real estate industry. Most of
our customers are located within our footprint.
Wealth Advisors, Government Finance, and Home Lending: This segment consists of our wealth
management, government banking, and home lending businesses. In wealth management, Huntington
provides financial services to high net worth clients in our primary banking markets and Florida.
Huntington Wealth Advisors delivers a comprehensive solution through a unified sales team providing
private banking, investment, insurance, and trust services. Aligned with the eleven regional
commercial banking markets, this coordinated service model delivers products and services directly
and through the other segment product partners. A fundamental
point of differentiation is our commitment to be in the market, working closely with clients and
their other advisors to identify needs, offer solutions and provide ongoing advice in an optimal
client experience.
139
The Government Finance Group provides financial products and services to government and other
public sector entities in our primary banking markets. A locally based team of relationship
managers works with clients to meet their public finance, brokerage, trust, lending, and treasury
management needs.
Home Lending originates and services consumer loans and mortgages for customers who are
generally located in our primary banking markets. Consumer and mortgage lending products are
primarily distributed through the Retail and Business Banking segment, as well as through
commissioned loan originators. Closely aligned, our Community Development group serves an important
role as it focuses on delivering on our commitment to the communities Huntington serves.
The segment also includes the related businesses of investment management, investment
servicing, custody, corporate trust and retirement plan services. Huntington Asset Advisors
provides investment management services through a variety of internal and external channels,
including advising the Huntington Funds, our proprietary family of funds. Huntington Asset Services
offers administrative and operational support to fund complexes, including fund accounting,
transfer agency, administration, and distribution services. Our retirement plan services business
offers fully bundled and third party distribution of a variety of qualified and non-qualified plan
solutions, and the national settlements business focuses on providing banking solutions to the
litigation settlement market.
140
Listed below is certain operating basis financial information reconciled to Huntingtons
September 30, 2011, December 31, 2010, and September 30, 2010, reported results by business
segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
|
|
Retail & |
|
|
Regional & |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Statements |
|
Business |
|
|
Commercial |
|
|
|
|
|
|
|
|
|
|
Treasury/ |
|
|
Huntington |
|
(dollar amounts in thousands) |
|
Banking |
|
|
Banking |
|
|
AFCRE |
|
|
WGH |
|
|
Other |
|
|
Consolidated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
$ |
229,613 |
|
|
|
61,320 |
|
|
|
94,380 |
|
|
|
49,381 |
|
|
|
(28,216 |
) |
|
$ |
406,478 |
|
Provision for credit losses |
|
|
36,467 |
|
|
|
16,530 |
|
|
|
(19,979 |
) |
|
|
10,568 |
|
|
|
|
|
|
|
43,586 |
|
Noninterest income |
|
|
110,756 |
|
|
|
34,030 |
|
|
|
28,362 |
|
|
|
54,565 |
|
|
|
30,846 |
|
|
|
258,559 |
|
Noninterest expense |
|
|
246,441 |
|
|
|
50,329 |
|
|
|
40,347 |
|
|
|
92,416 |
|
|
|
9,585 |
|
|
|
439,118 |
|
Income taxes |
|
|
20,111 |
|
|
|
9,972 |
|
|
|
35,831 |
|
|
|
337 |
|
|
|
(27,309 |
) |
|
|
38,942 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating/reported net income |
|
$ |
37,350 |
|
|
$ |
18,519 |
|
|
$ |
66,543 |
|
|
$ |
625 |
|
|
$ |
20,354 |
|
|
$ |
143,391 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
$ |
220,192 |
|
|
$ |
53,970 |
|
|
|
86,105 |
|
|
|
43,626 |
|
|
|
6,069 |
|
|
$ |
409,962 |
|
Provision for credit losses |
|
|
59,316 |
|
|
|
3,731 |
|
|
|
37,132 |
|
|
|
18,983 |
|
|
|
(2 |
) |
|
|
119,160 |
|
Noninterest income |
|
|
101,900 |
|
|
|
27,000 |
|
|
|
21,368 |
|
|
|
89,303 |
|
|
|
27,572 |
|
|
|
267,143 |
|
Noninterest expense |
|
|
232,028 |
|
|
|
40,711 |
|
|
|
40,318 |
|
|
|
88,623 |
|
|
|
25,629 |
|
|
|
427,309 |
|
Income taxes |
|
|
10,762 |
|
|
|
12,785 |
|
|
|
10,508 |
|
|
|
8,863 |
|
|
|
(13,228 |
) |
|
|
29,690 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating/reported net income |
|
$ |
19,986 |
|
|
$ |
23,743 |
|
|
$ |
19,515 |
|
|
$ |
16,460 |
|
|
$ |
21,242 |
|
|
$ |
100,946 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
|
|
Retail & |
|
|
Regional & |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Statements |
|
Business |
|
|
Commercial |
|
|
|
|
|
|
|
|
|
|
Treasury/ |
|
|
Huntington |
|
(dollar amounts in thousands ) |
|
Banking |
|
|
Banking |
|
|
AFCRE |
|
|
WGH |
|
|
Other |
|
|
Consolidated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
$ |
702,666 |
|
|
|
178,787 |
|
|
|
271,510 |
|
|
|
145,614 |
|
|
|
(84,432 |
) |
|
$ |
1,214,145 |
|
Provision for credit losses |
|
|
94,825 |
|
|
|
23,957 |
|
|
|
(30,050 |
) |
|
|
40,036 |
|
|
|
|
|
|
|
128,768 |
|
Noninterest income |
|
|
311,598 |
|
|
|
94,657 |
|
|
|
57,886 |
|
|
|
187,443 |
|
|
|
99,687 |
|
|
|
751,271 |
|
Noninterest expense |
|
|
705,216 |
|
|
|
142,189 |
|
|
|
125,649 |
|
|
|
265,151 |
|
|
|
60,021 |
|
|
|
1,298,226 |
|
Income taxes |
|
|
74,978 |
|
|
|
37,554 |
|
|
|
81,829 |
|
|
|
9,755 |
|
|
|
(81,449 |
) |
|
|
122,667 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating/reported net income |
|
$ |
139,245 |
|
|
$ |
69,744 |
|
|
$ |
151,968 |
|
|
$ |
18,115 |
|
|
$ |
36,683 |
|
|
$ |
415,755 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
$ |
637,863 |
|
|
|
155,686 |
|
|
|
247,319 |
|
|
$ |
120,511 |
|
|
$ |
42,132 |
|
|
$ |
1,203,511 |
|
Provision for credit losses |
|
|
150,320 |
|
|
|
57,607 |
|
|
|
202,440 |
|
|
|
45,700 |
|
|
|
91,507 |
|
|
|
547,574 |
|
Noninterest income |
|
|
300,444 |
|
|
|
80,667 |
|
|
|
58,625 |
|
|
|
246,704 |
|
|
|
91,198 |
|
|
|
777,638 |
|
Noninterest expense |
|
|
670,458 |
|
|
|
115,457 |
|
|
|
114,366 |
|
|
|
261,876 |
|
|
|
77,056 |
|
|
|
1,239,213 |
|
Income taxes |
|
|
41,136 |
|
|
|
22,151 |
|
|
|
(3,802 |
) |
|
|
20,875 |
|
|
|
(75,445 |
) |
|
|
4,915 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating/reported net income |
|
$ |
76,393 |
|
|
$ |
41,138 |
|
|
$ |
(7,060 |
) |
|
$ |
38,764 |
|
|
$ |
40,212 |
|
|
$ |
189,447 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets at |
|
|
Deposits at |
|
|
|
September 30, |
|
|
December 31, |
|
|
September 30, |
|
|
September 30, |
|
|
December 31, |
|
|
September 30, |
|
(dollar amounts in millions) |
|
2011 |
|
|
2010 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
|
2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail & Business Banking |
|
$ |
13,650 |
|
|
$ |
13,088 |
|
|
$ |
13,147 |
|
|
$ |
28,095 |
|
|
$ |
29,298 |
|
|
$ |
28,735 |
|
Regional & Commercial Banking |
|
|
9,757 |
|
|
|
8,720 |
|
|
|
8,286 |
|
|
|
4,173 |
|
|
|
3,538 |
|
|
|
3,217 |
|
AFCRE |
|
|
12,351 |
|
|
|
13,233 |
|
|
|
13,078 |
|
|
|
817 |
|
|
|
753 |
|
|
|
776 |
|
WGH |
|
|
7,132 |
|
|
|
6,971 |
|
|
|
6,756 |
|
|
|
9,013 |
|
|
|
7,449 |
|
|
|
7,247 |
|
Treasury / Other |
|
|
12,089 |
|
|
|
11,808 |
|
|
|
11,980 |
|
|
|
1,122 |
|
|
|
816 |
|
|
|
1,097 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
54,979 |
|
|
$ |
53,820 |
|
|
$ |
53,247 |
|
|
$ |
43,220 |
|
|
$ |
41,854 |
|
|
$ |
41,072 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
141
|
|
|
Item 3: |
|
Quantitative and Qualitative Disclosures about Market Risk |
Quantitative and qualitative disclosures for the current period can be found in the
Market Risk section of this report, which includes changes in market risk exposures from
disclosures presented in Huntingtons 2010 Form 10-K.
|
|
|
Item 4: |
|
Controls and Procedures |
Disclosure Controls and Procedures
Huntington maintains disclosure controls and procedures designed to ensure that the
information required to be disclosed in the reports that it files or submits under the Securities
Exchange Act of 1934, as amended, are recorded, processed, summarized, and reported within the time
periods specified in the SECs rules and forms. Disclosure controls and procedures include, without
limitation, controls and procedures designed to ensure that information required to be disclosed by
an issuer in the reports that it files or submits under the Exchange Act is accumulated and
communicated to the issuers management, including its principal executive and principal financial
officers, or persons performing similar functions, as appropriate to allow timely decisions
regarding required disclosure. Huntingtons Management, with the participation of its Chief
Executive Officer and the Chief Financial Officer, evaluated the effectiveness of Huntingtons
disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under
the Exchange Act) as of the end of the period covered by this report. Based upon such evaluation,
Huntingtons Chief Executive Officer and Chief Financial Officer have concluded that, as of the end
of such period, Huntingtons disclosure controls and procedures were effective.
There have not been any significant changes in Huntingtons internal controls over financial
reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during
the fiscal quarter to which this report relates that have materially affected, or are reasonably
likely to materially affect, Huntingtons internal controls over financial reporting.
PART II. OTHER INFORMATION
In accordance with the instructions to Part II, the other specified items in this part
have been omitted because they are not applicable or the information has been previously reported.
|
|
|
Item 1: |
|
Legal Proceedings |
Information required by this item is set forth in Note 16 of the Notes to Unaudited
Condensed Consolidated Financial Statements included in Item 1 of this report and incorporated
herein by reference.
Information required by this item is set forth in Part 1 Item 2.- Managements Discussion
and Analysis of Financial Condition and Results of Operations of this report and incorporated
herein by reference.
Exhibit Index
This report incorporates by reference the documents listed below that we have previously filed with
the SEC. The SEC allows us to incorporate by reference information in this document. The
information incorporated by reference is considered to be a part of this document, except for any
information that is superseded by information that is included directly in this document.
This information may be read and copied at the Public Reference Room of the SEC at 100 F Street,
N.E., Washington, D.C. 20549. The SEC also maintains an Internet web site that contains reports,
proxy statements, and other information about issuers, like us, who file electronically with the
SEC. The address of the site is http://www.sec.gov. The reports and other information filed by us
with the SEC are also available at our Internet web site. The address of the site is
http://www.huntington.com. Except as specifically incorporated by reference into this Quarterly
Report on Form 10-Q, information on those web sites is not part of this report. You also should be
able to inspect reports, proxy statements, and other information about us at the offices of the
NASDAQ National Market at 33 Whitehall Street, New York, New York.
142
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SEC File or |
|
|
|
Exhibit |
|
|
|
Report or Registration |
|
Registration |
|
Exhibit |
|
Number |
|
Document Description |
|
Statement |
|
Number |
|
Reference |
|
|
2.1 |
|
|
Agreement and Plan of Merger, dated December 20, 2006 by and
among Huntington Bancshares Incorporated, Penguin Acquisition,
LLC and Sky Financial Group, Inc.
|
|
Current Report on
Form 8-K dated
December 22, 2006.
|
|
000-02525
|
|
|
2.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.1 |
|
|
Articles of Restatement of Charter.
|
|
Annual Report on Form
10-K for the year
ended December 31,
1993.
|
|
000-02525
|
|
|
3 |
(i) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.2 |
|
|
Articles of Amendment to Articles of Restatement of Charter.
|
|
Current Report on
Form 8-K dated May
31, 2007
|
|
000-02525
|
|
|
3.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.3 |
|
|
Articles of Amendment to Articles of Restatement of Charter.
|
|
Current Report on
Form 8-K dated May 7,
2008
|
|
000-02525
|
|
|
3.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.4 |
|
|
Articles of Amendment to Articles of Restatement of Charter.
|
|
Current Report on
Form 8-K dated April
27, 2010
|
|
001-34073
|
|
|
3.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.5 |
|
|
Articles Supplementary of Huntington Bancshares Incorporated, as
of April 22, 2008.
|
|
Current Report on
Form 8-K dated April
22, 2008
|
|
000-02525
|
|
|
3.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.6 |
|
|
Articles Supplementary of Huntington Bancshares Incorporated, as
of April 22. 2008.
|
|
Current Report on
Form 8-K dated April
22, 2008
|
|
000-02525
|
|
|
3.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.7 |
|
|
Articles Supplementary of Huntington Bancshares Incorporated, as
of November 12, 2008.
|
|
Current Report on
Form 8-K dated
November 12, 2008
|
|
001-34073
|
|
|
3.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.8 |
|
|
Articles Supplementary of Huntington Bancshares Incorporated, as
of December 31, 2006.
|
|
Annual Report on Form
10-K for the year
ended December 31,
2006
|
|
000-02525
|
|
|
3.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.9 |
|
|
Bylaws of Huntington Bancshares Incorporated, as amended and
restated, as of April 22, 2010.
|
|
Current Report on
Form 8-K dated April
27, 2010.
|
|
001-34073
|
|
|
3.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.1 |
|
|
Instruments defining the Rights of Security Holders reference
is made to Articles Fifth, Eighth, and Tenth of Articles of
Restatement of Charter, as amended and supplemented. Instruments
defining the rights of holders of long-term debt will be
furnished to the Securities and Exchange Commission upon
request. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12.1 |
|
|
Ratio of Earnings to Fixed Charges. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12.2 |
|
|
Ratio of Earnings to Fixed Charges and Preferred Stock Dividends. |
|
|
|
|
|
|
|
|
|
|
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31.1 |
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Rule 13a-14(a) Certification Chief Executive Officer. |
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31.2 |
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Rule 13a-14(a) Certification Chief Financial Officer. |
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32.1 |
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Section 1350 Certification Chief Executive Officer. |
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32.2 |
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Section 1350 Certification Chief Financial Officer. |
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101 |
** |
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The following material from Huntingtons Form 10-Q Report for
the quarterly period ended September 30, 2011, formatted in
XBRL: (i) Unaudited Condensed Consolidated Balance Sheets, (ii)
Unaudited Condensed Consolidated Statements of Income, (iii)
Unaudited Condensed Consolidated Statement of Changes in
Shareholders Equity, (iv) Unaudited Condensed Consolidated
Statements of Cash Flows, and (v) the Notes to Unaudited
Condensed Consolidated Financial Statements. |
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* |
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Denotes management contract or compensatory plan or arrangement. |
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Furnished, not filed. |
143
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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Huntington Bancshares Incorporated
(Registrant)
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Date: October 31, 2011 |
/s/ Stephen D. Steinour
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Stephen D. Steinour |
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Chairman, Chief Executive Officer and President |
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Date: October 31, 2011 |
/s/ Donald R. Kimble
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Donald R. Kimble |
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Sr. Executive Vice President and Chief Financial Officer |
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144