Huntington National Bank 2004 Annual Report Download - page 80

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MANAGEMENT’S DISCUSSION AND ANALYSIS HUNTINGTON BANCSHARES INCORPORATED
Provision expense increased 38% from the prior year primarily due to provision expense related to loan growth and, to a lesser degree,
higher net charge-offs.
Non-interest income, net of fees shared with other business units, declined 1% from 2002, resulting from increased brokerage and
insurance revenue allocated to Regional Banking due to a change in allocation methodology. Brokerage income from retail investment
sales was essentially unchanged from 2002, excluding the impact of the change in allocation methodology. Insurance revenue
increased 26%, reflecting higher title insurance revenue due to increased mortgage refinancing activity combined with revenue from
sales of a new wealth transfer insurance product. Trust income was essentially flat with the prior year, as increased personal and
institutional trust income was offset by reduced revenue from proprietary mutual fund fees. The increase in personal trust revenue
was mainly due to the full-year impact of the April 2002 acquisition of Haberer Registered Investment Advisor. While assets under
management in the Huntington Funds increased 9%, from $2.7 billion to $2.9 billion at year end, fees declined due to increased
money market fund fee waivers implemented to maintain minimum customer yields. Significant growth also occurred in institutional
trust assets as a result of the acquisition of a major custodial account, which also produced $260,000 of additional revenue in 2003.
Other revenue increased 44%, primarily due to a $1.0 million increase in inter-company fees combined with increased revenue from
commercial loan swaps and market value gains realized on the sale of temporary investments.
Non-interest expense increased 2.0% from the prior year primarily due to the full-year impact of the Haberer acquisition and, to a
lesser degree, an increase in allocated corporate, indirect, and product-related expenses.
PFG ended the year with $8.9 billion of assets under management, up 6%, including $4.9 billion of personal trust assets, up 7%, and
$2.9 billion in Huntington mutual funds, up 9%. During 2003, each of Huntington’s equity funds produced double-digit returns and
each taxable or tax-free bond fund produced positive returns. Mutual fund and annuity sales expressed as a percent of the Company’s
retail deposits were 6.2% in 2003, comparable to 6.0% in 2002. Compared with peers, this level of sales penetration represented top
quartile performance.
The return on average assets and return on average equity for PFG, were 1.94% and 24.5%, respectively, compared with 2.39% and
22.3% in 2002.
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