Huntington National Bank 2005 Annual Report Download - page 118

NOTES TOCONSOLIDATED FINANCIAL STATEMENTS HUNTINGTON BANCSHARES INCORPORATED
There is a potential for loan products to contain contractual terms that give rise to a concentration of credit risk that may
increase a lending institution’s exposure to risk of nonpayment or realization. Examples of these contractual terms include loans
that permit negative amortization, a loan-to-value of greater than 100%, and option adjustable-rate mortgages. Huntington does
not offer mortgage loan products that contain these terms. Huntington does offer a home equity loan product that is interest
only with an introductory rate that is below the market interest rate for the initial period of the loan term and increases when
that period ends. Home equity loans totaled $4.6 billion, or 19%, of total loans at December 31, 2005 and 2004. From a credit
risk perspective, 87% of the home equity loans had a loan to value ratio of less than 90% at December 31, 2005. The charge-off
policy for home equity loans is described in Note 1.
7. OPERATING LEASE ASSETS
For periods before May 2002, Huntington purchased vehicles, primarily automobiles, for lease to consumers under operating lease
arrangements. Starting in 2004, Huntington also began purchasing equipment for lease to customers under similar operating lease
arrangements. These operating lease arrangements required the lessee to make a fixed monthly rental payment over a specified
lease term, typically from 36 to 66 months. The vehicles and equipment, net of accumulated depreciation, are recorded as
operating lease assets in the consolidated balance sheet. Rental income is earned by Huntington on the operating lease assets and
reported as non-interest income. The assets are depreciated over the term of the lease to the estimated fair value at the end of the
lease. The depreciation of these assets is reported as a component of non-interest expense. At the end of the lease, the asset is
either purchased by the lessee or returned to Huntington. The following is a summary of operating lease assets at December 31:
At December 31,
(in thousands of dollars) 2005 2004
Cost of operating lease assets (including residual values of $159,070 and $406,965, respectively) $506,445 $1,173,616
Deferred origination fees and costs (272) (1,138)
Accumulated depreciation (277,096) (585,168)
Total $229,077 $ 587,310
The future lease rental payments due from customers on operating lease assets at December 31, 2005, totaled $101.5 million and
are due as follows: $63.8 million in 2006; $17.6 million in 2007; $7.4 million in 2008; $5.6 million in 2009, $3.3 million in 2010,
and $3.4 million thereafter. Depreciation expense for each of the years ended December 31, 2005, 2004, and 2003 was
$99.3 million, $216.4 million, and $350.6 million, respectively.
8. PREMISES AND EQUIPMENT
At December 31, premises and equipment stated at cost were comprised of the following:
At December 31,
(in thousands of dollars) 2005 2004
Land and land improvements $ 67,787 $ 63,406
Buildings 246,745 237,071
Leasehold improvements 149,466 142,764
Equipment 477,192 467,674
Total premises and equipment 941,190 910,915
Less accumulated depreciation and amortization (580,513) (555,800)
Net premises and equipment $ 360,677 $ 355,115
Depreciation and amortization charged to expense and rental income credited to occupancy expense for the three years ended
December 31, 2005 were:
Year Ended December 31,
(in thousands of dollars) 2005 2004 2003
Total depreciation and amortization of premises and equipment $ 50,355 $50,097 $46,746
Rental income credited to occupancy expense 11,010 13,081 14,837
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