Huntington National Bank 2005 Annual Report Download - page 93

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MANAGEMENT’S DISCUSSION AND ANALYSIS HUNTINGTON BANCSHARES INCORPORATED
RESULTS FOR THE FOURTH QUARTER
Earnings Discussion
2005 fourth quarter earnings were $100.6 million, or $0.44 per common share, up 10% and 13%, respectively, from
$91.1 million, or $0.39 per common share, in the year-ago quarter. Significant items impacting 2005 fourth quarter performance
included (see table below):
– $7.0 million after-tax ($0.03 earnings per share) positive net impact related to the recognition of the effect of federal tax
refunds on income tax expense. Each quarter of 2005 reflected similar impacts, resulting from the ability to carry back
federal tax losses to prior years.
– $10.4 million pre-tax ($0.03 earnings per share) negative impact from (1) the sale of investment securities as part of a
plan to reposition a segment of the portfolio, which resulted in $8.8 million of pre-tax losses, and (2) a $1.6 million
impact of a recovery of temporary MSR impairment, net of hedge-related trading activity.
Significant Items Impacting Earnings Performance Comparisons(1):
Three Months Ended
Impact(2)
(In millions, except per share) Amount(3) EPS
December 31, 2005 — GAAP earnings(4) $ 100.6 $ 0.44
Net impact of federal tax loss carry back(4) 7.0 0.03
Securities losses plus recovery of temporary MSR impairment, net of hedge-related trading activity (10.4) (0.03)
December 31, 2004 — GAAP earnings(4) $ 91.1 $ 0.39
SEC/regulatory-related expenses (6.5) (0.03)
Property lease impairments (7.8) (0.02)
Adjustment to consolidated securitization 3.7 0.01
(1) Includes significant items with $0.01 EPS impact or greater.
(2) Favorable (unfavorable) impact on GAAP earnings.
(3) Pre-tax unless otherwise noted.
(4) After-tax.
Fully taxable equivalent net interest income increased $5.6 million, or 2%, from the year-ago quarter, primarily reflecting the
favorable impact of a $0.9 billion, or 3%, increase in average earning assets, partially offset by a 4 basis point, or an effective 1%,
decline in the net interest margin. The fully taxable equivalent net interest margin of 3.34% declined from 3.38% in the year-ago
quarter, as the net interest margin in the year-ago quarter included a 6 basis point positive impact related to a securitization
funding cost adjustment. Excluding this impact, the current quarter’s net interest margin would have increased 2 basis points
from the year-ago period, reflecting the benefit of higher-yielding loans, the unwinding of excess liquidity early in the year, and
disciplined deposit pricing.
Average total loans and leases increased $1.4 billion, or 6%, from the 2004 fourth quarter, with consumer and commercial loans
contributing equally to the growth. Average total consumer loans increased $0.7 billion, or 6%, from the year-ago quarter,
reflecting growth across all consumer loan categories. Average residential mortgages increased $0.5 billion, or 13%, and average
home equity loans increased $0.2 billion, or 4%. Though residential mortgage and home equity loan growth rates were strong
compared with the year-ago quarter, they have continued to slow.
Compared with the year-ago quarter, average total automobile loans and leases increased only 1%. Average automobile loans
increased $0.1 billion, or 5%, reflecting current automobile loan production and loan sales. Average direct financing leases
declined 2% from the year-ago quarter, reflecting declining production levels due to lower consumer demand and aggressive price
competition. Average operating lease assets declined $0.4 billion, or 62%, as this portfolio continued to run off. Total automobile
loan and lease exposure at quarter end was 18%, down from 21% a year ago.
Average total commercial loans increased $0.7 billion, or 7%, from the year-ago quarter. This reflected a $0.6 billion, or 8%,
increase in total middle market C&I and CRE loans, and 4% growth in average small business C&I and CRE loans.
Average total investment securities were $0.1 billion, or 2%, higher than in the year-ago quarter.
Average total core deposits in the 2005 fourth quarter increased $0.4 billion, or 3%, from the year-ago quarter. All of this
increase reflected growth in certificates of deposit less than $100,000, partially offset by declines in savings and other domestic
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