Huntington National Bank 2003 Annual Report Download - page 71

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MANAGEMENT’S DISCUSSION AND ANALYSIS
Specific loan loss reserve rates were established for each loan type and a related reserve was established in the affected business segment.
As a result, the ALLL for each business segment was higher in 2003 versus 2002, with a corresponding decline in the ALLL in the
Treasury/Other business segment.
C
OMPARABILITY WITH
2001 R
ESULTS
During 2003, business segment reporting was significantly expanded, which increased the level of business segment data gathered and
reported for 2003 and 2002. This expanded information, as well as certain other business performance metrics are not available for
2001 on a comparable basis and are, therefore, not included in the tables that follow. In addition, in the tables that follow, income
statement data for 2001 is shown in a summary form.
The data for 2003 and 2002 utilize the same reporting basis and methodologies. However, in 2003 and 2002, changes were made to the
methodologies utilized for certain balance sheet and income statement allocations from the company’s management reporting system.
This most notably impacted the funds transfer pricing methodology (see above discussion). The 2001 previously reported segment
results were not able to be restated for these methodology changes, which diminishes some of the benefit of net interest and net
operating earnings comparisons to 2001 results. The following tables within each segment show performance on this basis for the most
recent three years.
U
SE OF
O
PERATING
E
ARNINGS
Management uses earnings on an operating basis, rather than on a GAAP basis, to measure underlying performance trends for each
business segment. Operating earnings represent GAAP earnings adjusted to exclude the impact of the Significant Factor items 1-6
discussed in the Significant Factors Influencing Financial Performance Comparisons discussion and Table 3. In addition to this
discussion and Table 3, see Note 17 of the Notes to Consolidated Financial Statements. Analyzing earnings on an operating basis is very
helpful in assessing underlying performance trends, a critical factor used by Management to determine the success of strategies and
future earnings capabilities. In Table 20, the Significant Factors noted above are included in the business segment’s GAAP results, but
are not included in the operating results used to measure underlying performance trends.
In 2003, Dealer Sales recorded $26.0 million of after-tax gains on the sale of automobile loans. This line of business was also assessed an
internal charge of $12.5 million after-tax for the early extinguishment of the fixed-rate funding used to support the sold loans. This
resulted in a net gain of $13.5 million after-tax to Dealer Sales, with a $12.5 million after-tax credit to Treasury/Other representing the
early funding extinguishment charge offset.
The after-tax gain from selling the West Virginia banking offices was recorded in the Treasury/Other segment. Management chose to
record this gain outside the Regional Banking segment given its one-time nature, and to prevent overstating that segment’s run-rate
earnings.
HUNTINGTON BANCSHARES INCORPORATED 69