Huntington National Bank 2003 Annual Report Download - page 74

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MANAGEMENT’S DISCUSSION AND ANALYSIS
investments in infrastructure and staffing including the strengthening of centralized credit underwriting and collections, sales training,
and new teller platform technology.
With revenue growth of 10% exceeding expense growth of 6%, the Regional Banking efficiency ratio declined to 60.9% from 63.2%, in
2002.
The provision for credit losses declined significantly. This primarily reflected a 46% reduction in NPAs and an improvement in net
charge-offs to 0.86% of average outstandings in Regional Banking, from 1.15% a year-earlier.
The return on average assets and return on average equity for Regional Banking, were 1.17% and 17.0%, respectively, up from 0.84%
and 12.4% in 2002.
2002 versus 2001 Performance
Earnings in 2002 were $13.7 million, or 11%, lower than 2001. Total revenue for this segment declined 2%, while total non-interest
expense was up 7%. The net interest margin was 4.56% in 2002, down 44 basis points from 5.00% in 2001. Interest rates fell
throughout 2002, and interest rates on variable-rate loans declined more rapidly than deposit pricing, which was approaching de facto
pricing floors. Average total loans increased 6%, reflecting very strong growth in consumer loans and CRE loans. Consumer loan
growth was concentrated in residential mortgages and home equity loans and lines. Average deposits increased 7%, led by a very strong
37% increase in interest bearing demand deposits.
Non-interest income increased 2%, primarily reflecting higher service charges on consumer and commercial deposit accounts and fees
for electronic banking. This benefit was partially offset by a decline in mortgage banking income due to temporary MSR impairment
charges.
Non-interest expense increased 7%, primarily due to higher personnel costs. This increase reflected investments in strengthening
Regional Banking’s management team, business banking sales force, and credit administration team, as well as increased performance-
based incentive compensation.
72 HUNTINGTON BANCSHARES INCORPORATED