Huntington National Bank 2005 Annual Report Download - page 125

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NOTES TOCONSOLIDATED FINANCIAL STATEMENTS HUNTINGTON BANCSHARES INCORPORATED
At December 31, 2005, Huntington’s deferred tax asset related to net operating loss and other credit carry-forwards was
$54.5 million. This was comprised of a charitable contribution carry-forward of $4.4 million (expires in 2009) and a net
operating loss and other carry-forwards of $9.1 million for U.S. federal tax purposes, which will begin expiring in 2023, and a
capital loss carry-forward of $41.0 million which will expire in 2010. A valuation allowance in the amount of $41.0 million has
been established for the capital loss carry-forward. A valuation allowance is provided when it is more likely than not that some
portion of the deferred tax asset will not be realized. In Management’s opinion the results of future operations will generate
sufficient taxable income to realize the net operating loss and charitable contribution carry-forwards. Consequently, Management
has determined that a valuation allowance for deferred tax assets related to these carry-forwards was not required as of
December 31, 2005 or 2004.
19. BENEFIT PLANS
Huntington sponsors the Huntington Bancshares Retirement Plan (the Plan), a non-contributory defined benefit pension plan
covering substantially all employees. The Plan provides benefits based upon length of service and compensation levels. The
funding policy of Huntington is to contribute an annual amount that is at least equal to the minimum funding requirements but
not more than that deductible under the Internal Revenue Code.
In addition, Huntington has an unfunded defined benefit post-retirement plan that provides certain health care and life insurance
benefits to retired employees who have attained the age of 55 and have at least 10 years of vesting service under this plan. For
any employee retiring on or after January 1, 1993, post-retirement health-care benefits are based upon the employee’s number of
months of service and are limited to the actual cost of coverage. Life insurance benefits are a percentage of the employee’s base
salary at the time of retirement, with a maximum of $50,000 of coverage.
The following table shows the weighted-average assumptions used to determine the benefit obligation at December 31, 2005 and
2004, and the net periodic benefit cost for the years then ended. Huntington selected September 30, 2005 as the measurement
date for all calculations and contracted an actuary to provide measurement services.
Post-Retirement
Pension Benefits Benefits
2005 2004 2005 2004
Weighted-average assumptions used to determine benefit obligations at December 31
Discount rate 5.43% 5.81% 5.43% 5.81%
Rate of compensation increase 5.00 5.00 N/A N/A
Weighted-average assumptions used to determine net periodic benefit cost for the years ended December 31
Discount rate 5.81% 6.00% 5.81% 6.00%
Expected return on plan assets 7.00 7.00 N/A N/A
Rate of compensation increase 5.00 5.00 N/A N/A
N/A, Not Applicable
The expected long-term rate of return on plan assets is an assumption reflecting the average rate of earnings expected on the
funds invested or to be invested to provide for the benefits included in the projected benefit obligation. The expected long-term
rate of return is established at the beginning of the plan year based upon historical returns and projected returns on the
underlying mix of invested assets. The long-term rate of return assumption to determine the net periodic benefit cost will be
8.00% for the year ending December 31, 2006. The rate was raised one percentage point due to favorable historical and expected
future results.
In 2005, Huntington lowered its assumptions for the discount rate from 5.81% to 5.43%. The 5.43% assumed discount rate was
based upon the Moody’s daily long-term corporate Aa bond yield as of the Plan’s measurement date. The impact of lowering this
assumption will increase Huntington’s future pension expense.
The investment objective of the Plan is to maximize the return on Plan assets over a long time horizon, while meeting the Plan
obligations. At September 30, 2005, Plan assets were invested 71.5% in equity investments and 28.5% in bonds, with an average
duration of 3.4 years on bond investments. The estimated life of benefit obligations was 12 years. Management believes that this
mix is appropriate for the current economic environment.
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