Huntington National Bank 2006 Annual Report Download - page 29

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MANAGEMENT’S DISCUSSION AND ANALYSIS HUNTINGTON BANCSHARES INCORPORATED
Mortgage banking income for the three years ended December 31, 2006, was as follows:
Table 7 — Mortgage Banking Income
Year Ended December 31,
Change from 2005 Change from 2004
(in thousands of dollars) 2006 Amount % 2005 Amount % 2004
Mortgage Banking Income
Origination and secondary marketing $ 18,217 $ (6,717) (26.9)% $ 24,934 $ 2,225 9.8% $ 22,709
Servicing fees 24,659 2,478 11.2 22,181 485 2.2 21,696
Amortization of capitalized servicing (15,144) 3,215 (17.5) (18,359) 660 (3.5) (19,019)
Other mortgage banking income 10,173 (1,590) (18.5) 8,583 (1,441) (14.4) 10,024
Sub-total 37,905 566 1.5 37,339 1,929 5.4 35,410
MSR recovery(1) 4,871 500 11.4 4,371 2,993 N.M. 1,378
Net trading (losses) gains related to MSR
hedging (1,285) 12,092 (90.4) (13,377) (3,375) 33.7 (10,002)
Total mortgage banking income $ 41,491 $ 13,158 46.4% $ 28,333 $ 1,547 5.8% $ 26,786
Capitalized mortgage servicing rights(2) $ 131,104 $ 39,845 43.7% $ 91,259 $ 14,152 18.4% $ 77,107
MSR allowance(2) — 404 N.M. (404) 4,371 91.5 (4,775)
Total mortgages serviced for others(2) 8,252,000 976,000 13.4 7,276,000 415,000 6.0 6,861,000
N.M., not a meaningful value.
(1) In 2006, Huntington adopted Statement No. 156, under which MSRs were recorded and accounted for at fair value. Prior periods reflect temporary impairment or recovery, based on
accounting for MSRs at the lower of cost or market.
(2) At period end.
Non-Interest Expense
(This section should be read in conjunction with Significant Factors 1, 3, 5, and 7.)
Non-interest expense for the three years ended December 31, 2006 was as follows:
Table 8 — Non-Interest Expense
Year Ended December 31,
Change from 2005 Change from 2004
(in thousands of dollars) 2006 Amount % 2005 Amount % 2004
Salaries $ 425,657 $ 46,068 12.1% $379,589 $ 3,321 0.9% $ 376,268
Benefits 115,571 13,502 13.2 102,069 (7,469) (6.8) 109,538
Personnel costs 541,228 59,570 12.4 481,658 (4,148) (0.9) 485,806
Outside data processing and other services 78,779 4,141 5.5 74,638 2,523 3.5 72,115
Net occupancy 71,281 189 0.3 71,092 (4,849) (6.4) 75,941
Equipment 69,912 6,788 10.8 63,124 (218) (0.3) 63,342
Marketing 31,728 5,449 20.7 26,279 1,679 6.8 24,600
Professional services 27,053 (7,516) (21.7) 34,569 (2,307) (6.3) 36,876
Telecommunications 19,252 604 3.2 18,648 (1,139) (5.8) 19,787
Printing and supplies 13,864 1,291 10.3 12,573 110 0.9 12,463
Amortization of intangibles 9,962 9,133 N.M. 829 12 1.5 817
Restructuring reserve releases ——— — 1,151 N.M. (1,151)
Other 106,649 24,089 29.2 82,560 (14,008) (14.5) 96,568
Sub-total before automobile operating lease
expense 969,708 103,738 12.0 865,970 (21,194) (2.4) 887,164
Automobile operating lease expense 31,286 (72,564) (69.9) 103,850 (131,230) (55.8) 235,080
Total non-interest expense $ 1,000,994 $ 31,174 3.2% $969,820 $(152,424) (13.6)% $1,122,244
N.M., not a meaningful value.
2006 versus 2005
Non-interest expense in 2006 increased $31.2 million, or 3%, from 2005, despite a $72.6 million decline in automobile operating
lease expense as that portfolio continued to run off. Non-interest expense before automobile operating lease expense increased
$103.7 million, or 12% ($59.7 million merger-related), reflecting:
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