Huntington National Bank 2006 Annual Report Download - page 56

MANAGEMENT’S DISCUSSION AND ANALYSIS HUNTINGTON BANCSHARES INCORPORATED
Regional Banking
(This section should be read in conjunction with Significant Factors 1, 2, 4, 5 and 7.)
Objectives, Strategies and Priorities
Our Regional Banking line of business provides traditional banking products and services to consumer, small business, and
commercial customers located in its eight operating regions within the five states of Ohio, Michigan, West Virginia, Indiana, and
Kentucky. It provides these services through a banking network of 371 branches, over 980 ATMs, along with Internet and
telephone banking channels. It also provides certain services outside of these five states, including mortgage banking and
equipment leasing. Each region is further divided into retail and commercial banking units. Retail products and services include
home equity loans and lines of credit, first mortgage loans, direct installment loans, small business loans, personal and business
deposit products, as well as sales of investment and insurance services. At December 31, 2006, Retail Banking accounted for 59%
and 78% of total Regional Banking loans and deposits, respectively. Commercial Banking serves middle market and large
commercial banking relationships, which use a variety of banking products and services including, but not limited to, commercial
loans, international trade, cash management, leasing, interest rate protection products, capital market alternatives, 401(k) plans,
and mezzanine investment capabilities.
We have a business model that emphasizes the delivery of a complete set of banking products and services offered by larger
banks, but distinguished by local decision-making about the pricing and the offering of these products. Our strategy is to focus
on building a deeper relationship with our customers by providing a ‘‘Simply the Best’’ service experience. This focus on service
requires continued investments in state-of-the-art platform technology in our branches, award-winning retail and business
websites for our customers, extensive development of associates, and internal processes that empower our local bankers to serve
our customers better. We expect the combination of local decision-making and ‘‘Simply the Best’’ service will result in a
competitive advantage and drive revenue and earnings growth.
2006 versus 2005 Performance
Regional Banking contributed $349.5 million, or 76%, of total company net operating earnings for the year 2006 ending
December 31, 2006, up $57.1 million, or 20%, from last year. This improvement primarily reflected a $145.1 million, or 13%,
increase in fully taxable equivalent revenue offset by a $63.2 million, or 11%, increase in non-interest expense and a $30.8 million
increase in provision for income taxes. Our ROA was 1.71%, up from 1.58% for 2005 with a ROE of 30.6%, up from 28.9% a
year-ago.
Regional Banking results for 2006 were impacted by the acquisition of Unizan on March 1, 2006. At the time of acquisition,
Unizan had loans of $1.6 billion and core deposits of $1.5 billion, most of which were assigned to Regional Banking. As a result,
performance comparisons between 2006 and 2005 are affected, as Unizan results were not in 2005 results. Comparisons of 2006
reported results compared with 2005 pre-merger results are impacted as follows:
)Increased certain reported period-end balance sheet and credit quality items (e.g. non-performing loans).
)Increased reported average balance sheet, revenue, expense and credit quality results (e.g. net charge-offs)
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