Huntington National Bank 2006 Annual Report Download - page 79

Download and view the complete annual report

Please find page 79 of the 2006 Huntington National Bank annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 130

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130

MANAGEMENT’S DISCUSSION AND ANALYSIS HUNTINGTON BANCSHARES INCORPORATED
The over 90-day delinquent, but still accruing, ratio was 0.23% at December 31, 2006, unchanged from the end of the year-ago
quarter.
Allowances for Credit Losses (ACL) and Loan Loss Provision
We maintain two reserves, both of which are available to absorb probable credit losses: the allowance for loan and lease losses
(ALLL) and the allowance for unfunded loan commitments and letters of credit (AULC). When summed together, these reserves
constitute the total ACL. At December 31, 2006, the ALLL was $272.1 million, which was $3.7 million higher than the reserve
level of $268.3 million a year earlier. Expressed as a percent of period-end loans and leases, the ALLL ratio at December 31, 2006,
was 1.04%, down from 1.10% a year ago. The level of required loan loss reserves is determined using a highly quantitative
methodology, which determines the required levels for both the transaction reserve and economic reserve components. The table
below shows the change in the ALLL ratio and each reserve component for the 2006 fourth quarter compared with the 2005
fourth quarter.
Components of ALLL as a percent of total loans and leases:
4Q06 4Q05 Change from 4Q05
Transaction reserve 0.86% 0.89% (0.03)%
Economic reserve 0.18 0.21 (0.03)
Total ALLL 1.04% 1.10% (0.06)%
The ALLL as a percent of NPLs was 189% at December 31, 2006, down from 263% a year ago. The ALLL as a percent of NPAs
was 141% at December 31, 2006, down from 229% a year ago. At December 31, 2006, the AULC was $40.2 million, up from
$37.0 million at the end of the year-ago quarter.
On a combined basis, the ACL as a percent of total loans and leases at December 31, 2006, was 1.19%, down from 1.25% a year
ago. The ACL as a percent of NPAs was 161% at December 31, 2006, down from 261% a year earlier. The decline in the NPA
coverage ratio reflected (1) that a higher percentage of NPAs were secured by residential real estate or guaranteed by the
U.S. Government, which have an inherently lower potential for loss, and (2) a reporting change in 2006 to include in NPAs
foreclosed loans insured by HUD and serviced by Huntington, that had been previously reported as 90-day past due loans.
Capital
At December 31, 2006, the tangible equity to assets ratio was 6.87%, down from 7.19% a year ago. At December 31, 2006, the
tangible equity to risk-weighted assets ratio was 7.65%, down from 7.91% at the end of the year-ago quarter. Contributing to the
decline in capital ratios was the implementation of FASB Statement No. 158, Employer’s Accounting for Defined Benefit Pension
and Other Postretirement Plans. This decreased equity by $83.0 million but had no effect on reported net income. This
implementation contributed 21 basis points of the 32 basis point reduction from the end of last year. The decline in capital ratios
from the year-ago period also reflected the repurchase of 16.0 million shares over this 12-month period. Partially offsetting these
negative impacts was the positive impact from retained earnings.
Table 37 presents quarterly income statements and Table 38 presents quarterly stock summary, key ratios and statistics, and
capital data for eight quarters.
77