Huntington National Bank 2007 Annual Report Download - page 29

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The $0.8 billion, or 3%, non-merger-related increase in total average loans compared with the prior year primarily reflected a
$1.2 billion, or 7%, increase in average total commercial loans. This increase was the result of strong growth in both middle-
market commercial and industrial (C&I) loans and small business loans across substantially all regions. This was partially offset by
a $0.4 billion, or 2%, decrease in average total consumer loans reflecting declines in automobile loans and leases and residential
mortgages. These declines reflect weaker demand, a softer economy, as well as the continued impact of competitive pricing.
Average other earning assets increased $0.6 billion, primarily reflecting the increase in average trading account securities. The
increase in these assets reflected a change in our strategy to use trading account securities to hedge the change in fair value of our
mortgage servicing rights.
The $0.5 billion, or 1%, increase in total non-merger related average deposits primarily reflected a $0.6 billion, or 2%, increase in
average total core deposits as interest bearing demand deposits grew $0.3 billion, or 9%. While there was also strong growth in
core certificates of deposit, this was partially offset by the decline in savings and other domestic deposits, as customers transferred
funds from lower rate to higher rate accounts. In 2007, we reduced our dependence on non-core funds (total liabilities less core
deposits and accrued expenses and other liabilities) to 30% of total assets, down from 33% in 2006.
2006 VERSUS 2005
Fully-taxable equivalent net interest income increased $59.4 million, or 6% ($59.0 million Unizan merger-related), from 2005,
reflecting the favorable impact of a $2.1 billion, or 7%, increase in average earning assets, as the fully-taxable equivalent net interest
margin declined 4 basis points to 3.29%. Average total loans and leases increased $1.6 billion, or 7% ($1.4 billion Unizan merger-
related).
Average total commercial loans increased $1.2 billion, or 12% ($0.7 billion Unizan merger-related) from 2005. This growth
reflected a $0.7 billion, or 15%, increase in average middle-market C&I loans, a $0.4 billion, or 12%, increase in average middle-
market commercial real estate loans (CRE), and a $0.1 billion, or 4%, increase in average small business loans.
Average residential mortgages increased $0.5 billion, or 12% ($0.3 billion Unizan merger-related). Average home equity loans
increased $0.2 billion, or 5%, but would have increased less than 1% were it not for the Unizan merger.
Average total investment securities increased $0.6 million, or 15%, from 2005.
Average total core deposits in 2006 increased $1.8 billion, or 10% ($1.3 billion Unizan merger-related), from 2005. Most of the
increase reflected higher average core certificates of deposit, which increased $1.7 billion ($0.5 billion Unizan merger-related)
resulting from continued customer demand for higher, fixed rate deposit products. Average interest bearing demand deposits
increased $0.2 billion, primarily all merger-related, and average non-interest bearing deposits increased $0.2 billion ($0.1 billion
merger-related). Average savings and other domestic time deposits declined $0.2 billion, despite $0.4 billion of increase related to
the Unizan merger.
Table 7 shows average annual balance sheets and fully-taxable equivalent net interest margin analysis for the last five years. It
details average balances for total assets and liabilities, as well as shareholders’ equity, and their various components, most notably
loans and leases, deposits, and borrowings. It also shows the corresponding interest income or interest expense associated with
each earning asset and interest bearing liability category along with the average rate with the difference resulting in the net interest
spread. The net interest spread plus the positive impact from the non-interest bearing funds represents the net interest margin.
27
MANAGEMENT’S DISCUSSION AND ANALYSIS HUNTINGTON BANCSHARES INCORPORATED