Huntington National Bank 2007 Annual Report Download - page 62

Download and view the complete annual report

Please find page 62 of the 2007 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 120

  • 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

Table 34 — Key Performance Indicators for Regional Banking
(in thousands unless otherwise noted) 2007 2006 Amount Percent Fourth Third Amount Percent
Twelve Months Ended
December 31, Change from 2006 2007 Change from 3Q07
Net income (loss) $103,089 $340,759 $(237,670) (69.7)% $(174,023) $141,716 $(315,739) N.M.%
Total average assets (in millions
of dollars) 27,790 20,467 7,323 35.8 34,551 34,213 338 1.0
Total average deposits (in millions
of dollars) 26,352 19,708 6,644 33.7 32,453 32,153 300 0.9
Return on average equity 6.4% 29.8% (23.4)% (78.5) (29.7)% 35.0% (64.7)% N.M.
Retail banking # DDA
households (eop) 896,567 559,574 336,993 60.2 896,567 910,947 (14,380) (1.6)
Retail banking # new relationships
90-day cross-sell (average) 2.75 2.98 (0.23) (7.7) 2.75 2.68 0.07 2.6
Small business # business DDA
relationships (eop) 103,765 60,470 43,295 71.6 103,765 104,137 (372) (0.4)
Small business # new relationships
90-day cross-sell (average) 2.32 2.30 0.02 0.9 2.28 2.34 (0.06) (2.6)
Mortgage banking closed loan
volume (in millions) $ 3,493 $ 2,822 $ 671 23.8% $ 985 $ 1,029 $ (44) (4.3)%
eop — End of Period.
2007 FOURTH QUARTER VERSUS 2007 THIRD QUARTER
Regional Banking reported a net loss of $174.0 million for the fourth quarter of 2007. This compares with net income of
$141.7 million for the third quarter of 2007, a decline of $315.7 million. The $315.7 million decline primarily reflected a
$462.4 million increase to the provision for credit losses. This increase to provision for credit losses was largely due to the credit
deterioration of the Franklin relationship acquired in the Sky Financial merger, with a smaller portion due to the negative impact
of the economic weakness in our Midwest markets, most notably among our borrowers in eastern Michigan and northern Ohio,
and within the single family real estate development portfolio.
Net interest income decreased $14.5 million, primarily reflecting a $17.9 million reduction due to the placement of the Franklin
loans on nonaccrual status from November 16, 2007, until December 28, 2007. Excluding the impact of the Franklin reduction, net
interest income increased $3.4 million, reflecting a $117 million increase in average total loans and leases, partially offset by a
decline in the net interest margin. The decline in the net interest margin reflected the impact of the decline in the rate environment
and competitive pricing pressure, particularly on deposits.
Non-interest income increased $2.5 million, or 2%. Factors contributing to this increase were: (1) $3.2 million increase in deposit-
related service charges, and (2) $4.0 million increase in fees received from the sales of private financial and capital markets
products and services. These increases were partially offset by a $5.6 million decline in mortgage banking income largely due to
$5.8 million of higher losses related to MSR valuation, net of hedge-related trading activity.
Non-interest expense increased $11.4 million primarily reflecting: (1) $8.4 million higher allocated maintenance and transaction
processing costs resulting from post-conversion Sky Financial-related account volumes, and (2) $5.5 million higher allocated
corporate overhead, including executive management severance costs. These increases were partially offset by $2.6 million of lower
personnel-related expenses, mostly merger-related.
Net charge-offs totaled $363.2 million, or an annualized 4.49% of average loans and leases, for the 2007 fourth quarter compared
with $37.7 million, or an annualized 0.47% of average loans and leases, in the 2007 third quarter. This increase was largely due to
the $308.5 million charge off related to Franklin. Excluding the Franklin impact, net charge-offs were $54.7 million. The increase
to $54.7 million, compared with $37.7 million in the prior quarter, reflected the economic weakness in our Midwest markets, most
notably among our borrowers in eastern Michigan and northern Ohio.
The ROA was (2.00)% compared with 1.64%, and the ROE was (29.7)% compared with 35.0%. These changes reflected the 2007
fourth quarter net loss.
2007 VERSUS 2006
Regional Banking contributed $103.1 million of the company’s net income in 2007, down from $340.8 million, or 70%, in 2006.
This decrease primarily reflected a $557.2 million increase in the provision for credit losses. This increase was largely due to the
60
MANAGEMENT’S DISCUSSION AND ANALYSIS HUNTINGTON BANCSHARES INCORPORATED