Huntington National Bank 2009 Annual Report Download - page 120

in provision for income taxes expense reflectin
g
the net loss durin
g
2009. Althou
g
h we expect our commercia
l
portfolio will remain under pressure, we believe that the risks in our loan portfolios are mana
g
eable
.
Net interest income decreased
$
104.0 million, or 33%, primaril
y
reflectin
g
a 113 basis point decline i
n
net interest mar
g
in, and a
$
0.2 billion decline in avera
g
e earnin
g
assets, partiall
y
offset b
y
a
$
0.9 billion
decline in avera
g
e interest-bearin
g
liabilities. The net interest mar
g
in decline primaril
y
reflected the previousl
y
discussed FTP methodolo
gy
chan
g
e. Other factors contributin
g
to the decline in net interest mar
g
in included
a
re
d
uct
i
on
i
n
l
oan net
i
nterest
i
ncome, resu
l
t
i
n
gf
rom s
ig
n
ifi
cant
d
ec
li
nes
i
n
i
nterest rates an
dl
ower avera
g
e
total loans
,
as well as a
$
150 million increase in NALs
.
The decline in avera
g
e earnin
g
assets primaril
y
reflected a
$
0.2 billion decline in total avera
g
e loans an
d
leases, and included a
$
0.5 billion decrease in avera
g
e CRE loans, partiall
y
offset b
y
a
$
0.3 billion increase i
n
total avera
g
e C&I loans. These chan
g
es reflected the impact of reclassifications in 2009 of CRE loans to C&
I
loans, as well as the impact of substantiall
y
hi
g
her char
g
e-offs in 2009, the Franklin restructurin
g
, and lower
l
oan or
igi
nat
i
on pro
d
uct
i
on compare
d
w
i
t
h
2008 re
fl
ect
i
n
g
,
i
n part, our p
l
anne
d
e
ff
orts to s
h
r
i
n
k
t
h
e CRE
p
ort
f
o
li
o
.
Total avera
g
e interest-bearin
g
liabilities declined
$
0.9 billion, and included a
$
1.0 billion decline in
noncore de
p
osits and other swee
pp
roduct balances. This decline reflected a
$
0.5 billion decline in
p
ublic fun
d
deposit balances resultin
g
from a mana
g
ed decline in this product. Also, throu
g
hout 2009, a mi
g
ration o
f
money-mar
k
et account, t
i
me
d
epos
i
t, an
d
ot
h
er sweep pro
d
uct
b
a
l
ances
i
nto
d
eman
dd
epos
i
t accounts occurre
d
d
ue to
l
ower mar
k
et rates an
d
t
h
e
i
ncrease
d
FDIC
i
nsurance covera
g
e prov
id
e
d
to
d
eman
dd
epos
i
t accounts.
Noninterest income decreased $3.7 million, or 4%, primaril
y
reflectin
g
: (a) $5.7 million decrease i
n
derivative income due to a decline in demand for interest rate swa
pp
roducts, (b)
$
1.6 million decrease in
derivative tradin
g
income, (c) $1.3 million decrease in international and forei
g
n exchan
g
e income,
(d) $1.2 million decrease in loan s
y
ndication fee income, (e) $1.1 million decrease in mezzanine income, and
(f)
$
2.7 million decline in operatin
g
lease income as lease ori
g
inations were recorded as direct finance leases
rat
h
er t
h
an operat
i
n
gl
eases e
ff
ect
i
ve w
i
t
h
t
h
e 2009 secon
d
quarter. T
h
ese
d
ecreases were part
i
a
lly
o
ff
set
by:
(a) $5.5 million increase in loan commitment fee income reflectin
g
hi
g
her unfunded commitment loan fees
,
and (b) $4.2 million increase in service char
g
es on deposit accounts, reflectin
g
pricin
g
initiatives implemente
d
d
ur
i
n
g
t
h
e
fi
rst
h
a
lf
o
f
2009.
Noninterest ex
p
ense declined $3.9 million, and reflected: (a) $9.4 million decrease in
p
ersonnel ex
p
ens
e
resu
l
t
i
n
gf
rom a re
d
uct
i
on
i
n avera
g
e
f
u
ll
-t
i
me equ
i
va
l
ent emp
l
o
y
ees, as we
ll
as s
ig
n
ifi
cant
ly
re
d
uce
di
ncent
i
v
e
pa
y
outs, part
i
a
lly
o
ff
set
by
a
d
ecrease
i
n
d
e
f
erre
d
sa
l
ar
y
expense
d
ue to
d
ecrease
dl
oan pro
d
uct
i
on
;
(b) $3.2 million decrease in overhead allocation as a result of the previousl
y
discussed chan
g
es in our proces
s
for allocatin
g
corporate overhead; (c)
$
3.2 million reduction in travel, business development and marketin
g
a
s
a result of the im
p
lementation of several ex
p
ense reduction initiatives; and (d)
$
2.5 million decrease i
n
operatin
g
lease expense reflectin
g
the chan
g
e in accountin
g
for lease ori
g
inations effective with the 2009
second quarter as described above. These decreases were partiall
y
offset b
y
a $8.3 million increase in deposi
t
an
d
ot
h
er
i
nsurance expense as a resu
l
to
f
t
h
e compara
bl
e
y
ear-a
g
o per
i
o
d
’s expense was o
ff
set
by
an FDIC
insurance assessment credit that has since been full
y
utilized, and a
$
4.8 million increase in OREO an
d
foreclosure expense, as a result of hi
g
her levels of problem assets, as well as loss miti
g
ation activities
.
200
8 vs. 2
007
C
ommercial Bankin
g
reported net income of
$
104.4 million in 2008, compared with net income of
$129.5 million in 2007. The $25.2 million decline included a $107.5 million increase in
p
rovision for credi
t
losses. This increase was lar
g
el
y
due to a
$
67.0 million increase in NCOs, and a
$
115 million increase i
n
NALs compare
d
w
i
t
h
t
h
epr
i
or
y
ear-en
d
.T
h
e
i
ncrease
i
n
b
ot
h
NCOs an
d
NALs re
fl
ecte
d
t
h
e overa
ll
econom
ic
weakness across our re
g
ions. The increase to provision for credit losses was partiall
y
offset b
y
the net positiv
e
i
mpact o
f
t
h
eS
ky
F
i
nanc
i
a
l
acqu
i
s
i
t
i
on on Ju
ly
1, 2007. T
h
e acqu
i
s
i
t
i
on
i
ncrease
d
net
i
nterest
i
ncome,
non
i
nterest
i
ncome, non
i
nterest expense, avera
g
e tota
ll
oans an
d
avera
g
e tota
ld
epos
i
ts
f
rom t
h
epr
i
or
y
ear
.
112