Huntington National Bank 2015 Annual Report Download - page 45

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(1) Pretax unless otherwise noted.
(2) Based upon the annual average outstanding diluted common shares.
(3) After-tax.
Net Interest Income / Average Balance Sheet
Our primary source of revenue is net interest income, which is the difference between interest income from earning assets
(primarily loans, securities, and direct financing leases), and interest expense of funding sources (primarily interest-bearing
deposits and borrowings). Earning asset balances and related funding sources, as well as changes in the levels of interest rates,
impact net interest income. The difference between the average yield on earning assets and the average rate paid for interest-
bearing liabilities is the net interest spread. Noninterest-bearing sources of funds, such as demand deposits and shareholders’
equity, also support earning assets. The impact of the noninterest-bearing sources of funds, often referred to as “free” funds, is
captured in the net interest margin, which is calculated as net interest income divided by average earning assets. Both the net
interest margin and net interest spread are presented on a fully-taxable equivalent basis, which means that tax-free interest income
has been adjusted to a pretax equivalent income, assuming a 35% tax rate.
The following table shows changes in fully-taxable equivalent interest income, interest expense, and net interest income due
to volume and rate variances for major categories of earning assets and interest-bearing liabilities:
Table 4 - Change in Net Interest Income Due to Changes in Average Volume and Interest Rates (1)
(dollar amounts in millions)
2015 2014
Increase (Decrease) From
Previous Year Due To
Increase (Decrease) From
Previous Year Due To
Fully-taxable equivalent basis(2) Volume
Yield/
Rate Total Volume
Yield/
Rate Total
Loans and leases $ 117.6 $ (35.1) $ 82.5 $ 136.7 $ (94.5) $ 42.2
Investment securities 45.8 3.2 49.0 69.7 10.2 79.9
Other earning assets 10.4 0.7 11.1 (6.3) 0.2 (6.1)
Total interest income from earning assets 173.8 (31.2) 142.6 200.1 (84.1) 116.0
Deposits 5.6 (9.9)(4.3) 5.2 (35.0)(29.8)
Short-term borrowings (1.6) 0.3 (1.3) 1.5 — 1.5
Long-term debt 30.1 — 30.1 30.1 (18.5) 11.6
Total interest expense of interest-bearing
liabilities 34.1 (9.6) 24.5 36.8 (53.5)(16.7)
Net interest income $ 139.7 $ (21.6) $ 118.1 $ 163.3 $ (30.6) $ 132.7
(1) The change in interest rates due to both rate and volume has been allocated between the factors in proportion to the
relationship of the absolute dollar amounts of the change in each.
(2) Calculated assuming a 35% tax rate.
Table 5 - Consolidated Average Balance Sheet and Net Interest Margin Analysis (3)
(dollar amounts in millions)
Average Balances
Change from 2014 Change from 2013
Fully-taxable equivalent basis (1) 2015 Amount Percent 2014 Amount Percent 2013
Assets
Interest-bearing deposits in banks $90$ 5 6%$85$15 21%$70
Loans held for sale 654 331 102 323 (198)(38) 521
Available-for-sale and other securities:
Taxable 7,999 1,214 18 6,785 402 6 6,383
Tax-exempt 2,075 646 45 1,429 866 154 563
Total available-for-sale and other securities 10,074 1,860 23 8,214 1,268 18 6,946