Selected Financial Data | Huntington Bancshares Incorporated |
Year Ended December 31, | ||||||||||||||||||||
(in thousands, except per share amounts) | 2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||
Interest income
|
$ | 2,798,322 | $ | 2,742,963 | $ | 2,070,519 | $ | 1,641,765 | $ | 1,347,315 | ||||||||||
Interest expense
|
1,266,631 | 1,441,451 | 1,051,342 | 679,354 | 435,941 | |||||||||||||||
Net interest income
|
1,531,691 | 1,301,512 | 1,019,177 | 962,411 | 911,374 | |||||||||||||||
Provision for credit losses
|
1,057,463 | 643,628 | 65,191 | 81,299 | 55,062 | |||||||||||||||
Net interest income after provision for credit losses
|
474,228 | 657,884 | 953,986 | 881,112 | 856,312 | |||||||||||||||
Service charges on deposit accounts
|
308,053 | 254,193 | 185,713 | 167,834 | 171,115 | |||||||||||||||
Automobile operating lease income
|
39,851 | 7,810 | 43,115 | 133,015 | 285,431 | |||||||||||||||
Securities (losses) gains
|
(197,370 | ) | (29,738 | ) | (73,191 | ) | (8,055 | ) | 15,763 | |||||||||||
Other non-interest income
|
556,604 | 444,338 | 405,432 | 339,488 | 346,289 | |||||||||||||||
Total noninterest income
|
707,138 | 676,603 | 561,069 | 632,282 | 818,598 | |||||||||||||||
Personnel costs
|
783,546 | 686,828 | 541,228 | 481,658 | 485,806 | |||||||||||||||
Automobile operating lease expense
|
31,282 | 5,161 | 31,286 | 103,850 | 235,080 | |||||||||||||||
Other non-interest expense
|
662,546 | 619,855 | 428,480 | 384,312 | 401,358 | |||||||||||||||
Total noninterest expense
|
1,477,374 | 1,311,844 | 1,000,994 | 969,820 | 1,122,244 | |||||||||||||||
(Loss) Income before income taxes
|
(296,008 | ) | 22,643 | 514,061 | 543,574 | 552,666 | ||||||||||||||
(Benefit) provision for income taxes
|
(182,202 | ) | (52,526 | ) | 52,840 | 131,483 | 153,741 | |||||||||||||
Net (loss) income
|
$ | (113,806 | ) | $ | 75,169 | $ | 461,221 | $ | 412,091 | $ | 398,925 | |||||||||
Dividends on preferred shares
|
46,400 | | | | | |||||||||||||||
Net (loss) income applicable to common shares
|
$ | (160,206 | ) | $ | 75,169 | $ | 461,221 | $ | 412,091 | $ | 398,925 | |||||||||
Net (loss) income per common share basic
|
$(0.44 | ) | $0.25 | $1.95 | $1.79 | $1.74 | ||||||||||||||
Net (loss) income per common share diluted
|
(0.44 | ) | 0.25 | 1.92 | 1.77 | 1.71 | ||||||||||||||
Cash dividends declared per common share
|
0.6625 | 1.060 | 1.000 | 0.845 | 0.750 | |||||||||||||||
Balance sheet highlights
|
||||||||||||||||||||
Total assets (period end)
|
$ | 54,352,859 | $ | 54,697,468 | $ | 35,329,019 | $ | 32,764,805 | $ | 32,565,497 | ||||||||||
Total long-term debt (period
end)(2)
|
6,870,705 | 6,954,909 | 4,512,618 | 4,597,437 | 6,326,885 | |||||||||||||||
Total shareholders equity (period end)
|
7,227,141 | 5,949,140 | 3,014,326 | 2,557,501 | 2,537,638 | |||||||||||||||
Average long-term
debt(2)
|
7,374,681 | 5,714,572 | 4,942,671 | 5,168,959 | 6,650,367 | |||||||||||||||
Average shareholders equity
|
6,393,788 | 4,631,912 | 2,945,597 | 2,582,721 | 2,374,137 | |||||||||||||||
Average total assets
|
54,921,419 | 44,711,676 | 35,111,236 | 32,639,011 | 31,432,746 | |||||||||||||||
Key ratios and statistics
|
||||||||||||||||||||
Margin analysis as a % of average earnings assets
|
||||||||||||||||||||
Interest
income(3)
|
5.90 | % | 7.02 | % | 6.63 | % | 5.65 | % | 4.89 | % | ||||||||||
Interest expense
|
2.65 | 3.66 | 3.34 | 2.32 | 1.56 | |||||||||||||||
Net interest
margin(3)
|
3.25 | % | 3.36 | % | 3.29 | % | 3.33 | % | 3.33 | % | ||||||||||
Return on average total assets
|
(0.21 | )% | 0.17 | % | 1.31 | % | 1.26 | % | 1.27 | % | ||||||||||
Return on average total shareholders equity
|
(1.8 | ) | 1.6 | 15.7 | 16.0 | 16.8 | ||||||||||||||
Return on average tangible shareholders
equity(4)
|
(2.1 | ) | 3.9 | 19.5 | 17.4 | 18.5 | ||||||||||||||
Efficiency
ratio(5)
|
57.0 | 62.5 | 59.4 | 60.0 | 65.0 | |||||||||||||||
Dividend payout ratio
|
N.M. | N.M. | 52.1 | 47.7 | 43.9 | |||||||||||||||
Average shareholders equity to average assets
|
11.64 | 10.36 | 8.39 | 7.91 | 7.55 | |||||||||||||||
Effective tax rate
|
N.M. | N.M. | 10.3 | 24.2 | 27.8 | |||||||||||||||
Tangible common equity to tangible assets (period
end)(6)
|
4.04 | 5.08 | 6.93 | 7.19 | 7.18 | |||||||||||||||
Tangible equity to tangible assets (period
end)(7)
|
7.72 | 5.08 | 6.93 | 7.19 | 7.18 | |||||||||||||||
Tier 1 leverage ratio (period end)
|
9.82 | 6.77 | 8.00 | 8.34 | 8.42 | |||||||||||||||
Tier 1 risk-based capital ratio (period end)
|
10.72 | 7.51 | 8.93 | 9.13 | 9.08 | |||||||||||||||
Total risk-based capital ratio (period end)
|
13.91 | 10.85 | 12.79 | 12.42 | 12.48 | |||||||||||||||
Other data
|
||||||||||||||||||||
Full-time equivalent employees (period end)
|
10,951 | 11,925 | 8,081 | 7,602 | 7,812 | |||||||||||||||
Domestic banking offices (period end)
|
613 | 625 | 381 | 344 | 342 |
(1) | Comparisons for presented periods are impacted by a number of factors. Refer to the Significant Items for additional discussion regarding these key factors. |
(2) | Includes Federal Home Loan Bank advances, subordinated notes, and other long-term debt. |
(3) | On a fully taxable equivalent (FTE) basis assuming a 35% tax rate. |
(4) | Net (loss) income less expense excluding amortization of intangibles for the period divided by average tangible shareholders equity. Average tangible shareholders equity equals average total shareholders equity less average intangible assets and goodwill. Expense for amortization of intangibles and average intangible assets are net of deferred tax liability, and calculated assuming a 35% tax rate. |
(5) | Noninterest expense less amortization of intangibles divided by the sum of FTE net interest income and noninterest income excluding securities gains. |
(6) | Tangible common equity (total common equity less goodwill and other intangible assets) divided by tangible assets (total assets less goodwill and other intangible assets). Other intangible assets are net of deferred tax, and calculated assuming a 35% tax rate. |
(7) | Tangible equity (total equity less goodwill and other intangible assets) divided by tangible assets (total assets less goodwill and other intangible assets). Other intangible assets are net of deferred tax, and calculated assuming a 35% tax rate. |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | ||||||||
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
Managements Discussion and Analysis of Financial Condition | Huntington Bancshares Incorporated |
| Introduction Provides overview comments on important matters including risk factors, acquisitions, and other items. These are essential for understanding our performance and prospects. | |
| Discussion of Results of Operations Reviews financial performance from a consolidated company perspective. It also includes a Significant Items section that summarizes key issues helpful for understanding performance trends. Key consolidated average balance sheet and income statement trends are also discussed in this section. | |
| Risk Management and Capital Discusses credit, market, liquidity, and operational risks, including how these are managed, as well as performance trends. It also includes a discussion of liquidity policies, how we obtain funding, and related performance. In addition, there is a discussion of guarantees and/or commitments made for items such as standby letters of credit and commitments to sell loans, and a discussion that reviews the adequacy of capital, including regulatory capital requirements. | |
| Lines of Business Discussion Provides an overview of financial performance for each of our major lines of business and provides additional discussion of trends underlying consolidated financial performance. | |
| Results for the Fourth Quarter Provides a discussion of results for the 2008 fourth quarter compared with the 2007 fourth quarter. |
Managements Discussion and Analysis | Huntington Bancshares Incorporated |
Managements Discussion and Analysis | Huntington Bancshares Incorporated |
| Total Allowances for Credit Losses The allowance for credit losses (ACL) is the sum of the allowance for loan and lease losses (ALLL) and the allowance for unfunded loan commitments and letters of credit (AULC). At December 31, 2008, the ACL was $944.4 million. The amount of the ACL was determined by judgments regarding the quality of the loan portfolio and loan commitments. All known relevant internal and external factors that affected loan collectibility were considered. The ACL represents the estimate of the level of reserves appropriate to absorb inherent credit losses in the loan and lease portfolio, as well as unfunded loan commitments. We believe the process for determining the ACL considers all of the potential factors that could result in credit losses. However, the process includes judgmental and quantitative elements that may be subject to significant change. To the extent actual outcomes differ from our estimates, additional provision for credit losses could be required, which could adversely affect earnings or financial performance in future periods. |
| Fair Value Measurements The fair value of a financial instrument is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. We estimate the fair value of a financial instrument using a variety of valuation methods. Where financial instruments are actively traded and have quoted market prices, quoted market prices are used for fair value. When the financial instruments are not actively traded, other observable market inputs, such as quoted prices of securities with similar characteristics, may be used, if available, to determine fair value. When observable market prices do not exist, we estimate fair value. Our valuation methods consider factors such as liquidity and concentration concerns and, for the derivatives portfolio, counterparty credit risk. Other factors such as model assumptions, market dislocations, and unexpected correlations can affect estimates of fair value. Imprecision in estimating these factors can impact the amount of revenue or loss recorded. |
| Level 1 quoted prices (unadjusted) for identical assets or liabilities in active markets. | |
| Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices of identical or similar assets or liabilities in markets that are not active, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. | |
| Level 3 inputs that are unobservable and significant to the fair value measurement. |
Managements Discussion and Analysis | Huntington Bancshares Incorporated |
Financial Instrument(1) | Hierarchy | Valuation methodology | ||
Loans held-for-sale
|
Level 2 | Loans held-for-sale are estimated using security prices for similar product types. | ||
Investment Securities & TradingAccount
Securities(2)
|
Level 1 | Consist of U.S. Treasury and other federal agency securities, and money market mutual funds which generally have quoted prices. | ||
Level 2 | Consist of U.S. Government and agency mortgage-backed securities and municipal securities for which an active market is not available. Third-party pricing services provide a fair value estimate based upon trades of similar financial instruments. | |||
Level 3 | Consist of asset-backed securities and certain private label CMOs, for which we estimate the fair value. Assumptions used to determine the fair value of these securities have greater subjectivity due to the lack of observable market transactions. Generally, there are only limited trades of similar instruments and a discounted cash flow approach is used to determine fair value. | |||
Mortgage Servicing Rights
(MSRs)(3)
|
Level 3 | MSRs do not trade in an active, open market with readily observable prices. Although sales of MSRs do occur, the precise terms and conditions typically are not readily available. Fair value is based upon the final month-end valuation, which utilizes the month-end rate curve and prepayment assumptions. | ||
Derivatives(4)
|
Level 1 | Consist of exchange traded options and forward commitments to deliver mortgage-backed securities which have quoted prices. | ||
Level 2 | Consist of basic asset and liability conversion swaps and options, and interest rate caps. These derivative positions are valued using internally developed models that use readily observable market parameters. | |||
Level 3 | Consist of interest rate lock agreements related to mortgage loan commitments. The determinination of fair value includes assumptions related to the likelihood that a commitment will ultimately result in a closed loan, which is a significant unobservable assumption. | |||
Equity
Investments(5)
|
Level 3 | Consist of equity investments via equity funds (holding both private and publicly-traded equity securities), directly in companies as a minority interest investor, and directly in companies in conjunction with our mezzanine lending activities. These investments do not have readily observable prices. Fair value is based upon a variety of factors, including but not limited to, current operating performance and future expectations of the particular investment, industry valuations of comparable public companies, and changes in market outlook. |
(1) | Refer to Notes 1 and 19 of the Notes to the Consolidated Financial Statements for additional information. |
(2) | Refer to Note 4 of the Notes to the Consolidated Financial Statements for additional information. |
(3) | Refer to Note 6 of the Notes to the Consolidated Financial Statements for additional information. |
(4) | Refer to Note 20 of the Notes to the Consolidated Financial Statements for additional information. |
(5) | Certain equity investments are accounted for under the equity method and, therefore, are not subject to the fair value disclosure requirements. |
Managements Discussion and Analysis | Huntington Bancshares Incorporated |
Managements Discussion and Analysis | Huntington Bancshares Incorporated |
Managements Discussion and Analysis | Huntington Bancshares Incorporated |
| Income Taxes The calculation of our provision for federal income taxes is complex and requires the use of estimates and judgments. We have two accruals for income taxes: Our income tax receivable represents the estimated amount currently due from the federal government, net of any reserve for potential audit issues, and is reported as a component of accrued income and other assets in our consolidated balance sheet; our deferred federal income tax asset or liability represents the estimated impact of temporary differences between how we recognize our assets and liabilities under GAAP, and how such assets and liabilities are recognized under the federal tax code. |
Managements Discussion and Analysis | Huntington Bancshares Incorporated |
| Increased the absolute level of reported average balance sheet, revenue, expense, and the absolute level of certain credit quality results. | |
| Increased the absolute level of reported noninterest expense items because of costs incurred as part of merger integration activities, most notably employee retention bonuses, outside programming services related to systems conversions, occupancy expenses, and marketing expenses related to customer retention initiatives. |
| Merger-related refers to amounts and percentage changes representing the impact attributable to the merger. | |
| Merger costs represent noninterest expenses primarily associated with merger integration activities, including severance expense for key executive personnel. | |
| Non-merger-related refers to performance not attributable to the merger, and includes merger efficiencies, which represent noninterest expense reductions realized as a result of the merger. |
Managements Discussion and Analysis | Huntington Bancshares Incorporated |
Year Ended December 31, | ||||||||||||||||||||||||||||||||||||
Change from 2007 | Change from 2006 | |||||||||||||||||||||||||||||||||||
(in thousands, except per share amounts) | 2008 | Amount | Percent | 2007 | Amount | Percent | 2006 | 2005 | 2004 | |||||||||||||||||||||||||||
Interest income
|
$ | 2,798,322 | $ | 55,359 | 2.0 | % | $ | 2,742,963 | $ | 672,444 | 32.5 | % | $ | 2,070,519 | $ | 1,641,765 | $ | 1,347,315 | ||||||||||||||||||
Interest expense
|
1,266,631 | (174,820 | ) | (12.1 | ) | 1,441,451 | 390,109 | 37.1 | 1,051,342 | 679,354 | 435,941 | |||||||||||||||||||||||||
Net interest income
|
1,531,691 | 230,179 | 17.7 | 1,301,512 | 282,335 | 27.7 | 1,019,177 | 962,411 | 911,374 | |||||||||||||||||||||||||||
Provision for credit losses
|
1,057,463 | 413,835 | 64.3 | 643,628 | 578,437 | N.M. | 65,191 | 81,299 | 55,062 | |||||||||||||||||||||||||||
Net interest income after provision for credit losses
|
474,228 | (183,656 | ) | (27.9 | ) | 657,884 | (296,102 | ) | (31.0 | ) | 953,986 | 881,112 | 856,312 | |||||||||||||||||||||||
Service charges on deposit accounts
|
308,053 | 53,860 | 21.2 | 254,193 | 68,480 | 36.9 | 185,713 | 167,834 | 171,115 | |||||||||||||||||||||||||||
Brokerage and insurance income
|
137,796 | 45,421 | 49.2 | 92,375 | 33,540 | 57.0 | 58,835 | 53,619 | 54,799 | |||||||||||||||||||||||||||
Trust services
|
125,980 | 4,562 | 3.8 | 121,418 | 31,463 | 35.0 | 89,955 | 77,405 | 67,410 | |||||||||||||||||||||||||||
Electronic banking
|
90,267 | 19,200 | 27.0 | 71,067 | 19,713 | 38.4 | 51,354 | 44,348 | 41,574 | |||||||||||||||||||||||||||
Bank owned life insurance income
|
54,776 | 4,921 | 9.9 | 49,855 | 6,080 | 13.9 | 43,775 | 40,736 | 42,297 | |||||||||||||||||||||||||||
Automobile operating lease income
|
39,851 | 32,041 | N.M. | 7,810 | (35,305 | ) | (81.9 | ) | 43,115 | 133,015 | 285,431 | |||||||||||||||||||||||||
Mortgage banking
|
8,994 | (20,810 | ) | (69.8 | ) | 29,804 | (11,687 | ) | (28.2 | ) | 41,491 | 28,333 | 26,786 | |||||||||||||||||||||||
Securities (losses) gains
|
(197,370 | ) | (167,632 | ) | N.M. | (29,738 | ) | 43,453 | (59.4 | ) | (73,191 | ) | (8,055 | ) | 15,763 | |||||||||||||||||||||
Other
|
138,791 | 58,972 | 73.9 | 79,819 | (40,203 | ) | (33.5 | ) | 120,022 | 95,047 | 113,423 | |||||||||||||||||||||||||
Total noninterest income
|
707,138 | 30,535 | 4.5 | 676,603 | 115,534 | 20.6 | 561,069 | 632,282 | 818,598 | |||||||||||||||||||||||||||
Personnel costs
|
783,546 | 96,718 | 14.1 | 686,828 | 145,600 | 26.9 | 541,228 | 481,658 | 485,806 | |||||||||||||||||||||||||||
Outside data processing and other services
|
128,163 | 918 | 0.7 | 127,245 | 48,466 | 61.5 | 78,779 | 74,638 | 72,115 | |||||||||||||||||||||||||||
Net occupancy
|
108,428 | 9,055 | 9.1 | 99,373 | 28,092 | 39.4 | 71,281 | 71,092 | 75,941 | |||||||||||||||||||||||||||
Equipment
|
93,965 | 12,483 | 15.3 | 81,482 | 11,570 | 16.5 | 69,912 | 63,124 | 63,342 | |||||||||||||||||||||||||||
Amortization of intangibles
|
76,894 | 31,743 | 70.3 | 45,151 | 35,189 | N.M. | 9,962 | 829 | 817 | |||||||||||||||||||||||||||
Professional services
|
53,667 | 13,347 | 33.1 | 40,320 | 13,267 | 49.0 | 27,053 | 34,569 | 36,876 | |||||||||||||||||||||||||||
Marketing
|
32,664 | (13,379 | ) | (29.1 | ) | 46,043 | 14,315 | 45.1 | 31,728 | 26,279 | 24,600 | |||||||||||||||||||||||||
Automobile operating lease expense
|
31,282 | 26,121 | N.M. | 5,161 | (26,125 | ) | (83.5 | ) | 31,286 | 103,850 | 235,080 | |||||||||||||||||||||||||
Telecommunications
|
25,008 | 506 | 2.1 | 24,502 | 5,250 | 27.3 | 19,252 | 18,648 | 19,787 | |||||||||||||||||||||||||||
Printing and supplies
|
18,870 | 619 | 3.4 | 18,251 | 4,387 | 31.6 | 13,864 | 12,573 | 12,463 | |||||||||||||||||||||||||||
Other
|
124,887 | (12,601 | ) | (9.2 | ) | 137,488 | 30,839 | 28.9 | 106,649 | 82,560 | 95,417 | |||||||||||||||||||||||||
Total noninterest expense
|
1,477,374 | 165,530 | 12.6 | 1,311,844 | 310,850 | 31.1 | 1,000,994 | 969,820 | 1,122,244 | |||||||||||||||||||||||||||
(Loss) Income before income taxes
|
(296,008 | ) | (318,651 | ) | N.M. | 22,643 | (491,418 | ) | (95.6 | ) | 514,061 | 543,574 | 552,666 | |||||||||||||||||||||||
(Benefit) provision for income taxes
|
(182,202 | ) | (129,676 | ) | N.M. | (52,526 | ) | (105,366 | ) | N.M. | 52,840 | 131,483 | 153,741 | |||||||||||||||||||||||
Net (Loss) Income
|
(113,806 | ) | (188,975 | ) | N.M. | 75,169 | (386,052 | ) | (83.7 | ) | 461,221 | 412,091 | 398,925 | |||||||||||||||||||||||
Dividends on preferred shares
|
46,400 | 46,400 | N.M. | | | | | | | |||||||||||||||||||||||||||
Net (loss) income applicable to common shares
|
$ | (160,206 | ) | $ | (235,375 | ) | N.M. | % | $ | 75,169 | $ | (386,052 | ) | (83.7 | )% | $ | 461,221 | $ | 412,091 | $ | 398,925 | |||||||||||||||
Average common shares basic
|
366,155 | 65,247 | 21.7 | % | 300,908 | 64,209 | 27.1 | % | 236,699 | 230,142 | 229,913 | |||||||||||||||||||||||||
Average common shares
diluted(2)
|
366,155 | 62,700 | 20.7 | 303,455 | 63,535 | 26.5 | 239,920 | 233,475 | 233,856 | |||||||||||||||||||||||||||
Per common share:
|
||||||||||||||||||||||||||||||||||||
Net income basic
|
$ | (0.44 | ) | $ | (0.69 | ) | N.M. | % | $ | 0.25 | $ | (1.70 | ) | (87.2 | )% | $ | 1.95 | $ | 1.79 | $ | 1.74 | |||||||||||||||
Net income diluted
|
(0.44 | ) | (0.69 | ) | N.M. | 0.25 | (1.67 | ) | (87.0 | ) | 1.92 | 1.77 | 1.71 | |||||||||||||||||||||||
Cash dividends declared
|
0.6625 | (0.40 | ) | (37.5 | ) | 1.060 | 0.06 | 6.0 | 1.000 | 0.845 | 0.750 | |||||||||||||||||||||||||
Revenue fully taxable equivalent (FTE)
|
||||||||||||||||||||||||||||||||||||
Net interest income
|
$ | 1,531,691 | $ | 230,179 | 17.7 | % | $ | 1,301,512 | $ | 282,335 | 27.7 | % | $ | 1,019,177 | $ | 962,411 | $ | 911,374 | ||||||||||||||||||
FTE adjustment
|
20,218 | 969 | 5.0 | 19,249 | 3,224 | 20.1 | 16,025 | 13,393 | 11,653 | |||||||||||||||||||||||||||
Net interest
income(3)
|
1,551,909 | 231,148 | 17.5 | 1,320,761 | 285,559 | 27.6 | 1,035,202 | 975,804 | 923,027 | |||||||||||||||||||||||||||
Noninterest income
|
707,138 | 30,535 | 4.5 | 676,603 | 115,534 | 20.6 | 561,069 | 632,282 | 818,598 | |||||||||||||||||||||||||||
Total
revenue(3)
|
$ | 2,259,047 | $ | 261,683 | 13.1 | % | $ | 1,997,364 | $ | 401,093 | 25.1 | % | $ | 1,596,271 | $ | 1,608,086 | $ | 1,741,625 | ||||||||||||||||||
(1) | Comparisons for presented periods are impacted by a number of factors. Refer to Significant Factors for additional discussion regarding these key factors. |
(2) | For the year ended December 31, 2008, the impact of the convertible preferred stock issued in April of 2008 was excluded from the diluted share calculation. It was excluded because the result would have been higher than basic earnings per common share (anti-dilutive) for the year. |
(3) | On a fully taxable equivalent (FTE) basis assuming a 35% tax rate. |
Managements Discussion and Analysis | Huntington Bancshares Incorporated |
Managements Discussion and Analysis | Huntington Bancshares Incorporated |
Managements Discussion and Analysis | Huntington Bancshares Incorporated |
1. | Sky Financial Acquisition. The merger with Sky Financial was completed on July 1, 2007. The impacts of Sky Financial on the 2008 reported results compared with the 2007 reported results are as follows: |
| Increased the absolute level of reported average balance sheet, revenue, expense, and credit quality results (e.g., NCOs). | |
| Increased reported noninterest expense items as a result of costs incurred as part of merger integration and post- merger restructuring activities, most notably employee retention bonuses, outside programming services related to systems conversions, and marketing expenses related to customer retention initiatives. These net merger costs were $21.8 million ($0.04 per common share) in 2008 and $85.1 million ($0.18 per common share) in 2007. |
2. | Franklin Relationship. Our relationship with Franklin was acquired in the Sky Financial acquisition. The impacts of the Franklin relationship on the 2008 reported results compared with the 2007 reported results are as follows: |
| Performance for 2008 included a $454.3 million ($0.81 per common share) negative impact. In the 2008 fourth quarter, the cash flow from Franklins mortgages, which represent the collateral for our loans, deteriorated significantly. This deterioration resulted in a $438.0 million provision for credit losses, $9.0 million reduction of net interest income as the loans were placed on nonaccrual status, and $7.3 million of interest-rate swap losses recorded to noninterest income. |
Managements Discussion and Analysis | Huntington Bancshares Incorporated |
| Performance for 2007 included a $423.6 million ($0.91 per common share) negative impact. On December 28, 2007, the loans associated with Franklin were restructured, resulting in a $405.8 million provision for credit losses and a $17.9 million reduction of net interest income. |
3. | Visa® Initial Public Offering (IPO). Prior to the Visa® IPO occurring in March 2008, Visa® was owned by its member banks, which included the Bank. Impacts related to the Visa® IPO included a positive impact of $42.1 million ($0.07 per common share) in 2008, and a negative impact of $24.9 million ($0.04 per common share) in 2007. The impacts included: |
| In 2007, we recorded a $24.9 million ($0.05 per common share) for our pro-rata portion of an indemnification charge provided to Visa® by its member banks for various litigation filed against Visa®. Subsequently, in 2008, we reversed $17.0 million ($0.03 per common share) of the $24.9 million, as an escrow account was established by Visa® using a portion of the proceeds received from the IPO. This escrow accent was established for the potential settlements relating to this litigation thereby mitigating our potential liability from the indemnification. The accrual, and subsequent reversal, was recorded to noninterest expense. | |
| In 2008, a $25.1 million gain ($0.04 per common share), was recorded in other noninterest income resulting from the proceeds of the IPO in 2008 relating to the sale of a portion of our ownership interest in Visa®. |
4. | Mortgage Servicing Rights (MSRs) and Related Hedging. Included in total net market-related losses are net losses or gains from our MSRs and the related hedging. (See Mortgage Servicing Rights located within the Market Risk section). Net income included the following net impact of MSR hedging activity (see Table 10): |
(in thousands, except per share amounts) | ||||||||||||||||||||
Per |
||||||||||||||||||||
Net interest |
Noninterest |
Pretax |
Net |
common |
||||||||||||||||
Period | income | income | (loss) income | (loss) income | share | |||||||||||||||
2008
|
$ | 33,139 | $ | (63,955 | ) | $ | (30,816 | ) | $ | (20,030 | ) | $ | (0.05 | ) | ||||||
2007
|
5,797 | (24,784 | ) | (18,987 | ) | (12,342 | ) | (0.04 | ) | |||||||||||
2006
|
36 | 3,586 | (1) | 3,622 | 2,354 | 0.01 |
5. | Other Net Market-Related Gains or Losses. Other net market-related gains or losses included gains and losses related to the following market-driven activities: net securities gains and losses, gains and losses from public and private equity investments included in other noninterest income, net losses from the sale of loans included primarily in other noninterest income (except as otherwise noted), and the impact from the extinguishment of debt included in other noninterest expense. Total net market-related losses also include the net impact of MSRs and related hedging (see item 4 above). Net income included the following impact from other net market-related losses: |
(in thousands, except per share amounts) | ||||||||||||||||||||||||||||
Debt |
Per |
|||||||||||||||||||||||||||
Securities |
Equity |
Net loss on |
extinguish- |
Pretax |
Net |
common |
||||||||||||||||||||||
Period | losses | investments | loans sold | ment | (loss) income | (loss) income | share | |||||||||||||||||||||
2008
|
$ | (197,370 | ) | $ | (5,892 | ) | $ | (5,131 | )(1) | $ | 23,541 | $ | (184,852 | ) | $ | (120,154 | ) | $ | (0.33 | ) | ||||||||
2007(2)
|
(30,486 | ) | (20,009 | ) | (34,003 | ) | 8,058 | (76,440 | ) | (49,686 | ) | (0.16 | ) | |||||||||||||||
2006
|
(73,191 | ) | 7,436 | (859 | )(3) | | (66,614 | ) | (43,299 | ) | (0.18 | ) |
6. | Other Significant Items Influencing Earnings Performance Comparisons. In addition to the items discussed separately in this section, a number of other items impacted financial results. These included: |
| $12.4 million ($0.02 per common share) of asset impairment, including (a) $5.9 million venture capital loss included in other noninterest income, (b) $4.0 million charge off of a receivable included in other noninterest expense, and (c) $2.5 million write-down of leasehold improvements in our Cleveland main office included in net occupancy expense. | |
| $7.9 million ($0.02 per common share) benefit to provision for income taxes, representing a reduction to the previously established capital loss carryforward valuation allowance as a result of the 2008 first quarter Visa® IPO. |
| $10.8 million ($0.02 per common share) pretax negative impact primarily due to increases in litigation reserves on existing cases. |
Managements Discussion and Analysis | Huntington Bancshares Incorporated |
| $84.5 million ($0.35 per common share) reduction of provision for income taxes from the release of tax reserves as a result of the resolution of the federal income tax audit for 2002 and 2003, and recognition of a federal tax loss carryback. | |
| $10.0 million ($0.03 per common share) pretax contribution to the Huntington Foundation. | |
| $4.8 million ($0.01 per common share) in severance and consolidation pretax expenses. This reflected fourth quarter severance-related expenses associated with a reduction of 75 Regional Banking staff positions, as well as costs associated with the retirements of a vice chairman and an executive vice president. | |
| $3.7 million ($0.01 per common share) of Unizan pretax merger costs, primarily associated with systems conversion expenses. | |
| $3.5 million ($0.01 per common share) pretax negative impact associated with the refinancing of Federal Home Loan Bank (FHLB) funding. | |
| $3.3 million ($0.01 per common share) pretax gain on the sale of MasterCard® stock. | |
| $3.2 million ($0.01 per common share) pretax negative impact associated with the write-down of equity method investments. | |
| $2.3 million ($0.01 per common share) pretax unfavorable impact due to a cumulative adjustment to defer home equity annual fees. |
2008 | 2007 | 2006 | ||||||||||||||||||||||
(in thousands) | After-tax | EPS | After-tax | EPS | After-tax | EPS | ||||||||||||||||||
Net income GAAP
|
$ | (113,806 | ) | $ | 75,169 | $ | 461,221 | |||||||||||||||||
Earnings per share, after tax
|
$ | (0.44 | ) | $ | 0.25 | $ | 1.92 | |||||||||||||||||
Change from prior year $
|
(0.69 | ) | (1.67 | ) | 0.15 | |||||||||||||||||||
Change from prior year %
|
N.M. | % | (87.0 | )% | 8.5 | % | ||||||||||||||||||
Significant items favorable (unfavorable) impact: | Earnings(2) | EPS(3) | Earnings(2) | EPS(3) | Earnings(2) | EPS(3) | ||||||||||||||||||
Aggegate impact of Visa IPO
|
$ | 25,087 | $ | 0.04 | $ | | $ | | $ | | $ | | ||||||||||||
Visa®
anti-trust indemnification
|
16,995 | 0.03 | (24,870 | ) | (0.05 | ) | | | ||||||||||||||||
Deferred tax valuation allowance
benefit(4)
|
7,892 | 0.02 | | | | | ||||||||||||||||||
Franklin Credit relationship
|
(454,278 | ) | (0.81 | ) | (423,645 | ) | (0.91 | ) | | | ||||||||||||||
Net market-related losses
|
(215,667 | ) | (0.38 | ) | (95,427 | ) | (0.10 | ) | (62,992 | ) | (0.17 | ) | ||||||||||||
Merger/Restructuring costs
|
(21,830 | ) | (0.04 | ) | (85,084 | ) | (0.18 | ) | (3,749 | ) | (0.01 | ) | ||||||||||||
Asset impairment
|
(12,400 | ) | (0.02 | ) | | | | | ||||||||||||||||
Litigation losses
|
| | (10,767 | ) | (0.02 | ) | | | ||||||||||||||||
Reduction to federal income tax
expense(4)
|
| | | | 84,541 | 0.35 | ||||||||||||||||||
Gain on sale of
MasterCard®
stock
|
| | | | 3,341 | 0.01 | ||||||||||||||||||
Huntington Foundation contribution
|
| | | | (10,000 | ) | (0.03 | ) | ||||||||||||||||
Severance and consolidation expenses
|
| | | | (4,750 | ) | (0.01 | ) | ||||||||||||||||
FHLB refinancing
|
| | | | (3,530 | ) | (0.01 | ) | ||||||||||||||||
Accounting adjustment for certain equity investments
|
| | | | (3,240 | ) | (0.01 | ) | ||||||||||||||||
Adjustment to defer home equity annual fees
|
| | | | (2,254 | ) | (0.01 | ) |
(1) | See Significant Factors Influencing Financial Performance discussion. |
(2) | Pre-tax unless otherwise noted. |
(3) | Based upon the annual average outstanding diluted common shares. |
(4) | After-tax. |
Managements Discussion and Analysis | Huntington Bancshares Incorporated |
2008 | 2007 | |||||||||||||||||||||||
Increase (Decrease) From |
Increase (Decrease) From |
|||||||||||||||||||||||
Previous Year Due To | Previous Year Due To | |||||||||||||||||||||||
Fully-taxable equivalent
basis(2) |
Yield/ |
Yield/ |
||||||||||||||||||||||
(in millions) | Volume | Rate | Total | Volume | Rate | Total | ||||||||||||||||||
Loans and direct financing leases
|
$ | 504.7 | $ | (449.6 | ) | $ | 55.1 | $ | 519.8 | $ | 97.8 | $ | 617.6 | |||||||||||
Securities
|
17.0 | (16.2 | ) | 0.8 | (27.7 | ) | 23.2 | (4.5 | ) | |||||||||||||||
Other earning assets
|
19.1 | (18.7 | ) | 0.4 | 60.2 | 2.4 | 62.6 | |||||||||||||||||
Total interest income from earning assets
|
540.8 | (484.5 | ) | 56.3 | 552.3 | 123.4 | 675.7 | |||||||||||||||||
Deposits
|
206.8 | (301.5 | ) | (94.7) | 224.0 | 85.2 | 309.2 | |||||||||||||||||
Short-term borrowings
|
5.1 | (55.6 | ) | (50.5) | 18.3 | 2.3 | 20.6 | |||||||||||||||||
Federal Home Loan Bank advances
|
49.3 | (44.1 | ) | 5.2 | 32.2 | 10.4 | 42.6 | |||||||||||||||||
Subordinated notes and other long-term debt, including capital
securities
|
22.3 | (57.1 | ) | (34.8) | 6.6 | 11.1 | 17.7 | |||||||||||||||||
Total interest expense of interest-bearing liabilities
|
283.5 | (458.3 | ) | (174.8) | 281.1 | 109.0 | 390.1 | |||||||||||||||||
Net interest income
|
$ | 257.3 | $ | (26.2 | ) | $ | 231.1 | $ | 271.2 | $ | 14.4 | $ | 285.6 | |||||||||||
(2) | Calculated assuming a 35% tax rate. |
Managements Discussion and Analysis | Huntington Bancshares Incorporated |
Change Attributable to: | ||||||||||||||||||||||||||||
Twelve Months Ended |
||||||||||||||||||||||||||||
December 31, | Change | Non-merger-related | ||||||||||||||||||||||||||
Merger- |
||||||||||||||||||||||||||||
(in millions) | 2008 | 2007 | Amount | Percent | Related | Amount | Percent(1) | |||||||||||||||||||||
Loans/Leases
|
||||||||||||||||||||||||||||
Commercial and industrial
|
$ | 13,588 | $ | 10,636 | $ | 2,952 | 27.8 | % | $ | 2,388 | $ | 564 | 4.3 | % | ||||||||||||||
Commerical real estate
|
9,732 | 6,807 | 2,925 | 43.0 | 1,986 | 939 | 10.7 | |||||||||||||||||||||
Total commercial
|
$ | 23,320 | $ | 17,443 | $ | 5,877 | 33.7 | % | $ | 4,374 | $ | 1,503 | 6.9 | % | ||||||||||||||
Automobile loans and leases
|
4,527 | 4,118 | 409 | 9.9 | 216 | 193 | 4.5 | |||||||||||||||||||||
Home equity
|
7,404 | 6,173 | 1,231 | 19.9 | 1,193 | 38 | 0.5 | |||||||||||||||||||||
Residential mortgage
|
5,018 | 4,939 | 79 | 1.6 | 556 | (477 | ) | (8.7 | ) | |||||||||||||||||||
Other consumer
|
691 | 529 | 162 | 30.6 | 72 | 90 | 15.0 | |||||||||||||||||||||
Total consumer
|
17,640 | 15,759 | 1,881 | 11.9 | 2,037 | (156 | ) | (0.9 | ) | |||||||||||||||||||
Total loans and leases
|
$ | 40,960 | $ | 33,202 | $ | 7,758 | 23.4 | % | $ | 6,411 | $ | 1,347 | 3.4 | % | ||||||||||||||
Deposits
|
||||||||||||||||||||||||||||
Demand deposits noninterest bearing
|
$ | 5,095 | $ | 4,438 | $ | 657 | 14.8 | % | $ | 915 | $ | (258 | ) | (4.8 | )% | |||||||||||||
Demand deposits interest bearing
|
4,003 | 3,129 | 874 | 27.9 | 730 | 144 | 3.7 | |||||||||||||||||||||
Money market deposits
|
6,093 | 6,173 | (80 | ) | (1.3 | ) | 498 | (578 | ) | (8.7 | ) | |||||||||||||||||
Savings and other domestic time deposits
|
4,949 | 4,001 | 948 | 23.7 | 1,297 | (349 | ) | (6.6 | ) | |||||||||||||||||||
Core certificates of deposit
|
11,527 | 8,057 | 3,470 | 43.1 | 2,315 | 1,155 | 11.1 | |||||||||||||||||||||
Total core deposits
|
31,667 | 25,798 | 5,869 | 22.7 | 5,755 | 114 | 0.4 | |||||||||||||||||||||
Other deposits
|
6,169 | 5,268 | 901 | 17.1 | 672 | 229 | 3.9 | |||||||||||||||||||||
Total deposits
|
$ | 37,836 | $ | 31,066 | $ | 6,770 | 21.8 | % | $ | 6,427 | $ | 343 | 0.9 | % | ||||||||||||||
| $1.5 billion, or 7%, growth in average total commercial loans, with growth reflected in both the C&I and CRE portfolios. The growth in CRE loans was primarily to existing borrowers with a focus on traditional income producing property types and was not related to the single family home builder segment. The growth in C&I loans reflected a combination of draws associated with existing commitments, new loans to existing borrowers, and some originations to new high quality borrowers. |
| $0.2 billion, or 1%, decline in total average consumer loans reflecting a $0.5 billion, or 9%, decline in residential mortgages due to loan sales, as well as the continued slowdown in the housing markets. This decrease was partially offset by a $0.2 billion, or 4%, increase in average automobile loans and leases reflecting higher automobile loan originations, although automobile loan origination volumes have declined throughout 2008 due to the industry wide decline in sales. Automobile lease origination volumes have also declined throughout 2008. During the 2008 fourth quarter, we exited the automobile leasing business. |
Managements Discussion and Analysis | Huntington Bancshares Incorporated |
Twelve Months Ended |
||||||||||||||||||||||||||||
December 31, | Change | Non-merger-related | ||||||||||||||||||||||||||
Merger- |
||||||||||||||||||||||||||||
(in millions) | 2007 | 2006 | Amount | Percent | Related | Amount | Percent(1) | |||||||||||||||||||||
Loans/Leases
|
||||||||||||||||||||||||||||
Commercial and industrial
|
$ | 10,636 | $ | 7,323 | $ | 3,313 | 45.2 | % | $ | 2,388 | $ | 925 | 9.5 | % | ||||||||||||||
Commercial real estate
|
6,807 | 4,542 | 2,265 | 49.9 | 1,986 | 279 | 4.3 | |||||||||||||||||||||
Total commercial
|
17,443 | 11,865 | 5,578 | 47.0 | 4,374 | 1,204 | 7.4 | |||||||||||||||||||||
Automobile loans and leases
|
4,118 | 4,088 | 30 | 0.7 | 216 | (186 | ) | (4.3 | ) | |||||||||||||||||||
Home equity
|
6,173 | 4,970 | 1,203 | 24.2 | 1,193 | 10 | 0.2 | |||||||||||||||||||||
Residential mortgage
|
4,939 | 4,581 | 358 | 7.8 | 556 | (198 | ) | (3.9 | ) | |||||||||||||||||||
Other consumer
|
529 | 439 | 90 | 20.5 | 72 | 18 | 3.5 | |||||||||||||||||||||
Total consumer
|
15,759 | 14,078 | 1,681 | 11.9 | 2,037 | (356 | ) | (2.2 | ) | |||||||||||||||||||
Total loans and leases
|
$ | 33,202 | $ | 25,943 | $ | 7,259 | 28.0 | % | $ | 6,411 | $ | 848 | 2.6 | % | ||||||||||||||
Deposits
|
||||||||||||||||||||||||||||
Demand deposits noninterest bearing
|
$ | 4,438 | $ | 3,530 | $ | 908 | 25.7 | % | $ | 915 | $ | (7 | ) | (0.2 | )% | |||||||||||||
Demand deposits interest bearing
|
3,129 | 2,138 | 991 | 46.4 | 730 | 261 | 9.1 | |||||||||||||||||||||
Money market deposits
|
6,173 | 5,604 | 569 | 10.2 | 498 | 71 | 1.2 | |||||||||||||||||||||
Savings and other domestic time deposits
|
4,001 | 3,060 | 941 | 30.8 | 1,297 | (356 | ) | (8.2 | ) | |||||||||||||||||||
Core certificates of deposit
|
8,057 | 5,050 | 3,007 | 59.5 | 2,315 | 692 | 9.4 | |||||||||||||||||||||
Total core deposits
|
25,798 | 19,382 | 6,416 | 33.1 | 5,755 | 661 | 2.6 | |||||||||||||||||||||
Other deposits
|
5,268 | 4,802 | 466 | 9.7 | 672 | (206 | ) | (3.8 | ) | |||||||||||||||||||
Total deposits
|
$ | 31,066 | $ | 24,184 | $ | 6,882 | 28.5 | % | $ | 6,427 | $ | 455 | 1.5 | % | ||||||||||||||
(1) | Calculated as non-merger related / (prior period + merger-related) |
Managements Discussion and Analysis | Huntington Bancshares Incorporated |
Average Balances | ||||||||||||||||||||||||||||||||||||
Change from |
||||||||||||||||||||||||||||||||||||
Change from 2007 | 2006 | |||||||||||||||||||||||||||||||||||
Fully-taxable equivalent
basis(1) |
||||||||||||||||||||||||||||||||||||
(in millions) | 2008 | Amount | Percent | 2007 | Amount | Percent | 2006 | 2005 | 2004 | |||||||||||||||||||||||||||
Assets
|
||||||||||||||||||||||||||||||||||||
Interest bearing deposits in banks
|
$ | 303 | $ | 43 | 16.5 | % | $ | 260 | $ | 207 | N.M. | % | $ | 53 | $ | 53 | $ | 66 | ||||||||||||||||||
Trading account securities
|
1,090 | 448 | 69.8 | 642 | 550 | N.M. | 92 | 207 | 105 | |||||||||||||||||||||||||||
Federal funds sold and securities purchased under resale
agreement
|
435 | (156 | ) | (26.4 | ) | 591 | 270 | 84.1 | 321 | 262 | 319 | |||||||||||||||||||||||||
Loans held for sale
|
416 | 54 | 14.9 | 362 | 87 | 31.6 | 275 | 318 | 243 | |||||||||||||||||||||||||||
Investment securities:
|
||||||||||||||||||||||||||||||||||||
Taxable
|
3,878 | 225 | 6.2 | 3,653 | (544 | ) | (13.0 | ) | 4,197 | 3,683 | 4,425 | |||||||||||||||||||||||||
Tax-exempt
|
705 | 59 | 9.1 | 646 | 76 | 13.3 | 570 | 475 | 412 | |||||||||||||||||||||||||||
Total investment securities
|
4,583 | 284 | 6.6 | 4,299 | (468 | ) | (9.8 | ) | 4,767 | 4,158 | 4,837 | |||||||||||||||||||||||||
Loans and
leases:(3)
Commercial: |
||||||||||||||||||||||||||||||||||||
Commercial and industrial
|
13,588 | 2,953 | 27.8 | 10,636 | 3,308 | 45.1 | 7,327 | 6,171 | 5,466 | |||||||||||||||||||||||||||
Construction
|
2,061 | 527 | 34.4 | 1,533 | 275 | 21.8 | 1,259 | 1,738 | 1,468 | |||||||||||||||||||||||||||
Commercial
|
7,671 | 2,397 | 45.4 | 5,274 | 1,995 | 60.8 | 3,279 | 2,718 | 2,867 | |||||||||||||||||||||||||||
Commercial real estate
|
9,732 | 2,924 | 42.9 | 6,807 | 2,270 | 50.0 | 4,538 | 4,456 | 4,335 | |||||||||||||||||||||||||||
Total commercial
|
23,320 | 5,877 | 33.7 | 17,443 | 5,578 | 47.0 | 11,865 | 10,627 | 9,801 | |||||||||||||||||||||||||||
Consumer:
|
||||||||||||||||||||||||||||||||||||
Automobile loans
|
3,676 | 1,043 | 39.6 | 2,633 | 576 | 28.0 | 2,057 | 2,043 | 2,285 | |||||||||||||||||||||||||||
Automobile leases
|
851 | (634 | ) | (42.7 | ) | 1,485 | (546 | ) | (26.9 | ) | 2,031 | 2,422 | 2,192 | |||||||||||||||||||||||
Automobile loans and leases
|
4,527 | 409 | 9.9 | 4,118 | 30 | 0.7 | 4,088 | 4,465 | 4,477 | |||||||||||||||||||||||||||
Home equity
|
7,404 | 1,231 | 19.9 | 6,173 | 1,203 | 24.2 | 4,970 | 4,752 | 4,244 | |||||||||||||||||||||||||||
Residential mortgage
|
5,018 | 79 | 1.6 | 4,939 | 358 | 7.8 | 4,581 | 4,081 | 3,212 | |||||||||||||||||||||||||||
Other loans
|
691 | 162 | 30.6 | 529 | 90 | 20.5 | 439 | 385 | 393 | |||||||||||||||||||||||||||
Total consumer
|
17,640 | 1,881 | 11.9 | 15,759 | 1,681 | 11.9 | 14,078 | 13,683 | 12,326 | |||||||||||||||||||||||||||
Total loans and leases
|
40,960 | 7,758 | 23.4 | 33,202 | 7,259 | 28.0 | 25,943 | 24,310 | 22,127 | |||||||||||||||||||||||||||
Allowance for loan and lease losses
|
(695 | ) | (313 | ) | 81.9 | (382 | ) | (95 | ) | 33.1 | (287 | ) | (268 | ) | (298 | ) | ||||||||||||||||||||
Net loans and leases
|
40,265 | 7,445 | 22.7 | 32,820 | 7,164 | 27.9 | 25,656 | 24,042 | 21,829 | |||||||||||||||||||||||||||
Total earning assets
|
47,787 | 8,431 | 21.4 | 39,356 | 7,905 | 25.1 | 31,451 | 29,308 | 27,697 | |||||||||||||||||||||||||||
Automobile operating lease assets
|
180 | 163 | N.M. | 17 | (76 | ) | (81.7 | ) | 93 | 351 | 891 | |||||||||||||||||||||||||
Cash and due from banks
|
958 | 28 | 3.0 | 930 | 105 | 12.7 | 825 | 845 | 843 | |||||||||||||||||||||||||||
Intangible assets
|
3,446 | 1,427 | 70.7 | 2,019 | 1,452 | N.M. | 567 | 218 | 216 | |||||||||||||||||||||||||||
All other assets
|
3,245 | 473 | 17.1 | 2,772 | 309 | 12.5 | 2,462 | 2,185 | 2,084 | |||||||||||||||||||||||||||
Total Assets
|
$ | 54,921 | $ | 10,209 | 22.8 | % | $ | 44,712 | $ | 9,600 | 27.3 | % | $ | 35,111 | $ | 32,639 | $ | 31,433 | ||||||||||||||||||
Liabilities and Shareholders Equity
|
||||||||||||||||||||||||||||||||||||
Deposits:
|
||||||||||||||||||||||||||||||||||||
Demand deposits noninterest bearing
|
$ | 5,095 | $ | 657 | 14.8 | % | $ | 4,438 | $ | 908 | 25.7 | % | $ | 3,530 | $ | 3,379 | $ | 3,230 | ||||||||||||||||||
Demand deposits interest bearing
|
4,003 | 874 | 27.9 | 3,129 | 991 | 46.4 | 2,138 | 1,920 | 1,953 | |||||||||||||||||||||||||||
Money market deposits
|
6,093 | (80 | ) | (1.3 | ) | 6,173 | 569 | 10.2 | 5,604 | 5,738 | 5,254 | |||||||||||||||||||||||||
Savings and other domestic time deposits
|
4,949 | 948 | 23.7 | 4,001 | 941 | 30.8 | 3,060 | 3,206 | 3,434 | |||||||||||||||||||||||||||
Core certificates of deposit
|
11,527 | 3,470 | 43.1 | 8,057 | 3,007 | 59.5 | 5,050 | 3,334 | 2,689 | |||||||||||||||||||||||||||
Total core deposits
|
31,667 | 5,869 | 22.7 | 25,798 | 6,416 | 33.1 | 19,382 | 17,577 | 16,560 | |||||||||||||||||||||||||||
Other domestic time deposits of $100,000 or more
|
1,951 | 563 | 40.6 | 1,388 | 343 | 32.8 | 1,045 | 859 | 590 | |||||||||||||||||||||||||||
Brokered time deposits and negotiable CDs
|
3,243 | 4 | 0.1 | 3,239 | (3 | ) | (0.1 | ) | 3,242 | 3,119 | 1,837 | |||||||||||||||||||||||||
Deposits in foreign offices
|
975 | 334 | 52.1 | 641 | 126 | 24.5 | 515 | 457 | 508 | |||||||||||||||||||||||||||
Total deposits
|
37,836 | 6,770 | 21.8 | 31,066 | 6,882 | 28.5 | 24,184 | 22,012 | 19,495 | |||||||||||||||||||||||||||
Short-term borrowings
|
2,374 | 129 | 5.7 | 2,245 | 445 | 24.7 | 1,800 | 1,379 | 1,410 | |||||||||||||||||||||||||||
Federal Home Loan Bank advances
|
3,281 | 1,254 | 61.9 | 2,027 | 658 | 48.1 | 1,369 | 1,105 | 1,271 | |||||||||||||||||||||||||||
Subordinated notes and other long-term debt
|
4,094 | 406 | 11.0 | 3,688 | 114 | 3.2 | 3,574 | 4,064 | 5,379 | |||||||||||||||||||||||||||
Total interest bearing liabilities
|
42,490 | 7,902 | 22.8 | 34,588 | 7,191 | 26.2 | 27,397 | 25,181 | 24,325 | |||||||||||||||||||||||||||
All other liabilities
|
942 | (112 | ) | (10.6 | ) | 1,054 | (185 | ) | (14.9 | ) | 1,239 | 1,496 | 1,504 | |||||||||||||||||||||||
Shareholders equity
|
6,394 | 1,762 | 38.0 | 4,632 | 1,686 | 57.2 | 2,945 | 2,583 | 2,374 | |||||||||||||||||||||||||||
Total Liabilities and Shareholders Equity
|
$ | 54,921 | $ | 10,209 | 22.8 | % | $ | 44,712 | $ | 9,600 | 27.3 | % | $ | 35,111 | $ | 32,639 | $ | 31,433 | ||||||||||||||||||
Net interest income
|
||||||||||||||||||||||||||||||||||||
Net interest rate spread
|
||||||||||||||||||||||||||||||||||||
Impact of noninterest bearing funds on margin
|
||||||||||||||||||||||||||||||||||||
Net Interest Margin
|
||||||||||||||||||||||||||||||||||||
(1) | Fully-taxable equivalent (FTE) yields are calculated assuming a 35% tax rate. |
(2) | Loan and lease and deposit average rates include impact of applicable derivatives and non-deferrable fees. |
(3) | For purposes of this analysis, non-accrual loans are reflected in the average balances of loans. |
Managements Discussion and Analysis | Huntington Bancshares Incorporated |
Interest Income/Expense | Average Rate(2) | |||||||||||||||||||||||||||||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | 2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||||||||||||||||
$ | 7.7 | $ | 12.5 | $ | 3.2 | $ | 1.1 | $ | 0.7 | 2.53 | % | 4.80 | % | 6.00 | % | 2.16 | % | 1.05 | % | |||||||||||||||||||
57.5 | 37.5 | 3.8 | 8.5 | 4.4 | 5.28 | 5.84 | 4.19 | 4.08 | 4.15 | |||||||||||||||||||||||||||||
10.7 | 29.9 | 16.1 | 6.0 | 5.5 | 2.46 | 5.05 | 5.00 | 2.27 | 1.73 | |||||||||||||||||||||||||||||
25.0 | 20.6 | 16.8 | 17.9 | 13.0 | 6.01 | 5.69 | 6.10 | 5.64 | 5.35 | |||||||||||||||||||||||||||||
217.9 | 221.9 | 229.4 | 158.7 | 171.7 | 5.62 | 6.07 | 5.47 | 4.31 | 3.88 | |||||||||||||||||||||||||||||
48.2 | 43.4 | 38.5 | 31.9 | 28.8 | 6.83 | 6.72 | 6.75 | 6.71 | 6.98 | |||||||||||||||||||||||||||||
266.1 | 265.3 | 267.9 | 190.6 | 200.5 | 5.81 | 6.17 | 5.62 | 4.58 | 4.14 | |||||||||||||||||||||||||||||
770.2 | 791.0 | 536.3 | 362.9 | 250.6 | 5.67 | 7.44 | 7.32 | 5.88 | 4.58 | |||||||||||||||||||||||||||||
104.2 | 119.4 | 101.5 | 111.7 | 66.9 | 5.05 | 7.80 | 8.07 | 6.42 | 4.55 | |||||||||||||||||||||||||||||
430.1 | 395.8 | 244.3 | 162.9 | 141.5 | 5.61 | 7.50 | 7.45 | 5.99 | 4.95 | |||||||||||||||||||||||||||||
534.3 | 515.2 | 345.8 | 274.6 | 208.4 | 5.49 | 7.57 | 7.61 | 6.16 | 4.81 | |||||||||||||||||||||||||||||
1,304.5 | 1,306.2 | 882.1 | 637.5 | 459.0 | 5.59 | 7.49 | 7.43 | 6.00 | 4.68 | |||||||||||||||||||||||||||||
263.4 | 188.7 | 135.1 | 133.3 | 165.1 | 7.17 | 7.17 | 6.57 | 6.52 | 7.22 | |||||||||||||||||||||||||||||
48.1 | 80.3 | 102.9 | 119.6 | 109.6 | 5.65 | 5.41 | 5.07 | 4.94 | 5.00 | |||||||||||||||||||||||||||||
311.5 | 269.0 | 238.0 | 252.9 | 274.7 | 6.88 | 6.53 | 5.82 | 5.66 | 6.14 | |||||||||||||||||||||||||||||
475.2 | 479.8 | 369.7 | 288.6 | 208.6 | 6.42 | 7.77 | 7.44 | 6.07 | 4.92 | |||||||||||||||||||||||||||||
292.4 | 285.9 | 249.1 | 212.9 | 163.0 | 5.83 | 5.79 | 5.44 | 5.22 | 5.07 | |||||||||||||||||||||||||||||
68.0 | 55.5 | 39.8 | 39.2 | 29.5 | 9.85 | 10.51 | 9.07 | 10.23 | 7.51 | |||||||||||||||||||||||||||||
1,147.1 | 1,090.2 | 896.6 | 793.6 | 675.8 | 6.50 | 6.92 | 6.37 | 5.80 | 5.48 | |||||||||||||||||||||||||||||
2,451.6 | 2,396.4 | 1,778.7 | 1,431.1 | 1,134.8 | 5.99 | 7.22 | 6.86 | 5.89 | 5.13 | |||||||||||||||||||||||||||||
2,818.6 | 2,762.2 | 2,086.5 | 1,655.2 | 1,358.9 | 5.90 | 7.02 | 6.63 | 5.65 | 4.89 | |||||||||||||||||||||||||||||
| | | | | | | | | | |||||||||||||||||||||||||||||
22.2 | 40.3 | 19.3 | 10.6 | 8.3 | 0.55 | 1.29 | 0.90 | 0.55 | 0.42 | |||||||||||||||||||||||||||||
117.5 | 232.5 | 193.1 | 124.9 | 65.8 | 1.93 | 3.77 | 3.45 | 2.18 | 1.25 | |||||||||||||||||||||||||||||
92.9 | 96.1 | 53.5 | 45.2 | 44.2 | 1.88 | 2.40 | 1.75 | 1.41 | 1.29 | |||||||||||||||||||||||||||||
491.6 | 391.1 | 214.8 | 118.7 | 90.4 | 4.27 | 4.85 | 4.25 | 3.56 | 3.36 | |||||||||||||||||||||||||||||
724.2 | 760.0 | 480.7 | 299.4 | 208.7 | 2.73 | 3.55 | 3.02 | 2.10 | 1.56 | |||||||||||||||||||||||||||||
73.6 | 70.5 | 52.3 | 28.5 | 11.2 | 3.76 | 5.08 | 5.00 | 3.32 | 1.88 | |||||||||||||||||||||||||||||
118.8 | 175.4 | 169.1 | 109.4 | 33.1 | 3.66 | 5.41 | 5.22 | 3.51 | 1.80 | |||||||||||||||||||||||||||||
15.2 | 20.5 | 15.1 | 9.6 | 4.1 | 1.56 | 3.19 | 2.93 | 2.10 | 0.82 | |||||||||||||||||||||||||||||
931.8 | 1,026.4 | 717.2 | 446.9 | 257.1 | 2.85 | 3.85 | 3.47 | 2.40 | 1.58 | |||||||||||||||||||||||||||||
42.3 | 92.8 | 72.2 | 34.3 | 13.0 | 1.78 | 4.13 | 4.01 | 2.49 | 0.93 | |||||||||||||||||||||||||||||
107.8 | 102.6 | 60.0 | 34.7 | 33.3 | 3.29 | 5.06 | 4.38 | 3.13 | 2.62 | |||||||||||||||||||||||||||||
184.8 | 219.6 | 201.9 | 163.5 | 132.5 | 4.51 | 5.96 | 5.65 | 4.02 | 2.46 | |||||||||||||||||||||||||||||
1,266.7 | 1,441.4 | 1,051.3 | 679.4 | 435.9 | 2.98 | 4.17 | 3.84 | 2.70 | 1.79 | |||||||||||||||||||||||||||||
$ | 1,551.9 | $ | 1,320.8 | $ | 1,035.2 | $ | 975.8 | $ | 923.0 | |||||||||||||||||||||||||||||
2.92 | 2.85 | 2.79 | 2.95 | 3.10 | ||||||||||||||||||||||||||||||||||
0.33 | 0.51 | 0.50 | 0.38 | 0.23 | ||||||||||||||||||||||||||||||||||
3.25 | % | 3.36 | % | 3.29 | % | 3.33 | % | 3.33 | % | |||||||||||||||||||||||||||||
Managements Discussion and Analysis | Huntington Bancshares Incorporated |
Twelve Months Ended December 31, | ||||||||||||||||||||||||||||
Change from 2007 | Change from 2006 | |||||||||||||||||||||||||||
(in thousands) | 2008 | Amount | Percent | 2007 | Amount | Percent | 2006 | |||||||||||||||||||||
Service charges on deposit accounts
|
$ | 308,053 | $ | 53,860 | 21.2 | % | $ | 254,193 | $ | 68,480 | 36.9 | % | $ | 185,713 | ||||||||||||||
Brokerage and insurance income
|
137,796 | 45,421 | 49.2 | 92,375 | 33,540 | 57.0 | 58,835 | |||||||||||||||||||||
Trust services
|
125,980 | 4,562 | 3.8 | 121,418 | 31,463 | 35.0 | 89,955 | |||||||||||||||||||||
Electronic banking
|
90,267 | 19,200 | 27.0 | 71,067 | 19,713 | 38.4 | 51,354 | |||||||||||||||||||||
Bank owned life insurance income
|
54,776 | 4,921 | 9.9 | 49,855 | 6,080 | 13.9 | 43,775 | |||||||||||||||||||||
Mortgage banking
|
8,994 | (20,810 | ) | (69.8 | ) | 29,804 | (11,687 | ) | (28.2 | ) | 41,491 | |||||||||||||||||
Securities losses
|
(197,370 | ) | (167,632 | ) | N.M. | (29,738 | ) | 43,453 | (59.4 | ) | (73,191 | ) | ||||||||||||||||
Other income
|
138,791 | 58,972 | 73.9 | 79,819 | (40,203 | ) | (33.5 | ) | 120,022 | |||||||||||||||||||
Sub-total
|
667,287 | (1,506 | ) | (0.2 | ) | 668,793 | 150,839 | 29.1 | 517,954 | |||||||||||||||||||
Automobile operating lease income
|
39,851 | 32,041 | N.M. | 7,810 | (35,305 | ) | (81.9 | ) | 43,115 | |||||||||||||||||||
Total noninterest income
|
$ | 707,138 | $ | 30,535 | 4.5 | % | $ | 676,603 | $ | 115,534 | 20.6 | % | $ | 561,069 | ||||||||||||||
Managements Discussion and Analysis | Huntington Bancshares Incorporated |
Twelve Months Ended December 31, | ||||||||||||||||||||||||||||
Change from 2007 | Change from 2006 | |||||||||||||||||||||||||||
(in thousands) | 2008 | Amount | Percent | 2007 | Amount | Percent | 2006 | |||||||||||||||||||||
Mortgage Banking Income
|
||||||||||||||||||||||||||||
Origination and secondary marketing
|
$ | 37,257 | $ | 11,292 | 43.5 | % | $ | 25,965 | $ | 7,748 | 42.5 | % | $ | 18,217 | ||||||||||||||
Servicing fees
|
45,558 | 9,546 | 26.5 | 36,012 | 11,353 | 46.0 | 24,659 | |||||||||||||||||||||
Amortization of capitalized
servicing(1)
|
(26,634 | ) | (6,047 | ) | 29.4 | (20,587 | ) | (5,443 | ) | 35.9 | (15,144 | ) | ||||||||||||||||
Other mortgage banking income
|
16,768 | 3,570 | 27.0 | 13,198 | 3,025 | 29.7 | 10,173 | |||||||||||||||||||||
Sub-total
|
72,949 | 18,361 | 33.6 | 54,588 | 16,683 | 44.0 | 37,905 | |||||||||||||||||||||
MSR valuation
adjustment(1)
|
(52,668 | ) | (36,537 | ) | N.M. | (16,131 | ) | (21,002 | ) | N.M. | 4,871 | |||||||||||||||||
Net trading losses related to MSR hedging
|
(11,287 | ) | (2,634 | ) | 30.4 | (8,653 | ) | (7,368 | ) | N.M. | (1,285 | ) | ||||||||||||||||
Total mortgage banking income
|
$ | 8,994 | $ | (20,810 | ) | (69.8 | )% | $ | 29,804 | $ | (11,687 | ) | (28.2 | )% | $ | 41,491 | ||||||||||||
Average trading account securities used to hedge MSRs (in
millions)
|
$ | 1,031 | $ | 437 | 73.6 | % | $ | 594 | $ | 568 | N.M. | % | $ | 26 | ||||||||||||||
Capitalized mortgage servicing
rights(2)
|
167,438 | (40,456 | ) | (19.5 | ) | 207,894 | 76,790 | 58.6 | 131,104 | |||||||||||||||||||
Total mortgages serviced for others (in
millions)(2)
|
15,754 | 666 | 4.4 | 15,088 | 6,836 | 82.8 | 8,252 | |||||||||||||||||||||
MSR % of investor servicing portfolio
|
1.06 | % | (0.32 | ) | (23.2 | )% | 1.38% | (0.21 | ) | (13.2 | )% | 1.59 | % | |||||||||||||||
Net Impact of MSR Hedging
|
||||||||||||||||||||||||||||
MSR valuation
adjustment(1)
|
$ | (52,668 | ) | $ | (36,537 | ) | N.M. | % | $ | (16,131 | ) | $ | (21,002 | ) | N.M. | % | $ | 4,871 | ||||||||||
Net trading losses related to MSR hedging
|
(11,287 | ) | (2,634 | ) | 30.4 | (8,653 | ) | (7,368 | ) | N.M. | (1,285 | ) | ||||||||||||||||
Net interest income related to MSR hedging
|
33,139 | 27,342 | N.M. | 5,797 | 5,761 | N.M. | 36 | |||||||||||||||||||||
Net impact of MSR hedging
|
$ | (30,816 | ) | $ | (11,829 | ) | 62.3 | % | $ | (18,987 | ) | $ | (22,609 | ) | N.M. | % | $ | 3,622 | ||||||||||
(1) | The change in fair value for the period represents the MSR valuation adjustment, net of amortization of capitalized servicing. |
(2) | At period end. |
Change attributable to: | ||||||||||||||||||||||||||||||||
Twelve Months Ended |
||||||||||||||||||||||||||||||||
December 31, | Change | Other | ||||||||||||||||||||||||||||||
Merger- |
Significant |
|||||||||||||||||||||||||||||||
(in thousands) | 2008 | 2007 | Amount | Percent | Related | Items | Amount | Percent(1) | ||||||||||||||||||||||||
Service charges on deposit accounts
|
$ | 308,053 | $ | 254,193 | $ | 53,860 | 21.2 | % | $ | 48,220 | $ | | $ | 5,640 | 1.9 | % | ||||||||||||||||
Brokerage and insurance income
|
137,796 | 92,375 | 45,421 | 49.2 | 34,122 | | 11,299 | 8.9 | ||||||||||||||||||||||||
Trust services
|
125,980 | 121,418 | 4,562 | 3.8 | 14,018 | | (9,456 | ) | (7.0 | ) | ||||||||||||||||||||||
Electronic banking
|
90,267 | 71,067 | 19,200 | 27.0 | 11,600 | | 7,600 | 9.2 | ||||||||||||||||||||||||
Bank owned life insurance income
|
54,776 | 49,855 | 4,921 | 9.9 | 3,614 | | 1,307 | 2.4 | ||||||||||||||||||||||||
Mortgage banking income
|
8,994 | 29,804 | (20,810 | ) | (69.8 | ) | 12,512 | (37,102 | )(2) | 3,780 | 8.9 | |||||||||||||||||||||
Securities losses
|
(197,370 | ) | (29,738 | ) | (167,632 | ) | N.M. | 566 | (168,198 | )(3) | | | ||||||||||||||||||||
Other income
|
138,791 | 79,819 | 58,972 | 73.9 | 12,780 | 52,065 | (4) | (5,873 | ) | (6.3 | ) | |||||||||||||||||||||
Sub-total
|
667,287 | 668,793 | (1,506 | ) | (0.2 | ) | 137,432 | (153,235 | ) | 14,297 | 1.8 | |||||||||||||||||||||
Automobile operating lease income
|
39,851 | 7,810 | 32,041 | N.M. | | | 32,041 | N.M. | ||||||||||||||||||||||||
Total noninterest income
|
$ | 707,138 | $ | 676,603 | $ | 30,535 | 4.5 | % | $ | 137,432 | $ | (153,235 | ) | $ | 46,338 | 5.7 | % | |||||||||||||||
(1) | Calculated as other / (prior period + merger-related). |
(2) | Refer to Significant Items 4 and 5 of the Significant Items discussion. |
(3) | Refer to Significant Item 5 of the Significant Items discussion. |
(4) | Refer to Significant Items 2, 3, 5 and 6 of the Significant Items discussion. |
Managements Discussion and Analysis | Huntington Bancshares Incorporated |
| $32.0 million increase in automobile operating lease income as all leases originated since the 2007 fourth quarter were recorded as operating leases. During the 2008 fourth quarter, we exited the automobile leasing business. | |
| $11.3 million, or 9%, increase in brokerage and insurance income reflecting growth in annuity sales and the 2007 fourth quarter acquisition of an insurance company. | |
| $7.6 million, or 9%, increase in electronic banking income reflecting increased debit card transaction volumes. |
| $9.5 million, or 7%, decline in trust services income reflecting the impact of lower market values on asset management revenues. | |
| $5.9 million, or 6%, decline in other noninterest income, primarily reflecting lower derivatives revenue. |
Change attributable to: | ||||||||||||||||||||||||||||||||
Twelve Months Ended |
||||||||||||||||||||||||||||||||
December 31, | Change | Other | ||||||||||||||||||||||||||||||
Merger- |
Significant |
|||||||||||||||||||||||||||||||
(in thousands) | 2007 | 2006 | Amount | Percent | Related | Items | Amount | Percent(1) | ||||||||||||||||||||||||
Service charges on deposit accounts
|
$ | 254,193 | $ | 185,713 | $ | 68,480 | 36.9 | % | $ | 48,220 | $ | | $ | 20,260 | 8.7 | % | ||||||||||||||||
Trust services
|
121,418 | 89,955 | 31,463 | 35.0 | 14,018 | | 17,445 | 16.8 | ||||||||||||||||||||||||
Brokerage and insurance income
|
92,375 | 58,835 | 33,540 | 57.0 | 34,122 | | (582 | ) | (0.6 | ) | ||||||||||||||||||||||
Electronic banking
|
71,067 | 51,354 | 19,713 | 38.4 | 11,600 | | 8,113 | 12.9 | ||||||||||||||||||||||||
Bank owned life insurance income
|
49,855 | 43,775 | 6,080 | 13.9 | 3,614 | | 2,466 | 5.2 | ||||||||||||||||||||||||
Mortgage banking income
|
29,804 | 41,491 | (11,687 | ) | (28.2 | ) | 12,512 | (27,511 | )(2) | 3,312 | 6.1 | |||||||||||||||||||||
Securities losses
|
(29,738 | ) | (73,191 | ) | 43,453 | (59.4 | ) | 566 | 42,887 | (3) | | | ||||||||||||||||||||
Other income
|
79,819 | 120,022 | (40,203 | ) | (33.5 | ) | 12,780 | (58,547 | )(4) | 5,564 | 4.2 | |||||||||||||||||||||
Sub-total
|
668,793 | 517,954 | 150,839 | 29.1 | 137,432 | (43,171 | ) | 56,578 | 8.6 | |||||||||||||||||||||||
Automobile operating lease income
|
7,810 | 43,115 | (35,305 | ) | (81.9 | ) | | | (35,305 | ) | (81.9 | ) | ||||||||||||||||||||
Total noninterest income
|
$ | 676,603 | $ | 561,069 | $ | 115,534 | 20.6 | % | $ | 137,432 | $ | (43,171 | ) | $ | 21,273 | 3.0 | % | |||||||||||||||
(1) | Calculated as other / (prior period + merger-related). |
(2) | Refer to Significant Items 4 and 5 of the Significant Items discussion. |
(3) | Refer to Significant Item 5 of the Signficant Items discussion. |
(4) | Refer to Significant Items 5 and 6 of the Signficant Items discussion. |
| $20.3 million, or 9%, increase in service charges on deposit accounts, primarily reflecting higher personal and commercial service charge income. | |
| $17.4 million, or 17%, increase in trust services income. This increase reflected: (a) $9.7 million of revenues associated with the acquisition of Unified Fund Services, and (b) $4.8 million increase in Huntington Fund fees due to growth in Huntington Funds managed assets. | |
| $8.1 million, or 13%, increase in electronic banking income primarily reflecting increased debit card fees due to higher volume. | |
| $5.6 million, or 4%, increase in other income. This increase primarily reflected higher derivatives revenue. | |
| $4.2 million, or 8%, increase in mortgage banking income primarily reflecting increased fees due to higher origination volumes. |
| $35.3 million, or 82%, decline in automobile operating lease income. |
Managements Discussion and Analysis | Huntington Bancshares Incorporated |
Twelve Months Ended December 31, | ||||||||||||||||||||||||||||
Change from 2007 | Change from 2006 | |||||||||||||||||||||||||||
(in thousands) | 2008 | Amount | Percent | 2007 | Amount | Percent | 2006 | |||||||||||||||||||||
Salaries
|
$ | 634,881 | $ | 77,627 | 13.9 | % | $ | 557,254 | $ | 131,597 | 30.9 | % | $ | 425,657 | ||||||||||||||
Benefits
|
148,665 | 19,091 | 14.7 | 129,574 | 14,003 | 12.1 | 115,571 | |||||||||||||||||||||
Personnel costs
|
783,546 | 96,718 | 14.1 | 686,828 | 145,600 | 26.9 | 541,228 | |||||||||||||||||||||
Outside data processing and other services
|
128,163 | 918 | 0.7 | 127,245 | 48,466 | 61.5 | 78,779 | |||||||||||||||||||||
Net occupancy
|
108,428 | 9,055 | 9.1 | 99,373 | 28,092 | 39.4 | 71,281 | |||||||||||||||||||||
Equipment
|
93,965 | 12,483 | 15.3 | 81,482 | 11,570 | 16.5 | 69,912 | |||||||||||||||||||||
Amortization of intangibles
|
76,894 | 31,743 | 70.3 | 45,151 | 35,189 | N.M. | 9,962 | |||||||||||||||||||||
Professional services
|
53,667 | 13,347 | 33.1 | 40,320 | 13,267 | 49.0 | 27,053 | |||||||||||||||||||||
Marketing
|
32,664 | (13,379 | ) | (29.1 | ) | 46,043 | 14,315 | 45.1 | 31,728 | |||||||||||||||||||
Telecommunications
|
25,008 | 506 | 2.1 | 24,502 | 5,250 | 27.3 | 19,252 | |||||||||||||||||||||
Printing and supplies
|
18,870 | 619 | 3.4 | 18,251 | 4,387 | 31.6 | 13,864 | |||||||||||||||||||||
Other
|
124,887 | (12,601 | ) | (9.2 | ) | 137,488 | 30,839 | 28.9 | 106,649 | |||||||||||||||||||
Sub-total
|
1,446,092 | 139,409 | 10.7 | 1,306,683 | 336,975 | 34.8 | 969,708 | |||||||||||||||||||||
Automobile operating lease expense
|
31,282 | 26,121 | N.M. | 5,161 | (26,125 | ) | (83.5 | ) | 31,286 | |||||||||||||||||||
Total noninterest expense
|
$ | 1,477,374 | $ | 165,530 | 12.6 | % | $ | 1,311,844 | $ | 310,850 | 31.1 | % | $ | 1,000,994 | ||||||||||||||
Change attributable to: | ||||||||||||||||||||||||||||||||||||
Twelve Months Ended |
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December 31, | Change | Other | ||||||||||||||||||||||||||||||||||
Merger- |
Restructuring/ |
Significant |
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(in thousands) | 2008 | 2007 | Amount | Percent | Related | Merger Costs | Items | Amount | Percent(1) | |||||||||||||||||||||||||||
Personnel costs
|
$ | 783,546 | $ | 686,828 | $ | 96,718 | 14.1 | % | $ | 136,500 | $ | (17,633 | ) | $ | | $ | (22,149 | ) | (2.7 | )% | ||||||||||||||||
Outside data processing and other services
|
128,163 | 127,245 | 918 | 0.7 | 24,524 | (16,017 | ) | | (7,589 | ) | (5.6 | ) | ||||||||||||||||||||||||
Net occupancy
|
108,428 | 99,373 | 9,055 | 9.1 | 20,368 | (6,487 | ) | 2,500 | (2) | (7,326 | ) | (6.5 | ) | |||||||||||||||||||||||
Equipment
|
93,965 | 81,482 | 12,483 | 15.3 | 9,598 | 942 | | 1,943 | 2.1 | |||||||||||||||||||||||||||
Amortization of intangibles
|
76,894 | 45,151 | 31,743 | 70.3 | 32,962 | | | (1,219 | ) | (1.6 | ) | |||||||||||||||||||||||||
Professional services
|
53,667 | 40,320 | 13,347 | 33.1 | 5,414 | (6,399 | ) | | 14,332 | 36.4 | ||||||||||||||||||||||||||
Marketing
|
32,664 | 46,043 | (13,379 | ) | (29.1 | ) | 8,722 | (13,410 | ) | | (8,691 | ) | (21.0 | ) | ||||||||||||||||||||||
Telecommunications
|
25,008 | 24,502 | 506 | 2.1 | 4,448 | (550 | ) | | (3,392 | ) | (11.9 | ) | ||||||||||||||||||||||||
Printing and supplies
|
18,870 | 18,251 | 619 | 3.4 | 2,748 | (1,433 | ) | | (696 | ) | (3.6 | ) | ||||||||||||||||||||||||
Other expense
|
124,887 | 137,488 | (12,601 | ) | (9.2 | ) | 26,096 | (2,267 | ) | (64,863 | )(3) | 28,433 | 17.6 | |||||||||||||||||||||||
Sub-total
|
1,446,092 | 1,306,683 | 139,409 | 10.7 | 271,380 | (63,254 | ) | (62,363 | ) | (6,354 | ) | (0.4 | ) | |||||||||||||||||||||||
Automobile operating lease expense
|
31,282 | 5,161 | 26,121 | N.M. | | | | 26,121 | N.M. | |||||||||||||||||||||||||||
Total noninterest expense
|
$ | 1,477,374 | $ | 1,311,844 | $ | 165,530 | 12.6 | % | $ | 271,380 | $ | (63,254 | ) | $ | (62,363 | ) | $ | 19,767 | 1.3 | % | ||||||||||||||||
(1) | Calculated as other / (prior period + merger-related + restructuring/merger costs). |
(2) | Refer to Significant Item 6 of the Significant Items discussion. |
(3) | Refer to Significant Items 3, 5, and 6 of the Significant Items discussion. |
| $28.4 million, or 18%, increase in other expense primarily reflecting higher Federal Deposit Insurance Corporation (FDIC) insurance expense (discussed below) and OREO losses. | |
| $26.1 million increase in automobile operating lease expense as all leases originated since the 2007 fourth quarter were recorded as operating leases. During the 2008 fourth quarter, we exited the automobile leasing business. |
Managements Discussion and Analysis | Huntington Bancshares Incorporated |
| $14.3 million, or 36%, increase in professional services, reflecting increased legal and collection costs. We expect that collection costs will remain at higher levels throughout 2009. |
| $22.1 million, or 3%, decline in personnel expense reflecting the benefit of merger and restructuring efficiencies. | |
| $8.7 million, or 21%, decline in marketing expense. | |
| $7.6 million, or 6%, decline in outside data processing and other services reflecting merger efficiencies. | |
| $7.3 million, or 6%, decline in net occupancy expense, reflecting merger efficiencies. |
Change Attributable to: | ||||||||||||||||||||||||||||||||||||
Twelve Months Ended |
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December 31, | Change | Other | ||||||||||||||||||||||||||||||||||
Merger- |
Restructuring/ |
Significant |
||||||||||||||||||||||||||||||||||
(in thousands) | 2007 | 2006 | Amount | Percent | Related | Merger Costs | Items | Amount | Percent(1) | |||||||||||||||||||||||||||
Personnel costs
|
$ | 686,828 | $ | 541,228 | $ | 145,600 | 26.9 | % | $ | 136,500 | $ | 30,487 | $ | (4,750 | )(2) | $ | (16,637 | ) | (2.3 | )% | ||||||||||||||||
Outside data processing and other services
|
127,245 | 78,779 | 48,466 | 61.5 | 24,524 | 16,996 | | 6,946 | 5.8 | |||||||||||||||||||||||||||
Net occupancy
|
99,373 | 71,281 | 28,092 | 39.4 | 20,368 | 8,495 | | (771 | ) | (0.8 | ) | |||||||||||||||||||||||||
Equipment
|
81,482 | 69,912 | 11,570 | 16.5 | 9,598 | 1,936 | | 36 | 0.0 | |||||||||||||||||||||||||||
Amortization of intangibles
|
45,151 | 9,962 | 35,189 | N.M. | 34,862 | | | 327 | 0.7 | |||||||||||||||||||||||||||
Marketing
|
46,043 | 31,728 | 14,315 | 45.1 | 8,722 | 12,789 | | (7,196 | ) | (13.5 | ) | |||||||||||||||||||||||||
Professional services
|
40,320 | 27,053 | 13,267 | 49.0 | 5,414 | 6,046 | | 1,807 | 4.7 | |||||||||||||||||||||||||||
Telecommunications
|
24,502 | 19,252 | 5,250 | 27.3 | 4,448 | 1,002 | | (200 | ) | (0.8 | ) | |||||||||||||||||||||||||
Printing and supplies
|
18,251 | 13,864 | 4,387 | 31.6 | 2,748 | 1,332 | | 307 | 1.7 | |||||||||||||||||||||||||||
Other expense
|
137,488 | 106,649 | 30,839 | 28.9 | &nb |