How did Huntington's 2006 earnings change compared with 2005?

Net income rose $49.1 million, or 12%, to $461.2 million, and diluted EPS rose to $1.92 from $1.77. The increase primarily reflected a $78.6 million decline in income tax expense, partly offset by a $71.2 million decline in non-interest income and a $31.2 million increase in non-interest expense.

What drove the decline in the effective tax rate?

The effective tax rate fell to 10.3% in 2006 from 24.2% in 2005. The lower rate reflected an $84.5 million reduction from releasing federal income tax reserves after the IRS resolved its audit of tax years 2002 and 2003, along with recognition of a federal tax loss carryback.

What is the status of the Sky Financial acquisition?

Huntington announced a definitive agreement on December 20, 2006 to acquire Sky Financial Group, Inc. in a stock and cash transaction valued at about $3.5 billion. Sky shareholders will receive 1.098 Huntington shares and $3.023 in cash per share. The companies expect the merger to close in the third quarter of 2007, pending regulatory approvals and shareholder approval by both companies.

How did credit quality change during 2006?

Non-performing assets increased to $193.6 million at December 31, 2006, from $117.2 million a year earlier, and represented 0.74% of loans, leases and other real estate. The company said 59% of NPAs were secured by residential real estate or guaranteed by the U.S. Government. The provision for credit losses fell to $65.2 million from $81.3 million, and net charge-offs were 0.32% of average loans and leases.

What is the impact of the Unizan acquisition on 2006 results?

Unizan Financial Corp., which had $2.5 billion of assets at acquisition, was merged on March 1, 2006 and contributed to 2006 results for 10 months. Management estimated merger-related increases in personnel costs, average loans and deposits, and other categories, and reported merger costs of $3.7 million for 2006.

HBAN 10-K FY2006 Annual Report — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 10-K filed February 22, 2007. Cited figures are marked; the original filing is the authoritative source.

Huntington Bancshares Incorporated, a Columbus, Ohio-based multi-state diversified financial holding company, reported net income of $461.2 million^a, or $1.92 per diluted share, for 2006, up 12% from $412.1 million in 2005 (diluted EPS up 8%).

The increase primarily reflected a $78.6 million^b decline in income tax expense, as the effective tax rate fell to 10.3% from 24.2%, including an $84.5 million reduction tied to resolution of a federal tax audit for 2002 and 2003. Net interest income rose 5.9% to $1.02 billion, while non-interest income declined 11.3% to $561.1 million, reflecting the run-off of automobile operating leases and $73.2 million of securities losses from a balance sheet restructuring. The 2006 results also include the March 1, 2006 acquisition of Unizan Financial Corp., which had $2.5 billion of assets at acquisition.

Total assets were $35.3 billion^c at December 31, 2006, and total shareholders' equity was $3.0 billion. The tangible equity to assets ratio declined to 6.87% from 7.19%, partly due to the adoption of Statement No. 158, which reduced equity by $83.0 million. Non-performing assets rose to $193.6 million, or 0.74% of loans, leases and other real estate, from $117.2 million a year earlier, with 59% of NPAs secured by residential real estate or government guaranteed.

Net charge-offs were 0.32% of average loans and leases. The company also repurchased 16.0 million shares in 2006 for $378.8 million^d. Looking ahead, the pending acquisition of Sky Financial Group, Inc., a $17.6 billion financial holding company, is expected to be valued at approximately $3.5 billion and close in the third quarter of 2007, pending regulatory and shareholder approvals.

Sky Financial shareholders will receive 1.098 Huntington shares plus $3.023 in cash per share. Management noted that about $350 million is anticipated to be paid by the parent company in connection with the acquisition.

02—Key points

Key Highlights

Net income of $461.2 million, or $1.92 per diluted share, for 2006, up 12% from $412.1 million in 2005.
Effective tax rate fell to 10.3% from 24.2%, including an $84.5 million reduction from resolution of a federal tax audit for 2002 and 2003.
Net interest income rose 5.9% to $1,019.2 million; net interest margin declined to 3.29% from 3.33%.
Non-interest income fell 11.3% to $561.1 million, including $73.2 million of securities losses from a balance sheet restructuring and an $89.9 million decline in automobile operating lease income.
Total assets of $35.3 billion and shareholders' equity of $3.0 billion at December 31, 2006; tangible equity to assets ratio was 6.87%, down from 7.19%.
Non-performing assets rose to $193.6 million from $117.2 million; net charge-offs were 0.32% of average loans and leases.
Pending acquisition of Sky Financial Group, Inc. (about $3.5 billion, expected to close in Q3 2007) following the Unizan merger completed March 1, 2006.

03—Questions

Frequently Asked Questions

How did Huntington's 2006 earnings change compared with 2005?
Net income rose $49.1 million, or 12%, to $461.2 million, and diluted EPS rose to $1.92 from $1.77. The increase primarily reflected a $78.6 million decline in income tax expense, partly offset by a $71.2 million decline in non-interest income and a $31.2 million increase in non-interest expense.
What drove the decline in the effective tax rate?
The effective tax rate fell to 10.3% in 2006 from 24.2% in 2005. The lower rate reflected an $84.5 million reduction from releasing federal income tax reserves after the IRS resolved its audit of tax years 2002 and 2003, along with recognition of a federal tax loss carryback.
What is the status of the Sky Financial acquisition?
Huntington announced a definitive agreement on December 20, 2006 to acquire Sky Financial Group, Inc. in a stock and cash transaction valued at about $3.5 billion. Sky shareholders will receive 1.098 Huntington shares and $3.023 in cash per share. The companies expect the merger to close in the third quarter of 2007, pending regulatory approvals and shareholder approval by both companies.
How did credit quality change during 2006?
Non-performing assets increased to $193.6 million at December 31, 2006, from $117.2 million a year earlier, and represented 0.74% of loans, leases and other real estate. The company said 59% of NPAs were secured by residential real estate or guaranteed by the U.S. Government. The provision for credit losses fell to $65.2 million from $81.3 million, and net charge-offs were 0.32% of average loans and leases.
What is the impact of the Unizan acquisition on 2006 results?
Unizan Financial Corp., which had $2.5 billion of assets at acquisition, was merged on March 1, 2006 and contributed to 2006 results for 10 months. Management estimated merger-related increases in personnel costs, average loans and deposits, and other categories, and reported merger costs of $3.7 million for 2006.

04—Continue

← View all 10-K filings