COLUMBUS, Ohio — Huntington Bancshares acknowledged its balance sheet showed its auto loan balance slid from $6.2 billion to $5.6 billion as 2011 closed.

However, executives were quick to point out that Huntington continued to see strong levels of originations throughout the fourth quarter. The bank said the 9-percent quarter-over-quarter decline in fourth-quarter average vehicle loan balances reflected a full quarter's impact of the $1.0 billion automobile loan securitization completed on Sept. 15.

"In addition on Dec. 31, we reclassified $1.3 billion of auto loans to loans held for sale as we plan to complete another securitization in the first half of 2012," Huntington officials explained.

The company also recently reported its auto loan and lease net charge-offs were $4.2 million, or an annualized 0.30 percent of related average balances, up 10 percent from $3.9 million, or an annualized 0.25 percent in the prior quarter and in line "with seasonal expectations."

Executives added, "These relatively low levels of net charge-offs reflected the continued high credit quality of originations and a strong resale market for used vehicles."

And looking toward 2012 in the auto loan space, Huntington executives shared that "we will continue to evaluate the use of automobile loan securitizations to limit total on-balance sheet exposure as we expect to see continued strong levels of originations."

Overall Company Performance

Huntington reported its fourth-quarter net income dipped to $126.9 million, down $16.5 million or 12 percent from $143.4 million in the prior quarter. The company said its earnings per common share in the fourth quarter were 14 cents, down 2 cents from the prior quarter.

In the year-ago quarter, Huntington's net income was $122.9 million or 5 cents per common share.

For the full year of 2011, Huntington generated $542.6 million or 59 cents per common share in net income, a significant jump from the 2010 figure of $312.3 million or 19 cents per common share.

Huntington also announced its board of directors declared a quarterly cash dividend on its common stock of 4 cents per common share. The dividend is payable April 2 to shareholders of record on March 19.

"We are pleased with the quarter. By staying focused on executing our strategic plan, we are making progress in improving long-term profitability and adding to our earnings growth opportunities," stated Stephen Steinour, Huntington's chairman, president, and chief executive officer.

"Net interest income increased as a result of not only strong loan originations but also a higher net interest margin, reflecting our continued focus on fundamentally changing our deposit mix and driving down the overall cost of funds," Steinour continued. "These successes are a direct result of the strategic investments we have made over the last two years. We are especially pleased with the momentum in growing consumer households and commercial relationships resulting from our 'Fair Play' banking philosophy and Optimal Customer Relationship (OCR) sales approach.

"Nevertheless, our results continued to be negatively impacted by a number of challenges," he conceded. "These include an extended low interest rate environment, a weak economy, and continued customer uncertainty that is resulting in, among other things, the postponement of business investment decisions. In addition, we have had to absorb a number of government-mandated reductions in fee income and additional expenses related to additional regulatory requirements."

Steinour further referenced how Huntington has navigated a challenging banking climate.

"Disciplined management of capital to improve long-term shareholder risk-adjusted returns is important," he stressed.

"Over the course of the last several years, we have taken a significant number of actions to reduce risk," Steinour continued. "By increasing our dividend in 2011, we took the initial step to increase the amount of capital we return to the owners of the company. During the 2011 fourth quarter, in anticipation of regulatory changes under the BASEL III standards, we began to optimize our capital structure through an exchange of several existing trust preferred securities with new low cost perpetual preferred stock."

Commenting on credit quality trends, Steinour added, "Credit quality continued its expected improvement. This reflected well on the actions taken over the last three years to address credit-related issues in our loan portfolio. Even so, many of these performance metrics remain elevated compared with historical performance. We expect to see continued declines in nonaccrual loans and net charge-offs going forward."

2012 Performance Expectations

Besides its latest financial performance, Huntington also touched on how it might do this year.

"As we have done since early 2010, we will continue to execute our core strategy, making selective investments in initiatives to grow long-term profitability," Steinour began.

"We will remain disciplined in our growth and pricing of loans and deposits and are encouraged by the net interest margin expansion this quarter," he continued. "We continue to expect to improve credit quality. We will stay focused on increasing customer cross-sell, and work to improve operating efficiency. While there continues to be a high level of uncertainty and volatility surrounding the economy, lately we have seen more encouraging signs."

Beyond the top boss' comments, Huntington indicated that its net interest income is expected to show modest improvement from the fourth-quarter level.

"The momentum we are seeing in total loan and low-cost deposit growth is expected to continue," executives explained. "Earlier in the year, those benefits are expected to be mostly offset by downward pressure on the net interest margin due to the anticipated continued mix shift to lower-rate, higher quality loans and lower securities reinvestment rates given the low absolute level of interest rates and shape of the yield curve."

Huntington also mentioned its C&I portfolio is expected to continue to show meaningful growth with much of this reflecting the positive impact from strategic initiatives to expand its commercial lending expertise into areas such specialty banking, asset based lending, and equipment financing, in addition to its long-standing continued support of middle market and small business lending.

The company added residential mortgages and home equity loans are expected to show modest growth with CRE likely to experience slowing declines.

"We anticipate the increase in total loans to modestly outpace growth in total deposits, reflecting a heightened focus on our overall cost of funding and the continued shift towards low- and no-cost demand deposits and money market deposit accounts," Huntington executives projected.

"We anticipate making progress on improving our expense efficiency ratio, though this will likely reflect the benefit of revenue growth as we expect expenses could increase slightly," they continued. "While we will continue our focus on improving expense efficiencies throughout the company, these improvements could be offset by additional regulatory costs and expenses associated with strategic actions, such as the opening of 40 in-store branches and expenses relating to the consolidation of 29 traditional branches.

"Nonaccrual loans and net charge-offs are expected to continue to decline," Huntington went on to mention. "The level of provision for credit losses is currently in line with our long-term expectations. However, there could be some quarterly volatility given the absolute low level and the uncertain and uneven nature of the economic recovery."