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Huntington Bancshares (NASDAQ:HBAN) reported earnings last week and, despite a tough environment for all banks with dwindling mortgage refinancing income, it performed relatively well in the third quarter. While the bank reported flat revenue, it was able to reduce expenses and saw total earnings per share rise to $0.20, which was up from both $0.17 posted in the second quarter of this year and $0.19 in the third quarter of 2012.

While the ultimate bottom-line numbers were good, there were also three things beneath the surface of the earnings report that make this quarter's release look even better.

1. Margins remain strong
Huntington watched almost all of its meaningful profitability metrics improve both year over year and quarter over quarter, as shown in the chart below:

 

3Q 2012

3Q 2013

Change

Return on average assets

1.19%

1.27%

0.08%

Return on equity

11.9%

12.3%

0.4%

Return on tangible equity

13.9%

14.1%

0.2%

Efficiency ratio

64.5%

60.6%

-3.9%

Although its net interest margin was down slightly it declined at a rate lower than competitors thanks to Huntington's shifting balance sheet. And while Huntington is beat by Fifth Third Bancorp (NASDAQ:FITB) in return on average assets, it bests both Fifth Third and fellow competitor KeyCorp (NYSE:KEY) in two other crucial profitability metrics:

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Source: Company Earnings Reports

Huntington has a price to tangible book value that is below Fifth Third (1.53 vs. 1.46) despite its continued better margins. That could be one sign there is room for growth in the stock of this regional bank. 

2. Its balance sheet composition is changing
While a bank's balance sheet may not be the most exciting thing in the world, it is important to take note of everything that makes up the banks themselves. Over the last year Huntington has seen its total size stay roughly the same ($56.1 billion in the third quarter of 2012 versus $55.9 billion in the third quarter of 2013), but the composition of its assets has seen a pretty dramatic shift.

Huntington has seen its securities (things like bonds that it simply holds onto) fall by about 5%, or $500 million, while its loans and leases (what it can actually make money on) have risen by roughly $1.9 billion. Considering Huntington earned an average 2.4% on securities and 3.9% on loans in the most recent quarter, this shift will ultimately trickle straight down to the bottom line for the bank (and further improve its profitability as mentioned above).

3. Its business mix is also changing
Knowing that it is adding loans it's reasonable to ask where those loans are coming from. As you can see in the chart below, while its consumer business has been relatively stable, Huntington has seen significant growth in its two other business segments:

 Images

Source: Company Earnings Report

Huntington has seen huge growth in automobile loans, which stood at $4.3 billion in the third quarter of last year and $6.3 billion in the third quarter of this year, an increase of almost 50%. While auto loans can be a highly lucrative endeavor for banks, Huntington saw the rate it earns from them fall from 4.87% to 3.80% over the past year, whereas the rate of commercial real estate loans rose from 3.85% to 4.08%. Considering its charge-off rate (what it anticipates it will lose on those loans) has been cut in half for the auto loans, this drop in yield isn't the biggest point of concern. But it should be watched moving forward.

The company noted that its automobile originations, "while below industry levels, remained strong and our investments in the Northeast and upper Midwest continued to grow as planned." This could be a key growth business for Huntington as it continues to diversify its assets. Considering that Midwest competitor Fifth Third Bancorp added only $160 million in auto loans to its balance sheet (on a base of $11.9 billion) while Huntington added slightly more than $2 billion (on a base of $4 billion) it is clear management is executing well on its strategy.

While the results for Huntington look good at first glance, with better margins than peers and an evolving business mix, things below the surface at Huntington looked even better.

Fool contributor Patrick Morris has no position in any stocks mentioned. The Motley Fool owns shares of Fifth Third Bancorp, Huntington Bancshares, and KeyCorp. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.