UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 OR 15(d)

of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) July 18, 2013

 

 

HUNTINGTON BANCSHARES INCORPORATED

(Exact name of registrant as specified in its charter)

 

 

 

Maryland   1-34073   31-0724920

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

 

Huntington Center

41 South High Street

Columbus, Ohio

  43287
(Address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including area code (614) 480-8300

Not Applicable

(Former name or former address, if changed since last report.)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


Item 2.02. Results of Operations and Financial Condition.

On July 18, 2013, Huntington Bancshares Incorporated (“Huntington”) issued a news release announcing its earnings for the quarter ended June 30, 2013. Also on July 18, 2013, Huntington made a Quarterly Financial Supplement available on its web site, www.huntington-ir.com .

Huntington’s senior management will host an earnings conference call July 18, 2013, at 10:00 a.m. (Eastern Time). The call may be accessed via a live Internet webcast at www.huntington-ir.com or through a dial-in telephone number at 877-684-3807, conference ID 96993401. Slides will be available at www.huntington-ir.com just prior to the call. A replay of the web cast will be archived in the Investor Relations section of Huntington’s web site at www.huntington.com . A telephone replay will be available two hours after the completion of the call through July 31, 2013, at (855) 859-2056 or (404) 537-3406; conference call ID 96993401.

The information contained or incorporated by reference in this Current Report on Form 8-K contains certain forward-looking statements, including certain plans, expectations, goals, projections, and statements, which are subject to numerous assumptions, risks, and uncertainties. Forward-looking statements may be identified by words such as expect, anticipate, believe, intend, estimate, plan, target, goal, or similar expressions, or future or conditional verbs such as will, may, might, should, would, could, or similar variations.

While there is no assurance that any list of risks and uncertainties or risk factors is complete, below are certain factors which could cause actual results to differ materially from those contained or implied in the forward-looking statements: (1) worsening of credit quality performance due to a number of factors such as the underlying value of collateral that could prove less valuable than otherwise assumed and assumed cash flows may be worse than expected; (2) changes in economic conditions, including impacts from the implementation of the Budget Control Act of 2011, the American Taxpayer Relief Act of 2012, the Consolidated and Further Continuing Appropriations Act of 2013, as well as the continuing economic uncertainty in the US, the European Union, and other areas; (3) movements in interest rates; (4) competitive pressures on product pricing and services; (5) success, impact, and timing of our business strategies, including market acceptance of any new products or services implementing our “Fair Play” banking philosophy; (6) changes in accounting policies and principles and the accuracy of our assumptions and estimates used to prepare our financial statements; (7) extended disruption of vital infrastructure; (8) the final outcome of significant litigation; (9) the nature, extent, timing, and results of governmental actions, examinations, reviews, reforms, regulations, and interpretations, including those related to the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Basel III regulatory capital reforms, as well as those involving the OCC, Federal Reserve, and CFPB; and (10) the outcome of judicial and regulatory decisions regarding practices in the residential mortgage industry, including among other things the processes followed for foreclosing residential mortgages. Additional factors that could cause results to differ materially from those described above can be found in Huntington’s 2012 Annual Report on Form 10-K, and documents subsequently filed by Huntington with the Securities and Exchange Commission. All forward-looking statements included in this document are based on information available at the time of the release. Huntington assumes no obligation to update any forward-looking statement.


The information contained or incorporated by reference in Item 2.02 of this Form 8-K shall be treated as “furnished” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

 

Item 9.01. Financial Statements and Exhibits.

The exhibits referenced below shall be treated as “furnished” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

(d) Exhibits.

 

Exhibit 99.1 – News release of Huntington Bancshares Incorporated, dated July 18, 2013.

Exhibit 99.2 – Quarterly Financial Supplement, June 2013.


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

    HUNTINGTON BANCSHARES INCORPORATED
Date: July 18, 2013     By:   /s/ David S. Anderson
      David S. Anderson
      Interim Chief Financial Officer

EXHIBIT INDEX

 

Exhibit No.    Description
Exhibit 99.1    News release of Huntington Bancshares Incorporated, July 18, 2013.
Exhibit 99.2    Quarterly Financial Supplement, June 2013.

Exhibit 99.1

 

LOGO

FOR IMMEDIATE RELEASE

Jul. 18, 2013

Analysts: Todd Beekman (todd.beekman@huntington.com), 614.480.3878

        Mark Muth (mark.muth@huntington.com), 614.480.4720

Media: Maureen Brown (maureen.brown@huntington.com), 614.480.5512

HUNTINGTON BANCSHARES INCORPORATED

REPORTS NET INCOME OF $150.7 MILLION, OR $0.17 PER COMMON SHARE, FOR

THE 2013 SECOND QUARTER, RELATIVELY UNCHANGED FROM THE PRIOR AND

YEAR-AGO QUARTERS

Specific highlights compared with 2012 Second Quarter:

 

   

$0.39, or 7%, increase in tangible book value per common share to $5.88

 

   

1.08% return on average assets, down from 1.10%

 

   

$680.2 million of fully-taxable equivalent revenue, a 1% decrease

 

   

$3.2 million, or 1%, decrease in fully-taxable equivalent net interest income, reflecting a 3.38% fully-taxable equivalent net interest margin, down 4 basis points

 

   

$5.2 million, or 2%, decrease in noninterest income, reflecting a $4.7 million, or 12%, decrease in mortgage banking income

 

   

$1.6 million, or less than 1%, increase in noninterest expense

 

   

NCOs declined 59% and were an annualized 0.34% of total loans and leases

 

   

23% decline in nonaccrual loans to 0.87% of total loans and leases, down from 1.19%

 

   

Estimated Basel III negative impact to Tier 1 common risk-based capital of 60 basis points

Specific highlights compared with 2013 First Quarter:

 

   

$2.1 million, or less than 1%, decrease in fully-taxable equivalent revenue, reflecting:

 

   

4% annualized growth in average total loans and leases partially offset by a 4 basis point reduction to net interest margin

 

   

$3.6 million decrease in noninterest income as the prior quarter included a $7.6 million gain on the sale of Low Income Housing Tax Credit (LIHTC) investments and a $11.6 million, or 26%, decrease in mortgage banking income

 

   

$3.1 million, 1%, increase in noninterest expense

 

   

10.0 million shares repurchased at an average price of $7.50 per share

COLUMBUS, Ohio – Huntington Bancshares Incorporated (NASDAQ: HBAN; www.huntington.com ) reported 2013 second quarter net income of $150.7 million, a decrease of $2.1 million, or 1%, from the 2012 second quarter and a decrease of $1.1 million, or 1%, from the 2013 first quarter. Earnings per common share were $0.17, unchanged from the prior and year ago quarters.

The board of directors declared a quarterly cash dividend on its common stock of $0.05 per common share. The dividend is payable October 1, 2013, to shareholders of record on September 17, 2013.


Strategies Continue to Drive Business Performance

“Huntington had a good quarter that demonstrates progress in our strategic priorities,” said Stephen D. Steinour, chairman, president and CEO of Huntington Bank. “I am extremely pleased that we have returned to pre-recession, normal credit levels ahead of our prior expectations. This reflects our disciplined and prudent lending approach. We also continue to experience double-digit household growth. Expenses were managed slightly below our expectations. Revenue was relatively unchanged as strategic growth overcame multiple environmental headwinds and the prior quarters’ Low Income Housing Tax Credit related gains. Consumer lending and deposits have increased over the same quarter last year as consumer confidence in the recovery rises. Our commercial pipeline continues to be strong as business owners are seeing more signs of economic growth. Employment across our Midwest markets continues to improve with Ohio creating the largest month-to-month employment increase in the nation in May and Michigan coming in third.”

“We remain on track to deliver sustainable levels of long-term profitability,” added Steinour. “Our estimate for the negative impact from Basel III is approximately 90 basis points better than last year’s estimate. Our existing strategic investments continue to mature. We are focused on expense management and a more robust continuous improvement effort across the enterprise.”

Table 1 – Earnings Performance Summary

 

     2013     2012  
     Second     First     Fourth     Third     Second  

($ in millions, except per share data)

   Quarter     Quarter     Quarter     Quarter     Quarter  

Net Income

   $ 150.7      $ 151.8      $ 167.3      $ 167.8      $ 152.7   

Diluted earnings per common share

     0.17        0.17        0.19        0.19        0.17   

Return on average assets

     1.08     1.10     1.19     1.19     1.10

Return on average common equity

     10.4        10.7        11.6        11.9        11.1   

Return on average tangible common equity

     12.0        12.4        13.5        13.9        13.1   

Net interest margin

     3.38        3.42        3.45        3.38        3.42   

Efficiency ratio

     64.0        63.3        62.3        64.5        62.8   

Tangible book value per common share

   $ 5.88      $ 5.91      $ 5.78      $ 5.71      $ 5.49   

Cash dividends declared per common share

     0.05        0.04        0.04        0.04        0.04   

Average diluted shares outstanding (000’s)

     843,840        848,708        853,306        863,588        867,551   

Average earning assets

   $ 51,156      $ 50,960      $ 50,682      $ 51,330      $ 51,050   

Average loans

     41,280        40,864        40,397        40,120        41,179   

Average core deposits

     43,768        43,616        44,310        43,764        42,781   

Tangible common equity / tangible assets ratio

     8.78     8.92     8.76     8.74     8.41

Tier 1 common risk-based capital ratio

     10.71        10.62        10.48        10.28        10.08   

NCOs as a % of average loans and leases

     0.34     0.51     0.69     1.05     0.82

NAL ratio

     0.87        0.92        1.00        1.11        1.19   

ACL as a % of total loans and leases

     1.86        1.91        1.99        2.09        2.28   

Significant Items Influencing Financial Performance Comparisons

From time-to-time, revenue, expenses, or taxes are impacted by items we judge to be outside of ordinary banking activities and/or by items that, while they may be associated with ordinary banking activities, are so unusually large that we believe their outsized impact at that time to be infrequent or short term in nature. We believe the disclosure of such “Significant Items,” when appropriate, aids analysts/investors in better understanding corporate performance trends. (See Significant Items under the Basis of Presentation for a full discussion.)

 

2


Table 2 highlights the Significant Items impacting reported results for the prior five quarters. There were no significant items in the current quarter.

Table 2 – Significant Items Influencing Earnings Performance Comparisons

 

Three Months Ended    Impact  
(in millions, except per share)    Amount   (1)      EPS  (2)  

June 30, 2013 – net income

   $ 150.7       $ 0.17   

March 31, 2013 – net income

   $ 151.8       $ 0.17   

December 31, 2012 – net income

   $ 167.3       $ 0.19   

September 30, 2012 – net income

   $ 167.8       $ 0.19   

• State deferred tax valuation allowance benefit

     19.5         0.02   

June 30, 2012 – net income

   $ 152.7       $ 0.17   

 

(1)  

Favorable (unfavorable) impact on net income; after-tax unless otherwise noted

(2)  

EPS reflected on a fully diluted basis

Net Interest Income, Net Interest Margin, and Average Balance Sheet

Table 3 – Net Interest Income and Net Interest Margin Performance Summary

 

     2013     2012              
     Second     First     Fourth     Third     Second     Change (%)  

($ in millions)

   Quarter     Quarter     Quarter     Quarter     Quarter     LQ     YOY  

Net interest income

   $ 424.9      $ 424.2      $ 434.1      $ 430.3      $ 429.0        0     (1 )% 

FTE adjustment

     6.6        5.9        5.5        5.3        5.7        11        15   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income—FTE

     431.5        430.1        439.5        435.6        434.7        0        (1

Noninterest income

     248.7        252.2        297.7        261.1        253.8        (1     (2
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue—FTE

   $ 680.2      $ 682.3      $ 737.2      $ 696.6      $ 688.5        (0 )%      (1 )% 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                                   Change bps  

Yield / Cost

                                 LQ     YOY  

Total earning assets

     3.68     3.75     3.80     3.79     3.89     (7     (21

Total loans and leases

     3.95        4.03        4.13        4.12        4.18        (9     (24

Total securities

     2.38        2.39        2.38        2.41        2.45        (0     (6

Total interest-bearing liabilities

     0.42        0.45        0.50        0.58        0.63        (4     (22

Total interest-bearing deposits

     0.36        0.38        0.42        0.48        0.51        (3     (16

Net interest rate spread

     3.26        3.30        3.30        3.21        3.26        (4     0   

Impact of noninterest-bearing funds on margin

     0.12        0.12        0.15        0.17        0.16        0        (4
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest margin

     3.38     3.42     3.45     3.38     3.42     (4     (4
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See Page 9 of Quarterly Financial Supplement for additional rate detail.

Fully-taxable equivalent net interest income decreased $3.2 million, or 1%, from the 2012 second quarter. This reflected the impact of a 4 basis point decrease in the fully-taxable equivalent net interest margin (NIM) to 3.38% as average earning assets were essentially unchanged. The primary items impacting the decrease in the NIM were:

 

   

21 basis point negative impact from the mix and yield of earning assets primarily reflecting a decrease in consumer loan yields.

Partially offset by:

 

   

16 basis point positive impact from the mix and yield of deposits reflecting the strategic focus on changing the funding sources to no-cost demand deposits and low cost money markets deposits.

 

3


Compared to the 2013 first quarter, fully-taxable equivalent net interest income increased $1.4 million, or less than 1%, reflecting a $0.2 billion increase in average earnings assets as well as an additional day in the quarter, partially offset by a 4 basis point decrease in NIM. The primary items affecting the NIM were a 7 basis point negative impact from the mix and yield of earning assets, which was partially offset by a 3 basis point positive impact from the mix and yield of deposits.

Table 4 – Average Earning Assets – C&I and Automobile Continue To Drive Growth

 

     2013      2012         
     Second      First      Fourth      Third      Second      Change (%)  

(in billions)

   Quarter      Quarter      Quarter      Quarter      Quarter      LQ     YOY  

Average Loans and Leases

                   

Commercial and industrial

   $ 17.0       $ 17.0       $ 16.5       $ 16.3       $ 16.1         0     6

Commercial real estate

     5.0         5.3         5.5         5.7         6.1         (5     (17
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total commercial

     22.0         22.2         22.0         22.1         22.2         (1     (1
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Automobile

     5.3         4.8         4.5         4.1         5.0         9        6   

Home equity

     8.3         8.4         8.3         8.4         8.3         (2     (1

Residential mortgage

     5.2         5.0         5.2         5.2         5.3         5        (1

Other consumer

     0.5         0.4         0.4         0.4         0.5         12        (0
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total consumer

     19.2         18.6         18.4         18.1         19.0         3        1   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total loans and leases

     41.3         40.9         40.4         40.1         41.2         1        0   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total securities

     9.1         9.3         9.4         9.3         9.3         (2     (2

Held-for-sale and other earning assets

     0.8         0.8         0.9         1.9         0.5         (2     43   

Total earning assets

   $ 51.2       $ 51.0       $ 50.7       $ 51.3       $ 51.1         0     0
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

See Page 7 of Quarterly Financial Supplement for additional detail.

Average earning assets increased $0.1 billion, or less than 1%, from the year-ago quarter, driven by:

 

   

$0.9 billion, or 6%, growth in average Commercial and Industrial (C&I) loans. This reflected the continued growth across most business lines, with particularly strong growth in the healthcare vertical, dealer floorplan, and equipment finance.

 

   

$0.3 billion, or 6%, increase in average Automobile loans. In addition, $0.3 billion of automobile loans were transferred from loans held for sale to automobile loans and leases on June 30, as there are no securitizations expected for the remainder of 2013. This transfer had a minimal impact on average balances.

Partially offset by:

 

   

$1.1 billion, or 17%, decrease in average Commercial Real Estate (CRE) loans. This reflected continued runoff of the noncore portfolio and managed reduction of the core portfolios as acceptable returns for new core originations were balanced against internal concentration limits and increased competition for projects sponsored by high quality developers.

The 2013 second quarter exhibited similar trends in automotive and CRE when compared with the 2013 first quarter. Specifically, the $0.2 billion, or less than 1%, increase in average earning assets reflected a $0.5 billion, or 37% annualized, increase in automobile loans partially offset by a $0.3 billion, or 21% annualized, decrease in CRE.

 

4


Table 5 – Average Liabilities – Core Deposit Growth Offsets Reduction in Borrowings

 

     2013      2012         
     Second      First      Fourth      Third      Second      Change (%)  

(in billions)

   Quarter      Quarter      Quarter      Quarter      Quarter      LQ     YOY  

Average Deposits

                   

Demand deposits—noninterest bearing

   $ 12.9       $ 12.2       $ 13.1       $ 12.3       $ 12.1         6     7

Demand deposits—interest bearing

     5.9         6.0         5.8         5.8         5.9         (1     (0
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total demand deposits

     18.8         18.1         19.0         18.1         18.0         4        4   

Money market deposits

     15.1         15.0         14.7         14.5         13.2         0        14   

Savings and other domestic deposits

     5.1         5.1         5.0         5.0         5.0         1        3   

Core certificates of deposit

     4.8         5.3         5.6         6.1         6.6         (11     (28
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total core deposits

     43.8         43.6         44.3         43.8         42.8         0        2   

Other domestic deposits of $250,000 or more

     0.3         0.4         0.4         0.3         0.3         (10     9   

Brokered deposits and negotiable CDs

     1.8         1.7         1.8         1.9         1.4         5        25   

Other deposits

     0.3         0.3         0.3         0.4         0.4         (7     (11
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total deposits

     46.2         46.0         46.8         46.3         44.9         0        3   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Short and long-term borrow ings

     2.8         2.8         2.4         3.1         4.3         (2     (36

Total Interest-bearing liabilities

   $ 36.1       $ 36.6       $ 36.1       $ 37.0       $ 37.1         (2 )%      (3 )% 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

See Page 7 of Quarterly Financial Supplement for additional detail.

Average interest-bearing liabilities decreased $1.0 billion, or 3%, from the 2012 second quarter, primarily reflecting:

 

   

$1.5 billion, or 36%, decrease in subordinated notes and other short- and long-term debt reflecting the repayment of $0.6 billion of TLGP related debt in June of 2012 and the redemption of $0.2 billion of trust preferred securities in 2012 second half.

 

   

$1.8 billion, or 28%, decrease in average core certificates of deposit due to the strategic focus on changing the funding sources to no-cost demand deposits and low cost money markets deposits.

Partially offset by:

 

   

$1.9 billion, or 14%, increase in money market deposits reflecting the strategic focus on increased share of wallet and customer preference for increased liquidity.

Compared to the 2013 first quarter, average interest-bearing liabilities declined $0.6 billion, or 6% annualized. A $0.2 billion, or 1% annualized, increase in average total core deposits primarily reflected a $0.7 billion, or 23% annualized, increase in average noninterest bearing deposits that were partially offset by a $0.6 billion, or 42% annualized, decrease in core certificates of deposits.

 

5


Noninterest Income

Table 6 – Noninterest Income – Service Charges and Electronic Banking Mostly Offset Lack of LIHTC Sale and Decline in MSR Hedge

 

       2013     2012               
     Second     First     Fourth      Third      Second      Change (%)  

(in millions)

   Quarter     Quarter     Quarter      Quarter      Quarter      LQ     YOY  

Noninterest Income

                 

Service charges on deposit accounts

   $ 68.0      $ 60.9      $ 68.1       $ 67.8       $ 66.0         12     3

Mortgage banking income

     33.7        45.2        61.7         44.6         38.3         (26     (12

Trust services

     30.7        31.2        31.4         29.7         29.9         (2     3   

Electronic Banking

     23.3        20.7        21.0         22.1         20.5         13        14   

Brokerage income

     19.5        18.0        17.4         16.5         19.0         9        3   

Insurance income

     17.2        19.3        17.3         17.8         17.4         (11     (1

Gain on sale of loans

     3.3        2.6        20.7         6.6         4.1         28        (19

Bank ow ned life insurance income

     15.4        13.4        13.8         14.4         14.0         15        10   

Capital markets fees

     12.2        7.8        12.7         11.6         13.3         56        (8

Securities (losses) gains

     (0.4     (0.5     0.9         4.2         0.4         (19     (217

Other income

     25.7        33.6        32.8         25.8         30.9         (24     (17
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total noninterest income

   $ 248.7      $ 252.2      $ 297.7       $ 261.1       $ 253.8         (1 )%      (2 )% 
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

In the 2013 second quarter, noninterest income decreased $5.2 million, or 2%, from the year-ago quarter, primarily reflecting:

 

   

$5.3 million, or 17%, decrease in other noninterest income including a $4.3 million reduction in the gain on the sale of LIHTC investments.

 

   

$4.7 million, or 12%, decrease in mortgage banking income as the benefit of net mortgage servicing rights (MSR) decreased by $2.5 million while origination and secondary marketing income declined $2.3 million primarily due to lower spreads.

Partially offset by a number of smaller items, the largest of which was less than $3 million.

Compared to the 2013 first quarter, the $3.6 million, or 1%, decrease in noninterest income reflected the $11.6 million, or 26%, decrease in mortgage banking income as the benefit of net mortgage servicing rights (MSR) decreased by $11.6 million. Other income decreased $7.9 million, or 24%, as the prior quarter included a $7.6 million gain on the sale of LIHTC investments. These were partially offset by a $7.1 million, or 12%, increase in service charges on deposit accounts that follow yearly seasonal trends in customer activity and 8% annualized growth in consumer checking households, and a $4.4 million, or 56%, increase in capital markets activity.

 

6


Noninterest Expense

Table 7 – Noninterest Expense – Essentially Flat as Pace of Investment Slows

 

       2013      2012              
     Second     First      Fourth      Third      Second     Change (%)  

(in millions)

   Quarter     Quarter      Quarter      Quarter      Quarter     LQ     YOY  

Noninterest Expense

                 

Personnel costs

   $ 263.9      $ 258.9       $ 254.0       $ 247.7       $ 243.0        2     9

Outside data processing and other services

     49.9        49.3         48.7         50.4         48.6        1        3   

Net occupancy

     27.7        30.1         29.0         27.6         25.5        (8     9   

Equipment

     24.9        24.9         26.6         26.0         24.9        0        0   

Deposit and other insurance expense

     13.5        15.5         16.3         15.5         15.7        (13     (14

Professional services

     9.3        7.2         22.5         17.5         15.0        30        (38

Marketing

     14.2        11.0         16.5         16.8         17.4        30        (18

Amortization of intangibles

     10.4        10.3         11.6         11.4         11.9        0        (13

OREO and foreclosure expense

     (0.3     2.7         4.2         5.0         4.1        (110     (107

Gain on early extinguishment of debt

     —          —           —           1.8         (2.6     NR        (100

Other expense

     32.4        33.0         41.2         38.6         40.7        (2     (20
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total noninterest expense

   $ 445.9      $ 442.8       $ 470.6       $ 458.3       $ 444.3        1     0
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

(in thousands)

                                             

Number of employees (full-time equivalent)

     12.2        12.1         11.8         11.7         11.4        1     6

In the 2013 second quarter, noninterest expense increased $1.6 million, or less than 1%, from the year-ago quarter, primarily reflecting:

 

   

$20.8 million, or 9%, increase in personnel costs, reflecting a increased salaries and benefits and a 6% increase in the number of full-time equivalent employees, primarily reflecting growth in the in-store initiative and mortgage business.

Partially offset by:

 

   

$8.3 million, or 20%, decline in other expense, reflecting lower representations and warranties related expenses and lower litigation expense.

 

   

$5.7 million, or 38%, decrease in professional services, reflecting a decrease in legal and outside consultant expenses.

 

   

$4.4 million decline in OREO and foreclosure expense as there were net gains of $0.3 million during the 2013 second quarter.

 

   

$3.2 million, or 18%, decrease in marketing, primarily reflecting the refinement of targeted marketing programs and reduced promotional offers.

Noninterest expense increased $3.1 million, or 1%, from the prior quarter due to a $5.0 million, or 2%, increase in personnel costs reflecting higher commission expense and a $3.3 million, or 30%, seasonal increase in marketing that were partially offset by $2.9 million decline in OREO and foreclosure expense.

 

7


Credit Quality

Table 8 – Summary Credit Quality Metrics – Continued Improvement

 

     2013     2012  

($ in thousands)

   Jun. 30     Mar. 31     Dec. 31     Sep. 30     Jun. 30  

Total nonaccrual loans and leases

   $ 363,546      $ 380,311      $ 407,633      $ 445,046      $ 474,166   

Total other real estate, net

     21,066        25,139        28,097        54,206        38,608   

Other NPAs (1)

     12,087        10,045        10,045        10,476        10,476   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total nonperforming assets (2)

   $ 396,699      $ 415,495      $ 445,775      $ 509,728      $ 523,250   

Accruing loans and leases past due 90 days or more

     94,123        108,423        110,316        108,219        95,555   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NPAs + accruing loans and lease past due 90 days or more

   $ 490,822      $ 523,918      $ 556,091      $ 617,947      $ 618,805   

NAL ratio (2)

     0.87     0.92     1.00     1.11     1.19

NPA ratio (3)

     0.95        1.01        1.09        1.26        1.31   

(NPAs+90 days)/(Loans+OREO)

     1.38        1.48        1.59        1.75        1.76   

Provision for credit losses

   $ 24,722      $ 29,592      $ 39,458      $ 37,004      $ 36,520   

Net charge-offs

     34,790        51,687        70,130        105,095        84,245   

Net charge-offs / Average total loans

     0.34     0.51     0.69     1.05     0.82

Allowance for loans and lease losses

   $ 733,076      $ 746,769      $ 769,075      $ 789,142      $ 859,646   

Allowance for unfunded loan commitments and letters of credit

     44,223        40,855        40,651        53,563        50,978   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Allowance for credit losses (ACL)

   $ 777,299      $ 787,624      $ 809,726      $ 842,705      $ 910,624   

ACL as a % of:

          

Total loans and leases

     1.86     1.91     1.99     2.09     2.28

NALs

     214        207        199        189        192   

NPAs

     196        190        182        165        174   

 

(1) Other nonperforming assets includes certain impaired investment securities.
(2) NPA’s related to Chapter 7 bankruptcy: 2Q13- $59.6 MM, 1Q13- $ 59.9 MM, 4Q12—$60.1 MM, and 3Q12—$63.0 MM
(3) Total NALs as a % of total loans and leases
(4) Total NPAs as a % of sum of loans and leases, impaired loans held for sale, and net other real estate.

See Pages 12 through 15 of Quarterly Financial Supplement for additional detail.

Credit quality performance in the 2013 second quarter reflected continued improvement. Nonaccrual loans (NALs) declined $110.6 million, or 23%, from the 2012 second quarter and $16.8 million, or 4%, from the 2013 first quarter to $363.5 million, or 0.87% of total loans and leases. Nonperforming assets (NPAs) declined $126.6 million, or 24%, compared to the year-ago quarter and $18.8 million, or 5%, from the 2013 first quarter to $396.7 million, or 0.95% of total loans and leases, OREO, and other NPAs. The decreases primarily reflected meaningful improvement in CRE NALs.

The provision for credit losses decreased $11.8 million, or 32%, from the 2012 second quarter. Net charge-offs (NCOs) benefited from higher levels of recoveries than experienced over the last year and were $34.8 million, down 59% from $84.2 million in the year-ago quarter. NCOs were an annualized 0.34% of average loans and leases in the current quarter, down from 0.82% in the 2012 second quarter. The period-end allowance for credit losses (ACL) as a percentage of total loans and leases decreased to 1.86% from 2.28% a year ago, while the ACL as a percentage of period-end total NALs increased to 214% from 192%.

 

8


Capital

Table 9 – Capital Ratios – Tier 1 Common Continues to Increase

 

     2013     2012  

(in millions)

   Jun. 30     Mar. 31     Dec. 31,     Sep. 30     Jun. 30  

Tangible common equity / tangible assets ratio

     8.78     8.92     8.76     8.74     8.41

Tier 1 common risk-based capital ratio

     10.71     10.62     10.48     10.28     10.08

Regulatory Tier 1 risk-based capital ratio

     12.24     12.16     12.02     11.88     11.93

Excess over 6.0% (1)

   $ 3,000      $ 2,953      $ 2,876      $ 2,831      $ 2,840   

Regulatory Total risk-based capital ratio

     14.57     14.55     14.50     14.37     14.42

Excess over 10.0% (1)

   $ 2,197      $ 2,181      $ 2,150      $ 2,104      $ 2,117   

Total risk-w eighted assets

   $ 48,077      $ 47,937      $ 47,773      $ 48,147      $ 47,890   

See Page 16 of Quarterly Financial Supplement for additional detail.

The tangible common equity to tangible assets ratio at June 30, 2013 was 8.78%, up 37 basis points from the year ago quarter. Our Tier 1 common risk-based capital ratio at quarter end was 10.71%, up from 10.08% at the end of the 2012 second quarter. Based on the Federal Reserve’s revised Basel III rules, the estimate for the negative impact on Tier 1 common risk-based capital at June 30, 2013 is approximately 60 basis points. This estimate includes the assumption of opting out of the inclusion of accumulated other comprehensive income, an approximate 40 basis point positive impact, and is meaningfully lower than the previous estimate of approximately 150 basis points.

The regulatory Tier 1 risk-based capital ratio at June 30, 2013 was 12.24%, up from 11.93% at June 30, 2012. The increase in the regulatory Tier 1 risk-based capital ratio reflected the increase in retained earnings, partially offset by redemption of $150 million of qualifying trust preferred securities since June 30, 2012. All capital ratios were impacted by the repurchase of 31.6 million common shares over the last four quarters, of which 10.0 million were repurchased in the 2013 second quarter at an average price per share of $7.50.

Income Taxes

The provision for income taxes in the 2013 second quarter was $52.4 million, $52.2 million in the 2013 first quarter, and $49.3 million in the 2012 second quarter. The effective tax rates for the 2013 second quarter, 2013 first quarter, and 2012 second quarter were 25.8%, 25.6%, and 24.4%, respectively. At June 30, 2013, the net federal deferred tax asset was $159.0 million and the net state deferred tax asset was $39.7 million. Based on both positive and negative evidence and the level of forecasted future taxable income, there was no impairment to the net federal and net state deferred tax assets at June 30, 2013. As of June 30, 2013 and March 31, 2013, there was no disallowed deferred tax asset for regulatory capital purposes.

2013 Expectations

“Huntington is seeing an uptick in manufacturing across our markets led by the auto industry along with continued investments in the fledgling oil and gas exploration industry,” said Steinour. “We believe these developments, along with recent upward revisions to economic growth forecasts in 2014, will trigger further business investment. We also are seeing a stronger than expected housing recovery across much of our region, which we believe will lead to more consumer spending. We will remain disciplined as we manage our returns on an aggregate moderate-to-low risk profile.”

 

9


Net interest income is expected to modestly grow over the remainder of 2013. We anticipate an increase in total loans will be partially offset by a reduction in total securities as the portfolio’s cash flow is not reinvested into additional securities. However, those benefits to net interest income are expected to be mostly offset by continued downward NIM pressure. 2013 NIM is not expected to fall below the mid 3.30%’s due to continued deposit repricing and mix shift opportunities while maintaining a disciplined approach to loan pricing.

The C&I portfolio is expected to see growth consistent with the anticipated increase in customer activity. Our C&I loan pipeline remains robust with much of this reflecting the positive impact from our investments in specialized commercial verticals, focused OCR sales process, and continued support of middle market and small business lending. Given automobile loan yields are relatively more attractive than similar duration securities and the recent decline in estimated securitization gains, we currently do not anticipate any automobile securitizations in the second half of 2013. Residential mortgages and home equity loan balances are expected to increase modestly. CRE loans are expected to remain in the current $5 billion range.

We anticipate the increase in total loans will outpace growth in total deposits. This reflects our continued focus on the overall cost of funds as well as the continued shift towards low- and no-cost demand deposits and money market deposit accounts.

Yesterday, the board of directors approved and management communicated a curtailment of the Company’s pension plan effective December 31, 2013. As a result of the accounting treatment for the unamortized prior service pension cost and the change in the projected benefit obligation, a one-time non-cash gain is expected to be recognized in the 2013 third quarter.

Noninterest income, when compared to 2012 levels, is expected to be flat to slightly down, excluding the impact of any automobile loan sales, any net MSR impact, and the aforementioned one-time gain. The anticipated slowdown in mortgage banking activity is expected to be mostly offset by continued growth in new customers, increased contribution from higher cross-sell, and the continued maturation of our previous strategic investments.

Third quarter expenses are expected to modestly increase due to higher commission expense and higher occupancy and equipment expense related to our continued in-store expansion. Expenses will be consistent with previous expectations, with a modest downward bias related to the pension related expense. We continue to evaluate additional cost saving opportunities. We remain committed to posting positive operating leverage in 2013.

NPAs are expected to experience continued improvement. This quarter, NCOs were slightly below our expected normalized range of 35 to 55 basis points. The level of provision for credit losses was below our long-term expectation, and we continue to expect moderate quarterly volatility.

The effective tax rate for 2013 is expected to be in the range of 25% to 28%, primarily reflecting the impacts of tax-exempt income, tax advantaged investments, and general business credits.

 

10


Conference Call / Webcast Information

Huntington’s senior management will host an earnings conference call on Thursday, July 18, 2013, at 10:00 a.m. (Eastern Time). The call may be accessed via a live Internet webcast at www.huntington-ir.com or through a dial-in telephone number at (877) 684-3807; Conference ID 96993401. Slides will be available at www.huntington-ir.com about an hour prior to the call. A replay of the webcast will be archived in the Investor Relations section of Huntington’s web site, www.huntington.com. A telephone replay will be available approximately two hours after the completion of the call through July 31, 2013 at (855) 859-2056 or (404) 537-3406; conference ID #96993401.

Please see the 2013 Second Quarter Quarterly Financial Supplement for additional detailed financial performance metrics. This document can be found at: http://www.investquest.com/iq/h/hban/ne/news/index.htm

Forward-looking Statement

This document contains certain forward-looking statements, including certain plans, expectations, goals, projections, and statements, which are subject to numerous assumptions, risks, and uncertainties. Forward-looking statements may be identified by words such as expect, anticipate, believe, intend, estimate, plan, target, goal, or similar expressions, or future or conditional verbs such as will, may, might, should, would, could , or similar variations.

While there is no assurance that any list of risks and uncertainties or risk factors is complete, below are certain factors which could cause actual results to differ materially from those contained or implied in the forward-looking statements: (1) worsening of credit quality performance due to a number of factors such as the underlying value of collateral that could prove less valuable than otherwise assumed and assumed cash flows may be worse than expected; (2) changes in economic conditions, including impacts from the implementation of the Budget Control Act of 2011, the American Taxpayer Relief Act of 2012, the Consolidated and Further Continuing Appropriations Act of 2013, as well as the continuing economic uncertainty in the US, the European Union, and other areas; (3) movements in interest rates; (4) competitive pressures on product pricing and services; (5) success, impact, and timing of our business strategies, including market acceptance of any new products or services implementing our “Fair Play” banking philosophy; (6) changes in accounting policies and principles and the accuracy of our assumptions and estimates used to prepare our financial statements; (7) extended disruption of vital infrastructure; (8) the final outcome of significant litigation; (9) the nature, extent, timing, and results of governmental actions, examinations, reviews, reforms, regulations, and interpretations, including those related to the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Basel III regulatory capital reforms, as well as those involving the OCC, Federal Reserve, and CFPB;and (10) the outcome of judicial and regulatory decisions regarding practices in the residential mortgage industry, including among other things the processes followed for foreclosing residential mortgages. Additional factors that could cause results to differ materially from those described above can be found in Huntington’s 2012 Annual Report on Form 10-K, and documents subsequently filed by Huntington with the Securities and Exchange Commission. All forward-looking statements included in this document are based on information available at the time of the release. Huntington assumes no obligation to update any forward-looking statement.

Basis of Presentation

Use of Non-GAAP Financial Measures

This document may contain GAAP financial measures and non-GAAP financial measures where management believes it to be helpful in understanding Huntington’s results of operations or financial position. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found in this fourth quarter earnings conference call slides, or the Form 8-K related to this document, all of which can be found on Huntington’s website at www.huntington-ir.com .

Significant Items

From time to time, revenue, expenses, or taxes are impacted by items judged by Management to be outside of ordinary banking activities and/or by items that, while they may be associated with ordinary banking activities, are so unusually large that their outsized impact is believed by Management at that time to be infrequent or short term in nature. We refer to such items as “Significant Items”. Most often, these Significant Items result from factors originating outside the company – e.g., regulatory actions/assessments, windfall gains, changes in accounting principles, one-time tax assessments/refunds, litigation actions, etc. In other cases they may result from Management decisions associated with significant corporate actions out of the ordinary course of business – e.g., merger/restructuring charges, recapitalization actions, goodwill impairment, etc.

 

11


Even though certain revenue and expense items are naturally subject to more volatility than others due to changes in market and economic environment conditions, as a general rule volatility alone does not define a Significant Item. For example, changes in the provision for credit losses, gains/losses from investment activities, asset valuation write-downs, etc., reflect ordinary banking activities and are, therefore, typically excluded from consideration as a Significant Item.

Management believes the disclosure of “Significant Items”, when appropriate, aids analysts/investors in better understanding corporate performance and trends so that they can ascertain which of such items, if any, they may wish to include/exclude from their analysis of the company’s performance—i.e., within the context of determining how that performance differed from their expectations, as well as how, if at all, to adjust their estimates of future performance accordingly. To this end, Management has adopted a practice of listing “Significant Items” in its external disclosure documents (e.g., earnings press releases, quarterly performance discussions, investor presentations, Forms 10-Q and 10-K).

“Significant Items” for any particular period are not intended to be a complete list of items that may materially impact current or future period performance. A number of items could materially impact these periods, including those described in Huntington’s 2012 Annual Report on Form 10-K and other factors described from time to time in Huntington’s other filings with the Securities and Exchange Commission.

Annualized data

Certain returns, yields, performance ratios, or quarterly growth rates are presented on an “annualized” basis. This is done for analytical and decision-making purposes to better discern underlying performance trends when compared to full year or year-over-year amounts. For example, loan and deposit growth rates, as well as net charge-off percentages, are most often expressed in terms of an annual rate like 8%. As such, a 2% growth rate for a quarter would represent an annualized 8% growth rate.

Fully-taxable equivalent interest income and net interest margin

Income from tax-exempt earning assets is increased by an amount equivalent to the taxes that would have been paid if this income had been taxable at statutory rates. This adjustment puts all earning assets, most notably tax-exempt municipal securities and certain lease assets, on a common basis that facilitates comparison of results to results of competitors.

Earnings per share equivalent data

Significant income or expense items may be expressed on a per common share basis. This is done for analytical and decision-making purposes to better discern underlying trends in total corporate earnings per share performance excluding the impact of such items. Investors may also find this information helpful in their evaluation of the company’s financial performance against published earnings per share mean estimate amounts, which typically exclude the impact of Significant Items. Earnings per share equivalents are usually calculated by applying a 35% effective tax rate to a pre-tax amount to derive an after-tax amount, which is divided by the average shares outstanding during the respective reporting period. Occasionally, when the item involves special tax treatment, the after-tax amount is disclosed separately, with this then being the amount used to calculate the earnings per share equivalent.

Rounding

Please note that columns of data in this document may not add due to rounding.

Basel III Estimates

Basel III Tier I common capital ratio estimates are based on management’s current interpretation, expectations, and understanding of the final U.S. Basel III rules adopted by the Federal Reserve Board and released on July 2, 2013.

About Huntington

Huntington Bancshares Incorporated is a $56 billion regional bank holding company headquartered in Columbus, Ohio. The Huntington National Bank, founded in 1866, provides full-service commercial, small business, and consumer banking services; mortgage banking services; treasury management and foreign exchange services; equipment leasing; wealth and investment management services; trust services; brokerage services; customized insurance brokerage and service programs; and other financial products and services. The principal markets for these services are Huntington’s six-state retail banking franchise: Ohio, Michigan, Pennsylvania, Indiana, West Virginia, and Kentucky. The primary distribution channels include a banking network of more than 725 traditional branches and convenience branches located in grocery stores and retirement centers, and through an array of alternative distribution channels including internet and mobile banking, telephone banking, and more than 1,400 ATMs. Through automotive dealership relationships within its six-state retail banking franchise area and selected other Midwest and New England states, Huntington also provides commercial banking services to the automotive dealers and retail automobile financing for dealer customers.

###

 

12

Exhibit 99.2

HUNTINGTON BANCSHARES INCORPORATED

Quarterly Financial Supplement

June 2013

Table of Contents

 

Quarterly Key Statistics

     1   

Year To DateKey Statistics

     2   

Key Statistics Footnotes

     3  

Consolidated Balance Sheets

     4  

Loans and Leases Composition

     5  

Deposits Composition

     6  

Consolidated Quarterly Average Balance Sheets

     7  

Consolidated Quarterly Net Interest Margin Analysis

     8-9   

Selected Quarterly Income Statement Data

     10  

Quarterly Mortgage Banking Income

     11  

Quarterly Credit Reserves Analysis

     12  

Quarterly Net Charge-Off Analysis

     13  

Quarterly Nonaccrual Loans and Leases (NALs) and Nonperforming Assets (NPAs)

     14  

Quarterly Accruing Past Due Loans and Leases and Accruing Troubled Debt Restructured Loans

     15  

Quarterly Common Stock Summary, Capital, and Other Data

     16  

Consolidated Year To Date Average Balance Sheets

     17  

Consolidated Year To Date Net Interest Margin Analysis

     18-19   

Selected Year To Date Income Statement Data

     20   

Year To Date Mortgage Banking Income

     21  

Year To Date Credit Reserves Analysis

     22  

Year To Date Net Charge-Off Analysis

     23  

Year To Date Nonaccrual Loans and Leases (NALs) and Nonperforming Assets (NPAs)

     24  

Year To Date Accruing Past Due Loans and Leases and Accruing Troubled Debt Restructured Loans

     25  


Notes:

The preparation of financial statement data in conformity with accounting principles generally accepted in the United States (GAAP) requires management to make estimates and assumptions that affect amounts reported. Actual results could differ from those estimates. Certain prior period amounts have been reclassified to conform to the current period’s presentation.

Non-Regulatory Capital Ratios

In addition to capital ratios defined by banking regulators, the Company considers various other measures when evaluating capital utilization and adequacy, including:

 

   

Tangible common equity to tangible assets,

 

   

Tier 1 common equity to risk-weighted assets using Basel I and Basel III definitions, and

 

   

Tangible common equity to risk-weighted assets using Basel I definition.

These non-regulatory capital ratios are viewed by management as useful additional methods of reflecting the level of capital available to withstand unexpected market conditions. Additionally, presentation of these ratios allows readers to compare the Company’s capitalization to other financial services companies. These ratios differ from capital ratios defined by banking regulators principally in that the numerator excludes preferred securities, the nature and extent of which varies among different financial services companies. These ratios are not defined in GAAP or federal banking regulations. As a result, these non-regulatory capital ratios disclosed by the Company may be considered non-GAAP financial measures.

Because there are no standardized definitions for these non-regulatory capital ratios, the Company’s calculation methods may differ from those used by other financial services companies. Also, there may be limits in the usefulness of these measures to investors. As a result, the Company encourages readers to consider the consolidated financial statements and other financial information contained in the related press release in their entirety, and not to rely on any single financial measure.


Quarterly Key Statistics (1)

(Unaudited)

 

     2013     2012     Percent Changes vs.  

(dollar amounts in thousands, except per share amounts)

   Second     First     Second     1Q13     2Q12  

Net interest income

   $ 424,937     $ 424,170     $ 428,962       —       (1 )% 

Provision for credit losses

     24,722       29,592       36,520       (16     (32

Noninterest income

     248,655       252,209       253,819       (1     (2

Noninterest expense

     445,865       442,793       444,269       1       —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     203,005       203,994       201,992       —          1  

Provision for income taxes

     52,354       52,214       49,286       —          6  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 150,651     $ 151,780     $ 152,706       (1 )%      (1 )% 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Dividends on preferred shares

     7,967       7,970       7,984       —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income applicable to common shares

   $ 142,684     $ 143,810     $ 144,722       (1 )%      (1 )% 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income per common share—diluted

   $ 0.17     $ 0.17     $ 0.17       —       —  

Cash dividends declared per common share

     0.05       0.04       0.04       25       25  

Book value per common share at end of period

     6.51       6.53       6.13       —          6  

Tangible book value per common share at end of period

     5.88       5.91       5.49       (1     7  

Average common shares—basic

     834,730       841,103       862,261       (1     (3

Average common shares—diluted

     843,840       848,708       867,551       (1     (3

Return on average assets

     1.08     1.10     1.10    

Return on average common shareholders’ equity

     10.4       10.7       11.1      

Return on average tangible common shareholders’ equity (2)

     12.0       12.4       13.1      

Net interest margin (3)

     3.38       3.42       3.42      

Efficiency ratio (4)

     64.0       63.3       62.8      

Noninterest Income/Total Revenue

     36.6       37.0       36.9      

Effective tax rate

     25.8       25.6       24.4      

Average loans and leases

   $ 41,280,065     $ 40,863,921     $ 41,178,520       1       —     

Average loans and leases—linked quarter annualized growth rate

     4.1     4.6     20.8    

Average earning assets

   $ 51,156,168     $ 50,959,966     $ 51,050,479       —          —     

Average total assets

     55,889,271       55,728,126       55,837,396       —          —     

Average core deposits (5)

     43,768,948       43,615,639       42,780,749       —          2  

Average core deposits—linked quarter annualized growth rate

     1.4     (6.3 )%      13.5    

Average shareholders’ equity

   $ 5,888,206     $ 5,834,190     $ 5,617,615       1       5  

Total assets at end of period

     56,113,687       56,054,966       56,622,959       —          (1

Total shareholders’ equity at end of period

     5,783,515       5,867,138       5,649,231       (1     2  

Net charge-offs (NCOs)

     34,790       51,687       84,245       (33     (59

NCOs as a % of average loans and leases

     0.34     0.51     0.82    

Nonaccrual loans and leases (NALs)

   $ 363,546     $ 380,311     $ 474,166       (4     (23

NAL ratio

     0.87     0.92     1.19    

Nonperforming assets (NPAs) (6)

   $ 396,699     $ 415,495     $ 523,250       (5     (24

NPA ratio (6)

     0.95     1.01     1.31    

Allowance for loan and lease losses (ALLL) as a % of total loans and leases at the end of period

     1.76       1.81       2.15      

ALLL plus allowance for unfunded loan commitments and letters of credit (ACL) as a % of total loans and leases at the end of period

     1.86       1.91       2.28      

ACL as a % of NALs

     214       207       192      

ACL as a % of NPAs

     196       190       174      

Tier 1 leverage ratio (7)

     10.64       10.57       10.34      

Tier 1 common risk-based capital ratio (7)

     10.71       10.62       10.08      

Tier 1 risk-based capital ratio (7)

     12.24       12.16       11.93      

Total risk-based capital ratio (7)

     14.57       14.55       14.42      

Tangible common equity / tangible assets ratio (8)

     8.78       8.92       8.41      

See Notes to the Quarterly Key Statistics.

 

1


HUNTINGTON BANCSHARES INCORPORATED

Year To Date Key Statistics (1)

(Unaudited)

 

     Six Months Ended June 30,     Change  

(dollar amounts in thousands, except per share amounts)

   2013     2012     Amount     Percent  

Net interest income

   $ 849,107     $ 846,171     $ 2,936       —  

Provision for credit losses

     54,314       70,926       (16,612     (23

Noninterest income

     500,864       539,139       (38,275     (7

Noninterest expense

     888,658       906,945       (18,287     (2
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     406,999       407,439       (440     —     

Provision for income taxes

     104,568       101,463       3,105       3  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Income

   $ 302,431     $ 305,976     $ (3,545     (1 )% 
  

 

 

   

 

 

   

 

 

   

 

 

 

Dividends on preferred shares

     15,937       16,033       (96     (1
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income applicable to common shares

   $ 286,494     $ 289,943     $ (3,449     (1 )% 
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income per common share—diluted

   $ 0.34     $ 0.33     $ —         3

Cash dividends declared per common share

     0.09       0.08       0.01       13  

Average common shares—basic

     837,917       863,380       (25,463     (3

Average common shares—diluted

     846,274       868,357       (22,083     (3

Return on average assets

     1.09     1.11    

Return on average common shareholders’ equity

     10.6       11.3      

Return on average tangible common shareholders’ equity (2)

     12.2       13.3      

Net interest margin (3)

     3.40       3.41      

Efficiency ratio (4)

     63.7       63.3      

Noninterest Income/Total Revenue

     36.8       38.6      

Effective tax rate

     25.7       24.9      

Average loans and leases

   $ 41,073,143     $ 40,161,604     $ 911,539       2  

Average earning assets

     51,058,609       50,408,502       650,107       1  

Average total assets

     55,809,144       55,246,698       562,445       1  

Average core deposits (5)

     43,692,717       42,083,899       1,608,818       4  

Average shareholders’ equity

     5,861,347       5,554,922       306,426       6  

Net charge-offs (NCOs)

     86,477       167,237       (80,760     (48

NCOs as a % of average loans and leases

     0.42     0.83    

See Notes to the Annual and Quarterly Key Statistics.

 

2


Notes to the Quarterly Key Statistics

 

(1)  

Comparisons for all presented periods are impacted by a number of factors. Refer to Significant Items.

(2)  

Net income excluding expense for amortization of intangibles for the period divided by average tangible common shareholders’ equity. Average tangible common shareholders’ equity equals average total common 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.

(3)  

On a fully-taxable equivalent (FTE) basis assuming a 35% tax rate.

(4)  

Noninterest expense less amortization of intangibles and goodwill impairment divided by the sum of FTE net interest income and noninterest income excluding securities gains (losses).

(5)  

Includes noninterest-bearing and interest-bearing demand deposits, money market deposits, savings and other domestic deposits, and core certificates of deposit.

(6)  

NPAs include other real estate owned.

(7)  

June 30, 2013, figures are estimated.

(8)  

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 liability, and calculated assuming a 35% tax rate.

 

3


Huntington Bancshares Incorporated

Consolidated Balance Sheets

 

     2013     2012     Percent Changes vs.  
     June 30,     December 31,     June 30,     4Q12     2Q12  

(dollar amounts in thousands, except number of shares)

   (Unaudited)           (Unaudited)              

Assets

          

Cash and due from banks

   $ 993,906     $ 1,262,806     $ 1,218,588       (21 )%      (18 )% 

Federal funds sold and securities purchased under resale agreements

     —          —          —         

Interest-bearing deposits in banks

     76,715       70,921       88,825       8       (14

Trading account securities

     80,927       91,205       53,837       (11     50  

Loans held for sale

     458,275       764,309       2,123,371       (40     (78

Available-for-sale and other securities

     6,815,658       7,566,175       8,666,778       (10     (21

Held-to-maturity securities

     2,172,229       1,743,876       598,385       25       263  

Loans and leases (1)

     41,739,847       40,728,425       39,959,180       2       4  

Allowance for loan and lease losses

     (733,076     (769,075     (859,646     (5     (15
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loans and leases

     41,006,771       39,959,350       39,099,534       3       5  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Bank owned life insurance

     1,620,604       1,596,056       1,573,891       2       3  

Premises and equipment

     626,745       617,257       583,057       2       7  

Goodwill

     444,268       444,268       444,268       —          —     

Other intangible assets

     113,874       132,157       159,195       (14     (28

Accrued income and other assets

     1,703,715       1,904,805       2,013,230       (11     (15
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

   $ 56,113,687     $ 56,153,185     $ 56,622,959       —       (1 )% 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities and shareholders’ equity

          

Liabilities

          

Deposits (2)

   $ 46,331,434     $ 46,252,683     $ 46,076,075       —       1

Short-term borrowings

     630,405       589,814       1,205,995       7       (48

Federal Home Loan Bank advances

     983,420       1,008,959       835,653       (3     18  

Other long-term debt

     155,126       158,784       310,043       (2     (50

Subordinated notes

     1,114,368       1,197,091       1,418,216       (7     (21

Accrued expenses and other liabilities

     1,115,419       1,155,643       1,127,746       (3     (1
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

     50,330,172       50,362,974       50,973,728       —          (1
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Shareholder’s equity

          

Preferred stock—authorized 6,617,808 shares-Series A, 8.50% fixed rate, non-cumulative perpetual convertible preferred stock, par value of $0.01, and liquidation value per share of $1,000

     362,507       362,507       362,507       —          —     

Series B, floating rate, non-voting, non-cumulative perpetual preferred stock, par value of $0.01, and liquidation value per share of $1,000

     23,785       23,785       23,785       —          —     

Common stock—Par value of $0.01

     8,310       8,441       8,596       (2     (3

Capital surplus

     7,390,041       7,475,149       7,569,481       (1     (2

Less treasury shares, at cost

     (10,719     (10,921     (10,393     (2     3  

Accumulated other comprehensive loss

     (283,736     (150,817     (135,977     88       109  

Retained earnings

     (1,706,673     (1,917,933     (2,168,768     (11     (21
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total shareholders’ equity

     5,783,515       5,790,211       5,649,231       —          2  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 56,113,687     $ 56,153,185     $ 56,622,959       —          (1
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Common shares authorized (par value of $0.01)

     1,500,000,000       1,500,000,000       1,500,000,000      

Common shares issued

     831,030,258       844,105,349       859,597,015      

Common shares outstanding

     829,674,914       842,812,709       858,401,176      

Treasury shares outstanding

     1,355,344       1,292,640       1,195,839      

Preferred shares issued

     1,967,071       1,967,071       1,967,071      

Preferred shares outstanding

     398,007       398,007       398,007      

 

(1)  

See page 5 for detail of loans and leases.

(2)  

See page 6 for detail of deposits.

N.R- Not relevant, as denominator of calculation is a negative in prior period compared with a positive in current period, or as numberator of caculation is zero in the current period

 

4


Huntington Bancshares Incorporated

Loans and Leases Composition

 

                 2013     2012  
     June 30,     March 31,     December 31,     September 30,     June 30,  

(dollar amounts in millions)

   (Unaudited)     (Unaudited)                  (Unaudited)     (Unaudited)  

Ending Balances by Type:

                        

Commercial: (1)

                        

Commercial and industrial

   $ 17,113       41   $ 17,267        42   $ 16,971        42   $ 16,478        41   $ 16,322        41

Commercial real estate:

                        

Construction

     607       1       574        1       648        2       541        1       591        1  

Commercial

     4,286       10       4,485        11       4,751        12       4,956        12       5,317        13  
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Commercial real estate

     4,893       11       5,059        12       5,399        14       5,497        13       5,908        14  
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total commercial

     22,006       52       22,326        54       22,370        56       21,975        54       22,230        55  
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Consumer:

                        

Automobile

     5,810       14       5,036        12       4,634        11       4,276        11       3,808        10  

Home equity

     8,369       20       8,474        21       8,335        20       8,381        21       8,344        21  

Residential mortgage

     5,168       12       5,051        12       4,970        12       5,192        13       5,123        13  

Other consumer

     387       2       397        1       419        1       436        1       454        1  
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total consumer

     19,734       48       18,958        46       18,358        44       18,285        46       17,729        45  
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total loans and leases

   $ 41,740       100   $ 41,284        100   $ 40,728        100   $ 40,260        100   $ 39,959        100
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Ending Balances by Business Segment:

                        

Retail and Business Banking

   $ 12,642       30   $ 12,749        31   $ 12,644        31   $ 12,656        31   $ 12,714        32

Regional and Commercial Banking

     11,119       27       11,166        27       10,679        26       10,463        26       10,420        26  

AFCRE

     12,119       29       11,526        28       11,396        28       11,019        27       10,892        27  

WGH

     5,868       14       5,767        14       5,887        15       6,053        16       5,904        15  

Treasury / Other

     (8     —          76        —          122        —          69        —          29        —     
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total loans and leases

   $ 41,740       100   $ 41,284        100   $ 40,728        100   $ 40,260        100   $ 39,959        100
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 
                 2013     2012  
     Second     First     Fourth     Third     Second  

Average Balances by Business Segment:

                        

Retail and Business Banking

   $ 12,688       31   $ 12,693        31   $ 12,677        31   $ 12,703        32   $ 12,977        32

Regional and Commercial Banking

     11,058       27       10,987        27       10,390        26       10,427        26       10,229        25  

AFCRE

     11,683       28       11,454        28       11,221        28       10,949        27       11,891        29  

WGH

     5,837       14       5,711        14       6,054        15       5,993        15       6,007        14  

Treasury / Other

     14       —          19        —          55        —          48        —          75        —     
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total loans and leases

   $ 41,280       100   $ 40,864        100   $ 40,397        100   $ 40,120        100   $ 41,179        100
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

 

(1)  

As defined by regulatory guidance, there were no commercial loans outstanding that would be considered a concentration of lending to a particular industry or group of industries.

 

5


Huntington Bancshares Incorporated

Deposits Composition

 

     2013     2012  
     June 30,     March 31,     December 31,     September 30,     June 30,  

(dollar amounts in millions)

   (Unaudited)            (Unaudited)                         (Unaudited)     (Unaudited)  

Ending Balances by Type:

                         

Demand deposits—noninterest-bearing

   $ 13,491        29   $ 12,757        27   $ 12,600        27   $ 12,680        27   $ 12,324        27

Demand deposits—interest-bearing

     5,977        13       6,135        13       6,218        13       5,909        13       6,060        13  

Money market deposits

     15,131        33       15,165        32       14,691        32       14,926        32       13,756        30  

Savings and other domestic deposits

     5,054        11       5,174        11       5,002        11       4,949        11       4,961        11  

Core certificates of deposit

     4,353        9       5,170        11       5,516        12       5,817        12       6,508        14  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total core deposits

     44,006        95       44,401        94       44,027        95       44,281        95       43,609        95  

Other domestic deposits of $250,000 or more

     283        1       355        1       354        1       352        1       260        1  

Brokered deposits and negotiable CDs

     1,695        4       1,807        4       1,594        3       1,795        4       1,888        4  

Deposits in foreign offices

     347        —          304        1       278        1       313        —          319        —     
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total deposits

   $ 46,331        100   $ 46,867        100   $ 46,253        100   $ 46,741        100   $ 46,076        100
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total core deposits:

                         

Commercial

   $ 18,922        43   $ 18,502        42   $ 18,358        42   $ 19,207        43   $ 18,324        42

Consumer

     25,084        57       25,899        58       25,669        58       25,074        57       25,285        58  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total core deposits

   $ 44,006        100   $ 44,401        100   $ 44,027        100   $ 44,281        100   $ 43,609        100
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Ending Balances by Business Segment:

                         

Retail and Business Banking

   $ 28,209        61   $ 28,719        61   $ 28,367        61   $ 28,220        60   $ 28,348        62

Regional and Commercial Banking

     5,639        12       5,627        12       5,863        13       6,205        13       5,333        12  

AFCRE

     1,021        2       970        2       995        2       922        2       907        2  

WGH

     10,069        22       10,015        22       9,508        21       9,816        22       9,782        20  

Treasury / Other (1)

     1,393        3       1,536        3       1,520        3       1,578        3       1,706        4  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total deposits

   $ 46,331        100   $ 46,867        100   $ 46,253        100   $ 46,741        100   $ 46,076        100
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 
     2013     2012  
     Second            First            Fourth            Third            Second         

Average Balances by Business Segment:

                         

Retail and Business Banking

   $ 28,345        61   $ 28,331        62   $ 28,301        61   $ 28,248        61   $ 28,260        63

Regional and Commercial Banking

     5,506        12       5,668        12       6,120        13       5,715        12       4,762        11  

AFCRE

     954        2       922        2       949        2       942        2       855        2  

WGH

     9,919        22       9,623        21       9,873        21       9,735        21       9,783        21  

Treasury / Other (1)

     1,463        3       1,469        3       1,524        3       1,658        4       1,197        3  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total deposits

   $ 46,187        100   $ 46,013        100   $ 46,767        100   $ 46,298        100   $ 44,857        100
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

 

(1)  

Comprised primarily of national market deposits.

 

6


Huntington Bancshares Incorporated

Consolidated Quarterly Average Balance Sheets

(Unaudited)

 

     Average Balances              
     2013     2012     Percent Changes vs.  

(dollar amounts in millions)

   Second     First     Fourth     Third     Second     1Q13     2Q12  

Assets

              

Interest-bearing deposits in banks

   $ 84     $ 72     $ 73     $ 82     $ 124       17     (32 )% 

Loans held for sale

     678       709       840       1,829       410       (4     65  

Securities:

              

Available-for-sale and other securities:

              

Taxable

     6,728       6,964       7,131       8,014       8,285       (3     (19

Tax-exempt

     591       549       492       423       387       8       53  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total available-for-sale and other securities

     7,319       7,513       7,623       8,437       8,672       (3     (16

Trading account securities

     84       85       97       66       54       (1     56  

Held-to-maturity securities—taxable

     1,711       1,717       1,652       796       611       (0     180  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Securities

     9,114       9,315       9,372       9,299       9,337       (2     (2
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loans and leases: (1)

              

Commercial:

              

Commercial and industrial

     17,033       16,954       16,507       16,343       16,094       —         6  

Commercial real estate:

              

Construction

     586       598       576       569       584       (2     —    

Commercial

     4,429       4,694       4,897       5,153       5,491       (6     (19
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Commercial real estate

     5,015       5,292       5,473       5,722       6,075       (5     (17
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total commercial

     22,048       22,246       21,980       22,065       22,169       (1     (1
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Consumer:

              

Automobile

     5,283       4,833       4,486       4,065