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) October 17, 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 October 17, 2013, Huntington Bancshares Incorporated (“Huntington”) issued a news release announcing its earnings for the quarter ended September 30, 2013. Also on October 17, 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 October 17, 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 51293395. 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-ir.com . A telephone replay will be available two hours after the completion of the call through October 31, 2013, at (855) 859-2056 or (404) 537-3406; conference call ID 51293395.

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 October 17, 2013.

Exhibit 99.2 – Quarterly Financial Supplement, September 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: October 17, 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, October 17, 2013.
Exhibit 99.2    Quarterly Financial Supplement, September 2013.

Exhibit 99.1

 

LOGO   LOGO

FOR IMMEDIATE RELEASE

Oct. 17, 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 $178 MILLION, OR $0.20 PER COMMON SHARE, FOR THE

2013 THIRD QUARTER, UP 6% FROM THE YEAR-AGO QUARTER AND UP 18% FROM

THE PRIOR QUARTER

Specific highlights compared with 2012 Third Quarter:

 

   

$0.39, or 7%, increase in tangible book value per common share to $6.10

 

   

1.27% return on average assets, up from 1.19%

 

   

$682 million of fully-taxable equivalent revenue, a 2% decrease reflecting:

 

   

$4 million, or 1%, decrease in fully-taxable equivalent net interest income, reflecting a 3.34% fully-taxable equivalent net interest margin (NIM), down 4 basis points, and 5% average loan growth

 

   

$11 million, or 4%, decrease in noninterest income

 

   

$35 million, or 8%, decrease in noninterest expense due to reductions in all categories except net occupancy and equipment. The quarter included:

 

   

A previously announced, $34 million one-time, non-cash gain related to pension curtailment, and

 

   

$17 million of charges related to branch consolidations, severance, and facility optimization

 

   

25% decline in nonaccrual loans to 0.78% of total loans and leases, down from 1.11%

 

   

Tier 1 Common Ratio of 10.85%, up from 10.28%

Specific highlights compared with 2013 Second Quarter:

 

   

$2 million, or less than 1%, increase in fully-taxable equivalent revenue, reflecting:

 

   

7% annualized growth in average total loans and leases offset by 4 basis point reduction in NIM resulted in unchanged net interest income

 

   

$2 million increase in noninterest income as broad fee income growth was partially offset by the $10 million, or 30%, decrease in mortgage banking income

 

   

$23 million, or 5%, decrease in noninterest expense included $17 million of Significant Items

 

   

NCOs increased to 0.53% of average total loans and leases from 0.34%, and remained in our long-term expected range

 

   

2.0 million shares repurchased at an average price of $8.18 per share


COLUMBUS, Ohio – Huntington Bancshares Incorporated (NASDAQ: HBAN; www.huntington.com ) reported 2013 third quarter net income of $178 million, an increase of $11 million, or 6%, from the 2012 third quarter and an increase of $28 million, or 18%, from the 2013 second quarter. Earnings per common share were $0.20, an increase of $0.01 and $0.03 from the year-ago and prior quarters, respectively.

The board of directors declared a quarterly cash dividend on its common stock of $0.05 per common share. The dividend is payable January 2, 2014, to shareholders of record on December 19, 2013.

Strategies Continue to Drive Business Performance

“Huntington’s third-quarter results continue to demonstrate that our uniquely positioned products and services are driving robust organic customer acquisition across our commercial and consumer customer base while delivering stable returns to shareholders,” said Stephen D. Steinour, chairman, president and CEO of Huntington Bank. “Through our disciplined investments in fee-income businesses in conjunction with prudent expense management, we have been able to deliver modest positive operating leverage for the first nine months of the year.”

“There is much to recognize in the quarter, not the least of which was our successful consumer credit card launch. The third quarter was a time of continuing household growth, particularly within our in-store branches, and marked a return to stability of our commercial real estate loan portfolio,” said Steinour. “Our performance has benefited from ongoing improvement within our core Midwestern economies. We also made progress in managing expenses, including one-time savings attributable to pension curtailment, rightsizing of some investments, and the consolidation of 22 branch locations. Overall, it was a solid quarter positioning Huntington for a good finish for 2013.”

Table 1 – Earnings Performance Summary

 

     2013     2012  

($ in millions, except per share data)

   Third
Quarter
    Second
Quarter
    First
Quarter
    Fourth
Quarter
    Third
Quarter
 

Net Income

   $ 178.5      $ 150.7      $ 151.8      $ 167.3      $ 167.8   

Diluted earnings per common share

     0.20        0.17        0.17        0.19        0.19   

Return on average assets

     1.27     1.08     1.10     1.19     1.19

Return on average common equity

     12.3        10.4        10.7        11.6        11.9   

Return on average tangible common equity

     14.1        12.0        12.4        13.5        13.9   

Net interest margin

     3.34        3.38        3.42        3.45        3.38   

Efficiency ratio

     60.6        64.0        63.3        62.3        64.5   

Tangible book value per common share

   $ 6.10      $ 5.88      $ 5.91      $ 5.78      $ 5.71   

Cash dividends declared per common share

     0.05        0.05        0.04        0.04        0.04   

Average diluted shares outstanding (000’s)

     841,015        843,840        848,708        853,306        863,588   

Average earning assets

   $ 51,247      $ 51,156      $ 50,960      $ 50,682      $ 51,330   

Average loans

     41,994        41,280        40,864        40,397        40,120   

Average core deposits

     43,773        43,768        43,616        44,310        43,764   

Tangible common equity / tangible assets ratio

     9.02     8.78     8.92     8.76     8.74

Tier 1 common risk-based capital ratio

     10.85        10.71        10.62        10.48        10.28   

NCOs as a % of average loans and leases

     0.53     0.34     0.51     0.69     1.05

NAL ratio

     0.78        0.87        0.92        1.00        1.11   

ACL as a % of total loans and leases

     1.72        1.86        1.91        1.99        2.09   

 

2


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 performance trends. (See Significant Items under the Basis of Presentation for a full discussion.)

Table 2 highlights the Significant Items impacting reported results for the prior five quarters. This quarter contained two significant items relating to the pension curtailment and expense related to consolidation of 22 branches, severance, and facilities optimization.

Table 2 – Significant Items Influencing Earnings Performance Comparisons

 

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

September 30, 2013 – net income

     $ 178      $ 0.20   

• Pension curtailment gain

   $ 34        22        0.03   

• Franchise repositioning related expense

     (17     (11     (0.01

June 30, 2013 – net income

     $ 151      $ 0.17   

March 31, 2013 – net income

     $ 152      $ 0.17   

December 31, 2012 – net income

     $ 167      $ 0.19   

September 30, 2012 – net income

     $ 168      $ 0.19   

• State deferred tax valuation allowance adjustment

     N.A.        20        0.02   

 

(1)  

Favorable (unfavorable) impact on net income; 35% tax rate

(2)  

EPS reflected on a fully diluted basis

N.A. = Not applicable

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

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

 

       2013     2012              
     Third     Second     First     Fourth     Third     Change (%)  

($ in millions)

   Quarter     Quarter     Quarter     Quarter     Quarter     LQ     YOY  

Net interest income

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

FTE adjustment

     6.6       6.6       5.9       5.5       5.3       1       26  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income—FTE

     431.5       431.5       430.1       439.5       435.6       (0 )     (1 )

Noninterest income

     250.5       248.7       252.2       297.7       261.1       1       (4 )
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue—FTE

   $ 682.0     $ 680.2     $ 682.3     $ 737.2     $ 696.6       0     (2 )% 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                                   Change bps  

Yield / Cost

                                 LQ     YOY  

Total earning assets

     3.64     3.68     3.75     3.80 %     3.79     (4 )     (16 )

Total loans and leases

     3.87       3.95       4.03       4.13       4.12       (7 )     (25 )

Total securities

     2.41       2.38       2.39       2.38       2.41       3       0  

Total interest-bearing liabilities

     0.42       0.42       0.45       0.50       0.58       0       (15 )

Total interest-bearing deposits

     0.33       0.36       0.38       0.42       0.48       (2 )     (15 )

Net interest rate spread

     3.20       3.26       3.30       3.30       3.21       (6 )     (1 )

Impact of noninterest-bearing funds on margin

     0.14       0.12       0.12       0.15       0.17       2       (3 )
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest margin

     3.34     3.38     3.42     3.45 %     3.38     (4 )     (4 )
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

 

3


Fully-taxable equivalent net interest income decreased $4 million, or 1%, from the 2012 third quarter. This reflected the impact of a 4 basis point decrease in the fully-taxable equivalent net interest margin (NIM) to 3.34%, as average earning assets were essentially unchanged with 5% loan growth offset by the planned reduction in investment securities. The primary items impacting the decrease in the NIM were:

 

   

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

Partially offset by:

 

   

15 basis point positive impact from the mix and yield of deposits reflecting the strategic focus on changing the funding sources from higher rate time deposits to no-cost demand deposits and low cost money market deposits.

Compared to the 2013 second quarter, fully-taxable equivalent net interest income was unchanged, reflecting a $0.1 billion increase in average earnings assets as well as an additional day in the quarter, primarily offset by a 4 basis point decrease in NIM. The primary items affecting the NIM were a 4 basis point negative impact from the mix and yield of earning assets and the 3 basis point negative impact of the $750 million of debt issued during the quarter, partially offset by the 3 basis point benefit from lower cost deposits and increased equity.

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

 

     2013      2012               
     Third      Second      First      Fourth      Third      Change (%)  

(in billions)

   Quarter      Quarter      Quarter      Quarter      Quarter      LQ     YOY  

Average Loans and Leases

                   

Commercial and industrial

   $ 17.0       $ 17.0       $ 17.0       $ 16.5       $ 16.3         (0 )%      4

Commercial real estate

     4.9         5.0         5.3         5.5         5.7         (2 )     (14 )
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total commercial

     21.9         22.0         22.2         22.0         22.1         (0 )     (1 )
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Automobile

     6.1         5.3         4.8         4.5         4.1         15       49  

Home equity

     8.3         8.3         8.4         8.3         8.4         1       (0 )

Residential mortgage

     5.3         5.2         5.0         5.2         5.2         1       2  

Other consumer

     0.4         0.5         0.4         0.4         0.4         (18 )     (14 )
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total consumer

     20.1         19.2         18.6         18.4         18.1         4       11  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total loans and leases

     42.0         41.3         40.9         40.4         40.1         2       5  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total securities

     8.8         9.1         9.3         9.4        9.3         (3 )     (5 )

Held-for-sale and other earning assets

     0.4         0.8         0.8         0.9        1.9         (43 )     (77 )

Total earning assets

   $ 51.2       $ 51.2       $ 51.0       $ 50.7      $ 51.3         0 %     (0 )% 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

See Page 7 of Quarterly Financial Supplement for additional detail.

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

 

   

$1.5 billion, or 77%, decrease in Held-for-sale and other earning assets reflecting the impact of the Automobile loan securitization completed in 2012 fourth quarter.

 

   

$0.8 billion, or 14%, decrease in average Commercial Real Estate (CRE) loans. This decrease reflected continued runoff of the noncore portfolio and a slight reduction of the core portfolio, as acceptable returns for new core originations were balanced against internal concentration limits and increased competition for projects sponsored by high quality developers.

 

4


Partially offset by:

 

   

$2.0 billion, or 49%, increase in average on balance sheet Automobile loans, as originations, while below industry levels, remained strong and our investments in the Northeast and upper Midwest continued to grow as planned.

 

   

$0.7 billion, or 4%, increase in average Commercial and Industrial (C&I) loans and leases. This reflected the continued growth within the middle market healthcare vertical, equipment finance, and dealer floorplan.

Compared to the 2013 second quarter, the $0.1 billion, or less than 1%, increase in average earning assets reflected a $0.8 billion, or 15%, increase in automobile loans partially offset by a $0.3 billion decrease in both loans held for sale and total securities.

Table 5 – Average Liabilities – Noninterest Bearing Deposit Growth Continues and Customers Move from CDs to Money Market Deposits

 

     2013      2012               
     Third      Second      First      Fourth      Third      Change (%)  

(in billions)

   Quarter      Quarter      Quarter      Quarter      Quarter      LQ     YOY  

Average Deposits

                   

Demand deposits—noninterest bearing

   $ 13.1      $ 12.9       $ 12.2       $ 13.1       $ 12.3         2     6 %

Demand deposits—interest bearing

     5.8        5.9         6.0         5.8         5.8         (3 )     (1 )
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total demand deposits

     18.9        18.8         18.1         19.0         18.1         0       4  

Money market deposits

     15.7        15.1         15.0         14.7         14.5         4       8  

Savings and other domestic deposits

     5.0        5.1         5.1         5.0         5.0         (2 )     1  

Core certificates of deposit

     4.2        4.8         5.3         5.6         6.1         (13 )     (32 )
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total core deposits

     43.8        43.8         43.6         44.3         43.8         0       0  

Other domestic deposits of $250,000 or more

     0.3        0.3         0.4         0.4         0.3         (17 )     (11 )

Brokered deposits and negotiable CDs

     1.6        1.8         1.7         1.8         1.9         (13 )     (17 )

Other deposits

     0.4        0.3         0.3         0.3         0.4         19       6  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total deposits

     46.0        46.2         46.0         46.8         46.3         (0 )     (1 )
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Short and long-term borrowings

     3.0        2.8        2.8         2.4        3.1         10       (2 )

Total Interest-bearing liabilities

   $ 35.9      $ 36.1      $ 36.6       $ 36.1      $ 37.0         (0 )%      (3 )%
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

See Page 7 of Quarterly Financial Supplement for additional detail.

Average noninterest bearing deposits increased $0.8 billion, or 6%, while average interest-bearing liabilities decreased $1.1 billion, or 3%, from the 2012 third quarter, primarily reflecting:

 

   

$2.0 billion, or 32%, 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 market deposits.

Partially offset by:

 

   

$1.2 billion, or 8%, increase in money market deposits reflecting the strategic focus on customer growth, increased share of wallet and the customer’s, both consumer and commercial, preference for increased liquidity.

Compared to the 2013 second quarter, average interest-bearing liabilities declined $0.2 billion, or less than 1%. Average total core deposits were relatively unchanged as the $0.7 billion, or 4%, increase in money market deposits was nearly offset by the $0.6 billion, or 13%, decrease in core certificates of deposit.

 

5


Noninterest Income

Table 6 – Noninterest Income – Broad-Based Growth Offsets More than Half of the Decline in Mortgage Banking Income

 

     2013     2012               
     Third      Second     First     Fourth      Third      Change (%)  

(in millions)

   Quarter      Quarter     Quarter     Quarter      Quarter      LQ     YOY  

Noninterest Income

                 

Service charges on deposit accounts

   $ 72.9       $ 68.0      $ 60.9      $ 68.1       $ 67.8         7     8

Mortgage banking income

     23.6         33.7        45.2        61.7         44.6         (30 )     (47 )

Trust services

     30.5         30.7        31.2        31.4         29.7         (1 )     3  

Electronic Banking

     24.3         23.3        20.7        21.0         22.1         4       10  

Brokerage income

     16.5         19.5        18.0        17.4         16.5         (15 )     0  

Insurance income

     17.3         17.2        19.3        17.3         17.8         0       (3 )

Gain on sale of loans

     5.1         3.3        2.6        20.7         6.6         51       (23 )

Bank owned life insurance income

     13.7         15.4        13.4        13.8         14.4         (11 )     (4 )

Capital markets fees

     12.8         12.2        7.8        12.7         11.6         5       11  

Securities (losses) gains

     0.1         (0.4     (0.5     0.9         4.2         (124 )     (98 )

Other income

     33.7         25.7        33.6        32.8         25.8         31       31  
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total noninterest income

   $ 250.5       $ 248.7      $ 252.2      $ 297.7       $ 261.1         1     (4 )% 
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

In the 2013 third quarter, noninterest income decreased $11 million, or 4%, from the year-ago quarter, primarily reflecting:

 

   

$21 million, or 47%, decrease in mortgage banking income primarily driven by a lower gain on sale margin and a higher percentage of originations held on balance sheet.

 

   

$4 million, or 98%, decrease in security gains as the year-ago quarter had certain securities designated as available-for-sale that were sold and the proceeds from those sales were reinvested into the held-to-maturity portfolio.

Partially offset by:

 

   

$8 million, or 31%, increase in other noninterest income primarily related to fees associated with commercial loan activity.

 

   

$5 million, or 8%, increase in service charges on deposit accounts reflecting 9% consumer household and 7% commercial relationship growth and changing customer usage patterns.

Compared to the 2013 second quarter, noninterest income increased $2 million, or 1%, reflecting similar activity within other noninterest income and service charges on deposit accounts, which increased $8 million and $5 million, respectively. These were partially offset by the $10 million, or 30%, decrease in mortgage banking income on 5% lower origination volume with a tighter gain on sale margin and a $3 million, or 15%, decrease in brokerage income due to typical seasonal trends.

 

6


Noninterest Expense

Table 7 – Noninterest Expense – Decreases Even When Considering Significant Items

 

     2013      2012               
     Third      Second     First      Fourth      Third      Change %  

(in millions)

   Quarter      Quarter     Quarter      Quarter      Quarter      LQ     YOY  

Noninterest Expense

                  

Personnel costs

   $ 229.3       $ 263.9      $ 258.9       $ 254.0       $ 247.7         (13 )%      (7 )%

Outside data processing and other services

     49.3         49.9        49.3         48.7         50.4         (1 )     (2 )

Net occupancy

     35.6         27.7        30.1         29.0         27.6         29       29  

Equipment

     28.2         24.9        24.9         26.6         26.0         13       9  

Deposit and other insurance expense

     11.2         13.5        15.5         16.3         15.5         (17 )     (28 )

Professional services

     12.5         9.3        7.2         22.5         17.5         34       (29 )

Marketing

     12.3         14.2        11.0         16.5         16.8         (14 )     (27 )

Amortization of intangibles

     10.4         10.4        10.3         11.6         11.4         0       (9 )

OREO and foreclosure expense

     2.1         (0.3     2.7         4.2         5.0         658       (59 )

Loss (Gain) on early extinguishment of debt

     —           —          —           —           1.8         NR        (100 )

Other expense

     32.6         32.4        33.0         41.2         38.6         1       (16 )
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total noninterest expense

   $ 423.3       $ 445.9      $ 442.8       $ 470.6       $ 458.3         (5 )%     (8 )%
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

(in thousands)

                                              

Number of employees (full-time equivalent)

     12.0         12.2        12.1         11.8         11.7         (2 )%      2 %

NR-Not relevant

In the 2013 third quarter, noninterest expense decreased $35 million, or 8%, from the year-ago quarter. When adjusting for the $17 million of Significant Items, noninterest expense decreased $18 million. The decrease in the reported noninterest expenses primarily reflects:

 

   

$18 million, or 7%, decrease in personnel costs primarily reflecting the $34 million one-time, non-cash gain related to the pension curtailment. This was partially offset by $7 million of branch consolidation and severance expenses and an $8 million increase in salaries due to a 2% increase in the number of full-time equivalent employees as external information technology contractors were transitioned to full-time employees.

 

   

$6 million, or 16%, decline in other expense, reflecting lower representations and warranties related expenses and lower operating lease expense.

 

   

$5 million, or 29%, decrease in professional services, reflecting a decrease in legal and outside consultant expenses.

 

   

$5 million, or 27%, decrease in marketing, primarily reflecting the refinement of targeted marketing programs and reduced promotional offers.

 

   

$4 million, or 28%, decrease in deposit and other insurance expense due to lower insurance premiums.

 

   

$3 million, or 59%, decrease in OREO and foreclosure expense as OREO properties have declined 46%.

Partially offset by:

 

   

$8 million, or 29%, increase in net occupancy reflecting $8 million related to branch consolidation and facilities optimization.

 

7


Noninterest expense decreased $23 million, or 5%, from the prior quarter. When adjusting for the $17 million of Significant Items, noninterest expense decreased $5 million. Personnel costs decreased $35 million, or 13%, as it included $27 million of net benefit from the aforementioned Significant Items. Net occupancy and equipment increased $8 million and $3 million, respectively, and included $8 million and $2 million, respectively, of branch consolidation and facilities optimization related expenses.

Credit Quality

Table 8 – Summary Credit Quality Metrics – Nonaccrual Loans Continue Their Steady Decline

 

     2013     2012  

($ in thousands)

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

Total nonaccrual loans and leases

   $ 333,106     $ 363,546     $ 380,311     $ 407,633     $ 445,046  

Total other real estate, net

     29,154       21,066       25,139       28,097       54,206  

Other NPAs (1)

     12,000       12,087       10,045       10,045       10,476  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total nonperforming assets (2)

   $ 374,260     $ 396,699     $ 415,495     $ 445,775     $ 509,728  

Accruing loans and leases past due 90 days or more

     94,966       94,123       108,423       110,316       108,219  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

   $ 469,226     $ 490,822     $ 523,918     $ 556,091     $ 617,947  

NAL ratio (3)

     0.78     0.87 %     0.92 %     1.00 %     1.11

NPA ratio (2) (4)

     0.88       0.95       1.01       1.09       1.26  

(NPAs+90 days)/(Loans+OREO) (5)

     0.93       1.38       1.48       1.59       1.75  

Provision for credit losses

   $ 11,400     $ 24,722     $ 29,592     $ 39,458     $ 37,004  

Net charge-offs

     55,742       34,790       51,687       70,130       105,095  

Net charge-offs / Average total loans

     0.53     0.34 %     0.51 %     0.69 %     1.05

Allowance for loans and lease losses

   $ 666,030     $ 733,076     $ 746,769     $ 769,075     $ 789,142  

Allowance for unfunded loan commitments and letters of credit

     66,857       44,223       40,855       40,651       53,563  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Allowance for credit losses (ACL)

   $ 732,887     $ 777,299     $ 787,624     $ 809,726     $ 842,705  

ACL as a % of:

          

Total loans and leases

     1.72     1.86 %     1.91 %     1.99 %     2.09

NALs

     220       214       207       199       189  

NPAs

     196       196       190       182       165  

 

(1) Other nonperforming assets includes certain impaired investment securities.
(2) NPA’s related to Chapter 7 bankruptcy: 3Q13 - $57.9 MM, 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.
(5) The sum of nonperforming assets and total accruing loans and leases past due 90 days or more divided by the sum of loans and leases and other real estate.

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

Most credit quality related metrics in the 2013 third quarter reflected continued improvement. Nonaccrual loans and leases (NALs) declined $112 million, or 25%, from the 2012 third quarter and $30 million, or 8%, from the 2013 second quarter to $333 million, or 0.78% of total loans and leases. Nonperforming assets (NPAs) declined $135 million, or 27%, compared to the year-ago quarter and $22 million, or 6%, from the 2013 second quarter to $374 million, or 0.88% of total loans and leases, OREO, and other NPAs. The decreases primarily reflected meaningful improvement in both C&I and CRE NALs.

The provision for credit losses decreased $26 million, or 69%, from the 2012 third quarter due to the continued decline in classified, criticized, and nonaccrual loans and included the implementation of enhancements to our allowance for loan and lease losses (ALLL) model. Net charge-offs (NCOs) decreased $49 million from the year-ago quarter to $56 million as the year-ago quarter included $33 million of Chapter 7 bankruptcy related loans. As part of a review of our consumer portfolio, the current quarter includes $13 million of Chapter 7 home equity related charge-offs that were not identified in the 2012 third quarter implementation of the OCC’s regulatory guidance. NCOs were an annualized 0.53% of average loans and leases in the current quarter compared to 0.34% in the 2013 second quarter and 1.05% in the year-ago quarter.

 

8


The period-end allowance for credit losses (ACL) as a percentage of total loans and leases decreased to 1.72% from 2.09% a year ago, while the ACL as a percentage of period-end total NALs increased to 220% from 189%.

Capital

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

 

     2013     2012  

(in millions)

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

Tangible common equity / tangible assets ratio

     9.02     8.78     8.92     8.76     8.74

Tier 1 common risk-based capital ratio

     10.85     10.71     10.62     10.48     10.28

Regulatory Tier 1 risk-based capital ratio

     12.36     12.24     12.16     12.02     11.88

Excess over 6.0% (1)

   $ 3,096      $ 3,000      $ 2,953      $ 2,876      $ 2,831   

Regulatory Total risk-based capital ratio

     14.67     14.57     14.55     14.50     14.36

Excess over 10.0% (1)

   $ 2,274      $ 2,197      $ 2,181      $ 2,150      $ 2,099   

Total risk-weighted assets

   $ 48,687      $ 48,080      $ 47,937      $ 47,773      $ 48,147   

 

(1) “Well-capitalized” regulatory threshold

See Page 16 of Quarterly Financial Supplement for additional detail.

The tangible common equity to tangible assets ratio at September 30, 2013, was 9.02%, up 28 basis points from the year-ago quarter. Our Tier 1 common risk-based capital ratio at quarter end was 10.85%, up from 10.28% at the end of the 2012 third quarter.

The regulatory Tier 1 risk-based capital ratio at September 30, 2013, was 12.36%, up from 11.88% at September 30, 2012. The increase in the regulatory Tier 1 risk-based capital ratio reflected the increase in retained earnings, partially offset by redemption of $36 million of qualifying trust preferred securities since September 30, 2012. All capital ratios were impacted by the repurchase of 29.9 million common shares over the last four quarters, of which 2.0 million were repurchased in the 2013 third quarter at an average price per share of $8.18. Although Huntington has the ability to repurchase up to $136 million additional shares of common stock through the first quarter of 2014, we intend to continue disciplined repurchase activity consistent with our annual capital plan, our capital return objectives, and market conditions especially as those conditions impact the trading price of our common stock. We do not anticipate that the pending transaction with Camco will materially impact our repurchase activities except during the relatively limited time we will be required to be out of the market under the SEC’s Regulation M.

Income Taxes

The provision for income taxes in the 2013 third quarter was $62 million, $52 million in the 2013 second quarter, and $28 million in the 2012 third quarter. The effective tax rates for the 2013 third quarter, 2013 second quarter, and 2012 third quarter were 25.8%, 25.8%, and 14.4%, respectively. At September 30, 2013, the net federal deferred tax asset was $152 million, and the net state deferred tax asset was $37 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 September 30, 2013. As of September 30, 2013 and June 30, 2013, there was no disallowed deferred tax asset for regulatory capital purposes.

 

9


Expectations

“While we are optimistic about continuing indicators of economic improvement supporting Huntington’s performance for the next several quarters, we must face the headwinds related to the yield curve, regulatory environment, and ongoing uncertainty in Washington,” said Steinour. “We look to our federal elected officials to take the appropriate steps to support economic stability and continue to advocate for sound and sustainable fiscal policies.”

Net interest income is expected to modestly grow over the next several quarters. We anticipate an increase in earning assets as total loans modestly grow and investment securities increase in preparation for the new liquidity rules. However, those benefits to net interest income are expected to be mostly offset by continued modest downward pressure on NIM until the short end of the yield curve begins to move higher. Full-year 2013 NIM is not expected to fall below the mid 3.30%’s. While we are maintaining a disciplined approach to loan pricing, asset yields remain under pressure, and that is partially offset by the continued opportunity of deposit repricing and mix shift.

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. Automobile loan originations remain strong, and we currently do not anticipate any automobile securitizations in the near future. Residential mortgages, home equity, and CRE loan balances are expected to increase modestly.

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.

Noninterest income, when compared to recent levels, is expected to be relatively flat, excluding the impact of any automobile loan sales, any net MSR activity, and typical first quarter seasonality.

Expenses, excluding the $17 million of Significant Items, are expected to modestly increase due to higher depreciation, personnel, occupancy, and equipment expense related to our continued modest pace of investments. We continue to evaluate additional cost saving opportunities, and an additional $6 million of branch consolidation expense is expected in the 2013 fourth quarter from previously announced actions. We remain committed to posting positive operating leverage for the 2013 full year.

NPAs are expected to show continued improvement. This quarter, NCOs were at the high end of 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 27%, primarily reflecting the impacts of tax-exempt income, tax-advantaged investments, and general business credits.

Given its relative small size and structure, the acquisition of Camco Financial, which was announced on October 10, is not expected to have a meaningful impact on current expectations.

 

10


Conference Call / Webcast Information

Huntington’s senior management will host an earnings conference call on Thursday, October 17, 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# 51293395. 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 October 31, 2013 at (855) 859-2056 or (404) 537-3406; conference ID# 51293395.

 

Please see the 2013 Third Quarter Quarterly Financial Supplement for additional detailed financial performance metrics. This document can be found at: http://www.huntington-ir.com

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 general economic, political, or industry conditions; uncertainty in U.S. fiscal and monetary policy, including the interest rate policies of the Federal Reserve Board; volatility and disruptions in global capital and credit markets; (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 third 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.

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.

 

11


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.

About Huntington

Huntington Bancshares Incorporated is a $57 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 700 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 1,500 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

September 2013

Table of Contents

 

Quarterly Key Statistics

     1  

Year To Date Key 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 - Interest Income / Expense

     8  

Consolidated Quarterly Net Interest Margin - Yield

     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 - Interest Income / Expense

     18  

Consolidated Year To Date Net Interest Margin - Yield

     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 and Nonaccruing 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. Basel III Tier 1 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, 2012.


Huntington Bancshares Incorporated

Quarterly Key Statistics (1)

(Unaudited)

 

     2013     2012     Percent Changes vs.  

(dollar amounts in thousands, except per share amounts)

   Third     Second     Third     2Q13     3Q12  

Net interest income

   $ 424,852     $ 424,937     $ 430,298       —       (1 )% 

Provision for credit losses

     11,400       24,722       37,004       (54     (69

Noninterest income

     250,503       248,655       261,067       1       (4

Noninterest expense

     423,336       445,865       458,303       (5     (8
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     240,619       203,005       196,058       19       23  

Provision for income taxes

     62,132       52,354       28,291       19       120  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 178,487     $ 150,651     $ 167,767       18     6
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Dividends on preferred shares

     7,967       7,967       7,983       —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income applicable to common shares

   $ 170,520     $ 142,684     $ 159,784       20     7
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income per common share—diluted

   $ 0.20     $ 0.17     $ 0.19       18     5

Cash dividends declared per common share

     0.05       0.05       0.04       —          25  

Book value per common share at end of period

     6.72       6.51       6.34       3       6  

Tangible book value per common share at end of period

     6.10       5.88       5.71       4       7  

Average common shares—basic

     830,398       834,730       857,871       (1     (3

Average common shares—diluted

     841,015       843,840       863,588       —          (3

Return on average assets

     1.27     1.08     1.19    

Return on average common shareholders’ equity

     12.3       10.4       11.9      

Return on average tangible common shareholders’ equity (2)

     14.1       12.0       13.9      

Net interest margin (3)

     3.34       3.38       3.38      

Efficiency ratio (4)

     60.6       64.0       64.5      

Noninterest Income/Total Revenue

     36.7       36.6       37.5      

Effective tax rate

     25.8       25.8       14.4      

Average loans and leases

   $ 41,994,204     $ 41,280,065     $ 40,119,938       2       5  

Average loans and leases—linked quarter annualized growth rate

     6.9     4.1     (10.3 )%     

Average earning assets

   $ 51,247,215     $ 51,156,168     $ 51,330,241       —          —     

Average total assets

     55,914,791       55,889,271       56,138,175       —          —     

Average core deposits (5)

     43,773,153       43,768,948       43,763,695       —          —     

Average core deposits—linked quarter annualized growth rate

     —       1.4     9.2    

Average shareholders’ equity

   $ 5,879,479     $ 5,888,206     $ 5,730,951       —          3  

Total assets at end of period

     56,648,251       56,113,687       56,443,000       1       —     

Total shareholders’ equity at end of period

     5,961,579       5,783,515       5,807,604       3       3  

Net charge-offs (NCOs)

     55,742       34,790       105,095       60       (47

NCOs as a % of average loans and leases

     0.53     0.34     1.05    

Nonaccrual loans and leases (NALs)

   $ 333,106     $ 363,546     $ 445,046       (8     (25

NAL ratio

     0.78     0.87     1.11    

Nonperforming assets (NPAs) (6)

   $ 374,260     $ 396,699     $ 509,728       (6     (27

NPA ratio (6)

     0.88     0.95     1.26    

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

     1.57       1.76       1.96      

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

     1.72       1.86       2.09      

ACL as a % of NALs

     220       214       189      

ACL as a % of NPAs

     196       196       165      

Tier 1 leverage ratio (7)

     10.85       10.64       10.29      

Tier 1 common risk-based capital ratio (7)

     10.85       10.71       10.28      

Tier 1 risk-based capital ratio (7)

     12.36       12.24       11.88      

Total risk-based capital ratio (7)

     14.67       14.57       14.36      

Tangible common equity / tangible assets ratio (8)

     9.02       8.78       8.74      

See Notes to the Quarterly Key Statistics.

 

1


Huntington Bancshares Incorporated

Year To Date Key Statistics (1)

(Unaudited)

 

     Nine Months Ended September 30,     Change  

(dollar amounts in thousands, except per share amounts)

   2013     2012     Amount     Percent  

Net interest income

   $ 1,273,959     $ 1,276,469     $ (2,510     —  

Provision for credit losses

     65,714       107,930       (42,216     (39

Noninterest income

     751,367       800,206       (48,839     (6

Noninterest expense

     1,311,994       1,365,248       (53,254     (4
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     647,618       603,497       44,121       7  

Provision for income taxes

     166,700       129,754       36,946       28  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Income

   $ 480,918     $ 473,743     $ 7,175       2
  

 

 

   

 

 

   

 

 

   

 

 

 

Dividends on preferred shares

     23,904       24,016       (112     —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income applicable to common shares

   $ 457,014     $ 449,727     $ 7,287       2
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income per common share—diluted

   $ 0.54     $ 0.52     $ 0       4

Cash dividends declared per common share

     0.14       0.12       0.02       17  

Average common shares—basic

     835,410       861,543       (26,133     (3

Average common shares—diluted

     844,521       866,768       (22,247     (3

Return on average assets

     1.15     1.14    

Return on average common shareholders’ equity

     11.1       11.5      

Return on average tangible common shareholders’ equity (2)

     12.9       13.5      

Net interest margin (3)

     3.38       3.40      

Efficiency ratio (4)

     62.6       63.7      

Noninterest Income/Total Revenue

     36.8       38.3      

Effective tax rate

     25.7       21.5      

Average loans and leases

   $ 41,383,537     $ 40,147,614     $ 1,235,923       3  

Average earning assets

     51,122,168       50,717,991       404,177       1  

Average total assets

     55,844,746       55,546,026       298,720       1  

Average core deposits (5)

     43,719,823       42,647,918       1,071,905       3  

Average shareholders’ equity

     5,867,457       5,614,026       253,431       5  

Net charge-offs (NCOs)

     142,219       272,332       (130,113     (48 )% 

NCOs as a % of average loans and leases

     0.46     0.90    

See Notes to the Annual and Quarterly Key Statistics.

 

2


Key Statistics Footnotes

 

(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)  

September 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.  
     September 30,     December 31,     September 30,     4Q12     3Q12  

(dollar amounts in thousands, except number of shares)

   (Unaudited)           (Unaudited)              

Assets

          

Cash and due from banks

   $ 1,107,658     $ 1,262,806     $ 797,601       (12 )%      39

Interest-bearing deposits in banks

     63,100       70,921       65,635       (11     (4

Trading account securities

     74,167       91,205       91,970       (19     (19

Loans held for sale

     345,621       764,309       1,852,919       (55     (81

Available-for-sale and other securities

     6,446,681       7,566,175       7,778,568       (15     (17

Held-to-maturity securities

     2,236,121       1,743,876       1,582,150       28       41  

Loans and leases (1)

     42,555,833       40,728,425       40,260,417       4       6  

Allowance for loan and lease losses

     (666,030     (769,075     (789,142     (13     (16
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loans and leases

     41,889,803       39,959,350       39,471,275       5       6  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Bank owned life insurance

     1,633,247       1,596,056       1,586,902       2       3  

Premises and equipment

     639,632       617,257       590,750       4       8  

Goodwill

     444,268       444,268       444,268       —          —     

Other intangible assets

     103,512       132,157       143,804       (22     (28

Accrued income and other assets

     1,664,441       1,904,805       2,037,158       (13     (18
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

   $ 56,648,251     $ 56,153,185     $ 56,443,000       1     —  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities and shareholders’ equity

          

Liabilities

          

Deposits (2)

   $ 46,564,046     $ 46,252,683     $ 46,741,286       1     —  

Short-term borrowings

     660,932       589,814       1,259,771       12       (48

Federal Home Loan Bank advances

     333,352       1,008,959       9,406       (67     3,444  

Other long-term debt

     904,668       158,784       185,613       470       387  

Subordinated notes

     1,111,598       1,197,091       1,306,273       (7     (15

Accrued expenses and other liabilities

     1,112,076       1,155,643       1,133,047       (4     (2
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

     50,686,672       50,362,974       50,635,396       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

     8,315       8,441       8,567       (1     (3

Capital surplus

     7,387,033       7,475,149       7,551,509       (1     (2

Less treasury shares, at cost

     (10,893     (10,921     (10,817     —          1  

Accumulated other comprehensive loss

     (230,767     (150,817     (84,542     53       173  

Retained earnings

     (1,578,401     (1,917,933     (2,043,405     (18     (23
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total shareholders’ equity

     5,961,579       5,790,211       5,807,604       3       3  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 56,648,251     $ 56,153,185     $ 56,443,000       1     —  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Common shares authorized (par value of $0.01)

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

Common shares issued

     831,516,546       844,105,349       856,748,584      

Common shares outstanding

     830,144,646       842,812,709       855,485,376      

Treasury shares outstanding

     1,371,900       1,292,640       1,263,208      

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.

 

4


Huntington Bancshares Incorporated

Loans and Leases Composition

 

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

(dollar amounts in millions)

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

Ending Balances by Type:

                        

Commercial: (1)

                        

Commercial and industrial

   $ 17,335        41   $ 17,113       41   $ 17,267        42   $ 16,971        42   $ 16,478        41

Commercial real estate:

                        

Construction

     544        1       607       1       574        1       648        2       541        1  

Commercial

     4,328        10       4,286       10       4,485        11       4,751        12       4,956        12  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Commercial real estate

     4,872        11       4,893       11       5,059        12       5,399        14       5,497        13  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total commercial

     22,207        52       22,006       52       22,326        54       22,370        56       21,975        54  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Consumer:

                        

Automobile

     6,317        15       5,810       14       5,036        12       4,634        11       4,276        11  

Home equity

     8,347        20       8,369       20       8,474        21       8,335        20       8,381        21  

Residential mortgage

     5,307        12       5,168       12       5,051        12       4,970        12       5,192        13  

Other consumer

     378        1       387       2       397        1       419        1       436        1  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total consumer

     20,349        48       19,734       48       18,958        46       18,358        44       18,285        46  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total loans and leases

   $ 42,556        100   $ 41,740       100   $ 41,284        100   $ 40,728        100   $ 40,260        100
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Ending Balances by Business Segment:

                        

Retail and Business Banking

   $ 12,673        30   $ 12,642       30   $ 12,749        31   $ 12,644        31   $ 12,656        31

Regional and Commercial Banking

     11,397        27       11,119       27       11,166        27       10,679        26       10,463        26  

AFCRE

     12,484        29       12,119       29       11,526        28       11,396        28       11,019        27  

WGH

     5,961        14       5,868       14       5,767        14       5,887        15       6,053        16  

Treasury / Other

     41        —          (8     —          76        —          122        —          69        —     
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total loans and leases

   $ 42,556        100   $ 41,740       100   $ 41,284        100   $ 40,728        100   $ 40,260        100
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 
     2013     2012  
     Third     Second     First     Fourth     Third  

Average Balances by Business Segment:

                        

Retail and Business Banking

   $ 12,633        30   $ 12,688       31   $ 12,693        31   $ 12,677        31   $ 12,703        32

Regional and Commercial Banking

     11,150        27       11,058       27       10,987        27       10,390        26       10,427        26  

AFCRE

     12,239        29       11,683       28       11,454        28       11,221        28       10,949        27  

WGH

     5,923        14       5,837       14       5,711        14       6,054        15       5,993        15  

Treasury / Other

     49        —          14       —          19        —          55        —          48        —     
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total loans and leases

   $ 41,994        100   $ 41,280       100   $ 40,864        100   $ 40,397        100   $ 40,120        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  
     September 30,     June 30,     March 31,     December 31,     September 30,  

(dollar amounts in millions)

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

Ending Balances by Type:

                         

Demand deposits—noninterest-bearing

   $ 13,421        29   $ 13,491        29   $ 12,757        27   $ 12,600        27   $ 12,680        27

Demand deposits—interest-bearing

     5,856        13       5,977        13       6,135        13       6,218        13       5,909        13  

Money market deposits

     16,212        34       15,131        33       15,165        32       14,691        32       14,926        32  

Savings and other domestic deposits

     4,946        11       5,054        11       5,174        11       5,002        11       4,949        11  

Core certificates of deposit

     4,108        9       4,353        9       5,170        11       5,516        12       5,817        12  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total core deposits

     44,543        96       44,006        95       44,401        94       44,027        95       44,281        95  

Other domestic deposits of $250,000 or more

     268        1       283        1       355        1       354        1       352        1  

Brokered deposits and negotiable CDs

     1,366        3       1,695        4       1,807        4       1,594        3       1,795        4  

Deposits in foreign offices

     387        —          347        —          304        1       278        1       313        —     
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total deposits

   $ 46,564        100   $ 46,331        100   $ 46,867        100   $ 46,253        100   $ 46,741        100
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total core deposits:

                         

Commercial

   $ 19,526        44   $ 18,922        43   $ 18,502        42   $ 18,358        42   $ 19,207        43

Consumer

     25,017        56       25,084        57       25,899        58       25,669        58       25,074        57  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total core deposits

   $ 44,543        100   $ 44,006        100   $ 44,401        100   $ 44,027        100   $ 44,281        100
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Ending Balances by Business Segment:

                         

Retail and Business Banking

   $ 28,200        61   $ 28,209        61   $ 28,719        61   $ 28,367        61   $ 28,220        60

Regional and Commercial Banking

     6,191        13       5,639        12       5,627        12       5,863        13       6,205        13  

AFCRE

     1,084        2       1,021        2       970        2       995        2       922        2  

WGH

     9,935        22       10,069        22       10,015        22       9,508        21       9,816        22  

Treasury / Other (1)

     1,154        2       1,393        3       1,536        3       1,520        3       1,578        3  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total deposits

   $ 46,564        100   $ 46,331        100   $ 46,867        100   $ 46,253        100   $ 46,741        100
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 
     2013     2012  
     Third     Second     First     Fourth     Third  

Average Balances by Business Segment:

                         

Retail and Business Banking

   $ 28,172        61   $ 28,345        61   $ 28,331        62   $ 28,301        61   $ 28,248        61

Regional and Commercial Banking

     5,912        13       5,506        12       5,668        12       6,120        13       5,715        12  

AFCRE

     1,018        2       954        2       922        2       949        2       942        2  

WGH

     9,593        21       9,919        22       9,623        21       9,873        21       9,735        21  

Treasury / Other (1)

     1,275        3       1,463        3       1,469        3       1,524        3       1,658        4  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total deposits

   $ 45,970        100   $ 46,187        100   $ 46,013        100   $ 46,767        100   $ 46,298        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)

   Third     Second     First     Fourth     Third     2Q13     3Q12  

Assets

              

Interest-bearing deposits in banks

   $ 54     $ 84     $ 72     $ 73     $ 82       (36 )%      (34 )% 

Loans held for sale

     379       678       709       840       1,829       (44     (79

Securities:

              

Available-for-sale and other securities:

              

Taxable

     6,040       6,728       6,964       7,131       8,014       (10     (25

Tax-exempt

     565       591       549       492       423       (4     34  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total available-for-sale and other securities

     6,605       7,319       7,513       7,623       8,437       (10     (22

Trading account securities

     76       84       85       97       66       (10     15  

Held-to-maturity securities—taxable

     2,139       1,711       1,717       1,652       796       25       169  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Securities

     8,820       9,114       9,315       9,372       9,299       (3     (5
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loans and leases: (1)

              

Commercial:

              

Commercial and industrial

     17,032       17,033       16,954       16,507       16,343       —          4  

Commercial real estate:

              

Construction

     565       586       598       576       569       (4