Huntington Bancshares Incorporated (NASDAQ: HBAN;
www.huntington.com) reported net income for the 2014 fourth quarter
of $164 million, a $9 million and $5 million increase from the
prior and year-ago quarters, respectively. Earnings per common
share for the 2014 fourth quarter were $0.19, an increase of $0.01
from the prior and year-ago quarters.
2014 full-year net income was $632 million, down 1% from the
prior year. Earnings per common share for the year were $0.72,
unchanged from the prior year.
“We met our commitments of positive operating leverage and
revenue growth,” said Steve Steinour, chairman, president and CEO.
“We continue to invest opportunistically to position ourselves well
as we move into 2015 and beyond.
“Last year we invested in a series of initiatives that drove
revenue growth while streamlining our operations. As a result,
Huntington is uniquely attractive to both consumer and commercial
customers who appreciate our innovative products, strong
distribution system, digital banking, and award-winning customer
service,” continued Steinour. “We continue to manage risk while
investing to deliver continued growth and positive operating
leverage.
“2014 was a year of accomplishments, evidenced by retail banking
customers rating Huntington ‘Highest in Customer Satisfaction with
Retail Banking in the North Central Region’ for the second year in
a row in the J.D. Power 2014 U.S. Retail Banking Satisfaction
Study. Furthermore, small business owners ranked Huntington
‘Highest in Customer Satisfaction with Small Business Banking in
the Midwest Region’ in another study released by J.D. Power in
2014,” Steinour said. “Huntington has been recognized as the No. 1
SBA lender in the country in terms of number of loans, and also
cited by the U.S. Treasury Department as the largest lender in its
state small business credit initiative.”
Huntington today also announced that the Board of Directors
declared a quarterly cash dividend on its common stock of $0.06 per
common share. The dividend is payable April 1, 2015, to
shareholders of record on March 18, 2015.
Specific full-year 2014 highlights compared
with 2013:
- 1.01% return on average assets, 11.8%
return on average tangible common equity
- $100 million, or 4%, increase in
fully-taxable equivalent revenue
- Achieved positive operating leverage
for the second consecutive year
- $6.1 billion, or 12%, increase in
average earning assets
- $3.6 billion, or 9%, increase in
average loans and leases
- Net interest margin of 3.23%, a
decrease of 13 basis points
- $33 million, or 3%, decrease in
noninterest income, including a $42 million, or 33%, decrease in
mortgage banking income
- $124 million, or 7%, increase in
noninterest expense, largely driven by $76 million net impact of
Significant Items related to acquisitions, franchise repositioning,
net additions to litigation reserves, and the benefit from the
prior year’s pension curtailment
- Net charge-offs declined to 0.27% of
average loans and leases, down from 0.45%
- 35.7 million common shares repurchased
at an average price of $9.37 per share; Combined with dividends of
$0.21 per share, $506 million was returned to shareholders
2014 Fourth Quarter specific highlights
compared with 2013 Fourth Quarter:
- $0.36, or 6%, increase in tangible book
value per common share to $6.62; end of period dividend yield of
2.1%
- $7.0 billion, or 13%, increase in
average earning assets; $4.0 billion, or 9%, increase in average
loans and leases
- $25 million, or 4%, increase in
fully-taxable equivalent revenue
- $37 million, or 8%, increase in
noninterest expense, including $13 million net increase related to
Significant Items
- $22 million decrease in provision for
credit losses
2014 Fourth Quarter specific highlights
compared with 2014 Third Quarter:
- $1.3 billion, or 9% annualized,
increase in average earning assets, including a $1.0 billion, or 8%
annualized, increase in average loans and leases
- Net interest margin of 3.18%, a
decrease of 2 basis points
- $14 million, or 6%, decrease in
noninterest income, including an $11 million, or 44%, decrease in
mortgage banking income
- $22 million decrease in provision for
credit losses
Table 1 – Earnings Performance
Summary
Full Year 2014
2013
($ in millions, except per share data)
2014 2013
Fourth Quarter Third
Quarter
Fourth Quarter
Net Income
$ 632.4 $ 641.3
$ 163.6 $
155.0 $ 158.2 Diluted earnings per common share
0.72 0.72
0.19 $ 0.18 $ 0.18 Return on average assets
1.01 % 1.14 %
1.00 % 0.97 % 1.09 % Return on
average common equity
10.2 11.0
10.3 9.9 10.5 Return
on average tangible common equity
11.8 12.7
11.9 11.4
12.1 Net interest margin
3.23 3.36
3.18 3.20 3.28
Efficiency ratio
65.1 62.6
66.2 65.3 63.4
Tangible book value per common share
$ 6.62 $ 6.26
$ 6.62 $ 6.53 $ 6.26 Cash dividends declared per
common share
0.21 0.19
0.06 0.05 0.05 Average diluted
shares outstanding (000's)
833,081 843,974
825,338
829,623 842,324 Average earning assets
$
57,705 $ 51,598
$ 60,010 $ 58,707 $ 53,012
Average loans
45,425 41,826
47,092 46,113 43,138
Average core deposits
46,147 43,979
47,638 46,119
44,748 Tangible common equity / tangible assets ratio
8.17 % 8.82 %
8.17 % 8.35 % 8.82 % Tier 1
common risk-based capital ratio
10.23 10.31
10.23
10.31 10.90 NCOs as a % of average loans and leases
0.27 % 0.45 %
0.20 % 0.26 % 0.43 % NAL ratio
0.63 0.75
0.63 0.70 0.75 ACL as a % of total loans
and leases
1.40 1.65
1.40 1.47 1.65
Table 2 lists certain items that Management believes are
significant in understanding corporate performance and trends (see
Basis of Presentation). This quarter contained two Significant
Items: 1) a $12 million net increase in litigation reserves, and 2)
$9 million of franchise repositioning related expense for the
previously announced consolidation of 26 branches and
organizational actions.
Table 2 – Significant Items Influencing
Earnings
Three Months Ended
Pre-Tax
Impact
After-Tax
Impact
(in millions, except per share) Amount
Amount (1)
EPS (2)
December 31, 2014 – net income
$ 164 $ 0.19
- Addition to litigation reserves
$ (12 ) (8 ) (0.01 )
- Franchise repositioning related expense
(9 ) (6 ) (0.01 )
September 30, 2014 – net income
$ 155 $ 0.18
- Franchise repositioning related expense
$ (19 ) (13 ) (0.02 )
- Merger and acquisition related net expenses
(3 ) (2 ) (0.00 )
June 30, 2014 – net income $
165 $ 0.19 March 31, 2014 – net
income $ 149 $ 0.17
- Camco Financial acquisition
$ (12 ) (8 ) (0.01 )
- Addition to litigation reserves
(9 ) (6 ) (0.01 )
December 31, 2013 – net income
$ 158 $ 0.18
- Franchise repositioning related expense
$ (7 ) (5 ) (0.01 )
September 30, 2013 – net income
$ 178 $ 0.20
$ 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 $ 153 $ 0.17 (1)
Favorable (unfavorable) impact on net income; 35% operating tax
rate (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
2014 2013
2014 2013
Full Full Change
Fourth
Third Fourth Change (%)
($ in millions)
Year Year YOY
Quarter
Quarter Quarter LQ YOY Net interest income
$
1,837.1 $ 1,704.6 8 %
$ 473.3 $ 466.3 $ 430.6
(1 ) % 10 % FTE adjustment
27.6
27.3 1
7.5
7.5 8.2 --- (8 )
Net interest income - FTE
1,864.7 1,731.9 8
480.8
473.8 438.8 (1 ) 10 Noninterest income
979.2 1,012.2 (3 )
233.3 247.3 249.9
6 (7 ) Total revenue - FTE
$ 2,843.9 $ 2,744.1 4
%
$ 714.1 $ 721.2 $ 688.7 1
% 4 % Change bp Yield / Cost
LQ YOY Total earning assets
3.47
% 3.66 % (19 ) bp
3.41 % 3.44 % 3.58 % (3 ) bp (17 )
bp Total loans and leases
3.71 3.93 (22 )
3.60 3.66
3.77 (6 ) (18 ) Total securities
2.57 2.45 12
2.65
2.54 2.60 11 4 Total interest-bearing liabilities
0.34 0.43 (9 )
0.32 0.33 0.42 --- (10 ) Total
interest-bearing deposits
0.25 0.35 (10 )
0.23 0.23
0.32 (1 ) (9 ) Net interest rate spread
3.13 3.23 (10
)
3.09 3.11 3.16 (3 ) (8 ) Impact of noninterest-bearing
funds on margin
0.10 0.13
(3 )
0.09 0.09
0.12 --- (3 ) Net
interest margin
3.23 %
3.36 % (13 ) bp
3.18 % 3.20 % 3.28 %
(2 ) bp (11 ) bp
See Page 8 & 18 of Quarterly Financial Supplement for
additional detail.
Fully-taxable equivalent (FTE) net interest income for the 2014
fourth quarter increased $42 million, or 10%, from the 2013 fourth
quarter. This reflected the benefit from the $7.0 billion, or 13%,
increase in average earnings assets, including a $4.0 billion, or
9%, increase in average loans and leases and a $3.0 billion, or
31%, increase in average securities. This earning asset growth was
partially offset by the 10 basis point decrease in the FTE net
interest margin (NIM) to 3.18%. The NIM contraction reflected a 17
basis point decrease related to the mix and yield of earning assets
and 3 basis point reduction in benefit from the impact of
noninterest-bearing funds, partially offset by the 10 basis point
reduction in funding costs.
Compared to the 2014 third quarter, FTE net interest income
increased $7 million, or 6% annualized. While the NIM decreased 2
basis points, average earning assets increased $1.3 billion, or 9%
annualized, including a $1.0 billion, or 8% annualized, increase in
average loans and leases.
Table 4 – Average Earning Assets –
Automobile and C&I Activity Continue to Drive Growth
2014
2013
2014 2013
Full Full YOY
Fourth
Third Fourth Change (%) (in billions)
Year
Year Change
Quarter Quarter Quarter LQ YOY
Average Loans and Leases
Commercial and industrial
$ 18.3 $ 17.2 7 %
$
18.9 $ 18.6 $ 17.7 2 % 7 % Commercial real estate
5.0 5.0 (1 )
5.1
5.0 4.9 2 4 Total commercial
23.3 22.2 5
24.0 23.5 22.6 2 6 Automobile
7.7 5.7 35
8.5 8.0 6.5 6 31 Home equity
8.4
8.3 1
8.5 8.4 8.3 --- 1 Residential mortgage
5.6 5.2
8
5.8 5.7 5.3 --- 8 Other consumer
0.4 0.4 (9 )
0.4 0.4
0.4 4 7 Total consumer
22.1 19.6 13
23.1
22.6 20.6 2 12 Total loans and leases
45.4 41.8 9
47.1 46.1 43.1 2 9 Total
securities
11.9 9.2 29
12.5 12.2 9.5 2 31
Held-for-sale and other earning assets
0.4 0.6 (31 )
0.5 0.4 0.4 6 17 Total earning assets
$
57.7 $ 51.6 12 %
$ 60.0 $ 58.7 $ 53.0 2
% 13 %
See Page 6 & 16 of Quarterly Financial Supplement for
additional detail.
Average earning assets for the 2014 fourth quarter increased
$7.0 billion, or 13%, from the year-ago quarter, driven by:
- $3.0 billion, or 31%, increase in
average securities, reflecting an increase of $1.5 billion of
Liquidity Coverage Ratio (LCR) Level 1 qualified securities and
$1.3 billion of direct purchase municipal instruments, which at the
end of the year-ago quarter $0.6 billion were reclassified from
Commercial and Industrial (C&I) loans.
- $2.0 billion, or 31%, increase in
average Automobile loans, as originations remained strong.
- $1.2 billion, or 7%, increase in
average C&I loans and leases, primarily reflecting growth in
trade finance in support of our middle market and corporate
customers.
- $0.4 billion, or 8%, increase in
average Residential mortgage loans as a result of the Camco
acquisition and a decrease in the rate of payoffs due to lower
levels of refinancing.
Table 5 – Average Liabilities – Focus
on Core Customer Relationships and Reducing Funding Costs Continues
to Drive Shift in Funding Mix
2014 2013
2014 2013
Full Full YOY
Fourth Third Fourth Change (%)
(in billions)
Year Year Change
Quarter Quarter
Quarter LQ YOY
Average Deposits
Demand deposits - noninterest bearing
$ 14.0 $ 12.9 9
%
$ 15.2 $ 14.1 $ 13.3 8 % 14 % Demand deposits -
interest bearing
5.9 5.9 1
5.9 5.9 5.8 1
3 Total demand deposits
19.9 18.7 6
21.1 20.0 19.1 6 11 Money market deposits
17.9 15.7
14
18.4 17.9 16.8 3 9 Savings and other domestic deposits
5.0 5.0 ---
5.1 5.0 4.9 1 3 Core certificates of
deposit
3.3 4.5 (27 )
3.1 3.2 3.9 (3 ) (22 )
Total core deposits
46.1 44.0 5
47.6 46.1 44.7 3 6
Other domestic deposits of $250,000 or more
0.2 0.3 (21 )
0.2 0.2 0.3 (10 ) (27 ) Brokered deposits and negotiable CDs
2.1 1.6 33
2.4 2.3 1.4 8 74 Other deposits
0.4 0.3 8
0.5 0.4 0.4 28 35
Total deposits
48.9 46.2 6
50.8 49.0 46.8 4
9 Short and long-term borrowings
6.3 3.1 104
6.6 7.2 3.7 (7 ) 78 Total
Interest-bearing liabilities
$ 41.2 $
36.4 13 %
$ 42.2 $ 42.0 $ 37.2 --- % 14
%
See Page 6 & 16 of Quarterly Financial Supplement for
additional detail.
Average total core deposits for the 2014 fourth quarter
increased $2.9 billion, or 6%, from the year-ago quarter, of which
$1.1 billion were acquired deposits. Noninterest bearing deposits
increased $1.8 billion, or 14%. Average interest-bearing
liabilities increased $5.1 billion, or 14%, from the year-ago
quarter, reflecting:
- $2.9 billion, or 78%, increase in
short- and long-term borrowings, primarily reflecting a
cost-effective method of funding incremental LCR related securities
growth.
- $1.6 billion, or 9%, increase in money
market deposits, reflecting the strategic focus on customer growth
and increased share-of-wallet among both consumer and commercial
customers.
- $1.0 billion, or 74%, increase in
brokered deposits and negotiated CDs, which were used to
efficiently finance balance sheet growth while continuing to manage
the overall cost of funds.
Partially offset by:
- $0.9 billion, or 22%, decrease in
average core certificates of deposit due to the strategic focus on
changing the funding sources to no-cost demand deposits and
lower-cost money market deposits.
Compared to the 2014 third quarter, average noninterest bearing
deposits increased $1.1 billion, or 31% annualized, while average
short- and long-term borrowings decreased by $0.5 billion, or 29%
annualized.
Noninterest
Income
Table 6 – Noninterest Income
2014
2013
2014 2013
Full Full YOY
Fourth
Third Fourth Change (%) (in millions)
Year
Year Change
Quarter Quarter Quarter LQ YOY
Noninterest
Income Service charges on deposit accounts
$
273.7 $ 271.8 1 %
$ 67.4 $ 69.1 $ 70.0 (2 ) %
(4 ) % Trust services
116.0 123.0 (6 )
28.8 28.0 30.7
3 (6 ) Electronic Banking
105.4 92.6 14
28.0 27.3
24.3 3 15 Mortgage banking income
84.9 126.9 (33 )
14.0 25.1 24.3 (44 ) (42 ) Brokerage Income
68.3 69.6
(2 )
16.1 17.2 15.2 (6 ) 6 Insurance income
65.5 69.3
(5 )
16.3 16.7 15.6 (3 ) 4 Bank owned life insurance income
57.0 56.4 1
15.0 14.9 13.8 1 8 Capital markets fees
43.7 45.2 (3 )
13.8 10.2 12.3 35 12 Gain on sale of
loans
21.1 18.2 16
5.4 8.2 7.1 (34 ) (24 ) Securities
(losses) gains
17.6 0.4 4100
(0.1 ) 0.2 1.2
(153 ) (108 ) Other income
126.0
138.8 (9 )
28.7 30.4 35.4
(6 ) (19 ) Total noninterest income
$ 979.2 $ 1,012.2 (3 ) %
$ 233.3
$ 247.3 $ 249.9 (6 ) % (7)%
Noninterest income for the 2014 fourth quarter decreased $17
million, or 7%, from the year-ago quarter, primarily
reflecting:
- $10 million, or 42%, decrease in
mortgage banking income primarily related to the $6 million impact
of net MSR hedging activity.
- $7 million, or 19%, decrease in other
income, primarily related to lower fees associated with commercial
loan activity.
- $3 million, or 4%, decrease in service
charges on deposit accounts, reflecting the late July 2014
implementation of changes in consumer products that were partially
offset by a 10% increase in consumer households and changing
customer usage patterns.
Partially offset by:
- $4 million, or 15%, increase in
electronic banking due to higher card related income and underlying
customer growth.
Compared to the 2014 third quarter, noninterest income decreased
$14 million, or 6%, primarily related to a similar decline in
mortgage banking income.
Noninterest
Expense (see Basis of Presentation)
Table 7 – Noninterest Expense from
Continuing Operations (GAAP)
2014
2013
2014 2013
Full Full YOY
Fourth
Third Fourth
Change %
(in millions)
Year Year Change
Quarter
Quarter Quarter LQ YOY
Noninterest Expense Personnel costs
$ 1,048.8 $ 1,001.6 5 %
$ 263.3 $ 275.4
$ 249.6 (4 ) % 6 % Outside data processing and other services
212.6 199.5 7
53.7 53.1 51.1 1 5 Net occupancy
128.1 125.3 2
31.6 34.4 32.0 (8 ) (1 ) Equipment
119.7 106.8 12
32.0 30.2 28.8 6 11 Professional
services
59.6 40.6 47
15.7 13.8 11.6 14 35 Marketing
50.6 51.2 (1 )
12.5 12.6 13.7 (1 ) (9 ) Deposit and
other insurance expense
49.0 50.2 (2 )
13.1 11.6 10.1
13 30 Amortization of intangibles
39.3 41.4 (5 )
10.7
9.8 10.3 9 3 Other expense
174.8
141.4 24
50.9 39.5 39.0
29 31 Total noninterest expense
$ 1,882.3 $ 1,758.0 7 %
$
483.3 $ 480.3 $ 446.0 1 % 8 % (in
thousands) Number of employees (Average full-time equivalent)
11.9 11.8 0.9
11.9 11.9 11.8 (1 ) % 1 %
Table 8 - Impacts of Significant
Items:
2014 2013
2014 2013
Full Full YOY
Fourth Third Fourth Change (in millions)
Year Year Change
Quarter Quarter Quarter LQ
YOY
Noninterest Expense Personnel costs
$ 19.8
$ (27.2 ) $ 47.1
$ 2.2 $ 15.3 $0.1 $ (13.2 ) $ 2.1
Outside data processing and other services
5.5 1.4 4.2
0.3 0.3 0.9 0.0 (0.6 ) Net occupancy
11.2 12.1 (1.0 )
4.1 5.2 4.2 (1.1 ) (0.0 ) Equipment
2.2 2.4 (0.1 )
2.0 0.1 0.8 1.9 1.2 Professional services
2.2 - 2.2
- 0.0 - 0.0 - Marketing
1.4 - 1.4
0.0 0.8 -
(0.8 ) - Other expense
23.1 1.0
22.2
11.6 1.1 1.0
10.6 10.7 Total noninterest expense
$ 65.5 $ (10.5 ) $ 75.9
$
20.3 $ 22.8 $6.9 $ (2.5 ) $ 13.4
Table 9 - Adjusted Noninterest Expense
(Non-GAAP):
2014 2013
2014 2013
Full Full YOY
Fourth Third Fourth Change% (in millions)
Year Year Change
Quarter Quarter Quarter LQ
YOY
Noninterest Expense Personnel costs
$
1,028.9 $ 1,028.9 0 %
$ 261.1 $ 260.1 $ 249.5
0 % 5 % Outside data processing and other services
207.1
198.2 4
53.4 52.8 50.2 1 6 Net occupancy
116.9 113.2
3
27.4 29.2 27.8 (6 ) (1 ) Equipment
117.4 104.4 12
30.0 30.1 27.9 (0 ) 7 Professional services
57.3 40.6
41
15.7 13.8 11.6 14 35 Marketing
49.2 51.2 (4 )
12.5 11.8 13.7 6 (9 ) Deposit and other insurance expense
49.0 50.2 (2 )
13.1 11.6 10.1 13 30 Amortization of
intangibles
39.3 41.4 (5 )
10.7 9.8 10.3 9 3 Other
expense
151.7 140.4 8
39.2 38.4 38.0 2 3
Total noninterest expense
$ 1,816.9 $
1,768.5 3 %
$ 463.0 $ 457.5 $ 439.1 1 %
5 %
Reported noninterest expense for the 2014 fourth quarter
increased $37 million, or 8%, from the year-ago quarter. Excluding
the impact of Significant Items, noninterest expense increased $24
million, or 5%. Changes in reported noninterest expense primarily
reflect:
- $14 million, or 6%, increase in
personnel costs. Excluding the impact of Significant Items,
personnel costs increased $12 million, or 5%, primarily related to
a $9 million increase in salaries reflecting 1% increase in the
number of full-time equivalent employees and a $4 million increase
in health insurance costs.
- $12 million, or 31%, increase in other
expense. Excluding the impact of Significant Items, other expenses
increased $1 million, or 3%.
- $4 million, or 35%, increase in
professional services, reflecting an increase in outside consultant
expenses and legal services.
- $3 million, or 11%, increase in
equipment. Excluding the impact of Significant Items, equipment
expenses increased $2 million, or 7%, primarily reflecting higher
depreciation expense.
Noninterest expense increased $3 million, or less than 1%, from
the 2014 third quarter. When adjusting for the $20 million of
Significant Items in the 2014 fourth quarter and the $23 million of
Significant Items in the 2014 third quarter, noninterest expense
increased $5 million. On a reported basis, personnel costs
decreased $12 million, or 4%, reflecting the prior quarter’s
franchise repositioning actions. Other expense increased $11
million, or 29%, reflecting the current quarter’s $12 million net
increase to litigation reserves.
Credit
Quality
Table 10 – Summary Credit Quality
Metrics
2014 2013
($ in thousands)
Dec. 31 Sep. 30 Jun. 30 Mar. 31 Dec. 31
Total nonaccrual loans and leases
$ 300,244 $ 325,765
$ 324,957 $ 327,158 $ 322,056 Total other real estate, net
35,039 36,270 34,695 35,691 27,664
Other NPAs (1)
2,440 2,440 2,440
2,440 2,440 Total nonperforming assets
$ 337,723 $ 364,475 $ 362,092 $ 365,289 $ 352,160
Accruing loans and leases past due 90 days or more
75,469 87,348 85,367
98,412 76,209 NPAs + accruing loans and
lease past due 90 days or more
$ 413,192 $ 451,823 $
447,459 $ 463,701 $ 428,369 NAL ratio (2)
0.63
% 0.70
% 0.71
% 0.74
% 0.75
%
NPA ratio (3)
0.71 0.78 0.79 0.82 0.82 (NPAs+90
days)/(Loans+OREO)
0.98 1.08 1.08 1.17 1.20 Provision
for credit losses
$ 2,494 $ 24,480 $ 29,385 $ 24,630
$ 24,331 Net charge-offs
22,975 30,023 28,643 42,986 46,447
Net charge-offs / Average total loans
0.20 % 0.26
% 0.25
% 0.40
% 0.43
% Allowance
for loans and lease losses
$ 605,196 $ 631,036 $
635,101 $ 631,918 $ 647,870 Allowance for unfunded loan commitments
and letters of credit
60,806
55,449 56,927 59,368
62,899 Allowance for credit losses (ACL)
$
666,002 $ 686,485 $ 692,028 $ 691,286 $ 710,769
ACL as a % of:
Total loans and leases
1.40 % 1.47
% 1.50
% 1.56
% 1.65
% NALs
222 211 213 211
221 NPAs
197 188 191 191 202 (1) Other nonperforming
assets includes certain impaired investment securities. (2) Total
NALs as a % of total loans and leases. (3) Total NPAs as a % of sum
of loans and leases, impaired loans held for sale, and net other
real estate.
See Pages 11-14 & 21-24 of Quarterly Financial Supplement
for additional detail.
Nonaccrual loans and leases (NALs) decreased $22 million, or 7%,
compared to a year ago to $300 million, or 0.63% of total loans and
leases. Nonperforming assets (NPAs) decreased $14 million, or 4%,
to $338 million, or 0.71% of total loans and leases, OREO, and
other NPAs.
The provision for credit losses decreased $22 million to $2
million in the 2014 fourth quarter reflecting the current quarter’s
higher-than-expected level of commercial recoveries and 19%
decrease in NALs within the CRE portfolio. Net charge-offs (NCOs)
decreased to $23 million with less than $1 million of NCOs within
the total commercial portfolio. NCOs equated to an annualized 0.20%
of average loans and leases in the current quarter compared to
0.26% and 0.43% in the prior and year-ago quarters,
respectively.
The period-end allowance for credit losses (ACL) as a percentage
of total loans and leases decreased to 1.40% from 1.65% a year ago,
while the ACL as a percentage of period-end total NALs remained
consistent at 222%.
Capital
Table 11 – Capital Ratios
2014 2013 (in millions)
Dec. 31 Sep. 30
Jun. 30 Mar. 31 Dec. 31, Tangible common equity /
tangible assets ratio
8.17 % 8.35 % 8.38 % 8.63 %
8.82 % Tier 1 common risk-based capital ratio
10.23
% 10.31 % 10.26 % 10.60 % 10.90 % Regulatory Tier 1
risk-based capital ratio
11.50 % 11.61 % 11.56 %
11.95 % 12.28 %
Excess over 6.0% (1)
$ 2,996 $ 2,987 $ 2,949 $ 3,042 $ 3,121
Regulatory Total risk-based capital ratio
13.56 %
13.72 % 13.67 % 14.13 % 14.57 %
Excess over 10.0% (1)
$ 1,939 $ 1,980 $ 1,946 $ 2,111 $ 2,271 Total
risk-weighted assets
$
54,479
$ 53,239 $ 53,035 $ 51,120 $ 49,690
(1) "Well-capitalized" regulatory
threshold
See Page 15 of Quarterly Financial Supplement for additional
detail.
The tangible common equity to tangible assets ratio at December
31, 2014, was 8.17%, down 65 basis points from a year ago. Tier 1
common risk-based capital ratio was 10.23%, down from 10.90% a year
ago. The regulatory Tier 1 risk-based capital ratio was 11.50%,
down from 12.28% a year ago. Huntington estimates the negative
impact to Tier 1 common risk-based capital from the 2015 first
quarter implementation of the Federal Reserve’s revised Basel III
capital rules will be approximately 40 basis points on a fully
phased-in basis.
The decreases in the capital ratios were due to balance sheet
growth and share repurchases that were partially offset by
increased retained earnings and the stock issued in the Camco
acquisition. Specifically, all capital ratios were impacted by the
repurchase of 35.7 million common shares over the last four
quarters, 3.6 million of which were repurchased during the 2014
fourth quarter. This decrease was offset partially by the increase
in retained earnings, as well as the issuance of 8.7 million common
shares in the Camco acquisition.
Income Taxes
The provision for income taxes in the 2014 fourth quarter was
$57 million and $52 million in the 2013 fourth quarter. The
effective tax rates for the 2014 fourth quarter and 2013 fourth
quarter were 25.9% and 24.8%, respectively. At December 31, 2014,
we had a net federal deferred tax asset of $72.1 million and a net
state deferred tax asset of $45.3 million. As of December 31, 2014
and December 31, 2013, there was no disallowed deferred tax asset
for regulatory capital purposes.
Expectations – 2015
“As we move into 2015, customer activity is strong, pipelines
are stable, and our balance sheet is well positioned. We anticipate
economic growth throughout the year. We built our plan with an
assumption of no change in interest rates and with the contingent
flexibility to quickly adjust to an evolving operating
environment,” said Steinour. “We remain committed to investing in
the business, disciplined expense control, and delivering full-year
positive operating leverage.”
Excluding Significant Items and net MSR activity, we expect to
deliver positive operating leverage in 2015 with revenue growth
exceeding noninterest expense growth of 2-4%.
Overall, asset quality metrics are expected to remain near
current levels, although moderate quarterly volatility also is
expected, given the absolute low level of problem assets and credit
costs. We anticipate NCOs will remain within or below our long-term
normalized range of 35 to 55 basis points.
The effective tax rate for 2015 is expected to be in the range
of 25% to 28%.
Conference Call / Webcast
Information
Huntington’s senior management will host an earnings conference
call on January 22, 2015, at 10:00 a.m. (Eastern Standard Time).
The call may be accessed via a live Internet webcast at the
Investor Relations section of Huntington’s web site,
www.huntington.com, or through a dial-in telephone number at (877)
684-3807; Conference ID# 51410831. Slides will be available the
Investor Relations section of Huntington’s web site 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. A telephone
replay will be available approximately two hours after the
completion of the call through January 31, 2015 at (855) 859-2056
or (404) 537-3406; conference ID# 51410831.
Please see the 2014 Fourth Quarter Quarterly Financial
Supplement for additional detailed financial performance metrics.
This document can be found at the Investor Relations section of
Huntington’s web site, www.huntington.com.
Forward-looking StatementThis 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, FDIC, 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 2013 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.
J.D. Power DisclaimerHuntington National Bank received
the highest numerical score in the midwest region in the
proprietary J.D. Power 2014 Small Business Banking Satisfaction
StudySM. Study based on 8,996 total responses, measuring 9
financial institutions in the midwest region (IL, IN, IA, KS, MI,
MN, MO, NE, ND, OH, SD, WI) and measures opinions of small business
customers with annual revenues from $100,000 to $10 million.
Proprietary study results are based on experiences and perceptions
of customers surveyed in July-September 2014. Your experiences may
vary. Visit jdpower.com.
Huntington National Bank received the highest numerical score
among retail banks in the North Central region in the proprietary
J.D. Power 2014 Retail Banking Satisfaction StudySM. Study based on
80,445 total responses measuring 25 providers in the North Central
region (IN, KY, MI, OH & WV) and measures opinions of consumers
with their primary banking provider. Proprietary study results are
based on experiences and perceptions of consumers surveyed January
2014. Your experiences may vary. Visit jdpower.com.
Basis of PresentationUse of
Non-GAAP Financial MeasuresThis 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 release, 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 ItemsFrom 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.
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
2013 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 DataCertain 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 MarginIncome 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
DataSignificant 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.
RoundingPlease note that columns of
data in this document may not add due to rounding.
About HuntingtonHuntington Bancshares Incorporated is a
$66 billion asset regional bank holding company headquartered in
Columbus, Ohio. The Huntington National Bank, founded in 1866, and
its affiliates provide 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 Northeast
states, Huntington also provides commercial banking services to the
automotive dealers and retail automobile financing for dealer
customers.
Huntington Bancshares IncorporatedAnalysts:Todd
Beekman, 614-480-3878todd.beekman@huntington.comorMark Muth,
614-480-4720mark.muth@huntington.comorMedia:Maureen Brown,
614-480-5512maureen.brown@huntington.com
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