01—Abstract
Summary
Summary of the 10-K filed February 22, 2000. Cited figures are marked; the original filing is the authoritative source.
Huntington Bancshares Incorporated, a multi-state bank holding company headquartered in Columbus, Ohio, reported net income of $422.1 milliona for 1999, up from $301.8 million in 1998, with diluted earnings per share of $1.82 versus $1.29.
On an operating basis (excluding 1998 special charges and 1999 other non-recurring expenses), diluted EPS was $1.82b compared with $1.54 in 1998. Total assets were $29.0 billion at December 31, 1999, up from $28.3 billion, and return on average equity was 19.66% versus 17.54% a year earlier. Results were helped by a $108.5 million gain from the October 1999 sale of its credit card portfolio to The Chase Manhattan Bank, and were offset by a $96.8 million non-recurring expense charge in the fourth quarter that included a $58.2 million valuation adjustment on leased vehicles.
Core growth drivers included Dealer Sales vehicle leasing, home equity lending, and fee income. Non-interest income before securities and credit card sale gains rose to $452.1 millionc from $398.9 million, and service charges on deposit accounts increased 24%. Net interest margin declined to 4.11% from 4.28% as loan growth was funded with more expensive wholesale funds.
Core deposits fell 4.3% to $16.9 billiond as customers moved retail certificates of deposit into mutual funds and annuities. Capital and credit metrics remained solid. The Tier 1 risk-based capital ratio was 7.52% and the total risk-based capital ratio was 10.72%, both above well-capitalized thresholds.
Net loan charge-offs were 0.40% of average total loans, down from 0.51% in 1998. The company also announced a pending merger with Empire Banc Corporation, a $506 million Traverse City, Michigan bank, to be accounted for as a purchase and expected to close by the end of the second quarter of 2000.
02—Key points
Key Highlights
- Net income rose to $422.1 million ($1.82 diluted EPS) in 1999 from $301.8 million ($1.29) in 1998, including a $108.5 million gain on the sale of the credit card portfolio to Chase.
- Fourth-quarter 1999 included a $96.8 million non-recurring expense charge, including a $58.2 million valuation adjustment on vehicles underlying direct financing leases.
- Total assets were $29.0 billion at year-end 1999, compared with $28.3 billion at year-end 1998; total shareholders' equity was $2.18 billion.
- Net interest margin (fully tax equivalent) fell to 4.11% from 4.28%, as loan growth was funded with more expensive wholesale funds.
- Core deposits declined 4.3% to $16.9 billion, driven by runoff of retail certificates of deposit into alternative investments.
- Tier 1 risk-based capital ratio was 7.52% and total risk-based capital ratio was 10.72%, both above well-capitalized requirements; net loan charge-offs improved to 0.40% of average loans from 0.51%.
- Announced a pending merger with Empire Banc Corporation (a $506 million Michigan bank), expected to close by the end of the second quarter of 2000.
03—Questions
Frequently Asked Questions
Why did reported earnings rise so sharply in 1999?
Net income increased to $422.1 million from $301.8 million, largely because of the $108.5 million gain on the October 1999 sale of the credit card portfolio to The Chase Manhattan Bank. The 1998 results also included a $90 million special charge, so operating net income rose less sharply, from $362.1 million to $422.1 million.
What drove the non-recurring charge in the fourth quarter of 1999?
Huntington recorded $96.8 million in other non-recurring expenses in the fourth quarter. This included a $58.2 million valuation adjustment on vehicles underlying certain direct financing leases, reflecting changes in business dynamics and economic factors, plus costs tied to the 'Huntington 2000+' program and other one-time expenses.
How did the net interest margin and deposit base change?
The net interest margin declined to 4.11% in 1999 from 4.28% in 1998, primarily because loan growth outpaced core deposit growth and was funded with more expensive wholesale funds. Core deposits fell $0.7 billion, or 4.3%, to $16.9 billion, as customers reinvested certificates of deposit in mutual funds and annuities.
How strong is Huntington's capital position?
At December 31, 1999, the Tier 1 risk-based capital ratio was 7.52%, the total risk-based capital ratio was 10.72%, and the Tier 1 leverage ratio was 6.72%, each exceeding the well-capitalized requirements. The company repurchased approximately 3.3 million shares in 1999, and 11.9 million shares remained under its authorization at year-end.
What is the outlook for the pending Empire Banc acquisition?
Huntington agreed on February 7, 2000 to merge with Empire Banc Corporation, a $506 million one-bank holding company in Traverse City, Michigan. Huntington will issue 2.0355 shares for each Empire Banc share, the deal will be accounted for as a purchase, and it is expected to be completed by the end of the second quarter of 2000.
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