01—Abstract
Summary
Summary of the 10-K filed March 7, 2002. Cited figures are marked; the original filing is the authoritative source.
Huntington Bancshares Incorporated, a Columbus, Ohio-based multi-state financial holding company, reported 2001 net income of $178.5 milliona, or $0.71 per diluted share, down from $328.4 million, or $1.32 per share, in 2000.
Operating earnings, which exclude restructuring and special charges, were $293.5 millionb, or $1.17 per share. The decline reflected $176.9 million of pre-tax restructuring and special charges tied to a July 2001 strategic refocusing plan, plus a $50.0 million fourth-quarter addition to the loan loss provision. Return on average shareholders' equity was 7.50% and return on average assets was 0.63%.
Net charge-offs rose to 0.90% of average loans from 0.40% in 2000, and non-performing assets reached $227.5 millionc, or 1.05% of total loans and other real estate. The refocusing plan centers on the sale of Huntington's Florida operations to SunTrust Banks, Inc., which closed on February 15, 2002. The sale included 143 banking offices and approximately $4.8 billion of deposits, and Huntington received a 15% premium on the deposits sold.
After the sale, Huntington had 332 domestic banking offices and 8,552 full-time equivalent employees. The filing states that management expects the net interest margin, tangible equity to assets, and efficiency ratio to improve, and that the company will repurchase up to 22 million shares under a new program authorized in February 2002. Management also expects credit quality trends and net charge-offs to remain unfavorable, particularly in the first half of 2002.
The balance sheet was largely stable, with total assets of $28.5 billiond and shareholders' equity of $2.42 billion at year-end 2001. Tier 1 risk-based capital was 7.24% and total risk-based capital was 10.29%. The cash dividend was reduced by 20% beginning in the third quarter of 2001, and declared dividends were $0.72 per share for the year, compared with $0.76 in 2000.
02—Key points
Key Highlights
- Net income fell to $178.5 million ($0.71 per diluted share) in 2001 from $328.4 million ($1.32) in 2000; operating earnings were $293.5 million ($1.17 per share).
- Restructuring and special charges totaled $176.9 million pre-tax under the July 2001 strategic refocusing plan, and a $50.0 million pre-tax provision was added to the loan loss reserve in Q4 2001.
- Sale of Florida operations to SunTrust Banks, Inc. closed February 15, 2002, covering 143 banking offices and about $4.8 billion of deposits, with a 15% premium received on deposits.
- Net charge-offs rose to 0.90% of average loans in 2001 from 0.40% in 2000; non-performing assets rose to $227.5 million (1.05% of loans and other real estate).
- Allowance for loan losses was $410.6 million, or 1.90% of total loans, versus 1.45% a year earlier.
- Dividend was cut 20% starting in Q3 2001; a new repurchase program of up to 22 million shares was authorized in February 2002.
- Total assets were $28.5 billion and shareholders' equity was $2.42 billion at December 31, 2001; Tier 1 risk-based capital ratio was 7.24%.
03—Questions
Frequently Asked Questions
Why did Huntington's earnings decline so sharply in 2001?
Reported net income fell to $178.5 million from $328.4 million. The filing attributes the decline mainly to $176.9 million of pre-tax restructuring and special charges under the July 2001 refocusing plan, which included $71.7 million for credit quality actions, $37.3 million for asset impairment, and $16.2 million for exiting e-commerce activities. A further $50.0 million fourth-quarter addition to the loan loss provision also weighed on results.
What is the Florida sale and how does it affect the company?
Huntington sold its Florida retail and commercial operations to SunTrust Banks, Inc., closing on February 15, 2002. The operations included 143 banking offices, 456 ATMs, about $2.8 billion of loans and other tangible assets, and $4.8 billion of deposits. Huntington received a 15% premium on the deposits sold and increased wholesale borrowings by $1.2 billion. Management expects the net interest margin, tangible equity to assets, and efficiency ratio to improve as a result.
How is credit quality trending?
Credit quality weakened in 2001. Net charge-offs were 0.90% of average loans versus 0.40% in 2000, and non-performing assets rose to $227.5 million from $105.4 million. Management expects unfavorable trends in credit quality and net charge-offs to continue at or above current levels in all portfolios, particularly in the first half of 2002, and expects NPAs may increase in 2002.
What is the company's capital and shareholder return position?
At December 31, 2001, the Tier 1 risk-based capital ratio was 7.24%, the total risk-based capital ratio was 10.29%, and the Tier 1 leverage ratio was 7.41%. Cash dividends declared were $0.72 per share in 2001, down from $0.76, after a 20% cut beginning in Q3 2001. In February 2002 the board terminated the prior repurchase program, which had about 15.3 million shares remaining, and authorized a new program for up to 22 million shares.
What did the company's auto lease portfolio and related residual risk look like?
Huntington had a $3 billion automobile lease portfolio. It purchased residual value insurance in late 2000 covering losses on the portfolio, subject to a cap on insured losses of $120 million, with a $50 million cap on new originations from October 2000 to March 31, 2002. A reserve of $34.9 million remained available at December 31, 2001 for losses not covered by insurance, such as excess wear and tear or mileage. The filing notes there is no guarantee these protections will be sufficient.
04—Continue