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Huntington Bancshares Annual Report (Amendment), Year Ended Dec 31, 2002

Filing Date
Filed May 20, 2003
Period End
December 31, 2002
In the record · 2016–202610-K1110-Q338-K254

HBAN filed 11 annual reports (10-K), 33 quarterly reports (10-Q) and 254 current reports (8-K) between 2016 and 2026.

  1. FY2016 annual report10-K · Feb ’17Feb ’17
  2. Leadership change8-K · Jun ’19Jun ’19
  3. Material agreement8-K · Aug ’21Aug ’21
  4. Material agreement8-K · Oct ’25Oct ’25

01—Abstract

Summary

Summary of the 10-K/A filed May 20, 2003. Cited figures are marked; the original filing is the authoritative source.

Huntington Bancshares Incorporated filed this Form 10-K/A for fiscal year 2002 on May 20, 2003, primarily to restate its 2000, 2001 and 2002 financial results.

The restatement reclassifies automobile leases that were previously accounted for as direct financing leases to the operating lease method, because residual value insurance policies with aggregate loss caps meant those leases did not qualify as direct financing leases. As restated, 2002 net income is $333.1 milliona, or $1.36 per diluted share, versus previously reported figures in the restatement tables of $363.2 million and $1.49 per diluted share. Total assets at December 31, 2002 were $27.56 billion on a restated basis, compared with $27.58 billion previously reported.

Total interest income fell to $1.34 billionb restated, while non-interest income rose to $1.33 billion, reflecting the operating lease income now recorded in that line. Underlying performance on an operating basis was $298.4 million, or $1.22 per diluted share, excluding the Florida sale gain, the Merchant Services gain and restructuring charges. The company reported a net interest margin of 3.81% for 2002, up from 3.43% in 2001, and an efficiency ratio of 69.1%.

Net charge-offs rose to 1.13% of average loans and leases, and the allowance for loan and lease losses was $336.6 millionc, or 1.81% of total loans and leases at year-end. Tier 1 risk-based capital was 8.65% and total risk-based capital was 11.54%, both above well-capitalized minimums. Investors should note that the restatement changes the comparability of future periods.

Operating lease income and expense are expected to decline as pre-May 2002 leases run off, while interest income from direct financing leases and the provision for loan and lease losses are expected to increase. The filing also discloses that consolidating one securitization trust under FASB Interpretation No. 46 is expected to be the most significant impact of adoption, to occur no later than the end of the third quarter of 2003.

02—Key points

Key Highlights

  1. Restatement: automobile leases originated before May 2002 and covered by residual value policies with aggregate loss caps were reclassified from direct financing leases to operating leases; $2.3 billion of such leases are now operating lease assets, and $893 million of leases under the amended New Policy are classified as direct financing leases.
  2. Restated 2002 net income of $333.1 million, or $1.36 per diluted share, compared with 2001 net income of $145.4 million, or $0.58 per diluted share.
  3. Operating basis 2002 earnings of $298.4 million, or $1.22 per diluted share, excluding the $175.3 million Florida banking sale gain, the $24.6 million Merchant Services gain and restructuring charges.
  4. Net interest margin rose to 3.81% in 2002 from 3.43% in 2001, while the efficiency ratio improved to 69.1% from 74.2%.
  5. Credit quality: net charge-offs were 1.13% of average loans and leases, non-performing assets were $136.7 million (0.73% of loans and other real estate), and the allowance covered 246% of non-performing assets.
  6. Capital: Tier 1 risk-based capital ratio of 8.65%, total risk-based capital ratio of 11.54%, and Tier 1 leverage ratio of 8.85% at December 31, 2002.
  7. Share repurchases: 19.2 million shares were bought back in 2002 at a cost of $370.0 million, and a new authorization for up to 8 million shares was approved in January 2003.

03—Questions

Frequently Asked Questions

  1. Why did Huntington restate its financial results?

    Huntington reclassified certain automobile leases from the direct financing lease method to the operating lease method. Management determined in April 2003 that, because of aggregate loss caps in certain residual value insurance policies, leases originated before May 2002 did not qualify as direct financing leases. Leases covered by the amended New Policy are now classified as direct financing leases.

  2. How did the restatement affect reported 2002 net income?

    Previously reported 2002 net income was $363.2 million, or $1.49 per diluted share. As restated, net income is $333.1 million, or $1.36 per diluted share. The filing states that cash flows and total income over the lease term are identical under either method, but the timing of income recognition differs.

  3. What should investors expect for future results after the restatement?

    The filing states that operating lease income and operating lease expense will decline as older operating leases run off, while interest income from direct financing leases will increase. Management also expects to increase the provision for loan and lease losses as needed to reserve for new direct financing lease originations.

  4. What is the outlook for credit losses in 2003?

    Management expects full-year 2003 net charge-offs to be in the 0.65% to 0.75% range and expects favorable trends in credit quality assuming no further economic deterioration. Non-performing assets are expected to remain around current levels.

  5. What pending accounting change could affect the balance sheet?

    Huntington will adopt FASB Interpretation No. 46 no later than the end of the third quarter of 2003. Management believes the most significant impact will be consolidating one securitization trust, which at December 31, 2002 included $1,020 million of indirect automobile loans, $100 million of cash and $1,000 million of secured debt obligations.

04—Continue

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