01—Abstract
Summary
Summary of the 10-K filed February 24, 2009. Cited figures are marked; the original filing is the authoritative source.
Huntington Bancshares Incorporated reported a net loss of $113.8 milliona for 2008, or $0.44 per common share, compared with net income of $75.2 million, or $0.25 per share, in 2007.
The loss was driven primarily by a $454.3 millionb ($0.81 per share) negative impact from the Franklin Credit Management relationship, including a $438.0 million provision for credit losses recorded in the fourth quarter. Total provision for credit losses rose to $1,057.5 million from $643.6 million, and net charge-offs were $758.1 million, or an annualized 1.85% of average related balances. Nonaccrual loans increased to $1,502.1 million from $319.8 million, and securities losses reached $197.4 million, including $176.9 million of other-than-temporary impairment on Alt-A mortgage-backed securities.
Capital was strengthened by approximately $1.4 billionc of Series B preferred stock issued to the U.S. Treasury under the TARP Capital Purchase Program in November 2008, along with $569 million of Series A convertible preferred stock issued in the second quarter. The tangible equity ratio rose to 7.72% from 5.08%, but the tangible common equity ratio declined to 4.04% from 5.08%. Management reduced the quarterly common dividend to $0.01 per share, effective with the dividend declared January 22, 2009, and stated that the Bank could not pay dividends to the parent without regulatory approval at year-end.
The Bank remained well capitalized, with a total risk-based capital ratio of 10.71%d. Management expects a challenging 2009, anticipating continued elevated charge-offs, nonaccrual loans and allowance levels, net interest margin pressure, and higher FDIC deposit insurance expense.
The company also announced an expense reduction initiative expected to reduce 2009 expenses by about $100 million net of one-time costs. Huntington issued $600 million of FDIC-guaranteed senior bank notes in February 2009 under the Temporary Liquidity Guarantee Program.
02—Key points
Key Highlights
- Net loss of $113.8 million (-$0.44 per share) in 2008, versus net income of $75.2 million ($0.25 per share) in 2007.
- Franklin Credit Management relationship produced a $454.3 million ($0.81 per share) negative impact in 2008, including a $438.0 million provision for credit losses and $423.3 million of charge-offs.
- Provision for credit losses rose to $1,057.5 million from $643.6 million; net charge-offs totaled $758.1 million, or an annualized 1.85% of average balances.
- Nonaccrual loans and leases reached $1,502.1 million (3.66% of total loans), up from $319.8 million (0.80%) a year earlier.
- Received $1.4 billion of TARP Capital Purchase Program preferred capital in November 2008; tangible equity ratio improved to 7.72% while tangible common equity ratio fell to 4.04%.
- Quarterly common dividend cut to $0.01 per share, effective with the January 22, 2009 declaration; the Bank could not pay dividends to the parent without regulatory approval at December 31, 2008.
- Net interest margin declined 11 basis points to 3.25% and management expects continued pressure in 2009; expense reduction initiative targeted at about $100 million of 2009 savings.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2008filed February 24, 2009Financial Statements
| Interest Expense | $1.27B |
| Net Income | -$113.81M |
| EPS (Basic) | $-0.44 |
| EPS (Diluted) | $-0.44 |
| Shares Outstanding (Basic) | 366.15M |
| Shares Outstanding (Diluted) | 366.15M |
05—Questions
Frequently Asked Questions
Why did Huntington report a net loss in 2008?
The loss was driven mainly by credit deterioration in the Franklin Credit Management relationship, which reduced 2008 earnings by $454.3 million ($0.81 per share), and by $197.4 million of net securities losses including $176.9 million of other-than-temporary impairment on Alt-A mortgage-backed securities. Non-Franklin provisions and nonaccrual loans also rose substantially.
How much capital did Huntington receive from the U.S. Treasury?
On November 14, 2008, Huntington issued approximately $1.4 billion of 5% Series B non-voting cumulative preferred stock to the Treasury under the TARP Capital Purchase Program, along with a ten-year warrant to buy 23.6 million common shares at $8.90 per share. Separately, it issued $569 million of 8.50% Series A convertible preferred stock in the second quarter of 2008.
Did Huntington cut its common stock dividend?
Yes. The quarterly common dividend was reduced to $0.1325 per share effective with the July 1, 2008 payment and further reduced to $0.01 per share effective with the dividend declared January 22, 2009. Management said rebuilding common equity was a priority.
What outlook did management give for 2009?
Management expected a challenging 2009, with continued elevated net charge-offs, nonaccrual loans and allowance levels, net interest margin pressure, and higher FDIC deposit insurance premiums, which it estimated would reduce earnings per share by $0.07 to $0.09. It also announced an expense reduction initiative expected to reduce expenses by approximately $100 million net of one-time 2009 expenses compared with 2008.
Is the Bank still well capitalized?
Yes. At December 31, 2008, the Bank's Tier 1 leverage ratio was 5.99%, Tier 1 risk-based capital ratio 6.44%, and total risk-based capital ratio 10.71%, all above the well-capitalized minimums of 5.00%, 6.00% and 10.00%. The parent company's consolidated ratios were 9.82%, 10.72% and 13.91%.
06—Continue