01—Abstract
Summary
Summary of the 10-K filed February 17, 2012. Cited figures are marked; the original filing is the authoritative source.
Huntington Bancshares Incorporated reported 2011 net income of $542.6 milliona, or $0.59 per common share, up $230.3 million from 2010.
The primary driver was a $460.5 millionb, or 73%, decline in the provision for credit losses, which fell to $174.1 million. Noninterest income declined 6% to $1.0 billion, mainly on lower mortgage banking income, while noninterest expense rose 3% to $1.7 billion. Return on average total assets improved to 1.01% from 0.59%.
Credit quality improved across the year. Nonaccrual loans and leases fell 30% to $541.1 million, net charge-offs declined to $437.1 millionc (1.12% of average loans), and the allowance for credit losses was $1.0 billion, equal to 2.60% of total loans and leases. Capital also strengthened: the Tier 1 common risk-based capital ratio rose 71 basis points to 10.00%, and the tangible common equity ratio improved 74 basis points to 8.30%.
The company said it had submitted its capital plan to the Federal Reserve in January 2012 and expected the Fed's evaluation by the end of the first quarter of 2012. Management's 2012 outlook calls for modest improvement in net interest income, a modest increase in noninterest income, continued declines in nonaccrual loans and net charge-offs, and an effective tax rate of approximately 35% before permanent differences. The filing also highlights regulatory headwinds, including Dodd-Frank Act capital rules, the Durbin Amendment cap on debit interchange fees (which reduced fourth-quarter electronic banking income by $17.3 milliond from the third quarter), and Bank dividend restrictions that prevented the bank from paying dividends to the parent without regulatory approval at year-end 2011.
02—Key points
Key Highlights
- Net income of $542.6 million, or $0.59 per common share, versus $312.3 million in 2010; return on average total assets of 1.01%, up from 0.59%.
- Provision for credit losses fell $460.5 million (73%) to $174.1 million, the main driver of the earnings increase.
- Noninterest income declined 6% to $980.6 million, mainly due to a $92.4 million (53%) decrease in mortgage banking income; originations fell 28%.
- Nonaccrual loans and leases decreased 30% to $541.1 million; net charge-offs were $437.1 million, or 1.12% of average total loans and leases.
- Tier 1 common risk-based capital ratio improved 71 basis points to 10.00%; tangible common equity ratio rose 74 basis points to 8.30%.
- Net interest margin declined 6 basis points to 3.38%, reflecting the extended low-rate environment.
- Common dividend increased to $0.04 per share quarterly from $0.01 beginning with the July 2011 declaration; the company repurchased its TARP warrant for $49.1 million in January 2011.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2011filed February 17, 2012Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Interest Expense | $341.06M$526.59M | −35.2% |
| Net Income | $542.61M$312.35M | +73.7% |
| EPS (Basic) | $0.59$0.19 | +210.5% |
| EPS (Diluted) | $0.59$0.19 | +210.5% |
| Shares Outstanding (Basic) | 863.69M726.93M | +18.8% |
| Shares Outstanding (Diluted) | 867.62M729.53M | +18.9% |
05—Questions
Frequently Asked Questions
How did Huntington's profitability change in 2011?
Net income rose to $542.6 million from $312.3 million, and diluted earnings per share increased to $0.59 from $0.19. The increase was driven mainly by a lower provision for credit losses, which offset a 6% decline in noninterest income and a 3% increase in noninterest expense.
What is the outlook for 2012?
Management expects modest improvement in net interest income, a modest increase in noninterest income, and continued declines in nonaccrual loans and net charge-offs. It anticipates progress on the efficiency ratio, although expenses could rise. The effective tax rate is expected to be about 35% of pretax income, less approximately $65 to $75 million of permanent differences.
How strong is Huntington's capital position?
At December 31, 2011, Tier 1 and total risk-based capital exceeded well-capitalized thresholds by $2.8 billion and $2.2 billion, respectively. The consolidated Tier 1 risk-based capital ratio was 12.11%, and the Tier 1 common risk-based ratio was 10.00%. The company submitted its capital plan to the Federal Reserve in January 2012 and expects the results of the Capital Plan Review by the end of the first quarter of 2012.
What regulatory risks does the filing highlight?
The filing cites Dodd-Frank Act capital rules, including the phase-out of trust preferred securities as Tier 1 capital starting in 2013; the Durbin Amendment, which reduced fourth-quarter 2011 electronic banking income by $17.3 million; resolution plan requirements; and restrictions on dividends from the Bank to the parent company, which could not pay a dividend without regulatory approval at year-end 2011.
How did credit quality trend in 2011?
Credit quality improved throughout the year. Nonaccrual loans fell $236.9 million, or 30%, to $541.1 million. Net charge-offs declined to $437.1 million from $874.5 million, and the allowance for credit losses covered nonaccrual loans 187% at year-end, up from 166%. Total allowance as a percent of loans fell to 2.60% from 3.39%, which management attributed to the improved portfolio risk profile.
06—Continue