01—Abstract
Summary
Summary of the 10-K filed February 15, 2013. Cited figures are marked; the original filing is the authoritative source.
Huntington Bancshares Incorporated, a multi-state diversified regional bank holding company headquartered in Columbus, Ohio, reported net income of $641.0 milliona, or $0.71 per common share, for 2012, an increase of $98.4 million compared with 2011.
The increase primarily reflected a $117.2 millionb, or 12%, increase in noninterest income and an $81.4 million, or 5%, increase in net interest income, partially offset by a $107.4 million, or 6%, increase in noninterest expense. Return on average total assets rose to 1.15% from 1.01%. Credit quality continued to improve: nonaccrual loans declined 25% to $407.6 million, net charge-offs were $342.5 million (0.85% of average total loans and leases) versus $437.1 million in 2011, and the ACL as a percentage of loans fell to 1.99% from 2.60%.
Capital strengthened, with the Tier 1 common risk-based capital ratio at 10.48% versus 10.00% a year earlier. The company repurchased 23.3 million common shares at a weighted average price of $6.36c during 2012 under a program consistent with its capital plan, which the Federal Reserve did not object to in March 2012. Total assets were $56.15 billion at year-end, and shareholders' equity was $5.79 billion.
The company also acquired loans of Fidelity Bank from the FDIC in March 2012 and recognized an $11.2 milliond bargain purchase gain on that transaction. Management guided to modest 2013 net interest income growth, with net interest margin not expected to fall below the mid-3.30% range, and expected NCOs to approach normalized levels by the end of 2013. The filing also notes regulatory headwinds, including the Durbin Amendment, which reduced electronic banking income by over $55 million in 2012, and proposed Basel III capital rules, which management estimated could reduce its Basel I Tier 1 common ratio by approximately 150 basis points.
02—Key points
Key Highlights
- Net income of $641.0 million, or $0.71 per diluted share, up $98.4 million (18%) from 2011; return on average total assets increased to 1.15% from 1.01%.
- Noninterest income rose $117.2 million, or 12%, to $1.10 billion, driven by a $107.7 million, or 129%, increase in mortgage banking income.
- Net interest income increased $81.4 million, or 5%, to $1.71 billion; net interest margin rose 3 basis points to 3.41%.
- Credit quality improved: nonaccrual loans declined 25% to $407.6 million and net charge-offs fell to $342.5 million from $437.1 million.
- Tier 1 common risk-based capital ratio improved to 10.48% from 10.00%; 23.3 million common shares were repurchased at a weighted average price of $6.36.
- Electronic banking income fell $29.4 million, or 26%, as the Durbin Amendment debit interchange rules reduced fee income by over $55 million.
- Total assets of $56.15 billion and shareholders' equity of $5.79 billion at December 31, 2012.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2012filed February 15, 2013Financial Statements
FY2012 against FY2011
| Line item | FY2012FY2011 | Change |
|---|---|---|
| Interest Expense | $219.74M$341.06M | −35.6% |
| Net Income | $631.29M$542.61M | +16.3% |
| EPS (Basic) | $0.70$0.59 | +18.6% |
| EPS (Diluted) | $0.69$0.59 | +16.9% |
| Shares Outstanding (Basic) | 857.96M863.69M | −0.7% |
| Shares Outstanding (Diluted) | 863.40M867.62M | −0.5% |
05—Questions
Frequently Asked Questions
What drove the increase in Huntington's 2012 earnings?
Net income rose $98.4 million to $641.0 million, primarily reflecting a $117.2 million, or 12%, increase in noninterest income and an $81.4 million, or 5%, increase in net interest income. These gains were partially offset by a $107.4 million, or 6%, increase in noninterest expense. Mortgage banking income rose $107.7 million, or 129%.
How did credit quality trend in 2012?
Credit quality continued to improve. Nonaccrual loans and leases declined 25% to $407.6 million, and net charge-offs were $342.5 million, or 0.85% of average total loans and leases, down from $437.1 million, or 1.12%, in 2011. The ACL as a percentage of total loans declined to 1.99% from 2.60%, while the ACL as a percentage of nonaccrual loans rose to 199% from 187%.
What did management expect for 2013?
Management expects net interest income to modestly grow over 2013, with the net interest margin not expected to fall below the mid-3.30% range. Noninterest income is expected to be relatively stable, excluding automobile loan sale impacts and net MSR impacts. Net charge-offs should approach normalized levels by the end of 2013, and the company plans to moderate the pace of investments to drive positive operating leverage.
How did Huntington use its capital in 2012?
The Federal Reserve did not object to the company's capital plan in March 2012, which included potential repurchases of up to $182 million of common stock and a continuation of the common dividend through the first quarter of 2013. During 2012 Huntington repurchased 23.3 million common shares at a weighted average price of $6.36 and redeemed $230.3 million of trust preferred securities. The quarterly common dividend was $0.04 per share.
What regulatory risks does the filing highlight?
The filing cites the Durbin Amendment, which negatively affected electronic banking income by over $55 million in 2012. It also describes proposed Basel III capital rules, which management estimated could reduce the Basel I Tier 1 common risk-based capital ratio by approximately 150 basis points based on June 30, 2012 balances, and the Collins Amendment, which phases out trust preferred securities as Tier 1 capital beginning in 2013.
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