01—Abstract
Summary
Summary of the 10-K filed February 14, 2014. 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 $638.7 milliona, or $0.72 per common share, for 2013, relatively unchanged from the prior year.
The filing cites a 1.13% return on average assets and a 12.7% return on average tangible common equity. Net interest income was $1.7 billionb on a fully-taxable equivalent basis, up less than 1%, as 4% loan growth was offset by a 5 basis point decline in net interest margin to 3.36%. Noninterest income fell 9% to $1.0 billion, mainly on lower mortgage banking income and the absence of automobile securitizations in 2013, while noninterest expense fell 4% to $1.8 billion.
Credit quality improved across most metrics. Nonaccrual loans declined 21% to $322.1 millionc, net charge-offs fell 45% to $188.7 million, and the provision for credit losses decreased 39% to $90.0 million. The allowance for credit losses was $710.8 million, or 1.65% of total loans and leases.
The Tier 1 common risk-based capital ratio rose to 10.90%d from 10.48%, and the company repurchased 16.7 million common shares during 2013. The filing also discusses forthcoming Basel III capital requirements, which it estimates will reduce the Basel I Tier 1 common ratio by approximately 60 basis points, and the Durbin Amendment's impact on electronic banking income.
For 2014, management expects net interest income to moderately increase, noninterest income to be slightly lower, and noninterest expense to remain around current levels, with an effective tax rate of 25% to 28%. The filing notes a pending acquisition of Camco Financial, announced in October 2013 for approximately $97 million.
02—Key points
Key Highlights
- Net income of $638.7 million, or $0.72 per diluted common share, relatively unchanged from 2012; return on average assets of 1.13% and return on average tangible common equity of 12.7%.
- Net interest margin declined 5 basis points to 3.36%, while fully-taxable equivalent net interest income rose less than 1% to $1.7 billion on 4% loan growth.
- Noninterest income decreased 9% to $1.0 billion, driven by a $64.2 million decline in mortgage banking income and a $40.0 million decline in gain on sale of loans due to no automobile securitizations in 2013.
- Nonaccrual loans fell 21% to $322.1 million; net charge-offs decreased 45% to $188.7 million; the allowance for credit losses was 1.65% of total loans and leases.
- Tier 1 common risk-based capital ratio improved to 10.90% from 10.48%; the company repurchased 16.7 million common shares in 2013 at a weighted average price of $7.46.
- Loans and leases totaled $43.1 billion at year-end, up 6%, with growth concentrated in automobile loans; total deposits were $47.5 billion.
- Basel III final rules are estimated to reduce the Basel I Tier 1 common ratio by approximately 60 basis points, with requirements effective January 1, 2015.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2013filed February 14, 2014Financial Statements
FY2013 against FY2012
| Line item | FY2013FY2012 | Change |
|---|---|---|
| Interest Expense | $156.03M$219.74M | −29.0% |
| Net Income | $641.28M$631.29M | +1.6% |
| EPS (Basic) | $0.73$0.70 | +4.3% |
| EPS (Diluted) | $0.72$0.69 | +4.3% |
| Shares Outstanding (Basic) | 834.21M857.96M | −2.8% |
| Shares Outstanding (Diluted) | 843.97M863.40M | −2.3% |
05—Questions
Frequently Asked Questions
How did Huntington's profitability trend in 2013?
Net income was $638.7 million, or $0.72 per diluted share, compared with $641.0 million in 2012, a 1.13% return on average assets and a 12.7% return on average tangible common equity. Net interest income was $1.7 billion, and the efficiency ratio improved to 62.9% from 63.4%. Noninterest income declined 9%, offset by a 4% decrease in noninterest expense.
What drove the decline in noninterest income?
Mortgage banking income fell $64.2 million, or 34%, on lower volume, lower gain-on-sale margins and a higher share of originations held on balance sheet. Gain on sale of loans fell $40.0 million, or 69%, because no automobile securitizations occurred in 2013 compared with $2.3 billion in 2012.
How did credit quality change?
Nonaccrual loans declined 21% to $322.1 million, and nonperforming assets declined 21% to $352.2 million. Net charge-offs fell 45% to $188.7 million, and the provision for credit losses decreased 39% to $90.0 million. The allowance for credit losses declined to 1.65% of total loans and leases from 1.99%, while coverage of nonaccrual loans was 221%.
What are the company's capital and shareholder return plans?
The Tier 1 common risk-based capital ratio was 10.90% at year-end 2013. The company repurchased 16.7 million common shares during 2013 and has the ability to repurchase up to $136 million more through the first quarter of 2014. The quarterly common dividend was $0.05 per share, and the Federal Reserve did not object to the 2013 capital plan. Basel III requirements take effect January 1, 2015, with an estimated 60 basis point reduction to the Basel I Tier 1 common ratio.
What is the outlook for 2014?
Management expects net interest income to moderately increase as earning assets grow, though net interest margin faces continued downward pressure. Noninterest income, excluding net MSR activity, is expected to be slightly lower, and noninterest expense is expected to remain around 2013 levels. The effective tax rate is expected to be between 25% and 28%.
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