01—Abstract
Summary
Summary of the 10-K filed February 13, 2015. 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 2014 net income of $632.4 milliona, or $0.72 per diluted common share, relatively unchanged from the prior year.
The filing cites a 1.01% return on average assets and an 11.8% return on average tangible common equity. Average earning assets grew $6.1 billionb, or 12%, while fully-taxable equivalent net interest income rose $132.7 million, or 8%, to $1.9 billion, although the net interest margin declined 13 basis points to 3.23%. Noninterest income fell $33.0 million, or 3%, to $979.2 million, and noninterest expense rose $124.3 million, or 7%, to $1.9 billion, including $65.5 million of significant items.
Credit quality improved during 2014. Nonaccrual loans declined $21.8 millionc, or 7%, to $300.2 million, and net charge-offs fell $64.0 million, or 34%, to $124.6 million. The allowance for credit losses was $666.0 million, or 1.40% of total loans and leases, down from 1.65% a year earlier.
Capital ratios declined as balance sheet growth and share repurchases outpaced retained earnings: the Tier 1 common risk-based ratio was 10.23% at year-end versus 10.90%, and the company repurchased 35.7 million shares during the year. Management estimates the Basel III capital rules that take effect in the first quarter of 2015 will reduce the Tier 1 common ratio by approximately 40 basis points on a fully phased-in basis. Total assets reached $66.3 billiond at December 31, 2014, up from $59.5 billion.
Management stated its 2015 outlook: excluding significant items and net MSR hedging activity, it expects positive operating leverage with revenue growth exceeding noninterest expense growth of 2% to 4%. It anticipates net charge-offs will remain within or below its long-term normalized range of 35 to 55 basis points, and it expects an effective tax rate of 25% to 28%.
02—Key points
Key Highlights
- Net income of $632.4 million, or $0.72 per diluted share, roughly flat versus 2013; return on average assets of 1.01% and return on average tangible common equity of 11.8%.
- Fully-taxable equivalent net interest income rose $132.7 million, or 8%, to $1.9 billion on 12% earning asset growth, while net interest margin fell 13 basis points to 3.23%.
- Noninterest income declined $33.0 million, or 3%, to $979.2 million, driven by a $42.0 million, or 33%, drop in mortgage banking income.
- Noninterest expense rose $124.3 million, or 7%, to $1.88 billion, including $65.5 million of significant items tied to franchise repositioning, acquisitions, and litigation reserves.
- Credit quality improved: net charge-offs fell 34% to $124.6 million, and nonperforming assets declined 4% to $337.7 million, or 0.71% of total loans and leases.
- Tier 1 common risk-based capital ratio fell to 10.23% from 10.90% after the repurchase of 35.7 million common shares; Basel III is expected to reduce it by roughly 40 basis points on a fully phased-in basis.
- Total assets grew to $66.3 billion, including the Camco Financial acquisition and 24 Bank of America branches acquired in 2014.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2014filed February 13, 2015Financial Statements
FY2014 against FY2013
| Line item | FY2014FY2013 | Change |
|---|---|---|
| Interest Expense | $139.32M$156.03M | −10.7% |
| Net Income | $632.39M$641.28M | −1.4% |
| EPS (Basic) | $0.73$0.73 | 0.0% |
| EPS (Diluted) | $0.72$0.72 | 0.0% |
| Shares Outstanding (Basic) | 819.92M834.21M | −1.7% |
| Shares Outstanding (Diluted) | 833.08M843.97M | −1.3% |
05—Questions
Frequently Asked Questions
How did Huntington's 2014 earnings compare with 2013?
Net income was $632.4 million, or $0.72 per diluted common share, compared with $641.3 million and $0.72 in 2013. The company attributed the relatively flat result to higher net interest income offset by lower noninterest income and higher noninterest expense.
Is credit quality improving?
Yes. Net charge-offs decreased $64.0 million, or 34%, to $124.6 million, and nonaccrual loans fell $21.8 million, or 7%, to $300.2 million. The allowance for credit losses declined to 1.40% of total loans and leases from 1.65%, which management said reflects an improved risk profile.
How is the company managing its capital?
Huntington repurchased 35.7 million common shares during 2014 at a weighted average price of $9.37 and paid a quarterly common dividend of $0.06 declared in January 2015. The Tier 1 common ratio fell to 10.23%, and the company has approximately $51.7 million remaining under its current repurchase authorization.
What is the outlook for 2015?
Management expects revenue growth to exceed noninterest expense growth of 2% to 4%, excluding significant items and net MSR hedging activity, delivering positive operating leverage. It expects net charge-offs within or below a normalized range of 35 to 55 basis points and an effective tax rate of 25% to 28%.
What regulatory changes could affect the company?
Basel III capital rules took effect January 1, 2015, with a fully phased-in Tier 1 common reduction of roughly 40 basis points estimated. The company is also subject to the modified liquidity coverage ratio, phasing in from 90% in January 2016 to 100% in January 2017, and the Volcker Rule, with a conformance period ending July 21, 2015.
06—Continue