01—Abstract
Summary
Summary of the 10-K filed February 26, 2021. Cited figures are marked; the original filing is the authoritative source.
Huntington Bancshares Incorporated reported 2020 net income of $817 milliona, a 42% decrease from the prior year, with diluted EPS of $0.69, down 46%.
The decline was driven primarily by a provision for credit losses of $1.0 billionb, up $761 million or 265%, reflecting the deterioration in the macroeconomic environment from the COVID-19 pandemic and risk rating downgrades in the commercial portfolio. Fully-taxable equivalent net interest income rose $6 million as average earning assets grew 9%, while the FTE net interest margin fell 27 basis points to 2.99%. Noninterest income rose $137 million, or 9%, to $1.6 billion, led by a $199 million increase in mortgage banking income, while noninterest expense rose $74 million, or 3%, to $2.8 billion.
Credit quality weakened in 2020: net charge-offs were $449 millionc, or 0.57% of average loans and leases, up from 0.35% in 2019, and the ACL reached $1.9 billion, or 2.29% of total loans and leases, compared with 1.18% a year earlier. The increase reflected the January 1, 2020 CECL adoption, which added $393 million to the ACL, along with the pandemic-driven macroeconomic outlook. Capital ratios remained above well-capitalized levels, with the CET1 risk-based capital ratio at 10.00% and the Tier 1 risk-based capital ratio at 12.47%.
Common stock repurchases of $92 milliond over the last four quarters, along with cash dividends, were largely offset by earnings and the issuance of $1.0 billion of preferred stock in 2020. Looking ahead, the company entered into a merger agreement with TCF Financial Corporation on December 13, 2020, in an all-stock transaction valued at approximately $6.0 billion, under which each TCF common share converts into 3.0028 Huntington common shares. The transaction is anticipated to close in the second quarter of 2021, subject to regulatory and shareholder approvals.
02—Key points
Key Highlights
- Net income of $817 million in 2020, down 42% from the prior year; diluted EPS of $0.69, down 46%.
- Provision for credit losses rose $761 million, or 265%, to $1.0 billion, driven by COVID-19 macroeconomic deterioration and commercial risk rating downgrades.
- FTE net interest margin declined 27 basis points to 2.99% despite 9% average earning asset growth.
- Noninterest income increased $137 million, or 9%, to $1.6 billion, with mortgage banking income up $199 million, or 119%.
- Net charge-offs were $449 million, or 0.57% of average loans and leases, up from 0.35%; the ACL was 2.29% of total loans and leases.
- Regulatory CET1 ratio was 10.00% and Tier 1 risk-based capital ratio was 12.47% at December 31, 2020, above well-capitalized standards.
- Pending all-stock merger with TCF Financial Corporation (3.0028 Huntington shares per TCF share), valued at approximately $6.0 billion and expected to close in the second quarter of 2021.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2020filed February 26, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $884.00M$939.00M | −5.9% |
| Interest Expense | $423.00M$988.00M | −57.2% |
| Net Income | $817.00M$1.41B | −42.1% |
| EPS (Basic) | $0.71$1.29 | −45.0% |
| EPS (Diluted) | $0.69$1.27 | −45.7% |
| Shares Outstanding (Basic) | 1.02B1.04B | −2.1% |
| Shares Outstanding (Diluted) | 1.03B1.06B | −2.2% |
05—Questions
Frequently Asked Questions
How did Huntington's 2020 earnings compare with 2019?
Net income was $817 million, a 42% decrease from the prior year, and diluted EPS was $0.69, down 46%. The decline was driven mainly by a $761 million, or 265%, increase in the provision for credit losses to $1.0 billion, partly offset by higher noninterest income.
What drove the increase in the provision for credit losses?
The filing attributes the increase primarily to deterioration in the macroeconomic environment resulting from the COVID-19 pandemic and risk rating downgrades within the commercial portfolio. Oil and gas credits were a notable source of commercial net charge-offs.
How strong is Huntington's capital position?
At December 31, 2020, the CET1 risk-based capital ratio was 10.00%, the Tier 1 risk-based capital ratio was 12.47%, the total risk-based capital ratio was 14.46%, and the Tier 1 leverage ratio was 9.32%. The company states these ratios were above well-capitalized standards and that it issued $1.0 billion of preferred stock in 2020.
What are the terms of the pending TCF Financial merger?
Under the December 13, 2020 merger agreement, TCF shareholders will receive 3.0028 shares of Huntington common stock for each TCF common share, in an all-stock transaction valued at approximately $6.0 billion. The transaction is anticipated to close in the second quarter of 2021, subject to regulatory and shareholder approvals.
What is the outlook for Huntington's dividends and share repurchases?
On January 20, 2021, the Board declared a quarterly common dividend of $0.15 per share. The FRB permitted certain large BHCs, including Huntington, to make dividend and share repurchases in the first quarter of 2021, subject to limits based on the second quarter 2020 dividends and average net income over the preceding four quarters.
06—Continue