Huntington Bancshares Incorporated Reports Net Income of $178 Million, or $0.20 Per Common Share, fo

Huntington Bancshares Incorporated Reports Net Income of $178 Million, or $0.20 Per Common Share, for the 2013 Third Quarter, Up 6% from the Year-Ago Quarter and Up 18% from the Prior Quarter

Specific highlights compared with 2012 Third Quarter:

  • $0.39, or 7%, increase in tangible book value per common share to $6.10
  • 1.27% return on average assets, up from 1.19%
  • $682 million of fully-taxable equivalent revenue, a 2% decrease reflecting:
    • $4 million, or 1%, decrease in fully-taxable equivalent net interest income, reflecting a 3.34% fully-taxable equivalent net interest margin (NIM), down 4 basis points, and 5% average loan growth
    • $11 million, or 4%, decrease in noninterest income
  • $35 million, or 8%, decrease in noninterest expense due to reductions in all categories except net occupancy and equipment. The quarter included:
    • A previously announced, $34 million one-time, non-cash gain related to pension curtailment, and
    • $17 million of charges related to branch consolidations, severance, and facility optimization
  • 25% decline in nonaccrual loans to 0.78% of total loans and leases, down from 1.11%
  • Tier 1 Common Ratio of 10.85%, up from 10.28%

Specific highlights compared with 2013 Second Quarter:

  • $2 million, or less than 1%, increase in fully-taxable equivalent revenue, reflecting:
    • 7% annualized growth in average total loans and leases offset by 4 basis point reduction in NIM resulted in unchanged net interest income
    • $2 million increase in noninterest income as broad fee income growth was partially offset by the $10 million, or 30%, decrease in mortgage banking income
  • $23 million, or 5%, decrease in noninterest expense included $17 million of Significant Items
  • NCOs increased to 0.53% of average total loans and leases from 0.34%, and remained in our long-term expected range
  • 2.0 million shares repurchased at an average price of $8.18 per share

COLUMBUS, Ohio--(BUSINESS WIRE)-- Huntington Bancshares Incorporated (NASDAQ: HBAN; www.huntington.com) reported 2013 third quarter net income of $178 million, an increase of $11 million, or 6%, from the 2012 third quarter and an increase of $28 million, or 18%, from the 2013 second quarter. Earnings per common share were $0.20, an increase of $0.01 and $0.03 from the year-ago and prior quarters, respectively.

The board of directors declared a quarterly cash dividend on its common stock of $0.05 per common share. The dividend is payable January 2, 2014, to shareholders of record on December 19, 2013.

Strategies Continue to Drive Business Performance

"Huntington's third-quarter results continue to demonstrate that our uniquely positioned products and services are driving robust organic customer acquisition across our commercial and consumer customer base while delivering stable returns to shareholders," said Stephen D. Steinour, chairman, president and CEO of Huntington Bank. "Through our disciplined investments in fee-income businesses in conjunction with prudent expense management, we have been able to deliver modest positive operating leverage for the first nine months of the year."

"There is much to recognize in the quarter, not the least of which was our successful consumer credit card launch. The third quarter was a time of continuing household growth, particularly within our in-store branches, and marked a return to stability of our commercial real estate loan portfolio," said Steinour. "Our performance has benefited from ongoing improvement within our core Midwestern economies. We also made progress in managing expenses, including one-time savings attributable to pension curtailment, rightsizing of some investments, and the consolidation of 22 branch locations. Overall, it was a solid quarter positioning Huntington for a good finish for 2013."

Table 1 - Earnings Performance Summary

  2013   2012
Third   Second   First Fourth   Third
($ in millions, except per share data)   Quarter Quarter Quarter Quarter Quarter
Net Income $ 178.5 $ 150.7 $ 151.8 $ 167.3 $ 167.8
Diluted earnings per common share 0.20 0.17 0.17 0.19 0.19
 
Return on average assets 1.27 % 1.08 % 1.10 % 1.19 % 1.19 %
Return on average common equity 12.3 10.4 10.7 11.6 11.9
Return on average tangible common equity 14.1 12.0 12.4 13.5 13.9
Net interest margin 3.34 3.38 3.42 3.45 3.38
Efficiency ratio 60.6 64.0 63.3 62.3 64.5
 
Tangible book value per common share $ 6.10 $ 5.88 $ 5.91 $ 5.78 $ 5.71
Cash dividends declared per common share 0.05 0.05 0.04 0.04 0.04
Average diluted shares outstanding (000's) 841,015 843,840 848,708 853,306 863,588
 
Average earning assets $ 51,247 $ 51,156 $ 50,960 $ 50,682 $ 51,330
Average loans 41,994 41,280 40,864 40,397 40,120
Average core deposits 43,773 43,768 43,616 44,310 43,764
 
Tangible common equity / tangible assets ratio 9.02 % 8.78 % 8.92 % 8.76 % 8.74 %
Tier 1 common risk-based capital ratio 10.85 10.71 10.62 10.48 10.28
 
NCOs as a % of average loans and leases 0.53 % 0.34 % 0.51 % 0.69 % 1.05 %
NAL ratio 0.78 0.87 0.92 1.00 1.11
ACL as a % of total loans and leases 1.72 1.86 1.91 1.99 2.09
 

Significant Items Influencing Financial Performance Comparisons

From time-to-time, revenue, expenses, or taxes are impacted by items we judge to be outside of ordinary banking activities and/or by items that, while they may be associated with ordinary banking activities, are so unusually large that we believe their outsized impact at that time to be infrequent or short term in nature. We believe the disclosure of such "Significant Items," when appropriate, aids analysts/investors in better understanding performance trends. (See Significant Items under the Basis of Presentation for a full discussion.)

Table 2 highlights the Significant Items impacting reported results for the prior five quarters. This quarter contained two significant items relating to the pension curtailment and expense related to consolidation of 22 branches, severance, and facilities optimization.

Table 2 - Significant Items Influencing Earnings Performance Comparisons
Three Months Ended   Pre-Tax Impact   After-Tax Impact
(in millions, except per share) Amount Amount (1)   EPS (2)
September 30, 2013 - net income $ 178 $ 0.20

• Pension curtailment gain

$ 34 22 0.03

• Franchise repositioning related expense

(17 ) (11 ) (0.01 )
 
June 30, 2013 - net income $ 151 $ 0.17
 
March 31, 2013 - net income $ 152 $ 0.17
 
December 31, 2012 - net income $ 167 $ 0.19
 
September 30, 2012 - net income $ 168 $ 0.19

• State deferred tax valuation allowance adjustment

N.A. 20 0.02

 

(1) Favorable (unfavorable) impact on net income; 35% tax rate
(2) EPS reflected on a fully diluted basis
N.A. = Not applicable

Net Interest Income, Net Interest Margin, and Average Balance Sheet

Table 3 - Net Interest Income and Net Interest Margin Performance Summary

  2013   2012  
Third   Second   First Fourth   Third Change (%)
($ in millions)   Quarter Quarter Quarter Quarter Quarter LQ YOY
Net interest income $ 424.9 $ 424.9 $ 424.2 $ 434.1 $ 430.3 (0 ) % (1 ) %
FTE adjustment     6.6     6.6     5.9     5.5     5.3   1     26    
Net interest income - FTE 431.5 431.5 430.1 439.5 435.6 (0 ) (1 )
Noninterest income     250.5     248.7     252.2     297.7     261.1   1     (4 )  
Total revenue - FTE   $ 682.0   $ 680.2   $ 682.3   $ 737.2   $ 696.6   0   % (2 ) %  
 
Change bps
Yield / Cost                       LQ YOY
Total earning assets 3.64 % 3.68 % 3.75 % 3.80 % 3.79 % (4 ) (16 )
Total loans and leases 3.87 3.95 4.03 4.13 4.12 (7 ) (25 )
Total securities 2.41 2.38 2.39 2.38 2.41 3 0
 
Total interest-bearing liabilities 0.42 0.42 0.45 0.50 0.58 0 (15 )
Total interest-bearing deposits 0.33 0.36 0.38 0.42 0.48 (2 ) (15 )
 
Net interest rate spread 3.20 3.26 3.30 3.30 3.21 (6 ) (1 )
Impact of noninterest-bearing funds on margin     0.14     0.12     0.12     0.15     0.17   2     (3 )  
Net interest margin     3.34 %   3.38 %   3.42 %   3.45 %   3.38 % (4 )   (4 )  
 

See Page 9 of Quarterly Financial Supplement for additional rate detail.

Fully-taxable equivalent net interest income decreased $4 million, or 1%, from the 2012 third quarter. This reflected the impact of a 4 basis point decrease in the fully-taxable equivalent net interest margin (NIM) to 3.34%, as average earning assets were essentially unchanged with 5% loan growth offset by the planned reduction in investment securities. The primary items impacting the decrease in the NIM were:

  • 16 basis point negative impact from the mix and yield of earning assets primarily reflecting a decrease in consumer loan yields.

Partially offset by:

  • 15 basis point positive impact from the mix and yield of deposits reflecting the strategic focus on changing the funding sources from higher rate time deposits to no-cost demand deposits and low cost money market deposits.

Compared to the 2013 second quarter, fully-taxable equivalent net interest income was unchanged, reflecting a $0.1 billion increase in average earnings assets as well as an additional day in the quarter, primarily offset by a 4 basis point decrease in NIM. The primary items affecting the NIM were a 4 basis point negative impact from the mix and yield of earning assets and the 3 basis point negative impact of the $750 million of debt issued during the quarter, partially offset by the 3 basis point benefit from lower cost deposits and increased equity.

Table 4 - Average Earning Assets - Automobile and C&I Continue To Drive Growth

  2013   2012    
Third   Second   First Fourth   Third

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