Maryland 0-2525 31-0724920
--------------- ------------- ----------
(State or other (Commission File No.) (IRS Employer
jurisdiction of Identification Number)
incorporation or
organization)
--------------------
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Item 5. Other Events.
On July 17, 2001, Huntington Bancshares Incorporated ("Huntington") issued a news release announcing its earnings for the second quarter and six months ended June 30, 2001. The information contained in the news release, which is attached as Exhibit 99.1 to this report, is incorporated herein by reference. Huntington also presented this information during a conference call which was available via Internet Webcast. The presentation materials are attached at Exhibits 99.2 and 99.3 to this report, and are incorporated herein by reference.
The information contained or incorporated by reference in this Current Report on Form 8-K may contain forward-looking statements, including certain plans, expectations, goals, and projections, which are subject to numerous assumptions, risks, and uncertainties. Actual results could differ materially from those contained or implied by such statements for a variety of factors, including: changes in economic conditions; movements in interest rates; competitive pressures on product pricing and services; success and timing of business strategies; the successful integration of acquired businesses; the nature, extent, and timing of governmental actions and reforms; and extended disruption of vital infrastructure. All forward-looking statements included in this Current Report on Form 8-K are based on information available at the time of the Report. Huntington assumes no obligation to update any forward-looking statement.
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
Exhibit 99.1 News release of Huntington Bancshares Incorporated, dated
July 17, 2001.
Exhibit 99.2 Presentation Transcript of July 17, 2001.
Exhibit 99.3 Presentation Materials, dated July 17, 2001.
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Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: July 18, 2001 By:/s/ Michael J. McMennamin
-----------------------------------
Michael J. McMennamin, Vice Chairman, Chief
Financial Officer and Treasurer
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Exhibit No. Description
Exhibit 99.1 * News release of Huntington Bancshares Incorporated, July 17,
2001.
Exhibit 99.2 * Presentation Transcript of July 17, 2001.
Exhibit 99.3 * Presentation Materials, dated July 17, 2001.
_________________________
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FOR IMMEDIATE RELEASE
July 17, 2001 Contacts: Investors Media Laurie Counsel (614) 480-3878 Jeri Grier (614) 480-5413 Cheri Gray (614) 480-3803 Laura Bowers (614) 480-4433 |
Reports operating earnings of $.30 per share
After-tax charge of $72 million taken in the quarter related to previously announced restructuring and strategic refocusing
Net interest income increased 7% from the year-ago quarter
Fee income up 13% from the year-ago quarter
COLUMBUS, Ohio - Huntington Bancshares Incorporated (NASDAQ: HBAN; www.huntington.com) today reported second quarter operating earnings, excluding restructuring and other charges, of $74.5 million, or $.30 per share. These results compare with $67.9 million, or $.27 per share for the first quarter and $97.5 million, or $.40 per share in the prior year's quarter.
On July 12, Huntington announced a comprehensive restructuring and strategic refocus on its core Midwest markets. In conjunction with the restructuring, Huntington said it would record restructuring and other charges of approximately $140 million after tax to be taken in the second, third, and fourth quarters of 2001. The portion of the total charge taken in the second quarter of 2001 was $72.1 million after tax, primarily related to credit and asset impairment. Including the restructuring and other charges, the company reported earnings of $2.4 million, or $.01 per share in the second quarter.
Year-to-date, operating earnings were $142.4 million, or $.57 per share, compared with six-month results of $201.7 million, or $.82 per share, for the same period a year ago. Year-to-date, reported earnings were $70.2 million or $.28 per share. Subsequent results discussed in this press release are on an operating basis and exclude the impact of the restructuring and other charges.
"While our second quarter results excluding charges were in line with expectations, this earnings performance is clearly not satisfactory," said Thomas Hoaglin, president and chief executive officer of Huntington Bancshares Incorporated. "As we announced last week, we are taking a series of strategic and financial restructuring actions aimed at strengthening the company and positioning it for future growth. The entire Huntington management team is committed to our plan - including sharpening our focus on our core Midwest markets, streamlining operations and reducing costs, and creating a more customer-centric organization - in order to improve our core earnings, capital position and operating efficiency. With the announced restructuring plan, we have taken only the first step to improving Huntington's performance and returning the company to its position as a premier regional bank. We will now focus aggressively on the execution of our plan with the ultimate goal of delivering enhanced value to our shareholders."
Net interest income increased $4.9 million from the first quarter to $248.0 million and was up 7% from the second quarter a year ago. Over the last two quarters, the net interest margin has expanded 27 basis points from 3.70% to 3.97%. This expansion resulted from the reduction of lower-yielding investment securities and the decline in short-term interest rates. In the second quarter, the net interest margin increased 4 basis points from the previous quarter.
Total managed loan growth continued to moderate as a result of the general slowdown in economic activity. Annualized loan growth was 5% in the second quarter, compared with 6% in the first quarter and 11% in the fourth quarter of 2000. Reduced demand for automobile dealer floor plan financing caused commercial loan growth to decline to 4% in the second quarter from 9% in the previous quarter. Consumer loan growth remained stable at 6%, as home equity lines of credit grew at an annualized rate of 16%.
Non-interest expense totaled $233.3 million in the second quarter, up $35.2 million from the year-ago quarter. The year-over-year increase was driven by a low level of expenses in the prior year's quarter, higher personnel expenses, and premiums paid on residual value insurance for the auto lease portfolio. Operating expenses declined slightly from the previous quarter, with the efficiency ratio improving to 58.6% in the second quarter from 62.0% in the previous quarter.
Net charge-offs, as a percent of average loans, totaled .73% in the second quarter versus .55% in the previous three months. Charge-offs increased in the commercial and indirect loan and lease portfolios, reflecting weakened financial conditions resulting from the slower economy. Non-performing assets increased $41.1 million from the first quarter to $166.0 million, representing .79% of total loans and other real estate at quarter-end versus $124.9 million or .60% at the end of the first quarter. The allowance for loan losses was increased to 1.67% of total loans from 1.45% in the previous quarter as a result of additional credit reserves associated with the aforementioned charges.
At June 30, 2001, Huntington's tangible equity to assets ratio was 5.97%, essentially unchanged from the previous quarter. Huntington expects to improve this ratio to a minimum of 6.5% following the completion of its previously announced restructuring plan.
Webcast Information
A conference call to discuss second quarter results will be held today at 2:00 p.m. Eastern and will be available via a live Internet Webcast at www.streetfusion.com. A replay of the Webcast will be archived at that same address until midnight July 31. The supplemental financial tables as well as the slides for the conference call are available at www.huntington-ir.com and will be filed, along with management's comments, with the Securities and Exchange Commission on Form 8-K.
Huntington Bancshares Incorporated is a $28 billion regional bank holding company headquartered in Columbus, Ohio. Through its affiliated companies, Huntington has more than 135 years of serving the financial needs of its customers. Huntington provides innovative products and services through more than 500 offices in Florida, Indiana, Kentucky, Maryland, Michigan, New Jersey, Ohio and West Virginia. International banking services are made available through the headquarters office in Columbus and additional offices located in the Cayman Islands and Hong Kong. Huntington also offers products and services online at www.huntington.com; through its technologically advanced, 24-hour telephone bank, and through its network of more than 1,400 ATMs.
This press release contains certain forward-looking statements, including certain plans, expectations, goals, and projections, which are subject to numerous assumptions, risks, and uncertainties. Actual results could differ materially from those contained or implied by such statements for a variety of factors including: changes in economic conditions; movements in interest rates; competitive pressures on product pricing and services; success and timing of business strategies; the successful integration of acquired businesses; the nature, extent, and timing of governmental actions and reforms; and extended disruption of vital infrastructure. All forward-looking statements included in this news release are based on information available at the time of the release. Huntington assumes no obligation to update any forward-looking statement.
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Three Months Ended June 30, 2001
-----------------------------------------------------
Restructuring
and
Reported Other Operating
Earnings Charges Earnings
------------- ------------- -------------
Interest Income $ 498,959 $ --- $ 498,959
Interest Expense 250,926 --- 250,926
------------- ------------- -------------
Net Interest Income 248,033 --- 248,033
Provision for Loan Losses 117,495 71,718 45,777
Securities (Losses) Gains (2,503) (5,250) 2,747
Non-Interest Income 130,706 --- 130,706
Non-Interest Expense 233,296 --- 233,296
Special Charge 33,997 33,997 ---
------------- ------------- -------------
(Loss) Income Before Income Taxes (8,552) (110,965) 102,413
Provision for Income Taxes (10,929) (38,838) 27,909
------------- ------------- -------------
Net Income $ 2,377 $ (72,127) $ 74,504
============= ============= =============
Net Income per Common Share -- Diluted/(1)/ $ 0.01 ($0.29) $ 0.30
============= ============== =============
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----------------------------------------------------------------------------------------------------------------------------------
Six Months Ended June 30, 2001
--------------------------------------------------
Restructuring
and
Reported Other Operating
Earnings Charges Earnings
------------ ------------- ------------
Interest Income $ 1,016,934 $ --- $ 1,016,934
Interest Expense 525,777 --- 525,777
------------ ------------- ------------
Net Interest Income 491,157 --- 491,157
Provision for Loan Losses 150,959 71,718 79,241
Securities (Losses) Gains (425) (5,250) 4,825
Non-Interest Income 246,352 --- 246,352
Non-Interest Expense 467,386 --- 467,386
Special Charge 33,997 33,997 ---
------------ ------------ ------------
Income Before Income Taxes 84,742 (110,965) 195,707
Provision for Income Taxes 14,499 (38,838) 53,337
------------ ------------ ------------
Net Income $ 70,243 $ (72,127) $ 142,370
============ ============ ============
Net Income per Common Share -- Diluted/(1)/ $ 0.28 ($0.29) $ 0.57
============ ============ ============
----------------------------------------------------------------------------------------------------------------------------------
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/(1)/Adjusted for stock splits and stock dividends, as applicable.
-----------------------------------------------------------------------------------------------------------------------------------
Consolidated Results of Operations (Operating Basis)/(1)/
-----------------------------------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, Change June 30, Change
----------------------------- --------------------------
2001 2000 % 2001 2000 %
------------ ------------- ------- ------------ ----------- -------
Interest Income $ 498,959 $ 519,496 (4.0)% $ 1,016,934 $ 1,035,053 (1.8)%
Interest Expense 250,926 286,690 (12.5) 525,777 561,556 (6.4)
------------ ------------- ------------ -----------
Net Interest Income 248,033 232,806 6.5 491,157 473,497 3.7
Provision for Loan Losses 45,777 15,834 189.1 79,241 31,535 151.3
Securities Gains 2,747 114 N.M. 4,825 24,877 N.M.
Non-Interest Income 130,706 115,550 13.1 246,352 216,481 13.8
Non-Interest Expense 233,296 198,076 17.8 467,386 398,182 17.4
Income Before Income Taxes 102,413 134,560 (23.9) 195,707 285,138 (31.4)
Provision for Income Taxes 27,909 37,039 (24.6) 53,337 83,444 (36.1)
------------ ------------- ------------ -----------
Net Income $ 74,504 $ 97,521 (23.6)% $ 142,370 $ 201,694 (29.4)%
============ ============= ============ ===========
Net Income per Common Share (2)
Basic $ 0.30 $ 0.40 (25.0)% $ 0.57 $ 0.82 (30.5)%
Diluted $ 0.30 $ 0.40 (25.0)% $ 0.57 $ 0.82 (30.5)%
Diluted--Cash Basis (3) $ 0.33 $ 0.42 (21.4)% $ 0.63 $ 0.87 (27.6)%
Cash Dividends Declared $ 0.20 $ 0.18 11.1 % $ 0.40 $ 0.36 11.1 %
Shareholders' Equity (period end) $ 9.37 $ 9.02 3.9 % $ 9.37 $ 9.02 3.9 %
Average Common Shares (2)
Basic 251,024 244,835 2.5 % 250,984 246,405 1.9 %
Diluted 251,448 245,652 2.4 % 251,479 247,431 1.6 %
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-----------------------------------------------------------------------------------------------------------------------------------
Key Performance Ratios (Operating Basis)/(1)/
-----------------------------------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- ---------------------
2001 2000 2001 2000
------ ------ ------- ------
Return On:
Average Total Assets 1.05% 1.37% 1.01% 1.41%
Average Shareholders' Equity 12.43% 17.79% 11.98% 18.39%
Efficiency Ratio 58.59% 53.90% 60.23% 53.91%
Net Interest Margin 3.97% 3.72% 3.95% 3.75%
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-----------------------------------------------------------------------------------------------------------------------------------
Consolidated Statement of Condition Data (Average)
-----------------------------------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, Change June 30, Change
----------------------------- ---------------------------
2001 2000 % 2001 2000 %
------------ ------------ --------- ------------ ------------ -----
Total Loans - Reported $ 21,020,057 $ 20,762,295 1.2 % $ 20,863,289 $ 20,781,835 0.4 %
Total Loans - Managed 22,335,492 21,223,986 7.0 22,199,646 21,013,396 7.4
Total Deposits 19,098,894 19,675,603 (2.9) 19,081,740 19,732,583 (3.3)
Total Assets - Reported 28,342,381 28,573,827 (0.8) 28,289,852 28,765,005 (1.7)
Shareholders' Equity 2,403,418 2,204,865 9.0 2,395,579 2,205,393 8.6
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Capital Ratios and Asset Quality
-----------------------------------------------------------------------------------------------------------------------------------
June 30, June 30,
-------------------- -------------------
2001 2000 2001 2000
------ ------ ------- ---------
Tier I Risk-Based Capital/(4)/ 7.00% 7.40% Non-performing loans (NPLs) $156,072 $ 79,453
Total Risk-Based Capital/(4)/ 10.19% 10.90% Total non-performing assets (NPAs) $165,985 $ 95,123
Tier I Leverage/(4)/ 6.94% 6.89% Allowance for loan losses/total loans 1.67% 1.45%
Tangible Equity/Assets -- Period End 5.97% 5.78% Allowance for loan losses/NPLs 225.69% 373.67%
Average Equity/Assets -- Quarterly 8.48% 7.72% Allowance for loan losses and other
real estate/NPAs 211.20% 306.89%
-----------------------------------------------------------------------------------------------------------------------------------
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/(1)/ Income component excludes after-tax impact of $72,127 of Restructuring and Other Charges.
/(2)/ Adjusted for stock splits and stock dividends, as applicable.
/(3)/ Tangible or "Cash Basis" net income excludes amortization of goodwill, net of income taxes.
/(4)/ Estimated.
Operator: Good afternoon. My name is (Raina), and I will be your
conference facilitator today. At this time I would like to
welcome everyone to the Huntington Bancshares Second Quarter
Earnings Results conference call. All lines have been placed
on mute to prevent any background noise.
After the speakers' remarks, there will be a question and
answer period. If you would like to ask a question during
this time, simply press the number 1 on your telephone
keypad, and questions will be taken in the order they are
received. If you would like to withdraw your question, press
the pound key. Thank you.
Ms. Counsel, you may begin your conference.
Laurie Counsel: Thank you, (Raina). And good afternoon again to our
conference call participants. Thanks for taking the time
today to join us.
Here for this afternoon's conference call are Tom Hoaglin,
President and Chief Executive Officer, and Mike McMennamin,
Vice Chairman and Chief Financial Officer.
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This call is being recorded and will be available as a
rebroadcast starting today at 5:00 pm through July 27 at
midnight. It is also available on the Internet for two
weeks. Please call the Investor Relations Department at 614-
480-5676 for more information to access these recordings or
if you have not yet received the news release and
presentation materials for today's call.
Today's conference call and discussion, including related
questions and answers, may contain forward-looking
statements, including certain plans, expectations, goals,
and projections which are subject to numerous assumptions,
risks, and uncertainties.
Actual results could differ materially from those contained
or implied by such statements for a variety of factors,
including changes in economic conditions, improvements in
interest rates, competitive pressures on product pricing and
services, success and timing of business strategies, the
successful integration of acquired businesses, the nature,
extent, and timing of governmental actions and reforms, and
extended restructuring of vital infrastructure.
All forward-looking statements included in this conference
call and discussion, including related questions and
answers, are based on information that was available at the
time of the call. Huntington assumes no obligation to update
any forward-looking statements.
Now I'd like to turn the call over to our CEO, Tom Hoaglin.
Tom?
Tom Hoaglin: Welcome. And thanks, everyone, for joining us. And I also
want to thank so many of you who participated in our
investor conference last Thursday.
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We're very excited about the financial decisions we
announced and the strength and the stability they will
provide, the sale of our Florida franchise,
consolidation of banking offices outside of Florida, the 20%
reduction in our dividend, and the restructuring and special
charges. We're also confident about our ability to grow in
our core Midwest markets as we move forward.
In a moment, Mike McMennamin will talk about our second
quarter financial results. The special charge of $72 million
after taxes obviously had a significant impact on our
results.
We will want you to understand clearly our core operating
performance excluding the charge, so we will review our
estimates for the second half of 2001 and for full-year
2002.
As I mentioned last Thursday, going forward we want
Huntington to be conservative in its projections and
consistent in its record of meeting and exceeding them. We
will also review with you some of our financial analyses
about Florida.
One update since last Thursday, today we are announcing the
appointment of Jim Dunlap as Region President for Western
Michigan. Jim is a 22-year Huntington veteran and has done a
superb job during the last three years as Region President
in Florida. He is energetic, a tremendously effective leader
and team-builder, and a great salesman.
Jim will be based in Grand Rapids and start his new
assignment in mid to late August. His appointment represents
a significant commitment by Huntington to build our customer
base, market share, and financial performance in that key
market.
Now here is our CFO, Mike McMennamin, to review the
financials. Mike?
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Mike McMennamin: Thanks, Tom. As we've already announced, we intend to
recognize restructuring and other special charges totaling
$140 million after tax in the second, third, and fourth
quarters.
In the second quarter, $72 million of these charges were
recognized, related primarily to credit and asset impairment
issues. Excluding the $72 million of charges, operating
earnings totaled $74.5 million or 30 cents a share.
The numbers shown on this next slide, Estimated
Restructuring and Other Charges, are pretax. Of the $111
million pretax charge recognized during the quarter, $72
million was credit-related, $37 million was asset
impairment, and $2 million was legal reserves.
Of the $72 million credit-related charge, $26 million
represented lending businesses that we have exited, sub-
prime auto lending, which is a $150 million portfolio that's
being run off, embedded losses estimated at $15 million,
truck and equipment portfolio, a $60 million portfolio with
embedded losses of $11 million. These are loans on the large
tractor/trailer rigs.
Twenty million dollars in consumer and small business loans
greater than 120 days are being charged off or reserved.
This represents a more conservative application of current
banking regulations and represents an acceleration of
charge-offs that would have occurred in coming months.
Twenty-one million dollars of the reserve is increased
reserves for consumer bankruptcies. Bankruptcies have
increased 18% nationally versus a year ago and are up
approximately the same amount at Huntington.
The increase is related to a deterioration of the economy
and the weakening of consumer balance sheets and secondly,
increased bankruptcy filings in anticipation of the proposed
more stringent bankruptcy legislation.
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Five million of the total charge represents an increase in
commercial loan reserves. And $37 million represents asset
impairment.
Twelve million of the asset impairment is a write-down of
the residual interest in two auto loan securitizations that
were completed in 2000. Charge-offs on these loans have
increased beyond levels anticipated when the securitizations
were booked.
Five million dollars represents a loss on the sale of $15
million Pacific Gas and Electric Commercial Paper in June.
Twenty million dollars of the reserve represents an increase
in the reserve for auto lease residuals.
The remaining $104 million pretax charge is expected to be
recognized in the third and fourth quarters. The remaining
charge is related to closing costs on branch consolidations,
costs associated with the sale of the Florida branches, the
write-down of technology investments, and the establishment
of legal, accounting, and operational reserves.
My remaining comments today will address the second quarter
operating earnings. Turning to the next slide, Earnings Per
Share, in April we provided earnings guidance for the second
quarter of 27 to 29 cents per share.
Earnings for the quarter came in at 30 cents with core
earnings totaling 28 cents per share, consistent with our
projections. There was $5.9 million pretax income in the
second quarter of non-core earnings, roughly 2 cents a
share.
Residential mortgages totaling $107 million were sold during
the quarter and a $2 million gain recognized. Two point
seven million dollars of security gains were realized. And a
$1.2 million gain was recognized on the sale of a small
branch in Indiana.
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The core earnings of 28 cents per share were the same
as were reported in the fourth quarter of 2000 and the
first quarter of this year.
On a cash basis, second quarter earnings were 33 cents per
share, versus the 30 cents on a reported basis, with the
difference being the after-tax amortization of goodwill.
Return on equity on a cash basis improved to 13.7% during
the quarter.
Turning to some of the key performance indicators, the net
interest margin improved slightly during the quarter from
3.93% to 3.97%, following a 23 basis point increase from the
fourth quarter to the first quarter. The efficiency ratio
also declined from 62% in the first quarter to 58.6%.
The tangible common equity to asset ratio was basically
unchanged during the quarter, even after the $72 million
after-tax charge was realized. As announced at our
investment conference last week, our goal was to maintain a
minimum tangible common equity to asset ratio of 6-1/2% when
we are completed with the Florida sale.
The next slide just takes a look at some of the highlights
of the second quarter. As mentioned, the net interest margin
increased 4 basis points during the quarter, with almost all
of the increase related to increased loan fees that are
included in net interest income.
Higher loan fees were generated in the auto loan and lease
business as volume picked up from the first quarter levels
and also in commercial real estate. Managed loan growth
increased at a 5% annualized rate during the quarter.
The decline in the efficiency ratio from 62% to 58.6% was
driven by an $800,000 decline in operating expenses and a
$20 million increase in revenue, $5 million of net interest
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income, and $15 million in non-interest income
during the quarter.
Net charge-offs as a percentage of average loans increased
from 55 basis points in the first quarter to 73 basis
points. The increase occurred primarily in our auto loan and
lease portfolio as well as the commercial portfolio. Non-
performing assets as a percentage of total loans and OREO
increased 19 basis points or $41 million during the quarter.
Turning to the income statement, pretax earnings for the
quarter totaled $102.4 million, a $9.1 million increase.
Higher provision expense of $12.3 million was more than
offset by a $4.9 million increase in net interest income and
a $15.1 million increase in non-interest income led by a
very strong performance in the mortgage banking unit. A
small reduction in operating expenses and a small increase
in security gains also benefited the quarter.
Turning to managed loan growth, the following loan growth
information has been adjusted for the impact of
acquisitions, securitization activity, and asset sales.
Managed loan growth slowed only slightly during the quarter
to a 5% annualized growth rate. Growth during the first half
of the year has been at the 5% to 6% range, versus an 8% to
9% rate during the second half of last year, reflecting the
significant slowdown in the economy.
The decline in the growth of commercial loans during the
quarter -the decline in the growth rate, I should say, is
related to a significant slowing in the demand for
automobile floor-plan credit as auto dealers have sharply
curtailed their inventories.
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C&I loan to land - C&I loan demand, excluding floor-plan
loans, increased at a 7% rate during the quarter, roughly
the same as in the first quarter. Commercial real estate
loans were basically unchanged during the quarter, as
double-digit growth in construction loans was offset by
declines in permanent loans.
After no growth in the first quarter, auto loans and leases
grew at a 6% annualized rate, helped by seasonal factors
during the quarter, and are up 10% versus the prior year's
quarter.
Consumer loans, other than indirect auto loans, increased at
an 8% rate during the quarter, led by double-digit increases
in home equity line of credit, continuing the strength we've
seen in that area over the last year.
Just a comment on residential real estate loans, as we
discussed at the investor conference, we do not feel that
residential mortgage loans are a good use of our capital or
our funding capacity. As such, we've been selling these
assets in the last year.
Over the last year, these loans have declined from $1-1/2
billion to $900 million. This table, however, shows 9%
growth versus the year-ago quarter. And that represents
organic growth. These numbers in the table have been
adjusted for securitizations and sales activity.
Turning to non-interest income, revenue before security
gains increased $15.1 million or 13% versus the same quarter
last year and also from the same - from the first three
months of 2001.
Mortgage banking income was particularly strong in the
prevailing lower-rate environment with revenue increasing
$10.6 million or 131% from a year ago, an $8.7 million
increase from the first quarter.
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Origination volume expanded to $951 million during the quarter, compared with $363 million a year ago and $690 million in the first quarter of the year. Mortgage banking results for the period just ended were also positively impacted by the sale of $107 million of portfolio loans which generated a gain of approximately $2 million.
Brokerage and insurance revenue was $5.4 million or 39% higher than the year-ago period, with insurance income as the primary driver. Brokerage income posted a 5.9% increase, despite a relatively volatile equity market. Annuity sales continue to be strong, increasing 53% versus the second quarter of last year.
Trust income was up 15% over the prior year, indicative of increased revenue from Huntington's proprietary mutual funds. This improvement is a function of higher asset balances, aided in part by the introduction of five new funds, as well as price increases.
The $4-1/2 million decline in other non-interest income versus the prior year is primarily the result of significantly lower securitization activity. We securitized $556 million of auto loans in the prior-year quarter, versus only $107 million in the second quarter of this year.
Turning to non-interest expense, NIE increased $35.2 million or 18% compared with the same period last year, but was essentially flat with the first quarter of 2001.
The increase from a year ago was due to several factors, including $9.8 million of accrual adjustments in the prior-year quarter that resulted in a low expense base for that period.
The remaining increase was primarily due to higher sales commissions and other personnel-related costs as well as premium space for the auto lease residual insurance. The year-over-year impact of purchased acquisitions also drove expenses higher in the recent quarter.
Relative to the first quarter of this year, personnel-based costs increased $4.4 million as annual merit pay adjustments were effected in the second quarter and sales commissions increased in connection with the strength in fee-based businesses, particularly mortgage banking.
Substantially offsetting the higher personnel cost was the $3.8 million reduction in other non-interest expense. This reduction was related to the first quarter $4.2 million loss associated with the sale of Pacific Gas and Electric Commercial Paper.
While the efficiency ratio dropped from nearly 62% in the first quarter to 58.6% in the recent period, the decline was primarily driven by a $20 million increase in revenues. We do expect operating expenses to trend lower in the second half, indicative of the NIE initiative program that we introduced during the second quarter.
The next slide shows our non-performing asset trend. Non-performing assets increased $41 million during the quarter from $125 million to $166 million. Non-performing assets as a percentage of total loans and other real estate owned increased from 60 basis points to 79 basis points.
This slide depicts how Huntington's non-performing asset performance has compared in recent quarters with a peer group of banks. The increase in non-performing assets is primarily attributable to two credits, a $16 million credit to an assisted living healthcare operation -- this is the credit that we mentioned in our last earnings call -- and $14 million to a retailer of farm and agricultural equipment.
Turning to charge-offs, net charge-offs as a percentage of average loans increased from 55 basis points in the first quarter to 73 basis points in the second quarter.
Charge-offs increased in both our consumer and commercial portfolios. The increase in charge-offs in recent quarters appears to be consistent with increases that are being experienced by other peer banks.
The next slide shows the components of our net charge-offs by major portfolio. In the second quarter commercial charge-offs increased from 41 to 67 basis points. Commercial real estate charge-offs increased slightly to 18 basis points, but are at a very low level. Consumer charge-offs increased 17 basis points to 95 basis points during the quarter.
Of the commercial and commercial real estate charge-offs, no individual charge-off exceeded $2-1/2 million, nor were charge-offs concentrated in any particular industry.
The next slide provides more detail on our consumer charge-offs. The increase from 78 to 95 basis points in charge-offs during the quarter is related to the indirect auto loan and lease portfolio, with charge-offs in that area increasing from 113 to 143 basis points.
The higher indirect charge-offs are the result of lower-quality paper originated between the fourth quarter of '99 and the third quarter of 2000, the weaker economic environment and the adverse impact that is having on consumer balance sheet, and an increase in the average loss per vehicle.
The increase in charge-offs in the auto lease portfolio during the quarter from 89 basis points to 137 basis points was partially related to an operational problem that had the impact of first quarter charge-offs being booked in the second quarter. X that change, charge-offs would have increased from 109 to 121 basis points.
Loans originated in the fourth quarter '99 to the second quarter of 2000 period represent 20% of the loan portfolio and were 39% of the losses in the second quarter.
Along the same lines, leases originated in the fourth quarter of '99 to the third quarter of 2000 period represent 35% of the lease portfolio, but 53% of the second quarter losses. We expect improvement in portfolio credit quality as these vintages become a smaller percentage of the portfolio and ultimately roll off.
The higher credit quality originations in the last year represent 45% of the total loan portfolio and 35% of the lease portfolio. The average charge-off in the loan portfolio has increased 23% in the last year from $5300 per unit to $6500.
In the leasing portfolio the average charge-off per unit has increased 35% in the last year from $8400 to $11,500. This increased loss per vehicle is a reflection of the deterioration in the used car market.
There has been substantial improvement in the risk profile of loan originations in recent vintages and quarters. Average FICO scores on loans originated in the first half of 2001 were 713. That compared with 690 in late '99 and the first half of 2000. The percentage of D-Tier paper originated declined from 18% to 6% during the same two time periods. These same trends apply to the lease portfolios.
With the improvement in the risk profile of recent originations, we expect to see declines in the charge-off levels that we've seen over the last six months. The credit quality in the home equity direct installment and residential real estate portfolio is stable and performing well.
Turning to the next slide, 90-day-plus delinquencies in the total portfolio declined from 49 basis points to 32 basis points during the quarter. If you exclude the impact of the charge-offs that were included in the second quarter special charge, delinquencies would have declined from 49 basis points to 42 basis points.
Consumer delinquencies would have been basically unchanged, declining slightly from 69 to 66 points. And commercial and commercial real estate delinquencies would have declined from 29 basis points to 17 basis points.
The loan loss reserve was increased from 1.45% to 1.67% during the quarter, reflecting $44 million of additional credit reserves associated with a special charge. The expectation is that this reserve will decline as these loans are charged off.
Despite the larger reserve for loan losses, the $41 million increase in non-performing assets reduced the loan loss reserve coverage ratio from 239% to 211%. The next slide just provides some detail on the impact of the special charge on the allowance for loan losses in the second quarter.
At last week's investor conference in New York, we provided earnings guidance for the remainder of 2001 and 2002. We want to provide you with a little more detail today, particularly on the Florida market disposition.
The next slide you see, entitled 2002 Earnings Projections, is the same slide that we showed you last week, creating a 2002 earnings per share estimate by building on the 2001 estimate of $1.15 to $1.17 per share.
The next slide, Goodwill and CDI Amortization, breaks out the detail of our intangible assets, goodwill, and the core deposit intangibles between Florida and the rest of the company.
These are balances that are projected as of December 2001. Total Florida intangibles will total $526 million at that date. Only $191 million of goodwill will remain on Huntington's books.
The numbers at the bottom of the slide are the per share amortization of goodwill and the core deposit intangibles, broken out again by Florida and the rest of the company. Elimination of goodwill amortization will have the impact of increasing Huntington's earnings per share by 11% - I'm sorry by 11 cents in 2002, independent of the sale of Florida. This is the same 11 cents per share increase in 2002 earnings that you saw on the previous slide related to accounting change goodwill.
The next slide provides some detail on the excess capital that will be created or generated from the Florida sale. This shows the capital is generated and released by the sale of Florida and also the capital required to offset the $140 million of after-tax charges, some of which have been recognized in the Second Quarter, but the remainder be recognized in Third and Fourth Quarter, plus a small amount of capital required to true up or to bring the tangible common equity ratio up to 6-1/2% by the end of the year.
Assuming the Florida branches are sold at Huntington's book value, that is at $526 million of remaining intangibles we highlighted just a moment ago, capital of $526 million will be generated.
In addition the sale will release $170 million in tangible capital. We've assumed a ratio here of 6-1/2%. It's currently required to support the assumed $2.6 billion of tangible assets expected to be sold late in 2001.
This $696 million total will be augmented by any after-tax gain that the sale generates. That is, a deposit premium above Huntington's book value of $526 million. This 696 million plus whatever after-tax gain is generated will be reduced by the $140 million of after-tax charges that we will recognize this year, and $18 million in capital required to bring a tangible common equity asset ratio to 6-1/2%. Thus the net capital available for stock repurchase is the sum of $538 million plus whatever after-tax gain you want to assume we generate on the sale.
The final slide, we had showed in the presentation two to six cents earnings per share resulting from the disposition of the Florida branches at the investor presentation. There are three components of that number.
First of all, the Florida earnings would go away as a result of the sale. This represents the singe digit return on the $696 million of equity that Huntington has invested in Florida. As I said last week these cash earnings are net of, or after, core deposit intangible amortization. But these foregone earnings exclude the benefit from the elimination of goodwill amortization in Florida. The earnings give up on this component is a negative.
The second component is the earnings per share pick up resulting from the repurchase of Huntington stock. On our model we assumed $300 to $400 million of stock was repurchased. The source of funds for the stock repurchase is the net excess capital generated from the sale, that is the $538 million on the previous slide plus whatever after-tax gain we might recognize. This repurchase adds to earnings per share and is a positive component of the Florida market disposition.
The third component of the earnings - the third component is the earnings on the excess funding that's created by the disposition. This is the earnings on the sum of the $538 million plus the after tax gain, less whatever funds are actually utilized for the stock repurchase. Hopefully that provides you with a little bit more detail on some of the discussion that we had last week.
That concludes our presentation this morning. We'd be happy to take any questions.
Operator: At this time I'd like to remind everyone, in order to ask a question please press the number 1 on your telephone keypad. Please hold for your first question.
Your first question comes from Derek Statkevicus with KBW.
Derek Statkevicus: Hi, how are doing today?
Mike McMennamin: Good.
Derek Statkevicus: A quick question on the Florida sale. Again you just went over some graphs that showed even in what at least I would consider a fairly conservative sale price for Florida, you come up with round figures 540 million of capital available stock repurchase. Yet at the same time, in terms of trying to figure out what the earnings accretion you'd stock repurchase of $300 to $400 million. What's the disconnect there? Why not use the, you know, 540 million? Again assuming that you'll probably sell Florida for at least a small gain.
Mike McMennamin: Derek, I don't think that there's a disconnect. What we've - we don't know exactly how much stock we'll be able to buy back and what the time period we will be able to buy it back in. The assumption is just that in 2002 that we'll only be able to buy back something like $300 to $400 million of stock. If we can buy back more in 2002 then the benefit will be more - or the transaction will be more accretive.
I think we did point out that the 2002 does not represent the total accretion benefit from this sale, rather that we expect that the remaining stock to be repurchased in 2003 with a corresponding benefit or accretion in 2003 earnings. So it's just a conservative assumption. We could have used a higher number, we chose not to.
Derek Statkevicus: Okay. So again, the assumption is that the stock is bought back in the open market over time, as opposed to some sort of accelerated, you know, program relatively shortly after the completion of the sale of Florida.
Mike McMennamin: Well the assumption in the model is just that the stock gets bought back. There's no assumption - we haven't decided as we mentioned last week what program or what process we use to buy back.
Derek Statkevicus: Okay, fair enough. Thank you.
Operator: Again I would like to remind everyone, in order to ask a question simply press the number 1 on your telephone keypad.
Your next question comes from Ed Najarian with Merrill Lynch.
Ed Najarian: Yeah, good afternoon guys. Mike, could you just go over the 72 million of credit related charges - extra charges that you went over in the beginning of the call and you broke that out - can you break that out for me once again?
Mike McMennamin: Sure, hold on just one second. Okay it was $26 million, Ed, in businesses that we have exited. That was sub-prime auto lending that totaled $15 million. There's another $11 million of estimated embedded losses in a truck and equipment portfolio, about a $60 million portfolio. These are both portfolios that we are no longer making loans in. So that's 26 million.
There is $20 million in consumer and small business loans that's about 75% consumer that are over 120 days delinquent that are being charged off or reserved for. And this just represents as you probably know banking regulations require you to charge these loans off if they're more than 120 days delinquent. But there are a number of exceptions to that - to those rules. We are just getting a lot more conservative in the application of those rules to our portfolio. That's 20 million.
We've got $21 million which are increased reserves for consumer bankruptcy both related to just the deterioration we're seeing in consumer balance sheets as well as the increase in bankruptcies as related to the deterioration of the economy as well as, we think, some bankruptcy filings in anticipation of the proposed legislation. Just $5 million represents an increase in commercial loan reserves and I think that was the total.
Ed Najarian: Okay, thanks. And then when you talk about the core net charge off ratio which was I believe 70...
Mike McMennamin: Seventy-three basis points.
Ed Najarian: Seventy-three basis points, and then in the press release there's an actual net charge off ratio which I believe was about 120 net basis points?
Mike McMennamin: I think the difference Ed is the - the difference is the 125 basis points is total charge off including those that are included in the special charge, that was I think $27 million of charge offs that were embedded in the special charge. If we add those to the charge off that we ran through the operating part of the income statement we come up to 125 basis points.
Ed Najarian: Okay so now that $27 million difference was essentially the charges that are -were taken that are in - that are aligned with that 72 million that you just broke out for me. Is that correct?
Mike McMennamin: The 125 basis points includes $27 million of actual charge offs...
Ed Najarian: Right.
Mike McMennamin: ...that were embedded in the $72 million. The $72 million credit portion of the reserves was $27 million of charge offs that actually were booked and 40 - 44 or $45 million of additional reserves that were put up. So the additional reserves would show up in the form of a higher loan loss reserve ratio that went from 145 to 167.
Ed Najarian: Okay. I got that. I'm clear on that. Now that extra 44 to 45 million that was put in to the reserve, how quickly do you expect that to be used up or charged off? Will we see that go away in the form of extra charges in the Third and Fourth Quarter above and beyond the 65 basis point ratio that you talked about last week?
Mike McMennamin: No, we don't think we will. First of all the assumption in building that $45 million in reserves up is that as those charge offs occur that those - the reserve would actually be reduced as the charge offs go against the reserves have already been established. That would imply that the reserve over some period of time would go back to the 145 basis points that we were at to begin with which we did feel was adequate.
Ed Najarian: Okay.
Mike McMennamin: The charge offs that we've assumed - we however in our earnings forecast for the second half of 2001 and also for the 2002 period we've assumed charge offs of 65 basis points. So you could argue we've got an element of conservatism that's built in there.
Ed Najarian: Okay. So in some ways you're - wait, I think I sort of missed that last point. There won't be then expected additional charges above and beyond the 65 basis points. There will be some, but not as much as the 40 to 45 million I guess.
Mike McMennamin: Well we're saying that the - we do not expect charge offs in the next year and a half to be above 65 basis points.
Ed Najarian: Okay.
Mike McMennamin: Now that would imply - if charge offs stay exactly at the level that they've been at in the first half excluding this charge for just a second, charge offs in the first half have averaged 64 basis points. Let's assume for the sake of discussion the charge offs were to remain at that level for the rest of 2001 and for 2002. That would imply that the reserve would not be drawn down.
Ed Najarian: Right.
Mike McMennamin: So we've got an element of conservatism built into the numbers. Stated another way, if we're going to draw down the reserve by $45 million over the next few quarters then you would expect our reported charge offs to actually decline from the 65 basis points that we've assumed. We're unwilling to make that assumption today at this stage of the game. So there's an element of conservatism built in there.
Ed Najarian: Okay. I got it, thanks.
Operator: Your next question comes from Brock Vandervliet with Lehman Brothers.
Brock Vandervliet: Good afternoon. I could just ask a completely unrelated question tied to the indirect auto securitization page. You mentioned then in passing Mike that you'd securitized 550 million or so last year and just 107 or so this year. Was that just due to market conditions or another reason?
Mike McMennamin: Brock, we had two securitizations last year. There was a $500 million deal effected in the First Quarter. In the Second Quarter very - we securitized a billion dollars of which on - of which some that got done in the Second and Third Quarter. That was the 556 million I was referring to. There have been no securitizations done since that Second Quarter securitization. The $107 million that we do - the billion dollar securitization was done last year is a revolving securitization where you have - where you top off the loans sold on a quarterly basis keeping it up to the billion dollars outstanding. The top off in the First Quarter - in the Second Quarter was $107 million of that.
Brock Vandervliet: Okay, thank you.
Operator: Your next question comes from Fred Cummings with McDonald Investments.
Fred Cummings: Yes, good afternoon. Mike can you touch on how the Florida operation is impacted 1, the service charge on deposit growth or any of the - assuming that's the one major line item that Florida would've - might've influenced. And then related to that you had pretty good growth in your interest bearing checking accounts and I'm wondering if you exclude Florida how that growth rate would look.
Mike McMennamin: Fred I don't have any specific numbers but let me talk anecdotally. The Florida deposit mix is skewed away from demand deposits. My recollection is that only 13% of our total deposits in Florida are demand deposits, verses 19% of the total deposits in the rest of the company being demand deposits. So the service charge - your question on the service charge income I'm going to say that the Florida - Florida should not have been a large component of that.
In terms of the growth in the non-interest bearing deposits...
Tom Hoaglin: Interest bearing deposits.
Mike McMennamin: I'm sorry, interest bearing deposits.
Fred Cummings: Yes.
Mike McMennamin: You're talking interest bearing checking?
Fred Cummings: Yeah, interest - the demand accounts. Yeah, the interest bearing demand accounts.
Mike McMennamin: Don't really have any illuminating comments on that. I'd have to check on that and I'll get - I'll be happy to get back to you later.
Fred Cummings: Ok. And could you characterize how Michigan did, what's on the deposit growth side?
Mike McMennamin: Michigan has been doing well of late on deposit growth. As you know and as everyone knows we have been challenged in Michigan. But the deposits - we ran a couple of the special deposit campaigns up there and have had some success in the last few months. So Michigan has really picked up the pace verses a year ago when they were lagging considerably.
Fred Cummings: Ok, thank you.
Operation: At this time there are no further questions - okay, you have another question from Brock Vandervliet of Lehman Brothers.
Brock Vandervliet: Yeah Mike this is Brock. If you could just follow up on a comment you made on the conference call a couple of days ago. You described the returns earned on the Florida franchise's mid single digit or single digit. Could you - that strikes me as rather low. I'm just trying to get at why that was, whether it's small branch size or the deposit mix. Could you speak to that a little bit? Thanks.
Mike McMennamin: Brock I think that there's two or three factors that are involved in the - first of all we've got a relatively large capital investment down there. We've got on the slides that we just walked you through it's $696 million, I think we said $700 million in our presentation. So we $700 million invested down there. That's over 30% of our capital, Florida would represent only 23 or 24% of our deposits so we've got a disproportionate share of capital down there because of the purchase accounting. I think that's one factor.
Secondly the deposit mix as I mentioned is skewed away from demand deposit and heavily toward CDs just because of the demographics of the population. So you tend to earn - you're - the margin that you earn on your deposit business are reduced by I want to say about 30 basis points pre-taxed so you're earning less on your deposit business.
And thirdly unlike the rest of the company Florida has got a loan to deposit ratio that would be just a little south of 50%. And of course banks tend to make money when they earn relatively loan to deposit ratios. So I think that it's a combination that we've got a- we have a disproportion share of our capital invested down there, the deposit mix is just not as rich a mix as we've experienced elsewhere in the franchise, and we have a relatively low loan to deposit ratio vis-a-vis the rest of the company down there. I think when you add those factors up that just creates a relatively low return on our investment.
Brock Vandervliet: Thank you.
Operator: Your next question comes from Ed Najarian with Merrill Lynch.
Ed Najarian: Yeah, it's just a quick follow up. When you're talking about your $1.15 to $1.17 guidance for this year is that including a 28 cent Quarter for this Quarter the core number you broke out or the 30 cent operating number?
Mike McMennamin: Let's take the mid point in $1.16. We've reported total earnings for the first half of 57 cents and we've reported total core earnings of 56. So Ed there's only a penny difference...
Ed Najarian: Yeah, okay.
Mike McMennamin: From one one way or another. We are tending to think in terms of core earnings.
Ed Najarian: Okay, thanks.
Operator: Your next question comes from Fred Cummings with McDonald Investments.
Fred Cummings: Yeah, a follow up. Tom, when you talked about you targeted cost savings of $36 million pre tax that struck me as being maybe somewhat conservative as it represents about 4% of your annualized expense base. Is that a conservative number, and - or is there something in your cost structure that suggests there - why would - shouldn't we expect to see more improvement on that front?
Tom Hoaglin: Fred, thanks for the question. I fully expect that you will see more improvement as we go forward. What we did earlier this year was to focus our senior management team around what actions we could take sooner than later to tamper down the expense growth that we were looking at in our budget and our forecast for 2001.
And my marching orders was not - included not interfering with serving customers, growing businesses. We needed to focus expense on the - take out in the near term on areas where it was duplicative or just not necessary. So what we did not do included in this exercise was to probably get after some of the tougher decisions. We didn't do a lot of actions that would have affected significant numbers of employees. What we did was to make sure the actions could be implementable in 2001 with savings captured in 2001. So we moved swiftly.
But we fully understand that that's merely a down payment on our overall effort to control expenses. Going forward we want to make sure that as we grow revenues significantly we do not grow expenses commensurately so that we've got a nice gap between the rate of revenue growth and a rate of expense growth or hopefully non growth as the case may be. So we did what we could easily do quickly so that we could achieve the savings during 2001 but we're by no means suggest that our work is finished on the expense front.
Fred Cummings: Okay. Thanks Tom.
Operator: At this time there are no further questions.
Laurie Counsel: Okay. Operator I think we will conclude our presentation for this afternoon. Again thank you for joining us.
Operator: Okay, this concludes your conference. You may now disconnect.
Consolidated Financial Highlights............................................ 1 Consolidated Balance Sheets.................................................. 2 Consolidated Statements of Income............................................ 3 Loans and Deposits........................................................... 4 Non-Interest Income and Non-Interest Expense................................. 5 Consolidated Average Balances and Interest Rates (Quarterly)................. 6 & 7 Selected Quarterly Income Statement Data..................................... 8 Stock Summary, Key Ratios and Statistics, and Capital Data................... 9 Loan Loss Reserves and Asset Quality......................................... 10 |
Huntington Bancshares Incorporated Consolidated Financial
Highlights On an Operating Basis /(1)/
(in thousands, except per share amounts)
------------ ----------- ----------
For the Three Months Ended June 30, 2001 2000 % Change
---------------------------------------------------------- ------------ ----------- ----------
Net Income................................................ $ 74,504 $ 97,521 (23.6)%
Per Common Share Amounts/(2)/............................. (2)
Net income
Basic........................................... $ 0.30 $ 0.40 (25.0)
Diluted......................................... $ 0.30 $ 0.40 (25.0)
Cash dividends declared.............................. $ 0.20 $ 0.18 11.1
Average Common Shares Outstanding-Diluted /(2)/........... 251,448 245,652 2.4
Key Ratios
Return on:
Average total assets................................. 1.05% 1.37% (23.4)
Average shareholders' equity......................... 12.43% 17.79% (30.1)
Efficiency ratio.......................................... 58.59% 53.90% 8.7
Average equity/average assets............................. 8.48% 7.72% 9.8
Net interest margin....................................... 3.97% 3.72% 6.7
Tangible or "Cash Basis" Ratios /(3)/
Net Income Per Common Share -- Diluted /(2)/.............. $ 0.33 $ 0.42 (21.4)
Return on:
Average total assets................................. 1.19% 1.49% (20.1)
Average shareholders' equity......................... 13.72% 18.97% (27.7)
------------ ----------- ----------
For the Six Months Ended June 30, 2001 2000 % Change
---------------------------------------------------------- ------------ ----------- ----------
Net Income................................................ $ 142,370 $ 201,694 (29.4)%
Per Common Share Amounts /(2)/
Net income
Basic........................................... $ 0.57 $ 0.82 (30.5)
Diluted......................................... $ 0.57 $ 0.82 (30.5)
Cash dividends declared.............................. $ 0.40 $ 0.36 11.1
Average Common Shares Outstanding-Diluted /(2)/........... 251,479 247,431 1.6
Key Ratios
Return on:
Average total assets................................. 1.01% 1.41% (28.4)
Average shareholders' equity......................... 11.98% 18.39% (34.9)
Efficiency ratio.......................................... 60.23% 53.91% 11.7
Average equity/average assets............................. 8.47% 7.67% 10.4
Net interest margin....................................... 3.95% 3.75% 5.3
Tangible or "Cash Basis" Ratios /(3)/
Net Income Per Common Share -- Diluted /(2)/.............. $ 0.63 $ 0.87 (27.6)
Return on:
Average total assets................................. 1.15% 1.53% (24.8)
Average shareholders' equity......................... 13.29% 19.57% (32.1)
|
/(1)/ Income component excludes the after-tax impact of $72,127 of
Restructuring and Other Charges.
/(2)/ Adjusted for stock splits and stock dividends, as applicable.
/(3)/ Tangible or "Cash Basis" net income excludes amortization of goodwill.
Related asset amount excluded from total assets and shareholders' equity.
Huntington Bancshares Incorporated Consolidated Balance Sheets
(in thousands of dollars)
------------ ------------ ------------
June 30, December 31, June 30,
2001 2000 2000
------------ ------------ ------------
Assets
Cash and due from banks..................................................... $ 908,686 $ 1,322,700 $ 1,139,025
Interest bearing deposits in banks.......................................... 4,893 4,970 4,976
Trading account securities.................................................. 4,291 4,723 24,310
Federal funds sold and securities
purchased under resale agreements......................................... 59,725 133,183 137,203
Loans held for sale......................................................... 376,671 155,104 100,900
Securities available for sale - at fair value............................... 3,190,686 4,090,525 4,357,699
Investment securities - fair value $15,159; $16,414;
and $17,254, respectively................................................. 14,978 16,336 17,609
Total loans /(1)/........................................................... 21,127,862 20,610,191 20,522,443
Less allowance for loan losses............................................ 352,243 297,880 296,891
------------ ------------ ------------
Net loans................................................................... 20,775,619 20,312,311 20,225,552
------------ ------------ ------------
Bank owned life insurance................................................... 824,062 804,941 784,070
Premises and equipment...................................................... 457,749 454,844 439,007
Customers' acceptance liability............................................. 15,335 17,366 13,532
Accrued income and other assets............................................. 1,315,455 1,282,374 1,340,480
------------ ------------ ------------
Total Assets................................................................ $ 27,948,150 $ 28,599,377 $ 28,584,363
============ ============ ============
Liabilities and Shareholders' Equity
Total deposits /(1)/........................................................ $ 18,996,922 $ 19,777,245 $ 19,758,934
Short-term borrowings....................................................... 2,585,773 1,987,759 1,720,611
Bank acceptances outstanding................................................ 15,337 17,366 13,532
Medium-term notes........................................................... 1,983,603 2,467,150 2,939,150
Subordinated notes and other long-term debt................................. 890,371 870,976 870,756
Company obligated mandatorily redeemable preferred
capital securities of subsidiary trusts holding solely
junior subordinated debentures of the Parent Company...................... 300,000 300,000 300,000
Accrued expenses and other liabilities...................................... 822,622 812,834 714,726
------------ ------------ ------------
Total Liabilities......................................................... 25,594,628 26,233,330 26,317,709
------------ ------------ ------------
Shareholders' equity
Preferred stock - authorized 6,617,808 shares;
none outstanding........................................................ -- -- --
Common stock - without par value; authorized
500,000,000 shares; issued 257,866,255;
257,866,255; and 233,844,820 shares, respectively;
outstanding 251,056,761; 250,859,470; and
228,502,954 shares, respectively........................................ 2,490,682 2,493,645 2,253,224
Less 6,809,494; 7,006,765; and 5,341,866
treasury shares, respectively........................................... (125,095) (129,432) (122,245)
Accumulated other comprehensive income.................................... (8,388) (24,520) (105,987)
Retained earnings......................................................... (3,677) 26,354 241,662
------------ ------------ ------------
Total Shareholders' Equity................................................ 2,353,522 2,366,047 2,266,654
------------ ------------ ------------
Total Liabilities and Shareholders' Equity.................................. $ 27,948,150 $ 28,599,377 $ 28,584,363
============ ============ ============
------------ ------------ ------------
|
(1) See page 4 for detail on total loans and total deposits.
----------------------------------- -----------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------------- -----------------------------------
On an Operating Basis/(1)/ 2001 2000 2001 2000
-------------------------------------------------- --------------- -------------- --------------- -------------
Interest and fee income
Loans.......................................... $ 434,697 $ 448,597 $ 881,482 $ 888,243
Securities..................................... 55,434 66,891 119,268 140,042
Other.......................................... 8,828 4,008 16,184 6,768
--------------- -------------- --------------- -------------
Total Interest Income................. 498,959 519,496 1,016,934 1,035,053
--------------- -------------- --------------- -------------
Interest expense
Deposits....................................... 170,288 192,213 355,369 374,862
Short-term borrowings.......................... 30,039 25,216 63,202 49,980
Medium-term notes.............................. 32,940 48,839 69,603 99,197
Subordinated notes and other long-term debt.... 17,659 20,422 37,603 37,517
--------------- -------------- --------------- -------------
Total Interest Expense................ 250,926 286,690 525,777 561,556
--------------- -------------- --------------- -------------
Net Interest Income................... 248,033 232,806 491,157 473,497
Provision for loan losses......................... 45,777 15,834 79,241 31,535
--------------- -------------- --------------- -------------
Net Interest Income
After Provision for Loan Losses.. 202,256 216,972 411,916 441,962
--------------- -------------- --------------- -------------
Total non-interest income/(2)/.................... 133,453 115,664 251,177 241,358
Total non-interest expense/(2)/................... 233,296 198,076 467,386 398,182
--------------- -------------- --------------- -------------
Income Before Income Taxes............ 102,413 134,560 195,707 285,138
Provision for income taxes........................ 27,909 37,039 53,337 83,444
--------------- -------------- --------------- -------------
Net Income............................ $ 74,504 $ 97,521 $ 142,370 $ 201,694
=============== ============== =============== =============
Per Common Share /(3)/
Net income
Basic...................................... $ 0.30 $ 0.40 $ 0.57 $ 0.82
Diluted.................................... $ 0.30 $ 0.40 $ 0.57 $ 0.82
Cash dividends declared........................ $ 0.20 $ 0.18 $ 0.40 $ 0.36
Average Common Shares /(3)/
Basic...................................... 251,024,374 244,834,775 250,983,996 246,404,512
Diluted.................................... 251,447,651 245,651,908 251,479,136 247,431,449
--------------- -------------- --------------- -------------
|
/(1)/ Excludes the after-tax impact of $72,127 of Restructuring and Other
Charges.
/(2)/ See page 5 for detail of non-interest income and non-interest expense.
/(3)/ Adjusted for stock splits and stock dividends, as applicable.
----------------------- -------------------- ----------------------
June 30, 2001 December 31, 2000 June 30, 2000
----------------------- -------------------- ----------------------
Balance % Balance % Balance %
------------- -------- ------------ ------- ----------- --------
Commercial (unearned income $1,196; $1,538; $1,958)....... 6,753,809 32.0 $ 6,633,985 32.2 $ 6,552,186 31.8
Real Estate
Construction.......................................... 1,335,208 6.3 1,318,899 6.4 1,277,718 6.2
Commercial............................................ 2,304,603 10.9 2,253,477 10.9 2,186,768 10.7
Consumer
Loans (unearned income $3,521; $4,150; $4,933)........ 6,695,233 31.7 6,388,036 31.0 6,230,548 30.4
Leases (unearned income $520,564; $515,445; $470,868). 3,194,592 15.1 3,069,210 14.9 2,930,547 14.3
Residential Mortgage.................................. 844,417 4.0 946,584 4.6 1,344,676 6.6
------------ ------------ ------------
Total Loans.......................................... $ 21,127,862 100.0 $ 20,610,191 100.0 $ 20,522,443 100.0
============ ============ ============
|
----------------------- -------------------- ----------------------
June 30, 2001 December 31, 2000 June 30, 2000
----------------------- -------------------- ----------------------
Balance % Balance % Balance %
------------- -------- ------------ ------- ----------- --------
Demand deposits
Non-interest bearing.................................. $ 3,258,252 17.2 $ 3,480,876 17.6 $ 3,498,325 17.7
Interest bearing...................................... 4,878,355 25.7 4,645,127 23.5 4,373,313 22.1
Savings deposits........................................... 3,640,318 19.2 3,527,796 17.8 3,670,456 18.6
Certificates of deposit
Less than $100,000..................................... 5,447,117 28.7 5,938,486 30.0 5,847,359 29.6
$100,000 or more....................................... 1,262,827 6.6 1,520,547 7.7 1,547,303 7.8
------------ ------------ -----------
Total core deposits.................................. 18,486,869 97.4 19,112,832 96.6 18,936,756 95.8
------------ ------------ -----------
Other domestic time deposits............................... 100,233 0.5 256,106 1.3 416,693 2.1
Foreign time deposits...................................... 409,820 2.1 408,307 2.1 405,485 2.1
------------ ------------ -----------
Total Deposits...................................... $ 18,996,922 100.0 $ 19,777,245 100.0 $19,758,934 100.0
============ ============ ===========
|
Huntington Bancshares Incorporated Noninterest Income and
Noninterest Expense
(in thousands of dollars)
--------------------- ---------- ----------------------- ---------
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- Percent ----------------------- Percent
On an Operating Basis/(1)/ 2001 2000 Change 2001 2000 Change
------------------------------------------------ -------- ------ ---------- -------- --------- ---------
Service charges on deposit accounts............ $ 40,673 $ 40,097 1.4% $ 79,580 $ 81,757 (2.7)%
Brokerage and insurance income................. 19,388 13,945 39.0 38,156 29,229 30. 5
Mortgage banking............................... 18,733 8,122 130.6 28,764 16,637 72. 9
Trust services................................. 15,178 13,165 15.3 29,492 26,028 13. 3
Electronic banking fees........................ 12,217 11,250 8.6 23,315 21,099 10. 5
Bank Owned Life Insurance income............... 9,561 9,486 0.8 19,121 18,672 2. 4
Other.......................................... 14,956 19,485 (23.2) 27,924 23,059 21. 1
-------- -------- -------- -------- --------
Total Non-Interest income before securities
gains....................................... 130,706 115,550 13.1 246,352 216,481 13. 8
Securities gains............................... 2,747 114 N.M. 4,825 24,877 N.M.
-------- -------- -------- -------- --------
Total Non-Interest Income...................... $133,453 $115,664 15.4% $251,177 $241,358 4.1%
======== ======== ======== ======== ========
|
--------------------- ---------- ---------------------- ----------
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- Percent --------------------- Percent
On an Operating Basis/(1)/ 2001 2000 Change 2001 2000 Change
------------------------------------------------ -------- -------- ---------- -------- -------- ----------
Personnel and related costs.................... $122,068 $104,133 17.2% $239,730 $206,477 16.1%
Equipment...................................... 19,844 18,863 5.2 39,816 38,275 4.0
Net occupancy.................................. 18,188 18,613 (2.3) 37,968 37,748 0.6
Outside data processing and other services..... 17,671 15,336 15.2 34,325 30,338 13.1
Amortization of intangible assets.............. 10,435 9,206 13.4 21,011 18,402 14.2
Marketing...................................... 7,852 7,742 1.4 17,791 15,735 13.1
Telecommunications............................. 7,207 6,472 11.4 14,332 13,221 8.4
Legal and other professional services.......... 6,763 4,815 40.5 11,732 9,315 26.0
Printing and supplies.......................... 4,565 4,956 (7.9) 9,624 9,573 0.5
Franchise and other taxes...................... 2,246 2,635 (14.8) 4,366 5,073 (13.9)
Other.......................................... 16,457 5,305 210.2 36,691 14,025 161.6
--------- -------- -------- -------- --------
Total Non-Interest Expense..................... $233,296 $198,076 17.8% $467,386 $398,182 17.4%
========= ======== ======== ======== ========
|
/(1)/ Excludes the impact Restructuring and Other Charges.
N.M. - Not Meaningful.
Huntington Bancshares Incorporated
Consolidated Average Balances and Interest Rates (Quarterly Data)
------------------------- --------------------------
Second Quarter 2001 First Quarter 2001
------------------------ --------------------------
Fully Tax Equivalent Basis/(1)/ Average Yield/ Average Yield/
(in millions of dollars) Balance Rate Balance Rate
------------------------------------------------- --------- ----------- ------------ --------
Assets
Interest bearing deposits in banks............... $ 5 5.27% $ 5 5.05%
Trading account securities....................... 39 5.15 48 5.52
Federal funds sold and securities purchased
under resale agreements....................... 93 4.21 164 5.78
Mortgages held for sale.......................... 420 6.96 240 7.19
Securities:
Taxable.................................... 3,368 6.26 3,606 6.72
Tax exempt................................. 201 7.26 248 7.55
--------- ------------
Total Securities...................... 3,569 6.32 3,854 6.77
--------- ------------
Loans:
Commercial.................................. 6,741 7.44 6,678 8.19
Real Estate
Construction........................... 1,303 7.43 1,263 8.31
Commercial............................. 2,294 7.92 2,324 8.40
Consumer
Loans................................. 6,552 8.57 6,397 8.95
Leases................................ 3,189 6.71 3,082 6.90
Residential Mortgage.................. 942 7.72 960 7.91
--------- ------------
Total Consumer........................ 10,683 7.94 10,439 8.25
--------- ------------
Total Loans...................................... 21,021 7.75 20,704 8.25
--------- ------------
Allowance for loan losses........................ 316 307
--------- ------------
Net loans /(2)/.................................. 20,705 8.31 20,397 8.74
--------- ------------
Total earning assets............................. 25,147 7.98% 25,015 8.39%
--------- ------------
Cash and due from banks.......................... 903 950
All other assets................................. 2,608 2,579
--------- ------------
Total Assets..................................... $ 28,342 $ 28,237
========= ============
Liabilities and Shareholders' Equity
Core deposits
Non-interest bearing deposits............... $ 3,245 $ 3,211
Interest bearing demand deposits............ 4,799 2.87% 4,597 3.29%
Savings deposits............................ 3,547 3.42 3,505 3.85
Certificates of deposit..................... 7,012 5.74 7,318 6.01
--------- ------------
Total core deposits.................... 18,603 3.55 18,631 3.89
--------- ------------
Other domestic time deposits..................... 118 5.57 167 6.37
Foreign time deposits............................ 377 4.11 267 5.45
--------- ------------
Total deposits.............................. 19,098 3.58 19,065 3.94
--------- ------------
Short-term borrowings............................ 2,759 4.37 2,504 5.37
Medium-term notes................................ 2,005 6.59 2,240 6.64
Subordinated notes and other long-term debt,
including preferred capital securities........ 1,180 5.96 1,171 6.81
--------- ------------
Interest bearing liabilities................ 21,797 4.62% 21,769 5.12%
--------- ------------
All other liabilities............................ 897 869
Shareholders' equity............................. 2,403 2,388
--------- ------------
Total Liabilities and Shareholders' Equity $ 28,342 $ 28,237
========= ============
--------- ------------
Net interest rate spread............................ 3.36% 3.27%
Impact of non-interest bearing funds on margin...... 0.61% 0.66%
Net Interest Margin................................. 3.97% 3.93%
|
/(1)/ Fully tax equivalent yields are calculated assuming a 35% tax rate.
/(2)/ Net loan rate includes loan fees, whereas individual loan components above are shown exclusive of fees.
Huntington Bancshares Incorporated
Consolidated Average Balances and Interest Rates (Quarterly Data)
--------------------- --------------------- ---------------------
Fourth Quarter 2000 Third Quarter 2000 Second Quarter 2000
--------------------------------------------------- --------------------- --------------------- ---------------------
Fully Tax Equivalent Basis/(1)/ Average Yield/ Average Yield/ Average Yield/
(in millions of dollars) Balance Rate Balance Rate Balance Rate
--------------------------------------------------- ---------- -------- ---------- -------- ---------- --------
Assets
Interest bearing deposits in banks................. $ 5 5.50% $ 5 6.13% $ 6 5.13%
Trading account securities......................... 17 6.56 11 6.54 18 8.67
Federal funds sold and securities purchased
under resale agreements......................... 85 6.53 136 6.43 105 6.10
Mortgages held for sale............................ 129 7.74 99 8.51 99 8.11
Securities:
Taxable...................................... 4,410 6.31 4,273 6.33 4,067 6.20
Tax exempt................................... 264 7.53 270 7.57 276 7.63
---------- ---------- ----------
Total Securities........................ 4,674 6.38 4,543 6.40 4,343 6.29
---------- ---------- ----------
Loans:
Commercial.................................... 6,543 8.65 6,454 8.74 6,439 8.65
Real Estate
Construction............................. 1,306 8.87 1,283 8.88 1,254 8.72
Commercial............................... 2,227 8.64 2,193 8.60 2,172 8.51
Consumer
Loans................................... 6,425 8.90 6,392 8.82 6,530 8.38
Leases.................................. 3,049 6.92 2,976 6.79 2,895 6.71
Residential Mortgage.................... 940 7.94 1,325 7.64 1,473 7.62
---------- ---------- ----------
Total Consumer.......................... 10,414 8.24 10,693 8.11 10,898 7.83
---------- ---------- ----------
Total Loans........................................ 20,490 8.45 20,623 8.41 20,763 8.21
---------- ---------- ----------
Allowance for loan losses.......................... 302 302 302
---------- ---------- ----------
Net loans /(2)/...................................... 20,188 8.96 20,321 8.90 20,461 8.69
---------- ---------- ----------
Total earning assets............................... 25,400 8.47% 25,417 8.43% 25,334 8.27%
---------- ---------- ----------
Cash and due from banks............................ 960 968 1,046
All other assets................................... 2,597 2,615 2,496
---------- ---------- ----------
Total Assets....................................... $ 28,655 $ 28,698 $ 28,574
---------- ========== ==========
Liabilities and Shareholders' Equity
Core deposits
Non-interest bearing deposits................. $ 3,308 $ 3,425 $ 3,485
Interest bearing demand deposits.............. 4,496 3.62% 4,385 3.47% 4,228 3.32%
Savings deposits.............................. 3,498 4.28 3,528 4.14 3,583 4.21
Certificates of deposit....................... 7,522 6.07 7,450 5.94 7,247 5.64
---------- ---------- ----------
Total core deposits...................... 18,824 4.96 18,788 4.82 18,543 4.65
---------- ---------- ----------
Other domestic time deposits....................... 365 6.68 433 6.55 506 6.28
Foreign time deposits.............................. 322 6.37 561 6.63 626 6.66
---------- ---------- ----------
Total deposits................................ 19,511 5.02 19,782 4.93 19,675 4.78
---------- ---------- ----------
Short-term borrowings.............................. 2,133 6.00 2,014 6.12 1,761 5.77
Medium-term notes.................................. 2,665 6.85 2,592 6.81 3,042 6.46
Subordinated notes and other long-term debt,
including preferred capital securities.......... 1,171 7.42 1,171 7.39 1,148 7.08
---------- ---------- ----------
Interest bearing liabilities.................. 22,172 5.46% 22,134 5.39% 22,141 5.21%
---------- ---------- ----------
All other liabilities.............................. 822 787 743
Shareholders' equity............................... 2,353 2,352 2,205
---------- ---------- ----------
Total Liabilities and Shareholders' Equity......... $ 28,655 $ 28,698 $ 28,574
========== ========== ==========
---------- ---------- ----------
Net interest rate spread........................... 3.01% 3.04% 3.06%
Impact of non-interest bearing funds on margin..... 0.69% 0.70% 0.66%
Net Interest Margin................................ 3.70% 3.74% 3.72%
--------------------------------------------------- -------- -------- --------
|
/(1)/ Fully tax equivalent yields are calculated assuming a 35% tax rate.
/(2)/ Net loan rate includes loan fees, whereas individual loan components above
are shown exclusive of fees.
------------------- ------------------------------
2001 2000
------------------- ------------------------------
On an Operating Basis /(1)/ 2 Q 1 Q 4 Q 3 Q 2 Q
---------------------------------------------------- -------- -------- -------- -------- --------
Total Interest Income............................... $498,959 $517,975 $537,661 $535,791 $519,496
Total Interest Expense.............................. 250,926 274,851 304,595 299,922 286,690
-------- -------- -------- -------- --------
Net Interest Income................................. 248,033 243,124 233,066 235,869 232,806
Provision for loan losses........................... 45,777 33,464 32,548 26,396 15,834
-------- -------- -------- -------- --------
Net Interest Income After
Provision for Loan Losses......................... 202,256 209,660 200,518 209,473 216,972
-------- -------- -------- -------- --------
Service charges on deposit accounts................. 40,673 38,907 39,248 39,722 40,097
Brokerage and insurance income...................... 19,388 18,768 17,078 15,564 13,945
Mortgage banking.................................... 18,733 10,031 11,976 9,412 8,122
Trust services...................................... 15,178 14,314 14,404 13,181 13,165
Electronic banking fees............................. 12,217 11,098 11,546 11,238 11,250
Bank Owned Life Insurance income.................... 9,561 9,560 11,086 9,786 9,486
Other............................................... 14,956 12,968 24,366 11,370 19,485
-------- -------- -------- -------- --------
Total Non-Interest Income before securities
gains............................................ 130,706 115,646 129,704 110,273 115,550
Securities gains.................................... 2,747 2,078 845 11,379 114
-------- -------- -------- -------- --------
Total Non-Interest Income........................... 133,453 117,724 130,549 121,652 115,664
-------- -------- -------- -------- --------
Personnel and related costs......................... 122,068 117,662 105,810 109,463 104,133
Equipment........................................... 19,844 19,972 20,811 18,983 18,863
Net occupancy....................................... 18,188 19,780 18,614 19,520 18,613
Outside data processing and other services.......... 17,671 16,654 16,142 15,531 15,336
Amortization of intangible assets................... 10,435 10,576 10,494 10,311 9,206
Marketing........................................... 7,852 9,939 10,592 8,557 7,742
Telecommunications.................................. 7,207 7,125 6,524 6,480 6,472
Legal and other professional services............... 6,763 4,969 6,785 4,719 4,815
Printing and supplies............................... 4,565 5,059 5,212 4,849 4,956
Franchise and other taxes........................... 2,246 2,120 3,163 2,841 2,635
Other............................................... 16,457 20,234 19,703 12,331 5,305
-------- -------- -------- -------- --------
Total Non-Interest Expense.......................... 233,296 234,090 223,850 213,585 198,076
-------- -------- -------- -------- --------
Income Before Income Taxes.......................... 102,413 93,294 107,217 117,540 134,560
Provision for income taxes.......................... 27,909 25,428 30,995 34,510 37,039
-------- -------- -------- -------- --------
Net Income.......................................... $ 74,504 $ 67,866 $ 76,222 $ 83,030 $ 97,521
======== ======== ======== ======== ========
Per Common Share /(2)/
Net income
Diluted........................................ $ 0.30 $ 0.27 $ 0.30 $ 0.33 $ 0.40
Diluted - Cash Basis........................... $ 0.33 $ 0.30 $ 0.33 $ 0.36 $ 0.42
Cash Dividends Declared............................ $ 0.20 $ 0.20 $ 0.20 $ 0.20 $ 0.18
Fully Tax Equivalent Margin:
Net Interest Income................................. $248,033 $243,124 $233,066 $235,869 $232,806
Tax Equivalent Adjustment /(3)/..................... 1,616 2,002 2,057 2,022 2,074
-------- -------- -------- -------- --------
Tax Equivalent Net Interest Income.................. $249,649 $245,126 $235,123 $237,891 $234,880
======== ======== ======== ======== ========
-------- --------- -------- -------- --------
|
/(1)/ Excludes the after-tax impact of Restructuring and Other Charges ($72,127 in 2Q 2001 and $32,500 in 3Q 2000).
/(2)/ Adjusted for stock splits and stock dividends, as applicable.
/(3)/ Calculated assuming a 35% tax rate.
----------------------------- --------------------------------------------
2001 2000
----------------------------- --------------------------------------------
2 Q 1 Q 4 Q 3 Q 2 Q
------------- ------------ ------------ ------------ ----------
High........................................... $ 17.00 $ 18.000 $ 16.375 $ 18.813 $ 21.307
Low............................................ 13.875 12.625 12.516 14.375 14.091
Close.......................................... 16.375 14.250 16.188 14.688 14.375
Cash dividends declared........................ $ 0.20 $ 0.20 $ 0.20 $ 0.20 $ 0.18
------------- ------------ ------------ ------------ ----------
|
Note: Stock price quotations were obtained from NASDAQ.
----------------------------- --------------------------------------------
Margin Analysis - As a % 2001 2000
----------------------------- --------------------------------------------
of Average Earning Assets/(2)/ 2 Q 1 Q 4 Q 3 Q 2 QQ
---------------------------------------------- ------------- ------------ ------------ ------------ ----------
Interest Income............................... 7.98% 8.39% 8.47% 8.43% 8.27%
Interest Expense.............................. 4.01% 4.46% 4.77% 4.69% 4.55%
------------- ------------ ------------ ------------ ----------
Net Interest Margin...................... 3.97% 3.93% 3.70% 3.74% 3.72%
============= ============ ============ ============ ==========
Return on/(3)/
----------------------------------------------
Average total assets.......................... 1.05% 0.97% 1.06% 1.15% 1.37%
Average total assets - cash basis............. 1.19% 1.11% 1.19% 1.29% 1.49%
Average shareholders' equity.................. 12.43% 11.53% 12.89% 14.04% 17.79%
Average shareholders' equity - cash basis..... 13.72% 12.86% 14.20% 15.33% 18.97%
Efficiency Ratio/(3)/......................... 58.59% 61.95% 58.48% 58.38% 53.90%
Effective tax rate/(3)/....................... 27.25% 27.26% 28.91% 29.36% 27.53%
------------- ------------ ------------ ------------ ----------
|
Capital Data
----------------------------- --------------------------------------------
2001 2000
----------------------------- --------------------------------------------
(in millions of dollars) 2 Q 1 Q 4 Q 3 Q 2 QQ
---------------------------------------------- ------------- ------------ ------------ ------------ ----------
Total Risk-Adjusted Assets/(4)/............... $ 27,378 $ 27,230 $ 26,880 $ 26,370 $ 25,900
Tier 1 Risk-Based Capital Ratio/(4)/.......... 7.00% 7.20% 7.19% 7.20% 7.40%
Total Risk-Based Capital Ratio/(4)/........... 10.19% 10.33% 10.46% 10.64% 10.90%
Tier 1 Leverage Ratio/(4)/.................... 6.94% 7.13% 6.93% 6.80% 6.89%
Tangible Equity/Asset Ratio................... 5.97% 6.01% 5.87% 5.73% 5.78%
------------- ------------ ------------ ------------ ----------
|
/(1)/ Adjusted for stock splits and stock dividends, as applicable.
/(2)/ Presented on a fully tax equivalent basis assuming a 35% tax rate.
/(3)/ Income component excludes the impact of Restructuring and Other Charges.
/(4)/ Estimated.
------------------------------ ----------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------ ----------------------------------
2001/(1)/ 2000 2001/(1)/ 2000
-------------- ------------- ------------- -------------
Allowance for loan losses, beginning of period.............. $ 301,777 $ 296,743 $ 297,880 $ 299,309
Allowance acquired.......................................... --- 7,900 --- 7,900
Loan losses................................................. (75,472) (22,810) (111,121) (48,417)
Recoveries of loans previously charged off.................. 10,007 7,280 17,563 14,620
Allowance of securitized loans.............................. (1,564) (8,056) (3,038) (8,056)
Provision for loan losses................................... 117,495 15,834 150,959 31,535
-------------- ------------- ------------- -------------
Allowance for loan losses end of period..................... $ 352,243 $ 296,891 $ 352,243 $ 296,891
============== ============= ============= =============
As a % of average total loans
Net loan losses--annualized............................... 1.25% 0.30% 0.90% 0.33%
Net loan losses--annualized excluding special charges..... 0.73% 0.30% 0.64% 0.33%
Allowance for loan losses as a % of total loans............. 1.67% 1.45% 1.67% 1.45%
Net loan loss coverage /(2)/................................ 2.26x 9.68x 2.94x 9.37x
-------------- ------------- ------------- -------------
|
/(1)/ Including restructuring and other charges unless otherwise indicated.
/(2)/ Income before taxes (excluding restructuring and other charges) and the provision for loan losses to net loan losses.
------------------------------ ----------------------------------------------------
2001 2000
------------------------------ ----------------------------------------------------
2 Q 1 Q 4 Q 3 Q 2 Q
------------- -------------- ------------- ------------- -------------
Non-accrual loans:
Commercial................................... $ 116,044 $ 62,716 $ 55,804 $ 44,918 $ 45,138
Real Estate
Construction.............................. 4,572 6,735 8,687 7,973 8,736
Commercial................................ 22,298 28,158 18,015 13,722 12,714
Residential............................... 11,868 11,949 10,174 8,588 11,548
------------- -------------- ------------- ------------- -------------
Total Nonaccrual Loans....................... 154,782 109,558 92,680 75,201 78,136
Renegotiated loans........................... 1,290 1,297 1,304 1,311 1,317
------------- -------------- ------------- ------------- -------------
Total Non-Performing Loans................... 156,072 110,855 93,984 76,512 79,453
Other real estate, net....................... 9,913 14,031 11,413 11,982 15,670
------------- -------------- ------------- ------------- -------------
Total Non-Performing Assets.................. $ 165,985 $ 124,886 $ 105,397 $ 88,494 $ 95,123
============= ============== ============= ============= =============
Non-performing loans as a
% of total loans.......................... 0.74% 0.53% 0.46% 0.38% 0.39%
Non-performing assets as a
% of total loans and other real estate.... 0.79% 0.60% 0.51% 0.44% 0.46%
Allowance for loan losses as a % of
non-performing loans...................... 225.69% 272.23% 316.95% 385.15% 373.67%
Allowance for loan losses and other real
estate as a % of non-performing assets.... 211.20% 239.42% 279.16% 326.77% 306.89%
Accruing loans past due 90 days or more...... $ 67,077 $ 102,658 $ 80,306 $ 80,290 $ 62,775
============= ============== ============= ============= =============
------------- -------------- ------------- ------------- -------------
|
Huntington Bancshares Incorporated
[LOGO]
Today's conference call and discussion, including related questions and answers, may contain forward-looking statements, including certain plans, expectations, goals, and projections which are subject to numerous assumptions, risks and uncertainties. Actual results could differ materially from those contained or implied by such statements for a variety of factors including:
. Changes in economic conditions
. Movements in interest rates
. Competitive pressures on product pricing and services
. Success and timing of business strategies
. The successful integration of acquired businesses
. The nature, extent and timing of governmental actions and reforms
. Extended disruption of vital infrastructure
All forward-looking statements included in this conference call and discussion, included related questions and answers, are based on information available at the time of the call. Huntington assumes no obligation to update any forward- looking statement.
[LOGO]
Today's speakers [LOGO]
Reported Charges Operating
Net Interest Income $ 248.0 $ 248.0
Provision (117.5) $ (71.7) (45.8)
Non-Interest Income 130.7 130.7
Security Gains (2.5) (5.3) 2.7
Non-Interest Expense (267.3) (34.0) (233.3)
-------- ------- ---------
Pre-Tax Income $ (8.6) $(110.0) $ 102.4)
-------- ------- ---------
Net Income $ 2.4 $ (72.1) $ 74.5
-------- ======= ---------
EPS $ 0.O1 $ 0.30
======== =========
|
Estimated Restructuring and other Charges [LOGO]
================================================================================
------------- Timing
---------------------
($ in millions) Total 2Q 3Q-4Q
------- -------- -------
Restructuring $ 64 $ 64
Branches/ATMs/ops
Florida retention/transition
Corporate overhead
Facilities
e-Commerce
Impairment 45 37 8
I/O strip
PG&E
Auto residuals
Other
Credit 72 72 --
120 day delinquencies
Sub-prime auto
Truck & equipment
Other reserves 34 2 32
------- --------- -------
Total pre-tax charge $ 215 $111 $104
-------------
|
Earnings Per Share [LOGO]
================================================================================
GAAP 2Q01 1Q01 2Q00
----- ----- -----
Operating (1) $0.30 $0.27 $0.40
Core $0.28 $0.28 $0.37
Non-Core Items 2Q01 1Q01 2Q00
----- ----- -----
Better (Worse)
Mortgage Loan Sale $ 2.0
Security Gain (Loss) 2.7 $(2.1)/(2)/
Branch Sale Gain 1.2
$ 9.8
Accrual Adjustments ----- ----- -----
TOTAL $ 5.9 $(2.1) $ 9.8
|
(1) Excluding after-tax impact of $72.1MM of restructuring and other charges
(2) Includes PG&E Loss of $4.2MM
Cash Basis Performance/1/ [LOGO]
-------------------------------------------------------------------------------
2Q01/2/ 1Q01 2Q01
---- ---- ----
EPS $ 0.33 $ 0.30 $ 0.42
ROA 1.19% 1.11% 1.49%
ROE 13.72% 12.86% 18.97%
|
(1) Cash basis ratios are based on operating earnings excluding goodwill amortization of $7.1 million (2Q01), $7.2 million (1Q01), and $5.9 million (2Q00), net of tax
(2) Income component excludes after-tax impact of $72.1MM of restructuring and other charges
Key Performance Indicators [LOGO]
2Q01/1/ 1Q01 2Q00
---- ---- ----
EPS $ 0.30 $ 0.27 $ 0.40
ROA 1.05% 0.97% 1.37%
ROE 12.43% 11.53% 17.79%
Efficiency Ratio 58.59% 61.95% 53.90%
NIM% 3.97% 3.93% 3.72%
Tangible Equity/Assets/2/ 5.97% 6.01% 5.78%
|
(1) Income component excludes after-tax impact of $72.1MM of restructuring and
other charges
(2) Period end
Second Quarter Overview/1/ [LOGO]
vs. 1Q01
* NIM - 3.93% - 3.97%
* 5% managed loan growth
* Efficiency ratio of 62.0% - 58.6%
* Expenses down $0.8MM
* Revenue up $20MM
* Net charge offs - 0.55% - 0.73%
* NPAs - 0.60% - 0.79%
(1) Excludes after-tax impact of $72.1MM restructuring and other charges
Income Statement [LOGO]
2Q01 /1/ 1Q01 2Q00
------- ------- -------
Net Interest Income $ 248.0 $ 243.1 $ 232.8
Provision (45.8) (33.5) (15.8)
Non-Interest Income 130.7 115.6 115.6
Security Gains 2.7 2.1 0.1
Non-Interest Expense (233.3) (234.1) (198.1)
------- ------- -------
Pre-Tax Income $ 102.4 $ 93.0 $ 134.6
------- ------- -------
Net Income $ 74.5 $ 67.9 $ 97.5
======= ======= =======
|
(1) Excludes after-tax impact of $72.1MM of restructuring and other charges
Average Balance ($ Billions)
Annualized Growth
2Q01 vs. 1Q01 vs. 2001 vs.
2Q01 1Q01 4Q00 2Q00
------ ------ ------ ------
Commercial $ 6.7B 4% 9% 2%
Commercial Real Estate 3.6 1 6 4
------- ------ ------ ------
Total Commercial/CRE 10.3 3% 8% 3%
Auto Loan/Lease 7.1 6 --- 10
Consumer 4.0 8 8 12
Residential Real Estate 0.9 --- 20 9
------- ------ ------ ------
Total Consumer $ 12.0 6% 5% 11%
------- ------ ------ ------
Managed Loans $ 22.3B 5% 6% 7%
=======
|
Note: Growth percentages normalized for acquisitions, portfolio sales and
securitizations.
Non-Interest Income [LOGO]
($ In Millions)
Better or (Worse) vs.
---------------------
2Q01 1Q01($) 1Q01(%)/1/ 2Q00(%)
---- ------- ---------- ------
Service Charges $ 40.7 $ 1.8 5% 1%
Brokerage/Insurance 19.4 .6 3 39
Trust Income 15.2 .9 6 15
Electronic Banking 12.2 1.1 10 9
Mortgage Banking 18.7 8.7 87 131
Other 24.5 2.0 9 (15)
------ ------- ---------- ------
Total Non-Interest Income /2/ $130.7 $ 15.1 13% 13%
====== =======
|
(1) Linked quarter percentage growth is not annualized
(2) Excludes security gains
Non-Interest Expense [LOGO]
==============================================================================
$ In Millions
Better or (Worse) vs.
---------------------
2Q01 1Q01 ($) 1Q01 (%)/1/ 2Q00 (%)
---- -------- ----------- --------
Personnel & Related Costs $122.1 $(4.4) (4)% (17)%
Occupancy & Equipment 38.0 1.7 4 (1)
Outside Services 17.7 (1.0) (6) (15)
Amortization of Intangibles 10.4 0.1 1 (13)
Marketing 7.9 2.1 21 (1)
Other 37.2 2.3 6 (54)
------ ----- ---- ----
Non-Interest Expense $233.3 $ 0.8 --- % (18)%
====== =====
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(1) Linked quarter percentage growth is not annualized
NPAs/Total Loans + Oreo [LOGO]
Percent
--------------------------------------------------------------
1Q99 2Q99 3Q99 4Q99 1Q00 2Q00 3Q00 4Q00 1Q01 2Q01
--------------- ------ ------ ----- ----- ----- ----- ----- ----- ----- ------
* Huntington 0.48 0.46 0.47 0.47 0.45 0.46 0.44 0.51 0.6 0.79
--------------- ------ ------ ----- ----- ----- ----- ----- ----- ----- ------
|
Peer Group: ASO, BBT, CMA, FITB, FSR, KEY, NCC, OK, RGBK, USB
NCO / Average Loans/1/ [LOGO]
Percent
----------------------------------------------------------------------
1Q99 2Q99 3Q99 4Q99 1Q00 2Q00 3Q00 4Q00 1Q01 2Q01
--------------------------------------------------------------------------------
* 0.51 0.38 0.39 0.32 0.35 0.3 0.46 0.5 0.55 0.73
--------------------------------------------------------------------------------
|
* Huntington [_] Peer Average
Peer Group: ASO, BBT, CMA, FITB, FSR, KEY, NCC, OK, RGBK, USB
(1) Excludes impact of restructuring and other charges
Net Charge-Offs Summary [LOGO]
================================================================================
2Q01/1/ 1Q01 2Q00
------- ---- ----
Commercial 0.67% 0.41% 0.15%
Commercial R/E 0.18 0.15 0.03
Consumer 0.95 0.78 0.47
----- ---- ----
Total 0.73% 0.55% 0.30%
|
(1) Excludes impact of restructuring and other charges
Consumer Charge-Offs [LOGO]
--------------------------------------------------------------------------------
2Q01/1/ 1Q01 2Q00
------- ---- ----
Indirect 1.50% 1.43% 0.74%
Vehicle Lease 1.37 0.89 0.57
------- ---- ----
Subtotal 1.43 1.13 0.66
Installment 0.63 0.61 0.46
Home Equity Lines 0.31 0.34 0.25
Residential R/E 0.10 0.03 0.03
------- ---- ----
TOTAL 0.95% 0.78% 0.47%
|
(1) Excludes impact of restructuring and other charges
Credit Quality [LOGO]
================================================================================
2Q01 1Q01 2Q00
---- ---- ----
NPAs/Total Loans + OREO 0.79% 0.60% 0.46%
90+ Days Past Due 0.32 0.49 0.31
Consumer 0.48 0.69 0.46
Com/CRE 0.15 0.29 0.15
Reserve/Total Loans 1.67 1.45 1.45
Reserve/NPAs 211.20% 239.42% 306.89%
|
Allowance for Loan Losses [LOGO]
2Q01 Special 2Q01
operating charge reported
--------- ------ --------
Balance at March 31, 2001 $301.8 $ -- $301.8
Net charge-offs (38.1) (27.4) (65.5)
Provision 45.8 71.7 117.5
Other (1.6) -- (1.6)
------ ------ ------
Balance at June 30, 2001 $307.9 $ 44.3 $352.2
Annualized loan losses .73% 1.25%
ALL as % of total loans 1.45% 1.67%
|
2002 Earnings Projection [LOGO]
=================================================================
EPS
---
2001 EPS estimate $1.15 - $1.17
Growth 0.12 - 0.13
Restructure charge/branch consol. 0.04 - 0.06
Florida market disposition 0.02 - 0.06
Accounting change - goodwill 0.11 - 0.11
------------
2002 EPS estimate $1.44 - $1.53
|
Goodwill and CDI Amortization [LOGO]
================================================================================
($ in millions)
Projected Balances at December 2001
-----------------------------------
Assets HBI Florida HBI ex-Florida
------ --- ------- --------------
Goodwill $ 663 $ 472 $ 191
Core deposit intangible 54 54 ---
----- ----- -----
$ 717 $ 526 $ 191
Amortization Per Share/1/
-------------------------
Goodwill $0.11 $ .07 $ .04
Core deposit intangible .02 .02 ---
----- ----- -----
$0.13 $ .09 $ .04
|
(1) Prior to pending change in accounting for goodwill - Assumes 251.5 million shares outstanding
Excess Capital - Florida Sale [LOGO]
----------------------------------------------------------------------------
($ in millions)
Capital Generated/Released
. Intangibles $ 526
. Sale of $2,600MM assets (@6.50%) 170
--------
. After tax gain (deposit premium * than book value) ?
--------
. Total Capital Available 696 + ?
Capital Required
. After-tax charge (140)
. Replenish capital to 6.50% (18) (158)
------- --------
Net capital available for stock repurchase $ 538 + ?
|
* Denotes greater than
2002 Earnings Projection [LOGO]
Florida Market Disposition Components
-------------------------------------
. Florida earnings give up/1/ =
(Cash earnings - CDI amortization)
. Stock repurchase of $300 - $400MM +
. Earnings on excess funding +
---------
$.02 - .06
(1) Excludes benefit from elimination of goodwill amortization ($0.07 in 2002)
|