Maryland 0-2525 31-0724920 --------------- --------------------- ---------- (STATE OR OTHER (COMMISSION FILE NO.) (IRS EMPLOYER JURISDICTION OF IDENTIFICATION NUMBER) INCORPORATION OR ORGANIZATION) |
ITEM 5. OTHER EVENTS
On September 29, 2000, Huntington Bancshares Incorporated ("Huntington") issued a news release to provide information on earnings expectations for the third and fourth quarters of 2000 and for 2001. The information contained in the news release is attached as Exhibit 99.1 to this report, and 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 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.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
Exhibit 99.1 News release of Huntington Bancshares Incorporated,
dated September 29, 2000.
Exhibit 99.2 Presentation of September 29, 2000.
Exhibit 99.3 Presentation Slides, dated September 29, 2000.
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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: September 29, 2000 By: /s/ Anne Creek
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Anne Creek, Executive Vice President and
Chief Financial Officer
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Exhibit No. Description
Exhibit 99.1 * News release of Huntington Bancshares Incorporated,
dated September 29, 2000.
Exhibit 99.2 * Presentation of September 29, 2000.
Exhibit 99.3 * Presentation Slides, dated September 29, 2000.
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FOR IMMEDIATE RELEASE
SUBMITTED: SEPTEMBER 29, 2000
FOR FURTHER INFORMATION, CONTACT:
MEDIA ANALYSTS
DOROTHY BROWNLEY (614) 480-4531 ANNE CREEK (614) 480-3954
COLUMBUS, Ohio - Huntington Bancshares Incorporated (NASDAQ: HBAN;
www.huntington.com) today announced that it is revising its earnings outlook for
third and fourth quarter 2000 and for 2001. The revised operating earnings per
share estimates are $.30 for third quarter 2000 and ranges of $.31 to $.33 for
fourth quarter 2000 and $1.40 to $1.50 for 2001. Additionally, for the third
quarter 2000, the company plans to record a one-time charge to earnings of $33
million after-tax, or $.13 per share, representing a write-down of the auto
lease residual values associated with its $3 billion auto leasing portfolio.
"We are disappointed to report a lowering of our earnings estimates,"
said Frank Wobst, chairman and chief executive officer of Huntington Bancshares
Incorporated. "A variety of factors contributed to the shortfall, including the
repricing of consumer deposits to stimulate growth, the flat yield curve which
has put pressure on net interest income, lower than expected growth in retail
investment products, and a reduction in mortgage banking origination volumes. In
addition, our very successful expense reduction program, which has significantly
reduced operating costs over the past year, delayed implementation of our
revenue initiatives."
Wobst continued, "As part of our Huntington 2000+ program, the company
has repositioned its balance sheet to reduce earnings volatility, employed a
number of talented senior executives and changed our management approach from a
regional to a line of business structure. We believe these actions, combined
with expansive product changes, a disciplined daily sales
management process, and strategic investments in technology provide a strong
foundation to drive top-line revenue growth from our core business lines."
Looking ahead to 2001, Huntington expects to earn $1.40 to $1.50 per
share, excluding the impact of any securities gains and other non-recurring
items. It is also important to note the company has substantially reduced its
risk profile by increasing its reserve for auto lease residuals; selling $541
million of credit card receivables in the fourth quarter 1999; selling $3
billion of the company's mortgage servicing portfolio in the second quarter
2000; and, by continuing to expand its percentage of revenue generated from fee
income sources such as electronic banking and insurance.
"We believe the steps we've taken will make us a stronger company and
will better position us for long-term growth," said Wobst. "Our strategic
repositioning provides a more stable revenue base from which to grow.
Additionally, we will continue to explore acquisition opportunities in niche
businesses and within certain geographies to improve the value of the
franchise."
A conference call to discuss this announcement will be held today at
9:30 a.m. and will be available via a live Internet Webcast at
www.streetfusion.com. The slides for the conference call, along with
management's comments, will be filed with the Securities and Exchange Commission
on Form 8-K.
Huntington Bancshares Incorporated is a $29 billion regional bank
holding company headquartered in Columbus, Ohio. Through its affiliated
companies, Huntington has over 134 years of serving the financial needs of its
customers. Huntington provides innovative products and services through over 600
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.
For faxed copies of all company news releases, please call (800)
758-5804 extension 423276.
FORWARD-LOOKING STATEMENT DISCLOSURE:
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.
Huntington Bancshares Incorporated
Presentation To Investor Community
September 29, 2000 Conference Call Text
INTRODUCTION: Laurie Counsel, Director of Investor Relations
Good morning to our conference call participants. Thanks for taking the time today to join us.
Here today to discuss this morning's announcement are:
Frank Wobst, Chairman and Chief Executive Officer Pete Geier, President and Chief Operating Officer, and Anne Creek, Executive Vice President, Chief Financial Officer, and Treasurer
This call is being recorded and will be available as a rebroadcast starting today at 12:30 p.m. through October 13 at 8 p.m. and is also available on the Internet for 90 days. Please call the Investor Relations department at 614-480-5676 for more information to access these replays. Please also call if you have not yet received the news release and presentation for today's call and we'll get you the materials.
For those who may be listening to this as a rebroadcast or on the Internet or otherwise don't have a copy of our presentation, our forward-looking statement disclosure, slide 2, is contained in our 8-K filed with the SEC.
Slide 3 shows the outline for our presentation today.
Let me now introduce Huntington's Chairman and Chief Executive Officer, Frank Wobst...
SLIDE 2
GREETING: Frank Wobst, Chairman & Chief Executive Officer
o Thank you for joining us today on such short notice following our
announcement earlier this morning.
o Needless to say we are disappointed, as we know you are, with the
circumstances that led to today's announcement of lowered earnings
estimates and a write-down related to our auto leasing business.
o However, we feel it is important to inform the investment community and
our shareholders of the issues we are currently facing and of how we
are addressing them and what you can expect for the future.
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SLIDE 3
Today's presentation will cover three issues:
o Details and reasons for our revised earnings
o The rationale behind the write-down of our auto residual values and the significant
changes we have made in that business line
o Our strategy and plans for increasing revenue in our core business lines
SLIDE 4
Slide 4 of your slide package shows our earnings revisions and the impact of the
lease write-down.
o Our estimate for earnings per share for the third quarter will be $.33
and on an operating basis will be $.30 per share before the $.13 per
share write-down of lease residual values. We are estimating fourth
quarter earnings of $.31 -$ .33 per share and full year 2001 earnings
of $1.40-$1.50 per share.
o The earnings per share numbers in parenthesis represent items included
in reported earnings, i.e., securities gains, securitization income and
a 2 cent tax benefit in the second quarter of this year. Fourth quarter
and full year 2001 estimates do not reflect any benefit from these
activities.
I WILL NOW ASK PETE GEIER, OUR PRESIDENT AND CHIEF OPERATING OFFICER, TO REVIEW THE FACTORS THAT HAVE LED TO OUR REVISED EARNINGS.
SLIDE 5
Please turn to slide 5.
Redesign of consumer products
o We have recognized we could not retain and grow consumer deposits and market
share with our existing retail deposit product set. We have developed a full
set of new deposit products which offer a better value proposition to the customer
and will generate attractive profit margins for Huntington. Customer response
to the improved product set has been very favorable. The second quarter was
the first time we've seen growth in consumer core deposits in a year and a half.
o As existing customers have moved to these new deposit products from lower
cost deposits, the result has been an increase in our core deposit costs and
a negative impact on our net interest margin. However, as we continue to retain
existing customers and attract new customers with these products, there will
be a long-term benefit as we are able to reduce our reliance on more expensive
wholesale funding.
o The flat yield curve we have experienced this year has also compressed spreads
and put additional pressure on the net interest margin.
o The restructuring of the balance sheet in the first half of this year included
$1.5 billion of new securitizations. While securitizations will continue to
play an important role in our balance sheet and capital management efforts going
forward, securitization activity will slow down from the pace of the first half.
o Sales of retail investment products, i.e., mutual funds and annuities, increased
20% in the first half of the year, following a 55 % increase in 1999. Even though
we are still experiencing significant growth in sales the growth rate has slowed
from what we had been projecting because of the volatility and uncertainty in
the financial markets this year.
o Our mortgage banking unit was hurt this year because of the rise in mortgage
rates and the fact that we are relatively more dependent on refinancing activity
than the market as a whole.
o While we're very proud of the success of the expense reduction program and
believe it was absolutely necessary to better position us for growth, we do
believe that the intense management focus on this initiative also had the impact
of delaying the implementation of strategic growth initiatives. We have identified
the talent needs in several of our lines of business and are adding key personnel
to those areas to drive growth.
SLIDE 6
I'd like to now review some recent trends in the automobile leasing market and
the factors that led to our decision to write-down our lease residual values.
o The chart on this slide illustrates recent trends in residual value estimates
for 3, 4, and 5 year leases. The estimates for the market value of automobiles
at the end of the lease term rose significantly from 1990 - 1997. We recognized
gains on lease terminations until 1997, as cars that were returned to us at
the end of the lease were sold at higher prices than had been estimated when
the leases were originated. However, new leases booked during 1996 - 1997 were
originated with higher estimated ending residual values, and therefore Huntington,
and the industry as a whole, is experiencing losses from leases originated during
that period. In fact, 80% of current year residual losses are attributable to
leases originated in 1996 and 1997.
o The trend of increasing residual value estimates has reversed itself in the
last three years, with estimates declining to levels at or below those of the
early 1990s. Accordingly, the leases being originated now are being booked with
much lower ending residual value estimates.
o The strength in new car sales in recent years has led to a softening in used
car prices.
o Current estimates of ending residual values for new 4 and 5 year leases have
declined 18 - 25% from 1997 levels.
SLIDE 7
Let's now turn to the changes we are implementing in the auto leasing business:
o The $33MM after-tax charge we are taking in the third quarter reflects
100% of the embedded losses in the ENTIRE $3 billion portfolio and
reflects current market conditions, i.e., the soft state of the used
car market today.
Origination Mix and Pricing
o A disproportionate share of the residual losses have resulted from
short term leases, i.e., less than 4 years. We have shifted the
composition of our lease originations heavily toward 4 and 5 year
product this year. Over 85% of this year's originations are 4 and 5
year leases vs. 48% in 1997. We have eliminated the 2 year lease from
our product set and increased pricing on 3 year leases by 50 bp,
putting pricing for this product at the high end of the market.
o Origination fees are being increased by $100 - 250 per lease, for all
lease products, beginning in October. This will increase the yield on
these leases by approximately 25 basis points.
SLIDE 8
I'd like to spend a moment on slide 8 and discuss the Huntington 2000+ program,
which began in February, 1999.
o As mentioned earlier, phase 1 of the 2000+ program, focusing on expense
reduction was a great success. We reduced our annual run rate of
operating expenses by $140 million. With this program, we have
eliminated the many redundancies in our company.
o Phase 2, the restructuring of the company's balance sheet, is also
complete. That phase included exiting non-core businesses, reducing the
investment securities portfolio, and reducing interest rate risk in the
company, as well as securitizing auto loans to reduce our reliance on
wholesale funding. These efforts will create a more stable earnings
stream going forward.
o The third phase of 2000+ focuses on accelerating revenue growth in our
core businesses.
Frank will conclude our presentation with some closing thoughts.
SLIDE 11
I believe the decisions we've outlined here today provide a strong foundation
for future growth. Let me tell you what is working at Huntington:
o We continue to experience excellent credit quality. Our estimated charge-offs
of 37 basis points for 2000 compare favorably with 1999 charge-offs of 40 basis
points. We have not experienced the deterioration in our credit quality numbers
that some of our competitors are currently facing. Furthermore, we do not see
any significant deterioration in loan delinquencies or non-performing assets.
o Secondly, we have done a very good job bringing our expenses down in the last
two years. As we stated earlier, Phase I of the 2000+ initiative reduced expenses
at a $140 million annual run rate.
o We have solid strategies in place to drive revenue growth and earnings momentum
and have the executive management team to implement these strategies. We do
NOT feel the need to change these strategies.
o The issue we face is the need to implement these strategies and drive revenue
and earnings growth. We are beginning to see some early signs that this growth
is beginning to emerge.
This is a difficult time for the Huntington. I can assure you that our management
team is fully committed to generate sustainable, high-quality earnings and there
is a strong sense of urgency in the company to achieve our objectives. Thank
you. We will be delighted to take any questions.
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 - The successful integration of acquired businesses
- Movements in interest rates - The nature, extent and timing of governmental
actions and reforms
- Competitive pressures on product pricing
and services - Extended disruption of vital infrastructure
- Success and timing of business strategies
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[LOGO]
DISCUSSION TOPICS
EARNINGS REVISIONS / LEASE WRITE-DOWN
2000
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1ST QUARTER (A) $.42 ($.06)*
2ND QUARTER (A) $.40 ($.03)*
3RD QUARTER (E) $.33 ($.03)*
4TH QUARTER (E) $.31 - $.33
2001 $1.40 - $1.50
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EARNINGS REVISION FACTORS
AUTO LEASING ECONOMICS
Graph shows residual value estimates for 36 month, 48 month and 60 month term leases from 1990 to 2000. The graph shows:
* For 36 month term leases, the residual value was 58% in 1990, gradually rising to 68% by 1997, and then declining over the next three years to 59% in 2000.
* For 48 month term leases, the residual value was 49% in 1990, gradually rising to 61% by 1997 and then declining over the next three years to 50% in 2000.
* For 60 month term leases, the residual value was 44% in 1990, gradually rising to 51% by 1997 and then declining over the next three years to 38% in 2000.
*AUTO LEASE GUIDE (ALG)
MANAGEMENT ACTIONS: AUTO LEASING
REVIEW OF 2000+ PROGRAM
PHASE 3 = ACCELERATE REVENUE GROWTH IN CORE BUSINESSES (ON-GOING)
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[LOGO]
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MANAGEMENT ACTIONS TO DRIVE REVENUE
1) ORGANIZATIONAL CHANGES - STRENGTHEN SALES / MANAGEMENT TALENT - MOVE TO LINE OF BUSINESS STRUCTURE
2) ACCELERATE REVENUE GROWTH IN CORE BUSINESSES - RETAIL/BUSINESS BANKING - COMMERCIAL - PRIVATE FINANCE GROUP (PFG)
3) LEVERAGE TECHNOLOGY EXPERTISE FOR LONG-TERM GROWTH - e-BANK - e-PIN
GROWTH DRIVERS FOR 2001
WHAT'S WORKING AT HUNTINGTON
WHAT NEEDS TO BE DONE