COLUMBUS, Ohio, Jan. 23, 2018 /PRNewswire/ -- Huntington
Bancshares Incorporated (NASDAQ: HBAN; www.huntington.com) reported
2017 full-year net income of $1.2
billion, an increase of 67% from the prior year.
Earnings per common share for the year were $1.00, up 43% from the prior year.
Excluding approximately $152 million
pretax of FirstMerit acquisition-related expenses, or $0.09 per common share after tax, and an
estimated tax benefit of $123
million, or $0.11 per common
share, related to the Tax Cuts and Jobs Act ("federal tax reform")
enacted in the fourth quarter, adjusted earnings per common share
were $0.98. Return on average
assets for the 2017 full year was 1.17%, while return on average
tangible common equity was 15.7%. Total revenue increased 22%
over the prior year.
Net income for the 2017 fourth quarter was $432 million, or an 81% increase from the
year-ago quarter. Earnings per common share for the 2017
fourth quarter were $0.37, up 85%
from the year-ago quarter. Excluding approximately
$123 million of federal tax
reform-related estimated tax benefit, or $0.11 per common share, adjusted earnings per
common share were $0.26. Return
on average assets was 1.67% for the 2017 fourth quarter, while
return on average tangible common equity was 22.7%. Total
revenue increased 4% over the year-ago quarter.
"The 2017 fourth quarter caps off another year of record
performance and significant achievements for Huntington," said
Steve Steinour, chairman, president,
and CEO. "When we announced the transformational FirstMerit
acquisition two years ago, we expected it would help drive material
improvement in our profitability, accelerating the achievement of
our long-term financial goals. With the FirstMerit
integration complete, our fourth quarter results illustrate the
performance improvements realized over the past two years. We
achieved our long-term financial goals for Return on Tangible
Common Equity and Efficiency Ratio on a GAAP basis for the first
time. In fact, during the fourth quarter, we achieved all
five of our long-term financial goals. In addition, we
recently began the strategic planning process that later this year
will yield new long-term financial goals for the company."
"We have momentum in our businesses, with our brand, and
throughout our expanded footprint. We executed well in the
fourth quarter and continue to deliver on our consistent, long-term
strategy to gain market share and share of wallet by providing
superior customer service with expanded product and industry
expertise. As expected, the fourth quarter reflected
seasonally strong commercial loan production, particularly from our
middle market, corporate, and dealer floorplan customers at the end
of December, along with steady consumer loan production. We
also took advantage of volatility in the debt capital markets
during the quarter to more efficiently reposition our securities
portfolio," Steinour said. "Finally, credit metrics remain in
very good condition."
Full-year 2017 highlights compared with
2016:
- Completed the integration of the FirstMerit acquisition
- Increased cash dividends for the seventh consecutive year;
end-of-year dividend yield of 3.0%
- $10.4 billion, or 18%, increase
in average loans and leases, including a $4.1 billion, or 17%, increase in commercial and
industrial loans and a $1.0 billion,
or 9%, increase in automobile loans
- $13.5 billion, or 23%, increase
in average total core deposits, including a $9.2 billion, or 31%, increase in average demand
deposits and a $3.7 billion, or 47%,
increase in average savings and other domestic deposits
- $797 million, or 22%, increase in
fully-taxable equivalent revenue, including a $640 million, or 27%, increase in fully-taxable
equivalent net interest income
- Net interest margin of 3.30%, an increase of 14 basis
points
- $157 million, or 14%, increase in
noninterest income, including a $37
million, or 22%, increase in cards and payment processing
income, a $33 million, or 27%,
increase in trust and investment management services, and a
$29 million, or 9%, increase in
service charges on deposit accounts
- $123 million, or $0.11 per share, estimated tax benefit related to
federal tax reform
- Net charge-offs (NCOs) of 0.23% of average loans and leases, up
from 0.19%. 2017 represents the fourth consecutive year with
NCOs below our long-term financial goal of 0.35% to 0.55%
- $0.54, or 8%, increase in
tangible book value per common share (TBVPS) to $6.97
2017 Fourth Quarter highlights compared with
2016 Fourth Quarter:
- $2.5 billion, or 4%, increase in
average loans and leases, including a $1.1
billion, or 15%, increase in average residential mortgage
loans and a $1.1 billion, or 10%,
increase in average automobile loans
- $1.9 billion, or 8%, increase in
average securities
- $1.9 billion, or 3%, increase in
average total core deposits, driven by a $2.1 billion, or 11%, increase in average money
market deposits; average total demand deposits increased
$1.4 billion, or 4%
- $40 million, or 4%, increase in
fully-taxable equivalent revenue, including a $34 million, or 5%, increase in fully-taxable
equivalent net interest income and a $6
million, or 2%, increase in noninterest income
- Net interest margin of 3.30%, an increase of 5 basis
points
- $48 million, or 7%, decrease in
noninterest expense, driven by a $53
million reduction in Significant Item-related expenses
- $123 million, or $0.11 per share, estimated tax benefit related to
federal tax reform
- Net charge-offs represented 0.24% of average loans and leases,
down from 0.26%
- $92 million, or 19%, decrease in
nonperforming assets; NPA ratio decreased to 0.55%, down from
0.72%
Table 1 –
Earnings Performance Summary
|
|
|
|
|
|
|
|
Full Year
|
|
2017
|
|
2016
|
($ in millions,
except per share data)
|
2017
|
|
2016
|
|
Fourth
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
Net income
|
$
|
1,186
|
|
|
$
|
712
|
|
|
$
|
432
|
|
|
$
|
275
|
|
|
$
|
239
|
|
Diluted earnings per
common share
|
1.00
|
|
|
0.70
|
|
|
0.37
|
|
|
0.23
|
|
|
0.20
|
|
|
|
|
|
|
|
|
|
|
|
Return on average
assets
|
1.17%
|
|
|
0.86%
|
|
|
1.67%
|
|
|
1.08%
|
|
|
0.95%
|
|
Return on average
common equity
|
11.6
|
|
|
8.6
|
|
|
17.0
|
|
|
10.5
|
|
|
9.4
|
|
Return on average
tangible common equity
|
15.7
|
|
|
10.7
|
|
|
22.7
|
|
|
14.1
|
|
|
12.9
|
|
Net interest
margin
|
3.30
|
|
|
3.16
|
|
|
3.30
|
|
|
3.29
|
|
|
3.25
|
|
Efficiency
ratio
|
60.9
|
|
|
66.8
|
|
|
54.9
|
|
|
60.5
|
|
|
61.6
|
|
|
|
|
|
|
|
|
|
|
|
Tangible book value
per common share
|
$
|
6.97
|
|
|
$
|
6.43
|
|
|
$
|
6.97
|
|
|
$
|
6.85
|
|
|
$
|
6.43
|
|
Cash dividends
declared per common share
|
0.35
|
|
|
0.29
|
|
|
0.11
|
|
|
0.08
|
|
|
0.08
|
|
Average diluted
shares outstanding (000's)
|
1,136,186
|
|
|
918,790
|
|
|
1,130,117
|
|
|
1,106,491
|
|
|
1,104,358
|
|
|
|
|
|
|
|
|
|
|
|
Average earning
assets
|
$
|
92,423
|
|
|
$
|
76,362
|
|
|
$
|
93,937
|
|
|
$
|
92,849
|
|
|
$
|
91,463
|
|
Average loans and
leases
|
67,891
|
|
|
57,454
|
|
|
68,940
|
|
|
68,276
|
|
|
66,405
|
|
Average core
deposits
|
72,830
|
|
|
59,380
|
|
|
73,946
|
|
|
73,549
|
|
|
72,070
|
|
|
|
|
|
|
|
|
|
|
|
Tangible common
equity / tangible assets ratio
|
7.34%
|
|
|
7.16%
|
|
|
7.34%
|
|
|
7.42%
|
|
|
7.16%
|
|
Common equity Tier 1
risk-based capital ratio
|
9.89
|
|
|
9.56
|
|
|
9.89
|
|
|
9.94
|
|
|
9.56
|
|
|
|
|
|
|
|
|
|
|
|
NCOs as a % of
average loans and leases
|
0.23%
|
|
|
0.19%
|
|
|
0.24%
|
|
|
0.25%
|
|
|
0.26%
|
|
NAL ratio
|
0.50
|
|
|
0.63
|
|
|
0.50
|
|
|
0.49
|
|
|
0.63
|
|
ALLL as a % of total
loans and leases
|
0.99
|
|
|
0.95
|
|
|
0.99
|
|
|
0.98
|
|
|
0.95
|
|
ACL as a % of total
loans and leases
|
1.11
|
|
|
1.10
|
|
|
1.11
|
|
|
1.10
|
|
|
1.10
|
|
Table 2 lists certain items that management believes are
significant in understanding corporate performance and trends (see
Basis of Presentation on page 14). There was one Significant Item
in the 2017 fourth quarter: $123
million of federal tax reform-related tax benefit.
Table 2 –
Significant Items Influencing Earnings
|
|
|
|
|
|
Pre-Tax
Impact
|
|
After-Tax
Impact
|
($ in millions,
except per share)
|
Amount
|
|
Amount (1)
|
|
EPS
(2)
|
Twelve Months
Ended
|
|
|
|
|
|
December 31, 2017
– net income
|
|
|
$
|
1,186
|
|
$
|
1.00
|
•
|
|
Federal tax
reform-related estimated tax benefit (3)
|
N/A
|
|
123
|
|
0.11
|
•
|
|
Merger and
acquisition-related net expenses
|
$
|
(152)
|
|
(99)
|
|
(0.09)
|
December 31, 2016
– net income
|
|
|
$
|
712
|
|
$
|
0.70
|
•
|
|
Merger and
acquisition-related net expenses
|
$
|
(282)
|
|
(187)
|
|
(0.20)
|
•
|
|
Reduction to
litigation reserves
|
$
|
42
|
|
27
|
|
0.03
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
|
|
|
December 31, 2017
– net income
|
|
|
$
|
432
|
|
$
|
0.37
|
•
|
|
Federal tax
reform-related estimated tax benefit (3)
|
N/A
|
|
123
|
|
0.11
|
September 30, 2017
– net income
|
|
|
$
|
275
|
|
$
|
0.23
|
•
|
|
Merger and
acquisition-related net expenses
|
$
|
(31)
|
|
(20)
|
|
(0.02)
|
December 31, 2016
– net income
|
|
|
$
|
239
|
|
$
|
0.20
|
•
|
|
Merger and
acquisition-related net expenses
|
$
|
(96)
|
|
(63)
|
|
(0.06)
|
•
|
|
Reduction to
litigation reserves
|
$
|
42
|
|
27
|
|
0.02
|
(1) Favorable (unfavorable)
impact on net income
|
(2) EPS reflected on a fully
diluted basis
|
(3) Represents the reasonable
estimated impact of tax reform as of December 31, 2017. The
estimate could be adjusted in future periods during the measurement
period ending December 22, 2018.
|
Net Interest
Income, Net Interest Margin, and Average Balance
Sheet
|
|
Table 3 – Net
Interest Income and Net Interest Margin Performance Summary –
Rising Short-Term Interest Rates Drive NIM
Expansion
|
|
|
2017
|
|
2016
|
|
|
|
2017
|
|
2016
|
|
|
|
|
($ in
millions)
|
Full Year
|
|
Full Year
|
|
Change
YOY
|
|
Fourth
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
|
Change (%)
|
LQ
|
|
YOY
|
Net interest
income
|
$
|
3,002
|
|
$
|
2,369
|
|
27%
|
|
$
|
770
|
|
$
|
758
|
|
$
|
735
|
|
2%
|
|
5%
|
FTE
adjustment
|
50
|
|
43
|
|
16
|
|
12
|
|
13
|
|
13
|
|
8
|
|
8
|
Net interest income -
FTE
|
3,052
|
|
2,412
|
|
27
|
|
782
|
|
771
|
|
748
|
|
1
|
|
5
|
Noninterest
income
|
1,307
|
|
1,150
|
|
14
|
|
340
|
|
330
|
|
334
|
|
3
|
|
2
|
Total revenue -
FTE
|
$
|
4,359
|
|
$
|
3,562
|
|
22%
|
|
$
|
1,122
|
|
$
|
1,101
|
|
$
|
1,082
|
|
2%
|
|
4%
|
|
2017
|
|
2016
|
|
|
|
2017
|
|
2016
|
|
|
|
|
|
Full Year
|
|
Full Year
|
|
Change
YOY
|
|
Fourth
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
|
Change bp
|
Yield /
Cost
|
|
LQ
|
|
YOY
|
Total earning
assets
|
3.77%
|
|
3.50%
|
|
27bp
|
|
3.83%
|
|
3.78%
|
|
3.60%
|
|
5bp
|
|
23bp
|
Total loans and
leases
|
4.19
|
|
3.81
|
|
38
|
|
4.23
|
|
4.20
|
|
3.95
|
|
3
|
|
28
|
Total
securities
|
2.57
|
|
2.54
|
|
3
|
|
2.64
|
|
2.55
|
|
2.58
|
|
9
|
|
6
|
Total
interest-bearing liabilities
|
0.64
|
|
0.48
|
|
16
|
|
0.73
|
|
0.68
|
|
0.48
|
|
5
|
|
25
|
Total
interest-bearing deposits
|
0.33
|
|
0.23
|
|
10
|
|
0.37
|
|
0.35
|
|
0.23
|
|
2
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest rate
spread
|
3.13
|
|
3.02
|
|
11
|
|
3.10
|
|
3.10
|
|
3.12
|
|
—
|
|
(2)
|
Impact of
noninterest-bearing funds on margin
|
0.17
|
|
0.14
|
|
3
|
|
0.20
|
|
0.19
|
|
0.13
|
|
1
|
|
7
|
Net interest
margin
|
3.30%
|
|
3.16%
|
|
14bp
|
|
3.30%
|
|
3.29%
|
|
3.25%
|
|
1bp
|
|
5bp
|
See Pages 7-9 and 18-20 of
Quarterly Financial Supplement for additional detail.
Note: 2016 results reflect inclusion of FirstMerit since
August 16, 2016.
Fully-taxable equivalent (FTE) net interest income for the 2017
fourth quarter increased $34 million,
or 5%, from the 2016 fourth quarter. This reflected the
benefit from the $2.5 billion, or 3%,
increase in average earning assets partially coupled with a 5 basis
point improvement in the FTE net interest margin (NIM) to
3.30%. Average earning asset growth included a $2.5 billion, or 4%, increase in average loans
and leases and a $1.9 billion, or 8%,
increase in average securities, partially offset by a $1.9 billion, or 76%, decrease in average loans
held for sale related to the balance sheet optimization activities
executed in the year-ago quarter. The NIM expansion reflected
a 23 basis point increase in earning asset yields and a 7 basis
point increase in the benefit from noninterest-bearing funds,
partially offset by a 25 basis point increase in funding
costs. The cost of interest-bearing deposits increased 14
basis points from the year-ago quarter. FTE net interest
income during the 2017 fourth quarter included $24 million, or approximately 10 basis points, of
purchase accounting impact compared to $42
million, or approximately 18 basis points, in the year-ago
quarter.
Compared to the 2017 third quarter, FTE net interest income
increased $11 million, or 1%.
Average earning assets increased $1.1
billion, or 1%, sequentially, while the NIM increased 1
basis point. The increase in the NIM reflected a 5 basis
point increase in earning asset yields and a 1 basis point increase
in the benefit from noninterest-bearing funds, partially offset by
a 5 basis point increase in the cost of interest-bearing
liabilities. The cost of interest-bearing deposits increased
2 basis points from the prior quarter. The purchase
accounting impact on the net interest margin was approximately 10
basis points in the 2017 fourth quarter compared to approximately
12 basis points in the prior quarter.
Table 4 –
Average Earning Assets – Consumer Lending Continues to Drive
Average Loan Growth
|
|
|
|
|
2017
|
|
2016
|
|
|
|
2017
|
|
2016
|
|
|
|
|
($ in
billions)
|
Full
|
|
Full
|
|
YOY
|
|
Fourth
|
|
Third
|
|
Fourth
|
|
Change (%)
|
Year
|
|
Year
|
|
Change
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
LQ
|
|
YOY
|
Commercial and
industrial
|
$
|
27.7
|
|
$
|
23.7
|
|
17%
|
|
$
|
27.4
|
|
$
|
27.6
|
|
27.7
|
|
(1)%
|
|
(1)%
|
Commercial real
estate
|
7.2
|
|
6.0
|
|
20
|
|
7.2
|
|
7.2
|
|
7.2
|
|
—
|
|
—
|
Total
commercial
|
35.0
|
|
29.7
|
|
18
|
|
34.6
|
|
34.9
|
|
34.9
|
|
(1)
|
|
(1)
|
Automobile
|
11.5
|
|
10.5
|
|
9
|
|
12.0
|
|
11.7
|
|
10.9
|
|
2
|
|
10
|
Home
equity
|
10.0
|
|
9.1
|
|
10
|
|
10.0
|
|
10.0
|
|
10.1
|
|
1
|
|
(1)
|
Residential
mortgage
|
8.2
|
|
6.7
|
|
23
|
|
8.8
|
|
8.4
|
|
7.7
|
|
5
|
|
15
|
RV and marine
finance
|
2.2
|
|
0.7
|
|
211
|
|
2.4
|
|
2.3
|
|
1.8
|
|
5
|
|
30
|
Other
consumer
|
1.0
|
|
0.7
|
|
38
|
|
1.1
|
|
1.0
|
|
1.0
|
|
5
|
|
14
|
Total
consumer
|
32.9
|
|
27.8
|
|
19
|
|
34.3
|
|
33.4
|
|
31.5
|
|
3
|
|
9
|
Total loans and
leases
|
67.9
|
|
57.5
|
|
18
|
|
68.9
|
|
68.3
|
|
66.4
|
|
1
|
|
4
|
Total
securities
|
23.9
|
|
17.8
|
|
34
|
|
24.3
|
|
23.8
|
|
22.4
|
|
2
|
|
8
|
Held-for-sale and
other earning assets
|
0.7
|
|
1.2
|
|
(43)
|
|
0.7
|
|
0.8
|
|
2.6
|
|
(12)
|
|
(74)
|
Total earning
assets
|
$
|
92.4
|
|
$
|
76.4
|
|
21%
|
|
$
|
93.9
|
|
$
|
92.8
|
|
$
|
91.5
|
|
1%
|
|
3%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Pages 7 and 18
of Quarterly Financial Supplement for additional
detail.
|
|
|
|
Note: 2016 results
reflect inclusion of FirstMerit since August 16,
2016.
|
|
Average earning assets for the 2017 fourth quarter increased
$2.5 billion, or 3%, from the
year-ago quarter. Average securities increased $1.9 billion, or 8%, primarily reflecting the
reinvestment of proceeds of the $1.5
billion auto loan securitization completed in the year-ago
quarter. Average total loans and leases increased
$2.5 billion, or 4%. Average
residential mortgage loans increased $1.1
billion, or 15%, reflecting the benefit of the ongoing
expansion of the home lending business. Average automobile
loans increased $1.1 billion, or 10%,
reflecting continued strength in new and used automobile
originations across our 23-state auto finance lending
footprint. Average RV and marine finance loans increased
$0.6 billion, or 30%, reflecting the
success of the well-managed expansion of the acquired business into
17 new states over the past year. Partially offsetting these
increases, average loans held for sale decreased $1.9 billion, or 76%, reflecting the balance
sheet optimization strategy executed in the year-ago quarter.
Compared to the 2017 third quarter, average earning assets
increased $1.1 billion, or 1%.
Average total loans and leases increased $0.7 billion, or 1%, primarily reflecting growth
in residential mortgage, automobile, and RV and marine loans
partially offset by a decline in average commercial and industrial
loans. Average commercial and industrial loans were
negatively impacted by reductions in the specialty lending
verticals and dealer floorplan portfolios, partially offset by
growth in the corporate banking, equipment finance, and middle
market portfolios.
Table 5 –
Average Deposits and Average Debt – Growth in Money Market and
Demand Deposits Drive Year-over-Year Core Deposit
Growth
|
|
|
2017
|
|
2016
|
|
|
|
2017
|
|
2016
|
|
|
|
Full
|
|
Full
|
|
YOY
|
|
Fourth
|
|
Third
|
|
Fourth
|
|
Change (%)
|
($ in
billions)
|
Year
|
|
Year
|
|
Change
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
LQ
|
|
YOY
|
Demand deposits -
noninterest bearing
|
$
|
21.7
|
|
$
|
19.0
|
|
14%
|
|
$
|
21.7
|
|
$
|
21.7
|
|
$
|
23.3
|
|
—%
|
|
(6)%
|
Demand deposits -
interest bearing
|
17.6
|
|
11.0
|
|
60
|
|
18.2
|
|
17.9
|
|
15.3
|
|
2
|
|
19
|
Total demand
deposits
|
39.3
|
|
30.0
|
|
31
|
|
39.9
|
|
39.6
|
|
38.6
|
|
1
|
|
4
|
Money market
deposits
|
19.7
|
|
19.1
|
|
3
|
|
20.7
|
|
20.3
|
|
18.6
|
|
2
|
|
11
|
Savings and other
domestic deposits
|
11.7
|
|
8.0
|
|
47
|
|
11.3
|
|
11.6
|
|
12.3
|
|
(2)
|
|
(8)
|
Core certificates of
deposit
|
2.1
|
|
2.3
|
|
(8)
|
|
1.9
|
|
2.0
|
|
2.6
|
|
(5)
|
|
(26)
|
Total core
deposits
|
72.8
|
|
59.4
|
|
23
|
|
73.9
|
|
73.5
|
|
72.1
|
|
1
|
|
3
|
Other domestic
deposits of $250,000 or more
|
0.4
|
|
0.4
|
|
9
|
|
0.4
|
|
0.4
|
|
0.4
|
|
(7)
|
|
2
|
Brokered deposits and
negotiable CDs
|
3.7
|
|
3.5
|
|
5
|
|
3.4
|
|
3.6
|
|
4.3
|
|
(5)
|
|
(21)
|
Deposits in foreign
offices
|
—
|
|
0.2
|
|
(100)
|
|
—
|
|
—
|
|
0.2
|
|
—
|
|
(100)
|
Total
deposits
|
$
|
77.0
|
|
$
|
63.5
|
|
21%
|
|
$
|
77.7
|
|
$
|
77.5
|
|
$
|
76.9
|
|
—%
|
|
1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term
borrowings
|
$
|
2.9
|
|
$
|
1.5
|
|
91%
|
|
$
|
2.8
|
|
$
|
2.4
|
|
$
|
2.6
|
|
19%
|
|
8%
|
Long-term
debt
|
8.9
|
|
8.0
|
|
10
|
|
9.2
|
|
8.9
|
|
8.6
|
|
3
|
|
7
|
Total debt
|
$
|
11.8
|
|
$
|
9.5
|
|
24%
|
|
$
|
12.0
|
|
$
|
11.3
|
|
$
|
11.2
|
|
6%
|
|
7%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Interest-bearing liabilities
|
$
|
67.0
|
|
$
|
54.0
|
|
24%
|
|
$
|
68.1
|
|
$
|
67.2
|
|
$
|
64.9
|
|
1%
|
|
5%
|
|
See Pages 7 and 18
of Quarterly Financial Supplement for additional
detail.
|
|
Note: 2016 results
reflect inclusion of FirstMerit since August 16,
2016.
|
Average total deposits for the 2017 fourth quarter increased
$0.9 billion, or 1%, from the
year-ago quarter, while average total core deposits increased
$1.9 billion, or 3%. Average
total interest-bearing liabilities increased $3.2 billion, or 5%, from the year-ago
quarter. Average money market deposits increased $2.1 billion, or 11%, reflecting certain
specialty banking relationships with expected deposit fluctuations
and continued deepening of consumer relationships. Average
demand deposits increased $1.4
billion, or 4%, comprised of a $1.3
billion, or 5%, increase in average commercial demand
deposits and a $0.1 billion, or 1%,
increase in average consumer demand deposits. The growth in
commercial demand deposits reflected growth within interest bearing
demand deposits. Average long-term debt increased
$0.6 billion, or 7%, reflecting the
issuance of $1.7 billion and maturity
of $1.2 billion of senior debt over
the past five quarters. On the other hand, average savings
deposits decreased $0.9 billion, or
8%, primarily reflecting the deposit and branch divestiture
completed during the year-ago quarter and runoff in acquired
FirstMerit deposits. Average brokered deposits and negotiable
CDs decreased $0.9 billion, or
21%.
Compared to the 2017 third quarter, average total
interest-bearing liabilities increased $0.9
billion, or 1%, primarily reflecting a $0.4 billion, or 19%, increase in average
short-term borrowings and a $0.4
billion, or 1%, increase in average total core
deposits. Average core deposit growth during the 2017 fourth
quarter reflected continued new customer acquisition and deepening,
partially offset by seasonal decreases in government banking and
certain specialty banking deposit relationships.
Noninterest
Income (see Basis of Presentation on page 14)
|
|
Table 6 -
Noninterest Income (GAAP) - Capital Markets Posts Second
Consecutive Record Quarter
|
|
|
2017
|
|
2016
|
|
|
|
2017
|
|
2016
|
|
|
|
Full
|
|
Full
|
|
YOY
|
|
Fourth
|
|
Third
|
|
Fourth
|
|
Change (%)
|
($ in
millions)
|
Year
|
|
Year
|
|
Change
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
LQ
|
|
YOY
|
Service charges on
deposit accounts
|
$
|
353
|
|
$
|
324
|
|
9%
|
|
$
|
91
|
|
$
|
91
|
|
$
|
92
|
|
—%
|
|
(1)%
|
Cards and payment
processing income
|
206
|
|
169
|
|
22
|
|
53
|
|
54
|
|
49
|
|
(2)
|
|
8
|
Trust and investment
management services
|
156
|
|
123
|
|
27
|
|
41
|
|
39
|
|
39
|
|
5
|
|
5
|
Mortgage banking
income
|
131
|
|
128
|
|
2
|
|
33
|
|
34
|
|
38
|
|
(3)
|
|
(13)
|
Insurance
income
|
81
|
|
84
|
|
(4)
|
|
21
|
|
18
|
|
21
|
|
17
|
|
—
|
Capital markets
fees
|
76
|
|
60
|
|
27
|
|
23
|
|
22
|
|
19
|
|
5
|
|
21
|
Bank owned life
insurance income
|
67
|
|
58
|
|
16
|
|
18
|
|
16
|
|
17
|
|
13
|
|
6
|
Gain on sale of
loans
|
56
|
|
47
|
|
19
|
|
17
|
|
14
|
|
25
|
|
21
|
|
(32)
|
Securities (losses)
gains
|
(4)
|
|
—
|
|
(100)
|
|
(4)
|
|
—
|
|
(2)
|
|
(100)
|
|
(100)
|
Other
income
|
185
|
|
157
|
|
18
|
|
47
|
|
42
|
|
36
|
|
12
|
|
31
|
Total noninterest
income
|
$
|
1,307
|
|
$
|
1,150
|
|
14%
|
|
$
|
340
|
|
$
|
330
|
|
$
|
334
|
|
3%
|
|
2%
|
Table 7 -
Impact of Significant Items
|
|
|
2017
|
|
2016
|
|
|
|
2017
|
|
2016
|
|
|
|
Full
|
|
Full
|
|
|
|
Fourth
|
|
Third
|
|
Fourth
|
|
|
($ in
millions)
|
Year
|
|
Year
|
|
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
|
|
|
Service charges on
deposit accounts
|
$
|
—
|
|
$
|
—
|
|
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
|
|
Cards and payment
processing income
|
—
|
|
—
|
|
|
|
—
|
|
—
|
|
—
|
|
|
|
|
Trust and investment
management services
|
—
|
|
—
|
|
|
|
—
|
|
—
|
|
—
|
|
|
|
|
Mortgage banking
income
|
—
|
|
—
|
|
|
|
—
|
|
—
|
|
—
|
|
|
|
|
Insurance
income
|
—
|
|
—
|
|
|
|
—
|
|
—
|
|
—
|
|
|
|
|
Brokerage
income
|
—
|
|
—
|
|
|
|
—
|
|
—
|
|
—
|
|
|
|
|
Capital markets
fees
|
—
|
|
—
|
|
|
|
—
|
|
—
|
|
—
|
|
|
|
|
Bank owned life
insurance income
|
—
|
|
—
|
|
|
|
—
|
|
—
|
|
—
|
|
|
|
|
Gain on sale of
loans
|
—
|
|
—
|
|
|
|
—
|
|
—
|
|
—
|
|
|
|
|
Securities (losses)
gains
|
—
|
|
—
|
|
|
|
—
|
|
—
|
|
—
|
|
|
|
|
Other
income
|
2
|
|
(1)
|
|
|
|
—
|
|
—
|
|
(1)
|
|
|
|
|
Total noninterest
income
|
$
|
2
|
|
$
|
(1)
|
|
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(1)
|
|
|
|
|
Table 8 -
Adjusted Noninterest Income (Non-GAAP)
|
|
|
2017
|
|
2016
|
|
|
|
2017
|
|
2016
|
|
|
|
Full
|
|
Full
|
|
YOY
|
|
Fourth
|
|
Third
|
|
Fourth
|
|
Change (%)
|
($ in
millions)
|
Year
|
|
Year
|
|
Change
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
LQ
|
|
YOY
|
Service charges on
deposit accounts
|
$
|
353
|
|
$
|
324
|
|
9%
|
|
$
|
91
|
|
$
|
91
|
|
$
|
92
|
|
—%
|
|
(1)%
|
Cards and payment
processing income
|
206
|
|
169
|
|
22
|
|
53
|
|
54
|
|
49
|
|
(2)
|
|
8
|
Trust and investment
management services
|
156
|
|
123
|
|
27
|
|
41
|
|
39
|
|
39
|
|
5
|
|
5
|
Mortgage banking
income
|
131
|
|
128
|
|
2
|
|
33
|
|
34
|
|
38
|
|
(3)
|
|
(13)
|
Insurance
income
|
81
|
|
84
|
|
(4)
|
|
21
|
|
18
|
|
21
|
|
17
|
|
—
|
Capital markets
fees
|
76
|
|
60
|
|
27
|
|
23
|
|
22
|
|
19
|
|
5
|
|
21
|
Bank owned life
insurance income
|
67
|
|
58
|
|
16
|
|
18
|
|
16
|
|
17
|
|
13
|
|
6
|
Gain on sale of
loans
|
56
|
|
47
|
|
19
|
|
17
|
|
14
|
|
25
|
|
21
|
|
(32)
|
Securities (losses)
gains
|
(4)
|
|
—
|
|
(100)
|
|
(4)
|
|
—
|
|
(2)
|
|
(100)%
|
|
(100)%
|
Other
income
|
183
|
|
158
|
|
16
|
|
47
|
|
42
|
|
37
|
|
12
|
|
27
|
Total adjusted
noninterest income
|
$
|
1,305
|
|
$
|
1,151
|
|
13%
|
|
$
|
340
|
|
$
|
330
|
|
$
|
335
|
|
3%
|
|
1%
|
|
|
|
|
See Pages 10-11
and 21-22 of Quarterly Financial Supplement for additional
detail.
|
|
Note: 2016 results
reflect inclusion of FirstMerit since August 16,
2016.
|
Noninterest income for the 2017 fourth quarter increased
$6 million, or 2%, from the year-ago
quarter. Other income increased $11
million, or 31%, primarily reflecting a $10 million benefit related to elevated
derivative ineffectiveness recognized in the year-ago quarter and a
$5 million increase in servicing
income. Gain on sale of loans decreased $8 million, or 32%, primarily reflecting the
$11 million of gains related to the
balance sheet optimization strategy completed in the 2016 fourth
quarter. Mortgage banking income decreased $5 million, or 13%, primarily reflecting a
$6 million decrease from net mortgage
servicing rights (MSR) risk management-related
activities.
Compared to the 2017 third quarter, total noninterest income
increased $10 million, or 3%. This
increase primarily resulted from modest increases in trust and
investment management services, bank owned life insurance, SBA loan
sale gains, and lease sale gains, partially offset by $4 million of securities losses related to the
portfolio repositioning completed during the 2017 fourth
quarter.
Noninterest
Expense (see Basis of Presentation on page 14)
|
|
Table 9 –
Noninterest Expense (GAAP) – Continued Expense Discipline and
Realization of FirstMerit-
Related Cost Savings Highlight Fourth Quarter
Expenses
|
|
|
2017
|
|
2016
|
|
|
|
2017
|
|
2016
|
|
|
|
Full
|
|
Full
|
|
YOY
|
|
Fourth
|
|
Third
|
|
Fourth
|
|
Change (%)
|
($ in
millions)
|
Year
|
|
Year
|
|
Change
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
LQ
|
|
YOY
|
Personnel
costs
|
$
|
1,524
|
|
$
|
1,349
|
|
13%
|
|
$
|
373
|
|
$
|
377
|
|
$
|
360
|
|
(1)%
|
|
4%
|
Outside data
processing and other services
|
313
|
|
305
|
|
3
|
|
71
|
|
80
|
|
89
|
|
(11)
|
|
(20)
|
Net
occupancy
|
212
|
|
153
|
|
39
|
|
36
|
|
55
|
|
49
|
|
(35)
|
|
(27)
|
Equipment
|
171
|
|
165
|
|
4
|
|
36
|
|
45
|
|
60
|
|
(20)
|
|
(40)
|
Deposit and other
insurance expense
|
78
|
|
54
|
|
44
|
|
19
|
|
19
|
|
16
|
|
—
|
|
19
|
Professional
services
|
69
|
|
105
|
|
(34)
|
|
18
|
|
15
|
|
23
|
|
20
|
|
(22)
|
Marketing
|
60
|
|
63
|
|
(5)
|
|
10
|
|
17
|
|
21
|
|
(41)
|
|
(52)
|
Amortization of
intangibles
|
56
|
|
30
|
|
87
|
|
14
|
|
14
|
|
14
|
|
—
|
|
—
|
Other
expense
|
231
|
|
184
|
|
26
|
|
56
|
|
58
|
|
49
|
|
(3)
|
|
14
|
Total noninterest
expense
|
$
|
2,714
|
|
$
|
2,408
|
|
13%
|
|
$
|
633
|
|
$
|
680
|
|
$
|
681
|
|
(7)%
|
|
(7)%
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of employees
(Average full-time
equivalent)
|
15.4
|
|
16.0
|
|
(4)%
|
|
15.4
|
|
15.5
|
|
16.0
|
|
(1)%
|
|
(4)%
|
Table 10 -
Impacts of Significant Items
|
|
|
2017
|
|
2016
|
|
|
|
2017
|
|
2016
|
|
|
|
|
|
Full
|
|
Full
|
|
|
|
Fourth
|
|
Third
|
|
Fourth
|
|
|
($ in
millions)
|
Year
|
|
Year
|
|
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
|
|
|
Personnel
costs
|
$
|
42
|
|
$
|
76
|
|
|
|
$
|
—
|
|
$
|
4
|
|
$
|
(5)
|
|
|
|
|
Outside data
processing and other services
|
24
|
|
46
|
|
|
|
—
|
|
4
|
|
15
|
|
|
|
|
Net
occupancy
|
52
|
|
15
|
|
|
|
—
|
|
14
|
|
7
|
|
|
|
|
Equipment
|
16
|
|
25
|
|
|
|
—
|
|
6
|
|
20
|
|
|
|
|
Professional
services
|
10
|
|
58
|
|
|
|
—
|
|
2
|
|
9
|
|
|
|
|
Marketing
|
1
|
|
5
|
|
|
|
—
|
|
—
|
|
4
|
|
|
|
|
Other
expense
|
9
|
|
14
|
|
|
|
—
|
|
—
|
|
3
|
|
|
|
|
Total noninterest
expense
|
$
|
154
|
|
$
|
239
|
|
|
|
$
|
—
|
|
$
|
30
|
|
$
|
53
|
|
|
|
|
Table 11 -
Adjusted Noninterest Expense (Non-GAAP)
|
|
|
2017
|
|
2016
|
|
|
|
2017
|
|
2016
|
|
|
|
|
|
Full
|
|
Full
|
|
YOY
|
|
Fourth
|
|
Third
|
|
Fourth
|
|
Change (%)
|
($ in
millions)
|
Year
|
|
Year
|
|
Change
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
LQ
|
|
YOY
|
Personnel
costs
|
$
|
1,482
|
|
$
|
1,273
|
|
16%
|
|
$
|
373
|
|
$
|
373
|
|
$
|
365
|
|
—%
|
|
2%
|
Outside data
processing and other services
|
289
|
|
259
|
|
12
|
|
71
|
|
76
|
|
74
|
|
(7)
|
|
(4)
|
Net
occupancy
|
160
|
|
138
|
|
16
|
|
36
|
|
41
|
|
42
|
|
(12)
|
|
(14)
|
Equipment
|
155
|
|
140
|
|
11
|
|
36
|
|
39
|
|
40
|
|
(8)
|
|
(10)
|
Deposit and other
insurance expense
|
78
|
|
54
|
|
44
|
|
19
|
|
19
|
|
16
|
|
—
|
|
19
|
Professional
services
|
59
|
|
47
|
|
26
|
|
18
|
|
13
|
|
14
|
|
38
|
|
29
|
Marketing
|
59
|
|
58
|
|
2
|
|
10
|
|
17
|
|
17
|
|
(41)
|
|
(41)
|
Amortization of
intangibles
|
56
|
|
30
|
|
87
|
|
14
|
|
14
|
|
14
|
|
—
|
|
—
|
Other
expense
|
222
|
|
170
|
|
31
|
|
56
|
|
58
|
|
46
|
|
(3)
|
|
22
|
Total adjusted
noninterest expense
|
$
|
2,560
|
|
$
|
2,169
|
|
18%
|
|
$
|
633
|
|
$
|
650
|
|
$
|
628
|
|
(3)%
|
|
1%
|
|
See Pages 10 and
21 of Quarterly Financial Supplement for additional
detail.
|
|
Note: 2016 results
reflect inclusion of FirstMerit since August 16,
2016.
|
Reported noninterest expense for the 2017 fourth quarter
decreased $48 million, or 7%, from
the year-ago quarter, primarily reflecting the impact of
Significant Items in the year-ago quarter. Net occupancy
costs decreased $13 million, or 27%,
primarily reflecting $7 million of
acquisition-related Significant Items in the 2016 fourth quarter
and the benefit of branch and corporate office consolidations
completed during the past year. Marketing decreased
$11 million, or 52%, primarily
reflecting elevated marketing activities in the year-ago quarter
related to the FirstMerit acquisition and timing of marketing
campaigns within the 2017 calendar year. Personnel costs
increased $13 million, or 4%,
reflecting annual merit increases, higher medical claims, and
$5 million of acquisition-related
expense reversals in the year ago quarter. Other expense
increased $7 million, or 14%,
primarily reflecting the $6 million
benefit related to the extinguishment of trust preferred securities
in the 2016 fourth quarter.
Reported noninterest expense decreased $47 million, or 7%, from the 2017 third quarter,
primarily reflecting the impact of Significant Items in the prior
quarter. Net occupancy expense decreased $19 million, or 35%, including the benefit of
branch and corporate office consolidations completed during the
prior quarter. Outside data processing and other services
expense decreased $9 million, or 11%,
primarily reflecting the benefit of a debit card-related vendor
migration completed during the prior quarter. Marketing
decreased $7 million, or 41%,
reflecting normal seasonality in marketing spend.
Credit
Quality
|
|
Table 12 –
Credit Quality Metrics – NPAs and NCOs Remain Stable
Sequentially
|
|
|
2017
|
|
2016
|
($ in
millions)
|
December
31,
|
|
September
30,
|
|
June 30,
|
|
March 31,
|
|
December
31,
|
Total nonaccrual
loans and leases
|
$
|
349
|
|
$
|
338
|
|
$
|
364
|
|
$
|
401
|
|
$
|
423
|
Total other real
estate, net
|
33
|
|
42
|
|
44
|
|
50
|
|
51
|
Other NPAs
(1)
|
7
|
|
7
|
|
7
|
|
7
|
|
7
|
Total nonperforming
assets
|
389
|
|
387
|
|
415
|
|
458
|
|
481
|
Accruing loans and
leases past due 90
days or more
|
115
|
|
119
|
|
136
|
|
128
|
|
129
|
NPAs + accruing loans
and lease past due
90 days or more
|
$
|
504
|
|
$
|
506
|
|
$
|
551
|
|
$
|
586
|
|
$
|
610
|
NAL ratio
(2)
|
0.50%
|
|
0.49%
|
|
0.54%
|
|
0.60%
|
|
0.63%
|
NPA ratio
(3)
|
0.55
|
|
0.56
|
|
0.61
|
|
0.68
|
|
0.72
|
(NPAs+90
days)/(Loans+OREO)
|
0.72
|
|
0.74
|
|
0.81
|
|
0.87
|
|
0.91
|
Provision for credit
losses
|
$
|
65
|
|
$
|
43
|
|
$
|
25
|
|
$
|
68
|
|
$
|
75
|
Net
charge-offs
|
41
|
|
43
|
|
36
|
|
39
|
|
44
|
Net charge-offs /
Average total loans
|
0.24%
|
|
0.25%
|
|
0.21%
|
|
0.24%
|
|
0.26%
|
Allowance for loans
and lease losses
|
$
|
691
|
|
$
|
675
|
|
$
|
668
|
|
$
|
673
|
|
$
|
638
|
Allowance for
unfunded loan commitments
and letters of credit
|
87
|
|
79
|
|
85
|
|
92
|
|
98
|
Allowance for credit
losses (ACL)
|
$
|
778
|
|
$
|
754
|
|
$
|
753
|
|
$
|
765
|
|
$
|
736
|
ALLL as %
of:
|
|
|
|
|
|
|
|
|
|
Total loans and
leases
|
0.99%
|
|
0.98%
|
|
0.98%
|
|
1.00%
|
|
0.95%
|
NALs
|
198
|
|
200
|
|
183
|
|
168
|
|
151
|
NPAs
|
178
|
|
175
|
|
161
|
|
147
|
|
133
|
ACL as a %
of:
|
|
|
|
|
|
|
|
|
|
Total loans and
leases
|
1.11%
|
|
1.10%
|
|
1.11%
|
|
1.14%
|
|
1.10%
|
NALs
|
223
|
|
223
|
|
207
|
|
190
|
|
174
|
NPAs
|
200
|
|
195
|
|
181
|
|
167
|
|
153
|
|
(1) Other nonperforming assets
includes certain impaired investment securities.
|
(2) Total NALs as a % of total
loans and leases.
|
(3) Total NPAs as a % of sum of
loans and leases and net other real estate.
|
See Pages 12-15
and 23-26 of Quarterly Financial Supplement for additional
detail.
|
Overall asset quality remains strong. The overall consumer
credit metrics continue to perform as expected, with a modest
seasonal impact evident across the portfolios. The commercial
portfolios have performed consistently, with some
quarter-to-quarter volatility as a result of the absolute low level
of problem loans.
Nonaccrual loans and leases (NALs) of $349 million represented 0.50% of total loans and
leases, down from 0.63% a year ago. The decrease in the NAL
ratio reflected a 17% year-over-year decrease in NALs centered in
the commercial portfolio coupled with the impact of the 5%
year-over-year increase in total loans and leases.
Nonperforming assets (NPAs) of $389
million represented 0.55% of total loans and leases and
OREO, down from 0.72% a year ago. These ratios remained
stable sequentially as the NAL ratio increased 1 basis point from
the prior quarter, while the NPA ratio decreased 1 basis point.
The provision for credit losses decreased to $65 million in the 2017 fourth quarter compared
to $75 million in the 2016 fourth
quarter. Net charge-offs (NCOs) decreased $3 million, or 7%, to $41
million. NCOs represented an annualized 0.24% of
average loans and leases in the current quarter, down 1 basis point
from the prior quarter and down 2 basis points from the year-ago
quarter. Commercial charge-offs continued to be positively
impacted by recoveries in the CRE portfolio and broader continued
successful workout strategies, while consumer charge-offs remained
within our expected range. We continue to be pleased with the
net charge-off performance across the entire portfolio, as NCOs
remain below our targeted range of 0.35% to 0.55%.
The period-end allowance for credit losses (ACL) as a percentage
of total loans and leases increased to 1.11% from 1.10% a year ago,
while the ACL as a percentage of period-end total NALs increased to
223% from 174%. We believe the level of the ACL is
appropriate given the consistent improvement in the credit quality
metrics and the current composition of the overall loan and lease
portfolio.
Capital
|
|
Table 13 –
Capital Ratios – Share Repurchases Continuing to Return
Capital
|
|
|
|
2017
|
|
2016
|
($ in
billions)
|
|
December
31,
|
|
September
30,
|
|
June 30,
|
|
March 31,
|
|
December
31,
|
Tangible common
equity / tangible assets ratio
|
|
7.34%
|
|
7.42%
|
|
7.41%
|
|
7.28%
|
|
7.16%
|
Regulatory common
equity tier 1 risk-based
capital ratio (1)
|
|
9.89%
|
|
9.94%
|
|
9.88%
|
|
9.74%
|
|
9.56%
|
Regulatory Tier 1
risk-based capital ratio (1)
|
|
11.22%
|
|
11.30%
|
|
11.24%
|
|
11.11%
|
|
10.92%
|
Regulatory Total
risk-based capital ratio (1)
|
|
13.21%
|
|
13.39%
|
|
13.33%
|
|
13.26%
|
|
13.05%
|
Total risk-weighted
assets (1)
|
|
$
|
80.4
|
|
$
|
78.6
|
|
$
|
78.4
|
|
$
|
77.6
|
|
$
|
78.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) December 31,
2017 figures are estimated and are presented on a Basel III
standardized approach basis for calculating risk-weighted
assets.
|
|
See Pages 16-17 of
Quarterly Financial Supplement for additional
detail.
|
The tangible common equity to tangible assets ratio was 7.34% at
December 31, 2017, up 18 basis points from a year ago.
The regulatory Common Equity Tier 1 (CET1) risk-based capital ratio
was 9.89% at December 31, 2017, up from 9.56% at
December 31, 2016. The regulatory Tier 1 risk-based
capital ratio was 11.22% compared to 10.92% at December 31,
2016. All capital ratios were impacted by the repurchase of
$260 million of common stock at an
average cost of $13.38 per share
during 2017, including $137 million
of common stock at an average cost of $14.00 per share during the 2017 fourth
quarter.
Income Taxes
On December 22, 2017, the Tax Cuts
& Jobs Act was signed into law. The 2017 fourth quarter
and full-year results reflect a reasonable estimate of the tax
benefit associated with this tax legislation. A $123 million tax benefit related to federal tax
reform was recorded in the 2017 fourth quarter and full-year
results. The 2017 fourth quarter tax benefit was primarily
attributable to the revaluation of net deferred tax liabilities at
the lower statutory tax rate.
The provision for income taxes in the 2017 fourth quarter was a
$20 million benefit compared to
expense of $74 million in the 2016
fourth quarter. The effective tax rates for the 2017 fourth quarter
and 2016 fourth quarter were (4.8)% and 23.6%, respectively.
At December 31, 2017, the Company had a net federal
deferred tax liability of $57 million
and a net state deferred tax asset of $25
million.
Expectations – 2018
"Fourth quarter results clearly demonstrated the improvement in
the underlying earnings power of the company we have achieved over
the past several years. Going forward, we have tasked
ourselves with further improving this level of performance to
distinguish ourselves with peer-leading profitability, operating
efficiency, and shareholder value creation," Steinour said.
"We expect to achieve all of our long-term financial goals on an
annual basis in 2018, two years ahead of our original
expectations. We also expect to deliver our sixth consecutive
year of annual positive operating leverage."
"We enter 2018 with optimism, fueled by both the improving
macroeconomic environment and the continued execution of our core
strategies to drive organic growth. The operating environment
appears poised for further improvement given strong labor markets,
the enactment of federal tax reform, and outlook for additional
interest rate hikes by the Federal Reserve. Sentiment remains
healthy among both our consumer and business customers.
Commercial loan growth was particularly encouraging during the
final few weeks of the year, and our commercial pipelines remain
good as we start the new year. Consumer loan growth remained
steady all year," Steinour said.
Full-year revenues are expected to increase approximately 4% to
6%, while full-year noninterest expense is expected to decrease
approximately 2% to 4%. The full-year NIM is expected to
remain relatively flat on a GAAP basis versus 2017 as core NIM
expansion offsets the anticipated reduction in the benefit of
purchase accounting. The 2018 efficiency ratio is expected to
approximate 55% to 57%.
Average loans and leases are expected to increase approximately
4% to 6% on an annual basis, while average deposits are expected to
increase approximately 3% to 5%.
Overall, asset quality metrics are expected to remain near
current levels, although moderate quarterly volatility also is
expected, given the current low level of problem assets and credit
costs. We anticipate NCOs will remain below our long-term
normalized range of 35 to 55 basis points.
The effective tax rate for 2018 is expected to be in the range
of 16% to 17%.
Conference Call / Webcast Information
Huntington's senior management will host an earnings conference
call on January 23, 2018, at 9:00 a.m.
(Eastern Standard Time). The call may be accessed via a live
Internet webcast at the Investor Relations section of Huntington's
website, www.huntington.com, or through a dial-in telephone number
at (877) 407-8029; Conference ID# 13674942. Slides will be
available in the Investor Relations section of Huntington's website
about an hour prior to the call. A replay of the webcast will be
archived in the Investor Relations section of Huntington's website.
A telephone replay will be available approximately two hours after
the completion of the call through February
2, 2018 at (877) 660-6853 or (201) 612-7415;
conference ID# 13674942.
Please see the 2017 Fourth Quarter Quarterly Financial
Supplement for additional detailed financial performance metrics.
This document can be found on the Investor Relations section of
Huntington's website, www.huntington.com.
Caution regarding Forward-Looking Statements
This communication contains certain forward-looking statements,
including, but not limited to, certain plans, expectations, goals,
projections, and statements, which are not historical facts and are
subject to numerous assumptions, risks, and uncertainties.
Statements that do not describe historical or current facts,
including statements about beliefs and expectations, are
forward-looking statements. Forward-looking statements may be
identified by words such as expect, anticipate, believe, intend,
estimate, plan, target, goal, or similar expressions, or future or
conditional verbs such as will, may, might, should, would, could,
or similar variations. The forward-looking statements are intended
to be subject to the safe harbor provided by Section 27A of the
Securities Act of 1933, Section 21E of the Securities Exchange Act
of 1934, and the Private Securities Litigation Reform Act of
1995.
While there is no assurance that any list of risks and
uncertainties or risk factors is complete, below are certain
factors which could cause actual results to differ materially from
those contained or implied in the forward-looking statements:
changes in general economic, political, or industry conditions;
uncertainty in U.S. fiscal and monetary policy, including the
interest rate policies of the Federal Reserve Board; volatility and
disruptions in global capital and credit markets; movements in
interest rates; competitive pressures on product pricing and
services; success, impact, and timing of our business strategies,
including market acceptance of any new products or services
implementing our "Fair Play" banking philosophy; the nature,
extent, timing, and results of governmental actions, examinations,
reviews, reforms, regulations, and interpretations, including those
related to the Dodd-Frank Wall Street Reform and Consumer
Protection Act and the Basel III regulatory capital reforms, as
well as those involving the OCC, Federal Reserve, FDIC, and CFPB;
and other factors that may affect our future results. Additional
factors that could cause results to differ materially from those
described above can be found in our Annual Report on Form 10-K for
the year ended December 31, 2016, and
Quarterly Reports on Form 10-Q for the quarters ended March 31, 2017, June 30,
2017 and September 30, 2017,
which are on file with the Securities and Exchange Commission (the
"SEC") and available in the "Investor Relations" section of our
website, http://www.huntington.com, under the heading "Publications
and Filings" and in other documents we file with the SEC.
All forward-looking statements speak only as of the date they
are made and are based on information available at that time. We do
not assume any obligation to update forward-looking statements to
reflect circumstances or events that occur after the date the
forward-looking statements were made or to reflect the occurrence
of unanticipated events except as required by federal securities
laws. As forward-looking statements involve significant risks and
uncertainties, caution should be exercised against placing undue
reliance on such statements.
Basis of Presentation
Use of Non-GAAP Financial Measures
This document contains GAAP financial measures and non-GAAP
financial measures where management believes it to be helpful in
understanding Huntington's results of operations or financial
position. Where non-GAAP financial measures are used, the
comparable GAAP financial measure, as well as the reconciliation to
the comparable GAAP financial measure, can be found in this
document, conference call slides, or the Form 8-K related to this
document, all of which can be found in the Investor Relations
section of Huntington's website
(http://www.huntington.com).
Annualized Data
Certain returns, yields, performance ratios, or quarterly growth
rates are presented on an "annualized" basis. This is done for
analytical and decision-making purposes to better discern
underlying performance trends when compared to full-year or
year-over-year amounts. For example, loan and deposit growth rates,
as well as net charge-off percentages, are most often expressed in
terms of an annual rate like 8%. As such, a 2% growth rate for a
quarter would represent an annualized 8% growth rate.
Fully-Taxable Equivalent Interest Income and Net Interest
Margin
Income from tax-exempt earning assets is increased by an amount
equivalent to the taxes that would have been paid if this income
had been taxable at statutory rates. This adjustment puts all
earning assets, most notably tax-exempt municipal securities and
certain lease assets, on a common basis that facilitates comparison
of results to results of competitors.
Earnings per Share Equivalent Data
Significant income or expense items may be expressed on a per
common share basis. This is done for analytical and decision-making
purposes to better discern underlying trends in total corporate
earnings per share performance excluding the impact of such items.
Investors may also find this information helpful in their
evaluation of the company's financial performance against published
earnings per share mean estimate amounts, which typically exclude
the impact of Significant Items. Earnings per share equivalents are
usually calculated by applying an effective tax rate to a pre-tax
amount to derive an after-tax amount, which is divided by the
average shares outstanding during the respective reporting period.
Occasionally, when the item involves special tax treatment, the
after-tax amount is disclosed separately, with this then being the
amount used to calculate the earnings per share equivalent.
Rounding
Please note that columns of data in this document may not add
due to rounding.
Significant Items
From time to time, revenue, expenses, or taxes are impacted by
items judged by management to be outside of ordinary banking
activities and/or by items that, while they may be associated with
ordinary banking activities, are so unusually large that their
outsized impact is believed by management at that time to be
infrequent or short term in nature. We refer to such items as
"Significant Items". Most often, these Significant Items result
from factors originating outside the company – e.g., regulatory
actions/assessments, windfall gains, changes in accounting
principles, one-time tax assessments/refunds, litigation actions,
etc. In other cases they may result from management decisions
associated with significant corporate actions out of the ordinary
course of business – e.g., merger/restructuring charges,
recapitalization actions, goodwill impairment, etc.
Even though certain revenue and expense items are naturally
subject to more volatility than others due to changes in market and
economic environment conditions, as a general rule volatility alone
does not define a Significant Item. For example, changes in the
provision for credit losses, gains/losses from investment
activities, asset valuation write-downs, etc., reflect ordinary
banking activities and are, therefore, typically excluded from
consideration as a Significant Item.
Management believes the disclosure of "Significant Items", when
appropriate, aids analysts/investors in better understanding
corporate performance and trends so that they can ascertain which
of such items, if any, they may wish to include/exclude from their
analysis of the company's performance - i.e., within the context of
determining how that performance differed from their expectations,
as well as how, if at all, to adjust their estimates of future
performance accordingly. To this end, management has adopted a
practice of listing "Significant Items" in its external disclosure
documents (e.g., earnings press releases, quarterly performance
discussions, investor presentations, Forms 10-Q and 10-K).
"Significant Items" for any particular period are not intended
to be a complete list of items that may materially impact current
or future period performance. A number of items could materially
impact these periods, including those described in Huntington's
2016 Annual Report on Form 10-K and other factors described from
time to time in Huntington's other filings with the Securities and
Exchange Commission.
About Huntington
Huntington Bancshares Incorporated is a regional bank holding
company headquartered in Columbus,
Ohio, with $104 billion of
assets and a network of 966 branches and 1,848 ATMs across eight
Midwestern states. Founded in 1866, The Huntington National Bank
and its affiliates provide consumer, small business, commercial,
treasury management, wealth management, brokerage, trust, and
insurance services. Huntington also provides auto dealer, equipment
finance, national settlement and capital market services that
extend beyond its core states. Visit huntington.com for more
information.
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