COLUMBUS, Ohio, Jan. 24,
2019 /PRNewswire/ -- Huntington Bancshares Incorporated
(Nasdaq: HBAN; www.huntington.com) reported 2018 full-year net
income of $1.4 billion, an increase
of 17% from the prior year. Earnings per common share for the
year were $1.20, up 20% from the
prior year. Tangible book value per common share as of 2018
year-end was $7.34, a 5%
year-over-year increase. Return on average assets for the
2018 full year was 1.33%, return on average common equity was
13.4%, and return on average tangible common equity was 17.9%.
Net income for the 2018 fourth quarter was $334 million, a 23% decrease from the year-ago
quarter. Earnings per common share for the 2018 fourth
quarter were $0.29, down 22% from the
year-ago quarter. The 2017 fourth quarter included an
estimated tax benefit of $123
million, or $0.11 per common
share, related to the Tax Cuts and Jobs Act ("federal tax
reform"). Excluding this tax benefit for the 2017 fourth
quarter, 2018 fourth quarter earnings per common share were up 12%
from the year-ago quarter. Return on average assets for the
2018 fourth quarter was 1.25%, return on average common equity was
12.9%, and return on average tangible common equity was 17.3%.
"2018 marks another year of strong
performance for Huntington, with record net income for the fourth
consecutive year and annual positive operating leverage for the
sixth consecutive year," said Steve
Steinour, chairman, president, and CEO. "For the first
time, we achieved all five of our long-term financial goals on a
full-year GAAP basis. This achievement accelerated our
ability to provide enhanced long-term targets as a part of the new
strategic plan announced in the fourth quarter. Our strategy
is based on capitalizing on our sustainable competitive advantages,
driving organic revenue growth, and adhering to our aggregate
moderate-to-low risk appetite."
"Total revenue for the 2018 full year increased 4%
year-over-year driven by organic balance sheet growth and net
interest margin expansion. The revenue growth coupled with
our disciplined expense management drove annual positive operating
leverage," Steinour said. "Average loan growth remained
strong at 6% for the 2018 full year, driven by broad-based consumer
and commercial lending. As expected, the fourth quarter
reflected seasonally strong commercial loan production,
particularly from our corporate, dealer floorplan, and equipment
finance customers at the end of December, along with steady
consumer loan production."
"Our view of 2019 from a balance sheet growth perspective
remains unchanged, generally consistent with our view of overall
economic activity. The underlying fundamentals of our local
economies are positive, and businesses are generally performing
well and are optimistic about 2019. Our loan pipelines remain
steady, and credit metrics remain strong. We are executing on
our new strategic plan and continue to invest to drive organic
growth. The plan entails low execution risk and builds on the
success of the past two strategic plans. At the same time,
given recent market volatility, we are reverting to our historic
practice of assuming no interest rate hikes in our revenue
expectation and are adjusting our expense expectation as a
result. We are focused on what we can control to drive
long-term performance."
Full-year 2018 highlights compared with
2017:
- Fully-taxable equivalent total revenue increased $181 million, or 4%.
- Fully-taxable equivalent net interest income increased
$167 million, or 5%.
- Net interest margin increased 3 basis points to 3.33%.
- Noninterest income increased $14
million, or 1%.
- Noninterest expense decreased $67
million, or 2%, as 2017 included $154
million of acquisition-related expense.
- Efficiency ratio of 56.9%, down from 60.9%.
- Average loans and leases increased $4.4
billion, or 6%, including a $3.2
billion, or 10%, increase in consumer loans and a
$1.1 billion, or 3%, increase in
commercial loans.
- Average core deposits increased $3.6
billion, or 5%, driven by a $2.1
billion, or 98%, increase in core certificates of deposits
(CDs) and a $1.7 billion, or 9%,
increase in money market deposits.
- Net charge-offs (NCOs) equated to 0.20% of average loans and
leases, down from 0.23% and represented continued performance below
the average through-the-cycle target range of 0.35% to 0.55%.
- Nonperforming asset (NPA) ratio of 0.52%, down from 0.55%.
- Common Equity Tier 1 (CET1) risk-based capital ratio of 9.65%,
down from 10.01% and within our 9% to 10% operating guideline.
- Tangible common equity (TCE) ratio of 7.21%, down from
7.34%.
- Tangible book value per common share (TBVPS) increased
$0.37, or 5%, to $7.34.
- Repurchased $939 million of
common stock (61.6 million shares at an average price of
$15.23 per share).
- Cash dividends on common stock increased for the eighth
consecutive year.
2018 Fourth Quarter highlights compared with
2017 Fourth Quarter:
- Fully-taxable equivalent total revenue increased $48 million, or 4%.
- Fully-taxable equivalent net interest income increased
$59 million, or 8%.
- Net interest margin increased 11 basis points to 3.41%.
- Noninterest income decreased $11
million, or 3%.
- Noninterest expense increased $78
million, or 12%.
- Average loans and leases increased $4.9
billion, or 7%, including a $3.0
billion, or 9%, increase in consumer loans and a
$1.9 billion, or 5%, increase in
commercial loans.
- Average securities decreased $1.7
billion, or 7%.
- Average core deposits increased $5.1
billion, or 7%, driven by a $3.8
billion, or 193%, increase in average core CDs and a
$1.9 billion, or 9%, increase in
money market deposits.
- NCOs equated to 0.27% of average loans and leases, up from
0.24% and remaining below the average through-the-cycle target
range of 0.35% to 0.55%.
- Repurchased $200 million of
common stock (15.0 million shares at an average price of
$13.36 per share).
- In October, Huntington announced the consolidation of 70
branches and additional corporate facilities. While the expense of
these actions was included in the 2018 fourth quarter, certain
consolidations were completed early in the 2019 first quarter.
- In December, Huntington announced the sale of 32 Wisconsin
branches, which is expected to close in the 2019 second
quarter.
Table 1 – Earnings Performance Summary
|
Full Year
|
|
2018
|
|
2017
|
($ in millions,
except per share data)
|
2018
|
|
2017
|
|
Fourth
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
Net income
|
$
|
1,393
|
|
|
$
|
1,186
|
|
|
$
|
334
|
|
|
$
|
378
|
|
|
$
|
432
|
|
Diluted earnings per
common share
|
1.20
|
|
|
1.00
|
|
|
0.29
|
|
|
0.33
|
|
|
0.37
|
|
|
|
|
|
|
|
|
|
|
|
Return on average
assets
|
1.33
|
%
|
|
1.17
|
%
|
|
1.25
|
%
|
|
1.42
|
%
|
|
1.67
|
%
|
Return on average
common equity
|
13.4
|
|
|
11.6
|
|
|
12.9
|
|
|
14.3
|
|
|
17.0
|
|
Return on average
tangible common equity
|
17.9
|
|
|
15.7
|
|
|
17.3
|
|
|
19.0
|
|
|
22.7
|
|
Net interest
margin
|
3.33
|
|
|
3.30
|
|
|
3.41
|
|
|
3.32
|
|
|
3.30
|
|
Efficiency
ratio
|
56.9
|
|
|
60.9
|
|
|
58.7
|
|
|
55.3
|
|
|
54.9
|
|
|
|
|
|
|
|
|
|
|
|
Tangible book value
per common share
|
$
|
7.34
|
|
|
$
|
6.97
|
|
|
$
|
7.34
|
|
|
$
|
7.06
|
|
|
$
|
6.97
|
|
Cash dividends
declared per common share
|
0.50
|
|
|
0.35
|
|
|
0.14
|
|
|
0.14
|
|
|
0.11
|
|
Average diluted
shares outstanding (000's)
|
1,105,985
|
|
|
1,136,186
|
|
|
1,073,055
|
|
|
1,103,740
|
|
|
1,130,117
|
|
|
|
|
|
|
|
|
|
|
|
Average earning
assets
|
$
|
96,577
|
|
|
$
|
92,423
|
|
|
$
|
97,752
|
|
|
$
|
96,753
|
|
|
$
|
93,937
|
|
Average loans and
leases
|
72,246
|
|
|
67,891
|
|
|
73,822
|
|
|
72,751
|
|
|
68,940
|
|
Average core
deposits
|
76,403
|
|
|
72,830
|
|
|
79,078
|
|
|
77,680
|
|
|
73,946
|
|
|
|
|
|
|
|
|
|
|
|
Tangible common
equity / tangible assets ratio
|
7.21
|
%
|
|
7.34
|
%
|
|
7.21
|
%
|
|
7.25
|
%
|
|
7.34
|
%
|
Common equity Tier 1
risk-based capital ratio
|
9.65
|
|
|
10.01
|
|
|
9.65
|
|
|
9.89
|
|
|
10.01
|
|
|
|
|
|
|
|
|
|
|
|
NCOs as a % of
average loans and leases
|
0.20
|
%
|
|
0.23
|
%
|
|
0.27
|
%
|
|
0.16
|
%
|
|
0.24
|
%
|
NAL ratio
|
0.45
|
|
|
0.50
|
|
|
0.45
|
|
|
0.50
|
|
|
0.50
|
|
ALLL as a % of total
loans and leases
|
1.03
|
|
|
0.99
|
|
|
1.03
|
|
|
1.04
|
|
|
0.99
|
|
Table 2 lists certain items that management believes are
significant in understanding corporate performance and trends (see
Basis of Presentation on page 14). There were no Significant Items
in 2018.
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, 2018
– net income
|
|
|
$
|
1,393
|
|
|
$
|
1.20
|
|
|
•
|
None
|
N/A
|
|
—
|
|
|
—
|
|
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)
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
|
|
|
December 31, 2018
– net income
|
|
|
$
|
334
|
|
|
$
|
0.29
|
|
|
•
|
None
|
N/A
|
|
—
|
|
|
—
|
|
September 30, 2018
– net income
|
|
|
$
|
378
|
|
|
$
|
0.33
|
|
|
•
|
None
|
N/A
|
|
—
|
|
|
—
|
|
December 31, 2017
– net income
|
|
|
$
|
432
|
|
|
$
|
0.37
|
|
|
•
|
Federal tax
reform-related estimated tax benefit (3)
|
N/A
|
|
123
|
|
|
0.11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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. We completed our provisional estimate related to tax
reform during 2018 which resulted in an immaterial impact for the
year.
|
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 Drove NIM
Expansion
|
2018
|
|
2017
|
|
|
|
2018
|
|
2017
|
|
|
|
|
($ in
millions)
|
Full Year
|
|
Full Year
|
|
Change
YOY
|
|
Fourth
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
|
Change (%)
|
LQ
|
|
YOY
|
Net interest
income
|
$
|
3,189
|
|
|
$
|
3,002
|
|
|
6
|
%
|
|
$
|
833
|
|
|
$
|
802
|
|
|
$
|
770
|
|
|
4
|
%
|
|
8
|
%
|
FTE
adjustment
|
30
|
|
|
50
|
|
|
(40)
|
|
|
8
|
|
|
8
|
|
|
12
|
|
|
0
|
|
|
33
|
|
Net interest income -
FTE
|
3,219
|
|
|
3,052
|
|
|
5
|
|
|
841
|
|
|
810
|
|
|
782
|
|
|
4
|
|
|
8
|
|
Noninterest
income
|
1,321
|
|
|
1,307
|
|
|
1
|
|
|
329
|
|
|
342
|
|
|
340
|
|
|
(4)
|
|
|
(3)
|
|
Total revenue -
FTE
|
$
|
4,540
|
|
|
$
|
4,359
|
|
|
4
|
%
|
|
$
|
1,170
|
|
|
$
|
1,152
|
|
|
$
|
1,122
|
|
|
2
|
%
|
|
4
|
%
|
|
2018
|
|
2017
|
|
|
|
2018
|
|
2017
|
|
|
|
|
|
Full Year
|
|
Full Year
|
|
Change
YOY
|
|
Fourth
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
|
Change bp
|
Yield /
Cost
|
|
LQ
|
|
YOY
|
Total earning
assets
|
4.12
|
%
|
|
3.77
|
%
|
|
35
|
bp
|
|
4.34
|
%
|
|
4.16
|
%
|
|
3.83
|
%
|
|
18
|
bp
|
|
51
|
bp
|
Total loans and
leases
|
4.58
|
|
|
4.19
|
|
|
39
|
|
4.76
|
|
|
4.60
|
|
|
4.23
|
|
|
16
|
|
|
53
|
|
Total
securities
|
2.72
|
|
|
2.57
|
|
|
15
|
|
2.84
|
|
|
2.73
|
|
|
2.64
|
|
|
11
|
|
|
20
|
|
Total
interest-bearing liabilities
|
1.06
|
|
|
0.64
|
|
|
42
|
|
1.23
|
|
|
1.13
|
|
|
0.73
|
|
|
10
|
|
|
50
|
|
Total
interest-bearing deposits
|
0.65
|
|
|
0.33
|
|
|
32
|
|
0.84
|
|
|
0.73
|
|
|
0.37
|
|
|
11
|
|
|
47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest rate
spread
|
3.06
|
|
|
3.13
|
|
|
(7)
|
|
3.11
|
|
|
3.03
|
|
|
3.10
|
|
|
8
|
|
|
1
|
|
Impact of
noninterest-bearing funds on margin
|
0.27
|
|
|
0.17
|
|
|
10
|
|
0.30
|
|
|
0.29
|
|
|
0.20
|
|
|
1
|
|
|
10
|
|
Net interest
margin
|
3.33
|
%
|
|
3.30
|
%
|
|
3
|
bp
|
|
3.41
|
%
|
|
3.32
|
%
|
|
3.30
|
%
|
|
9
|
bp
|
|
11
|
bp
|
See Pages 7-9 and 18-20 of
Quarterly Financial Supplement for additional detail.
Fully-taxable equivalent (FTE) net interest income for the 2018
fourth quarter increased $59 million,
or 8%, from the 2017 fourth quarter. This reflected the
benefit from the $3.8 billion, or 4%,
increase in average earning assets coupled with an 11 basis point
increase in the FTE net interest margin (NIM) to 3.41%.
Average earning asset yields increased 51 basis points
year-over-year, driven by a 53 basis point improvement in loan
yields. Average interest-bearing liability costs increased 50
basis points, although interest-bearing deposit costs only
increased 47 basis points. The cost of short-term borrowings
and long-term debt increased 134 basis points and 109 basis points,
respectively. The benefit from noninterest-bearing funds
increased 10 basis points versus the year-ago quarter.
Embedded within these yields and costs, FTE net interest income
during the 2018 fourth quarter included $17
million, or approximately 7 basis points, of purchase
accounting impact compared to $24
million, or approximately 10 basis points, in the year-ago
quarter. The 2018 fourth quarter included an approximately 2
basis point impact from higher commercial interest
recoveries. On a year-over-year basis, NIM was negatively
impacted by 2 basis points as a result of the impact of federal tax
reform on the FTE adjustment.
Compared to the 2018 third quarter, FTE net interest income
increased $31 million, or 4%,
primarily reflecting a 9 basis point increase in NIM. Average
earning asset yields increased 18 basis points sequentially, driven
by a 16 basis point increase in loan yields, which includes the
aforementioned commercial interest recovery benefit, and the
benefit of the earning asset mix shift. Average
interest-bearing liability costs increased 10 basis points,
primarily driven by an 11 basis point increase in average
interest-bearing deposit costs. The benefit of
noninterest-bearing funds increased 1 basis point. The
purchase accounting impact on the net interest margin was
approximately 7 basis points in the 2018 fourth quarter, unchanged
from the prior quarter.
Table 4 – Average Earning Assets – Broad-based Consumer
and C&I Loan Growth Reflects Underlying Economic Strength of
Footprint
|
2018
|
|
2017
|
|
|
|
2018
|
|
2017
|
|
|
|
|
($ in
billions)
|
Full
|
|
Full
|
|
YOY
|
|
Fourth
|
|
Third
|
|
Fourth
|
|
Change (%)
|
Year
|
|
Year
|
|
Change
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
LQ
|
|
YOY
|
Commercial and
industrial
|
$
|
28.9
|
|
|
$
|
27.7
|
|
|
4
|
%
|
|
$
|
29.6
|
|
|
$
|
28.9
|
|
|
27.4
|
|
|
2
|
%
|
|
8
|
%
|
Commercial real
estate
|
7.2
|
|
|
7.2
|
|
|
0
|
|
|
6.9
|
|
|
7.2
|
|
|
7.2
|
|
|
(3)
|
|
|
(4)
|
|
Total
commercial
|
36.1
|
|
|
35.0
|
|
|
3
|
|
|
36.5
|
|
|
36.0
|
|
|
34.6
|
|
|
1
|
|
|
5
|
|
Automobile
|
12.3
|
|
|
11.5
|
|
|
7
|
|
|
12.4
|
|
|
12.4
|
|
|
12.0
|
|
|
0
|
|
|
4
|
|
Home
equity
|
9.9
|
|
|
10.0
|
|
|
(1)
|
|
|
9.8
|
|
|
9.9
|
|
|
10.0
|
|
|
(1)
|
|
|
(2)
|
|
Residential
mortgage
|
9.9
|
|
|
8.2
|
|
|
20
|
|
|
10.6
|
|
|
10.2
|
|
|
8.8
|
|
|
3
|
|
|
20
|
|
RV and marine
finance
|
2.8
|
|
|
2.2
|
|
|
32
|
|
|
3.2
|
|
|
3.0
|
|
|
2.4
|
|
|
7
|
|
|
34
|
|
Other
consumer
|
1.2
|
|
|
1.0
|
|
|
18
|
|
|
1.3
|
|
|
1.2
|
|
|
1.1
|
|
|
4
|
|
|
18
|
|
Total
consumer
|
36.2
|
|
|
32.9
|
|
|
10
|
|
|
37.3
|
|
|
36.7
|
|
|
34.3
|
|
|
2
|
|
|
9
|
|
Total loans and
leases
|
72.2
|
|
|
67.9
|
|
|
6
|
|
|
73.8
|
|
|
72.8
|
|
|
68.9
|
|
|
1
|
|
|
7
|
|
Total
securities
|
23.5
|
|
|
23.9
|
|
|
(2)
|
|
|
22.7
|
|
|
23.2
|
|
|
24.3
|
|
|
(2)
|
|
|
(7)
|
|
Held-for-sale and
other earning assets
|
0.8
|
|
|
0.7
|
|
|
29
|
|
|
1.3
|
|
|
0.8
|
|
|
0.7
|
|
|
54
|
|
|
85
|
|
Total earning
assets
|
$
|
96.6
|
|
|
$
|
92.4
|
|
|
4
|
%
|
|
$
|
97.8
|
|
|
$
|
96.8
|
|
|
$
|
93.9
|
|
|
1
|
%
|
|
4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Pages 7 and 18 of
Quarterly Financial Supplement for additional detail.
Average earning assets for the 2018 fourth quarter increased
$3.8 billion, or 4%, from the
year-ago quarter, primarily reflecting a $4.9 billion, or 7%, increase in average total
loans and leases. Average commercial and industrial (C&I)
loans increased $2.1 billion, or 8%,
reflecting broad-based growth. Average residential mortgage
loans increased $1.8 billion, or 20%,
driven by an increase in lending officers and expansion into the
Chicago market. Average RV
and marine finance loans increased $0.8
billion, or 34%, reflecting the success of the well-managed
geographic expansion over the past two years, while maintaining our
commitment to super prime originations. Average automobile
loans increased $0.5 billion, or 4%,
driven by origination volume consistent with current market
dynamics and our continued commitment to high quality borrowers
while optimizing yield and production in the rising rate
environment over the past year. Average securities decreased
$1.7 billion, or 7%, primarily due to
runoff in the portfolio, partially offset by continued growth in
direct purchase municipal instruments in our commercial banking
segment.
Compared to the 2018 third quarter, average earning assets
increased $1.0 billion, or 1%.
Average total loans and leases increased $1.1 billion, or 1%. Average C&I loans
increased $0.7 billion, or 2%,
reflecting growth in dealer floorplan, corporate, and middle market
banking. Average total consumer loans increased $0.6 billion, or 2%, driven by continued growth
in residential mortgage and RV and marine lending. Average
securities decreased $0.5 billion, or
2%, primarily due to runoff in the portfolio. As of
December 31, 2018, approximately
$121 million of loans were included
in held-for-sale related to the announced sale of our Wisconsin branches, which is expected to close
in the 2019 second quarter.
Table 5 – Average Liabilities – Continued Growth in Core
Deposits Drove Reduction in Wholesale Funding
|
2018
|
|
2017
|
|
|
|
2018
|
|
2017
|
|
|
|
Full
|
|
Full
|
|
YOY
|
|
Fourth
|
|
Third
|
|
Fourth
|
|
Change (%)
|
($ in
billions)
|
Year
|
|
Year
|
|
Change
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
LQ
|
|
YOY
|
Demand deposits -
noninterest bearing
|
$
|
20.4
|
|
|
$
|
21.7
|
|
|
(6)
|
%
|
|
$
|
20.4
|
|
|
$
|
20.2
|
|
|
$
|
21.7
|
|
|
1
|
%
|
|
(6)
|
%
|
Demand deposits -
interest bearing
|
19.3
|
|
|
17.6
|
|
|
10
|
|
|
19.9
|
|
|
19.6
|
|
|
18.2
|
|
|
2
|
|
|
9
|
|
Total demand
deposits
|
39.7
|
|
|
39.3
|
|
|
1
|
|
|
40.2
|
|
|
39.8
|
|
|
39.9
|
|
|
1
|
|
|
1
|
|
Money market
deposits
|
21.4
|
|
|
19.7
|
|
|
9
|
|
|
22.6
|
|
|
21.5
|
|
|
20.7
|
|
|
5
|
|
|
9
|
|
Savings and other
domestic deposits
|
11.1
|
|
|
11.7
|
|
|
(5)
|
|
|
10.5
|
|
|
11.4
|
|
|
11.3
|
|
|
(8)
|
|
|
(7)
|
|
Core certificates of
deposit
|
4.2
|
|
|
2.1
|
|
|
98
|
|
|
5.7
|
|
|
4.9
|
|
|
1.9
|
|
|
16
|
|
|
193
|
|
Total core
deposits
|
76.4
|
|
|
72.8
|
|
|
5
|
|
|
79.1
|
|
|
77.7
|
|
|
73.9
|
|
|
2
|
|
|
7
|
|
Other domestic
deposits of $250,000 or more
|
0.3
|
|
|
0.4
|
|
|
(37)
|
|
|
0.3
|
|
|
0.3
|
|
|
0.4
|
|
|
21
|
|
|
(14)
|
|
Brokered deposits and
negotiable CDs
|
3.5
|
|
|
3.7
|
|
|
(5)
|
|
|
3.5
|
|
|
3.5
|
|
|
3.4
|
|
|
(1)
|
|
|
3
|
|
Total
deposits
|
$
|
80.2
|
|
|
$
|
77.0
|
|
|
4
|
%
|
|
$
|
82.9
|
|
|
$
|
81.5
|
|
|
$
|
77.7
|
|
|
2
|
%
|
|
7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term
borrowings
|
$
|
2.7
|
|
|
$
|
2.9
|
|
|
(6)
|
%
|
|
$
|
1.0
|
|
|
$
|
1.7
|
|
|
$
|
2.8
|
|
|
(42)
|
%
|
|
(65)
|
%
|
Long-term
debt
|
9.0
|
|
|
8.9
|
|
|
1
|
|
|
8.9
|
|
|
8.9
|
|
|
9.2
|
|
|
0
|
|
|
(4)
|
|
Total debt
|
$
|
11.7
|
|
|
$
|
11.8
|
|
|
(1)
|
%
|
|
$
|
9.9
|
|
|
$
|
10.6
|
|
|
$
|
12.0
|
|
|
(7)
|
%
|
|
(18)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Interest-bearing liabilities
|
$
|
71.5
|
|
|
$
|
67.0
|
|
|
7
|
%
|
|
$
|
72.4
|
|
|
$
|
71.9
|
|
|
$
|
68.1
|
|
|
1
|
%
|
|
6
|
%
|
See Pages 7 and 18 of Quarterly
Financial Supplement for additional detail.
Average total interest-bearing liabilities for the 2018 fourth
quarter increased $4.4 billion, or
6%, from the year ago quarter. Average total deposits
increased $5.2 billion, or 7%, while
average total core deposits increased $5.1
billion, or 7%. Average core CDs increased
$3.8 billion, or 193%, reflecting
consumer deposit growth initiatives primarily in the first three
quarters of 2018. Average money market deposits increased
$1.9 billion, or 9%, primarily
reflecting growth in commercial and consumer balances.
Savings and other domestic deposits decreased $0.8 billion, or 7%, primarily reflecting
FirstMerit-related balance attrition and continued consumer product
mix shift. Average short-term borrowings decreased
$1.8 billion, or 65%, as continued
growth in core deposits reduced reliance on wholesale funding.
Compared to the 2018 third quarter, average total
interest-bearing liabilities increased $0.5
billion, or 1%. Average total core deposits
increased $1.4 billion, or 2%.
Average core CDs increased $0.8
billion, or 16%, reflecting the aforementioned consumer
deposit growth initiatives. Average total demand deposits
increased $0.5 billion, or 1%,
primarily driven by commercial interest checking growth.
Average money market deposits increased $1.0
billion, or 5%, reflecting initiatives to drive commercial
and consumer money market growth and a re-class of certain
commercial savings accounts. Savings and other domestic
deposits decreased $0.9 billion, or
8%, primarily reflecting the re-class of certain commercial savings
accounts and continued consumer product mix shift. Average
short-term borrowings decreased $0.7
billion, or 42%, as continued growth in core deposits
reduced reliance on wholesale funding. As of December 31, 2018, approximately $872 million of deposits are held-for-sale
associated with the previously-mentioned pending Wisconsin branch sale (included in total
deposits in Table 5 above).
Noninterest Income (see Basis of Presentation on
page 14)
Table 6 - Noninterest Income (GAAP) - Continued Momentum
in Capital Markets and Card and Payment Processing
Income
|
2018
|
|
2017
|
|
|
|
2018
|
|
2017
|
|
|
|
Full
|
|
Full
|
|
YOY
|
|
Fourth
|
|
Third
|
|
Fourth
|
|
Change (%)
|
($ in
millions)
|
Year
|
|
Year
|
|
Change
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
LQ
|
|
YOY
|
Service charges on
deposit accounts
|
$
|
364
|
|
|
$
|
353
|
|
|
3
|
%
|
|
$
|
94
|
|
|
$
|
93
|
|
|
$
|
91
|
|
|
1
|
%
|
|
3
|
%
|
Card and payment
processing income
|
224
|
|
|
206
|
|
|
9
|
|
|
58
|
|
|
57
|
|
|
53
|
|
|
2
|
|
|
9
|
|
Trust and investment
management services
|
171
|
|
|
156
|
|
|
10
|
|
|
42
|
|
|
43
|
|
|
41
|
|
|
(2)
|
|
|
2
|
|
Mortgage banking
income
|
108
|
|
|
131
|
|
|
(18)
|
|
|
23
|
|
|
31
|
|
|
33
|
|
|
(26)
|
|
|
(30)
|
|
Capital markets
fees
|
91
|
|
|
76
|
|
|
20
|
|
|
29
|
|
|
22
|
|
|
23
|
|
|
32
|
|
|
26
|
|
Insurance
income
|
82
|
|
|
81
|
|
|
1
|
|
|
21
|
|
|
19
|
|
|
21
|
|
|
11
|
|
|
0
|
|
Bank owned life
insurance income
|
67
|
|
|
67
|
|
|
0
|
|
|
16
|
|
|
19
|
|
|
18
|
|
|
(16)
|
|
|
(11)
|
|
Gain on sale of
loans
|
55
|
|
|
56
|
|
|
(2)
|
|
|
16
|
|
|
16
|
|
|
17
|
|
|
0
|
|
|
(6)
|
|
Securities (losses)
gains
|
(21)
|
|
|
(4)
|
|
|
(425)
|
|
|
(19)
|
|
|
(2)
|
|
|
(4)
|
|
|
(850)
|
|
|
(375)
|
|
Other
income
|
180
|
|
|
185
|
|
|
(3)
|
|
|
49
|
|
|
44
|
|
|
47
|
|
|
11
|
|
|
4
|
|
Total noninterest
income
|
$
|
1,321
|
|
|
$
|
1,307
|
|
|
1
|
%
|
|
$
|
329
|
|
|
$
|
342
|
|
|
$
|
340
|
|
|
(4)
|
%
|
|
(3)
|
%
|
Table 7 - Impact of Significant Items
|
2018
|
|
2017
|
|
|
|
2018
|
|
2017
|
|
|
|
Full
|
|
Full
|
|
|
|
Fourth
|
|
Third
|
|
Fourth
|
|
|
($ in
millions)
|
Year
|
|
Year
|
|
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
|
|
|
Service charges on
deposit accounts
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
Card and payment
processing income
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
Trust and investment
management services
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
Mortgage banking
income
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
Capital markets
fees
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
Insurance
income
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
Bank owned life
insurance income
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
Gain on sale of
loans
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
Securities (losses)
gains
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
Other
income
|
—
|
|
|
2
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
Total noninterest
income
|
$
|
—
|
|
|
$
|
2
|
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
Table 8 - Adjusted Noninterest Income
(Non-GAAP)
|
2018
|
|
2017
|
|
|
|
2018
|
|
2017
|
|
|
|
Full
|
|
Full
|
|
YOY
|
|
Fourth
|
|
Third
|
|
Fourth
|
|
Change (%)
|
($ in
millions)
|
Year
|
|
Year
|
|
Change
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
LQ
|
|
YOY
|
Service charges on
deposit accounts
|
$
|
364
|
|
|
$
|
353
|
|
|
3
|
%
|
|
$
|
94
|
|
|
$
|
93
|
|
|
$
|
91
|
|
|
1
|
%
|
|
3
|
%
|
Card and payment
processing income
|
224
|
|
|
206
|
|
|
9
|
|
|
58
|
|
|
57
|
|
|
53
|
|
|
2
|
|
|
9
|
|
Trust and investment
management services
|
171
|
|
|
156
|
|
|
10
|
|
|
42
|
|
|
43
|
|
|
41
|
|
|
(2)
|
|
|
2
|
|
Mortgage banking
income
|
108
|
|
|
131
|
|
|
(18)
|
|
|
23
|
|
|
31
|
|
|
33
|
|
|
(26)
|
|
|
(30)
|
|
Capital markets
fees
|
91
|
|
|
76
|
|
|
20
|
|
|
29
|
|
|
22
|
|
|
23
|
|
|
32
|
|
|
26
|
|
Insurance
income
|
82
|
|
|
81
|
|
|
1
|
|
|
21
|
|
|
19
|
|
|
21
|
|
|
11
|
|
|
0
|
|
Bank owned life
insurance income
|
67
|
|
|
67
|
|
|
0
|
|
|
16
|
|
|
19
|
|
|
18
|
|
|
(16)
|
|
|
(11)
|
|
Gain on sale of
loans
|
55
|
|
|
56
|
|
|
(2)
|
|
|
16
|
|
|
16
|
|
|
17
|
|
|
0
|
|
|
(6)
|
|
Securities (losses)
gains
|
(21)
|
|
|
(4)
|
|
|
(425)
|
|
|
(19)
|
|
|
(2)
|
|
|
(4)
|
|
|
(850)
|
|
|
(375)
|
|
Other
income
|
180
|
|
|
183
|
|
|
(2)
|
|
|
49
|
|
|
44
|
|
|
47
|
|
|
11
|
|
|
4
|
|
Total adjusted
noninterest income
|
$
|
1,321
|
|
|
$
|
1,305
|
|
|
1
|
%
|
|
$
|
329
|
|
|
$
|
342
|
|
|
$
|
340
|
|
|
(4)
|
%
|
|
(3)
|
%
|
See Pages 10-11 and 21-22 of
Quarterly Financial Supplement for additional detail.
Noninterest income for the 2018 fourth quarter decreased
$11 million, or 3%, from the year-ago
quarter. Securities losses were $19
million compared to $4 million
in the year-ago quarter, reflecting the losses related to the
$1.1 billion portfolio repositioning
completed in the 2018 fourth quarter. Mortgage banking income
decreased $10 million, or 30%,
primarily reflecting lower spreads on origination volume.
Capital markets fees increased $6
million, or 26%, primarily driven by $4 million of fees from Hutchinson, Shockey, and
Erley & Co. (HSE), which was acquired October 1, 2018. Card and payment
processing income increased $5
million, or 9%, due to underlying customer growth and higher
card usage.
Compared to the 2018 third quarter, total noninterest income
decreased $13 million, or 4%.
Securities losses were $19 million
compared to $2 million in the 2018
third quarter, reflecting the $19
million of losses related to the aforementioned portfolio
repositioning. Mortgage banking income decreased $8 million, or 26%, primarily reflecting lower
spreads on origination volume and lower volume. Capital
markets fees increased $7 million, or
32%, primarily driven by $4 million
of fees from HSE and increased sales of foreign exchange and
commodity derivatives.
Noninterest Expense (see Basis of Presentation on
page 14)
Table 9 – Noninterest Expense (GAAP) – Year-over-Year
Variance Driven by Branch and Facility Consolidation-Related
Actions in the 2018 Fourth Quarter
|
2018
|
|
2017
|
|
|
|
2018
|
|
2017
|
|
|
|
Full
|
|
Full
|
|
YOY
|
|
Fourth
|
|
Third
|
|
Fourth
|
|
Change (%)
|
($ in
millions)
|
Year
|
|
Year
|
|
Change
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
LQ
|
|
YOY
|
Personnel
costs
|
$
|
1,559
|
|
|
$
|
1,524
|
|
|
2
|
%
|
|
$
|
399
|
|
|
$
|
388
|
|
|
$
|
373
|
|
|
3
|
%
|
|
7
|
%
|
Outside data
processing and other services
|
294
|
|
|
313
|
|
|
(6)
|
|
|
83
|
|
|
69
|
|
|
71
|
|
|
20
|
|
|
17
|
|
Net
occupancy
|
184
|
|
|
212
|
|
|
(13)
|
|
|
70
|
|
|
38
|
|
|
36
|
|
|
84
|
|
|
94
|
|
Equipment
|
164
|
|
|
171
|
|
|
(4)
|
|
|
48
|
|
|
38
|
|
|
36
|
|
|
26
|
|
|
33
|
|
Deposit and other
insurance expense
|
63
|
|
|
78
|
|
|
(19)
|
|
|
9
|
|
|
18
|
|
|
19
|
|
|
(50)
|
|
|
(53)
|
|
Professional
services
|
60
|
|
|
69
|
|
|
(13)
|
|
|
17
|
|
|
17
|
|
|
18
|
|
|
0
|
|
|
(6)
|
|
Marketing
|
53
|
|
|
60
|
|
|
(12)
|
|
|
15
|
|
|
12
|
|
|
10
|
|
|
25
|
|
|
50
|
|
Amortization of
intangibles
|
53
|
|
|
56
|
|
|
(5)
|
|
|
13
|
|
|
13
|
|
|
14
|
|
|
0
|
|
|
(7)
|
|
Other
expense
|
217
|
|
|
231
|
|
|
(6)
|
|
|
57
|
|
|
58
|
|
|
56
|
|
|
(2)
|
|
|
2
|
|
Total noninterest
expense
|
$
|
2,647
|
|
|
$
|
2,714
|
|
|
(2)
|
%
|
|
$
|
711
|
|
|
$
|
651
|
|
|
$
|
633
|
|
|
9
|
%
|
|
12
|
%
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of employees
(Average full-time
equivalent)
|
15.7
|
|
|
15.8
|
|
|
(1)
|
%
|
|
15.7
|
|
|
15.8
|
|
|
15.4
|
|
|
(1)
|
%
|
|
2
|
%
|
Table 10 - Impacts of Significant Items
|
2018
|
|
2017
|
|
|
|
2018
|
|
2017
|
|
|
|
|
|
Full
|
|
Full
|
|
|
|
Fourth
|
|
Third
|
|
Fourth
|
|
|
($ in
millions)
|
Year
|
|
Year
|
|
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
|
|
|
Personnel
costs
|
$
|
—
|
|
|
$
|
42
|
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
Outside data
processing and other services
|
—
|
|
|
24
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
Net
occupancy
|
—
|
|
|
52
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
Equipment
|
—
|
|
|
16
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
Deposit and other
insurance expense
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
Professional
services
|
—
|
|
|
10
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
Marketing
|
—
|
|
|
1
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
Amortization of
intangibles
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
Other
expense
|
—
|
|
|
9
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
Total noninterest
expense
|
$
|
—
|
|
|
$
|
154
|
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
Table 11 - Adjusted Noninterest Expense
(Non-GAAP)
|
2018
|
|
2017
|
|
|
|
2018
|
|
2017
|
|
|
|
|
|
Full
|
|
Full
|
|
YOY
|
|
Fourth
|
|
Third
|
|
Fourth
|
|
Change (%)
|
($ in
millions)
|
Year
|
|
Year
|
|
Change
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
LQ
|
|
YOY
|
Personnel
costs
|
$
|
1,559
|
|
|
$
|
1,482
|
|
|
5
|
%
|
|
$
|
399
|
|
|
$
|
388
|
|
|
$
|
373
|
|
|
3
|
%
|
|
7
|
%
|
Outside data
processing and other services
|
294
|
|
|
289
|
|
|
2
|
|
|
83
|
|
|
69
|
|
|
71
|
|
|
20
|
|
|
17
|
|
Net
occupancy
|
184
|
|
|
160
|
|
|
16
|
|
|
70
|
|
|
38
|
|
|
36
|
|
|
84
|
|
|
(14)
|
|
Equipment
|
164
|
|
|
155
|
|
|
6
|
|
|
48
|
|
|
38
|
|
|
36
|
|
|
26
|
|
|
33
|
|
Deposit and other
insurance expense
|
63
|
|
|
78
|
|
|
44
|
|
|
9
|
|
|
18
|
|
|
19
|
|
|
(50)
|
|
|
19
|
|
Professional
services
|
60
|
|
|
59
|
|
|
2
|
|
|
17
|
|
|
17
|
|
|
18
|
|
|
0
|
|
|
(6)
|
|
Marketing
|
53
|
|
|
59
|
|
|
(10)
|
|
|
15
|
|
|
12
|
|
|
10
|
|
|
25
|
|
|
50
|
|
Amortization of
intangibles
|
53
|
|
|
56
|
|
|
(5)
|
|
|
13
|
|
|
13
|
|
|
14
|
|
|
0
|
|
|
(7)
|
|
Other
expense
|
217
|
|
|
222
|
|
|
(2)
|
|
|
57
|
|
|
58
|
|
|
56
|
|
|
(2)
|
|
|
2
|
|
Total adjusted
noninterest expense
|
$
|
2,647
|
|
|
$
|
2,560
|
|
|
3
|
%
|
|
$
|
711
|
|
|
$
|
651
|
|
|
$
|
633
|
|
|
9
|
%
|
|
12
|
%
|
See Pages 10 and 21 of
Quarterly Financial Supplement for additional detail.
Reported noninterest expense for the 2018 fourth quarter
increased $78 million, or 12%, from
the year-ago quarter. Net occupancy costs increased
$34 million, or 94%, primarily
reflecting $28 million of branch and
facility consolidation-related expense in the 2018 fourth
quarter. Personnel costs increased $26
million, or 7%, reflecting annual merit increases, higher
benefit costs, and $3 million of
run-rate expense from HSE. Equipment increased $12 million, or 33%, primarily reflecting
$7 million of branch and facility
consolidation-related expense in the 2018 fourth quarter.
Outside data processing and other services expense increased
$12 million, or 17%, primarily driven
by higher technology investment costs. Marketing increased
$5 million, or 50%, primarily
reflecting timing of marketing campaigns. Insurance expense
decreased $10 million, or 53%, due to
the discontinuation of the FDIC surcharge in the 2018 fourth
quarter.
Reported noninterest expense increased $60 million, or 9%, from the 2018 third
quarter. Net occupancy expense increased $32 million, or 84%, primarily reflecting
$28 million of branch and facility
consolidation-related expense in the 2018 fourth quarter.
Outside data processing and other services expense increased
$14 million, or 20%, primarily driven
by higher technology investment costs. Personnel costs
increased $11 million, 3%, reflecting
higher benefit costs and $3 million
of run-rate expense from HSE. Equipment increased
$10 million, or 26%, primarily
reflecting $7 million of branch and
facility consolidation-related expense in the 2018 fourth
quarter. Insurance expense decreased $9 million, or 50%, due to the discontinuation of
the FDIC surcharge in the 2018 fourth quarter.
Credit Quality
Table 12 – Credit Quality Metrics – NPA Ratio at Cyclical
Low, and NCOs Remain Below the Average Through-the-Cycle Target
Range
|
2018
|
|
2017
|
($ in
millions)
|
December
31,
|
|
September
30,
|
|
June 30,
|
|
March 31,
|
|
December
31,
|
Total nonaccrual
loans and leases
|
$
|
340
|
|
|
$
|
370
|
|
|
$
|
378
|
|
|
$
|
383
|
|
|
$
|
349
|
|
Total other real
estate, net
|
23
|
|
|
27
|
|
|
28
|
|
|
30
|
|
|
33
|
|
Other NPAs
(1)
|
24
|
|
|
6
|
|
|
6
|
|
|
7
|
|
|
7
|
|
Total nonperforming
assets
|
387
|
|
|
403
|
|
|
412
|
|
|
420
|
|
|
389
|
|
Accruing loans and
leases past due 90 days or
more
|
170
|
|
|
154
|
|
|
132
|
|
|
106
|
|
|
115
|
|
NPAs + accruing loans
and lease past due 90
days or more
|
$
|
557
|
|
|
$
|
557
|
|
|
$
|
544
|
|
|
$
|
526
|
|
|
$
|
504
|
|
NAL ratio
(2)
|
0.45
|
%
|
|
0.50
|
%
|
|
0.52
|
%
|
|
0.54
|
%
|
|
0.50
|
%
|
NPA ratio
(3)
|
0.52
|
|
|
0.55
|
|
|
0.57
|
|
|
0.59
|
|
|
0.55
|
|
(NPAs+90
days)/(Loans+OREO)
|
0.74
|
|
|
0.76
|
|
|
0.75
|
|
|
0.74
|
|
|
0.72
|
|
Provision for credit
losses
|
$
|
60
|
|
|
$
|
53
|
|
|
$
|
56
|
|
|
$
|
66
|
|
|
$
|
65
|
|
Net
charge-offs
|
50
|
|
|
29
|
|
|
28
|
|
|
38
|
|
|
41
|
|
Net charge-offs /
Average total loans
|
0.27
|
%
|
|
0.16
|
%
|
|
0.16
|
%
|
|
0.21
|
%
|
|
0.24
|
%
|
Allowance for loans
and lease losses (ALLL)
|
$
|
772
|
|
|
$
|
761
|
|
|
$
|
741
|
|
|
$
|
721
|
|
|
$
|
691
|
|
Allowance for
unfunded loan commitments and
letters of credit
|
96
|
|
|
97
|
|
|
93
|
|
|
85
|
|
|
87
|
|
Allowance for credit
losses (ACL)
|
$
|
868
|
|
|
$
|
858
|
|
|
$
|
834
|
|
|
$
|
806
|
|
|
$
|
778
|
|
ALLL as %
of:
|
|
|
|
|
|
|
|
|
|
Total loans and
leases
|
1.03
|
%
|
|
1.04
|
%
|
|
1.02
|
%
|
|
1.01
|
%
|
|
0.99
|
%
|
NALs
|
228
|
|
|
206
|
|
|
197
|
|
|
188
|
|
|
198
|
|
NPAs
|
200
|
|
|
189
|
|
|
180
|
|
|
172
|
|
|
178
|
|
(1)
|
Other
nonperforming assets at December 31, 2018 include certain loans
held-for-sale. Amounts prior to December 31, 2018 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 performance remained consistent with prior
periods and our expectations. The consumer portfolio metrics
continue to reflect the results associated with our focus on high
quality borrowers, with an expected 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) decreased $9 million, or 3%, from the year-ago quarter to
$340 million, or 0.45% of total loans
and leases. The year-over-year decline was centered in the
commercial real estate and residential mortgage portfolios,
partially offset by an increase in the commercial portfolio.
OREO balances decreased $10 million,
or 30%, from the year-ago quarter. The decline in OREO assets
reflected reductions in both commercial and residential
properties. Nonperforming assets (NPAs) decreased to
$387 million, or 0.52% of total loans
and leases and OREO. On a linked quarter basis, NALs
decreased $30 million, or 8%, while
NPAs decreased $16 million, or
4%.
The provision for credit losses decreased $5 million year-over-year to $60 million in the 2018 fourth quarter. Net
charge-offs (NCOs) increased $9
million to $50 million.
The increase was primarily centered in the C&I portfolio, with
no segment or geographic concentration. Consumer charge-offs
have remained consistent over the past year. NCOs represented
an annualized 0.27% of average loans and leases in the current
quarter, up from 0.16% in the prior quarter and up from 0.24% in
the year-ago quarter. We continue to be pleased with the net
charge-off performance within each portfolio and in total.
The allowance for loan and lease losses (ALLL) as a percentage
of total loans and leases increased to 1.03% compared to 0.99% a
year ago, while the ALLL as a percentage of period-end total NALs
increased to 228% from 198% over the same period. The
increase in the ALLL is primarily the result of loan growth.
We believe the level of the ALLL and ACL are appropriate given the
low level of problem loans and the current composition of the
overall loan and lease portfolio.
Capital
Table 13 – Capital Ratios – Managing Capital Ratios within
Targeted Ranges
|
|
2018
|
|
2017
|
($ in
billions)
|
|
December
31,
|
|
September
30,
|
|
June 30,
|
|
March 31,
|
|
December
31,
|
Tangible common
equity / tangible assets ratio
|
|
7.21
|
%
|
|
7.25
|
%
|
|
7.78
|
%
|
|
7.70
|
%
|
|
7.34
|
%
|
Regulatory common
equity tier 1 risk-based capital ratio (1)
|
|
9.65
|
%
|
|
9.89
|
%
|
|
10.53
|
%
|
|
10.45
|
%
|
|
10.01
|
%
|
Regulatory Tier 1
risk-based capital ratio (1)
|
|
11.06
|
%
|
|
11.33
|
%
|
|
11.99
|
%
|
|
11.94
|
%
|
|
11.34
|
%
|
Regulatory Total
risk-based capital ratio (1)
|
|
12.98
|
%
|
|
13.36
|
%
|
|
13.97
|
%
|
|
13.92
|
%
|
|
13.39
|
%
|
Total risk-weighted
assets (1)
|
|
$
|
85.7
|
|
|
$
|
83.6
|
|
|
$
|
83.0
|
|
|
$
|
81.4
|
|
|
$
|
80.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
December 31,
2018 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 7.21% at
December 31, 2018, down 13 basis points from a year ago.
Common Equity Tier 1 (CET1) risk-based capital ratio was 9.65% at
December 31, 2018, compared to 10.01% at December 31,
2017. The regulatory Tier 1 risk-based capital ratio was
11.06% compared to 11.34% at December 31, 2017. During
the 2018 fourth quarter, Huntington submitted, and received no
objection from the Federal Reserve, a proposal to adjust the
quarterly path of common stock repurchases that were included in
the 2018 Capital Plan. The adjusted quarterly path allowed
the Company to take advantage of recent market volatility by
accelerating common stock repurchases from 2019 into the 2018
fourth quarter. As a result, the Company repurchased
$200 million of common stock during
the 2018 fourth quarter at an average cost of $13.36 per share. There is $177 million of share repurchase authorization
remaining under the 2018 Capital Plan.
Income Taxes
The provision for income taxes was a
$57 million expense in the 2018
fourth quarter compared to a $20
million tax benefit in the 2017 fourth quarter. The
effective tax rates for the 2018 fourth quarter and 2017 fourth
quarter were 14.6% and (4.8)%, respectively. The 2017 fourth
quarter tax benefit was primarily attributable to the revaluation
of the net deferred tax liabilities at the lower statutory rate
related to federal tax reform.
At December 31, 2018, the Company had a net federal
deferred tax liability of $105
million and a net state deferred tax asset of $41 million.
Expectations – 2019
With the assumption of no interest
rate hikes in 2019, full-year revenue is expected to increase
approximately 4% to 7%. The full-year NIM is expected to
remain relatively flat on a GAAP basis versus 2018 as modest core
NIM expansion offsets the anticipated reduction in the benefit of
purchase accounting. Full-year noninterest expense is
expected to increase approximately 2% to 4%. The change in
revenue growth expectations is entirely related to the updated
interest rate assumptions, while the reduced expense growth
expectations reflect actions taken to better pace investment
spending in light of the revised revenue outlook.
Average loans and leases are expected to increase approximately
4% to 6% on an annual basis. Average total deposits are
expected to increase approximately 4% to 6% on an annual basis.
Asset quality metrics are expected to remain better than our
average through-the-cycle target ranges, with some moderate
quarterly volatility.
The effective tax rate for 2019 is expected to be in the range
of 15.5% to 16.5%.
Conference Call / Webcast Information
Huntington's
senior management will host an earnings conference call on
January 24, 2019, 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# 13686018. 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 1, 2019 at
(877) 660-6853 or (201) 612-7415; conference ID#
13686018.
Please see the 2018 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.
About Huntington
Huntington Bancshares Incorporated is
a regional bank holding company headquartered in Columbus, Ohio, with $109 billion of assets and a network of 954
branches and 1,774 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.
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 BCFP;
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 2017 Annual Report
on Form 10-K, as well as our subsequent Securities and Exchange
Commission ("SEC") filings, which are on file with the SEC and
available in the "Investor Relations" section of our website,
http://www.huntington.com, under the heading "Publications and
Filings."
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, and litigation
actions. 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, and goodwill impairment.
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, and asset valuation write-downs 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, and 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
2017 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.
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