EXHIBIT 99.1
FOR IMMEDIATE RELEASE
OCTOBER 17, 2002
CONTACTS:
Investors Media
Jay Gould (614) 480-4060 Jeri Grier (614) 480-5413
Susan Stuart (614) 480-3878
HUNTINGTON BANCSHARES REPORTS THIRD QUARTER 2002 RESULTS
- REPORTED EARNINGS PER SHARE OF $0.41
- OPERATING EARNINGS PER SHARE OF $0.34 EXCLUDING GAIN
- 11% ANNUALIZED INCREASE IN MANAGED LOANS
- 10% ANNUALIZED INCREASE IN CORE DEPOSITS
- 3% DECLINE IN NET CHARGE-OFFS
- 4% DECLINE IN NON-PERFORMING ASSETS
- 2.00% LOAN LOSS RESERVE RATIO MAINTAINED
COLUMBUS, Ohio - Huntington Bancshares Incorporated (NASDAQ: HBAN;
www.huntington.com) today reported third quarter earnings of $98.1 million, or
$0.41 per common share. This compares with earnings of $42.6 million, or $0.17
per common share, in the year-ago third quarter, and $82.2 million, or $0.33 per
common share, in the second quarter of 2002. Year-to-date earnings in 2002 were
$278.1 million, or $1.13 per common share, compared with $112.9 million, or
$0.45 per common share, in the year-ago nine-month period.
Third quarter 2002 operating earnings were $82.2 million, or $0.34 per
common share, excluding a $24.5 million pre-tax ($16.0 million after tax) gain
on the previously announced restructuring of Huntington's ownership interest in
Huntington Merchant Services, L.L.C. These results were up 1% and 3%,
respectively, from second quarter operating earnings of $81.7 million, or $0.33
per common share, and up 2% and 6%, respectively, compared with the year-ago
quarter's operating earnings of $80.9 million, or $0.32 per share. Prior period
operating earnings exclude one-time restructuring charges and the impact of the
sale of the Florida banking operations and other non-operating items (see Basis
of Discussion - Operating Earnings below). Operating earnings for the first nine
months of 2002 were $243.4 million, or $0.99 per common
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share, up 7% and 9%, respectively, from the comparable prior-year period
operating earnings of $228.0 million, or $0.91 per common share.
"Huntington continued to build momentum in the third quarter as
evidenced in a number of key financial performance indicators," said Thomas
Hoaglin, chairman, president and chief executive officer. "Despite a contraction
in the net interest margin, net interest income increased 3% from the second
quarter as loan and deposit growth remained strong. Mortgage banking income
declined from the second quarter due to a $6.6 million pre-tax mortgage
servicing impairment, reflecting heavy prepayment and refinancing activity.
Nevertheless, excluding mortgage banking income, non-interest income was up 4%,
led by a 6% increase in deposit service charges."
"We are also encouraged by the fact that credit quality trends
continued to improve," Hoaglin said. "Net charge-offs declined for the third
consecutive quarter, and non-performing assets declined for the second
consecutive quarter. Importantly, the inflow of new non-performing assets
declined 35% from the second quarter level. Despite this improvement, given the
continued economic uncertainty, we maintained the loan loss reserve ratio at
2.00%. As a result, and reflecting the strong loan growth, loan loss provision
expense was up significantly from last quarter, and exceeded net charge-offs by
38%. We remain cautiously optimistic for credit quality trends assuming no
further significant deterioration in the economy."
"We also took a number of important strategic steps in the third
quarter to enhance our portfolio of businesses and to strengthen our
capabilities," he added. "As previously announced, to better utilize resources
and maintain our focus on our core businesses and markets, we sold the
Florida-based J. Rolfe Davis Insurance Agency and restructured our ownership
interest in Huntington Merchant Services. To broaden our product offering to
commercial customers and complement our existing equipment leasing business, we
purchased LeaseNet Group, Inc., a small privately held equipment leasing company
specializing in the financing of network server class equipment. We also
continued to invest in customer service technology with our enhanced teller
platform technology now in 64% of our branches and all remaining branches
targeted for installation by year-end. On the personnel side, in August we
appointed a new head of small
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business banking. We also continued our investment in employees by establishing
our second company-wide employee stock option grant."
"Lastly, this past quarter we formally announced a new vision for the company
and our employees, which is to be an essential partner to our customers. This
reinforces the concepts of employee empowerment and customer service
re-dedication initiated just over a year ago. It's very rewarding to see these
principles evident in this quarter's financial performance and achievements,"
Hoaglin concluded.
BASIS OF DISCUSSION - OPERATING EARNINGS
- ----------------------------------------
Reported results since the 2001 second quarter have been significantly
impacted by a number of non-operating items, primarily related to the strategic
restructuring announced in July 2001 and the subsequent sale of the Florida
banking operations in the 2002 first quarter. Therefore, to better understand
comparable underlying trends, the following discussion is presented on an
operating basis. OPERATING EARNINGS EXCLUDE THE IMPACT OF RESTRUCTURING AND
OTHER CHARGES, THE GAIN FROM THE SALE OF FLORIDA BANKING OPERATIONS AND ITS
RELATED RUN-RATE IMPACT FROM PRIOR PERIODS, AND OTHER NON-OPERATING ITEMS.
(Please refer to the schedules beginning on page 9, as well as the 2002 third
quarter's Quarterly Financial Review for schedules reconciling reported with
operating earnings and additional schedules excluding the impact of the Florida
operations.)
DISCUSSION OF RESULTS
- ---------------------
Third quarter 2002 results compared with sequential second quarter
performance on an operating basis reflected:
- - 2% increase in revenue excluding securities gains
----------------------
- 3% increase in net interest income
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- 4.26% net interest margin
- 11% annualized growth in managed loans
- 10% annualized growth in core deposits
- 1% decline in non-interest income including the impact of a $6.6 million
mortgage servicing rights impairment
- - 53.1% efficiency ratio, improved slightly
----------------------
- - Improved credit quality and a strong allowance for loan losses
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- 5 basis point decline in the net charge-off ratio to 0.83% excluding net
charge-offs on exited portfolios
- $9.1 million, or 4%, decline in non-performing assets (NPAs) and 35%
decline in the inflow of new NPAs
- 2.00% allowance for loan losses ratio maintained
- NPA coverage ratio increased to 191% from 176%
- - Maintained strong capital position
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- 8.00% tangible common equity ratio
- Repurchased 6.2 million shares, bringing program-to-date repurchases to
15.0 million shares or $294 million
Net interest income increased $7.6 million, or 3%, from the second
quarter reflecting a $797 million, or 4%, increase in average earning assets due
to growth in both loans and securities, and a 1% decrease in the margin. The net
interest margin declined to 4.26% from 4.30% driven by a flattening yield curve
and mortgage loan origination and prepayment activity. Compared with the
year-ago quarter, net interest income was up $19.0 million, or 8%, reflecting
the combination of a 5% increase in average earning assets and a 9 basis point
increase in the net interest margin from 4.17%.
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Average managed loans increased 11% on an annualized basis from the
second quarter. Loan generation continued to be positively impacted by strong
growth in consumer loans. Average residential mortgages grew $80.7 million, or
81% annualized, with average home equity loans and lines of credit up $151.0
million, or 18% annualized. This reflected continued strong demand for
residential mortgages, refinancing activity, and the promotion of adjustable
mortgage products. In addition, average managed auto loans and leases increased
$229.6 million, or 14% annualized, reflecting record auto industry sales in the
third quarter and a new quarterly record level of production for the Dealer
Sales Group. Commercial real estate loans increased $92.9 million, or 10%
annualized. These increases were partially offset by a $111.4 million, or 8%
annualized, decline in commercial loans. Compared with the year-ago quarter,
average managed loans were up 7%.
Average core deposits increased $385.4 million, or 10% annualized, from
the second quarter, reflecting strong inflows in both interest bearing and
non-interest bearing demand deposits. Within interest bearing deposits, money
market accounts showed the strongest growth. Deposit inflow continued to be
influenced, in part, by recent turbulence in the financial markets, but also by
the success of sales and deposit growth programs. Compared with the year-ago
quarter, average core deposits were up 12%.
Non-interest income, excluding securities gains, was down $0.6 million,
or 1%, from the second quarter. This reflected a $4.4 million decline in
mortgage banking income as a result of a $6.6 million mortgage servicing rights
impairment. Without the impairment, mortgage-banking income would have increased
20%.
Excluding mortgage banking, non-interest income was up $3.8 million, or
4%, from the second quarter driven primarily by a $2.1 million, or 6%, increase
in deposit service charges. Trust income was down $1.3 million, or 8%, and
brokerage and insurance income was down $1.0 million, or 7%, both declines
driven by market conditions. Other income was up $3.7 million from the second
quarter reflecting an increase in trading results and customer derivative sales.
Compared with the year-ago quarter, non-interest income on an operating basis
and excluding securities gains was up 3%, or 12% excluding a 55% decline in
mortgage banking
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income. Contributing to this year-over-year increase were a 12% increase in
deposit service charges and a 20% increase in bank owned life insurance, with
other service charges and other income up 14% and 27%, respectively.
Non-interest expense was up $3.5 million, or 2%, from the second
quarter driven by a $3.9 million increase in personnel costs, primarily related
to building regional banking and increased activity in mortgage banking and
dealer sales. Equipment and occupancy costs were up $0.9 million. These
increases were partially offset by a $1.5 million decrease in outside data
processing and other services. Compared with the year-ago quarter, operating
non-interest expense was up $6.7 million, or 4%, primarily reflecting a $5.6
million, or 6%, increase in personnel costs and a $1.8 million, or 31%, increase
in marketing costs. These costs were partially offset by a $2.4 million decrease
in intangible amortization due to a reduction in amortization of non-Florida
related intangibles. The third quarter efficiency ratio improved slightly to
53.1% from 53.2% in the second quarter and improved from 54.0% in the year-ago
quarter.
Net charge-offs were $43.7 million, down 3%, in the third quarter and
represented an annualized 0.87% of average loans. Excluding the impact of net
charge-offs on exited portfolios for which reserves were previously established,
net charge-offs represented 0.83% of average loans, down from 0.88% in the
second quarter. The over 30-day delinquency ratio for consumer loans decreased
16 basis points to 2.10% at the end of the third quarter from 2.26% at the end
of the second quarter.
Loan loss provision expense in the third quarter was $60.2 million,
exceeding net charge-offs by $16.5 million, or 38%. The September 30, 2002,
allowance for loan losses as a percent of period-end loans was maintained at
2.00% and was significantly higher than 1.77% at the end of the year-ago third
quarter. The allowance for loan losses as a percent of non-performing assets
increased to 191% from 176% in the second quarter and 166% from the year ago
quarter.
Non-performing assets at September 30, 2002, were $214.1 million, or
1.05% of period-end loans and other real estate owned, down 4% from $223.2
million, or 1.14%, at June 30,
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2002. The inflow of new non-performing assets declined $25.8 million to $47.2
million in the third quarter. Non-performing assets continue to be concentrated
in the manufacturing and services sectors reflecting weakness in Midwest
manufacturing.
At September 30, 2002, the tangible equity to assets ratio was 8.00%,
down from 8.51% at June 30, 2002, reflecting the impact of the company's share
repurchase program and the growth in assets.
2002 OUTLOOK
"Given our financial performance for the first nine-months, and
assuming continuing positive trends and no significant change in the economy or
market environment, we believe earnings per share will be $0.34-$0.35 in the
fourth quarter. This is within the range for full-year 2002 operating earnings
guidance originally given last January," Hoaglin said.
CONFERENCE CALL / WEBCAST INFORMATION
Huntington's senior management will host an earnings conference call
today, October 17, at 12:00 p.m. EDT. Participating in today's call will be Tom
Hoaglin, Chairman, President and CEO; Mike McMennamin, Vice Chairman and CFO;
and Nick Stanutz, Executive Vice President - Dealer Sales Group. The call may be
accessed via a live Internet webcast at www.huntington-ir.com or through a
dial-in telephone number at (800) 782-3741. Slides will be available at
www.huntington-ir.com just prior to 12:00 p.m. EDT on October 17, 2002, for
review during the call.
A replay of the webcast will be archived in the Investor Relations
section of Huntington's web site www.huntington.com. A telephone replay will be
available two hours after the completion of the call through October 31, 2002,
at (800) 642-1687; conference ID 5970472.
The Quarterly Financial Review as well as the slides for the conference
call will be filed, along with management's comments, with the Securities and
Exchange Commission on Form 8-K.
ABOUT HUNTINGTON
Huntington Bancshares Incorporated is a $27 billion regional bank holding
company headquartered in Columbus, Ohio. Through its affiliated companies,
Huntington has more than 136 years of serving the financial needs of its
customers. Huntington provides innovative retail and commercial financial
products and services through more than
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300 regional banking offices in Indiana, Kentucky, Michigan, Ohio and West
Virginia. Huntington also offers retail and commercial financial services online
at www.huntington.com; through its technologically advanced, 24-hour telephone
bank; and through its network of more than 900 ATMs. Selected financial service
activities are also conducted in other states including: Dealer Sales offices in
Florida, Georgia, Tennessee, Pennsylvania and Arizona; Private Financial Group
offices in Florida; and Mortgage Banking offices in Florida, Maryland and New
Jersey. International banking services are made available through the
headquarters office in Columbus and additional offices located in the Cayman
Islands and Hong Kong.
FORWARD-LOOKING STATEMENT
This press release contains certain forward-looking statements, including
certain plans, expectations, goals, and projections, which are subject to
numerous assumptions, risks, and uncertainties. A number of factors, including
but not limited to those set forth under the heading "Business Risks" included
in Item 1 of Huntington's Annual Report on Form 10-K for the year ended December
31, 2001, and other factors described from time to time in Huntington's other
filings with the Securities and Exchange Commission, could cause actual
conditions, events, or results to differ significantly from those described in
the forward-looking statements. All forward-looking statements included in this
news release are based on information available at the time of the release.
Huntington assumes no obligation to update any forward-looking statement.
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