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2014 Q3 EARNINGS REVIEW – Huntington Energy

Huntington Energy · Oct 17, 2014 · 67 slides

Investor presentation from the Shale Experts oil & gas presentation and slide database. Every page is imaged and its text indexed for search across operators, plays, basins and time.

Slides

  1. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 1
    2014 Third Quarter Earnings Review October 17, 2014 1
  2. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 2
    Do we consolidate Basis of Presentation this and next slide Use of non-GAAP financial measures This document may contain GAAP financial measures and non-GAAP financial measures where management believes it to be helpful in…
  3. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 3
    Basis of Presentation 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…
  4. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 4
    Presenters Steve Steinour Chairman, President, and Chief Executive Officer Mac McCullough Senior Executive Vice President Chief Financial Officer Other Participants Dan Neumeyer Senior Executive Vice President Chief Credit Officer…
  5. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 5
    2014 Third Quarter Highlights Net income of 155 MM, or 0.18 per common share Impacted by 23 MM of noninterest expense related Significant Items(1) 0.97% return on average assets 9.9% return on equity Compared with 2013 Third…
  6. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 6
    3Q14 Highlights (cont.) Compared with 2013 Third Quarter Credit quality 26 MM, or 46%, decrease in net charge-offs (NCOs), 26 bp of loans & leases 7 MM, or 2%, decrease in nonaccrual loans (NALs), 70 bp of loans & leases Capital…
  7. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 7
    Other Highlights Acquired and converted 24 branches in Michigan from Bank of America: 0.7 B of deposits, no loans Announcing the planned consolidation of 26 branches by year end Accelerating in-store branch expansion: approximately 50…
  8. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 8
    Quarterly Performance Highlights 3Q14 2Q14 1Q14 4Q13 3Q13 EPS 0.18 0.19 0.17 0.18 0.20 Cash dividends declared per common share 0.05 0.05 0.05 0.05 0.05 Book value per common share at end of period 7.24 7.17 6.99 6.86 6.70 Tangible…
  9. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 9
    3Q14 YoY Summary Income Statement & Notables 2014 2013 Third Second First Fourth Third Change (in millions) Quarter Quarter Quarter Quarter Quarter LQ YOY Net interest income - FTE 473.8 466.7 443.4 438.8 431.5 2 % 10 % Total…
  10. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 10
    Net Interest Income and Margin(1) Average Earning Asset Mix Net Interest Margin (FTE) FTE Net Interest Income (MM) 431.5 438.8 443.4 466.7 473.8 3.60% 1% 1% 1% 1% 1% 100% 10% 10% 10% 10% 10% 90% Other Earning Assets 3.45% 80%…
  11. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 11
    Deposits Core CD Maturities & Avg. Total Deposits Rate / Mix Avg. Maturity Rate Rate 0.48% 0.33% 0.32% 0.28% 0.25% 0.23% 4.0 (B) 2.00% 100% 5% 5% 4% 5% 5% 6% Noncore 3.5 1.75% 90% 9% 8% 8% 7% 6% 13% 80% 11% 11% 10% 11% 10% Core…
  12. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 12
    Capital(1) 3Q14 2Q14 1Q14 4Q13 3Q13 Tang. common equity / tang. assets 8.35% 8.38% 8.63% 8.82% 9.01% Tier 1 common 10.31 10.26 10.60 10.90 10.85 Tier 1 leverage 9.83 10.01 10.32 10.67 10.85 Tier 1 risk-based capital 11.61 11.56…
  13. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 13
    Credit Quality Trends Overview 3Q14 2Q14 1Q14 4Q13 3Q13 3Q12 Net charge-off ratio 0.26% 0.25% 0.40% 0.43% 0.53% 1.05% 90+ days PD and accruing 0.30 0.30 0.35 0.38 0.42 0.27 NAL ratio(1) 0.70 0.71 0.74 0.75 0.78 1.11 NPA ratio(2) 0.78…
  14. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 14
    Nonperforming Asset Trends NPAs EOP NPA Inflows (MM) (MM) 1,000 3Q14 vs. % Chg 350 900 3Q12 -28% 300 800 3Q13 -3% 250 700 600 2Q14 1% 200 500 400 150 300 100 200 50 100 (1)% (3)% (13)% (7)% (5)% (6)% (6)% 4% (1)% 1% 0 0…
  15. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 15
    Provision, NCO, and ACL Loan Loss Provision vs. Allowance for Credit Losses (MM) Net Charge-offs vs. NALs % Chg. 2.5% 225% 3Q14 vs. LLP NCO 221% 220% 3Q12 -34% -71% 2.09% 3Q13 115% -46% 214% 130 1.99% 105.1 213% 215%…
  16. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 16
    Consumer Checking Account Household Growth 3Q14: 17.9% annualized linked quarter growth, 10.6% YoY growth 48.8% with 6+ products or services penetration(1), up from 47.3% a year ago 3Q14 revenue of 260 MM, up 3 MM LQ, up 23 MM YoY…
  17. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 17
    Commercial Relationship(1) Growth 3Q14: 12.0% annualized linked quarter growth, 2.6% YoY growth(2) 41.2% with 4+ products or services penetration(3), up from 36.8% a year ago. 3Q14 revenue of 213 MM, up 1 MM LQ, up 19 MM YoY 165…
  18. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 18
    4Q14 Expectations Challenge / Opportunity HBAN Disciplined Modest economic C&I growth due to customer activity and positive impact from our investments in Loan recovery and intense specialized commercial verticals, automotive dealer…
  19. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 19
    Positive Operating Leverage YTD 2014 2013 Y/Y Change Actual Actual % Net interest income 1,363.9 1,274.0 FTE adjustment 20.0 19.1 FTE Net interest income 1,383.9 1,293.1 90.8 7.0 % Noninterest income 745.9 762.3 Net gain MSR hedging…
  20. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 20
    21
  21. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 21
    Reconciliation Noninterest Expense from Continuing Operations (GAAP) Impacts of Significant Items 2014 2013 Third Second Third (in millions) Quarter Quarter Quarter Personnel costs 15.3 - (27.3) Outside data processing and other…
  22. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 22
    Reconciliation Significant Items Impacting Financial Performance Comparisons (in millions, except per share amounts) 3Q14 2Q14 1Q14 After-tax EPS After-tax EPS After-tax EPS Net incom e - reported earnings 155.0 164.6 149.1 Net incom e…
  23. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 23
    Appendix 24
  24. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 24
    Table of Contents OCR Performance Review 26 Total Consumer Loans and Leases 52 Income Statement 32 Indirect Auto 53 Mortgage banking income 33 Home equity 55 Residential mortgages 56 Balance Sheet 34 Credit Quality Review 57 Deposits…
  25. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 25
    OCR Performance Review 26
  26. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 26
    OCR Drives Higher Customer Profitability The Optimal Customer Relationship (OCR) Model Sales Higher Welcome Customer Management OCR Culture Profitability & Execution Clearly outlined activities by segment Defined…
  27. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 27
    Consumer Relationship Product Penetration Over 20 potential products or services counted: checking, savings, online bill pay, credit card, mortgage, brokerage account, insurance, etc.(1) Product Penetration 1-3 Services / HH 8%…
  28. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 28
    Consumer Checking Household Revenue 3Q14, adjusted for debit card interchange fee impact, exceeds pre-Fair Play and Reg E level Includes net interest income and noninterest income 265 (MM) Pre-Reg E 260 Post-Durbin Posting 260 255…
  29. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 29
    Commercial Relationship(1)(2) Product Penetration Deepening relationships and accelerating product or service cross-sell 30% Product Penetration 1 Services / Relationship 46% Product Penetration 2-3 Services / Relationship 25.9%…
  30. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 30
    Commercial Relationship(1) Revenue Migration from credit-dependent to relationship-based / cross-sell culture (MM) 215 212 213 205 195 197 194 190 191 185 189 175 179 176 175 176 175 165 170 167 161 155 158 152 145 143…
  31. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 31
    Income Statement 32
  32. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 32
    Mortgage Banking Income Summary (MM) 3Q14 2Q14 1Q14 4Q13 3Q13 Origination and secondary marketing 15.5 14.3 14.5 14.2 15.6 Servicing fees 10.8 10.9 10.9 10.8 10.9 Amortization of capitalized servicing (6.1) (6.0) (6.0) (6.1) (6.8)…
  33. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 33
    Balance Sheet 34
  34. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 34
    Assets 2014 2013 Change (%) ( in millions) Sep. 30, Jun. 30, Sep. 30, LQ YOY Assets Cash and due from banks 880 1,218 1,108 (28) % (21) % Interest bearing deposits in banks 73 70 63 5 16 Trading account securities 66 51 74 31 (10)…
  35. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 35
    Liabilities & Shareholders Equity 2014 2013 Change (%) ( in millions) Sep. 30, Jun. 30, Sep. 30, LQ YOY Liabilities Demand deposits - non-interest bearing 14,754 14,151 13,421 4 % 10 % Demand deposits - interest bearing 6,052 5,921…
  36. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 36
    Deposits 37
  37. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 37
    Total Core Deposit Trends Annualized Grow th (1) 3Q14 v 2Q14 v 3Q14 v Average (B) 3Q14 2Q14 1Q14 3Q13 Com m ercial Demand deposits - non-interest bearing 11.6 22 % 5 % 6 % Demand deposits - interest bearing 1.1 30 48 6 Other core…
  38. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 38
    Capital 39
  39. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 39
    Capital Ratios(1) 14.00% 13.00% 12.16% 12.24% 12.36% 12.28% 11.88% 12.02% 11.95% 12.00% 11.56% 11.61% 11.00% 10.85% 10.90% 10.62% 10.71% 10.60% 10.00% 10.28% 10.48% 10.31% 10.26% 9.00% 8.76% 9.01% 8.82% 8.74% 8.76%…
  40. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 40
    Investment Securities 41
  41. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 41
    Securities Mix & Yield(1) Securities Portfolio Mix Securities Portfolio Yield ( MM) 5.00% 14,000 Available-for-sale Held-to-maturity Held-to-maturity Available-for-sale 12,000 4.00% 3,556 10,000 3,677 3,783 796 3.00% 2.81%…
  42. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 42
    Securities Overview 9/30/14 Portfolio weighted average life of 4.7 years, average duration of 3.9 years Available-for-sale, and other securities (M M ) Credit Rating of Fair Value Am ount (1) Fair Value AAA AA +/- A +/- BBB…
  43. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 43
    Managing Interest Rate Risk 8/30/2014 Net Interest Income at Risk(1) 6.0% Forward Curve +2%, +1%, & -1% Gradual Change in Rates 4.0% 3.2% 3.3% 2.8% 2.9% 2.0% 1.4% 1.9% 1.7% 0.8% 3.3 MM 1.6% 1.5% 0.1% 0.0% 0.2% 0.0% 0.9% 0.7%…
  44. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 44
    Loan Portfolio Overview 45
  45. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 45
    Total Commercial Loans 46
  46. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 46
    Total Commercial Loans Granularity EOP Outstandings 23.8 Billion of Loans by Size Loans by Dollar Size 1,119 3% 3% 13% 38% 34,261 97% 30% < 5 MM 5+ MM 17% < 5 MM 5 MM - < 10 MM 556 5 MM - < 10 MM 10 MM - < 25 MM 459 10…
  47. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 47
    Commercial and Industrial: 18.8 Billion(1) Diversified by sector and geographically within our Midwest footprint Focuses on middle market companies with 20-500 MM in sales and Business…
  48. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 48
    C&I Auto Industry End of period balances Outstandings (MM) 3Q14 2Q14 1Q14 4Q13 3Q13 Suppliers(1) Domestic 273 258 226 255 258 Foreign 0 12 20 0 24 Total suppliers 273 270 246 255 282 Dealers Floorplan-domestic 1,011 1,141 1,131…
  49. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 49
    Commercial Real Estate: 5.0 Billion(1) Long-term meaningful relationships with opportunities for additional cross-sell Primarily Midwest footprint projects generating adequate return on capital Proven CRE participants 28+ years average…
  50. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 50
    CRE Portfolio Composition 6,000 Period-End Balance 5,000 4,872 4,850 5,031 4,990 4,990 By Loan Type 4,000 Lines / Letters of Non Project Credit 3,000 Construction Loans 4% 10% 17% 2,000 Permanent 21% 1,000 Mini-perm 48% 0…
  51. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 51
    Total Consumer Loans and Leases 52
  52. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 52
    Indirect Auto: 8.3 Billion(1) Deep local relationships with high quality Dealers Consistently in the market for over 60 years 1 Bank in the U.S. in Dealer Satisfaction, with dominant market position in the Midwest with over 3,500…
  53. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 53
    Auto Loans Production and Credit Quality Overview 3Q14 2Q14 1Q14 4Q13 3Q13 2Q13 1Q13 4Q12 Originations Amount (MM) 1,481 1,463 1,068 994 1,166 1,088 972 878 % new vehicles 50% 50% 47% 47% 46% 44% 45% 46% Avg. LTV 89% 89% 89% 89% 89%…
  54. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 54
    Home Equity: 8.4 Billion(1) Focused on geographies within our Midwest footprint with relationship customers Focused on high quality borrowers 3Q14 originations: Average FICO scores of 750+ Average LTVs…
  55. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 55
    Residential Mortgages: 5.8 Billion(1) Focused on geographies within our Midwest footprint Traditional product mix very limited nontraditional exposure as we never originated sub-prime, payment option ARMs, or negative amortization…
  56. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 56
    Credit Quality Review 57
  57. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 57
    Consumer Loan Delinquencies(1) 30+ Days 90+ Days 6.00% 2.00% 1.80% 1.70% 5.00% 4.53% 1.55% 4.26% 4.16% 1.43% 1.52% 1.50% 3.96% 3.95% 4.00% 3.00% 1.00% 2.00% 1.00% 1.01% 0.50% 1.00% 0.89% 0.91% 1.00% 0.17% 0.19% 0.18%…
  58. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 58
    Total Commercial Loan Delinquencies 30+ Days 90+ Days(1) 0.80% 1.20% 0.70% 0.70% 0.64% 0.61% 1.00% 0.60% 0.60% 0.80% 0.50% 0.47% 0.45% 0.48% 0.40% 0.60% 0.32% 0.30% 0.30% 0.37% 0.37% 0.40% 0.32% 0.32% 0.20% 0.30% 0.24%…
  59. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 59
    Total Consumer Loan Delinquencies(1) 30+ Days 90+ Days 3.00% 0.80% 0.70% 0.68% 2.50% 2.32% 0.64% 2.24% 0.60% 0.60% 0.56% 0.56% 2.01% 1.95% 0.53% 2.00% 1.86%1.83% 0.50% 0.50% 0.47% 0.45% 1.62% 1.71% 1.50% 1.61% 0.40% 0.30%…
  60. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 60
    Net Charge-Offs Commercial Loans Consumer Loans (MM) Amount (MM) 100 Annualized % 1.20% 100 0.90% 0.83% 90 90 0.77% 0.80% 1.00% 80 80 0.68% 0.70% 70 70 0.80% 0.60% 60 60 0.50% (2) 50 0.60% 50 0.40% 0.42% 40 40 39 0.37%…
  61. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 61
    Nonperforming Asset Flow Analysis (MM) 3Q14 2Q14 1Q14 4Q13 3Q13 NPA beginning-of-period 362.1 365.3 352.2 374.3 396.7 Additions / increases 102.8 123.6 117.8 109.5 139.8 Return to accruing status (24.9) (23.0) (9.3) (12.4) (31.3) Loan…
  62. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 62
    Total Commercial Loans Criticized Loan Flow Analysis End of Period (MM) 3Q14 2Q14 1Q14 4Q13 3Q13 Criticized beginning-of-period 1,344 1,345 1,360 1,508 1,448 Additions / increases 218 308 214 178 328 Advances 69 65 85 31 48 Upgrades…
  63. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 63
    Franchise and Leadership 64
  64. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 64
    Huntington Bancshares Overview Midwest financial services holding company Founded - 1866 Branches 754(2) Headquarters - Columbus, Ohio ATMs 1,501 Total assets - 64 Billion Employees(1) - 11,946 Franchise: Deposits - Top 10 MSAs MSA…
  65. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 65
    Combined In-Store Strategy Attractive distribution option: 2x acquisition vs traditional, full service, better fee mix 52 branches breakeven or better for 3Q14 89 of 104 planned Giant Eagle in-store branches opened 41 of 80+…
  66. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 66
    Leadership Team Chairman, President and CEO Stephen Steinour Retail and Business Banking Regional Banking and The Private Client Group Mary Navarro Jim Dunlap Automobile Finance and Commercial Banking & Insurance Commercial Real…
  67. 2014 Q3 EARNINGS REVIEW – Huntington Energy – slide 67
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