3 Reasons to Buy Huntington Bancshares

Looking for a value stock in this "overheated" market? Look no further.

Huntington Bancshares (HBAN 0.74%) is based in Columbus, Ohio, and is a regional bank in the truest sense of the word -- yet it has three compelling reasons that make it worthy of your investment consideration.

1. Its book value is rising steadily
Over the last 10 quarters, Huntington has watched its tangible book value rise by 22% as shown in the chart below:

Source: Company earnings reports.

The tangible book value is the essential valuation metric for banks, because it represents exactly how much of the bank's equity is available to common shareholders, and 22% growth over 10 quarters (or roughly 8.5% annualized) growth is phenomenal. Consider that competitor KeyCorp (KEY 0.55%) has seen its tangible book value only grow just barely above half of Huntington's (11.5%) over the same time period.

Other Ohio-based bank, Fifth Third Bancorp (FITB 1.40%) has seen its tangible book value grow by 24% over the same time. However, two banks growing their book value is good for both and simply shows that both are delivering solid results. This stable growth in tangible book value is essential for any bank -- and the strong performance at Huntington is something to be lauded.

2. Diverse business segments
There is often a concern (and rightly so) with smaller banks that they are too dependent on the income from their regional consumers or small businesses to thrive, but as shown in the chart below, Huntington has a loan portfolio that is evenly distributed among a variety of different business segments:

Source: Company earnings reports. Loan amounts in billions.

Yet not only is its loan portfolio diverse, but Huntington also has a diverse stream of noninterest income that spans a variety of different businesses as well:

Source: Company earnings reports.

As you can see, Huntington has numerous streams of income that all contribute to its bottom line. In comparison, KeyCorp just had four business segments with non interest income: trust and investment services, investment banking, operating lease income, and payments and services.

For a smaller regional bank like Huntington that only operates in seven states, this makes it a compelling consideration because it helps insulate it against any hiccups that may occur in the banking industry since it has such diversity in its business model.

3. Expanding customer base
There were two fascinating charts from the most recent earnings release from Huntington that are available below:

Source: Company earnings reports.

Source: Company earnings reports.

As you can see in the charts, it is rapidly expanding both its consumer and commercial relationships. This is noteworthy because, with any small bank, there is always concern that it will be bested by its larger counterparts, but Huntington is clearly immune to this and is both adding customers and developing broader relationships with those customers.

In the third quarter of 2011, Huntington reported that roughly 73% of consumer customers had more than four products or services with it, and in the first quarter of this year (the last time it was reported), that number had moved all the way to 80%. Also consider that in now disclosing how many customers have more than six products or services with the bank, Huntington truly has ambitions of becoming a full-scale financial services provider to all of its customers.

In 2009, Huntington embarked on a "Break Away Strategic Plan" with five key areas that were:

• 2009: Lay the foundation
• 2010: Optimize the current franchise
• 2011: Invest in the core
• 2012: Focus Future

And in 2013, it has moved into "Extend and Expand." Thus far, it has executed admirably over the last four years, and is clearly on pace to continue into the future. Any company that lays out a set of goals and executes on them profitably is certainly one to consider putting on your watchlist.