Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



1 Critical Takeaway from Huntington Bancshares Incorporated Earnings

With the dust settled on earnings seasons, there is one major takeaway from Huntington Bancshares (NASDAQ: HBAN  )  every investor should take note of.

Banks like Huntington are in an interesting place. At last count, it was the 37th largest bank in the US by assets, meaning it often has to be selective about its growth opportunities, and doesn't operate on nearly the same scale and magnitude of some of its principal competitors.

But when you consider almost 80% of its deposits are held in Ohio and Michigan, there is no denying Huntington is a regional bank in the truest sense of the word.

And while banks everywhere were reporting a dramatically better year in 2013 compared to 2012, that unfortunately wasn't the case for Huntington, as it actually saw a decline in net income on the year.

First glance may be deceiving
"We are pleased with our year-end results, which demonstrate again that our strategies are working," said Huntington Bancshares CEO Stephen D. Steinour, of the results in the fourth quarter. "Huntington's performance in the second half of 2013 demonstrates strong business momentum, positioning us well for 2014."

But a quick glance at the bottom line of income growth at Huntington certainly leaves something to be desired when compared to other Ohio-based peers KeyCorp (NYSE: KEY  ) and Fifth Third Bank (NASDAQ: FITB  ) :













Fifth Third Bank




Source: Company Investor Relations

Yet buried at the bottom of its earnings release Huntington shows the biggest reason for its drop in income resulted from its mortgage banking operations, where income plummeted by 34%, or nearly $64 million in 2013:

Source: Company Investor Relations

Compare that to KeyCorp where the percentage drop was larger (52.5%), but the $40 million to $19 million drop could largely be classified as inconsequential relative to its $1.8 billion in noninterest income. And while mortgage banking also dipped at Fifth Third, from $845 million to $700 million, the decline of 17% was less dramatic.

What to make of it all
The reality is, as a result of the refinancing boom that swept the country in 2012, Huntington was a major beneficiary. This translated directly to the bottom line income of the company, and was one of the key reasons its total net income rose 18% from $543 million to $641 million in 2011 to 2012.

Yet at the same time, the exact opposite happened in 2013, and the fall in net income was almost entirely attributable to shrinking mortgage banking income as shown in the chart below:

  2011 2012 2013
Net interest income after provision for credit losses $1,455 $1,563 $1,615
Total noninterest income (exc. mortgage banking) $897 $907 $871
    Total noninterest expense $1,729 $1,836 $1,758
Income before income taxes $624 $634 $728

Dollars in millions. Source: Company Investor Relations

The mortgage business is a significant part of Huntington, and its drop shouldn't be discounted, but the big decrease in earnings is more the result of a great 2012 than a poor 2013. 

The dividend is key
One of the dirty secrets few finance professionals will openly admit is the fact dividend stocks as a group handily outperform their non-dividend paying brethren. The reasons for this are too numerous to list here, but you can rest assured it's true. However, knowing this is only half the battle. The other half is identifying which dividend stocks in particular are the best. With this in mind, our top analysts put together a free list of nine high-yielding stocks that should be in every income investor's portfolio. To learn the identity of these stocks instantly and for free, all you have to do is click here now.

Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2833118, ~/Articles/ArticleHandler.aspx, 9/1/2015 8:24:02 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Patrick Morris

After a few stints in banking and corporate finance, Patrick joined the Motley Fool as a writer covering the financial sector. He's scaled back his everyday writing a bit, but he's always happy to opine on the latest headline news surrounding Berkshire Hathaway, Warren Buffett and all things personal finance.

Today's Market

updated 11 hours ago Sponsored by:
DOW 16,528.03 -114.98 -0.69%
S&P 500 1,972.18 -16.69 -0.84%
NASD 4,776.51 -51.82 -1.07%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

8/31/2015 3:59 PM
FITB $19.92 Down -0.05 -0.25%
Fifth Third Bancor… CAPS Rating: ****
HBAN $10.91 Down +0.00 +0.00%
Huntington Bancsha… CAPS Rating: ****
KEY $13.74 Down -0.04 -0.29%
KeyCorp CAPS Rating: ***