Huntington Bancshares records a "reset" quarter

April 26, 2010
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After posting net income of nearly $40 million for the year’s first quarter, Chairman, President and CEO Stephen Steinour said last week that Huntington Bancshares Inc. was in a position to move forward for the rest of 2010 after a rough 2009.

Net income during the first quarter totaled $39.7 million, or $0.01 per common share, which included a net tax benefit of $38.2 million. “(It’s) a big day for us here at Huntington, a return to profitability. This is really a reset moment for us,” said Steinour in a conference call last week. “(It’s) a very significant improvement for us and it certainly compares well to the prior quarter.”

Huntington posted a net loss of $369.7 million, or $0.56 per common share, for the fourth quarter of last year and $2.4 billion, or $6.79 per share, during the first quarter of 2009.

But Steinour said the bank’s balance sheet and liquidity positions are now strong, the credit trend is improving, and the capital level is solid. “As we look at the year now, we expect to be profitable for the year and that’s an upgrade from prior statements. It’s great. There is a tremendous energy and a sense of pride in the company today,” he said. “We’re about a year ahead of where most of the analysts in this community thought we would be, certainly the consensus.”

The bank’s cash and investment securities on March 31 were $10.3 billion, up by 43 percent from a year ago. Loans and leases for the quarter represented 92 percent of deposits, up by 101 percent from a year earlier. And Steinour reported that average total core deposits grew at a 5-percent annualized rate during the quarter and were 13 percent higher than in the same 2009 quarter.

“So we’re in the black. Credit losses and related metrics have improved significantly,” he said. “And (we’re) in a position to move forward dynamically throughout the year.”

The pre-tax, pre-provision earnings in the recently-completed quarter were $251.8 million, which was up by 4 percent from the previous quarter and by 12 percent in the comparable quarter in 2009. Those earnings primarily rose because of a higher net interest income, as the margin increased to 3.47 percent from the fourth-quarter figure of 3.19 percent.

“This is the fifth quarter that we’ve had pre-tax, pre-provision income growth, one of the few banks that have done that,” he said. “We’re on our way to meeting a commitment we made roughly this time last year of driving the pre-tax, pre-provision to $275 million by the third quarter of 2010.”

Huntington’s net charge-offs in the first quarter were $238.5 million, or an annualized 2.58 percent, of average total loans and leases, which was down by 46 percent from the fourth quarter. The bank’s total nonperforming assets were $1.9 billion on March 31; down by 7 percent from Dec. 31.

Steinour said the decrease was driven by a 52 percent decline in new nonperforming assets and a 7 percent decline in commercial “criticized” loans.

Huntington, which is based in Columbus, Ohio, received nearly $1.4 billion from the Federal government through the Troubled Assets Relief Program in November 2008 and Steinour said the bank wasn’t quite ready to pay that debt off.

“We have said, since this time last year, that we want to see the economy stable. We want to have a confidence in the economy. Until very recently, we were getting a lot of noise about potential double dips and inflationary impacts having consequences of significance to the economy. So I think we need a bit more time,” he said.

Steinour also said that roundtables the bank held last year proved to him that small businesses were “more bullish” than larger corporations about the economy. He said the results of those meetings gave him the sense that small businesses would grow this year and add employees. That feedback led the bank to unveil a three-year, $4 billion lending initiative late last year for small businesses.

In West Michigan, Huntington decided to make $360 million in loans available to small business owners.

“We’re very satisfied with the first six weeks,” Huntington President Jim Dunlap told the Business Journal in February of reaction to the effort locally. “If the demand exceeds that, I am prepared to exceed the commitment. That is not a problem.”

As for Huntington’s future, Steinour indicated that growth would be more likely to come from within than from a merger or an acquisition. “Our key is growing from the core. We have to keep growing from the core. We’ve had five good quarters and we expect to continue to do that,” he said. “Along the way if there are acquisition opportunities, we’re in a position to do those. We did one last year and we’re in a position to do more, should we choose.”

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