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Huntington Bancshares Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: August 9, 2010 09:00PM
Huntington Bancshares Inc. (HBAN) filed Quarterly Report for the period ended 2010-06-30. Huntington Bancshares Inc. has a market cap of $4.48 billion; its shares were traded at around $6.25 with and P/S ratio of 1.38. The dividend yield of Huntington Bancshares Inc. stocks is 0.64%.HBAN is in the portfolios of Arnold Schneider of Schneider Capital Management, Diamond Hill Capital of Diamond Hill Capital Management Inc, HOTCHKIS & WILEY of HOTCHKIS & WILEY Capital Management LLC, Bruce Kovner of Caxton Associates, Jim Simons of Renaissance Technologies LLC, Steven Cohen of SAC Capital Advisors.
Highlight of Business Operations:
Continuing to build upon the momentum from the prior quarter, we reported net income of $48.8 million, or $0.03 per common share, compared with $39.7 million, or $0.01 per common share, in the prior quarter (see Table 1). Pretax, pre-provision income was $270.5 million, up $18.6 million, or 7%, from the prior quarter, and primarily resulted from a $34.8 million, or 5% increase in fully-taxable equivalent revenue. Pretax, pre-provision income increased for the sixth consecutive quarter (see Table 4).
Credit quality performance in the current quarter continued to show improvement. This improvement reflected the benefits of our focused actions taken in 2009 to address credit-related issues. Compared with the prior quarter, nonperforming assets (NPAs) declined 17%, new NPAs declined 28%, and our nonaccrual loan coverage ratio improved to 120% from 87%. We also saw a decline in the level of criticized commercial loans reflecting a decrease in the level of inflows. Although net charge-offs (NCOs) increased $40.7 million, the current quarter was impacted by $80.0 million of NCOs related to our relationship with Franklin Credit Management Corporation (Franklin). Non-Franklin-related NCOs declined $27.8 million.
At the end of the current quarter, we transferred all of our Franklin-related loans to loans held-for-sale at a lower of cost or fair value of $323.4 million. This had a significant impact on the current quarters performance as this action resulted in $75.5 million of charge-offs, with a commensurate increase in the provision for credit losses. As the current quarter progressed, we saw renewed buyer interest in distressed debt that, among other factors, provided us a business opportunity to move the portfolio to loans held for sale. (See Significant Items for additional discussion).
On July 20, 2010, $274.2 million of the Franklin-related residential mortgages were sold, leaving the remaining Franklin-related portfolio balance of only $49.2 million. Going forward, we anticipate this sale will improve our overall future financial performance as we have essentially brought this relationship to a close. We have reinvested the sale proceeds in higher yielding investments and will no longer have expenses related to portfolio servicing and other support costs.
Our period-end capital position remained solid with increases in all of our capital ratios. At June 30, 2010, our regulatory Tier 1 and Total risk-based capital were $2.8 billion and $2.0 billion, respectively, above the well-capitalized regulatory thresholds. Our tangible common equity ratio improved 16 basis points to 6.12%. Also, our Tier 1 common risk-based capital ratio improved 53 basis points to 7.06%.
Stocks Discussed: HBAN,