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Huntington Bancshares Inc. Reports Operating Results (10-Q)

May 11, 2009 | About:

Huntington Bancshares Inc. (NASDAQ:HBAN) filed Quarterly Report for the period ended 2009-03-31.

Huntington Bancshares is a multi-state bank holding company. Its subsidiaries conduct a full-service commercial and consumer bankingbusiness engage in mortgage banking lease financing trust services discount brokerage services underwriting credit life and disability insurance selling other insurance products and issuing commercial paper guaranteed by Huntington and providing other financial products and services. Huntington Bancshares Inc. has a market cap of $2.09 billion; its shares were traded at around $5.71 with and P/S ratio of 0.9. The dividend yield of Huntington Bancshares Inc. stocks is 0.7%.

Highlight of Business Operations:

Goodwill is tested for impairment annually, as of October 1, using a two-step process that begins with an estimation of the fair value of a reporting unit. Goodwill impairment exists when a reporting units carrying value of goodwill exceeds its implied fair value. Goodwill is also tested for impairment on an interim basis if an event occurs or circumstances change between annual tests that would more likely than not reduce the fair value of the reporting unit below its carrying amount. During the 2009 first quarter, our stock price declined 78%, from $7.66 per common share at December 31, 2008, to $1.66 per common share at March 31, 2009. Peer banks also experienced similar declines in market capitalization. This decline primarily reflected the continuing economic slowdown and increased market concern surrounding financial institutions credit risks and capital positions, as well as uncertainty related to increased regulatory supervision and intervention. We determined that these changes would more-likely-than-not reduce the fair value of certain reporting units below their carrying amounts. Therefore, we performed an interim goodwill impairment test during the 2009 first quarter, which is a two-step process. An independent third party was engaged to assist with the impairment assessment. We had previously performed goodwill impairment tests at June 30, October 1, and December 31, 2008, and concluded no impairment existed at those dates.

Upon completion of Step 2, we determined that the Regional Banking and Insurance reporting units goodwill carrying values exceeded their implied fair values of goodwill by $2,573.8 million and $28.9 million, respectively. As a result, we recorded a noncash pretax impairment charge of $2,602.7 million, or $7.09 per common share, in the 2009 first quarter. The impairment charge was included in noninterest expense and did not affect our regulatory and tangible capital ratios.

As a result of the impairment charge, our goodwill totaled $0.5 billion at March 31, 2009, down from $3.1 billion at December 31, 2008. Of these amounts, $0.3 billion and $2.9 billion of our total goodwill was allocated to Regional Banking at March 31, 2009 and December 31, 2008, respectively.

Franklin is a specialty consumer finance company primarily engaged in servicing residential mortgage loans. Prior to March 31, 2009, Franklin owned a portfolio of loans secured by first and second liens on 1-4 family residential properties. At December 31, 2008, our total loans outstanding to Franklin were $650.2 million, all of which were placed on nonaccrual status. Additionally, the specific ALLL for the Franklin portfolio was $130.0 million, resulting in our net exposure to Franklin at December 31, 2008 of $520.2 million.

Read the The complete ReportHBAN is in the portfolios of Arnold Schneider of Schneider Capital Management, Charles Brandes of Brandes Investment.

Rating: 3.5/5 (8 votes)

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