FirstMerit Acquisition Reduces Huntington Earnings

COLUMBUS, Ohio – Huntington Bancshares Inc., holding company of Huntington National Bank, Wednesday reported third-quarter net income of $127 million, or 11 cents per diluted share.

This compares to second-quarter net income of $175 million, or 19 cents per share, and third-quarter 2015 income of $153 million, or 18 cents a share.

Huntington closed on its acquisition of FirstMerit Corp., Aug. 16, which accounts for much of the lower performance, Huntington said. Acquisition-related net expense recognized was $159 million pretax and $107 million after-tax, Huntington said.

In the second quarter, Huntington recognized $21 million in acquisition pretax net expense, which was $14 million after-tax.

FirstMerit added $26.8 billion in assets, to take Huntington assets to $101 billion, $15.5 billion in total loans to raise Huntington total loans and leases to $60.7 billion, and $21.2 billion in total deposits to raise Huntington deposits to $66.5 billion.

In a prepared statement, the chairman, president and CEO of Huntington, Steve Steinour, said, “Integration execution [of FirstMerit] is proceeding on schedule as we move closer to operating as one expanded company. We have completed workforce onboarding and initial training and we are laser-focused on customer experience and retention. We remain confident we will complete the majority of systems conversions during the first quarter if 2017, swiftly moving to our target of realizing $255 million of annualized cost savings.”

Key performance ratios for the quarters ended Sept. 30, June 30 and Sept. 30, 2015:

• Return on average assets, 0.58%, 0.96%, 0.87%.
• Return on average common equity, 5.4%, 9.6%, 9.3%.
• Net interest margin, 3.18%, 3.06%, 3.16%.
• Efficiency ratio, 75.0%, 66.1%, 69.1%.

“Personnel expense continues to drive growth of noninterest expense,” Huntington said in its earnings release, salaries, employee benefits and separation expense coming to $405 million for the quarter ended Sept. 30 compared to $299 million the quarter ended June 30 and $286 million the quarter ended Sept. 30, 2015.

The workforce (full-time equivalent) stood at 14,500 at Sept. 30, up from 12,400 at both June 30 and Sept. 30, 2015.

Total noninterest expense (includes rents, data processing, marketing, taxes and Federal Deposit Insurance Corp. premiums) came to $712 million, up from $524 million the second quarter and $527 million the year-ago quarter.

Total revenues were $938 million of which $636 million was net interest income, $302 million noninterest (fees, commissions, service charges, mortgage services) compared to $787 million the preceding quarter ($516 million, $271 million respectively) and $757 million the year-ago quarter ($504 million, $253 million respectively).

Huntington set aside $64 million for credit losses for the quarter, up from $25 million the second quarter and $22 million the year-ago quarter provision for losses.

Total nonperforming assets (includes loans 90 days past due) were $475 million, down from $490 million the second quarter but up from $381 million a year ago. Nonaccrual loans and leases were $404 million, $461 million and $356 million respectively.

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