COLUMBUS, Ohio, July 17 OH-Huntington-earns
COLUMBUS, Ohio, July 17 /PRNewswire-FirstCall/ --
-- Includes a net negative impact of $0.03 per common share from
significant items
-- Annualized net charge-offs of 0.64%
-- $56 million net increase in the allowance for credit losses to 1.80%
-- Removal of $762 million of the Franklin loans from non-performing
asset status
-- 9.03% Tier 1 capital ratio and 12.31% Total risk-based capital ratio
-- 2008 Full-Year Reported Earnings Target of $1.25-$1.35 Per Common
Share
Huntington Bancshares Incorporated (Nasdaq: HBAN; www.huntington.com)
reported 2008 second quarter net income of $101.4 million, or $0.25 per common
share. Earnings in the year-ago second quarter were $80.5 million, or $0.34
per common share.
Huntington also revised its 2008 full-year reported earnings target to
$1.25-$1.35 per common share, down from the previously targeted amount of
$1.45-$1.50 per common share. The reduction primarily reflected an assumed
higher provision for loan and lease losses.
PERFORMANCE OVERVIEW
Performance compared with the 2008 first quarter included:
-- Net income of $0.25 per common share, compared with net income of $0.35
per common share.
- Current quarter earnings were negatively impacted by $0.03 per
common share primarily reflecting merger/restructuring costs and net
market-related losses. The 2008 first quarter earnings were
positively impacted by $0.03 per common share reflecting the
significant items detailed in Table 1 below.
- Current quarter earnings per common share reflected a dilutive
impact of $0.03 per common share, related to the convertible
preferred stock issuance in April.
-- $120.8 million of provision for credit losses, up from $88.7 million in
the first quarter, and $55.6 million higher than net charge-offs of
$65.2 million, or an annualized 0.64% of average total loans and
leases.
-- 3.29% net interest margin, up from 3.23% in the 2008 first quarter,
primarily reflecting improved pricing of core deposits and the funding
provided by the convertible preferred capital issuance.
-- 11% annualized linked-quarter growth in average total commercial loans
and a 1% annualized linked-quarter increase in average total consumer
loans.
-- 1% annualized linked-quarter decline in average total core deposits,
primarily reflecting a planned reduction in non-relationship
collateralized public fund deposits.
-- Strong linked-quarter growth in service charges on deposit accounts,
other service charges, and non-MSR related mortgage banking income.
-- $7.3 million linked-quarter increase in total non-interest expense all
attributable to the increase in merger/restructuring costs, with
non-merger-related expenses reflecting our continued focus on improving
expense efficiencies.
-- $3.4 million benefit to provision for income taxes, representing a
reduction to the previously established capital loss carry-forward
valuation allowance related to the value of Visa(R) shares held. The
comparable tax benefit in the first quarter was $11.1 million.
-- 1.80% period-end allowance for credit losses (ACL) ratio, up from 1.67%
at the end of the first quarter.
-- 41% decrease in non-performing assets (NPAs), primarily reflecting:
- 68% decline from Franklin Credit Management Corporation (Franklin)
restructured loans, to $368.4 million at June 30, 2008 from
$1.157 billion at the end of the prior quarter as the Tranche A
portion was removed from non-performing status. Total Franklin
loans declined 2% to $1.130 billion as of June 30, 2008.
- 42% increase in non-accrual loans (NALs) with most of the increase
in commercial real estate (CRE) loans, including the single family
home builder segment, and commercial and industrial (C&I) loans
related to the residential development segment. Period-end NALs
represented 1.30% of total loans and leases, up from 0.92% at
March 31, 2008.
-- 9.03% and 12.31% period-end Tier 1 and Total risk-based capital ratios,
higher than 7.56% and 10.87%, respectively, at March 31, 2008, and well
above the regulatory "well capitalized" thresholds of 6.0% and 10.0%,
respectively. The "well capitalized" level is the highest regulatory
capital designation.
"Despite a continued challenging credit environment, we are pleased with
the performance of our core franchise," said Thomas E. Hoaglin, chairman,
president, and chief executive officer. "Our net interest margin rebounded
nicely from the first quarter, reflecting market stabilization and more
rational pricing in our markets. We grew loans in ten of our thirteen
regions and increased demand deposits in a challenging market. We took steps
to further enhance our balance sheet with the sale of $473 million in mortgage
loans and executed an on-balance sheet securitization of $887 million in
automobile loans. Key fee income activities increased or rebounded from
seasonally low first quarter levels and underlying operating expenses
declined."
"We accomplished our objective of significantly strengthening our
capital," he continued. "Our period end Tier 1 risk-based capital ratio
improved to 9.03%, up from 7.56% at the end of the first quarter. This
improvement reflected the convertible preferred securities that we issued in
April, the impact of strategic asset sales and securitizations, and our second
quarter retained earnings. We believe our capital level is well-positioned to
navigate the current credit environment. Our Tier 1 capital ratio is one of
the highest among our peer group."
"Our credit quality performance was consistent with the expectations we
announced on June 19," he continued. "Our allowance for credit losses (ACL)
increased $56 million, or 13 basis points, and our net charge-offs ratio was
64 basis points, which is slightly less than our current 2008 full year net
charge-off targeted range of 65-70 basis points. The economy remains weak in
our markets and this continues to put stress on borrowers. As we entered this
year, our expectation was that the economy would remain under stress and it is
increasingly likely that we will not see any improvement until we are well
into next year. We do not think the economic environment will get materially
worse, but neither do we expect any near term relief. As such, we expect to
continue to build our reserves and estimate that our year-end allowance for
credit losses will be 10-20 basis points higher than June's 1.80% level."
Hoaglin said, "We continue to monitor closely our lending relationship
with Franklin Credit Management Corporation. Second quarter cash flows from
the Franklin loans again exceeded those required per terms of the 2007 fourth
quarter restructuring agreement. This performance was reflected in our
decision to move $762 million out of non-performing asset status. All the
Franklin loans, including those remaining classified as non-performing assets,
continued to perform and accrue interest."
"We are reducing our 2008 full-year earnings estimate to $1.25-$1.35 per
share," he said. "This reduction in our guidance from three months ago
reflects second quarter performance, but mostly a continued building of our
allowance for credit losses in the second half of the year, although at a
slower pace than the first half. This earnings range is wider than our
previous guidance due to economic uncertainty, especially regarding credit.
We continue to expect good performance for the second half of the year,
including a flat to slightly up net interest margin, modest loan and deposit
growth, increases in key fee income activities, and improved expense
efficiencies. We also remain confident that despite the current credit
quality challenges, the actions we have taken over the last several years to
reduce portfolio risk will result in overall better relative credit quality
performance throughout this cycle," he concluded.
SECOND QUARTER PERFORMANCE DISCUSSION
Significant Items Influencing Financial Performance Comparisons
Specific significant items impacting 2008 second quarter performance
included (see Table 1 below):
-- $3.4 million ($0.01 per common share) benefit to provision for income
taxes, representing a reduction to the previously established capital
loss carry-forward valuation allowance related to the value of Visa(R)
shares held.
-- $14.6 million pre-tax ($0.03 per common share) of merger/restructuring
costs (see Estimating the Impact on Balance Sheet and Income Statement
Results Due to Acquisitions discussion). We expect no further
merger/restructuring expenses in 2008.
-- $6.8 million pre-tax ($0.01 per common share) negative impact of net
market-related losses consisting of:
- $7.2 million loss on the sale of non-performing, held-for-sale loans,
- $4.6 million of equity investment losses,
- $1.3 million net negative impact of mortgage servicing rights (MSR)
hedging consisting of a net impairment loss of $10.7 million included
in non-interest income, partially offset by related net interest
income benefit of $9.4 million,
- $2.2 million gain on extinguishment of debt,
- $2.1 million of investment securities gains, and
- $2.1 million gain on the sale of $473 million in mortgage loans.
Table 1 - Significant Items Impacting Earnings Performance
Comparisons (1)
Three Months EndedImpact (2)
(in millions, except per share)Pre-tax EPS (3)
June 30, 2008 - GAAP earnings $101.4 (3)$0.25
-- Deferred tax valuation allowance benefit 3.4 (3) 0.01
-- Merger/restructuring costs (14.6) (0.03)
-- Net market-related losses (6.8) (0.01)
March 31, 2008 - GAAP earnings $127.1 (3)$0.35
-- Aggregate impact of Visa(R) IPO 37.5 0.07
-- Deferred tax valuation allowance benefit 11.1 (3) 0.03
-- Net market-related losses(20.0) (0.04)
-- Asset impairment (11.0) (0.02)
-- Merger costs (7.3) (0.01)
June 30, 2007 - GAAP earnings $80.5 (3)$0.34
-- Merger costs (7.6) (0.02)
-- Net market-related losses (3.5) (0.01)
(1) Includes significant items with $0.01 EPS impact or greater
(2) Favorable (unfavorable) impact on GAAP earnings; pre-tax unless
otherwise noted
(3) After-tax; EPS reflected on a fully diluted basis
Net Interest Income, Net Interest Margin, and Average Balance Sheet
2008 Second Quarter versus 2007 Second Quarter
Fully taxable equivalent net interest income increased $138.0 million, or
54%, from the year-ago quarter. This reflected the favorable impact of a
$16.6 billion, or 52%, increase in average earning assets, with $14.6 billion
representing an increase in average loans and leases, and a 3 basis point
increase in the net interest margin to 3.29%. The increase in average earning
assets, including loans and leases, was primarily Sky Financial merger-
related. Table 2 details the $14.6 billion reported increase in average loans
and leases.
Table 2 - Loans and Leases - 2Q08 vs. 2Q07
Non-merger
Second QuarterChangeMergerRelated
(in billions) 2008 2007 Amount % Related Amount %(1)
Average Loans and Leases
Commercial and industrial $13.6 $8.2 $5.5 67 % $4.8 $0.75 %
Commercial real estate 9.64.75.0NM 4.0 1.0 11
Total commercial23.2 12.8 10.4 81 8.7 1.78
Automobile loans and
leases 4.63.90.7 18 0.4 0.26
Home equity 7.45.02.4 48 2.4 0.00
Residential mortgage5.24.40.8 19 1.1 (0.3) (5)
Other consumer 0.70.40.3 65 0.1 0.1 23
Total consumer 17.8 13.64.2 31 4.1 0.11
Total loans and leases $41.0 $26.4 $14.6 55 % $12.8 $1.85 %
(1) = non-merger related / (prior period + merger-related)
The $1.8 billion, or 5%, non-merger-related increase in average total
loans and leases primarily reflected:
-- $1.7 billion, or 8%, increase in average total commercial loans, with
growth reflected in both commercial and industrial (C&I) loans and
commercial real estate (CRE) loans. The growth in CRE was primarily to
existing borrowers with a focus on traditional income producing
property types and was not related to residential developer segments.
-- $0.1 billion, or 1%, increase in average total consumer loans. This
reflected growth in automobile loans and leases and other consumer
loans, partially offset by a decline in residential mortgages due to
loan sales in the current and year-ago quarters. Average home equity
loans were little changed.
Table 3 details the $13.8 billion reported increase in average total
deposits.
Table 3 - Deposits - 2Q08 vs. 2Q07
Non-merger
Second QuarterChangeMergerRelated
(in billions) 2008 2007 Amount % Related Amount %(1)
Average Deposits
Demand deposits - non-
interest bearing$5.1 $3.6 $1.5 41 % $1.8 $(0.4) (7)%
Demand deposits -
interest bearing 4.12.41.7 70 1.50.26
Money market deposits 6.35.50.8 15 1.0 (0.2) (3)
Savings and other
domestic deposits5.02.92.1 72 2.6 (0.5) (9)
Core certificates of
deposit 11.05.65.4 96 4.60.77
Total core deposits 31.4 20.0 11.4 57 11.5 (0.1) (0)
Other deposits 6.64.32.3 54 1.31.0 17
Total deposits$38.0 $24.3 $13.8 57 % $12.9 $0.92 %
(1) = non-merger related / (prior period + merger-related)
Most of the increase in average total deposits was merger-related. The
$0.9 billion non-merger-related increase reflected:
-- $1.0 billion, or 17%, growth in other deposits, primarily other
domestic deposits over $100,000, reflecting increases in commercial and
public funds deposits.
Partially offset by:
-- $0.1 billion decrease in average total core deposits. This reflected a
decline in non-interest bearing demand deposits, a planned reduction in
non-relationship collateralized public fund deposits, as well as a
decline in average savings and other domestic deposits and money market
deposits, as customers continued to transfer funds from lower rate to
higher rate accounts like certificates of deposits. Offsetting these
declines was continued growth in core certificates of deposit, as well
as in interest bearing demand deposits.
2008 Second Quarter versus 2008 First Quarter
Compared with the 2008 first quarter, fully taxable equivalent net
interest income increased $13.2 million, or 3%. This reflected the positive
impact of a higher net interest margin and an increase in average earning
assets, primarily loans. The net interest margin was 3.29% in the quarter, up
6 basis points. The 6 basis point increase reflected:
-- 5 basis points positive impact primarily due to improved pricing of
core deposits.
-- 2 basis points increase related to the funding provided by the
convertible preferred capital issuance.
Partially offset by:
-- 1 basis point decrease related to earning asset mix.
Table 4 details the $0.7 billion reported increase in average loans and
leases.
Table 4 - Loans and Leases - 2Q08 vs. 1Q08
SecondFirst
Quarter Quarter Change
(in billions)2008 2008Amount %
Average Loans and Leases
Commercial and industrial $13.6$13.3$0.3 2 %
Commercial real estate 9.6 9.3 0.3 3
Total commercial 23.2 22.6 0.6 3
Automobile loans and leases 4.6 4.4 0.2 3
Home equity 7.4 7.3 0.1 1
Residential mortgage5.2 5.4(0.2)(3)
Other consumer 0.7 0.7(0.0)(2)
Total consumer 17.8 17.7 0.1 0
Total loans and leases $41.0$40.4$0.7 2 %
The $0.7 billion, or 2%, increase in average total loans and leases
reflected 3% growth in average total commercial loans. The second quarter
growth was comprised primarily of new or increased loan facilities to existing
borrowers. This growth was not related to the single family home builder
segment or funding interest coverage on existing construction loans. Average
total consumer loans increased slightly, led by growth in automobile loans and
leases and modest growth in home equity, partially offset by declines in
residential mortgages and other consumer loans. During the quarter, $473
million residential mortgage loans were sold to improve our interest rate risk
position and overall balance sheet.
Table 5 details the $0.1 billion increase in average total deposits.
Table 5 - Deposits - 2Q08 vs. 1Q08
SecondFirst
Quarter Quarter Change
(in billions) 2008 2008 Amount %
Average Deposits
Demand deposits - non-interest
bearing$5.1 $5.0$0.0 1 %
Demand deposits - interest bearing 4.1 3.9 0.2 4
Money market deposits6.3 6.8(0.5)(7)
Savings and other domestic deposits 5.0 5.0 0.0 1
Core certificates of deposit11.0 10.8 0.2 1
Total core deposits 31.4 31.5(0.1)(0)
Other deposits6.6 6.4 0.2 3
Total deposits $38.0$37.9$0.1 0 %
Average total deposits were $38.0 billion, up slightly compared with the
prior quarter. There were changes between the various deposit account
categories consisting of:
-- $0.2 billion, or 3%, increase in other deposits, reflecting an increase
in brokered deposits.
Partially offset by:
-- $0.1 billion decline in average total core deposits. The primary
driver of the change was a planned reduction in low margin
collateralized public fund deposits.
Provision for Credit Losses
The provision for credit losses in the 2008 second quarter was $120.8
million, up $60.7 million from the year-ago quarter, and up $32.2 million from
the first quarter. The reported 2008 second quarter provision for credit
losses exceeded net charge-offs by $55.6 million. (See Credit Quality
Discussion).
Non-Interest Income
2008 Second Quarter versus 2007 Second Quarter
Non-interest income increased $80.2 million from the year-ago quarter.
The $68.7 million of merger-related non-interest income drove most of the
increase. Table 6 details the $80.2 million increase in reported total non-
interest income.
Table 6 - Non-interest Income - 2Q08 vs. 2Q07
Non-merger
Second Quarter ChangeMergerRelated
(in millions)20082007 Amount % Related Amount %(1)
Non-interest Income
Service charges on
deposit accounts $79.6 $50.0 $29.6 59 % $24.1 $5.5 7 %
Trust services 33.126.86.3 24 7.0 (0.7) (2)
Brokerage and
insurance income 35.717.2 18.5 NM 17.11.4 4
Other service charges
and fees 23.214.98.3 56 5.82.512
Bank owned life
insurance income 14.110.93.2 30 1.81.411
Mortgage banking
income (loss) 12.5 7.15.4 76 6.3 (0.9) (7)
Securities gains
(losses)2.1(5.1) 7.2 NM 0.36.9NM
Other income36.134.41.75 6.4 (4.7) (12)
Total non-interest
income $236.4 $156.2 $80.2 51 % $68.7 $11.5 5 %
(1) = non-merger related / (prior period + merger-related)
The $11.5 million, or 5%, non-merger-related increase reflected:
-- $6.9 million increase in securities gains, reflecting the current
quarter's gain compared with a loss in the year-ago quarter.
-- $5.5 million, or 7%, increase in service charges on deposit accounts,
primarily reflecting strong growth in personal service charge income.
-- $2.5 million, or 12%, increase in other service charges, reflecting
higher debit card volume.
Partially offset by:
-- $4.7 million, or 12%, decrease in other income, primarily reflecting
the current quarter's $7.2 million loss on sale of held-for-sale
loans, higher equity investment losses ($4.6 million loss in the
current quarter vs. $2.3 million gain in the year-ago quarter),
partially offset by higher automobile operating lease income ($9.4
million in the current quarter vs. $1.6 million in the year-ago
quarter).
2008 Second Quarter versus 2008 First Quarter
Non-interest income increased $0.7 million from the first quarter.
Table 7 - Non-interest Income - 2Q08 vs. 1Q08
SecondFirst
Quarter Quarter Change
(in millions) 2008 2008 Amount %
Non-interest Income
Service charges on deposit accounts $79.6$72.7$7.0 10 %
Trust services 33.1 34.1(1.0)(3)
Brokerage and insurance income 35.7 36.6(0.9)(2)
Other service charges and fees 23.2 20.7 2.5 12
Bank owned life insurance income 14.1 13.8 0.4 3
Mortgage banking income (loss) 12.5 (7.1) 19.6 NM
Securities gains (losses) 2.1 1.4 0.6 45
Other income 36.1 63.5 (27.5) (43)
Total non-interest income$236.4 $235.8$0.7 0 %
This $0.7 million increase reflected:
-- $19.6 million increase in mortgage banking income. This reflected a
$3.5 million, or 20%, increase in core mortgage banking activities,
primarily secondary marketing and servicing fees, a $2.1 million gain
on sale of mortgage loans, and a $14.0 million lower negative MSR
valuation impact reflecting the current quarter's $10.7 million
negative MSR valuation impact, compared with a $24.7 million negative
MSR valuation impact in the prior quarter. These negative MSR
valuation impacts are partially offset by a net interest margin benefit
from the hedging assets.
-- $7.0 million, or 10%, increase in service charges on deposit accounts,
primarily reflecting a seasonal increase in personal service charges.
-- $2.5 million, or 12%, increase in other service charges and fees,
reflecting a seasonal increase in debit card fees.
Partially offset by:
-- $27.5 million, or 43%, decrease in other income. The first quarter
included a $25.1 million gain related to the Visa(R) IPO and a
$5.9 million venture capital loss. The second quarter included a
$7.2 million loss on loans held-for-sale, a $1.9 million decline in
equity investment income ($4.6 million loss in the current quarter vs.
$2.7 million loss in the prior quarter), a $3.3 million decline in
derivatives income, and a $3.5 million increase in automobile operating
lease income.
Non-interest Expense
2008 Second Quarter versus 2007 Second Quarter
Non-interest expense increased $133.1 million from the year-ago quarter.
The $135.7 million of merger-related expenses and $7.0 million of higher
merger/restructuring costs drove the increase, as non-merger-related expenses
declined $9.5 million, or 2%. Table 8 details the $133.1 million increase in
reported total non-interest expense.
Table 8 - Non-interest Expense - 2Q08 vs. 2Q07
Second QuarterChange
(in millions) 2008 2007Amount %
Non-interest Expense
Personnel costs$200.0 $135.2$64.8 48 %
Outside data processing and other
services30.2 25.7 4.5 17
Net occupancy27.0 19.4 7.6 39
Equipment25.7 17.2 8.6 50
Amortization of intangibles 19.3 2.5 16.8 NM
Marketing 7.3 9.0 (1.6) (18)
Professional services13.8 8.1 5.7 70
Telecommunications6.9 4.6 2.3 50
Printing and supplies 4.8 3.7 1.1 30
Other expense42.9 19.3 23.5 NM
Total non-interest expense $377.8 $244.7 $133.1 54 %
(1) = non-merger related / (prior period + merger-related)
Merger / Non-merger
Merger Restruct. Related
(in millions) Related Costs Amount%(1)
Non-interest Expense
Personnel costs $68.3 $10.0 $(13.5)(6)%
Outside data processing and other
services12.3(5.0)(2.8)(9)
Net occupancy10.2 1.7 (4.3) (14)
Equipment 4.8 2.8 1.0 4
Amortization of intangibles 16.5 - 0.3 2
Marketing 4.4(1.6)(4.5) (38)
Professional services 2.7(1.0) 3.9 40
Telecommunications2.2 0.0 0.1 1
Printing and supplies 1.4 0.0 (0.3)(6)
Other expense13.0(0.1)10.5 33
Total non-interest expense $135.7$7.0$(9.5)(2)%
(1) = non-merger related / (prior period + merger-related)
The $9.5 million, or 2%, non-merger-related decline reflected:
-- $13.5 million, or 6%, decline in personnel expense, reflecting the
benefit of merger efficiencies, including the impact of a 667 person
reduction, or 6%, in full-time equivalent staff from December 31,
2007.
-- $4.5 million, or 38%, decline in marketing expense.
-- $4.3 million, or 14%, decline in net occupancy expense reflecting
merger efficiencies.
-- $2.8 million, or 9%, decline in outside data processing and other
services, reflecting merger efficiencies.
Partially offset by:
-- $10.5 million, or 33%, increase in other expense. This increase
primarily reflected a $6.3 million increase in automobile operating
lease expense and a $6.0 million increase in OREO expenses, partially
offset by a $1.9 million decline in gains from the extinguishment of
debt ($2.2 million in the current quarter vs. $4.1 million in the
year-ago quarter).
-- $3.9 million, or 40%, increase in professional services expense,
reflecting increased collection costs.
2008 Second Quarter versus 2008 First Quarter
Non-interest expense increased $7.3 million, or 2%, from the 2008 first
quarter, reflecting increased merger/restructuring costs. Table 9 details the
$7.3 million increase in reported total non-interest expense.
Table 9 - Non-interest Expense - 2Q08 vs. 1Q08
Second First Merger/ Non-merger
Quarter QuarterChange Restruct. Related
(in millions)20082008 Amount %Costs Amount %(1)
Non-interest Expense
Personnel costs $200.0 $201.9 $(2.0) (1)% $7.8 $(9.7) (5)%
Outside data
processing and other
services 30.234.4 (4.2) (12) (4.3) 0.1 0
Net occupancy 27.033.2 (6.3) (19)1.4 (7.6) (22)
Equipment 25.723.81.9 8 2.7 (0.8) (3)
Amortization of
intangibles 19.318.90.4 2 - 0.4 2
Marketing 7.3 8.9 (1.6) (18) (0.1) (1.5) (17)
Professional services 13.8 9.14.751 0.44.345
Telecommunications 6.9 6.20.610(0.6) 1.221
Printing and supplies 4.8 5.6 (0.9) (15) (0.0) (0.8) (15)
Other expense 42.928.3 14.551 0.0 14.551
Total non-interest
expense $377.8 $370.5 $7.3 2 % $7.3 $0.0 0 %
(1) = non-merger related / (prior period + merger-related)
Non-merger-related expenses were flat, and reflected:
-- $14.5 million, or 51%, increase in other expense. The first quarter
included a $12.4 million Visa(R) indemnification reversal and a
$2.6 million asset impairment expense. The second quarter included a
$2.7 million increase in automobile operating lease expense and a
$2.7 million increase in OREO expenses, partially offset by a
$2.2 million gain from debt extinguishment.
-- $4.3 million, or 45%, increase in professional services reflecting
increased collection costs.
Partially offset by:
-- $9.7 million, or 5%, decrease in personnel costs, reflecting
seasonally lower payroll taxes and lower headcount.
-- $7.6 million, or 22%, decrease in net occupancy expense, reflecting
higher seasonal expenses in the prior quarter, and the prior quarter's
$2.5 million write down of leasehold improvements in our Cleveland
main office.
Income Taxes
The provision for income taxes in the 2008 second quarter was $26.3
million, resulting in an effective tax rate of 20.6%. The effective tax rate
included a $3.4 million benefit to provision for income taxes, representing a
reduction to the previously established capital loss carry-forward valuation
allowance related to the value of Visa(R) shares held. The effective tax rate
for the second half of 2008 is expected to be in a range of 24%-26%.
Franklin Credit Management Relationship
At June 30, 2008, total exposure to Franklin was $1.130 billion, down $27
million, or 2%, from $1.157 billion at March 31, 2008. This relationship
continued to perform and accrue interest. In the second half of 2008, our
proportion of payments received is expected to increase to our pro-rata
participation level, following satisfaction of certain terms of the
restructuring agreement, which provided for a more rapid amortization on a
certain participant's portion of the debt. There were no Franklin-related net
charge-offs or provision for credit losses in the current or prior quarter.
At June 30, 2008, the specific allowance for loan and lease losses for
Franklin was $115.3 million, unchanged from March 31, 2008. The cash flow
generated by the underlying collateral continued to exceed that required per
terms of the 2007 fourth quarter restructuring agreement. As a result, and as
announced June 19, 2008, the $762 million Tranche A portion of our Franklin
exposure was moved out of the troubled debt restructuring non-performing asset
classification based on 2008 first half and continued expected cash flow
performance.
Credit Quality
Credit quality performance in the 2008 second quarter was consistent with
expectations announced on June 19, 2008. The reserve increase reflected the
impact of the continued economic weakness across our Midwest markets. These
economic factors influenced the performance of net charge-offs (NCOs) and non-
accrual loans (NALs). To maintain the adequacy of our reserves, there was a
commensurate significant increase in the provision for credit losses (see
Provision for Credit Losses discussion) in order to increase the absolute and
relative levels of our allowance for credit losses (ACL).
Net Charge-Offs
Total net charge-offs for the 2008 second quarter were $65.2 million, or
an annualized 0.64% of average total loans and leases. Second quarter net
charge-offs in the year-ago quarter were $34.5 million, or an annualized
0.52%. Total net charge-offs in the 2008 first quarter were $48.4 million, or
an annualized 0.48%.
Total commercial net charge-offs for the 2008 second quarter were $27.5
million, or an annualized 0.47%, compared with 2007 second quarter net charge-
offs of $20.5 million, or 0.64%. Total commercial net charge-offs in the 2008
first quarter were $15.0 million, or an annualized 0.27%. Of the current
quarter's total commercial net charge-offs, C&I loan net charge-offs were
$12.4 million, or an annualized 0.36%, and CRE loan net charge-offs were $15.1
million, or an annualized 0.63%.
Total consumer net charge-offs in the current quarter were $37.8 million,
or an annualized 0.85%. This was higher than an annualized 0.41% in the year-
ago period and 0.75% in the prior quarter.
Automobile loan and lease net charge-offs were $11.5 million, or an
annualized 1.01% in the current quarter, up from 0.45% in the year-ago period
but consistent with 1.02% in the prior period. This level reflected a
slightly lower level of annualized automobile loan net charge-offs compared
with the prior quarter, but an increase in annualized automobile lease net
charge-offs. The declining balances of automobile direct financing leases,
coupled with the fact that no new automobile direct financing leases are being
originated, increases the potential for volatility in reported automobile
direct financing lease net charge-offs. Both the automobile loan and lease
net charge-offs were also negatively impacted by the lack of recovery in used
car prices. It is our expectation that the automobile loan and lease net
charge-off ratio for the 2008 second half will be consistent with the 2008
first half.
Home equity net charge-offs in the 2008 second quarter were $14.0 million,
or an annualized 0.76%, up from an annualized 0.43%, in the year-ago quarter
but down from an annualized 0.80% in the prior quarter. This portfolio
continues to be impacted by the general housing market slowdown. The losses
were evident across our footprint, but are lower in our Columbus and
Cincinnati markets. Our expectation is that 2008 second half performance will
be consistent with the 2008 first half, as the small broker-originated
portfolio continues to decline, and our enhanced loss mitigation programs
positively impact performance. We continue to believe our home equity net
charge-off experience will compare very favorably to the industry.
Residential mortgage net charge-offs were $4.3 million, or an annualized
0.33% of related average balances. This was up from an annualized 0.16% in
the year-ago quarter and from an annualized 0.22% in the prior quarter. We
expect residential mortgage net charge-offs will remain under modest upward
pressure from the 2008 first half level for the remainder of 2008, given our
limited exposure to non-traditional mortgages.
Non-accrual Loans and Non-performing Assets
Non-accrual loans (NALs) were $535.0 million at June 30, 2008, and
represented 1.30% of total loans and leases. This compared with $211.5
million, or 0.79%, at the end of the year-ago period, and $377.4 million, or
0.92%, at March 31, 2008. The $157.7 million, or 42%, increase in NALs from
the end of the prior quarter, primarily reflected a $78.7 million, or 43%,
increase in CRE NALs and a $59.5 million, or 58%, increase in C&I NALs.
Residential mortgage and home equity NALs increased 25%, and 12%,
respectively, also reflecting the overall economic weakness in our markets.
Non-performing assets (NPAs), which include NALs, were $993.1 million at
June 30, 2008. This compared with $261.2 million at the end of the year-ago
period and $1.678 billion at March 31, 2008. The $684.7 million, or 41%,
decrease in NPAs from the end of the prior quarter reflected:
-- $789.0 million, or 68%, reduction in restructured Franklin loans,
primarily reflecting the removal of the Tranche A portion of the total
Franklin loans based on the 2008 first half and continued expected
cash flow performance.
-- $51.6 million, or 78%, reduction in impaired loans held-for-sale,
primarily reflecting loan sales.
-- $1.5 million decline in other real estate.
Partially offset by:
-- $157.7 million increase in NALs as discussed above.
The over 90-day delinquent, but still accruing, ratio was 0.33% at June
30, 2008, up from 0.25% at the end of the year-ago quarter, but down from
0.37% at March 31, 2008. The 4 basis point decrease in the 90-day delinquent
ratio from March 31, 2008, reflected a 4 basis point decrease in the total
commercial loan 90-day delinquent ratio to 0.14% from 0.18%, and a 3 basis
point decrease in the total consumer loan 90-day delinquent ratio to 0.59%
from 0.62%.
Allowances for Credit Losses (ACL)
We maintain two reserves, both of which are available to absorb probable
credit losses: the allowance for loan and lease losses (ALLL) and the
allowance for unfunded loan commitments and letters of credit (AULC). When
summed together, these reserves constitute the total ACL.
At June 30, 2008, the ALLL was $679.4 million, up from $307.5 million a
year ago and from $627.6 million at March 31, 2008. Expressed as a percent of
period-end loans and leases, the ALLL ratio at June 30, 2008, was 1.66%, up
from 1.15% a year ago and from 1.53% at March 31, 2008. The $51.8 million
increase from the end of the prior quarter primarily reflected the impact of
the continued economic weakness across our Midwest markets. Given the current
market conditions, we believe the increase in the ALLL is prudent and
appropriate. At June 30, 2008, the specific ALLL related to Franklin was
$115.3 million, unchanged from March 31, 2008.
Table 10 shows the change in the ALLL ratio and each reserve component for
the 2008 second quarter and for the 2008 first quarter and 2007 second
quarter.
Table 10 - Components of ALLL as Percent of Total Loans
and Leases
2Q08
change from
2Q08 1Q08 2Q071Q08 2Q07
Transaction reserve (1) 1.45 %1.34 %0.94 % 0.11 % 0.51 %
Economic reserve 0.21 0.19 0.210.02 --
Total ALLL 1.66 %1.53 %1.15 % 0.13 % 0.51 %
(1) Includes specific reserve
The ALLL as a percent of NALs was 127% at June 30, 2008, down from 145% a
year ago and from 166% at March 31, 2008. At June 30, 2008, the AULC was
$61.3 million, up from $41.6 million at the end of the year-ago quarter, and
from $57.6 million at March 31, 2008.
On a combined basis, the ACL as a percent of total loans and leases at
June 30, 2008, was 1.80%, up from 1.30% a year ago and from 1.67% at March 31,
2008. The ACL as a percent of NALs was 138% at June 30, 2008, down from 165% a
year ago and from 182% at March 31, 2008.
Capital
At June 30, 2008, the regulatory Tier 1 and Total risk-based capital
ratios were 9.03% and 12.31%, respectively, up from 7.56% and 10.87%,
respectively, at March 31, 2008. Both ratios are well above the regulatory
"well capitalized" thresholds of 6.0% and 10.0%, respectively. The "well
capitalized" level is the highest regulatory capital designation.
No shares were repurchased during the quarter. Though there are currently
3.9 million shares remaining available for repurchase under the current
authorization announced April 20, 2006, no future share repurchases are
currently contemplated.
2008 OUTLOOK
When earnings guidance is given, it is our practice to do so on a GAAP
basis, unless otherwise noted. Such guidance includes the expected results of
all significant forecasted activities. However, guidance typically excludes
selected items where the timing and financial impact is uncertain until the
impact can be reasonably forecasted, as well as potential unusual or one-time
items.
Our expectation for 2008 is that the Midwest economic environment will
continue to be weak. We will continue to target our interest rate risk
position at our customary relatively neutral position.
The assumptions listed below form the basis for our 2008 full-year
earnings outlook.
-- Second half 2008 net interest margin flat to slightly up from the 2008
second quarter, reflecting improved loan and deposit pricing.
-- Second half 2008 average total loan growth in the low-single digit
range from the 2008 second quarter level adjusted for the mortgage
loan sale, with commercial loans in the mid-single digit range and
consumer loans being relatively flat.
-- Second half 2008 average core deposit growth in the low to mid-single
digit range from the 2008 second quarter level.
-- Second half 2008 non-interest income growth in the low-single digit
range from the annualized 2008 second quarter non-interest income
level adjusted for the significant items noted earlier (see
Significant Items Influencing Financial Performance Comparisons
discussion and Table 1).
-- Second half 2008 non-interest expenses that are down slightly from the
annualized 2008 second quarter non-interest expense level adjusted for
the significant items noted earlier (see Significant Items Influencing
Financial Performance Comparisons discussion and Table 1).
-- $21 million, or $0.03 per common share, gain on extinguishment of debt
transaction on June 30, 2008, that settled in early July and will be
recognized in the third quarter results.
-- No other significant net market-related gains or losses.
-- 10-20 basis point increase by year end in the ACL ratio from the 1.80%
level at the end of the 2008 second quarter, continuing to reflect the
general stress in the market. Full-year net charge-offs in the 65-70
basis point range.
-- No share repurchases.
-- The effective tax rate for the second half 2008 in a range of 24%-26%.
With the above assumptions, earnings for full year 2008 are targeted for
$1.25-$1.35 per common share.
Conference Call / Webcast Information
Huntington's senior management will host an earnings conference call on
Thursday, July 17, 2008, at 1:00 p.m. (Eastern Daylight Time). The call may
be accessed via a live Internet webcast at www.huntington-ir.com or through a
dial-in telephone number at 800-223-1238; conference ID 52522284. Slides will
be available at www.huntington-ir.com just prior to 1:00 p.m. (Eastern
Daylight Time) on July 17, 2008, for review during the call. A replay of the
webcast will be archived in the Investor Relations section of Huntington's web
site www.huntington.com. A telephone replay will be available two hours after
the completion of the call through July 31, 2008, at 800-642-1687; conference
ID 52522284.
Forward-looking Statement
This press release contains certain forward-looking statements, including
certain plans, expectations, goals, projections, and statements, which are
subject to numerous assumptions, risks, and uncertainties. Actual results
could differ materially from those contained or implied by such statements for
a variety of factors including: (1) deterioration in the loan portfolio could
be worse than expected due to a number of factors such as the underlying value
of the collateral could prove less valuable than otherwise assumed and assumed
cash flows may be worse than expected; (2) merger revenue synergies may not be
fully realized and/or within the expected timeframes; (3) changes in economic
conditions; (4) movements in interest rates; (5) competitive pressures on
product pricing and services; (6) success and timing of other business
strategies; (7) the nature, extent, and timing of governmental actions and
reforms; and (8) extended disruption of vital infrastructure. Additional
factors that could cause results to differ materially from those described
above can be found in Huntington's 2007 Annual Report on Form 10-K, and
documents subsequently filed by Huntington with the Securities and Exchange
Commission. All forward-looking statements included in this release are based
on information available at the time of the release. Huntington assumes no
obligation to update any forward-looking statement.
Basis of Presentation
Use of Non-GAAP Financial Measures
This earnings release contains GAAP financial measures and non-GAAP
financial measures where management believes it to be helpful in understanding
Huntington's results of operations or financial position. Where non-GAAP
financial measures are used, the comparable GAAP financial measure, as well as
the reconciliation to the comparable GAAP financial measure, can be found in
this release, the Quarterly Financial Review supplement to this earnings
release, or the 2008 second quarter earnings conference call slides, which can
be found on Huntington's website at huntington-ir.com.
Significant Items
Certain components of the Income Statement are naturally subject to more
volatility than others. As a result, analysts/investors may view such items
differently in their assessment of performance compared with their
expectations and/or any implications resulting from them on their assessment
of future performance trends. It is a general practice of analysts/investors
to try and determine their perception of what "underlying" or "core" earnings
performance is in any given reporting period, as this typically forms the
basis for their estimation of performance in future periods.
Therefore, Management believes the disclosure of certain "Significant
Items" in current and prior period results aids analysts/investors in better
understanding corporate performance so that they can ascertain for themselves
what, if any, items they may wish to include/exclude from their analysis of
performance; i.e., within the context of determining how that performance
differed from their expectations, as well as how, if at all, to adjust their
estimates of future performance accordingly.
To this end, Management has adopted a practice of listing as "Significant
Items" in its external disclosure documents (e.g., earnings press releases,
investor presentations, Forms 10-Q and 10-K) individual and/or particularly
volatile items that impact the current period results by $0.01 per share or
more. (The one exception is the provision for credit losses discussed below).
Such "Significant Items" generally fall within one of two categories: timing
differences and other items.
Timing Differences
Part of the company's regular business activities are by their nature
volatile; e.g. capital markets income, gains and losses on the sale of loans,
etc. While such items may generally be expected to occur within a full-year
reporting period, they may vary significantly from period to period. Such
items are also typically a component of an Income Statement line item and not,
therefore, readily discernable. By specifically disclosing such items,
analysts/investors can better assess how, if at all, to adjust their estimates
of future performance.
Other Items
From time to time, an event or transaction might significantly impact
revenues, expenses, or taxes in a particular reporting period that are judged
to be one-time, short-term in nature, and/or materially outside typically
expected performance. Examples would be (1) merger costs as they typically
impact expenses for only a few quarters during the period of transition; e.g.,
restructuring charges, asset valuation adjustments, etc.; (2) changes in an
accounting principle; (3) one-time tax assessments/refunds; (4) a large
gain/loss on the sale of an asset; (5) outsized commercial loan net charge-
offs related to fraud; etc. In addition, for the periods covered by this
release, the impact of the Franklin restructuring is deemed to be a
significant item due to its unusually large size and because it was acquired
in the Sky Financial merger and thus it is not representative of our typical
underwriting criteria. By disclosing such items, analysts/investors can
better assess how, if at all, to adjust their estimates of future performance.
Provision for Credit Losses
While the provision for credit losses may vary significantly between
periods, Management typically excludes it from the list of "Significant
Items", unless in Management's view, there is a significant specific
credit(s), which is causing distortion in the period.
Provision expense is always an assumption in analyst/investor expectations
of earnings and there is apparent agreement among them that provision expense
is included in their definition of "underlying" or "core" earnings unlike
"timing differences" or "other items". In addition, provision expense is an
individual Income Statement line item so its value is easily known and, except
in very rare situations, the amount in any reporting period always exceeds
$0.01 per share. In addition, the factors influencing the level of provision
expense receive detailed additional disclosure and analysis so that
analysts/investors have information readily available to understand the
underlying factors that result in the reported provision expense amount.
In addition, provision expense trends usually increase/decrease in a
somewhat orderly pattern in conjunction with credit quality cycle changes;
i.e., as credit quality improves provision expense generally declines and vice
versa. While they may have differing views regarding magnitude and/or trends
in provision expense, every analyst and most investors incorporate a provision
expense estimate in their financial performance estimates.
Other Exclusions
"Significant Items" for any particular period are not intended to be a
complete list of items that may significantly impact future periods. A number
of factors, including those described in Huntington's 2007 Annual Report on
Form 10-K and other factors described from time to time in Huntington's other
filings with the Securities and Exchange Commission, could significantly
impact future periods.
Estimating the Impact on Balance Sheet and Income Statement Results Due to
Acquisitions
The merger with Sky Financial Group Inc. (Sky Financial) was completed on
July 1, 2007. At the time of acquisition, Sky Financial had assets of $16.8
billion, including $13.3 billion of loans, and core deposits of $12.0 billion.
Sky Financial results were fully included in our consolidated results for the
full 2007 third quarter, and will impact all quarters thereafter. As a
result, performance comparisons of 2008 second quarter performance to
comparable year-ago periods are affected, as Sky Financial results were not
included in the year-ago periods. Comparisons of the 2008 second quarter
performance compared with year-ago periods are impacted as follows:
-- Increased reported average balance sheet, revenue, expense, and the
absolute level of certain credit quality results (e.g., amount of net
charge-offs).
-- Increased reported non-interest expense items because of costs
incurred as part of merger integration activities, most notably
employee retention bonuses, outside programming services related to
systems conversions, occupancy expenses, and marketing expenses
related to customer retention initiatives.
Given the significant impact of the merger on reported 2008 and 2007
results, management believes that an understanding of the impacts of the
merger is necessary to understand better underlying performance trends. When
comparing post-merger period results to pre-merger periods, the following
terms are used when discussing financial performance:
-- "Merger-related" refers to amounts and percentage changes representing
the impact attributable to the merger.
-- "Merger costs" represent non-interest expenses primarily associated
with merger integration activities, including severance expense for
key executive personnel.
-- "Non-merger-related" refers to performance not attributable to the
merger, and includes "merger efficiencies", which represent non-
interest expense reductions realized because of the merger.
The following methodology has been implemented to estimate the approximate
effect of the Sky Financial merger used to determine "merger-related" impacts.
Balance Sheet Items
For loans and leases, as well as core deposits, Sky Financial's balances
as of June 30, 2007, adjusted for consolidating, merger, and purchase
accounting adjustments, are used in the comparison. To estimate the impact on
2008 second quarter average balances, it was assumed that the June 30, 2007
balances, as adjusted, remained constant throughout the 2007 third quarter and
all subsequent periods.
Income Statement Items
For income statement line items, Sky Financial's actual results for the
first six months of 2007, adjusted for the impact of unusual items and
purchase accounting adjustments, were determined. This six-month adjusted
amount was divided by two to estimate a quarterly amount. This results in an
approximate quarterly impact as the methodology does not adjust for any
unusual items or seasonal factors in Sky Financial's 2007 six-month results.
Nor does it consider any revenue or expense synergies realized since the
merger date. This same estimated amount will also be used in all subsequent
quarterly reporting periods. The one exception to this methodology of
holding the estimated quarterly impact constant relates to the amortization of
intangibles expense where the amount is known and is therefore used.
Table 11 below provides detail of changes to selected reported results to
quantify the impact of the Sky Financial merger using this methodology:
Table 11 - Estimated Impact of Sky Financial Merger
2008 Second Quarter versus 2007 Second Quarter
Second Quarter Change Merger
(in millions) 2008 2007 Amount % Related
Average Loans and Leases
Commercial and industrial$13,631 $8,167 $5,464 66.9 % $4,775
Commercial real estate 9,6014,6514,950NM 3,971
Total commercial23,232 12,818 10,414 81.2 8,746
Automobile loans and leases4,5513,873 678 17.5432
Home equity7,3654,9732,392 48.1 2,385
Residential mortgage 5,1784,351 827 19.0 1,112
Other consumer 699 424 275 64.9143
Total consumer 17,793 13,6214,172 30.6 4,072
Total loans and leases $41,025 $26,439 $14,586 55.2 % $12,818
(1) = non-merger related / (prior period + merger-related)
Average Deposits
Demand deposits - non-interest
bearing $5,061 $3,591 $1,470 40.9 % $1,829
Demand deposits - interest
bearing 4,0862,4041,682 70.0 1,460
Money market deposits 6,2675,466 801 14.7996
Savings and other domestic
deposits 5,0472,9312,116 72.2 2,594
Core certificates of deposit 10,9525,5915,361 95.9 4,630
Total core deposits31,413 19,983 11,430 57.2 11,509
Other deposits 6,6144,2902,324 54.2 1,342
Total deposits $38,027 $24,273 $13,754 56.7 % $12,851
(1) = non-merger related / (prior period + merger-related)
Non-merger Related
(in millions)Amount % (1)
Average Loans and Leases
Commercial and industrial $689 5.3 %
Commercial real estate 97911.4
Total commercial 1,668 7.7
Automobile loans and leases 246 5.7
Home equity7 0.1
Residential mortgage(285) (5.2)
Other consumer 13223.3
Total consumer100 0.6
Total loans and leases $1,768 4.5 %
(1) = non-merger related / (prior period + merger-related)
Average Deposits
Demand deposits - non-interest
bearing $(359) (6.6)%
Demand deposits - interest bearing 222 5.7
Money market deposits (195) (3.0)
Savings and other domestic deposits (478) (8.7)
Core certificates of deposit 731 7.2
Total core deposits (79) (0.3)
Other deposits98217.4
Total deposits$903 2.4 %
(1) = non-merger related / (prior period + merger-related)
Second Quarter Change Merger
(in thousands) 2008 2007 Amount % Related
Net interest income - FTE $395,490 $257,518 $137,972 53.6 % $151,592
Non-interest Income
Service charges on
deposit accounts$79,630 $50,017 $29,613 59.2 % $24,110
Trust services33,08926,764 6,325 23.6 7,009
Brokerage and insurance
income 35,69417,19918,495 NM 17,061
Other service charges and
fees 23,24214,923 8,319 55.7 5,800
Bank owned life insurance
income 14,13110,904 3,227 29.6 1,807
Mortgage banking income
(loss) 12,502 7,122 5,380 75.5 6,256
Securities gains (losses) 2,073(5,139)7,212 NM 283
Other income 36,06934,403 1,6664.8 6,390
Total non-interest income $236,430 $156,193 $80,237 51.4 % $68,716
(1) = non-merger related / (prior period + merger-related)
Non-interest Expense
Personnel costs $199,991 $135,191 $64,800 47.9 % $68,250
Outside data processing
and other services 30,18625,701 4,485 17.5 12,262
Net occupancy 26,97119,417 7,554 38.9 10,184
Equipment 25,74017,157 8,583 50.0 4,799
Amortization of
intangibles 19,327 2,51916,808 NM 16,481
Marketing 7,339 8,986(1,647) (18.3) 4,361
Professional services 13,752 8,101 5,651 69.8 2,707
Telecommunications 6,864 4,577 2,287 50.0 2,224
Printing and supplies 4,757 3,672 1,085 29.5 1,374
Other expense 42,87619,33423,542 NM 13,048
Total non-interest
expense $377,803 $244,655 $133,148 54.4 % $135,690
(1) = non-merger related / (prior period + merger-related)
Merger /
Restruct. Non-merger Related
(in thousands) Costs Amount % (1)
Net interest income - FTE$(13,620) (3.3)%
Non-interest Income
Service charges on deposit accounts $5,503 7.4 %
Trust services (684) (2.0)
Brokerage and insurance income1,434 4.2
Other service charges and fees2,519 12.2
Bank owned life insurance income 1,420 11.2
Mortgage banking income (loss) (876) (6.5)
Securities gains (losses) 6,929NM
Other income (4,724)(11.6)
Total non-interest income $11,521 5.1 %
(1) = non-merger related / (prior period + merger-related)
Non-interest Expense
Personnel costs$10,019 $(13,469) (6.3)%
Outside data processing and other
services (4,969) (2,808) (8.5)
Net occupancy1,702 (4,332)(13.8)
Equipment2,799 985 4.0
Amortization of intangibles-327 1.7
Marketing (1,551) (4,457)(37.8)
Professional services (995) 3,939 40.1
Telecommunications 3 60 0.9
Printing and supplies 19 (308) (6.1)
Other expense (52) 10,546 32.6
Total non-interest expense$6,975 $(9,517) (2.5)%
(1) = non-merger related / (prior period + merger-related)
2008 Second Quarter versus 2008 First Quarter
SecondFirst
Quarter Quarter Change
(in millions) 2008 2008Amount%
Average Loans and Leases
Commercial and industrial$13,631 $13,343 $2882.2 %
Commercial real estate 9,601 9,2873143.4
Total commercial23,23222,6306022.7
Automobile loans and leases4,551 4,3991523.5
Home equity7,365 7,274 911.3
Residential mortgage 5,178 5,351 (173) (3.2)
Other consumer 699 713(14) (2.0)
Total consumer 17,79317,737 560.3
Total loans and leases $41,025 $40,367 $6581.6 %
Average Deposits
Demand deposits - non-interest
bearing $5,061$5,034$270.5 %
Demand deposits - interest bearing 4,086 3,9341523.9
Money market deposits 6,267 6,753 (486) (7.2)
Savings and other domestic deposits5,047 5,004 430.9
Core certificates of deposit 10,95210,7961561.4
Total core deposits31,41331,521 (108) (0.3)
Other deposits 6,614 6,4102043.2
Total deposits $38,027 $37,931$960.3 %
SecondFirst
Quarter QuarterChange
(in thousands) 2008 2008Amount %
Net interest income - FTE$395,490 $382,326 $13,1643.4 %
Non-interest Income
Service charges on deposit accounts $79,630 $72,668 $6,9629.6 %
Trust services 33,08934,128 (1,039) (3.0)
Brokerage and insurance income 35,69436,560 (866) (2.4)
Other service charges and fees 23,24220,7412,501 12.1
Bank owned life insurance income 14,13113,750 3812.8
Mortgage banking income (loss) 12,502(7,063) 19,565 NM
Securities gains (losses) 2,073 1,429 644 45.1
Other income 36,06963,539 (27,470) (43.2)
Total non-interest income$236,430 $235,752 $6780.3 %
(1) = non-merger related / (prior period + merger-related)
Non-interest Expense
Personnel costs$199,991 $201,943 $(1,952) (1.0)%
Outside data processing and other
services30,18634,361 (4,175) (12.2)
Net occupancy26,97133,243 (6,272) (18.9)
Equipment25,74023,7941,9468.2
Amortization of intangibles 19,32718,917 4102.2
Marketing 7,339 8,919 (1,580) (17.7)
Professional services13,752 9,0904,662 51.3
Telecommunications6,864 6,245 6199.9
Printing and supplies 4,757 5,622 (865) (15.4)
Other expense42,87628,347 14,529 51.3
Total non-interest expense $377,803 $370,481 $7,3222.0 %
(1) = non-merger related / (prior period + merger-related)
Merger /
Restruct. Non-merger Related
(in thousands) CostsAmount % (1)
Net interest income - FTE $13,164 3.4 %
Non-interest Income
Service charges on deposit accounts$6,962 9.6 %
Trust services (1,039) (3.0)
Brokerage and insurance income (866) (2.4)
Other service charges and fees 2,501 12.1
Bank owned life insurance income 381 2.8
Mortgage banking income (loss) 19,565NM
Securities gains (losses) 644 45.1
Other income (27,470)(43.2)
Total non-interest income $678 0.3 %
(1) = non-merger related / (prior period + merger-related)
Non-interest Expense
Personnel costs$7,775 $(9,727) (4.6)%
Outside data processing and other
services (4,305)130 0.4
Net occupancy 1,359 (7,631)(22.1)
Equipment 2,703(757) (2.9)
Amortization of intangibles - 410 2.2
Marketing (67) (1,513)(17.1)
Professional services 399 4,263 44.9
Telecommunications (591) 1,210 21.4
Printing and supplies (27) (838)(15.0)
Other expense 28 14,501 51.1
Total non-interest expense $7,274 $48 0.0 %
(1) = non-merger related / (prior period + merger-related)
2008 Six Months versus 2007 Six Months
Six Months Ended
June 30, Change
(in millions) 2008 2007 Amount%
Average Loans and Leases
Commercial and industrial $13,487 $8,077 $5,410 67.0 %
Commercial real estate 9,4444,5634,881NM
Total commercial 22,931 12,640 10,291 81.4
Automobile loans and leases 4,4753,893 582 14.9
Home equity 7,3204,9432,377 48.1
Residential mortgage5,2644,423 841 19.0
Other consumer706 423 283 66.9
Total consumer 17,765 13,6824,083 29.8
Total loans and leases $40,696 $26,322 $14,374 54.6 %
(1) = non-merger related / (prior period + merger-related)
Average Deposits
Demand deposits - non-interest
bearing $5,047 $3,561 $1,486 41.7 %
Demand deposits - interest bearing 4,0102,3771,633 68.7
Money market deposits 6,5105,4771,033 18.9
Savings and other domestic deposits 5,0262,9152,111 72.4
Core certificates of deposit 10,8745,5235,351 96.9
Total core deposits 31,467 19,853 11,614 58.5
Other deposits 6,5124,5082,004 44.5
Total deposits $37,979 $24,361 $13,618 55.9 %
(1) = non-merger related / (prior period + merger-related)
Merger Non-merger Related
(in millions) Related Amount %(1)
Average Loans and Leases
Commercial and industrial$4,775$635 4.9 %
Commercial real estate3,971 910 10.7
Total commercial8,746 1,545 7.2
Automobile loans and leases 432 150 3.5
Home equity 2,385 (8) (0.1)
Residential mortgage 1,112(271) (4.9)
Other consumer 143 140 24.7
Total consumer 4,072 11 0.1
Total loans and leases$12,818 $1,556 4.0 %
(1) = non-merger related / (prior period + merger-related)
Average Deposits
Demand deposits - non-interest
bearing $1,829 $(343) (6.4)%
Demand deposits - interest bearing1,460 173 4.5
Money market deposits 996 37 0.6
Savings and other domestic deposits 2,594(483) (8.8)
Core certificates of deposit 4,630 721 7.1
Total core deposits 11,509 105 0.3
Other deposits 1,342 662 11.3
Total deposits$12,851$767 2.1 %
(1) = non-merger related / (prior period + merger-related)
Six Months Ended
June 30,Change
(in thousands) 2008 2007 Amount %
Net interest income - FTE $777,816 $517,120 $260,696 50.4 %
Non-interest Income
Service charges on deposit
accounts $152,298 $94,810 $57,488 60.6 %
Trust services 67,21752,65814,559 27.6
Brokerage and insurance income 72,25433,28138,973 NM
Other service charges and fees 43,98328,13115,852 56.4
Bank owned life insurance income27,88121,755 6,126 28.2
Mortgage banking income (loss) 5,43916,473 (11,034) (67.0)
Securities gains (losses)3,502(5,035)8,537 NM
Other income99,60859,29740,311 68.0
Total non-interest income $472,182 $301,370 $170,812 56.7 %
(1) = non-merger related / (prior period + merger-related)
Non-interest Expense
Personnel costs $401,934 $269,830 $132,104 49.0 %
Outside data processing and other
services 64,54747,51517,032 35.8
Net occupancy 60,21439,32520,889 53.1
Equipment 49,53435,37614,158 40.0
Amortization of intangibles 38,244 5,03933,205 NM
Marketing 16,25816,682 (424) (2.5)
Professional services 22,84214,583 8,259 56.6
Telecommunications 13,109 8,703 4,406 50.6
Printing and supplie
