Mortgages Weigh on Regional Banks

The Columbus, Ohio-based company had previously warned of charges against the loans made by Franklin Credit Management(FCMC Quote - Cramer on FCMC - Stock Picks), over concerns that the loans had deteriorated much faster than expected. The commercial relationship was grandfathered in as a result of Huntington's purchase of Sky Financial last year.

Huntington's charges totaled $1 per share. That included a $512 million provision for credit losses -- $406 million of which was for loan losses expected in the Franklin loans. It also had market-related losses and a $25 million pretax charge for the Visa settlement, among other things.

"We are disappointed with these results," said Chairman and CEO Thomas Hoaglin. "Clearly the biggest setback was the significant negative impact associated with the previously announced restructuring of the Franklin relationship acquired in the Sky Financial merger. However, we firmly believe that the specific reserves we have established and the positive cash flow coverage resulting from the restructuring address fully the current and anticipated financial performance issues associated with this relationship. As such, we do not anticipate any further negative impact from this relationship.

"Also negatively impacting performance was the need to build non-Franklin-related loan loss reserves in view of the continued weakness in the residential real estate development market," he added.

Huntington attributed the remaining provision to continued weakness in Michigan and Ohio.

Shares were falling 7.2% to $11.54 on late Thursday.

Comerica

Elsewhere, Comerica's(CMA Quote - Cramer on CMA - Stock Picks) shares tanked more than 10% after reporting profits fell 60% to $119 million or 79 cents a share, missing analysts' estimates by 26 cents.

The fourth quarter of 2006 included a one-time gain of $47 million from a lawsuit settlement and an after-tax gain of $108 million on the sale of Comerica's stake in Munder Capital Management, which was sold to a private equity firm and Munder's management in 2006.

The Dallas-based regional bank primarily attributed the lower earnings to its loan loss provision of $108 million and a lower net interest margin -- the profit that a bank makes by taking in deposits and lending them out again. Comerica's net interest margin fell 32 basis points from a year earlier and by 23 basis points from the third quarter to 3.43.

Last year "was a challenging year for the banking industry, including Comerica," said Chairman and CEO Ralph Babb Jr. "While we continued to execute our strategy, reflected by strong loan growth, particularly in our high growth markets, challenges in the residential real estate development portfolio affected our performance. Our fourth quarter earnings were largely impacted by an increase in the provision for loan losses and a decline in the net interest margin, driven in part by a decision to increase the securities portfolio and a competitive funding environment."

The stock dipped $4.38 to $37.89.

First Horizon

Memphis-based First Horizon (FHN Quote - Cramer on FHN - Stock Picks), meanwhile, swung to a huge continuing-operations loss of $252.8 million, or $2 a share, compared with a year-ago profit of 17 cents a share. That, furthermore, widens from a third-quarter shortfall of just 11 cents a share as the pretax loss from its mortgage segment vaulted nearly sixfold, sequentially, to $262.8 million.

First Horizon also set aside $156.6 million to cover bad loans, up from a third-quarter loan-loss provision of $43.3 million. It said the provision would cover "inherent losses" in residential construction portfolios related to discontinued product structures and "higher-risk national markets," including Florida, California, Virginia, Georgia and Nevada. The bank's share of the Visa settlement, totaling $55.7 million, factored in losses as well.

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