Huntington Bancshares Inc. Q1 2010 Earnings Call Transcript
Huntington Bancshares Inc. (HBAN)
Q1 2010 Earnings Call
April 21, 2010 11:00 am ET
Executives
Jay Gould - Director of Investor Relations
Steve Steinour - Chairman, President and CEO
Don Kimble - Senior EVP and CFO
Tim Barber - SVP of Credit Risk Management
Dan Neumeyer - Senior EVP and Chief Credit Officer.
Analysts
Dave Rochester - FBR Capital Markets
Ken Zerbe - Morgan Stanley
Mathew O'Connor - Deutsche Bank
Scott Siefers - Sandler O'Neill
Tony Davis - Stifel Nicolaus
Bob Patten - Morgan Keegan
Terry McEvoy - Oppenheimer
Ken Usdin - Bank of America
Erika Penela - UBS
Brian Foran - Goldman Sachs
Presentation
Operator
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Good morning. My name is Jeff and I will be your conference operator today. At this time, I would like to welcome everyone to the Huntington first quarter earnings call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions). Thank you.
Mr. Gould, you may begin your conference.
Jay Gould
Thank you, Jeff and welcome. I'm Jay Gould, Director of Investor Relations for Huntington. Copies of the slides we will be reviewing could be found on our website, huntington.com. This call is being recorded and will be available as a rebroadcast starting about one hour from the close of the call.
Please call Investor Relations at 614-480-5676 for more information on how to access these recordings or playback or should you have difficulty getting a copy of the slides.
Turning to slides two, three and four, you will note several aspects of the basis of today’s presentation. I encourage you to read these, but let me point out one key disclosure.
This presentation contains both GAAP and non-GAAP financial measures, where we believe it is helpful to 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 on the slide presentation, in as appendix, in the press release, in the quarterly financial review supplement to today’s earnings press release or in the related 8-K filed today, all of which are on our website.
Turning to slide five, today’s discussion including the Q&A period may contain forward-looking statements. Such statements are based on information and assumptions available at this time and are subject to changes, risks and uncertainties, which may cause actual results to differ materially. We assume no obligation to update such statements.
For a complete discussion of risks and uncertainties, please refer to this slide and material information filed with the SEC including our most recent Forms 10-K and 8-K filings.
Now, turning to today’s presentation. As noted on slide six, participating today are Steve Steinour, Chairman, President and Chief Executive Officer; Don Kimble, Senior Executive Vice President and Chief Financial Officer; and Tim Barber, Senior Vice President of Credit Risk Management. Also present for the Q&A session is Dan Neumeyer, Senior Executive Vice President and Chief Credit Officer.
Let’s get going. Turning to slide seven, Steve?
Steve Steinour
Thank you, Jay. Welcome everyone. I will begin with review of our first quarter performance highlights, Don will follow with the detailed overview of our financial performance, Tim will provide an update on credit, and then I will return with some 2010 outlook comments what I hope you and other investors take away from today’s presentation.
Let me begin the presentation turning to slide eight. We entered 2010 as a stronger company with underlying momentum and said we expected to return to profitability sometime in 2010. I am very pleased to report that sometime is now.
We reported net income of $39.7 million or $0.01 a share this morning. This is a very significant step forward and represents a reset of expectations for the year. But we now expect to report a profit for the full year 2010.
The results included a $38.2 million net tax benefit that Don will detail for you. As you think about the performance for the rest of the year, it's important to note that we continue to report very good improvement in pre-tax, pre-provision income. This was up 4% for the quarter and 16% annualized from the fourth quarter level and represented the fifth consecutive quarterly improvement. This is 12% higher than a year ago.
We believe this positive performance momentum will increasingly differentiate us from number of our peers over coming quarters. Primary driver was a 5% linked quarter increase in net interest income as our net interest margin expanded to 3.47% from 3.19% in the fourth quarter.
As we mentioned last quarter, the growth in investment securities in the fourth quarter was in short duration securities about 2.4-year duration. During the quarter, we modestly repositioned our interest rate risk position for more asset sensitivity for 2011. Don will provide details.
We now believe our net interest margin for the rest of the year will remain around a 3.5% level. Average loans declined slightly as decreases in total commercial loans were partially offset by growth in average total consumer loans.
Non-interest income was down due primarily to seasonal factors, though we saw good revenue growth in some key activities. The increases in expenses reflected a combination of seasonal factors, but also investments as well.
Credit quality trends continue to improve as expected across the board, NPAs declined 7%. Importantly, new NPAs for the quarter declined 52% and charge-offs declined for the quarter 46%, and we saw early stage delinquencies or commercial loans down 13% and consumer loans down 4%.
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