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Huntington
Bancshares Incorporated
Huntington
Center
41
South High Street
Columbus,
Ohio 43287
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Thomas
E. Hoaglin
Chairman
& Chief Executive Officer
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614.480.5533
614.480.5485
facsimile
thomas.hoaglin@huntington.com
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April
27,
2007
Dear
Fellow Huntington Shareholder:
On
April
19, we reported 2007 first quarter earnings of $95.7 million, or $0.40 per
common share. This is higher than the previous quarter’s level of $0.37 per
share, but lower than the $0.45 per share we earned in the 2006 first
quarter.
While
earnings were below our expectations, the shortfall was primarily the result
of
two factors unrelated to core business operations. First, we had losses ($0.02
per share) from equity investments made in funds invested in financial services
companies, reflecting the stock market turbulence in the sector. Second,
litigation losses of $0.01 per share reflected the settlement of cases dating
back to a bank Huntington acquired in 1997.
Underlying
financial performance was sound. Our net interest margin expanded by eight
basis
points to 3.36%, in contrast to the margin compression reported by many regional
banks. Good middle market commercial and small business loan growth offset
a
decline in residential and commercial real estate lending. Fee income from
trust
services, brokerage and insurance was strong, and expenses remained
well-contained.
Non-performing
assets and loan loss reserves both increased, but net charge-offs of 28 basis
points were well below our long-term target. Huntington has not engaged in
subprime lending, but we do expect continued pressure on non-performing asset
levels until regional and local economic conditions improve.
Our
shareholder meeting to approve the acquisition of Sky Financial Group, Inc.
has
been set for May 30, 2007. Detailed information on this is being mailed to
Huntington shareholders of record as of March 15, 2007. Much merger integration
preparation is underway. Consistent with our announcement last December, we
remain highly confident that the merger will generate significant value for
shareholders.
The
economic environment in many of our markets remains challenging. Nevertheless,
with the underlying momentum in the first quarter, we expect full-year earnings
in the range of $1.84-$1.89 per share, excluding merger-related charges,
reflecting growth in the coming quarters. As always, I appreciate your support
and welcome your comments.
Sincerely,
