Midwest regional bank Huntington Bancshares' (Nasdaq: HBAN) profits jumped by a whopping 22% during the first quarter. The period was marked by a fall in provision for credit losses as well as noticeably higher revenues generated by its mortgage banking business.
Impressive growth
Huntington's net interest income rose by 3% to $417.2 million from a year ago and a modest 1% on a sequential basis. The rise came from a $0.6 billion or 1% rise in average earning assets and also an increase in its net interest margin on a sequential basis. In fact, the net interest margin has gone up in the last two quarters -- from 3.34% in the third quarter of 2011 to 3.40% at present. This is indicative of the fact that the bank is managing its funds much more effectively than before.
However, its non-interest income grew by an impressive 20% to $285.3 million. The gain reflected a $22.3 million rise in its mortgage banking revenues as well as another $11.4 million coming in from its acquisition of Michigan-based Fidelity Bank.
The rise in revenue, coupled with a 30% fall in provision for loan losses from a year ago, helped Huntington's net income rise to $153 million from $126 million in the year-ago period.
A growing trend...
The rise in the bank's net interest income during the quarter can also be attributed to the fact that Huntington was able to grow its total loans and leases by 6% from a year ago, which includes a 12% rise in total commercial lending.
As we all know, low long-term interest rates have haunted U.S. banks for quite some time now, but these banks have somewhat managed to counteract these pressures by growing their loan books. Peer PNC Financial (NYSE: PNC), which saw its first-quarter profits fall by 2.5% last week, increased its loans by $17 billion to $176 billion -- although much of this growth was an outcome of its acquisition of RBC Bank. Similarly, fellow Midwest bank US Bancorp (NYSE: USB), whose profits jumped by a staggering 28%, witnessed a 6.4% rise in average loans. This was comprised of a 17% rise in commercial borrowing and a 26% rise in commercial and commercial-real-estate commitments. Loan growth is certainly a bright sign for these banks.
Creditworthy
As I've mentioned before, Huntington's loan loss provisions fell. On the whole, the bank's credit quality improved and its net charge-offs declined by 50% to $83 million. At the same time, its nonperforming assets declined by 24% to $527 million.
Plus, its Tier 1 capital ratio also rose a hair to 12.2%, indicating a pretty strong capital position.
All in all, Huntington posted a pretty strong quarter to kick off 2012. To follow the Ohio-based regional bank in 2012, you can use the Fool's free My Watchlist service.
Earnings season is here in full force, and earnings reports provide a great peek into how a business is performing, as well as how it might deliver over several years. Make sure to check out our free report, "5 Stocks Investors Need to Watch This Earnings Season."
