Huntington starts to tap into last year’s FirstMerit acquisition

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The benefits of Huntington Bancshares’ purchase of FirstMerit came into a sharper focus as the Columbus, Ohio, company reported fourth-quarter results.

Despite recording $96 million in merger-related costs, the $100 billion-asset Huntington’s earnings rose 19% from a year earlier, to $212 million. The quarter was the first full reporting period since Huntington completed the $3.4 billion acquisition of FirstMerit in Akron, Ohio.

“We are very pleased with our strong close to 2016,” Stephen Steinour, Huntington’s chairman, president and CEO, said in a press release. Last year’s performance “demonstrated continued progress toward achieving our long-term financial goals.”

Revenue rose 39% to $1.1 billion, a new record for the company. Operating expenses, however, jumped 45% to $748 million, driven in large part by a $71 million rise in personnel costs. For the full year, Huntington achieved its goal of positive operating leverage.

Huntington said it expects to generate positive operating leverage again this year, projecting a 20% increase in revenues. The company said $255 million in merger-related cost saves should be fully phased in by the end of the third quarter.

Acquiring the $26.8 billion-asset FirstMerit had a dramatic effect on Huntington’s loans and deposits. Loans increased 33% from a year earlier to $66.4 billion. Deposits jumped 39% to $77 billion.

Huntington maintained its strong presence in indirect automobile lending, originating $1.4 billion in loans in the fourth quarter. The company also completed a $1.5 billion auto-loan securitization during the quarter, “demonstrating strong investor demand for our superior automobile loan production quality,” Steinour said.

The FirstMerit deal did not have a noticeable impact on asset quality. Nonperforming loans totaled $423 million, or 0.63% of total loans at Dec. 31. That compares with $372 million, or 0.74% of total loans, a year earlier.

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