Huntington Restructures Relationship with Franklin Credit

Huntington Bancshares Inc. in Columbus, Ohio, has restructured its relationship with Franklin Credit Management Corp., allowing Huntington to take control of the mortgages and other real estate owned assets that previously served as collateral for the company's commercial loans to Franklin. Four hundred and ninety-four million dollars of fair value first- and second-lien mortgages and $80 million of fair value OREO assets were acquired by Huntington in the restructuring. These OREO assets could be disposed of over the next several quarters. This transaction immediately adds 29 basis points to Huntington's tangible common equity ratio, and the restructuring resulted in a one-time $160 million after-tax benefit. "We can accelerate the resolution and recovery of the value embedded in these assets as this relieves Franklin from the ownership of these assets," said Stephen D. Steinour, Huntington's chairman, president, and chief executive officer. He said the new servicing contract would allow Franklin to pursue the acquisition of third-party servicing arrangements. Huntington noted that it acquired control of the approximately 30,000 mortgages in the restructuring. Through this change, for Huntington, $615 million of existing non-accrual commercial loans to Franklin are eliminated. These balances at year-end were $650 million, with the reduction since then reflecting 2009 first quarter cash payments to date. A $130 million Franklin-specific allowance for credit losses was eliminated in the restructuring.