Huntington's MSR Problem Nips Income: The company posted a $2 million adjustment to its servicing valuation.(Mortgage Servicing Rights Valuation)(Huntington Bancshares Inc.)

COLUMBUS, OH -- Huntington Bancshares here saw its earnings slip in the first quarter, with a negative adjustment to the value of its mortgage servicing rights playing a role in the decline.

Huntington said a negative adjustment to its MSR valuation, net of hedges, trimmed earnings per share by one penny in the first quarter.

But that wasn't the only issue putting pressure on Huntington. Losses on equity investments and litigation expenses also had an impact.

The $2 million pretax adjustment to the MSR valuation contributed to a 29% decline in mortgage banking income during the first quarter. In the first quarter of 2006, Huntington had posted a gain from a $5.1 million upward adjustment in the value of its MSR asset.

On the positive side, Huntington posted higher gains from the sale of home loans in the first quarter of 2007 compared with the year-earlier period. Secondary market gains and higher origination fee income contributed to an increase in non-interest income from mortgage banking in this year's first quarter.

Overall, Huntington reported first-quarter net income of $95.7 million, or $0.40 per common share, down from $104.5 million, or $0.45 per ...