COLUMBUS, Ohio, July 23, 2020 /PRNewswire/ -- Huntington
Bancshares Incorporated (Nasdaq: HBAN; www.huntington.com) reported
net income for the 2020 second quarter of $150 million, a decrease of 59% from the year-ago
quarter. Earnings per common share for the 2020 second
quarter were $0.13, down 61% from the
year-ago quarter. Tangible book value per common share as of
2020 second quarter-end was $8.32, a
4% year-over-year increase. Return on average assets was
0.51%, return on average common equity was 5.0%, and return on
average tangible common equity was 6.7%. Results were
impacted by elevated credit provisioning related to the ongoing
uncertain economic outlook.
CEO Commentary:
"Our second quarter results reflect strong execution across the
bank in a very challenging operating environment, including our
extraordinary efforts to help our customers through the economic
challenges associated with the pandemic," said Steve Steinour, chairman, president, and
CEO. "To aid small- and medium-sized businesses across our
footprint, we funded more than 37,000 loans with a total volume of
more than $6 billion through the
SBA's Paycheck Protection Program (PPP), and we continue to
originate more PPP loans. Many of our customers benefited
from a variety of actions we instituted, including fee waivers and
payment relief programs. These actions are consistent with
our Purpose of looking out for people. Huntington is
well-positioned to support our customers through these current
challenges and to help the economic recovery in the communities we
serve."
"I am pleased we maintained total revenues essentially level
with the year-ago quarter. Total noninterest income increased
5% as a result of record mortgage banking activity, though waivers
to assist our customers pressured certain of our noninterest income
lines. We continue to balance investments in technology and
strategic business initiatives with prudent expense management
given the headwinds posed by the interest rate environment and the
effects of the pandemic on credit costs. We are taking action
to manage expenses this year and position ourselves to make further
investments in technology and other strategic initiatives, which
will drive future performance."
"We saw strong balance sheet growth in the second quarter," said
Steinour. "Average loan growth of 7% was driven by the PPP
loans. The funds provided from these loans and inflows from
government stimulus programs were key drivers of average core
deposit growth of 13%. While line utilization has largely
returned to pre-pandemic levels at this point, the related core
deposits have largely remained with the bank, resulting in an
elevated amount of deposits at quarter-end. Recently, as the
economic outlook stabilized, our loan pipelines also experienced a
modest upturn, providing reason for optimism regarding loan growth
late this year and next."
"In June we received the results of the Federal Reserve's
Comprehensive Capital Assessment and Review, and once again
Huntington's credit results were among the best of the regional
banks. Our projected cumulative loan losses in the Fed's
independently-modeled, severely adverse scenario were tied for
lowest in the peer group, and our projected capital ratios remained
well in excess of regulatory requirements. Our consistently
strong performance demonstrates our disciplined enterprise risk
management and solid core earnings power."
"Yesterday, the Board declared the third quarter cash dividend
of $0.15 per common share, unchanged
from the prior quarter. Based on what we know today,
management expects to maintain the current quarterly dividend rate
in the fourth quarter, subject to the Board's normal quarterly
approval process."
2020 Second Quarter Highlights compared with
2019 Second Quarter:
- Fully-taxable equivalent total revenue decreased $5 million, or less than 1%.
- Fully-taxable equivalent net interest income decreased
$22 million, or 3%.
- Net interest margin decreased 37 basis points to 2.94%.
- Noninterest income increased $17
million, or 5%, driven by a $62
million, or 182%, increase in mortgage banking income.
- Noninterest expense decreased $25
million, or 4%.
- Efficiency ratio of 55.9%, down from 57.6%.
- Average loans and leases increased $5.3
billion, or 7%, including a $4.8
billion, or 13%, increase in average commercial loans,
$4.1 billion of which represented PPP
loans, and a $0.4 billion, or 1%,
increase in average consumer loans.
- Average core deposits increased $10.2
billion, or 13%, including a $10.1
billion, or 26%, increase in average demand deposits.
- Net charge-offs equated to 0.54% of average loans and leases,
up from 0.25%.
- Nonperforming asset ratio of 0.89%, up from 0.61%.
- Provision for credit losses increased $268 million year-over-year to $327 million.
- Allowance for loan and lease losses (ALLL) increased
$928 million to $1.7 billion, or 2.12% of total loans and leases;
allowance for credit losses (ACL) increased to $1.8 billion, or 2.27% of total loans and
leases.
- Common Equity Tier 1 (CET1) risk-based capital ratio of 9.84%,
down from 9.88% and consistent with our 9% to 10% operating
guideline.
- Tangible common equity (TCE) ratio of 7.28%, down from
7.80%.
- Tangible book value per common share increased $0.35, or 4%, to $8.32.
Table 1 –
Earnings Performance Summary
|
|
|
2020
|
|
2019
|
(in millions,
except per share data)
|
Second
|
|
First
|
|
Fourth
|
|
Third
|
|
Second
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
Net Income
|
$
|
150
|
|
|
$
|
48
|
|
|
$
|
317
|
|
|
$
|
372
|
|
|
$
|
364
|
|
Diluted earnings per
common share
|
0.13
|
|
|
0.03
|
|
|
0.28
|
|
|
0.34
|
|
|
0.33
|
|
|
|
|
|
|
|
|
|
|
|
Return on average
assets
|
0.51
|
%
|
|
0.17
|
%
|
|
1.15
|
%
|
|
1.37
|
%
|
|
1.36
|
%
|
Return on average
common equity
|
5.0
|
|
|
1.1
|
|
|
11.1
|
|
|
13.4
|
|
|
13.5
|
|
Return on average
tangible common equity
|
6.7
|
|
|
1.8
|
|
|
14.3
|
|
|
17.3
|
|
|
17.7
|
|
Net interest
margin
|
2.94
|
|
|
3.14
|
|
|
3.12
|
|
|
3.20
|
|
|
3.31
|
|
Efficiency
ratio
|
55.9
|
|
|
55.4
|
|
|
58.4
|
|
|
54.7
|
|
|
57.6
|
|
|
|
|
|
|
|
|
|
|
|
Tangible book value
per common share
|
$
|
8.32
|
|
|
$
|
8.28
|
|
|
$
|
8.25
|
|
|
$
|
8.25
|
|
|
$
|
7.97
|
|
Cash dividends
declared per common share
|
0.15
|
|
|
0.15
|
|
|
0.15
|
|
|
0.15
|
|
|
0.14
|
|
Average diluted
shares outstanding
|
1,029
|
|
|
1,035
|
|
|
1,047
|
|
|
1,051
|
|
|
1,060
|
|
|
|
|
|
|
|
|
|
|
|
Average earning
assets
|
$
|
109,038
|
|
|
$
|
101,783
|
|
|
$
|
100,062
|
|
|
$
|
99,692
|
|
|
$
|
99,188
|
|
Average loans and
leases
|
80,199
|
|
|
75,696
|
|
|
75,103
|
|
|
75,096
|
|
|
74,932
|
|
Average core
deposits
|
88,878
|
|
|
79,528
|
|
|
79,690
|
|
|
79,335
|
|
|
78,723
|
|
|
|
|
|
|
|
|
|
|
|
Tangible common
equity / tangible assets ratio
|
7.28
|
%
|
|
7.52
|
%
|
|
7.88
|
%
|
|
8.00
|
%
|
|
7.80
|
%
|
Common equity Tier 1
risk-based capital ratio
|
9.84
|
|
|
9.47
|
|
|
9.88
|
|
|
10.02
|
|
|
9.88
|
|
|
|
|
|
|
|
|
|
|
|
NCOs as a % of
average loans and leases
|
0.54
|
%
|
|
0.62
|
%
|
|
0.39
|
%
|
|
0.39
|
%
|
|
0.25
|
%
|
NAL ratio
|
0.81
|
|
|
0.72
|
|
|
0.62
|
|
|
0.58
|
|
|
0.57
|
|
ACL as a % of total
loans and leases
|
2.27
|
|
|
2.05
|
|
|
1.18
|
|
|
1.18
|
|
|
1.17
|
|
Net Interest
Income, Net Interest Margin, and Average Balance
Sheet
|
|
Table 2 – Net
Interest Income and Net Interest Margin Performance Summary –
Year-over-Year Net Interest Margin Compression Outpaced Increase in
Average Earning Assets
|
|
|
2020
|
|
2019
|
|
|
|
|
($ in
millions)
|
Second
|
|
First
|
|
Fourth
|
|
Third
|
|
Second
|
|
Change (%)
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
LQ
|
|
YOY
|
Net interest
income
|
$
|
792
|
|
|
$
|
790
|
|
|
$
|
780
|
|
|
$
|
799
|
|
|
$
|
812
|
|
|
0%
|
|
(2)%
|
FTE
adjustment
|
5
|
|
|
6
|
|
|
6
|
|
|
6
|
|
|
7
|
|
|
(17)
|
|
(29)
|
Net interest income -
FTE
|
797
|
|
|
796
|
|
|
786
|
|
|
805
|
|
|
819
|
|
|
0
|
|
(3)
|
Noninterest
income
|
391
|
|
|
361
|
|
|
372
|
|
|
389
|
|
|
374
|
|
|
8
|
|
5
|
Total revenue -
FTE
|
$
|
1,188
|
|
|
$
|
1,157
|
|
|
$
|
1,158
|
|
|
$
|
1,194
|
|
|
$
|
1,193
|
|
|
3%
|
|
0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change (bp)
|
Yield /
Cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LQ
|
|
YOY
|
Total earning
assets
|
3.35%
|
|
|
3.88%
|
|
|
4.03%
|
|
|
4.21%
|
|
|
4.35%
|
|
|
(53)
|
|
(100)
|
Total loans and
leases
|
3.75
|
|
|
4.29
|
|
|
4.47
|
|
|
4.67
|
|
|
4.80
|
|
|
(54)
|
|
(105)
|
Total
securities
|
2.35
|
|
|
2.64
|
|
|
2.68
|
|
|
2.74
|
|
|
2.79
|
|
|
(29)
|
|
(44)
|
Total
interest-bearing liabilities
|
0.57
|
|
|
0.98
|
|
|
1.24
|
|
|
1.36
|
|
|
1.39
|
|
|
(41)
|
|
(82)
|
Total
interest-bearing deposits
|
0.28
|
|
|
0.68
|
|
|
0.87
|
|
|
0.98
|
|
|
0.97
|
|
|
(40)
|
|
(69)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest rate
spread
|
2.78
|
|
|
2.90
|
|
|
2.79
|
|
|
2.85
|
|
|
2.96
|
|
|
(12)
|
|
(18)
|
Impact of
noninterest-bearing funds on margin
|
0.16
|
|
|
0.24
|
|
|
0.33
|
|
|
0.35
|
|
|
0.35
|
|
|
(8)
|
|
(19)
|
Net interest
margin
|
2.94%
|
|
|
3.14%
|
|
|
3.12%
|
|
|
3.20%
|
|
|
3.31%
|
|
|
(20)
|
|
(37)
|
|
See Pages 7-9 of
Quarterly Financial Supplement for additional
detail.
|
Fully-taxable equivalent (FTE) net interest income for the 2020
second quarter decreased $22 million,
or 3%, from the 2019 second quarter. This reflected a 37
basis point decrease in the FTE net interest margin (NIM) to 2.94%,
partially offset by the benefit from a $9.9
billion, or 10%, increase in average earning assets.
The NIM compression reflected a 100 basis point year-over-year
decrease in average earning asset yields and a 19 basis point
decrease in the benefit from noninterest-bearing funds, partially
offset by an 82 basis point decrease in average interest-bearing
liability costs. The decrease in earning asset yields was
primarily driven by the impact of lower interest rates on
commercial and home equity loan yields and securities yields,
pandemic-related late fee waivers, and elevated deposits at the
Federal Reserve Bank. The decrease in average
interest-bearing liability costs primarily reflected lower
interest-bearing deposit costs (down 69 basis points) and lower
long-term debt costs (down 133 basis points), both due to the
impact of lower interest rates.
Compared to the 2020 first quarter, FTE net interest income
increased $1 million, or less than
1%, reflecting a 7% increase in average earning assets partially
offset by NIM compression of 20 basis points. The NIM
compression reflected a 53 basis point decrease in average earning
asset yields and an 8 basis point decrease in the benefit from
noninterest-bearing funds, partially offset by a 41 basis point
decrease in average interest-bearing liability costs. The
decrease in earning asset yields was primarily driven by the impact
of lower interest rates on commercial and home equity loan yields
as well as elevated deposits at the Federal Reserve Bank. The
decrease in average interest-bearing liability costs primarily
reflects lower interest-bearing deposit costs (down 40 basis
points) and lower short-term borrowings costs (down 99 basis
points), both due to the impact of lower interest rates. The
NIM in the 2020 second quarter was negatively impacted by
approximately 3 basis points of derivative ineffectiveness compared
to a benefit of approximately 4 basis points in the 2020 first
quarter.
Table 3 –
Average Earning Assets – Commercial & Industrial Loans and
Elevated Deposits at the Federal Reserve Bank Drive Year-Over-Year
Earning Asset Growth
|
|
|
2020
|
|
2019
|
|
|
|
|
($ in
billions)
|
Second
|
|
First
|
|
Fourth
|
|
Third
|
|
Second
|
|
Change (%)
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
LQ
|
|
YOY
|
Commercial and
industrial
|
$
|
35.3
|
|
|
$
|
30.8
|
|
|
$
|
30.4
|
|
|
$
|
30.6
|
|
|
$
|
30.6
|
|
|
14
|
%
|
|
15
|
%
|
Commercial real
estate
|
7.1
|
|
|
6.7
|
|
|
6.8
|
|
|
6.9
|
|
|
6.9
|
|
|
5
|
|
|
3
|
|
Total
commercial
|
42.4
|
|
|
37.6
|
|
|
37.2
|
|
|
37.6
|
|
|
37.5
|
|
|
13
|
|
|
13
|
|
Automobile
|
12.7
|
|
|
12.9
|
|
|
12.6
|
|
|
12.2
|
|
|
12.2
|
|
|
(2)
|
|
|
4
|
|
Home
equity
|
8.9
|
|
|
9.0
|
|
|
9.2
|
|
|
9.4
|
|
|
9.5
|
|
|
(1)
|
|
|
(6)
|
|
Residential
mortgage
|
11.5
|
|
|
11.4
|
|
|
11.3
|
|
|
11.2
|
|
|
11.0
|
|
|
1
|
|
|
4
|
|
RV and
marine
|
3.7
|
|
|
3.6
|
|
|
3.6
|
|
|
3.5
|
|
|
3.4
|
|
|
3
|
|
|
9
|
|
Other
consumer
|
1.1
|
|
|
1.2
|
|
|
1.2
|
|
|
1.3
|
|
|
1.3
|
|
|
(9)
|
|
|
(14)
|
|
Total
consumer
|
37.8
|
|
|
38.1
|
|
|
37.9
|
|
|
37.5
|
|
|
37.4
|
|
|
(1)
|
|
|
1
|
|
Total loans and
leases
|
80.2
|
|
|
75.7
|
|
|
75.1
|
|
|
75.1
|
|
|
74.9
|
|
|
6
|
|
|
7
|
|
Total
securities
|
24.2
|
|
|
24.4
|
|
|
23.2
|
|
|
23.1
|
|
|
22.9
|
|
|
(1)
|
|
|
6
|
|
Held-for-sale and
other earning assets
|
4.6
|
|
|
1.7
|
|
|
1.8
|
|
|
1.5
|
|
|
1.4
|
|
|
173
|
|
|
233
|
|
Total earning
assets
|
$
|
109.0
|
|
|
$
|
101.8
|
|
|
$
|
100.1
|
|
|
$
|
99.7
|
|
|
$
|
99.2
|
|
|
7
|
%
|
|
10
|
%
|
|
See Page 7 of
Quarterly Financial Supplement for additional
detail.
|
Average earning assets for the 2020 second quarter increased
$9.9 billion, or 10%, from the
year-ago quarter, primarily reflecting a $5.3 billion, or 7%, increase in average total
loans and leases, a $2.9 billion, or
559%, increase in interest-bearing deposits at the Federal Reserve
Bank, and a $1.3 billion, or 6%,
increase in average total securities. Average commercial
& industrial (C&I) loans increased $4.6 billion, or 15%, primarily reflecting the
$4.1 billion of average PPP
loans. Average automobile loans increased $0.5 billion, or 4%, driven by strong production
over the past year. Average residential mortgage loans
increased $0.5 billion, or 4%,
reflecting robust portfolio mortgage production over the past
year. The increase in average total securities primarily
reflected portfolio growth and the mark-to-market of the
available-for-sale portfolio. Partially offsetting these
increases, average home equity loans and lines of credit decreased
$0.6 billion, or 6%, reflecting a
shift in consumer preferences.
Compared to the 2020 first quarter, average earning assets
increased $7.3 billion, or 7%,
primarily reflecting a $4.5 billion,
or 6%, increase in average total loans and leases and a
$2.7 billion, or 402%, increase in
interest-bearing deposits at the Federal Reserve Bank.
Average commercial and industrial (C&I) loans increased
$4.4 billion, or 14%, primarily
reflecting the $4.1 billion of
average PPP loans.
On June 14, 2019, Huntington
completed the sale of the Wisconsin retail branches, which included
$117 million of loans
held-for-sale.
Table 4 –
Average Liabilities – Demand Deposits Drive Robust Year-over-Year
Growth in Core Deposits
|
|
|
2020
|
|
2019
|
|
|
|
Second
|
|
First
|
|
Fourth
|
|
Third
|
|
Second
|
|
Change (%)
|
($ in
billions)
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
LQ
|
|
YOY
|
Demand deposits -
noninterest-bearing
|
$
|
25.7
|
|
|
$
|
20.1
|
|
|
$
|
20.6
|
|
|
$
|
19.9
|
|
|
$
|
19.8
|
|
|
28
|
%
|
|
30
|
%
|
Demand deposits -
interest-bearing
|
23.9
|
|
|
21.2
|
|
|
20.1
|
|
|
19.8
|
|
|
19.7
|
|
|
13
|
|
|
21
|
|
Total demand
deposits
|
49.6
|
|
|
41.3
|
|
|
40.7
|
|
|
39.7
|
|
|
39.5
|
|
|
20
|
|
|
26
|
|
Money market
deposits
|
25.7
|
|
|
24.7
|
|
|
24.6
|
|
|
24.3
|
|
|
23.3
|
|
|
4
|
|
|
10
|
|
Savings and other
domestic deposits
|
10.6
|
|
|
9.6
|
|
|
9.6
|
|
|
9.7
|
|
|
10.1
|
|
|
10
|
|
|
5
|
|
Core certificates of
deposit
|
3.0
|
|
|
3.9
|
|
|
4.8
|
|
|
5.7
|
|
|
5.9
|
|
|
(24)
|
|
|
(49)
|
|
Total core
deposits
|
88.9
|
|
|
79.5
|
|
|
79.7
|
|
|
79.3
|
|
|
78.7
|
|
|
12
|
|
|
13
|
|
Other domestic
deposits of $250,000 or more
|
0.2
|
|
|
0.3
|
|
|
0.3
|
|
|
0.3
|
|
|
0.3
|
|
|
(28)
|
|
|
(26)
|
|
Brokered deposits and
negotiable CDs
|
4.1
|
|
|
2.9
|
|
|
2.6
|
|
|
2.6
|
|
|
2.7
|
|
|
43
|
|
|
53
|
|
Total
deposits
|
$
|
93.2
|
|
|
$
|
82.7
|
|
|
$
|
82.6
|
|
|
$
|
82.2
|
|
|
$
|
81.7
|
|
|
13
|
%
|
|
14
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term
borrowings
|
$
|
0.8
|
|
|
$
|
3.4
|
|
|
$
|
2.0
|
|
|
$
|
2.3
|
|
|
$
|
3.2
|
|
|
(76)
|
%
|
|
(74)
|
%
|
Long-term
debt
|
9.8
|
|
|
10.1
|
|
|
9.9
|
|
|
9.5
|
|
|
8.9
|
|
|
(3)
|
|
|
10
|
|
Total debt
|
$
|
10.6
|
|
|
$
|
13.5
|
|
|
$
|
11.9
|
|
|
$
|
11.8
|
|
|
$
|
12.1
|
|
|
(21)
|
%
|
|
(12)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
interest-bearing liabilities
|
$
|
78.2
|
|
|
$
|
76.1
|
|
|
$
|
73.8
|
|
|
$
|
74.2
|
|
|
$
|
74.0
|
|
|
3
|
%
|
|
6
|
%
|
|
See Page 7 of
Quarterly Financial Supplement for additional
detail.
|
Average total interest-bearing liabilities for the 2020 second
quarter increased $4.2 billion, or
6%, from the year-ago quarter. Average total deposits
increased $11.5 billion, or 14%,
while average total core deposits increased $10.2 billion, or 13%. The increase in
average total core deposits was primarily driven by commercial
growth related to the PPP loans and commercial line draws, consumer
growth related to government stimulus, and reduced account
attrition. Specifically within core deposits, average total
demand deposits increased $10.1
billion, or 26%, average money market deposits increased
$2.4 billion, or 10%, and average
savings and other domestic deposits increased $0.5 billion, or 5%. Partially offsetting
these increases, average core certificates of deposit (CDs)
decreased $2.9 billion, or 49%,
reflecting the maturity of balances related to the 2018 consumer
deposit growth initiatives. Average brokered deposits
and negotiable CDs increased $1.4
billion, or 53%, reflecting balance growth in new and
existing brokered deposit accounts. Average total debt
decreased $1.5 billion, or 12%,
reflecting the repayment of short-term borrowings due to the strong
core deposit growth.
Compared to the 2020 first quarter, average total
interest-bearing liabilities increased $2.1
billion, or 3%. Average total deposits increased
$10.5 billion, or 13%, while average
total core deposits increased $9.4
billion, or 12%. The increase in average total core
deposits was primarily driven by commercial growth related to the
PPP loans and commercial line draws, consumer growth related to
government stimulus, and reduced account attrition.
Specifically within core deposits, average total demand deposits
increased $8.3 billion, or 20%,
average money market deposits increased $1.0
billion, or 4%, and average savings and other domestic
deposits increased $1.0 billion, or
10%. Partially offsetting these increases, average core CDs
decreased $0.9 billion, or 24%,
reflecting the maturity of balances related to the 2018 consumer
deposit growth initiatives. Average brokered deposits and
negotiable CDs increased $1.2
billion, or 43%, reflecting balance growth in new and
existing brokered deposit accounts. Average total debt
decreased $2.8 billion, or 21%, as
short-term borrowings were repaid as a result of the strong core
deposit inflows.
On June 14, 2019, Huntington
completed the sale of the Wisconsin retail branches, which included
$725 million of deposits.
Noninterest
Income
|
Table 5 –
Noninterest Income – Record Mortgage Banking Income Drives Growth
in Noninterest Income
|
|
|
2020
|
|
2019
|
|
|
|
Second
|
|
First
|
|
Fourth
|
|
Third
|
|
Second
|
|
Change (%)
|
($ in
millions)
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
LQ
|
|
YOY
|
Service charges on
deposit accounts
|
$
|
60
|
|
|
$
|
87
|
|
|
$
|
95
|
|
|
$
|
98
|
|
|
$
|
92
|
|
|
(31)
|
%
|
|
(35)
|
%
|
Card and payment
processing income
|
59
|
|
|
58
|
|
|
64
|
|
|
64
|
|
|
63
|
|
|
2
|
|
|
(6)
|
|
Mortgage banking
income
|
96
|
|
|
58
|
|
|
58
|
|
|
54
|
|
|
34
|
|
|
66
|
|
|
182
|
|
Trust and investment
management services
|
45
|
|
|
47
|
|
|
47
|
|
|
44
|
|
|
43
|
|
|
(4)
|
|
|
5
|
|
Insurance
income
|
25
|
|
|
23
|
|
|
24
|
|
|
20
|
|
|
23
|
|
|
9
|
|
|
9
|
|
Capital markets
fees
|
31
|
|
|
33
|
|
|
31
|
|
|
36
|
|
|
34
|
|
|
(6)
|
|
|
(9)
|
|
Bank owned life
insurance income
|
17
|
|
|
16
|
|
|
17
|
|
|
18
|
|
|
15
|
|
|
6
|
|
|
13
|
|
Gain on sale of loans
and leases
|
8
|
|
|
8
|
|
|
16
|
|
|
13
|
|
|
13
|
|
|
0
|
|
|
(38)
|
|
Net (losses) gains on
sales of securities
|
(1)
|
|
|
0
|
|
|
(22)
|
|
|
0
|
|
|
(2)
|
|
|
NM
|
|
NM
|
Other noninterest
income
|
51
|
|
|
31
|
|
|
42
|
|
|
42
|
|
|
59
|
|
|
65
|
|
|
(14)
|
|
Total noninterest
income
|
$
|
391
|
|
|
$
|
361
|
|
|
$
|
372
|
|
|
$
|
389
|
|
|
$
|
374
|
|
|
8
|
%
|
|
5
|
%
|
|
See Pages 10-11 of
Quarterly Financial Supplement for additional
detail.
|
Total noninterest income for the 2020 second quarter increased
$17 million, or 5%, from the year-ago
quarter. Mortgage banking income increased $62 million, or 182%, primarily reflecting higher
secondary marketing spreads and a 105% increase in salable mortgage
originations. Partially offsetting this increase, service
charges on deposit accounts decreased $32
million, or 35%, primarily reflecting reduced customer
activity and pandemic-related fee waivers. Other noninterest
income decreased $8 million, or 14%,
primarily as a result of several notable items impacting each
quarter. The 2019 second quarter included a $15 million gain on the sale of the Wisconsin retail branches, a $5 million mark-to-market adjustment on economic
hedges, and $2 million of mezzanine
gains. Partially offsetting these items, the 2020 second
quarter included a $13 million gain
on the annuitization of a retiree health plan, a $5 million gain on the sale of the retirement
plan services recordkeeping business, and $3
million of mezzanine losses. Gain on sale of loans and
leases decreased $5 million, or 38%,
primarily due to lower SBA loan sales.
Compared to the 2020 first quarter, total noninterest income
increased $30 million, or 8%.
Mortgage banking income increased $38
million, or 66%, primarily reflecting a 72% increase in
salable mortgage originations and higher secondary marketing
spreads. Other noninterest income increased $20 million, or 65%, primarily reflecting a
$13 million gain on the annuitization
of a retiree health plan, a $5
million gain on the sale of the retirement plan services
recordkeeping business, and a $3
million increase in income on terminated leases, which was
offset by $3 million of mezzanine
losses. Partially offsetting these increases, service charges
on deposit accounts decreased $27
million, or 31%, primarily reflecting reduced customer
activity and pandemic-related fee waivers.
Noninterest
Expense
|
Table 6 –
Noninterest Expense – Continued Focus on Disciplined Expense
Management While Investing in Technology and Other Strategic
Business Initiatives
|
|
|
2020
|
|
2019
|
|
|
|
Second
|
|
First
|
|
Fourth
|
|
Third
|
|
Second
|
|
Change (%)
|
($ in
millions)
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
LQ
|
|
YOY
|
Personnel
costs
|
$
|
418
|
|
|
$
|
395
|
|
|
$
|
426
|
|
|
$
|
406
|
|
|
$
|
428
|
|
|
6
|
%
|
|
(2)
|
%
|
Outside data
processing and other services
|
90
|
|
|
85
|
|
|
89
|
|
|
87
|
|
|
89
|
|
|
6
|
|
|
1
|
|
Equipment
|
46
|
|
|
41
|
|
|
42
|
|
|
41
|
|
|
40
|
|
|
12
|
|
|
15
|
|
Net
occupancy
|
39
|
|
|
40
|
|
|
41
|
|
|
38
|
|
|
38
|
|
|
(3)
|
|
|
3
|
|
Professional
services
|
11
|
|
|
11
|
|
|
14
|
|
|
16
|
|
|
12
|
|
|
0
|
|
|
(8)
|
|
Amortization of
intangibles
|
10
|
|
|
11
|
|
|
12
|
|
|
12
|
|
|
12
|
|
|
(9)
|
|
|
(17)
|
|
Marketing
|
5
|
|
|
9
|
|
|
9
|
|
|
10
|
|
|
11
|
|
|
(44)
|
|
|
(55)
|
|
Deposit and other
insurance expense
|
9
|
|
|
9
|
|
|
10
|
|
|
8
|
|
|
8
|
|
|
0
|
|
|
13
|
|
Other noninterest
expense
|
47
|
|
|
51
|
|
|
58
|
|
|
49
|
|
|
62
|
|
|
(8)
|
|
|
(24)
|
|
Total noninterest
expense
|
$
|
675
|
|
|
$
|
652
|
|
|
$
|
701
|
|
|
$
|
667
|
|
|
$
|
700
|
|
|
4
|
%
|
|
(4)
|
%
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average full-time
equivalent employees
|
15.7
|
|
|
15.4
|
|
|
15.5
|
|
|
15.7
|
|
|
15.8
|
|
|
2
|
%
|
|
(1)
|
%
|
|
See Page 10 of
Quarterly Financial Supplement for additional
detail.
|
Total noninterest expense for the 2020 second quarter decreased
$25 million, or 4%, from the year-ago
quarter. Other noninterest expense decreased $15 million, or 24%, primarily as a result of
lower travel and business development expense as well as a
$5 million donation to the Columbus
Foundation in the year-ago quarter. Personnel costs decreased
$10 million, or 2%, primarily
reflecting reduced benefits expense and lower equity compensation
expense. Marketing expense decreased $6 million, or 55%, related to the timing of
marketing campaigns in light of the pandemic. Partially
offsetting these decreases, equipment expense increased
$6 million, or 15%, primarily
reflecting the impact of increased technology costs.
Total noninterest expense increased $23
million, or 4%, from the 2020 first quarter. Personnel
costs increased $23 million, or 6%,
primarily reflecting increased incentive compensation, particularly
in mortgage, and the timing of equity compensation expense in the
second quarter. Outside data processing and other services
increased $5 million, or 6%, and
equipment expense increased $5
million, or 12%, both primarily reflecting the impact of
increased technology costs.
Table 7 –
Credit Quality Metrics – Further Deterioration in Economic Outlook
Drives Increase in Allowance
|
|
|
2020
|
|
2019
|
($ in
millions)
|
June 30,
|
|
March 31,
|
|
December
31,
|
|
September
30,
|
|
June 30,
|
Total nonaccrual
loans and leases
|
$
|
648
|
|
|
$
|
558
|
|
|
$
|
468
|
|
|
$
|
438
|
|
|
$
|
425
|
|
Total other real
estate
|
7
|
|
|
10
|
|
|
11
|
|
|
12
|
|
|
14
|
|
Other NPAs
(1)
|
58
|
|
|
18
|
|
|
19
|
|
|
32
|
|
|
21
|
|
Total nonperforming
assets
|
713
|
|
|
586
|
|
|
498
|
|
|
482
|
|
|
460
|
|
Accruing loans and
leases past due 90+ days
|
194
|
|
|
167
|
|
|
171
|
|
|
163
|
|
|
152
|
|
NPAs + accruing loans
& leases past due 90+ days
|
$
|
907
|
|
|
$
|
753
|
|
|
$
|
669
|
|
|
$
|
645
|
|
|
$
|
612
|
|
NAL ratio
(2)
|
0.81
|
%
|
|
0.72
|
%
|
|
0.62
|
%
|
|
0.58
|
%
|
|
0.57
|
%
|
NPA ratio
(3)
|
0.89
|
|
|
0.75
|
|
|
0.66
|
|
|
0.64
|
|
|
0.61
|
|
(NPAs+90
days)/(Loans+OREO)
|
1.13
|
|
|
0.96
|
|
|
0.89
|
|
|
0.86
|
|
|
0.82
|
|
Provision for credit
losses
|
$
|
327
|
|
|
$
|
441
|
|
|
$
|
79
|
|
|
$
|
82
|
|
|
$
|
59
|
|
Net
charge-offs
|
107
|
|
|
117
|
|
|
73
|
|
|
73
|
|
|
48
|
|
Net charge-offs /
Average total loans
|
0.54
|
%
|
|
0.62
|
%
|
|
0.39
|
%
|
|
0.39
|
%
|
|
0.25
|
%
|
Allowance for loans
and lease losses (ALLL)
|
$
|
1,702
|
|
|
$
|
1,504
|
|
|
$
|
783
|
|
|
$
|
780
|
|
|
$
|
774
|
|
Allowance for
unfunded loan commitments and letters of credit
|
119
|
|
|
99
|
|
|
104
|
|
|
101
|
|
|
101
|
|
Allowance for credit
losses (ACL)
|
$
|
1,821
|
|
|
$
|
1,603
|
|
|
$
|
887
|
|
|
$
|
881
|
|
|
$
|
875
|
|
ALLL as a %
of:
|
|
|
|
|
|
|
|
|
|
Total loans and
leases
|
2.12
|
%
|
|
1.93
|
%
|
|
1.04
|
%
|
|
1.04
|
%
|
|
1.03
|
%
|
NALs
|
263
|
|
|
270
|
|
|
167
|
|
|
178
|
|
|
182
|
|
NPAs
|
239
|
|
|
257
|
|
|
157
|
|
|
163
|
|
|
168
|
|
ACL as a %
of:
|
|
|
|
|
|
|
|
|
|
Total loans and
leases
|
2.27
|
%
|
|
2.05
|
%
|
|
1.18
|
%
|
|
1.18
|
%
|
|
1.17
|
%
|
NALs
|
281
|
|
|
287
|
|
|
190
|
|
|
201
|
|
|
206
|
|
NPAs
|
255
|
|
|
273
|
|
|
178
|
|
|
184
|
|
|
190
|
|
|
|
(1)
|
Other
nonperforming assets include certain impaired securities and/or
nonaccrual loans held-for-sale.
|
(2)
|
Total NALs as a %
of total loans and leases.
|
(3)
|
Total NPAs as a %
of sum of loans and leases, other real estate owned, and other
NPAs.
|
|
See Pages 12-15 of
Quarterly Financial Supplement for additional
detail.
|
Asset quality performance continues to be impacted by our oil
and gas portfolio, while the remainder of the commercial portfolio
has performed in line with expectations. The consumer
portfolio metrics continue to reflect our focus on high quality
borrowers.
Nonperforming assets (NPAs) increased to $713 million, or 0.89% of total loans and leases
and OREO, from $460 million, or
0.61%, a year ago. Nonaccrual loans and leases (NALs)
increased $223 million, or 52%, to
$648 million, or 0.81% of total loans
and leases. The year-over-year increase was primarily in the
commercial portfolio, particularly the oil and gas portfolio.
OREO balances decreased $7 million,
or 50%, from the year-ago quarter. On a linked quarter basis,
NALs increased $90 million, or 16%,
while NPAs increased $127 million, or
22%. The oil and gas portfolio contributed approximately 56%
of the newly categorized NPAs.
The provision for credit losses increased $268 million year-over-year to $327 million in the 2020 second quarter.
Net charge-offs (NCOs) increased $59
million to $107 million.
The oil and gas portfolio accounted for approximately 75% of the
$80 million of commercial NCOs,
nearly all of which resulted from charge-offs on loans sold in the
quarter or under contract to be sold. Consumer NCOs of
$27 million were down on both a
year-over-year and linked quarter basis, consistent with our
expectations. NCOs represented an annualized 0.54% of average
loans and leases in the current quarter, down from 0.62% in the
prior quarter and up from 0.25% in the year-ago quarter. We
remain confident in the long-term credit performance of our loan
portfolios.
The allowance for loan and lease losses (ALLL) increased
$928 million from the year-ago
quarter to $1.7 billion, or 2.12% of
total loans and leases. The ALLL as a percentage of
period-end total NALs increased to 263% from 182% over the same
period. The allowance for credit losses (ACL) increased by
$946 million from the year-ago
quarter to $1.8 billion, or 2.27% of
total loans and leases. On a linked quarter basis, the ACL
increased $218 million. We
believe the levels of the ALLL and ACL are appropriate given the
current level of problem loans and the economic outlook.
Capital
|
Table 8 –
Capital Ratios – Ratios Remain within Targeted Operating
Ranges
|
|
|
2020
|
|
2019
|
($ in
billions)
|
June 30,
|
|
March 31,
|
|
December
31,
|
|
September
30,
|
|
June 30,
|
Tangible common
equity / tangible assets ratio
|
7.28
|
%
|
|
7.52
|
%
|
|
7.88
|
%
|
|
8.00
|
%
|
|
7.80
|
%
|
Common equity tier 1
risk-based capital ratio (1)
|
9.84
|
%
|
|
9.47
|
%
|
|
9.88
|
%
|
|
10.02
|
%
|
|
9.88
|
%
|
Regulatory Tier 1
risk-based capital ratio (1)
|
11.79
|
%
|
|
10.81
|
%
|
|
11.26
|
%
|
|
11.41
|
%
|
|
11.28
|
%
|
Regulatory Total
risk-based capital ratio (1)
|
13.84
|
%
|
|
12.74
|
%
|
|
13.04
|
%
|
|
13.29
|
%
|
|
13.13
|
%
|
Total risk-weighted
assets (1)
|
$
|
87.3
|
|
|
$
|
90.2
|
|
|
$
|
87.5
|
|
|
$
|
86.7
|
|
|
$
|
86.3
|
|
|
|
(1)
|
June 30, 2020
figures are estimated. Amounts are presented on a Basel III
standardized approach basis for calculating risk-weighted
assets. The estimated June 30, 2020, and March 31, 2020,
capital ratios reflect Huntington's election of a five-year
transition to delay for two years the full impact of CECL on
regulatory capital, followed by a three-year transition
period.
|
|
|
See Pages 16-17 of
Quarterly Financial Supplement for additional
detail.
|
The tangible common equity to tangible assets ratio was 7.28% at
June 30, 2020, down 52 basis points from a year ago due to
year-over-year balance sheet growth. Common Equity Tier 1
(CET1) risk-based capital ratio was 9.84%, down from 9.88% a year
ago. The regulatory Tier 1 risk-based capital ratio was
11.79% compared to 11.28% at June 30, 2019. The balance
sheet growth impact on regulatory capital ratios was predominantly
offset by a change in asset mix during the 2020 second quarter
related to the PPP loans and elevated deposits at the Federal
Reserve (both of which are 0% risk weighted). The capital
impact of the repurchase of $352
million of common stock over the last four quarters (none in
the 2020 second quarter) and cash dividends effectively offset
earnings, adjusted for the CECL transition, on a year-over-year
basis. The regulatory Tier 1 risk-based capital and total
risk-based capital ratios also reflect the issuance of $500 million of Series F preferred stock in the
2020 second quarter.
We do not currently expect to repurchase common shares during
the 2020 third quarter; however, the Board has authorized the
repurchase of common shares during the 2020 third quarter to offset
compensation plan-related share issuances as permitted by the
Federal Reserve Board. We may, at our discretion, repurchase
common shares as permitted by this Board authorization.
Purchases of common shares under the authorization may
include open market purchases, privately negotiated transactions,
and accelerated share repurchase programs.
Income Taxes
The provision for income taxes was $31
million in the 2020 second quarter and $63 million in the 2019 second quarter. The
effective tax rates for the 2020 second quarter and 2019 second
quarter were 17.2% and 14.6%, respectively. The variance
between the 2020 second quarter and the 2019 second quarter
provision for income taxes and effective tax rates relates
primarily to lower pre-tax income and the impact of stock-based
compensation.
At June 30, 2020, we had a net federal deferred tax
liability of $222 million and a net
state deferred tax asset of $33
million.
Expectations - 2020 Third Quarter
Third quarter revenue is expected to increase approximately 2%
from the 2020 second quarter. The 2020 third quarter NIM is
expected to expand approximately 7 to 10 basis points on a linked
quarter basis. Third quarter noninterest expense is expected
to increase approximately 5% compared to the 2020 second
quarter.
Average loans and leases are expected to remain relatively
unchanged on a linked quarter basis. Average total deposits
are expected to decrease approximately 1% compared to the 2020
second quarter.
Asset quality metrics are expected to continue to be impacted by
the challenged economic outlook. Net charge-offs are expected
to be near 65 basis points in the 2020 third quarter, impacted by
the oil & gas portfolio and broader economic
considerations.
Conference Call / Webcast Information
Huntington's senior management will host an earnings conference
call on July 23, 2020, at 9:00 a.m.
(Eastern Daylight Time). The call may be accessed via a live
Internet webcast at the Investor Relations section of Huntington's
website, www.huntington.com, or through a dial-in telephone number
at (877) 407-8029; Conference ID #13704964. Slides will
be available in the Investor Relations section of Huntington's
website about an hour prior to the call. A replay of the
webcast will be archived in the Investor Relations section of
Huntington's website. A telephone replay will be available
approximately two hours after the completion of the call through
July 31, 2020 at (877) 660-6853 or (201) 612-7415;
conference ID #13704964.
Please see the 2020 Second Quarter Quarterly Financial
Supplement for additional detailed financial performance metrics.
This document can be found on the Investor Relations section of
Huntington's website, http://www.huntington.com.
About Huntington
Huntington Bancshares Incorporated is a regional bank holding
company headquartered in Columbus,
Ohio, with $118 billion of
assets and a network of 839 full-service branches, including 12
Private Client Group offices, and 1,344 ATMs across seven
Midwestern states. Founded in 1866, The Huntington National
Bank and its affiliates provide consumer, small business,
commercial, treasury management, wealth management, brokerage,
trust, and insurance services. Huntington also provides vehicle
finance, equipment finance, national settlement, and capital market
services that extend beyond its core states. Visit
huntington.com for more information.
Caution regarding Forward-Looking Statements
This communication contains certain forward-looking statements,
including, but not limited to, certain plans, expectations, goals,
projections, and statements, which are not historical facts and are
subject to numerous assumptions, risks, and uncertainties.
Statements that do not describe historical or current facts,
including statements about beliefs and expectations, are
forward-looking statements. Forward-looking statements may be
identified by words such as expect, anticipate, believe, intend,
estimate, plan, target, goal, or similar expressions, or future or
conditional verbs such as will, may, might, should, would, could,
or similar variations. The forward-looking statements are
intended to be subject to the safe harbor provided by Section 27A
of the Securities Act of 1933, Section 21E of the Securities
Exchange Act of 1934, and the Private Securities Litigation Reform
Act of 1995.
While there is no assurance that any list of risks and
uncertainties or risk factors is complete, below are certain
factors which could cause actual results to differ materially from
those contained or implied in the forward-looking statements:
changes in general economic, political, or industry conditions; the
magnitude and duration of the COVID-19 pandemic and its impact on
the global economy and financial market conditions and our
business, results of operations, and financial condition;
uncertainty in U.S. fiscal and monetary policy, including the
interest rate policies of the Federal Reserve Board; volatility and
disruptions in global capital and credit markets; movements in
interest rates; reform of LIBOR; competitive pressures on product
pricing and services; success, impact, and timing of our business
strategies, including market acceptance of any new products or
services including those implementing our "Fair Play" banking
philosophy; the nature, extent, timing, and results of governmental
actions, examinations, reviews, reforms, regulations, and
interpretations, including those related to the Dodd-Frank Wall
Street Reform and Consumer Protection Act and the Basel III
regulatory capital reforms, as well as those involving the OCC,
Federal Reserve, FDIC, and CFPB; and other factors that may affect
our future results. Additional factors that could cause
results to differ materially from those described above can be
found in our 2019 Annual Report on Form 10-K, and our Quarterly
Report on Form 10-Q for the quarter ended March 31, 2020, as well as our subsequent
Securities and Exchange Commission ("SEC") filings, which are on
file with the SEC and available in the "Investor Relations" section
of our website, http://www.huntington.com, under the heading
"Publications and Filings."
All forward-looking statements speak only as of the date they
are made and are based on information available at that time.
We do not assume any obligation to update forward-looking
statements to reflect circumstances or events that occur after the
date the forward-looking statements were made or to reflect the
occurrence of unanticipated events except as required by federal
securities laws. As forward-looking statements involve
significant risks and uncertainties, caution should be exercised
against placing undue reliance on such statements.
Basis of Presentation
Use of Non-GAAP Financial Measures
This document contains GAAP financial measures and non-GAAP
financial measures where management believes it to be helpful in
understanding Huntington's results of operations or financial
position. Where non-GAAP financial measures are used, the
comparable GAAP financial measure, as well as the reconciliation to
the comparable GAAP financial measure, can be found in this
document, conference call slides, or the Form 8-K related to this
document, all of which can be found in the Investor Relations
section of Huntington's website, http://www.huntington.com.
Annualized Data
Certain returns, yields, performance ratios, or quarterly growth
rates are presented on an "annualized" basis. This is done
for analytical and decision-making purposes to better discern
underlying performance trends when compared to full-year or
year-over-year amounts. For example, loan and deposit growth
rates, as well as net charge-off percentages, are most often
expressed in terms of an annual rate like 8%. As such, a 2%
growth rate for a quarter would represent an annualized 8% growth
rate.
Fully-Taxable Equivalent Interest Income and Net Interest
Margin
Income from tax-exempt earning assets is increased by an amount
equivalent to the taxes that would have been paid if this income
had been taxable at statutory rates. This adjustment puts all
earning assets, most notably tax-exempt municipal securities and
certain lease assets, on a common basis that facilitates comparison
of results to results of competitors.
Earnings per Share Equivalent Data
Significant income or expense items may be expressed on a per
common share basis. This is done for analytical and
decision-making purposes to better discern underlying trends in
total corporate earnings per share performance excluding the impact
of such items. Investors may also find this information
helpful in their evaluation of our financial performance against
published earnings per share mean estimate amounts, which typically
exclude the impact of Significant Items. Earnings per share
equivalents are usually calculated by applying an effective tax
rate to a pre-tax amount to derive an after-tax amount, which is
divided by the average shares outstanding during the respective
reporting period. Occasionally, when the item involves
special tax treatment, the after-tax amount is disclosed
separately, with this then being the amount used to calculate the
earnings per share equivalent.
Rounding
Please note that columns of data in this document may not add
due to rounding.
Significant Items
From time to time, revenue, expenses, or taxes are impacted by
items judged by management to be outside of ordinary banking
activities and/or by items that, while they may be associated with
ordinary banking activities, are so unusually large that their
outsized impact is believed by management at that time to be
infrequent or short term in nature. We refer to such items as
"Significant Items". Most often, these Significant Items
result from factors originating outside the company – e.g.,
regulatory actions/assessments, windfall gains, changes in
accounting principles, one-time tax assessments/refunds, and
litigation actions. In other cases they may result from
management decisions associated with significant corporate actions
out of the ordinary course of business – e.g., merger/restructuring
charges, recapitalization actions, and goodwill impairment.
Even though certain revenue and expense items are naturally
subject to more volatility than others due to changes in market and
economic environment conditions, as a general rule volatility alone
does not define a Significant Item. For example, changes in
the provision for credit losses, gains/losses from investment
activities, and asset valuation write-downs reflect ordinary
banking activities and are, therefore, typically excluded from
consideration as a Significant Item.
Management believes the disclosure of "Significant Items", when
appropriate, aids analysts/investors in better understanding
corporate performance and trends so that they can ascertain which
of such items, if any, they may wish to include/exclude from their
analysis of the company's performance - i.e., within the context of
determining how that performance differed from their expectations,
as well as how, if at all, to adjust their estimates of future
performance accordingly. To this end, management has adopted
a practice of listing "Significant Items" in our external
disclosure documents (e.g., earnings press releases, quarterly
performance discussions, investor presentations, and Forms 10-Q and
10-K).
"Significant Items" for any particular period are not intended
to be a complete list of items that may materially impact current
or future period performance. A number of items could
materially impact these periods, including those which may be
described from time to time in Huntington's filings with the
Securities and Exchange Commission.
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