COLUMBUS, Ohio, July 25, 2019 /PRNewswire/ -- Huntington
Bancshares Incorporated (Nasdaq: HBAN; www.huntington.com) reported
net income for the 2019 second quarter of $364 million, an increase of 3% from the year-ago
quarter. Earnings per common share (EPS) for the 2019 second
quarter were $0.33, up 10% from the
year-ago quarter. Tangible book value per common share as of
2019 second quarter-end was $7.97, a
10% year-over-year increase. Return on average assets was
1.36%, return on average common equity was 13.5%, and return on
average tangible common equity was 17.7%.
"We are pleased with our solid second quarter performance," said
Steve Steinour, chairman, president,
and CEO. "We remain disciplined in the execution of our
strategies and have taken appropriate measures to drive long-term
performance. In the quarter, we completed the sale of our
Wisconsin retail branches and
optimized our balance sheet through the sale of securities and the
exit of certain loan and deposit relationships which did not meet
our heightened return profile. We are focused on improving
long-term returns through efficient capital allocation, prudent
pricing, and disciplined growth."
"During the second quarter, the downward movement in LIBOR and
the flattening of the yield curve compressed the NIM. Due to
the changing interest rate outlook, market volatility, and the
market's expectations for Fed interest rate cuts during the second
half of this year, we took certain actions to drive results in this
more challenging interest rate environment. We accelerated
the implementation of our hedging program and have now
substantially executed the planned hedging transactions. We
are better positioned to manage through a lower interest rate
environment going forward. Also, consistent with our
commitment to adjust expense growth as the revenue environment
changes, we moderated the pace of discretionary spending and
certain planned investments in order to reduce expense
growth. We remain committed to driving positive operating
leverage for the seventh consecutive year in 2019."
"Huntington received the highest score in the J.D. Power 2019
U.S. Online Banking and Banking Mobile App Satisfaction
Studies. We are pleased with this independent recognition of
our mobile and digital technology, which follows the launch of our
digital platform "The Hub" last year. Our investments
continue to build on our customer experience advantage to grow
market share and share of wallet in the markets we
serve."1
In accordance with our 2019 capital plan, last week the Board
approved a 7% increase to the quarterly cash dividend on the
Company's common stock. Following the completion of the 2018
capital plan's share repurchase in the 2019 second quarter, the
Board also approved the repurchase of up to $513 million of common shares over the next four
quarters. Purchases of common stock under the authorization
may include open market purchases, privately negotiated
transactions, and accelerated share repurchase programs.
"The underlying economic fundamentals in our footprint continue
to reflect a favorable outlook for both consumers and
businesses. Our business customers remain positive yet
continue to experience a tight labor market. Our loan
pipelines remain steady as competition for loans and deposits is
rational. Our credit metrics remain strong. We do not
foresee a recession in the near term; however, our core earnings
power, strong capital, aggregate moderate-to-low risk appetite, and
long-term strategic alignment position us to withstand economic
headwinds, including changes in the interest rate outlook,"
Steinour said.
2019 Second Quarter Highlights compared with
2018 Second Quarter:
- Fully-taxable equivalent total revenue increased $66 million, or 6%.
- Fully-taxable equivalent net interest income increased
$28 million, or 4%.
- Net interest margin increased 2 basis points to 3.31%.
- Noninterest income increased $38
million, or 11%, including a $15
million gain on the sale of the Wisconsin retail branches.
- Noninterest expense increased $48
million, or 7%.
- Efficiency ratio of 57.6%, up from 56.6%.
- Average loans and leases increased $3.0
billion, or 4%, year-over-year, including a $1.7 billion, or 5%, increase in consumer loans
and a $1.3 billion, or 4%, increase
in commercial loans.
- Average core deposits increased $3.3
billion, or 4%, year-over-year, driven by a $2.4 billion, or 11%, increase in money market
deposits and a $2.1 billion, or 54%,
increase in core certificates of deposit.
- Net charge-offs equated to 0.25% of average loans and leases,
up from 0.16%.
- Nonperforming asset ratio of 0.61%, up from 0.57%.
- Common Equity Tier 1 (CET1) risk-based capital ratio of 9.88%,
down from 10.53% and within our 9% to 10% operating guideline.
- Tangible common equity (TCE) ratio of 7.80%, up from 7.78%.
- Tangible book value per common share increased $0.70, or 10%, to $7.97.
- Repurchased $152 million of
common stock (11.3 million shares at an average price of
$13.40 per share).
1Huntington received the highest score in the J.D.
Power 2019 US Online Banking and Banking Mobile App Satisfaction
Studies of customers' satisfaction with their financial
institution's online experience and mobile applications for banking
account management. Visit jdpower.com/awards
Table 1 – Earnings Performance Summary
|
2019
|
|
2018
|
(in millions,
except per share data)
|
Second
|
|
First
|
|
Fourth
|
|
Third
|
|
Second
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
Net Income
|
$
|
364
|
|
|
$
|
358
|
|
|
$
|
334
|
|
|
$
|
378
|
|
|
$
|
355
|
|
Diluted earnings per
common share
|
0.33
|
|
|
0.32
|
|
|
0.29
|
|
|
0.33
|
|
|
0.30
|
|
|
|
|
|
|
|
|
|
|
|
Return on average
assets
|
1.36
|
%
|
|
1.35
|
%
|
|
1.25
|
%
|
|
1.42
|
%
|
|
1.36
|
%
|
Return on average
common equity
|
13.5
|
|
|
13.8
|
|
|
12.9
|
|
|
14.3
|
|
|
13.2
|
|
Return on average
tangible common equity
|
17.7
|
|
|
18.3
|
|
|
17.3
|
|
|
19.0
|
|
|
17.6
|
|
Net interest
margin
|
3.31
|
|
|
3.39
|
|
|
3.41
|
|
|
3.32
|
|
|
3.29
|
|
Efficiency
ratio
|
57.6
|
|
|
55.8
|
|
|
58.7
|
|
|
55.3
|
|
|
56.6
|
|
|
|
|
|
|
|
|
|
|
|
Tangible book value
per common share
|
$
|
7.97
|
|
|
$
|
7.67
|
|
|
$
|
7.34
|
|
|
$
|
7.06
|
|
|
$
|
7.27
|
|
Cash dividends
declared per common share
|
0.14
|
|
|
0.14
|
|
|
0.14
|
|
|
0.14
|
|
|
0.11
|
|
Average diluted
shares outstanding
|
1,060
|
|
|
1,066
|
|
|
1,073
|
|
|
1,104
|
|
|
1,123
|
|
|
|
|
|
|
|
|
|
|
|
Average earning
assets
|
$
|
99,188
|
|
|
$
|
99,212
|
|
|
$
|
97,752
|
|
|
$
|
96,753
|
|
|
$
|
96,363
|
|
Average loans and
leases
|
74,932
|
|
|
74,775
|
|
|
73,822
|
|
|
72,751
|
|
|
71,887
|
|
Average core
deposits
|
78,723
|
|
|
79,033
|
|
|
79,078
|
|
|
77,680
|
|
|
75,386
|
|
|
|
|
|
|
|
|
|
|
|
Tangible common
equity / tangible assets ratio
|
7.80
|
%
|
|
7.57
|
%
|
|
7.21
|
%
|
|
7.25
|
%
|
|
7.78
|
%
|
Common equity Tier 1
risk-based capital ratio
|
9.88
|
|
|
9.84
|
|
|
9.65
|
|
|
9.89
|
|
|
10.53
|
|
|
|
|
|
|
|
|
|
|
|
NCOs as a % of
average loans and leases
|
0.25
|
%
|
|
0.38
|
%
|
|
0.27
|
%
|
|
0.16
|
%
|
|
0.16
|
%
|
NAL ratio
|
0.57
|
|
|
0.56
|
|
|
0.45
|
|
|
0.50
|
|
|
0.52
|
|
ALLL as a % of total
loans and leases
|
1.03
|
|
|
1.02
|
|
|
1.03
|
|
|
1.04
|
|
|
1.02
|
|
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 Income Growth
Primarily Driven by Increase in Average Earning Assets
|
2019
|
|
2018
|
|
|
|
|
($ in
millions)
|
Second
|
|
First
|
|
Fourth
|
|
Third
|
|
Second
|
|
Change (%)
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
LQ
|
|
YOY
|
Net interest
income
|
$
|
812
|
|
|
$
|
822
|
|
|
$
|
833
|
|
|
$
|
802
|
|
|
$
|
784
|
|
|
(1)
|
%
|
|
4
|
%
|
FTE
adjustment
|
7
|
|
|
7
|
|
|
8
|
|
|
8
|
|
|
7
|
|
|
0
|
|
|
0
|
|
Net interest income -
FTE
|
819
|
|
|
829
|
|
|
841
|
|
|
810
|
|
|
791
|
|
|
(1)
|
|
|
4
|
|
Noninterest
income
|
374
|
|
|
319
|
|
|
329
|
|
|
342
|
|
|
336
|
|
|
17
|
|
|
11
|
|
Total revenue -
FTE
|
$
|
1,193
|
|
|
$
|
1,148
|
|
|
$
|
1,170
|
|
|
$
|
1,152
|
|
|
$
|
1,127
|
|
|
4
|
%
|
|
6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Change (bp)
|
Yield /
Cost
|
|
|
|
|
|
|
|
|
|
|
LQ
|
|
YOY
|
Total earning
assets
|
4.35
|
%
|
|
4.40
|
%
|
|
4.32
|
%
|
|
4.16
|
%
|
|
4.07
|
%
|
|
(5)
|
|
|
28
|
|
Total loans and
leases
|
4.80
|
|
|
4.85
|
|
|
4.76
|
|
|
4.60
|
|
|
4.49
|
|
|
(5)
|
|
|
31
|
|
Total
securities
|
2.79
|
|
|
2.86
|
|
|
2.84
|
|
|
2.73
|
|
|
2.71
|
|
|
(7)
|
|
|
8
|
|
Total
interest-bearing liabilities
|
1.39
|
|
|
1.35
|
|
|
1.23
|
|
|
1.13
|
|
|
1.05
|
|
|
4
|
|
|
34
|
|
Total
interest-bearing deposits
|
0.97
|
|
|
0.94
|
|
|
0.84
|
|
|
0.73
|
|
|
0.59
|
|
|
3
|
|
|
38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest rate
spread
|
2.96
|
|
|
3.05
|
|
|
3.09
|
|
|
3.03
|
|
|
3.02
|
|
|
(9)
|
|
|
(6)
|
|
Impact of
noninterest-bearing funds on margin
|
0.35
|
|
|
0.34
|
|
|
0.32
|
|
|
0.29
|
|
|
0.27
|
|
|
1
|
|
|
8
|
|
Net interest
margin
|
3.31
|
%
|
|
3.39
|
%
|
|
3.41
|
%
|
|
3.32
|
%
|
|
3.29
|
%
|
|
(8)
|
|
|
2
|
|
See Pages 7-9 of
Quarterly Financial Supplement for additional
detail.
|
Fully-taxable equivalent (FTE) net interest income for the 2019
second quarter increased $28 million,
or 4%, from the 2018 second quarter. This reflected the
benefit from the $2.8 billion, or 3%,
increase in average earning assets coupled with a 2 basis point
increase in the FTE net interest margin (NIM) to 3.31%. The NIM
expansion reflected a 28 basis point year-over-year increase in
average earning asset yields and an 8 basis point increase in the
benefit from noninterest-bearing funds, partially offset by a 34
basis point increase in average interest-bearing liability
costs. The increase in earning asset yields was primarily
driven by higher consumer loan yields and the impact of higher
LIBOR rates on commercial loan yields. The increase in
average interest-bearing liability costs primarily reflects higher
deposit costs. Embedded within these yields and costs, FTE
net interest income during the 2019 second quarter included
$13 million, or approximately 5 basis
points, of purchase accounting impact compared to $19 million, or approximately 8 basis points, in
the year-ago quarter.
Compared to the 2019 first quarter, FTE net interest income
decreased $10 million, or 1%,
primarily reflecting the NIM compression of 8 basis points as
average earning assets remained flat. The NIM contraction
reflected a 5 basis point decrease in average earning asset yields
and a 4 basis point increase in average interest-bearing liability
costs, partially offset by a 1 basis point increase in the benefit
from noninterest-bearing funds. The decrease in earning asset
yields was primarily driven by the impact of lower LIBOR rates in
the quarter on commercial loan yields, the incremental cost of the
hedging program, and lower securities yields. The increase in
average interest-bearing liability costs primarily reflects higher
money market deposit costs. The purchase accounting impact on
the NIM was approximately 5 basis points in the 2019 second
quarter, down 1 basis point from the prior quarter. The net
impact of the asset and liability derivatives on the NIM was a less
than 1 basis point reduction in the 2019 second quarter as the
liability derivatives nearly offset the impact of the asset
derivatives.
Table 3 – Average Earning Assets – Continued
Year-over-Year C&I and Residential Mortgage Loan Growth
Reflects Underlying Economic Strength of the Footprint
|
2019
|
|
2018
|
|
|
|
|
($ in
billions)
|
Second
|
|
First
|
|
Fourth
|
|
Third
|
|
Second
|
|
Change (%)
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
LQ
|
|
YOY
|
Commercial and
industrial
|
$
|
30.6
|
|
|
$
|
30.5
|
|
|
$
|
29.6
|
|
|
$
|
28.9
|
|
|
$
|
28.9
|
|
|
0
|
%
|
|
6
|
%
|
Commercial real
estate
|
6.9
|
|
|
6.9
|
|
|
6.9
|
|
|
7.2
|
|
|
7.4
|
|
|
1
|
|
|
(6)
|
|
Total
commercial
|
37.5
|
|
|
37.4
|
|
|
36.5
|
|
|
36.0
|
|
|
36.2
|
|
|
0
|
|
|
4
|
|
Automobile
|
12.2
|
|
|
12.4
|
|
|
12.4
|
|
|
12.4
|
|
|
12.3
|
|
|
(1)
|
|
|
0
|
|
Home
equity
|
9.5
|
|
|
9.6
|
|
|
9.8
|
|
|
9.9
|
|
|
9.9
|
|
|
(2)
|
|
|
(5)
|
|
Residential
mortgage
|
11.0
|
|
|
10.8
|
|
|
10.6
|
|
|
10.2
|
|
|
9.6
|
|
|
2
|
|
|
14
|
|
RV and
marine
|
3.4
|
|
|
3.3
|
|
|
3.2
|
|
|
3.0
|
|
|
2.7
|
|
|
4
|
|
|
28
|
|
Other
consumer
|
1.3
|
|
|
1.3
|
|
|
1.3
|
|
|
1.2
|
|
|
1.2
|
|
|
(2)
|
|
|
9
|
|
Total
consumer
|
37.4
|
|
|
37.4
|
|
|
37.3
|
|
|
36.7
|
|
|
35.7
|
|
|
0
|
|
|
5
|
|
Total loans and
leases
|
74.9
|
|
|
74.8
|
|
|
73.8
|
|
|
72.8
|
|
|
71.9
|
|
|
0
|
|
|
4
|
|
Total
securities
|
22.9
|
|
|
23.1
|
|
|
22.7
|
|
|
23.2
|
|
|
23.8
|
|
|
(1)
|
|
|
(4)
|
|
Held-for-sale and
other earning assets
|
1.4
|
|
|
1.3
|
|
|
1.3
|
|
|
0.8
|
|
|
0.7
|
|
|
6
|
|
|
97
|
|
Total earning
assets
|
$
|
99.2
|
|
|
$
|
99.2
|
|
|
$
|
97.8
|
|
|
$
|
96.8
|
|
|
$
|
96.4
|
|
|
0
|
%
|
|
3
|
%
|
See Page 7 of
Quarterly Financial Supplement for additional
detail.
|
Average earning assets for the 2019 second quarter increased
$2.8 billion, or 3%, from the
year-ago quarter, primarily reflecting a $3.0 billion, or 4%, increase in average loans
and leases. Average commercial and industrial (C&I) loans
increased $1.8 billion, or 6%,
reflecting growth in corporate banking, asset finance, and dealer
floorplan. Average residential mortgage loans increased
$1.4 billion, or 14%, driven by the
successful expansion of our home lending business within our
existing markets. Average RV and marine loans increased
$0.7 billion, or 28%, reflecting
market share increases across our markets, while maintaining our
commitment to super prime originations. Held-for-sale and
other earning assets increased $0.7
billion, or 97%, primarily due to the inclusion of deposits
in Federal Reserve Bank balances. These balances were treated
as non-earning assets prior to the fourth quarter 2018.
Average total securities decreased $0.9
billion, or 4%, primarily due to runoff in the portfolio in
2018 and balance sheet optimization actions taken in the 2019
second quarter.
Compared to the 2019 first quarter, average earning assets were
relatively unchanged. Average commercial loans increased less
than 1%. The disciplined growth included continued active
portfolio management associated with our heightened return
requirements. Consumer loans were relatively unchanged, with
consistency across products. Average total securities
decreased $0.3 billion, or 1%,
primarily reflecting the balance sheet optimization actions taken
in the 2019 second quarter.
On June 14, 2019, Huntington
completed the sale of the Wisconsin retail branches, which included
$117 million of loans
held-for-sale.
Table 4 – Average Liabilities – Continued Year-over-Year
Growth in Core Deposits
|
2019
|
|
2018
|
|
|
|
Second
|
|
First
|
|
Fourth
|
|
Third
|
|
Second
|
|
Change (%)
|
($ in
billions)
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
LQ
|
|
YOY
|
Demand deposits -
noninterest-bearing
|
$
|
19.8
|
|
|
$
|
19.9
|
|
|
$
|
20.4
|
|
|
$
|
20.2
|
|
|
$
|
20.4
|
|
|
(1)
|
%
|
|
(3)
|
%
|
Demand deposits -
interest-bearing
|
19.7
|
|
|
19.8
|
|
|
19.9
|
|
|
19.6
|
|
|
19.1
|
|
|
0
|
|
|
3
|
|
Total demand
deposits
|
39.5
|
|
|
39.7
|
|
|
40.3
|
|
|
39.8
|
|
|
39.5
|
|
|
(1)
|
|
|
0
|
|
Money market
deposits
|
23.3
|
|
|
22.9
|
|
|
22.6
|
|
|
21.5
|
|
|
20.9
|
|
|
2
|
|
|
11
|
|
Savings and other
domestic deposits
|
10.1
|
|
|
10.3
|
|
|
10.5
|
|
|
11.4
|
|
|
11.1
|
|
|
(2)
|
|
|
(9)
|
|
Core certificates of
deposit
|
5.9
|
|
|
6.1
|
|
|
5.7
|
|
|
4.9
|
|
|
3.8
|
|
|
(3)
|
|
|
54
|
|
Total core
deposits
|
78.7
|
|
|
79.0
|
|
|
79.1
|
|
|
77.7
|
|
|
75.4
|
|
|
0
|
|
|
4
|
|
Other domestic
deposits of $250,000 or more
|
0.3
|
|
|
0.3
|
|
|
0.3
|
|
|
0.3
|
|
|
0.2
|
|
|
(7)
|
|
|
28
|
|
Brokered deposits and
negotiable CDs
|
2.7
|
|
|
3.4
|
|
|
3.5
|
|
|
3.5
|
|
|
3.7
|
|
|
(21)
|
|
|
(27)
|
|
Total
deposits
|
$
|
81.7
|
|
|
$
|
82.7
|
|
|
$
|
82.9
|
|
|
$
|
81.5
|
|
|
$
|
79.3
|
|
|
(1)
|
%
|
|
3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term
borrowings
|
$
|
3.2
|
|
|
$
|
2.3
|
|
|
$
|
1.0
|
|
|
$
|
1.7
|
|
|
$
|
3.1
|
|
|
36
|
%
|
|
3
|
%
|
Long-term
debt
|
8.9
|
|
|
9.0
|
|
|
8.9
|
|
|
8.9
|
|
|
9.2
|
|
|
(1)
|
|
|
(3)
|
|
Total debt
|
$
|
12.1
|
|
|
$
|
11.3
|
|
|
$
|
9.9
|
|
|
$
|
10.6
|
|
|
$
|
12.3
|
|
|
7
|
%
|
|
(2)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
interest-bearing liabilities
|
$
|
74.0
|
|
|
$
|
74.1
|
|
|
$
|
72.4
|
|
|
$
|
71.9
|
|
|
$
|
71.2
|
|
|
0
|
%
|
|
4
|
%
|
See Page 7 of
Quarterly Financial Supplement for additional
detail.
|
Average total interest-bearing liabilities for the 2019 second
quarter increased $2.8 billion, or
4%, from the year-ago quarter. Average total deposits
increased $2.4 billion, or 3%, while
average total core deposits increased $3.3
billion, or 4%. Average money market deposits
increased $2.4 billion, or 11%,
reflecting the shift in promotional pricing to consumer money
market accounts in mid-2018. Average core certificates of
deposit increased $2.1 billion, or
54%, reflecting consumer deposit growth initiatives primarily in
the first three quarters of 2018. Average interest-bearing
demand deposits increased $0.6
billion, or 3%, primarily driven by the shift in commercial
balances from noninterest-bearing to interest-bearing
checking. Savings and other domestic deposits decreased
$1.0 billion, or 9%, primarily
reflecting a continued shift in consumer product mix. Average
brokered deposits and negotiable CDs decreased $1.0 billion, or 27%, as growth in core deposits
reduced reliance on wholesale funding. Average
noninterest-bearing demand deposits decreased $0.6 billion, or 3%, primarily driven by the
aforementioned shift in commercial checking balances, partially
offset by continued growth in consumer noninterest-bearing
checking.
Compared to the 2019 first quarter, average total
interest-bearing liabilities decreased $0.1
billion, or less than 1%. Average total deposits
decreased $1.1 billion, or 1%.
Average short-term borrowings increased $0.8
billion, or 36%, which was nearly offset by a decrease of
$0.7 billion, or 21%, in average
brokered deposits and negotiable CDs due to changes in the
wholesale funding mix.
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 – Broad-Based Fee Income
Growth and a $15 Million Gain on the
Sale of Wisconsin Retail Branches Drive Year-over-Year
Growth
|
2019
|
|
2018
|
|
|
|
Second
|
|
First
|
|
Fourth
|
|
Third
|
|
Second
|
|
Change (%)
|
($ in
millions)
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
LQ
|
|
YOY
|
Service charges on
deposit accounts
|
$
|
92
|
|
|
$
|
87
|
|
|
$
|
94
|
|
|
$
|
93
|
|
|
$
|
91
|
|
|
6
|
%
|
|
1
|
%
|
Card and payment
processing income
|
63
|
|
|
56
|
|
|
58
|
|
|
57
|
|
|
56
|
|
|
13
|
|
|
13
|
|
Trust and investment
management services
|
43
|
|
|
44
|
|
|
42
|
|
|
43
|
|
|
42
|
|
|
(2)
|
|
|
2
|
|
Mortgage banking
income
|
34
|
|
|
21
|
|
|
23
|
|
|
31
|
|
|
28
|
|
|
62
|
|
|
21
|
|
Capital markets
fees
|
34
|
|
|
22
|
|
|
34
|
|
|
26
|
|
|
26
|
|
|
55
|
|
|
31
|
|
Insurance
income
|
23
|
|
|
21
|
|
|
21
|
|
|
19
|
|
|
21
|
|
|
10
|
|
|
10
|
|
Bank owned life
insurance income
|
15
|
|
|
16
|
|
|
16
|
|
|
19
|
|
|
17
|
|
|
(6)
|
|
|
(12)
|
|
Gain on sale of loans
and leases
|
13
|
|
|
13
|
|
|
16
|
|
|
16
|
|
|
15
|
|
|
0
|
|
|
(13)
|
|
Securities gains
(losses)
|
(2)
|
|
|
0
|
|
|
(19)
|
|
|
(2)
|
|
|
0
|
|
|
NM
|
|
NM
|
Other
income
|
59
|
|
|
39
|
|
|
44
|
|
|
40
|
|
|
40
|
|
|
51
|
|
|
48
|
|
Total noninterest
income
|
$
|
374
|
|
|
$
|
319
|
|
|
$
|
329
|
|
|
$
|
342
|
|
|
$
|
336
|
|
|
17
|
%
|
|
11
|
%
|
See Pages 10-11 of
Quarterly Financial Supplement for additional
detail.
|
Total noninterest income for the 2019 second quarter increased
$38 million, or 11%, from the
year-ago quarter. Other income increased $19 million, or 48%, as a result of the
$15 million gain on the sale of the
Wisconsin retail branches and a
$5 million mark-to-market adjustment
on economic hedges. Capital markets fees increased
$8 million, or 31%, driven by
increased underwriting activity primarily associated with the
Hutchinson, Shockey, Erley & Co. acquisition. Card and
payment processing income increased $7
million, or 13%, primarily due to continued household and
business activity growth. Mortgage banking income increased
$6 million, or 21%, primarily
reflecting higher overall salable spreads.
Compared to the 2019 first quarter, total noninterest income
increased $55 million, or 17%.
Other income increased $20 million,
or 51%, as a result of the $15
million gain on the sale of the Wisconsin retail branches and a $5 million mark-to-market adjustment on economic
hedges. Mortgage banking income increased $13 million, or 62%, primarily reflecting
seasonally higher origination volume. Capital markets fees
increased $12 million, or 55%,
primarily driven by the $6 million of
unfavorable commodities derivatives mark-to-market adjustments in
the prior quarter and increased interest rate derivative and
underwriting activity. Card and payment processing income
increased $7 million, or 13%,
primarily due to continued household and business activity
growth. Service charges on deposit accounts increased
$5 million, or 6%, primarily
reflecting seasonality.
Noninterest Expense
Table 6 – Noninterest Expense – Continued Thoughtful
Investment in Colleagues and Technology
|
2019
|
|
2018
|
|
|
|
Second
|
|
First
|
|
Fourth
|
|
Third
|
|
Second
|
|
Change (%)
|
($ in
millions)
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
LQ
|
|
YOY
|
Personnel
costs
|
$
|
428
|
|
|
$
|
394
|
|
|
$
|
399
|
|
|
$
|
388
|
|
|
$
|
396
|
|
|
9
|
%
|
|
8
|
%
|
Outside data
processing and other services
|
89
|
|
|
81
|
|
|
83
|
|
|
69
|
|
|
69
|
|
|
10
|
|
|
29
|
|
Net
occupancy
|
38
|
|
|
42
|
|
|
70
|
|
|
38
|
|
|
35
|
|
|
(10)
|
|
|
9
|
|
Equipment
|
40
|
|
|
40
|
|
|
48
|
|
|
38
|
|
|
38
|
|
|
0
|
|
|
5
|
|
Deposit and other
insurance expense
|
8
|
|
|
8
|
|
|
9
|
|
|
18
|
|
|
18
|
|
|
0
|
|
|
(56)
|
|
Professional
services
|
12
|
|
|
12
|
|
|
17
|
|
|
17
|
|
|
15
|
|
|
0
|
|
|
(20)
|
|
Marketing
|
11
|
|
|
7
|
|
|
15
|
|
|
12
|
|
|
18
|
|
|
57
|
|
|
(39)
|
|
Amortization of
intangibles
|
12
|
|
|
13
|
|
|
13
|
|
|
13
|
|
|
13
|
|
|
(8)
|
|
|
(8)
|
|
Other
expense
|
62
|
|
|
56
|
|
|
57
|
|
|
58
|
|
|
50
|
|
|
11
|
|
|
24
|
|
Total noninterest
expense
|
$
|
700
|
|
|
$
|
653
|
|
|
$
|
711
|
|
|
$
|
651
|
|
|
$
|
652
|
|
|
7
|
%
|
|
7
|
%
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average full-time
equivalent employees
|
15.8
|
|
|
15.7
|
|
|
15.7
|
|
|
15.8
|
|
|
15.7
|
|
|
1
|
%
|
|
1
|
%
|
See Page 10 of
Quarterly Financial Supplement for additional
detail.
|
Total noninterest expense for the 2019 second quarter increased
$48 million, or 7%, from the year-ago
quarter. Personnel costs increased $32
million, or 8%, primarily reflecting the implementation of
annual merit increases in the 2019 second quarter, increased
incentive compensation, and strategic hiring. Outside data
processing and other services increased $20
million, or 29%, primarily driven by higher technology
investment costs. Other expense increased $12 million, or 24%, primarily as a result of a
$5 million Columbus Foundation
donation in the 2019 second quarter and the impact of the new lease
accounting standard on personal property tax expense. Deposit
and other insurance expense decreased $10
million, or 56%, due to the discontinuation of the FDIC
surcharge in the 2018 fourth quarter. Marketing decreased
$7 million, or 39%, reflecting the
timing of marketing campaigns and deposit promotions.
Additionally, included in total noninterest expense during the
quarter was $2 million of
transaction-related expense associated with the sale of the
Wisconsin retail branches.
Total noninterest expense increased $47
million, or 7%, from the 2019 first quarter. Personnel
costs increased $34 million, or 9%,
primarily reflecting the timing of equity compensation expense in
the second quarter and higher wages and incentive
compensation. Outside data processing and other services
increased $8 million, or 10%,
primarily driven by higher technology investment costs. Other
expense increased $6 million, or 11%,
primarily as a result of a $5 million
Columbus Foundation donation in the 2019 second quarter. Net
occupancy decreased $4 million, or
10%, reflecting a decrease of seasonal expenses partially offset by
a $3 million impairment of a
corporate building.
Table 7 – Credit Quality Metrics – NCOs Below Low End of
Average Through-the-Cycle Target Range
|
2019
|
|
2018
|
($ in
millions)
|
June 30,
|
|
March 31,
|
|
December
31,
|
|
September
30,
|
|
June 30,
|
Total nonaccrual
loans and leases
|
$
|
425
|
|
|
$
|
417
|
|
|
$
|
340
|
|
|
$
|
370
|
|
|
$
|
378
|
|
Total other real
estate
|
14
|
|
|
18
|
|
|
23
|
|
|
27
|
|
|
28
|
|
Other NPAs
(1)
|
21
|
|
|
26
|
|
|
24
|
|
|
6
|
|
|
6
|
|
Total nonperforming
assets
|
460
|
|
|
461
|
|
|
387
|
|
|
403
|
|
|
412
|
|
Accruing loans and
leases past due 90 days or more
|
152
|
|
|
147
|
|
|
170
|
|
|
154
|
|
|
132
|
|
NPAs + accruing loans
and lease past due 90 days or more
|
$
|
612
|
|
|
$
|
608
|
|
|
$
|
557
|
|
|
$
|
557
|
|
|
$
|
544
|
|
NAL ratio
(2)
|
0.57
|
%
|
|
0.56
|
%
|
|
0.45
|
%
|
|
0.50
|
%
|
|
0.52
|
%
|
NPA ratio
(3)
|
0.61
|
|
|
0.61
|
|
|
0.52
|
|
|
0.55
|
|
|
0.57
|
|
(NPAs+90
days)/(Loans+OREO)
|
0.82
|
|
|
0.81
|
|
|
0.74
|
|
|
0.76
|
|
|
0.75
|
|
Provision for credit
losses
|
$
|
59
|
|
|
$
|
67
|
|
|
$
|
60
|
|
|
$
|
53
|
|
|
$
|
56
|
|
Net
charge-offs
|
48
|
|
|
71
|
|
|
50
|
|
|
29
|
|
|
28
|
|
Net charge-offs /
Average total loans
|
0.25
|
%
|
|
0.38
|
%
|
|
0.27
|
%
|
|
0.16
|
%
|
|
0.16
|
%
|
Allowance for loans
and lease losses (ALLL)
|
$
|
774
|
|
|
$
|
764
|
|
|
$
|
772
|
|
|
$
|
761
|
|
|
$
|
741
|
|
Allowance for
unfunded loan commitments and letters of credit
|
101
|
|
|
100
|
|
|
96
|
|
|
97
|
|
|
93
|
|
Allowance for credit
losses (ACL)
|
$
|
875
|
|
|
$
|
864
|
|
|
$
|
868
|
|
|
$
|
858
|
|
|
$
|
834
|
|
ALLL as a %
of:
|
|
|
|
|
|
|
|
|
|
Total loans and
leases
|
1.03
|
%
|
|
1.02
|
%
|
|
1.03
|
%
|
|
1.04
|
%
|
|
1.02
|
%
|
NALs
|
182
|
|
|
183
|
|
|
228
|
|
|
206
|
|
|
197
|
|
NPAs
|
168
|
|
|
166
|
|
|
200
|
|
|
189
|
|
|
180
|
|
(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.
|
Overall asset quality performance remained consistent with prior
periods. The consumer portfolio metrics continue to reflect
our focus on high quality borrowers. The commercial
portfolios have generally performed consistently, with some
quarter-to-quarter volatility as a result of the absolute low level
of problem loans.
Nonperforming assets (NPAs) increased to $460 million, or 0.61% of total loans and leases
and OREO from the year-ago quarter. Nonaccrual loans and
leases increased $47 million, or 12%,
to $425 million, or 0.57% of total
loans and leases. The year-over-year increase was centered in
the C&I portfolio and was partially offset by a decrease in the
commercial real estate, residential mortgage, and home equity
portfolios. OREO balances decreased $14 million, or 50%, primarily reflecting a
continued reduction in residential properties. On a
year-over-year basis, there was also an increase in Other NPAs
associated with the securities portfolio. On a linked quarter
basis, NALs increased $8 million, or
2%, while NPAs decreased $1 million,
or less than 1%.
The provision for credit losses increased $3 million year-over-year to $59 million in the 2019 second quarter. Net
charge-offs increased $20 million to
$48 million, centered in the
commercial portfolio, as consumer losses were relatively
consistent. NCOs represented an annualized 0.25% of average
loans and leases in the current quarter, down from 0.38% in the
prior quarter and up from 0.16% in the year-ago quarter. We
remain confident in the long-term performance of our credit
portfolios.
The allowance for loan and lease losses as a percentage of total
loans and leases increased to 1.03% compared to 1.02% a year ago,
while the ALLL as a percentage of period-end total NALs decreased
to 182% from 197% over the same period. The modest increase
in the ALLL was primarily a result of loan growth and portfolio
management activity. We believe the levels of the ALLL and
ACL are appropriate given the low level of problem loans and the
current composition of the overall loan and lease portfolio.
Capital
Table 8 – Capital Ratios – Managing Capital Ratios within
Targeted Ranges
|
|
2019
|
|
2018
|
($ in
billions)
|
|
June 30,
|
|
March 31,
|
|
December
31,
|
|
September
30,
|
|
June 30,
|
Tangible common
equity / tangible assets ratio
|
|
7.80
|
%
|
|
7.57
|
%
|
|
7.21
|
%
|
|
7.25
|
%
|
|
7.78
|
%
|
Common equity tier 1
risk-based capital ratio (1)
|
|
9.88
|
%
|
|
9.84
|
%
|
|
9.65
|
%
|
|
9.89
|
%
|
|
10.53
|
%
|
Regulatory Tier 1
risk-based capital ratio (1)
|
|
11.28
|
%
|
|
11.25
|
%
|
|
11.06
|
%
|
|
11.33
|
%
|
|
11.99
|
%
|
Regulatory Total
risk-based capital ratio (1)
|
|
13.13
|
%
|
|
13.11
|
%
|
|
12.98
|
%
|
|
13.36
|
%
|
|
13.97
|
%
|
Total risk-weighted
assets (1)
|
|
$
|
86.3
|
|
|
$
|
86.0
|
|
|
$
|
85.7
|
|
|
$
|
83.6
|
|
|
$
|
83.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
June 30, 2019
figures are estimated. Amounts are presented on a Basel III
standardized approach basis for calculating risk-weighted
assets.
|
See Pages 16-17 of
Quarterly Financial Supplement for additional detail.
|
The tangible common equity to tangible assets ratio was 7.80% at
June 30, 2019, up 2 basis points from a year ago. Common
Equity Tier 1 (CET1) risk-based capital ratio was 9.88%, down from
10.53% a year ago. The regulatory Tier 1 risk-based capital
ratio was 11.28% compared to 11.99% at June 30, 2018.
All capital ratios were impacted by the repurchase of 71.8 million
common shares over the last four quarters. We completed the
2018 capital plan's share repurchase authorization with the
repurchase of $152 million of common
stock during the 2019 second quarter at an average cost of
$13.40 per share.
Income Taxes
The provision for income taxes was $63
million in the 2019 second quarter compared to $57 million in the 2018 second quarter. The
effective tax rates for the 2019 second quarter and 2018 second
quarter were 14.6% and 13.8%, respectively. The 2019 second
quarter and 2018 second quarter included $4
million and $5 million,
respectively, of tax benefits related to stock-based
compensation.
At June 30, 2019, we had a net federal deferred tax
liability of $222 million and a net
state deferred tax asset of $34
million.
Expectations - 2019
With the assumption of two interest rate cuts in the second half
of 2019, full-year revenue is expected to increase approximately 3%
to 4.5% versus 2018. The full-year NIM is expected to be in
the 3.25% to 3.30% range on a GAAP basis. Full-year
noninterest expense is expected to increase approximately 1% to
2.5%.
Average loans and leases are expected to increase approximately
4% to 5% on an annual basis. Average total deposits are
expected to increase approximately 2% to 3% on an annual basis.
Asset quality metrics are expected to remain better than our
average through-the-cycle target ranges, with some moderate
quarterly volatility.
The effective tax rate for the remainder of 2019 is expected to
be in the range of 15.5% to 16.5%.
Conference Call / Webcast Information
Huntington's senior management will host an earnings conference
call on July 25, 2019, 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 #13691869. 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
August 2, 2019 at (877) 660-6853 or (201) 612-7415;
conference ID #13691869.
Please see the 2019 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 $108 billion of
assets and a network of 868 full-service branches, including 12
Private Client Group offices, and 1,687 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;
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; competitive pressures on product pricing and
services; success, impact, and timing of our business strategies,
including market acceptance of any new products or services
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 2018 Annual Report
on Form 10-K, 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 the company's 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 its 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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