COLUMBUS, Ohio, Oct. 22,
2020 /PRNewswire/ -- Huntington Bancshares Incorporated (Nasdaq:
HBAN; www.huntington.com) reported net income for the 2020 third
quarter of $303 million, a 19%
decrease from the year-ago quarter. Earnings per common share
for the 2020 third quarter were $0.27, down 21% from the year-ago quarter.
Tangible book value per common share as of 2020 third quarter-end
was $8.43, a 2% year-over-year
increase. Return on average assets was 1.01%, return on
average common equity was 10.2%, and return on average tangible
common equity was 13.2%. Third-quarter results were impacted
by elevated credit provisioning related to the ongoing uncertain
economic outlook.
CEO Commentary:
"Our colleagues remain highly engaged and focused on our
customers and, as a result, delivered solid third-quarter results
in a challenging economic environment. Our underlying
earnings power remains strong. We grew revenues 5% in the
face of material headwinds and actively managed our expense base to
fund investments across our businesses for future growth," said
Steve Steinour, chairman, president,
and CEO. "I am particularly pleased with the 7% average loan
growth and the robust 14% average core deposit growth as we
continue to add and deepen customer relationships across the
Bank."
"Our past experience of helping customers in difficult economic
moments builds long-term relationships which fuel our growth.
During the third quarter, we extended 24-Hour Grace for consumers
to our business customers. We also introduced our no-fee
overdraft $50 Safety Zone for
consumers and businesses. These innovative features, among
others, help position Huntington as an industry leader in looking
out for our customers and advance our vision to make peoples' lives
better, help businesses thrive, and strengthen the communities we
serve. This is consistent with Huntington's strategy to build
the leading People-First, Digitally-Powered bank."
"As we look forward, we are optimistic that business activity
and the economic recovery will continue to improve. Small
businesses will be essential to the recovery, and we are pleased
once again to be the largest SBA 7(a) lender in the nation in
fiscal year 2020. During the third quarter, we originated a
new record amount of residential mortgages, helping customers
realize their dreams of home ownership or refinancing their
existing mortgages to help solidify their financial
well-being. We also continued to work with customers who have
been challenged by the pandemic and are encouraged by the
substantial number of customers exiting deferrals."
2020 Third-Quarter Highlights Compared with
2019 Third Quarter:
- Fully-taxable equivalent total revenue increased $58 million, or 5%.
- Fully-taxable equivalent net interest income increased
$17 million, or 2%.
- Net interest margin decreased 24 basis points to 2.96%.
- Noninterest income increased $41
million, or 11%, driven by a $68
million, or 126%, increase in mortgage banking income.
- Noninterest expense increased $45
million, or 7%, including approximately $15 million of expense related to the
implementation of position reductions and planned branch
consolidations.
- Efficiency ratio of 56.1%, up from 54.7%.
- Average loans and leases increased $5.4
billion, or 7%, including a $4.3
billion, or 12%, increase in average commercial loans and a
$1.1 billion, or 3%, increase in
average consumer loans.
- Average core deposits increased $11.4
billion, or 14%, including an $11.6
billion, or 29%, increase in average demand deposits.
- Net charge-offs equated to 0.56% of average loans and leases,
up from 0.39%.
- Nonperforming asset ratio of 0.74%, up from 0.64%.
- Provision for credit losses increased $95 million year-over-year to $177 million.
- Allowance for loan and lease losses (ALLL) increased
$1.0 billion to $1.8 billion, or 2.21% of total loans and leases;
allowance for credit losses (ACL) increased to $1.9 billion, or 2.31% of total loans and
leases.
- Common Equity Tier 1 (CET1) risk-based capital ratio of 9.89%,
down from 10.02% and consistent with our 9% to 10% operating
guideline.
- Tangible common equity (TCE) ratio of 7.27%, down from
8.00%.
- Tangible book value per common share increased $0.18, or 2%, to $8.43.
- In September, Huntington announced the planned consolidation of
27 branches, which are expected to be completed in the 2021 first
quarter.
Table 1 –
Earnings Performance Summary
|
|
|
2020
|
|
2019
|
(in millions,
except per share data)
|
Third
|
|
Second
|
|
First
|
|
Fourth
|
|
Third
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
Net Income
|
$
|
303
|
|
|
$
|
150
|
|
|
$
|
48
|
|
|
$
|
317
|
|
|
$
|
372
|
|
Diluted earnings per
common share
|
0.27
|
|
|
0.13
|
|
|
0.03
|
|
|
0.28
|
|
|
0.34
|
|
|
|
|
|
|
|
|
|
|
|
Return on average
assets
|
1.01
|
%
|
|
0.51
|
%
|
|
0.17
|
%
|
|
1.15
|
%
|
|
1.37
|
%
|
Return on average
common equity
|
10.2
|
|
|
5.0
|
|
|
1.1
|
|
|
11.1
|
|
|
13.4
|
|
Return on average
tangible common equity
|
13.2
|
|
|
6.7
|
|
|
1.8
|
|
|
14.3
|
|
|
17.3
|
|
Net interest
margin
|
2.96
|
|
|
2.94
|
|
|
3.14
|
|
|
3.12
|
|
|
3.20
|
|
Efficiency
ratio
|
56.1
|
|
|
55.9
|
|
|
55.4
|
|
|
58.4
|
|
|
54.7
|
|
|
|
|
|
|
|
|
|
|
|
Tangible book value
per common share
|
$
|
8.43
|
|
|
$
|
8.32
|
|
|
$
|
8.28
|
|
|
$
|
8.25
|
|
|
$
|
8.25
|
|
Cash dividends
declared per common share
|
0.15
|
|
|
0.15
|
|
|
0.15
|
|
|
0.15
|
|
|
0.15
|
|
Average diluted
shares outstanding
|
1,031
|
|
|
1,029
|
|
|
1,035
|
|
|
1,047
|
|
|
1,051
|
|
|
|
|
|
|
|
|
|
|
|
Average earning
assets
|
$
|
110,665
|
|
|
$
|
109,038
|
|
|
$
|
101,783
|
|
|
$
|
100,062
|
|
|
$
|
99,692
|
|
Average loans and
leases
|
80,542
|
|
|
80,199
|
|
|
75,696
|
|
|
75,103
|
|
|
75,096
|
|
Average core
deposits
|
90,692
|
|
|
88,878
|
|
|
79,528
|
|
|
79,690
|
|
|
79,335
|
|
|
|
|
|
|
|
|
|
|
|
Tangible common
equity / tangible assets ratio
|
7.27
|
%
|
|
7.28
|
%
|
|
7.52
|
%
|
|
7.88
|
%
|
|
8.00
|
%
|
Common equity Tier 1
risk-based capital ratio
|
9.89
|
|
|
9.84
|
|
|
9.47
|
|
|
9.88
|
|
|
10.02
|
|
|
|
|
|
|
|
|
|
|
|
NCOs as a % of
average loans and leases
|
0.56
|
%
|
|
0.54
|
%
|
|
0.62
|
%
|
|
0.39
|
%
|
|
0.39
|
%
|
NAL ratio
|
0.70
|
|
|
0.81
|
|
|
0.72
|
|
|
0.62
|
|
|
0.58
|
|
ACL as a % of total
loans and leases
|
2.31
|
|
|
2.27
|
|
|
2.05
|
|
|
1.18
|
|
|
1.18
|
|
Net Interest Income, Net Interest Margin, and Average Balance
Sheet
Table 2 – Net
Interest Income and Net Interest Margin Performance Summary –
Year-over-Year Increase in Average
Earning Assets Outpaced Net Interest Margin
Compression
|
|
|
2020
|
|
2019
|
|
|
|
|
($ in
millions)
|
Third
|
|
Second
|
|
First
|
|
Fourth
|
|
Third
|
|
Change (%)
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
LQ
|
|
YOY
|
Net interest
income
|
$
|
817
|
|
|
$
|
792
|
|
|
$
|
790
|
|
|
$
|
780
|
|
|
$
|
799
|
|
|
3
|
%
|
|
2
|
%
|
FTE
adjustment
|
5
|
|
|
5
|
|
|
6
|
|
|
6
|
|
|
6
|
|
|
0
|
|
|
(17)
|
|
Net interest income -
FTE
|
822
|
|
|
797
|
|
|
796
|
|
|
786
|
|
|
805
|
|
|
3
|
|
|
2
|
|
Noninterest
income
|
430
|
|
|
391
|
|
|
361
|
|
|
372
|
|
|
389
|
|
|
10
|
|
|
11
|
|
Total revenue -
FTE
|
$
|
1,252
|
|
|
$
|
1,188
|
|
|
$
|
1,157
|
|
|
$
|
1,158
|
|
|
$
|
1,194
|
|
|
5
|
%
|
|
5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Change (bp)
|
Yield /
Cost
|
|
|
|
|
|
|
|
|
|
|
LQ
|
|
YOY
|
Total earning
assets
|
3.22
|
%
|
|
3.35
|
%
|
|
3.88
|
%
|
|
4.03
|
%
|
|
4.21
|
%
|
|
(13)
|
|
|
(99)
|
|
Total loans and
leases
|
3.75
|
|
|
3.75
|
|
|
4.29
|
|
|
4.47
|
|
|
4.67
|
|
|
—
|
|
|
(92)
|
|
Total
securities
|
2.13
|
|
|
2.35
|
|
|
2.64
|
|
|
2.68
|
|
|
2.74
|
|
|
(22)
|
|
|
(61)
|
|
Total
interest-bearing liabilities
|
0.39
|
|
|
0.57
|
|
|
0.98
|
|
|
1.24
|
|
|
1.36
|
|
|
(18)
|
|
|
(97)
|
|
Total interest-bearing
deposits
|
0.18
|
|
|
0.28
|
|
|
0.68
|
|
|
0.87
|
|
|
0.98
|
|
|
(10)
|
|
|
(80)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest rate
spread
|
2.83
|
|
|
2.78
|
|
|
2.90
|
|
|
2.79
|
|
|
2.85
|
|
|
5
|
|
|
(2)
|
|
Impact of
noninterest-bearing funds on margin
|
0.13
|
|
|
0.16
|
|
|
0.24
|
|
|
0.33
|
|
|
0.35
|
|
|
(3)
|
|
|
(22)
|
|
Net interest
margin
|
2.96
|
%
|
|
2.94
|
%
|
|
3.14
|
%
|
|
3.12
|
%
|
|
3.20
|
%
|
|
2
|
|
|
(24)
|
|
|
See Pages 7-9 of
Quarterly Financial Supplement for additional
detail.
|
Fully-taxable equivalent (FTE) net interest income for the 2020
third quarter increased $17 million,
or 2%, from the 2019 third quarter. This increase reflected
the benefit of an $11.0 billion, or
11%, increase in average earning assets, partially offset by a 24
basis point decrease in the FTE net interest margin (NIM) to
2.96%. The NIM compression reflected a 99 basis point
year-over-year decrease in average earning asset yields and a 22
basis point decrease in the benefit from noninterest-bearing funds,
partially offset by a 97 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 loan, home equity loan, and security yields and
elevated deposits at the Federal Reserve Bank. The decrease
in average interest-bearing liability costs primarily reflected
lower interest-bearing deposit costs (down 80 basis points) and
lower long-term debt costs (down 172 basis points), both due to the
impact of lower interest rates.
Compared to the 2020 second quarter, FTE net interest income
increased $25 million, or 3%,
reflecting a 1% increase in average earning assets and 2 basis
points of NIM expansion. The NIM expansion reflected an 18
basis point decrease in average interest-bearing liability costs,
partially offset by a 13 basis point decrease in average earning
asset yields and a 3 basis point decrease in the benefit from
noninterest-bearing funds. The decrease in average
interest-bearing liability costs primarily reflects lower
interest-bearing deposit costs (down 10 basis points) and lower
long-term borrowings costs (down 71 basis points), both due to the
impact of lower interest rates. The decrease in earning asset
yields was primarily driven by the impact of lower interest rates
on securities yields as well as elevated deposits at the Federal
Reserve Bank.
Table 3 –
Average Earning Assets – Commercial & Industrial Loans and
Elevated Deposits at the Federal
Reserve Bank Drive Year-Over-Year Earning Asset
Growth
|
|
|
2020
|
|
2019
|
|
|
|
|
($ in
billions)
|
Third
|
|
Second
|
|
First
|
|
Fourth
|
|
Third
|
|
Change (%)
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
LQ
|
|
YOY
|
Commercial and
industrial
|
$
|
34.7
|
|
|
$
|
35.3
|
|
|
$
|
30.8
|
|
|
$
|
30.4
|
|
|
$
|
30.6
|
|
|
(2)
|
%
|
|
13
|
%
|
Commercial real
estate
|
7.2
|
|
|
7.1
|
|
|
6.7
|
|
|
6.8
|
|
|
6.9
|
|
|
2
|
|
|
4
|
|
Total
commercial
|
41.9
|
|
|
42.4
|
|
|
37.6
|
|
|
37.2
|
|
|
37.6
|
|
|
(1)
|
|
|
12
|
|
Automobile
|
12.9
|
|
|
12.7
|
|
|
12.9
|
|
|
12.6
|
|
|
12.2
|
|
|
2
|
|
|
6
|
|
Home equity
|
8.9
|
|
|
8.9
|
|
|
9.0
|
|
|
9.2
|
|
|
9.4
|
|
|
0
|
|
|
(5)
|
|
Residential
mortgage
|
11.8
|
|
|
11.5
|
|
|
11.4
|
|
|
11.3
|
|
|
11.2
|
|
|
3
|
|
|
5
|
|
RV and
marine
|
4.0
|
|
|
3.7
|
|
|
3.6
|
|
|
3.6
|
|
|
3.5
|
|
|
8
|
|
|
14
|
|
Other
consumer
|
1.0
|
|
|
1.1
|
|
|
1.2
|
|
|
1.2
|
|
|
1.3
|
|
|
(3)
|
|
|
(17)
|
|
Total
consumer
|
38.7
|
|
|
37.8
|
|
|
38.1
|
|
|
37.9
|
|
|
37.5
|
|
|
2
|
|
|
3
|
|
Total loans and
leases
|
80.5
|
|
|
80.2
|
|
|
75.7
|
|
|
75.1
|
|
|
75.1
|
|
|
0
|
|
|
7
|
|
Total
securities
|
22.8
|
|
|
24.2
|
|
|
24.4
|
|
|
23.2
|
|
|
23.1
|
|
|
(6)
|
|
|
(1)
|
|
Held-for-sale and
other earning assets
|
7.3
|
|
|
4.6
|
|
|
1.7
|
|
|
1.8
|
|
|
1.5
|
|
|
58
|
|
|
374
|
|
Total earning
assets
|
$
|
110.7
|
|
|
$
|
109.0
|
|
|
$
|
101.8
|
|
|
$
|
100.1
|
|
|
$
|
99.7
|
|
|
1
|
%
|
|
11
|
%
|
|
See Page 7 of
Quarterly Financial Supplement for additional
detail.
|
Average earning assets for the 2020 third quarter increased
$11.0 billion, or 11%, from the
year-ago quarter, primarily reflecting a $5.4 billion, or 7%, increase in average total
loans and leases and a $5.3 billion,
or 1039%, increase in interest-bearing deposits at the Federal
Reserve Bank. Average commercial & industrial (C&I)
loans increased $4.0 billion, or 13%,
primarily reflecting the $6.1 billion
of average Payroll Protection Program (PPP) loans. Average
automobile loans increased $0.7
billion, or 6%, driven by strong production over the past
year. Average residential mortgage loans increased
$0.6 billion, or 5%, reflecting
continued robust portfolio mortgage production. Average RV
and marine loans increased $0.5
billion, or 14%, reflecting strong consumer demand and
continued strong production levels. Partially offsetting
these increases, average home equity loans and lines of credit
decreased $0.5 billion, or 5%,
reflecting a shift in consumer preferences.
Compared to the 2020 second quarter, average earning assets
increased $1.6 billion, or 1%,
primarily reflecting a $2.4
billion, or 72%, increase in interest-bearing deposits at
the Federal Reserve Bank. Partially offsetting this increase,
average securities decreased $1.4
billion, or 6%, reflecting accelerated cash flows within the
existing portfolio. Average C&I loans decreased
$0.6 billion, or 2%, primarily
reflecting lower commercial utilization rates, mainly within dealer
floorplan, partially offset by the full quarter impact of
$6.1 billion of PPP loans.
While not affecting quarterly average balances, Huntington
completed the acquisition of a $0.5
billion equipment finance loan portfolio on September 30, 2020.
Table 4 –
Average Liabilities – Demand Deposits Drive Robust Year-over-Year
Growth in Core Deposits
|
|
|
2020
|
|
2019
|
|
|
|
Third
|
|
Second
|
|
First
|
|
Fourth
|
|
Third
|
|
Change (%)
|
($ in
billions)
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
LQ
|
|
YOY
|
Demand deposits -
noninterest-bearing
|
$
|
27.4
|
|
|
$
|
25.7
|
|
|
$
|
20.1
|
|
|
$
|
20.6
|
|
|
$
|
19.9
|
|
|
7
|
%
|
|
38
|
%
|
Demand deposits -
interest-bearing
|
23.9
|
|
|
23.9
|
|
|
21.2
|
|
|
20.1
|
|
|
19.8
|
|
|
0
|
|
|
21
|
|
Total demand
deposits
|
51.3
|
|
|
49.6
|
|
|
41.3
|
|
|
40.7
|
|
|
39.7
|
|
|
4
|
|
|
29
|
|
Money market
deposits
|
26.2
|
|
|
25.7
|
|
|
24.7
|
|
|
24.6
|
|
|
24.3
|
|
|
2
|
|
|
8
|
|
Savings and other
domestic deposits
|
11.2
|
|
|
10.6
|
|
|
9.6
|
|
|
9.6
|
|
|
9.7
|
|
|
5
|
|
|
15
|
|
Core certificates of
deposit
|
2.0
|
|
|
3.0
|
|
|
3.9
|
|
|
4.8
|
|
|
5.7
|
|
|
(32)
|
|
|
(64)
|
|
Total core
deposits
|
90.7
|
|
|
88.9
|
|
|
79.5
|
|
|
79.7
|
|
|
79.3
|
|
|
2
|
|
|
14
|
|
Other domestic
deposits of $250,000 or more
|
0.2
|
|
|
0.2
|
|
|
0.3
|
|
|
0.3
|
|
|
0.3
|
|
|
(24)
|
|
|
(44)
|
|
Brokered deposits and
negotiable CDs
|
4.2
|
|
|
4.1
|
|
|
2.9
|
|
|
2.6
|
|
|
2.6
|
|
|
2
|
|
|
61
|
|
Total
deposits
|
$
|
95.1
|
|
|
$
|
93.2
|
|
|
$
|
82.7
|
|
|
$
|
82.6
|
|
|
$
|
82.2
|
|
|
2
|
%
|
|
16
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term
borrowings
|
$
|
0.2
|
|
|
$
|
0.8
|
|
|
$
|
3.4
|
|
|
$
|
2.0
|
|
|
$
|
2.3
|
|
|
(80)
|
%
|
|
(93)
|
%
|
Long-term
debt
|
9.3
|
|
|
9.8
|
|
|
10.1
|
|
|
9.9
|
|
|
9.5
|
|
|
(5)
|
|
|
(2)
|
|
Total debt
|
$
|
9.5
|
|
|
$
|
10.6
|
|
|
$
|
13.5
|
|
|
$
|
11.9
|
|
|
$
|
11.8
|
|
|
(11)
|
%
|
|
(20)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
interest-bearing liabilities
|
$
|
77.1
|
|
|
$
|
78.2
|
|
|
$
|
76.1
|
|
|
$
|
73.8
|
|
|
$
|
74.2
|
|
|
(1)
|
%
|
|
4
|
%
|
|
See Page 7 of
Quarterly Financial Supplement for additional
detail.
|
Average total interest-bearing liabilities for the 2020 third
quarter increased $2.9 billion, or
4%, from the year-ago quarter. Average total deposits
increased $12.8 billion, or 16%,
while average total core deposits increased $11.4 billion, or 14%. The increase in
average total core deposits was primarily driven by business and
commercial growth related to the PPP loans and increased liquidity
levels in reaction to the economic downturn, consumer growth
largely related to government stimulus, increased consumer and
business banking account production, and reduced attrition.
Specifically within core deposits, average total demand deposits
increased $11.6 billion, or 29%,
average money market deposits increased $1.9
billion, or 8%, and average savings and other domestic
deposits increased $1.5 billion, or
15%. Partially offsetting these increases, average core
certificates of deposit (CDs) decreased $3.6
billion, or 64%, reflecting the maturity of balances related
to the 2018 consumer deposit growth initiatives.
Average brokered deposits and negotiable CDs increased $1.6 billion, or 61%, reflecting balance growth
in new and existing brokered deposit accounts. Average total
debt decreased $2.4 billion, or 20%,
reflecting the repayment of short-term borrowings due to the strong
core deposit growth.
Compared to the 2020 second quarter, average total
interest-bearing liabilities decreased $1.1
billion, or 1%. Both average total deposits and
average total core deposits increased $1.8
billion, or 2%. The increase in average total core
deposits was primarily driven by increased consumer and business
banking account production, low attrition, increased liquidity
levels among our business banking customers, and the seasonal
increase in public funds. Specifically within core deposits,
average total demand deposits increased $1.8
billion, or 4%, average money market deposits increased
$0.5 billion, or 2%, and average
savings and other domestic deposits increased $0.5 billion, or 5%. Partially offsetting
these increases, average core CDs decreased $1.0 billion, or 32%, reflecting the maturity of
balances related to the 2018 consumer deposit growth
initiatives. Average total debt decreased $1.1 billion, or 11%, due to the repayment of
short-term borrowings as a result of the strong core deposit
inflows and a $500 million long-term
debt maturity in the 2020 third quarter.
Noninterest Income
Table 5 –
Noninterest Income – Record Mortgage Banking Income Drives Growth
in Noninterest Income
|
|
|
2020
|
|
2019
|
|
|
|
Third
|
|
Second
|
|
First
|
|
Fourth
|
|
Third
|
|
Change (%)
|
($ in
millions)
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
LQ
|
|
YOY
|
Service charges on
deposit accounts
|
$
|
76
|
|
|
$
|
60
|
|
|
$
|
87
|
|
|
$
|
95
|
|
|
$
|
98
|
|
|
27
|
%
|
|
(22)
|
%
|
Card and payment
processing income
|
66
|
|
|
59
|
|
|
58
|
|
|
64
|
|
|
64
|
|
|
12
|
|
|
3
|
|
Mortgage banking
income
|
122
|
|
|
96
|
|
|
58
|
|
|
58
|
|
|
54
|
|
|
27
|
|
|
126
|
|
Trust and investment
management services
|
48
|
|
|
45
|
|
|
47
|
|
|
47
|
|
|
44
|
|
|
7
|
|
|
9
|
|
Insurance
income
|
24
|
|
|
25
|
|
|
23
|
|
|
24
|
|
|
20
|
|
|
(4)
|
|
|
20
|
|
Capital markets
fees
|
27
|
|
|
31
|
|
|
33
|
|
|
31
|
|
|
36
|
|
|
(13)
|
|
|
(25)
|
|
Bank owned life
insurance income
|
17
|
|
|
17
|
|
|
16
|
|
|
17
|
|
|
18
|
|
|
0
|
|
|
(6)
|
|
Gain on sale of loans
and leases
|
13
|
|
|
8
|
|
|
8
|
|
|
16
|
|
|
13
|
|
|
63
|
|
|
0
|
|
Net (losses) gains on
sales of securities
|
0
|
|
|
(1)
|
|
|
0
|
|
|
(22)
|
|
|
0
|
|
|
NM
|
|
|
NM
|
|
Other noninterest
income
|
37
|
|
|
51
|
|
|
31
|
|
|
42
|
|
|
42
|
|
|
(27)
|
|
|
(12)
|
|
Total noninterest
income
|
$
|
430
|
|
|
$
|
391
|
|
|
$
|
361
|
|
|
$
|
372
|
|
|
$
|
389
|
|
|
10
|
%
|
|
11
|
%
|
|
See Pages 10-11 of
Quarterly Financial Supplement for additional
detail.
|
Total noninterest income for the 2020 third quarter increased
$41 million, or 11%, from the
year-ago quarter. Mortgage banking income increased
$68 million, or 126%, primarily
reflecting higher secondary marketing spreads and a 73% increase in
salable mortgage originations. Partially offsetting this
increase, service charges on deposit accounts decreased
$22 million, or 22%, primarily
reflecting reduced customer activity and elevated deposits.
Capital markets fees decreased $9
million, or 25%, primarily reflecting reduced customer
derivatives activity.
Compared to the 2020 second quarter, total noninterest income
increased $39 million, or 10%.
Mortgage banking income increased $26
million, or 27%, primarily reflecting higher secondary
marketing spreads and a 6% increase in salable mortgage
originations. Service charges on deposit accounts increased
$16 million, or 27%, primarily
reflecting a rebound in customer activity and pandemic-related fee
waivers in the prior quarter. Card and payment processing
income increased $7 million, or 12%,
primarily reflecting increased debit card and ATM usage.
Partially offsetting these increases, other noninterest income
decreased $14 million, or 27%,
primarily reflecting the $13 million
gain on the annuitization of a retiree health plan and $5 million gain on the sale of the retirement
plan services recordkeeping business, both in the prior
quarter.
Noninterest Expense
Table 6 –
Noninterest Expense – Continued Investment in Talent and Technology
Drive Noninterest Expense
|
|
|
2020
|
|
2019
|
|
|
|
Third
|
|
Second
|
|
First
|
|
Fourth
|
|
Third
|
|
Change (%)
|
($ in
millions)
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
LQ
|
|
YOY
|
Personnel
costs
|
$
|
453
|
|
|
$
|
418
|
|
|
$
|
395
|
|
|
$
|
426
|
|
|
$
|
406
|
|
|
8
|
%
|
|
12
|
%
|
Outside data
processing and other services
|
98
|
|
|
90
|
|
|
85
|
|
|
89
|
|
|
87
|
|
|
9
|
|
|
13
|
|
Equipment
|
44
|
|
|
46
|
|
|
41
|
|
|
42
|
|
|
41
|
|
|
(4)
|
|
|
7
|
|
Net
occupancy
|
40
|
|
|
39
|
|
|
40
|
|
|
41
|
|
|
38
|
|
|
3
|
|
|
5
|
|
Professional
services
|
12
|
|
|
11
|
|
|
11
|
|
|
14
|
|
|
16
|
|
|
9
|
|
|
(25)
|
|
Amortization of
intangibles
|
10
|
|
|
10
|
|
|
11
|
|
|
12
|
|
|
12
|
|
|
0
|
|
|
(17)
|
|
Marketing
|
9
|
|
|
5
|
|
|
9
|
|
|
9
|
|
|
10
|
|
|
80
|
|
|
(10)
|
|
Deposit and other
insurance expense
|
6
|
|
|
9
|
|
|
9
|
|
|
10
|
|
|
8
|
|
|
(33)
|
|
|
(25)
|
|
Other noninterest
expense
|
40
|
|
|
47
|
|
|
51
|
|
|
58
|
|
|
49
|
|
|
(15)
|
|
|
(18)
|
|
Total noninterest
expense
|
$
|
712
|
|
|
$
|
675
|
|
|
$
|
652
|
|
|
$
|
701
|
|
|
$
|
667
|
|
|
5
|
%
|
|
7
|
%
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average full-time
equivalent employees
|
15.7
|
|
|
15.7
|
|
|
15.4
|
|
|
15.5
|
|
|
15.7
|
|
|
0
|
%
|
|
|
0%
|
|
See Page 10 of
Quarterly Financial Supplement for additional
detail.
|
Total noninterest expense for the 2020 third quarter increased
$45 million, or 7%, from the year-ago
quarter. Personnel costs increased $47
million, or 12%, primarily reflecting increased incentives
and commissions, contract help, overtime, and equity compensation
expense as well as $11 million of
expense related to position reductions. Outside data
processing and other services increased $11
million, or 13%, primarily reflecting the impact of
increased technology costs. Partially offsetting these
increases, other noninterest expense decreased $9 million, or 18%, primarily as a result of
lower travel and business development expense and a $7 million insurance recovery.
Total noninterest expense increased $37
million, or 5%, from the 2020 second quarter.
Personnel costs increased $35
million, or 8%, primarily reflecting increased incentive
compensation as well as $11 million
of expense related to position reductions.
Table 7 –
Credit Quality Metrics – Further Deterioration in Economic Outlook
Drives Increase in Allowance
|
|
|
2020
|
|
2019
|
($ in
millions)
|
September
30,
|
|
June 30,
|
|
March 31,
|
|
December
31,
|
|
September
30,
|
Total nonaccrual
loans and leases
|
$
|
569
|
|
|
$
|
648
|
|
|
$
|
558
|
|
|
$
|
468
|
|
|
$
|
438
|
|
Total other real
estate
|
5
|
|
|
7
|
|
|
10
|
|
|
11
|
|
|
12
|
|
Other NPAs
(1)
|
28
|
|
|
58
|
|
|
18
|
|
|
19
|
|
|
32
|
|
Total nonperforming
assets
|
602
|
|
|
713
|
|
|
586
|
|
|
498
|
|
|
482
|
|
Accruing loans and
leases past due 90+ days
|
175
|
|
|
194
|
|
|
167
|
|
|
171
|
|
|
163
|
|
NPAs + accruing loans
& leases past due 90+ days
|
$
|
777
|
|
|
$
|
907
|
|
|
$
|
753
|
|
|
$
|
669
|
|
|
$
|
645
|
|
NAL ratio
(2)
|
0.70
|
%
|
|
0.81
|
%
|
|
0.72
|
%
|
|
0.62
|
%
|
|
0.58
|
%
|
NPA ratio
(3)
|
0.74
|
|
|
0.89
|
|
|
0.75
|
|
|
0.66
|
|
|
0.64
|
|
(NPAs+90
days)/(Loans+OREO)
|
0.96
|
|
|
1.13
|
|
|
0.96
|
|
|
0.89
|
|
|
0.86
|
|
Provision for credit
losses
|
$
|
177
|
|
|
$
|
327
|
|
|
$
|
441
|
|
|
$
|
79
|
|
|
$
|
82
|
|
Net
charge-offs
|
113
|
|
|
107
|
|
|
117
|
|
|
73
|
|
|
73
|
|
Net charge-offs /
Average total loans
|
0.56
|
%
|
|
0.54
|
%
|
|
0.62
|
%
|
|
0.39
|
%
|
|
0.39
|
%
|
Allowance for loans
and lease losses (ALLL)
|
$
|
1,796
|
|
|
$
|
1,702
|
|
|
$
|
1,504
|
|
|
$
|
783
|
|
|
$
|
783
|
|
Allowance for
unfunded loan commitments and
letters of credit
|
82
|
|
|
119
|
|
|
99
|
|
|
104
|
|
|
101
|
|
Allowance for credit
losses (ACL)
|
$
|
1,878
|
|
|
$
|
1,821
|
|
|
$
|
1,603
|
|
|
$
|
887
|
|
|
$
|
884
|
|
ALLL as a %
of:
|
|
|
|
|
|
|
|
|
|
Total loans and
leases
|
2.21
|
%
|
|
2.12
|
%
|
|
1.93
|
%
|
|
1.04
|
%
|
|
1.05
|
%
|
NALs
|
316
|
|
|
263
|
|
|
270
|
|
|
167
|
|
|
179
|
|
NPAs
|
298
|
|
|
239
|
|
|
257
|
|
|
157
|
|
|
163
|
|
ACL as a %
of:
|
|
|
|
|
|
|
|
|
|
Total loans and
leases
|
2.31
|
%
|
|
2.27
|
%
|
|
2.05
|
%
|
|
1.18
|
%
|
|
1.18
|
%
|
NALs
|
330
|
|
|
281
|
|
|
287
|
|
|
190
|
|
|
202
|
|
NPAs
|
311
|
|
|
255
|
|
|
273
|
|
|
178
|
|
|
184
|
|
|
|
(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 favorable
consumer portfolio metrics continue to reflect our focus on high
quality borrowers, who have held up well over the past two
quarters.
Nonperforming assets (NPAs) increased to $602 million, or 0.74% of total loans and leases
and OREO, from $482 million, or
0.64%, a year ago. Nonaccrual loans and leases (NALs)
increased $131 million, or 30%, to
$569 million, or 0.70% 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 58%, from the year-ago quarter. On a linked quarter basis,
NALs decreased $79 million, or 12%,
while NPAs decreased $111 million, or
16%.
The provision for credit losses increased $95 million year-over-year to $177 million in the 2020 third quarter. Net
charge-offs (NCOs) increased $40
million to $113 million.
The oil and gas portfolio accounted for approximately 44% of the
$89 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
$24 million were down on both a
year-over-year and linked quarter basis, consistent with our
expectations. NCOs represented an annualized 0.56% of average
loans and leases in the current quarter, up from 0.54% in the prior
quarter and up from 0.39% 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
$1.0 billion from the year-ago
quarter to $1.8 billion, or 2.21% of
total loans and leases. The ALLL as a percentage of
period-end total NALs increased to 316% from 179% over the same
period. The allowance for credit losses (ACL) increased by
$994 million from the year-ago
quarter to $1.9 billion, or 2.31% of
total loans and leases. On a linked quarter basis, the ACL
increased $57 million. We
believe the levels of the ALLL and ACL are appropriate given the
current level of problem loans and the economic outlook.
Capital
Table 8 –
Capital Ratios – Ratios Remain within Targeted Operating
Ranges
|
|
|
|
2020
|
|
2019
|
($ in
billions)
|
|
September
30,
|
|
June 30,
|
|
March 31,
|
|
December
31,
|
|
September
30,
|
Tangible common
equity / tangible assets ratio
|
|
7.27
|
%
|
|
7.28
|
%
|
|
7.52
|
%
|
|
7.88
|
%
|
|
8.00
|
%
|
Common equity tier 1
risk-based capital ratio (1)
|
|
9.89
|
%
|
|
9.84
|
%
|
|
9.47
|
%
|
|
9.88
|
%
|
|
10.02
|
%
|
Regulatory Tier 1
risk-based capital ratio (1)
|
|
12.37
|
%
|
|
11.79
|
%
|
|
10.81
|
%
|
|
11.26
|
%
|
|
11.41
|
%
|
Regulatory Total
risk-based capital ratio (1)
|
|
14.39
|
%
|
|
13.84
|
%
|
|
12.74
|
%
|
|
13.04
|
%
|
|
13.29
|
%
|
Total risk-weighted
assets (1)
|
|
$
|
88.4
|
|
|
$
|
87.3
|
|
|
$
|
90.2
|
|
|
$
|
87.5
|
|
|
$
|
86.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
September 30,
2020 figures are estimated. Amounts are presented on a Basel
III standardized approach basis for calculating risk-
weighted assets. The 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 7.27% at
September 30, 2020, down 73 basis points from a year ago due
to year-over-year balance sheet growth. Common Equity Tier 1
(CET1) risk-based capital ratio was 9.89%, down from 10.02% a year
ago. The regulatory Tier 1 risk-based capital ratio was
12.37% compared to 11.41% at September 30, 2019. The
balance sheet growth impact on regulatory capital ratios was
largely offset by a change in asset mix during 2020 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 $284 million of common
stock over the last four quarters (none in the 2020 second quarter
or 2020 third 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 and $500 million
of Series G preferred stock in the 2020 third quarter.
The Board has authorized the repurchase of common shares during
the 2020 fourth 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. We currently expect to repurchase approximately
$5 million of common shares during
the 2020 fourth quarter to offset compensation plan-related share
issuances.
Income Taxes
The provision for income taxes was $55
million in the 2020 third quarter and $67 million in the 2019 third quarter. The
effective tax rates for the 2020 third quarter and 2019 third
quarter were 15.2% and 15.4%, respectively. The variance
between the 2020 third quarter and the 2019 third quarter provision
for income taxes and effective tax rates relates primarily to lower
pre-tax income and the impact of stock-based compensation.
At September 30, 2020, we had a net federal deferred tax
liability of $155 million and a net
state deferred tax asset of $32
million.
Expectations - 2020
Full year 2020 revenue is expected to increase approximately
3.0% to 3.5% from the prior year. Full year 2020 noninterest
expense is expected to increase approximately 2.0% to 2.5%
year-over-year.
Average loans and leases are expected to increase approximately
6% year-over-year. Average total deposits are expected to
increase approximately 10% compared to full year 2019.
Asset quality metrics are expected to continue to be impacted by
COVID-19 and other broader economic conditions. Full year
results have been impacted by the oil & gas portfolio.
Net charge-offs are expected to be approximately 50 to 55 basis
points for the full year 2020.
Conference Call / Webcast Information
Huntington's senior management will host an earnings conference
call on October 22, 2020, at 10:00 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 #13709770. 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
October 30, 2020 at (877) 660-6853 or
(201) 612-7415; conference ID #13709770.
Please see the 2020 Third 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 $120 billion of
assets and a network of 839 full-service branches, including 11
Private Client Group offices, and 1,330 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
Reports on Form 10-Q for the quarter ended March 31, 2020, and for the quarter ended
June 30, 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.
Rounding
Please note that columns of data in this document may not add
due to rounding.
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