Huntington Bancshares Incorporated · NASDAQ:HBAN
Huntington Bancshares — Q3 2020 Earnings Presentation
33 slides from Huntington Bancshares's earnings presentation, Oct 22, 2020
Slide 1: 2020 Third Quarter Earnings Review
2020 Third Quarter Earnings Review October 22, 2020 The Huntington National Bank is Member FDIC. ®, Huntington® and Huntington. Welcome.® are federally registered service marks of Huntington Bancshares Incorporated. ©2020 Huntington Bancshares Incorporated. Disclaimer CAUTION REGARDING FORWARD‐LOOKI
Slide 2: Building the Leading People-First, Digitally-Powered Bank
Building the Leading People‐First, Digitally‐Powered Bank Creating a sustainable competitive advantage with focused investment in customer experience, product differentiation, and key growth initiatives We are a Purpose‐driven company Our Purpose is to make people’s lives better, help businesses t
Slide 3: 2020 Third Quarter Financial Highlights
2020 Third Quarter Financial Highlights Revenue growth of 5% despite challenging environment Revenue (FTE) EPS TBVPS $1.3 billion $0.27 $8.43 5% Y/Y 21% Y/Y 2% Y/Y ROA ROCE ROTCE 1.01% 10.2% 13.2% 36 basis points Y/Y 3.2 percentage pts Y/Y 4.1 percentage pts Y/Y Average loans increased $5.4 billio
Slide 4: Net Interest Income
Net Interest Income Year‐over‐year 11% increase in average earning assets outpaced 24 basis points of net interest margin compression $ in millions Net Interest Income (FTE) $830.00 3.80% +2% 3.70% $820.00 $822 3.60% $810.00 3.50% NIM change LQ 2Q20: 2.94% $800.00 $805 3.40% Hedging activity +0.07 $
Slide 5: Average Non-Equity Funding
Average Non‐Equity Funding Demand deposits drive robust year‐over‐year growth in core deposits Average Quarterly Growth Year‐over‐Year Average Growth Linked Quarter DDA‐Nonint. Bearing: +$7.5 38% DDA‐Nonint. Bearing: +$1.8 7% DDA‐Int. Bearing: +$4.1 21% Savings / Other: +$0.5 5% MMA: +$1.9 8% MMA: +
Slide 6: Capital and Liquidity
Capital and Liquidity Managing capital and liquidity consistent with our aggregate moderate‐to‐low risk appetite $0.96 EOP Loan to Deposit Ratio $2.00 EOP Modified Liquidity Coverage Ratio $0.94 $1.90 183% (1) $0.92 92% $1.80 91% 170% $0.90 $0.88 90% $1.70 $0.86 $1.60 86% 149% 150% $0.84 85% 147% $1
Slide 7: Credit Quality – NPAs and TDRs
Credit Quality – NPAs and TDRs Proactive and conservative approach to identifying impaired loans Nonperforming Assets (NPAs): Q/Q Trend in Nonperforming Assets 3Q20 2Q20 0.89% ($ in millions) Change 0.64% 0.66% 0.75% 0.74% $44 $56 $288 $148 Commercial and Industrial $388 $485 $(97) $195 $438 $442 $3
Slide 8: Consumer Financial Accommodations
Consumer Financial Accommodations Consumer deferrals are down $1.5B from June 30 as customers have exited their original deferral plans, with limited new or second deferrals. Repossessions were re‐instituted in the 3rd quarter while foreclosure activity remains suspended. o Mortgage deferrals redu
Slide 9: Asset Quality and Reserve Trends; 2020 Full-Year Expectations
Asset Quality and Reserve Trends Asset quality metrics stable despite broader economic considerations Net Charge‐off Ratio ACL and ALLL Ratios ACL Ratio 0.62% ALLL Ratio 2.31% 2.27% 0.54% 0.56% 2.05% 0.39% 0.39% 2.21% 2.12% 1.93% 1.18% 1.18% 1.04% 1.04% 3Q19 4Q19 1Q20 2Q20 3Q20 3Q19 4Q19 1Q20 2Q20 3
Slide 10: Reconciliation
Reconciliation Tangible common equity, ROTCE, and ACL ratio ex. PPP loans ($ in millions) 3Q20 2Q20 3Q19 Average common shareholders’ equity $10,701 $10,590 $10,510 Less: intangible assets and goodwill 2,195 2,206 2,240 Add: net tax effect of intangible assets 43 45 53 Average tangible common shareh
Slide 11: Basis of Presentation
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, th
Slide 12: Income Statement – Net Interest Margin (FTE)
Income Statement Net Interest Margin (FTE) NIM down 24 basis points year‐over‐year reflecting lower market interest rates and inherent asset sensitivity of balance sheet Net Interest Margin Trends Components of Cost of Interest‐Bearing Liabilities 3.59% 4.21% 3.50% 4.03% 3.88% 3.35% 2.28% 3.22% 2.70
Slide 13: Hedging Program Overview; Noninterest Income
Hedging Program Overview Loan by Rate Index(1) Loan by Rate Index(1) Hybrid ARMs Hybrid ARMs 10% Variable 10% Variable (>1‐month) (>1‐month) 4% 4% Variable Fixed Fixed (1‐month) 49% Variable 49% Hedged (1‐month) Impact of Hedging 19% 38% Variable (1‐month) Unhedged 19% Wtd. Avg. Wtd Avg. Wtd. Notion
Slide 14: Noninterest Expense; Mortgage Banking
Noninterest Expense Continued investment in talent and technology drive expense growth Change in Quarterly Noninterest Expense Year‐over‐Year Total Expense +7% Personnel costs: +$47 12% $712 Outside data processing: +$11 13% Equipment: +$3 7% $675 $667 Net occupancy: +$2 5% Marketing: ($1) ‐10% Depo
Slide 15: Historical Yield Curves; Tax Rate Summary
Historical Yield Curves Yield curve moved lower and inverted LIBOR / Swap Curves 2.25% 2.00% 12/31/19 1.75% 1.50% 1.25% 1.00% 3/31/20 0.75% 9/30/20 0.50% 6/30/20 0.25% 0.00% 1mL 3mL 6mL 12mL 2Y 3Y 4Y 5Y 7Y 10Y 1 month 2 year 4 year 10 year Rate LIBOR Swap swap swap 12/31/19 1.76% 1.70% 1.70% 1.90% 3
Slide 16: Balance Sheet – Average Deposit Composition
Balance Sheet Average Deposit Composition: $95.0 Billion 3Q20 average balances Average Balance by Type Average Balance by Segment 2% 0% 4% 5% 1% 7% 12% 29% 24% 28% 63% 25% Demand ‐ Noninterest Bearing $27.4B Consumer and Business Banking: $59.5B Demand ‐ Interest Bearing $23.9B Commercial Banking: $
Slide 17: Total Core Deposit Trends; Average Loan Composition
Total Core Deposit Trends YTD vs 3Q20 vs 3Q20 vs Average ($ in billions) YTD 2020 3Q20 PYTD 2Q20(1) 3Q19 Commercial Demand deposits – noninterest bearing $ 18.4 23) % $ 20.8 33) % 38) % Demand deposits – interest bearing 13.5 19) 13.7 (16) 19) Total commercial DDA 31.8 21) 34.5 12) 30) Other core de
Slide 18: Consumer and Commercial Asset Trends
Consumer and Commercial Asset Trends YTD vs 3Q20 vs 3Q20 vs Average ($ in billions) YTD 2020 3Q20 PYTD 2Q20(1) 3Q19 Commercial Commercial and industrial loans $ 33.6 10) % $ 34.7 (7) % 13) % Commercial real estate: Construction loans 1.2 1) 1.2 (9) 1) Commercial loans 5.8 2) 6.0 11) 5) Total commerc
Slide 19: Securities Mix and Yield
Securities Mix and Yield(1) Securities Portfolio Mix Securities Portfolio Yield $30 ($ in billions) 3.20% Held‐to‐maturity Available‐for‐sale 3.04% 3.01% 3.00% 2.94% $25 2.87% 2.79% 2.80% 2.75% 2.84% $20 13.9 2.52% 2.54% 2.51% 2.50% 2.50% 14.4 2.60% 13.4 14.0 13.8 14.0 13.9 13.5 13.5 $15 2.43% 2.45%
Slide 20: Total Commercial Loans – Granularity
Total Commercial Loans – Granularity End of period outstandings of $42.1 billion # of Loans by Size Loans by Dollar Size 8% 15% 70,257 37% 98% 27% 1,698 2% 13% < $5 MM $5+ MM < $5 MM: $15.7B $5 MM ‐ < $10 MM 746 $5 MM ‐ < $10 MM: $5.3B $10 MM ‐ < $25 MM 714 $10 MM ‐ <$25 MM: $11.3B $25 MM ‐ < $50 MM
Slide 21: C&I – Auto Industry; Commercial Real Estate
C&I – Auto Industry End of period balances Outstandings ($ in millions) 3Q20 2Q20 1Q20 4Q19 3Q19 Suppliers(1) Domestic $ 910 $ 977 $ 883 $ 759 $ 809 Foreign 0 0 0 0 0 Total suppliers 910 977 883 759 809 Dealers Floorplan‐domestic 1,593 1,562 2,309 2,370 1,983 Floorplan‐foreign 810 883 1,207 986 763
Slide 22: Automobile: $12.9 Billion
Automobile: $12.9 Billion Extensive relationships with high quality dealers o Huntington consistently in the market for nearly 70 years o Dominant market position in the Midwest with ~4,200 dealers o Floorplan and dealership real estate lending, core deposit relationship, full Treasury Management,
Slide 23: Auto Loans – Origination Trends; Home Equity
Auto Loans – Origination Trends Loan originations from 2013 through 3Q20 demonstrate strong characteristics and continued improvements from pre‐2010 Credit scoring model most recently updated in January 2017 2016‐2019 net charge‐offs impacted by acquisition of FirstMerit, including purchase acco
Slide 24: Home Equity Origination Trends; Residential Mortgages
Home Equity – Origination Trends Consistent origination strategy since 2010 HPI Index is at highest level since pre‐2007 – consistent with general assessment of the overall market Focused on high quality borrowers… 3Q20 originations: o Average weighted FICO scores of 750+ o Average weighted LT
Slide 25: Residential Mortgage Origination Trends; RV and Marine
Residential Mortgages – Origination Trends Consistent origination strategy since 2010 HPI Index is at highest level since pre‐2007 – consistent with general assessment of the overall market Average 3Q20 portfolio origination: purchased / refinance mix of 50% / 50% ($ in billions) YTD 2020 2019
Slide 26: RV and Marine – Origination Trends
RV and Marine – Origination Trends Tightened underwriting standards post‐FirstMerit acquisition along with geographic expansion, primarily into the Southeast and the West Net charge‐offs impacted by acquisition of FirstMerit, including purchase accounting treatment of acquired portfolio A ($ in
Slide 27: Strategic Credit Risk Management Actions Since 2009
Strategic Credit Risk Management Actions Since 2009 Positioned for top quartile through‐the‐cycle performance • Established clear credit risk appetite and aligned credit strategy and policy • Centralized credit and risk management (versus delegation to each region) 2009 • Established credit concentr
Slide 28: Consumer Loan Delinquencies
Consumer Loan Delinquencies(1) 30+ Days 90+ Days 1.36% 1.15% 1.18% 1.11% 1.13% 2.50% 2.40% 2.28% 2.18% 2.10% 1.34% 1.36% 1.22% 0.48% 1.11% 0.95% 1.03% 0.41% 0.42% 0.41% 0.42% 0.81% 0.88% 0.69% 0.84% 0.87% 0.54% 0.80% 0.14% 0.16% 0.13% 0.12% 0.12% 0.51% 0.47% 0.06% 0.07% 0.06% 0.06% 0.07% 3Q19 4Q19 1
Slide 29: Net Charge-Offs; Nonperforming Asset Flow Analysis
Net Charge‐Offs Total Commercial Loans Total Consumer Loans ($ in millions) Oil & Gas NCOs ($ in millions) NCOs CML NCOs ex‐Oil & Gas Annualized % Annualized % Annualized ex‐Oil & Gas 0.89% 0.85% 0.75% 0.65% 0.47% 0.40% 0.38% 0.38% 0.39% 0.35% 0.30% 0.24% 0.19% $89 0.20% $83 $80 0.05% $22 $40 $60 $3
Slide 30: Criticized Commercial Loan Analysis
Criticized Commercial Loan Analysis End of Period ($ in millions) 3Q20 2Q20 1Q20 4Q19 3Q19 Criticized beginning‐of‐period $3,601 $2,473 $2,394 $2,365 $2,256 Additions / increases 355 1,411 510 479 523 Advances 120 329 187 109 106 Upgrades to “Pass” (407) (111) (100) (174) (153) Paydowns (429) (352)
Slide 31: Huntington Overview; Executive Leadership Team
Huntington Overview We serve our customers through a banking network of over 800 retail branches as well as digital, telephone, and ATM banking capabilities. OUR GEOGRAPHIC FOOTPRINT RETAIL FOOTPRINT PRODUCTS: EXTENDED FOOTPRINT PRODUCTS: Consumer Asset Finance Business Banking Auto Commercial Corpo
Slide 32: Deeply Engaged, Diverse Board of Directors
Deeply Engaged, Diverse Board of Directors Our Board sets the strategy, risk management culture, and ethical standards for the entire organization Our directors represent a well‐rounded diversity of skills, knowledge, and experience aligned with our strategy. o Our Board is committed to board re
Slide 33: Notes
Notes Slide 35: (1) Linked quarter percent changes annualized (2) Includes commercial bonds booked as investment securities under GAAP Slide 37: (1) Averages balances; Trading Account and Other securities excluded Slide 38: (1) End of period (2) Tax‐equivalent yield on municipal securities calculate
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