Huntington Bancshares Incorporated · NASDAQ:HBAN
Huntington Bancshares — Q2 2020 Earnings Presentation
34 slides from Huntington Bancshares's earnings presentation, Jul 23, 2020
Slide 1: 2020 Second Quarter Earnings Review
2020 Second Quarter Earnings Review July 23, 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‐LOOKING
Slide 2: 2020 Second Quarter Financial Highlights
2020 Second Quarter Financial Highlights Tangible book value per common share increased 4% year‐over‐year Revenue (FTE) EPS TBVPS $1,188 million $0.13 $8.32 0% Y/Y 61% Y/Y 4% Y/Y ROA ROCE ROTCE 0.51% 5.0% 6.7% 85 basis points Y/Y 8.5 percentage pts Y/Y 11.0 percentage pts Y/Y Average loans increas
Slide 3: Net Interest Margin Drivers and Average Earning Assets
Net Interest Margin (FTE) Drivers Hedging program partially offsets negative impacts of lower interest rates and excess liquidity 0.20% 0.02% ‐0.17% ‐0.08% ‐0.07% 3.14% ‐0.07% ‐0.03% 2.94% 2020 Second Quarter Earnings Review 5 Average Earning Assets Commercial & Industrial loans and elevated deposit
Slide 4: Average Non-Equity Funding and Key Fee Income Drivers
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: +$5.9 30% DDA‐Nonint. Bearing: +$5.6 28% DDA‐Int. Bearing: +$4.2 21% DDA‐Int. Bearing: +$2.7 13% MMA: +$2.4 10% No
Slide 5: Capital and Liquidity
Capital and Liquidity Managing capital and liquidity conservatively within uncertain economic outlook and consistent with our aggregate moderate‐to‐low risk appetite $0.96 EOP Loan to Deposit Ratio $1.80 EOP Modified Liquidity Coverage Ratio 170% $0.94 $1.75 $0.92 $1.70 93% 92% 91% $0.90 $1.65 $0.88
Slide 6: Allowance for Credit Losses and Credit Quality
Allowance for Credit Losses (ACL) Strengthened ACL due to further deterioration and uncertainty in economic outlook $1,821 Utilized Moody’s May Baseline Forecast as foundation 2.45% of $1,603 loans ex. Economic outlook generally deteriorated during the PPP (1) second quarter, resulting in an inc
Slide 7: Commercial and Consumer Financial Accommodations
Commercial Financial Accommodations Commercial customers are exiting their deferral period with no known significant credit issues to date o Deferrals being replaced with amendments/waivers, deferral volumes expected to drop materially in Q3 o Hospitality customers generally requesting a second 90
Slide 8: Credit Update and Asset Quality Trends
Credit Update (including PPP) Actions Taken Increase in Criticized Assets (LQ) Proactive customer outreach program Other Non‐ COVID 12% Hotels and Frequent reviews of at‐risk portfolios Hospitality 26% o 75% of commercial portfolio reviewed at least once in Q2 Oil & Gas 18% Non‐ o Emphasis on li
Slide 9: Near-Term Outlook
Near‐Term Outlook 3Q20E (vs. 2Q20) Commentary • Commercial loans down approximately 1% as full quarter impact of PPP offset by continued reductions in dealer floorplan and commercial line utilization rates Avg Loans ~Flat • Consumer loans up approximately 2% driven by continued growth in residential
Slide 10: Reconciliation
Reconciliation Tangible common equity, ROTCE, and ACL ratio ex. PPP loans ($ in millions) 2Q20 1Q20 2Q19 Average common shareholders’ equity $10,590 $10,433 $10,272 Less: intangible assets and goodwill 2,206 2,217 2,252 Add: net tax effect of intangible assets 45 48 55 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: Table of Contents
Table of Contents Income Statement 24 Net Interest Income 25 Hedging Program Overview 27 Noninterest Income 28 Noninterest Expense 29 Mortgage Banking Noninterest Income 30 Tax Rate Summary 32 Balance Sheet 33 Deposit Composition 34 Loan Composition 36 Investment Securities 39 Commercial Loan Detail
Slide 13: Net Interest Income and Net Interest Margin
Net Interest Income Year‐over‐year net interest margin compression outpaced increase in average earning assets $ in millions $830.00 Net Interest Income (FTE) 3.80% 3.70% $820.00 $819 3.60% $810.00 -3% 3.50% $800.00 $805 3.40% 3.31% $790.00 $796 $797 3.30% 3.20% $786 3.14% 3.20% $780.00 3.10% $770.0
Slide 14: Hedging Program Overview and 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) 5% 5% Fixed Fixed Variable (1‐month) 46% Impact of Hedging 46% Variable Hedged (1‐month) Variable 19% 39% (1‐month) Unhedged 20% Wtd Avg. Wtd Avg. Notional Wtd
Slide 15: Noninterest Expense and Mortgage Banking Income
Noninterest Expense Continued focus on disciplined expense management while investing in technology and other strategic business initiatives Change in Quarterly Noninterest Expense Year‐over‐Year Total Expense Equipment: +$6 15% $700 ‐4% Outside data processing: +$1 1% $675 Net occupancy: +$1 3% $65
Slide 16: Historical Yield Curves and 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% 0.75% 3/31/20 6/30/20 0.50% 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% 3/31/20 0
Slide 17: Balance Sheet: Average Deposit Composition
Balance Sheet Average Deposit Composition: $93.2 Billion 2Q20 average balances Average Balance by Type Average Balance by Segment 0% 4% 5% 3% 1% 7% 11% 28% 26% 61% 28% 26% Demand ‐ Noninterest Bearing $25.7B Consumer and Business Banking: $56.9B Demand ‐ Interest Bearing $23.9B Commercial Banking: $
Slide 18: Total Core Deposit Trends and Average Loan Composition
Total Core Deposit Trends YTD vs 2Q20 vs 2Q20 vs Average ($ in billions) YTD 2020 2Q20 PYTD 1Q20(1) 2Q19 Commercial Demand deposits – noninterest bearing $ 17.1 15) % $ 19.3 116) % 31) % Demand deposits – interest bearing 13.4 19) 14.2 56) 28) Total commercial DDA 30.5 17) 33.5 88) 30) Other core de
Slide 19: Consumer and Commercial Asset Trends; Common Shares Outstanding
Consumer and Commercial Asset Trends YTD vs 2Q20 vs 2Q20 vs Average ($ in billions) YTD 2020 2Q20 PYTD 1Q20(1) 2Q19 Commercial Commercial and industrial loans $ 33.1 8) % $ 35.3 58) % 15) % Commercial real estate: Construction loans 1.2 1) 1.2 12) 3) Commercial loans 5.7 0) 5.9 23) 3) Total commerci
Slide 20: Securities Mix and Yield; AFS and HTM Overview
Securities Mix and Yield(1) Securities Portfolio Mix Securities Portfolio Yield $30 ($ in billions) 3.10% Held‐to‐maturity Available‐for‐sale 3.04% 3.01% 3.00% 2.94% $25 2.90% 2.87% 2.84% 2.79% $20 2.80% 2.75% 2.81% 13.9 14.4 2.70% 14.4 14.0 13.8 14.0 13.9 13.5 13.5 $15 2.60% 2.54% 2.52% 2.51% 2.50%
Slide 21: Commercial Loans Granularity and Commercial and Industrial
Total Commercial Loans – Granularity End of period outstandings of $42.1 billion # of Loans by Size Loans by Dollar Size 8% 17% 68,015 37% 98% 1,700 26% 2% 12% < $5 MM $5+ MM < $5 MM: $15.5B $5 MM ‐ < $10 MM 747 $5 MM ‐ < $10 MM: $5.3B $10 MM ‐ < $25 MM 696 $10 MM ‐ <$25 MM: $11.2B $25 MM ‐ < $50 MM
Slide 22: C&I Auto Industry and Commercial Real Estate
C&I – Auto Industry End of period balances Outstandings ($ in millions) 2Q20 1Q20 4Q19 3Q19 2Q19 Suppliers(1) Domestic $ 977 $ 883 $ 759 $ 809 $ 807 Foreign 0 0 0 0 0 Total suppliers 977 883 759 809 807 Dealers Floorplan‐domestic 1,562 2,309 2,370 1,983 2,060 Floorplan‐foreign 883 1,207 986 763 828
Slide 23: Automobile Loans: Production and Credit Quality
Automobile: $12.7 Billion Extensive relationships with high quality dealers o Huntington consistently in the market for nearly 70 years o Dominant market position in the Midwest with ~4,200 dealers o Floorplan and dealership real estate lending, core deposit relationship, full Treasury Management,
Slide 24: Auto Loan Origination Trends and Home Equity
Auto Loans – Origination Trends Loan originations from 2013 through 2Q20 demonstrate strong characteristics and continued improvements from pre‐2010 Credit scoring model most recently updated in January 2017 2016‐2019 net charge‐offs impacted by acquisition of FirstMerit, including purchase acco
Slide 25: Home Equity Originations and Residential Mortgages
Home Equity – Origination Trends Consistent origination strategy since 2010 HPI Index is at highest level since pre‐2007 – consistent with general assessment of the overall market Focused on high quality borrowers… 2Q20 originations: o Average weighted FICO scores of 750+ o Average weighted LT
Slide 26: Residential Mortgage Originations and RV and Marine
Residential Mortgages – Origination Trends Consistent origination strategy since 2010 HPI Index is at highest level since pre‐2007 – consistent with general assessment of the overall market Average 2Q20 portfolio origination: purchased / refinance mix of 35% / 65% ($ in billions) YTD 2020 2019
Slide 27: RV and Marine Originations; Credit Quality Review
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 28: 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 29: Consumer and Commercial Loan Delinquencies
Consumer Loan Delinquencies(1) 30+ Days 90+ Days 1.36% 1.13% 1.15% 1.11% 1.07% 2.49% 2.50% 2.40% 2.18% 2.10% 1.32% 1.34% 1.36% 1.22% 0.48% 1.03% 0.41% 0.42% 0.41% 0.95% 0.39% 0.84% 0.84% 0.88% 0.87% 0.54% 0.81% 0.81% 0.80% 0.16% 0.16% 0.14% 0.13% 0.12% 0.51% 0.06% 0.06% 0.07% 0.06% 0.06% 2Q19 3Q19 4
Slide 30: Net Charge-Offs and Nonperforming Asset Flow
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% 0.75% 0.65% 0.40% 0.38% 0.39% 0.38% 0.35% 0.31% 0.30% 0.20% 0.19% 0.20% $83 $80 0.11% 0.05% $22 $60 $38 $36 $1
Slide 31: Criticized Commercial Loan Analysis
Criticized Commercial Loan Analysis End of Period ($ in millions) 2Q20 1Q20 4Q19 3Q19 2Q19 Criticized beginning‐of‐period $2,473 $2,394 $2,365 $2,256 $2,216 Additions / increases 1,411 510 479 523 524 Advances 329 187 109 106 129 Upgrades to “Pass” (111) (100) (174) (153) (236) Paydowns (352) (435)
Slide 32: Huntington Bancshares Overview and Leadership Team
Huntington Bancshares Overview $118 billion asset regional bank holding company Consolidated Ohio Retail Footprint Products Branches: 827 Branches: 394 Deposits: $93.7 billion Deposits: $59.2 billion Consumer Loans(1): $117.0 billion Loans(1): $43.3 billion Business Banking Commercial Wealth Managem
Slide 33: Notes
Notes Slide 9: (1) 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 Slide 10: Peer group includes CFG, CMA, FHN, FITB
Slide 34: Notes
Notes Slide 53: (1) RV/Marine LTV based on wholesale value Slide 56: (1) NALs divided by total loans and leases (2) NPAs divided by the sum of loans and leases, net other real estate owned, and other NPAs (3) Criticized assets = commercial criticized loans + consumer loans >60 DPD + OREO; Total crit
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