0000049196us-gaap:OtherDebtSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2021-09-30
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
| | | | | |
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31,September 30, 2021
Huntington Bancshares Incorporated
(Exact name of registrant as specified in its charter)
| | | | | | | | |
| Maryland | 1-34073 | 31-0724920 |
(State or other jurisdiction of incorporation or organization) | (Commission File Number) | (I.R.S. Employer Identification No.) |
Registrant’s address: 41 South High Street, Columbus, Ohio 43287
Registrant’s telephone number, including area code: (614) 480-2265
Securities registered pursuant to Section 12(b) of the Act
| | | | | | | | |
| Title of class | Trading Symbol(s) | Name of exchange on which registered |
Depositary Shares (each representing a 1/40th interest in a share of 5.875% Series C Non-Cumulative, perpetual preferred stock) | HBANN | NASDAQ |
Depositary Shares (each representing a 1/40th interest in a share of 6.250% Series D Non-Cumulative, perpetual preferred stock) | HBANO | NASDAQ |
| Depositary Shares (each representing a 1/40th interest in a share of 4.500% Series H Non-Cumulative, perpetual preferred stock) | HBANP | NASDAQ |
| Depositary Shares (each representing a 1/100th interest in a share of 5.70% Series I Non-Cumulative, perpetual preferred stock) | HBANM | NASDAQ |
| Common Stock—Par Value $0.01 per Share | HBAN | NASDAQ |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. x Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). x Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| | | | | | | | | | | | | | | | | |
| Large Accelerated Filer | x | | Accelerated filer | ☐ |
| | | | | |
| Non-accelerated filer | ☐ | | Smaller reporting company | ☐ |
| | | | Emerging growth company | ☐ |
| | | | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes x No
There were 1,018,052,9231,446,461,249 shares of the registrant’s common stock ($0.01 par value) outstanding on March 31,September 30, 2021.
HUNTINGTON BANCSHARES INCORPORATED
INDEX
2 Huntington Bancshares Incorporated
Glossary of Acronyms and Terms
The following listing provides a comprehensive reference of common acronyms and terms used throughout the document:
| | | | | | | | |
| ACL | | Allowance for Credit Losses |
| AFS | | Available-for-Sale |
| | |
| ALLL | | Allowance for Loan and Lease Losses |
| AOCI | | Accumulated Other Comprehensive Income |
| ASC | | Accounting Standards Codification |
| | |
| AULC | | Allowance for Unfunded LoanLending Commitments |
| Basel III | | Refers to the final rule issued by the FRB and OCC and published in the Federal Register on October 11, 2013 |
| CARES Act | | Coronavirus Aid, Relief, and Economic Security Act, as amended |
| C&I | | Commercial and Industrial |
CCAR | | Comprehensive Capital Analysis and Review |
| CDs | | Certificates of Deposit |
| CDI | | Core Deposit Intangible |
| CECL | | Current Expected Credit Loss |
| CET1 | | Common Equity Tier 1 on a Basel III basis |
| CFPB | | Bureau of Consumer Financial Protection |
| CMO | | Collateralized Mortgage Obligations |
| COVID-19 | | Coronavirus Disease 2019 |
| CRE | | Commercial Real Estate |
| | |
| EAD | | Exposure at Default |
| EVE | | Economic Value of Equity |
| FASB | | Financial Accounting Standards Board |
| FDIC | | Federal Deposit Insurance Corporation |
| FHLB | | Federal Home Loan Bank of Cincinnati |
| FICO | | Fair Isaac Corporation |
| | |
| FRB | | Federal Reserve BoardBank |
| FTE | | Fully-Taxable Equivalent |
| FTP | | Funds Transfer Pricing |
| FVO | | Fair Value Option |
| GAAP | | Generally Accepted Accounting Principles in the United States of America |
| HTM | | Held-to-Maturity |
| IRS | | Internal Revenue Service |
| Last-of-Layer | | Last-of-layer is a fair value hedge of the interest rate risk of a portfolio of similar prepayable assets whereby the last dollar amount within the portfolio of assets is identified as the hedged item |
| | |
LCRLGD | | Liquidity Coverage RatioLoss Given Default |
| LIBOR | | London Interbank Offered Rate |
| LIHTC | | Low Income Housing Tax Credit |
| MBS | | Mortgage-Backed Securities |
| MD&A | | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
| MSR | | Mortgage Servicing Right |
| NAICS | | North American Industry Classification System |
| NALs | | Nonaccrual Loans |
| NCO | | Net Charge-off |
| NII | | NoninterestNet Interest Income |
| NIM | | Net Interest Margin |
| NPAs | | Nonperforming Assets |
| | |
| | | | | | | | |
| OCC | | Office of the Comptroller of the Currency |
| OCI | | Other Comprehensive Income (Loss) |
| | |
| | | | | | | | |
| OLEM | | Other Loans Especially Mentioned |
OREO | | Other Real Estate Owned |
| PCD | | Purchased-Credit-DeterioratedPurchased Credit Deteriorated |
| PD | | Probability of Default |
| PPP | | Paycheck Protection Program |
PPPLF | | Paycheck Protection Program Liquidity Facility |
| RBHPCG | | Regional Banking and The Huntington Private Client Group |
| ROC | | Risk Oversight Committee |
| | |
| | |
| | |
| SBA | | Small Business Administration |
| SEC | | Securities and Exchange Commission |
| TCF | | TCF Financial Corporation |
| TDR | | Troubled Debt Restructuring |
| U.S. Treasury | | U.S. Department of the Treasury |
| | |
UCSUPB | | Uniform Classification SystemUnpaid principal balance |
| VIE | | Variable Interest Entity |
| XBRL | | eXtensible Business Reporting Language |
4 Huntington Bancshares Incorporated
PART I. FINANCIAL INFORMATION
When we refer to “we”, “our”, and “us”, “Huntington”, and “the Company” in this report, we mean Huntington Bancshares Incorporated and our consolidated subsidiaries, unless the context indicates that we refer only to the parent company, Huntington Bancshares Incorporated. When we refer to the “Bank” in this report, we mean our only bank subsidiary, The Huntington National Bank, and its subsidiaries.
Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations
INTRODUCTION
We are a multi-state diversified regional bank holding company organized under Maryland law in 1966 and headquartered in Columbus, Ohio. Through the Bank, we have over 150 years of servicing the financial needs of our customers. Through our subsidiaries, we provide full-service commercial and consumer banking services, mortgage banking services, automobile financing, recreational vehicle and marine financing, equipment financing, inventory finance, investment management, trust services, brokerage services, insurance products and services, and other financial products and services. Our 8141,236 full-service branches and private client group offices are primarily located in Ohio, Colorado, Illinois, Indiana, Kentucky, Michigan, Minnesota, Pennsylvania, South Dakota, West Virginia and West Virginia.Wisconsin. Select financial services and other activities are also conducted in various other states. International banking services are available through the headquarters office in Columbus, Ohio. Our foreign banking activities, in total or with any individual country, are not significant.
On December 13, 2020, we announced the signing of a definitive merger agreement (the “TCF/Huntington Merger Agreement”). Under the terms of the agreement, which was unanimously approved by the boards of directors of both companies, TCF Financial Corporation, the parent company of TCF National Bank will merge into Huntington in an all-stock transaction. TCF is a financial holding company headquartered in Detroit, Michigan with reported total assets of $47.8 billion based on their balance sheet at December 31, 2020.
Under the terms of the Merger Agreement, TCF shareholders will receive 3.0028 shares of Huntington common stock for each share of TCF common stock. Holders of TCF common stock will also receive cash in lieu of fractional shares. Each outstanding share of 5.70% Series C Non-Cumulative Perpetual Preferred Stock of TCF will be converted into the right to receive one share of a newly created series of preferred stock of Huntington.
This MD&A provides information we believe necessary for understanding our financial condition, changes in financial condition, results of operations, and cash flows. The MD&A included in our 2020 Annual Report on Form 10-K should be read in conjunction with this MD&A as this discussion provides only material updates to the 2020 Annual Report on Form 10-K. This MD&A should also be read in conjunction with the Unaudited Condensed Consolidated Financial Statements, Notes to Unaudited Condensed Consolidated Financial Statements, and other information contained in this report.
EXECUTIVE OVERVIEW
Acquisition of TCF Financial Corporation
On June 9, 2021, Huntington closed the acquisition of TCF Financial Corporation in an all-stock transaction valued at $7.2 billion. TCF was a financial holding company headquartered in Detroit, Michigan with operations across the Midwest. The acquisition added depth in existing markets and new markets for expansion and brings complimentary businesses together to drive synergies and growth. Historical periods prior to June 9, 2021 reflect results of legacy Huntington operations. Subsequent to closing, results reflect all post-acquisition activity. For further information, refer to Note 2 “Acquisition of TCF Financial Corporation” of the Notes to Unaudited Condensed Consolidated Financial Statements. Summary of 2021 FirstThird Quarter Results Compared to 2020 FirstThird Quarter
For the quarter, we reported net income of $532$377 million, or $0.48$0.22 per common share, compared with $48$303 million, or $0.03$0.27 per common share, in the year-ago quarter. The reported net income benefited from a decline in provision for credit losses of $239 million and was impacted by TCF acquisition-related expenses totaling $234 million. After tax TCF acquisition-related expenses were $192 million or $(0.13) per common share.
Fully-taxable equivalentNet interest income was $1.2 billion, up $343 million, or 42% from the year-ago quarter. FTE net interest income was $978 million,$1.2 billion, up $182$345 million, or 23%42%, from the year-ago quarter. ThisThe increase in FTE net interest income reflected the benefit from the $12.3$48.7 billion, or 12%44%, increase in average earning assets, andpartially offset by a 346 basis point increasedecrease in the FTE net interest margin to 3.48%2.90%.
The provision for credit losses decreased $501 million year-over-year to $(60) million in the 2021 first quarter. Net charge-offs decreased $53 million to $64 million. Both Commercial NCOs of $49 million and Consumer NCOs of $15 million were down on both Average earning asset growth included a year-over-year basis. Total NCOs represented an annualized 0.32% of$29.4 billion, or 36%, increase in average loans and leases and a $13.1 billion, or 57% increase in average securities, both of which were impacted by the current quarter, down from 0.62%TCF acquisition in the year-ago quarter.
Noninterest income was $395 million, up $34 million, or 9%, from the year ago quarter. Mortgage banking income increased $42 million, or 72%. Partially offsetting these increases, service charges on deposit accounts decreased $18 million, or 21%.June 2021.
Noninterest expenseThe provision for the 2021 first quarter increased $141credit losses decreased $239 million or 22%, from the year-ago quarter Personnel costs increased $73to a benefit of $62 million in the 2021 third quarter. The decrease reflected the benefit from improvement in the macroeconomic scenarios. NCOs decreased $58 million from the year-ago-quarter to $55 million. Both commercial NCOs of $47 million and consumer NCOs of $8 million were down on a year-over-year basis. Total NCOs represented an annualized 0.20% of average loans and leases in the current quarter, down from 0.56% in the year-ago quarter.
Noninterest income was $535 million, up $105 million, or 18%. Outside data processing24%, and other services increased $30 million, or 35%. Other noninterest expense increased $22$577 million, or 43%81%, from the year ago quarter. The increases in both noninterest income and noninterest expense were primarily reflecting a $25 million donation to The Columbus Foundation.impacted by the acquisition of TCF.
Common Equity Tier 1 risk-based capital ratio was 10.33%9.57%, updown from 9.47%9.89% a year ago. The regulatory Tier 1 risk-based capital ratio was 13.32%11.35% compared to 10.81%12.37% at March 31,September 30, 2020. The increasedecrease in regulatory capital ratios was driven by the repurchase of 33.4 million common shares over the last three quarters, cash dividends, partially offset by earnings, adjusted for the CECL transition, offset by the repurchase of $5 million of common stock over the last four quarters (all during 2020 fourth quarter) and cash dividends.transition. The balance sheet growth impact on regulatory capital ratiosas a result of the TCF acquisition was largely offset by a change in asset mix during 2020the common stock issued related to the PPP loansacquisition, net of goodwill and intangibles, as well as elevated deposits at the Federal Reserve bothBank (both of which are 0% risk weighted.weighted). The regulatory Tier 1 risk-based capital ratioand total risk-based capital ratios also reflectsreflect the issuance of $500 million of Series F preferred stock, $500 million of Series G preferred stock and $500 million of Series H preferred stock in the 2020 second quarter, 2020 third quarter, and 2021 first quarter, respectively.the issuance of $175 million of Series I preferred stock in the 2021 second quarter resulting from the conversion of TCF preferred stock, partially offset by the redemption of $600 million of Series D preferred stock in the 2021 third quarter. Additionally, the total risk-based capital ratio reflects the issuance of $558 million of subordinated notes in the 2021 third quarter.
On July 21, 2021, the Board approved the repurchase of up to $800 million of common shares within the next four quarters. Purchases of common stock under the authorization may include open market purchases, privately negotiated transactions, and accelerated share repurchase programs. During the 2021 third quarter, Huntington repurchased a total of $500 million of common stock, representing 33.4 million common shares, at a weighted average price of $14.96.
Business Overview
General
Our general business objectives are:
•ConsistentPursue consistent organic revenue and balance sheet growth.
•Invest in our businesses, particularly technology and risk management.
•Deliver positive long-term operating leverage.
•Maintain an aggregate moderate-to-low, through-the-cycle risk appetite.
•DisciplinedExecute disciplined capital management.
COVID-19
The COVID-19 pandemic continues to cause significant,has caused unprecedented disruption that affectshas affected daily living and has negatively impactsimpacted the economy. As further discussed in “Discussion of Results of Operations,” the current interest rate environment, borrowervolatility in the markets and counterparty credit quality and market volatility, among other factors,lingering economic uncertainty caused by the pandemic continue to impact our performance. Though we are unable to estimate the magnitude, we expect the pandemic and the resulting economic environment will continue to affect our future operating results.
Huntington was able to react quickly to the changes required by the pandemic because of the commitment and flexibility of its workforce coupled with well-prepared business continuity plans. While state and local governments have eased temporary business closures and we have opened our branches, we expect our colleagues who have been operating remotely to continue for a period of time. While the approved vaccines are being administered throughout our footprint, it remains unknown when, or if, there will be a return to historical norms of economic and social activity.
We continue to workmonitor the impact of the virus and evolving government guidelines.
Throughout the pandemic, we have worked with our customers to originate and renew business loans as well as originate loans made available through the Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”),SBA PPP, a lending program established as part of the relief to American consumers and businesses in the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”).Act. Several subsequent congressional acts have reopened and extended the PPP loan program. During the 2021 firstthird quarter, we continued to work with our customers who received PPP loan forgiveness. Through September 2021, $8.5 billion of the PPP loans have processed over 17,000 applications totaling approximately $1.8been forgiven by the SBA of the original $11.4 billion under the reopened PPP.
Pending acquisition of TCF Financial Corporation
In late March 2021,PPP loans originated by both Huntington and TCF shareholders approved the proposed merger of TCF with and into Huntington. The integration planning continuesprior to proceedacquisition.
Uncertainty remains as expected. We expect that the transactionto when there will be completed late ina return to historical norms of economic and social activity. Should current economic conditions deteriorate or if the second quarterpandemic worsens due to various factors, including through the spread of 2021, subject to regulatory approvalmore easily communicable variants of COVID-19, such conditions could have an adverse effect on our business and the satisfactionresults of other customary closing conditions set forth in the merger agreement.
Economy
Our first quarter results reflected a very strong beginning to what will be an important year for Huntington. The economic recovery continues to gain its footing,operations and we are seeing encouraging signs acrosscould adversely affect our footprint and our individual businesses. Our lending pipelines are up across the board, and customer sentiment is improving —financial condition.
6 Huntington Bancshares Incorporated
supportingEconomy
We continued to see increasing momentum in our confidence in more robustbusiness strategies during the quarter, delivering loan demand later in the year.growth (excluding PPP) and fee income, including areas like wealth, capital markets, and cards and payments. Additionally, we continue to see strong core deposit inflows and expect this elevated level of liquidity will remain for some time.make strategic investments to drive sustained organic growth by dynamically managing expenses.
DISCUSSION OF RESULTS OF OPERATIONS
This section provides a review of financial performance fromon a consolidated perspective. It also includes a “Significant Items” section (See Non-GAAP Financial Measures) that summarizes key issues important for a complete understanding of performance trends.basis. Key Unaudited Condensed Consolidated Balance Sheet and Unaudited Condensed Statement of Income trends are discussed. All earnings per share data are reported on a diluted basis. For additional insight on financial performance, please read this section in conjunction with the “Business Segment Discussion”.
| | Table 1 - Selected Quarterly Income Statement Data | Table 1 - Selected Quarterly Income Statement Data | Table 1 - Selected Quarterly Income Statement Data |
| | | | Three Months Ended | | Three Months Ended |
| | March 31, | | December 31, | | September 30, | | June 30, | | March 31, | | September 30, | | June 30, | | | September 30, |
| (amounts in millions, except per share data) | (amounts in millions, except per share data) | 2021 | | 2020 | | 2020 | | 2020 | | 2020 | (amounts in millions, except per share data) | 2021 | | 2021 | | | 2020 |
| Interest income | Interest income | $ | 869 | | | $ | 878 | | | $ | 892 | | | $ | 902 | | | $ | 975 | | Interest income | $ | 1,205 | | | $ | 935 | | | | $ | 892 | |
| Interest expense | Interest expense | (103) | | | 53 | | | 75 | | | 110 | | | 185 | | Interest expense | 45 | | | 97 | | | | 75 | |
| Net interest income | Net interest income | 972 | | | 825 | | | 817 | | | 792 | | | 790 | | Net interest income | 1,160 | | | 838 | | | | 817 | |
| Provision for credit losses | Provision for credit losses | (60) | | | 103 | | | 177 | | | 327 | | | 441 | | Provision for credit losses | (62) | | | 211 | | | | 177 | |
| Net interest income after provision for credit losses | Net interest income after provision for credit losses | 1,032 | | | 722 | | | 640 | | | 465 | | | 349 | | Net interest income after provision for credit losses | 1,222 | | | 627 | | | | 640 | |
| Mortgage banking income | Mortgage banking income | 100 | | | 90 | | | 122 | | | 96 | | | 58 | | Mortgage banking income | 81 | | | 67 | | | | 122 | |
| Service charges on deposit accounts | Service charges on deposit accounts | 69 | | | 78 | | | 76 | | | 60 | | | 87 | | Service charges on deposit accounts | 114 | | | 88 | | | | 76 | |
| Card and payment processing income | Card and payment processing income | 65 | | | 65 | | | 66 | | | 59 | | | 58 | | Card and payment processing income | 96 | | | 80 | | | | 66 | |
| Trust and investment management services | Trust and investment management services | 52 | | | 49 | | | 48 | | | 45 | | | 47 | | Trust and investment management services | 61 | | | 56 | | | | 48 | |
| Leasing revenue | | Leasing revenue | 42 | | | 12 | | | | 3 | |
| Capital markets fees | Capital markets fees | 29 | | | 34 | | | 27 | | | 31 | | | 33 | | Capital markets fees | 40 | | | 35 | | | | 27 | |
| Insurance income | Insurance income | 27 | | | 25 | | | 24 | | | 25 | | | 23 | | Insurance income | 25 | | | 25 | | | | 24 | |
| Bank owned life insurance income | Bank owned life insurance income | 16 | | | 14 | | | 17 | | | 17 | | | 16 | | Bank owned life insurance income | 15 | | | 16 | | | | 17 | |
| Gain on sale of loans | Gain on sale of loans | 3 | | | 13 | | | 13 | | | 8 | | | 8 | | Gain on sale of loans | 2 | | | 3 | | | | 13 | |
| Net (losses) gains on sales of securities | — | | | — | | | — | | | (1) | | | — | | |
| Net gains (losses) on sales of securities | | Net gains (losses) on sales of securities | — | | | 10 | | | | — | |
| Other noninterest income | Other noninterest income | 34 | | | 41 | | | 37 | | | 51 | | | 31 | | Other noninterest income | 59 | | | 52 | | | | 34 | |
| Total noninterest income | Total noninterest income | 395 | | | 409 | | | 430 | | | 391 | | | 361 | | Total noninterest income | 535 | | | 444 | | | | 430 | |
| Personnel costs | Personnel costs | 468 | | | 426 | | | 453 | | | 418 | | | 395 | | Personnel costs | 643 | | | 592 | | | | 453 | |
| Outside data processing and other services | Outside data processing and other services | 115 | | | 111 | | | 98 | | | 90 | | | 85 | | Outside data processing and other services | 304 | | | 162 | | | | 98 | |
| Equipment | Equipment | 46 | | | 49 | | | 44 | | | 46 | | | 41 | | Equipment | 79 | | | 55 | | | | 44 | |
| Net occupancy | Net occupancy | 42 | | | 39 | | | 40 | | | 39 | | | 40 | | Net occupancy | 95 | | | 72 | | | | 40 | |
| Lease financing equipment depreciation | | Lease financing equipment depreciation | 19 | | | 5 | | | | — | |
| Professional services | Professional services | 17 | | | 21 | | | 12 | | | 11 | | | 11 | | Professional services | 26 | | | 48 | | | | 12 | |
| Amortization of intangibles | Amortization of intangibles | 10 | | | 10 | | | 10 | | | 10 | | | 11 | | Amortization of intangibles | 13 | | | 11 | | | | 10 | |
| Marketing | Marketing | 14 | | | 15 | | | 9 | | | 5 | | | 9 | | Marketing | 25 | | | 15 | | | | 9 | |
| Deposit and other insurance expense | Deposit and other insurance expense | 8 | | | 8 | | | 6 | | | 9 | | | 9 | | Deposit and other insurance expense | 17 | | | 8 | | | | 6 | |
| Other noninterest expense | Other noninterest expense | 73 | | | 77 | | | 40 | | | 47 | | | 51 | | Other noninterest expense | 68 | | | 104 | | | | 40 | |
| Total noninterest expense | Total noninterest expense | 793 | | | 756 | | | 712 | | | 675 | | | 652 | | Total noninterest expense | 1,289 | | | 1,072 | | | | 712 | |
| Income before income taxes | 634 | | | 375 | | | 358 | | | 181 | | | 58 | | |
| Income (loss) before income taxes | | Income (loss) before income taxes | 468 | | | (1) | | | | 358 | |
| Provision for income taxes | Provision for income taxes | 102 | | | 59 | | | 55 | | | 31 | | | 10 | | Provision for income taxes | 90 | | | 14 | | | | 55 | |
| Net income | 532 | | | 316 | | | 303 | | | 150 | | | 48 | | |
| Income (loss) after income taxes | | Income (loss) after income taxes | 378 | | | (15) | | | | 303 | |
| Income attributable to non-controlling interest | | Income attributable to non-controlling interest | 1 | | | — | | | | — | |
| Net income (loss) attributable to Huntington Bancshares Inc | | Net income (loss) attributable to Huntington Bancshares Inc | 377 | | | (15) | | | | 303 | |
| Dividends on preferred shares | Dividends on preferred shares | 31 | | | 35 | | | 28 | | | 19 | | | 18 | | Dividends on preferred shares | 29 | | | 43 | | | | 28 | |
| Net income applicable to common shares | $ | 501 | | | $ | 281 | | | $ | 275 | | | $ | 131 | | | $ | 30 | | |
| Impact of preferred stock redemption | | Impact of preferred stock redemption | 15 | | | — | | | | — | |
| Net income (loss) applicable to common shares | | Net income (loss) applicable to common shares | $ | 333 | | | $ | (58) | | | | $ | 275 | |
| | Average common shares—basic | Average common shares—basic | 1,018 | | | 1,017 | | | 1,017 | | | 1,016 | | | 1,018 | | Average common shares—basic | 1,463 | | | 1,125 | | | | 1,017 | |
| Average common shares—diluted | Average common shares—diluted | 1,041 | | | 1,036 | | | 1,031 | | | 1,029 | | | 1,035 | | Average common shares—diluted | 1,487 | | | 1,125 | | | | 1,031 | |
| Net income per common share—basic | $ | 0.49 | | | $ | 0.28 | | | $ | 0.27 | | | $ | 0.13 | | | $ | 0.03 | | |
| Net income per common share—diluted | 0.48 | | | 0.27 | | | 0.27 | | | 0.13 | | | 0.03 | | |
| Net income (loss) per common share—basic | | Net income (loss) per common share—basic | $ | 0.23 | | | $ | (0.05) | | | | $ | 0.27 | |
| Net income (loss) per common share—diluted | | Net income (loss) per common share—diluted | 0.22 | | | (0.05) | | | | 0.27 | |
| Return on average total assets | Return on average total assets | 1.76 | % | | 1.04 | % | | 1.01 | % | | 0.51 | % | | 0.17 | % | Return on average total assets | 0.86 | % | | (0.05) | % | | | 1.01 | % |
| Return on average common shareholders’ equity | Return on average common shareholders’ equity | 18.7 | | | 10.4 | | | 10.2 | | | 5.0 | | | 1.1 | | Return on average common shareholders’ equity | 7.6 | | | (1.9) | | | | 10.2 | |
| Return on average tangible common shareholders’ equity (1) | Return on average tangible common shareholders’ equity (1) | 23.7 | | | 13.3 | | | 13.2 | | | 6.7 | | | 1.8 | | Return on average tangible common shareholders’ equity (1) | 11.5 | | | (2.1) | | | | 13.2 | |
| Net interest margin (2) | Net interest margin (2) | 3.48 | | | 2.94 | | | 2.96 | | | 2.94 | | | 3.14 | | Net interest margin (2) | 2.90 | | | 2.66 | | | | 2.96 | |
| Efficiency ratio (3) | Efficiency ratio (3) | 57.0 | | | 60.2 | | | 56.1 | | | 55.9 | | | 55.4 | | Efficiency ratio (3) | 74.9 | | | 83.1 | | | | 56.1 | |
| Effective tax rate | Effective tax rate | 16.1 | | | 15.8 | | | 15.2 | | | 17.2 | | | 17.0 | | Effective tax rate | 19.0 | | | (2,353.3) | | | | 15.2 | |
| | Revenue—FTE | | |
| Revenue and Net Interest Income—FTE (Non-GAAP) | | Revenue and Net Interest Income—FTE (Non-GAAP) | | | |
| Net interest income | Net interest income | $ | 972 | | | $ | 825 | | | $ | 817 | | | $ | 792 | | | $ | 790 | | Net interest income | $ | 1,160 | | | $ | 838 | | | | $ | 817 | |
| FTE adjustment | FTE adjustment | 6 | | | 5 | | | 5 | | | 5 | | | 6 | | FTE adjustment | 7 | | | 6 | | | | 5 | |
| Net interest income (2) | 978 | | | 830 | | | 822 | | | 797 | | | 796 | | |
| Net interest income, FTE (non-GAAP) (2) | | Net interest income, FTE (non-GAAP) (2) | 1,167 | | | 844 | | | | 822 | |
| Noninterest income | Noninterest income | 395 | | | 409 | | | 430 | | | 391 | | | 361 | | Noninterest income | 535 | | | 444 | | | | 430 | |
| Total revenue (2) | $ | 1,373 | | | $ | 1,239 | | | $ | 1,252 | | | $ | 1,188 | | | $ | 1,157 | | |
| Total revenue, FTE (non-GAAP) (2) | | Total revenue, FTE (non-GAAP) (2) | $ | 1,702 | | | $ | 1,288 | | | | $ | 1,252 | |
(1)Net income (loss) excluding expense for amortization of intangibles for the period divided by average tangible common shareholders’ equity. Average tangible common shareholders’ equity equals average total common shareholders’ equity less average intangible assets and goodwill. Expense for amortization of intangibles and average intangible assets are net of deferred tax liability, and calculated assuming a 21% tax rate.
(2)On an FTE basis assuming a 21% tax rate.
(3)Noninterest expense less amortization of intangibles and goodwill impairment divided by the sum of FTE net interest income and noninterest income excluding securities gains.gains (losses).
8 Huntington Bancshares Incorporated
Significant Items
Table 2 list certain items that we believe are significant to understanding corporate performance and trends (See Non-GAAP Financial Measures included in “Additional Disclosures” section). There was one Significant Item in the 2021 first quarter: $21 million of noninterest expense related to the pending acquisition of TCF. This resulted in a negative impact of $(0.02) per common share. There were no Significant Items in the other periods presented. | | | | | | | | | | | | | | | | | | | |
| Table 2 - Significant Items Influencing Earnings Performance Comparison |
| | Three Months Ended | | | | | | | | |
| March 31, 2021 | | | | |
| (dollar amounts in millions, share amounts in thousands) | Amount | | EPS (1) | | | | | | | | |
| Net income | $ | 532 | | | | | | | | | | | |
| Earnings per share, after-tax | | | $ | 0.48 | | | | | | | | | |
| | | | | | | | | | | |
| Significant Items—favorable (unfavorable) impact: | Earnings | | EPS (1) | | | | | | | | |
| Mergers and acquisitions, net expenses | $ | (21) | | | | | | | | | | | |
| Tax impact | 4 | | | | | | | | | | | |
| Mergers and acquisitions, after tax | $ | (17) | | | $ | (0.02) | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
| Table 2 - Selected Year to Date Income Statements |
| | | | | | | |
| | Nine Months Ended September 30, | | Change |
| (amounts in millions, except per share data) | 2021 | | 2020 | | Amount | | Percent |
| Interest income | $ | 3,009 | | | $ | 2,769 | | | $ | 240 | | | 9 | % |
| Interest expense | 39 | | | 370 | | | (331) | | | (89) | |
| Net interest income | 2,970 | | | 2,399 | | | 571 | | | 24 | |
| Provision for credit losses | 89 | | | 945 | | | (856) | | | (91) | |
| Net interest income after provision for credit losses | 2,881 | | | 1,454 | | | 1,427 | | | 98 | |
| Mortgage banking income | 248 | | | 277 | | | (29) | | | (10) | |
| Service charges on deposit accounts | 271 | | | 223 | | | 48 | | | 22 | |
| Card and payment processing income | 241 | | | 183 | | | 58 | | | 32 | |
| Trust and investment management services | 169 | | | 140 | | | 29 | | | 21 | |
| Leasing revenue | 58 | | | 14 | | | 44 | | | 314 | |
| Capital markets fees | 104 | | | 91 | | | 13 | | | 14 | |
| Insurance income | 77 | | | 72 | | | 5 | | | 7 | |
| Bank owned life insurance income | 47 | | | 49 | | | (2) | | | (4) | |
| Gain on sale of loans | 8 | | | 30 | | | (22) | | | (73) | |
| Net gains (losses) on sales of securities | 10 | | | (1) | | | 11 | | | 1,100 | |
| Other noninterest income | 141 | | | 104 | | | 37 | | | 36 | |
| Total noninterest income | 1,374 | | | 1,182 | | | 192 | | | 16 | |
| Personnel costs | 1,703 | | | 1,267 | | | 436 | | | 34 | |
| Outside data processing and other services | 581 | | | 273 | | | 308 | | | 113 | |
| Equipment | 180 | | | 132 | | | 48 | | | 36 | |
| Net occupancy | 209 | | | 119 | | | 90 | | | 76 | |
| Lease financing equipment depreciation | 24 | | | 1 | | | 23 | | | 2,300 | |
| Professional services | 91 | | | 34 | | | 57 | | | 168 | |
| Amortization of intangibles | 34 | | | 31 | | | 3 | | | 10 | |
| Marketing | 54 | | | 23 | | | 31 | | | 135 | |
| Deposit and other insurance expense | 33 | | | 24 | | | 9 | | | 38 | |
| Other noninterest expense | 245 | | | 135 | | | 110 | | | 81 | |
| Total noninterest expense | 3,154 | | | 2,039 | | | 1,115 | | | 55 | |
| Income before income taxes | 1,101 | | | 597 | | | 504 | | | 84 | |
| Provision for income taxes | 206 | | | 96 | | | 110 | | | 115 | |
| Income after income taxes | 895 | | | 501 | | | 394 | | | 79 | |
| Income attributable to non-controlling interest | 1 | | | — | | | 1 | | | 100 | |
| Net income attributable to Huntington Bancshares Inc | 894 | | | 501 | | | 393 | | | 78 | |
| Dividends on preferred shares | 103 | | | 65 | | | 38 | | | 58 | |
| Impact of preferred stock redemption | 15 | | | — | | | 15 | | | 100 | |
| Net income applicable to common shares | $ | 776 | | | $ | 436 | | | $ | 340 | | | 78 | % |
| | | | | | | |
| Average common shares—basic | 1,202 | | | 1,017 | | | 185 | | | 18 | % |
| Average common shares—diluted | 1,225 | | | 1,032 | | | 193 | | | 19 | |
| Net income per common share—basic | $ | 0.65 | | | $ | 0.43 | | | $ | 0.22 | | | 51 | |
| Net income per common share—diluted | 0.63 | | | 0.42 | | | 0.21 | | | 50 | |
| | | | | | | |
| | | | | | | |
| Revenue and Net Interest Income—FTE (Non-GAAP) | | | | | | | |
| Net interest income | $ | 2,970 | | | $ | 2,399 | | | $ | 571 | | | 24 | % |
| FTE adjustment | 19 | | | 16 | | | 3 | | | 19 | |
| Net interest income, FTE (non-GAAP) (1) | 2,989 | | | 2,415 | | | 574 | | | 24 | |
| Noninterest income | 1,374 | | | 1,182 | | | 192 | | | 16 | |
| Total revenue, FTE (non-GAAP) (1) | $ | 4,363 | | | $ | 3,597 | | | $ | 766 | | | 21 | % |
(1)Based upon the quarterly average outstanding diluted common shares.On an FTE basis assuming a 21% tax rate.
Net Interest Income / Average Balance Sheet
The following tables detail the change in our average balance sheet and the net interest margin:
| | Table 3 - Consolidated Average Balance Sheet and Net Interest Margin Analysis | Table 3 - Consolidated Average Balance Sheet and Net Interest Margin Analysis | Table 3 - Consolidated Average Balance Sheet and Net Interest Margin Analysis | |
| | | Average Balances | | | Average Balances | |
| | Three Months Ended | | Change | | Three Months Ended | | Change | | Change |
| | March 31, | | December 31, | | September 30, | | June 30, | | March 31, | | 1Q21 vs. 1Q20 | | September 30, | | June 30, | | | September 30, | | 3Q21 vs. 3Q20 | | 3Q21 vs. 2Q21 |
| (dollar amounts in millions) | (dollar amounts in millions) | 2021 | | 2020 | | 2020 | | 2020 | | 2020 | | Amount | | Percent | (dollar amounts in millions) | 2021 | | 2021 | | | 2020 | | Amount | | Percent | | Amount | | Percent |
| Assets: | Assets: | | | | | | | | | | | | | | Assets: | | | | | | | | | | | | | | |
| Interest-bearing deposits in Federal Reserve Bank | $ | 6,065 | | | $ | 5,507 | | | $ | 5,857 | | | $ | 3,413 | | | $ | 680 | | | $ | 5,385 | | | 792 | % | |
| Interest-bearing deposits at Federal Reserve Bank | | Interest-bearing deposits at Federal Reserve Bank | $ | 11,536 | | | $ | 7,636 | | | | $ | 5,857 | | | $ | 5,679 | | | 97 | % | | $ | 3,900 | | | 51 | % |
| Interest-bearing deposits in banks | Interest-bearing deposits in banks | 177 | | | 205 | | | 177 | | | 169 | | | 150 | | | 27 | | | 18 | | Interest-bearing deposits in banks | 466 | | | 319 | | | | 177 | | | 289 | | | 163 | | | 147 | | | 46 | |
| Securities: | Securities: | | Securities: | | | |
| Trading account securities | Trading account securities | 52 | | | 53 | | | 49 | | | 39 | | | 95 | | | (43) | | | (45) | | Trading account securities | 49 | | | 48 | | | | 49 | | | — | | | — | | | 1 | | | 2 | |
| Available-for-sale securities: | Available-for-sale securities: | | Available-for-sale securities: | | | |
| Taxable | Taxable | 14,827 | | | 12,048 | | | 10,670 | | | 11,179 | | | 11,671 | | | 3,156 | | | 27 | | Taxable | 20,147 | | | 20,096 | | | | 10,670 | | | 9,477 | | | 89 | | | 51 | | | — | |
| Tax-exempt | Tax-exempt | 2,650 | | | 2,710 | | | 2,749 | | | 2,728 | | | 2,753 | | | (103) | | | (4) | | Tax-exempt | 3,116 | | | 2,832 | | | | 2,749 | | | 367 | | | 13 | | | 284 | | | 10 | |
| Total available-for-sale securities | Total available-for-sale securities | 17,477 | | | 14,758 | | | 13,419 | | | 13,907 | | | 14,424 | | | 3,053 | | | 21 | | Total available-for-sale securities | 23,263 | | | 22,928 | | | | 13,419 | | | 9,844 | | | 73 | | | 335 | | | 1 | |
| Held-to-maturity securities—taxable | Held-to-maturity securities—taxable | 8,269 | | | 8,844 | | | 8,932 | | | 9,798 | | | 9,428 | | | (1,159) | | | (12) | | Held-to-maturity securities—taxable | 11,964 | | | 7,280 | | | | 8,932 | | | 3,032 | | | 34 | | | 4,684 | | | 64 | |
| | Other securities | Other securities | 412 | | | 420 | | | 430 | | | 474 | | | 445 | | | (33) | | | (7) | | Other securities | 677 | | | 479 | | | | 430 | | | 247 | | | 57 | | | 198 | | | 41 | |
| Total securities | Total securities | 26,210 | | | 24,075 | | | 22,830 | | | 24,218 | | | 24,392 | | | 1,818 | | | 7 | | Total securities | 35,953 | | | 30,735 | | | | 22,830 | | | 13,123 | | | 57 | | | 5,218 | | | 17 | |
| Loans held for sale | Loans held for sale | 1,392 | | | 1,319 | | | 1,259 | | | 1,039 | | | 865 | | | 527 | | | 61 | | Loans held for sale | 1,525 | | | 1,294 | | | | 1,259 | | | 266 | | | 21 | | | 231 | | | 18 | |
Loans and leases: (3)(1) | Loans and leases: (3)(1) | | Loans and leases: (3)(1) | | | |
| Commercial: | Commercial: | | Commercial: | | | |
| Commercial and industrial | Commercial and industrial | 34,352 | | | 34,850 | | | 34,669 | | | 35,284 | | | 30,849 | | | 3,503 | | | 11 | | Commercial and industrial | 40,597 | | | 34,126 | | | | 32,464 | | | 8,133 | | | 25 | | | 6,471 | | | 19 | |
| Commercial real estate: | Commercial real estate: | | Commercial real estate: | | | |
| Construction | Construction | 1,053 | | | 1,085 | | | 1,175 | | | 1,201 | | | 1,165 | | | (112) | | | (10) | | Construction | 1,803 | | | 1,310 | | | | 1,175 | | | 628 | | | 53 | | | 493 | | | 38 | |
| Commercial | Commercial | 6,122 | | | 6,092 | | | 6,045 | | | 5,885 | | | 5,566 | | | 556 | | | 10 | | Commercial | 12,891 | | | 7,773 | | | | 6,045 | | | 6,846 | | | 113 | | | 5,118 | | | 66 | |
| Commercial real estate | Commercial real estate | 7,175 | | | 7,177 | | | 7,220 | | | 7,086 | | | 6,731 | | | 444 | | | 7 | | Commercial real estate | 14,694 | | | 9,083 | | | | 7,220 | | | 7,474 | | | 104 | | | 5,611 | | | 62 | |
| Lease financing | | Lease financing | 4,983 | | | 2,798 | | | | 2,205 | | | 2,778 | | | 126 | | | 2,185 | | | 78 | |
| Total commercial | Total commercial | 41,527 | | | 42,027 | | | 41,889 | | | 42,370 | | | 37,580 | | | 3,947 | | | 11 | | Total commercial | 60,274 | | | 46,007 | | | | 41,889 | | | 18,385 | | | 44 | | | 14,267 | | | 31 | |
| Consumer: | Consumer: | | | | | | | | | | | | | | Consumer: | | | | | | | | | | | | | | |
| Automobile | Automobile | 12,665 | | | 12,857 | | | 12,889 | | | 12,681 | | | 12,924 | | | (259) | | | (2) | | Automobile | 13,209 | | | 12,793 | | | | 12,889 | | | 320 | | | 2 | | | 416 | | | 3 | |
| Residential mortgage | | Residential mortgage | 18,886 | | | 13,768 | | | | 11,817 | | | 7,069 | | | 60 | | | 5,118 | | | 37 | |
| Home equity | Home equity | 8,809 | | | 8,919 | | | 8,878 | | | 8,897 | | | 9,026 | | | (217) | | | (2) | | Home equity | 11,106 | | | 9,375 | | | | 8,878 | | | 2,228 | | | 25 | | | 1,731 | | | 18 | |
| Residential mortgage | 12,094 | | | 12,100 | | | 11,817 | | | 11,463 | | | 11,391 | | | 703 | | | 6 | | |
| RV and marine | RV and marine | 4,193 | | | 4,181 | | | 4,020 | | | 3,706 | | | 3,590 | | | 603 | | | 17 | | RV and marine | 4,998 | | | 4,447 | | | | 4,020 | | | 978 | | | 24 | | | 551 | | | 12 | |
| Other consumer | Other consumer | 973 | | | 1,032 | | | 1,049 | | | 1,082 | | | 1,185 | | | (212) | | | (18) | | Other consumer | 1,458 | | | 1,047 | | | | 1,049 | | | 409 | | | 39 | | | 411 | | | 39 | |
| Total consumer | Total consumer | 38,734 | | | 39,089 | | | 38,653 | | | 37,829 | | | 38,116 | | | 618 | | | 2 | | Total consumer | 49,657 | | | 41,430 | | | | 38,653 | | | 11,004 | | | 28 | | | 8,227 | | | 20 | |
| Total loans and leases | Total loans and leases | 80,261 | | | 81,116 | | | 80,542 | | | 80,199 | | | 75,696 | | | 4,565 | | | 6 | | Total loans and leases | 109,931 | | | 87,437 | | | | 80,542 | | | 29,389 | | | 36 | | | 22,494 | | | 26 | |
| Allowance for loan and lease losses | Allowance for loan and lease losses | (1,809) | | | (1,804) | | | (1,720) | | | (1,557) | | | (1,239) | | | (570) | | | (46) | | Allowance for loan and lease losses | (2,219) | | | (1,828) | | | | (1,720) | | | (499) | | | (29) | | | (391) | | | (21) | |
| Net loans and leases | Net loans and leases | 78,452 | | | 79,312 | | | 78,822 | | | 78,642 | | | 74,457 | | | 3,995 | | | 5 | | Net loans and leases | 107,712 | | | 85,609 | | | | 78,822 | | | 28,890 | | | 37 | | | 22,103 | | | 26 | |
| Total earning assets | Total earning assets | 114,105 | | | 112,222 | | | 110,665 | | | 109,038 | | | 101,783 | | | 12,322 | | | 12 | | Total earning assets | 159,411 | | | 127,421 | | | | 110,665 | | | 48,746 | | | 44 | | | 31,990 | | | 25 | |
| Cash and due from banks | Cash and due from banks | 1,080 | | | 1,113 | | | 1,173 | | | 1,299 | | | 914 | | | 166 | | | 18 | | Cash and due from banks | 1,535 | | | 1,106 | | | | 1,173 | | | 362 | | | 31 | | | 429 | | | 39 | |
| Intangible assets | 2,176 | | | 2,185 | | | 2,195 | | | 2,206 | | | 2,217 | | | (41) | | | (2) | | |
| Goodwill and other intangible assets | | Goodwill and other intangible assets | 5,578 | | | 3,055 | | | | 2,195 | | | 3,383 | | | 154 | | | 2,523 | | | 83 | |
| All other assets | All other assets | 7,443 | | | 7,279 | | | 7,216 | | | 7,205 | | | 6,472 | | | 971 | | | 15 | | All other assets | 9,528 | | | 8,076 | | | | 7,216 | | | 2,312 | | | 32 | | | 1,452 | | | 18 | |
| Total assets | Total assets | $ | 122,995 | | | $ | 120,995 | | | $ | 119,529 | | | $ | 118,191 | | | $ | 110,147 | | | $ | 12,848 | | | 12 | % | Total assets | $ | 173,833 | | | $ | 137,830 | | | | $ | 119,529 | | | $ | 54,304 | | | 45 | % | | $ | 36,003 | | | 26 | % |
| Liabilities and Shareholders’ Equity: | Liabilities and Shareholders’ Equity: | | | | | | | | | | | | | | Liabilities and Shareholders’ Equity: | | | | | | | | | | | | | | |
| Interest-bearing deposits: | Interest-bearing deposits: | | Interest-bearing deposits: | | | |
| Demand deposits—interest-bearing | Demand deposits—interest-bearing | $ | 26,812 | | | $ | 25,094 | | | 23,865 | | | $ | 23,878 | | | $ | 21,202 | | | $ | 5,610 | | | 26 | % | Demand deposits—interest-bearing | $ | 35,690 | | | $ | 29,729 | | | | $ | 23,865 | | | $ | 11,825 | | | 50 | % | | $ | 5,961 | | | 20 | % |
| Money market deposits | Money market deposits | 26,247 | | | 26,144 | | | 26,200 | | | 25,728 | | | 24,697 | | | 1,550 | | | 6 | | Money market deposits | 33,281 | | | 28,124 | | | | 26,200 | | | 7,081 | | | 27 | | | 5,157 | | | 18 | |
| Savings and other domestic deposits | Savings and other domestic deposits | 12,277 | | | 11,468 | | | 11,157 | | | 10,609 | | | 9,632 | | | 2,645 | | | 27 | | Savings and other domestic deposits | 20,931 | | | 15,190 | | | | 11,157 | | | 9,774 | | | 88 | | | 5,741 | | | 38 | |
| Core certificates of deposit (4) | 1,384 | | | 1,479 | | | 2,035 | | | 3,003 | | | 3,943 | | | (2,559) | | | (65) | | |
| Other domestic time deposits of $250,000 or more | 115 | | | 139 | | | 175 | | | 230 | | | 321 | | | (206) | | | (64) | | |
| Brokered deposits and negotiable CDs | 3,355 | | | 4,100 | | | 4,182 | | | 4,114 | | | 2,884 | | | 471 | | | 16 | | |
| Core certificates of deposit (2) | | Core certificates of deposit (2) | 3,319 | | | 1,832 | | | | 2,035 | | | 1,284 | | | 63 | | | 1,487 | | | 81 | |
| Other domestic deposits of $250,000 or more | | Other domestic deposits of $250,000 or more | 582 | | | 259 | | | | 175 | | | 407 | | | 233 | | | 323 | | | 125 | |
| Negotiable CDs, brokered and other deposits | | Negotiable CDs, brokered and other deposits | 3,905 | | | 2,986 | | | | 4,182 | | | (277) | | | (7) | | | 919 | | | 31 | |
| | Total interest-bearing deposits | Total interest-bearing deposits | 70,190 | | | 68,424 | | | 67,614 | | | 67,562 | | | 62,679 | | | 7,511 | | | 12 | | Total interest-bearing deposits | 97,708 | | | 78,120 | | | | 67,614 | | | 30,094 | | | 45 | | | 19,588 | | | 25 | |
| Short-term borrowings | Short-term borrowings | 208 | | | 239 | | | 162 | | | 826 | | | 3,383 | | | (3,175) | | | (94) | | Short-term borrowings | 317 | | | 241 | | | | 162 | | | 155 | | | 96 | | | 76 | | | 32 | |
| Long-term debt | Long-term debt | 7,766 | | | 8,799 | | | 9,318 | | | 9,802 | | | 10,076 | | | (2,310) | | | (23) | | Long-term debt | 7,587 | | | 6,887 | | | | 9,318 | | | (1,731) | | | (19) | | | 700 | | | 10 | |
| Total interest-bearing liabilities | Total interest-bearing liabilities | 78,164 | | | 77,462 | | | 77,094 | | | 78,190 | | | 76,138 | | | 2,026 | | | 3 | | Total interest-bearing liabilities | 105,612 | | | 85,248 | | | | 77,094 | | | 28,518 | | | 37 | | | 20,364 | | | 24 | |
| Demand deposits—noninterest-bearing | Demand deposits—noninterest-bearing | 29,095 | | | 28,140 | | | 27,435 | | | 25,660 | | | 20,054 | | | 9,041 | | | 45 | | Demand deposits—noninterest-bearing | 44,595 | | | 34,558 | | | | 27,435 | | | 17,160 | | | 63 | | | 10,037 | | | 29 | |
| All other liabilities | All other liabilities | 2,412 | | | 2,452 | | | 2,322 | | | 2,396 | | | 2,319 | | | 93 | | | 4 | | All other liabilities | 3,823 | | | 2,608 | | | | 2,322 | | | 1,501 | | | 65 | | | 1,215 | | | 47 | |
| Shareholders’ equity | 13,324 | | | 12,941 | | | 12,678 | | | 11,945 | | | 11,636 | | | 1,688 | | | 15 | | |
| Total Huntington Bancshares Inc shareholders’ equity | | Total Huntington Bancshares Inc shareholders’ equity | 19,783 | | | 15,410 | | | | 12,678 | | | 7,105 | | | 56 | | | 4,373 | | | 28 | |
| Non-controlling interest | | Non-controlling interest | 20 | | | 6 | | | | — | | | 20 | | | 100 | | | 14 | | | 233 | |
| Total equity | | Total equity | 19,803 | | | 15,416 | | | | 12,678 | | | 7,125 | | | 56 | | | 4,387 | | | 28 | |
| Total liabilities and shareholders’ equity | Total liabilities and shareholders’ equity | $ | 122,995 | | | $ | 120,995 | | | $ | 119,529 | | | $ | 118,191 | | | $ | 110,147 | | | $ | 12,848 | | | 12 | % | Total liabilities and shareholders’ equity | $ | 173,833 | | | $ | 137,830 | | | | $ | 119,529 | | | $ | 54,304 | | | 45 | % | | $ | 36,003 | | | 26 | % |
(1)For purposes of this analysis, NALs are reflected in the average balances of loans and leases.
(2)Includes consumer certificates of deposit of $250,000 or more.
10 Huntington Bancshares Incorporated
| | | | | | | | | | | | | | | | | | | | | |
| Table 3 - Consolidated Average Balance Sheet and Net Interest Margin Analysis (Continued) |
| | | | | | | | | |
| | Average Yield Rates (1) |
| | Three Months Ended |
| September 30, | | June 30, | | | | | | September 30, |
| Fully-taxable equivalent basis (2) | 2021 | | 2021 | | | | | | 2020 |
| Assets: | | | | | | | | | |
| Interest-bearing deposits at Federal Reserve Bank | 0.17 | % | | 0.11 | % | | | | | | 0.10 | % |
| Interest-bearing deposits in banks | 0.04 | | | 0.01 | | | | | | | 0.13 | |
| Securities: | | | | | | | | | |
| Trading account securities | 2.98 | | | 2.96 | | | | | | | 3.18 | |
| Available-for-sale securities: | | | | | | | | | |
| Taxable | 1.34 | | | 1.34 | | | | | | | 1.89 | |
| Tax-exempt | 2.37 | | | 2.42 | | | | | | | 2.71 | |
| Total available-for-sale securities | 1.48 | | | 1.47 | | | | | | | 2.06 | |
| Held-to-maturity securities—taxable | 1.58 | | | 1.94 | | | | | | | 2.28 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Other securities | 1.43 | | | 1.72 | | | | | | | 1.23 | |
| Total securities | 1.52 | | | 1.59 | | | | | | | 2.13 | |
| Loans held for sale | 3.23 | | | 2.79 | | | | | | | 2.82 | |
| Loans and leases: (3) | | | | | | | | | |
| Commercial: | | | | | | | | | |
| Commercial and industrial | 4.04 | | | 3.70 | | | | | | | 3.55 | |
| Commercial real estate: | | | | | | | | | |
| Construction | 3.68 | | | 3.57 | | | | | | | 3.40 | |
| Commercial | 3.17 | | | 3.06 | | | | | | | 2.63 | |
| Commercial real estate | 3.23 | | | 3.13 | | | | | | | 2.75 | |
| Lease financing | 4.84 | | | 5.00 | | | | | | | 5.52 | |
| Total commercial | 3.91 | | | 3.67 | | | | | | | 3.52 | |
| Consumer: | | | | | | | | | |
| Automobile | 3.62 | | | 3.62 | | | | | | | 3.93 | |
| Residential mortgage | 2.95 | | | 3.04 | | | | | | | 3.41 | |
| Home equity | 4.03 | | | 3.79 | | | | | | | 3.79 | |
| RV and marine | 4.33 | | | 4.13 | | | | | | | 4.60 | |
| Other consumer | 7.98 | | | 10.17 | | | | | | | 11.23 | |
| Total consumer | 3.65 | | | 3.69 | | | | | | | 4.00 | |
| Total loans and leases | 3.80 | | | 3.68 | | | | | | | 3.75 | |
| Total earning assets | 3.02 | | | 2.96 | | | | | | | 3.22 | |
| Liabilities: | | | | | | | | | |
| Interest-bearing deposits: | | | | | | | | | |
| Demand deposits—interest-bearing | 0.04 | | | 0.04 | | | | | | | 0.05 | |
| Money market deposits | 0.08 | | | 0.06 | | | | | | | 0.28 | |
| Savings and other domestic deposits | 0.03 | | | 0.04 | | | | | | | 0.06 | |
| Core certificates of deposit (4) | (0.23) | | | 0.19 | | | | | | | 1.03 | |
| Other domestic deposits of $250,000 or more | 0.21 | | | 0.26 | | | | | | | 0.92 | |
| Negotiable CDs, brokered and other deposits | 0.15 | | | 0.16 | | | | | | | 0.19 | |
| | | | | | | | | |
| Total interest-bearing deposits | 0.05 | | | 0.06 | | | | | | | 0.18 | |
| Short-term borrowings | 0.14 | | | 0.47 | | | | | | | 0.30 | |
| Long-term debt (5) | 1.81 | | | 4.97 | | | | | | | 1.87 | |
| Total interest-bearing liabilities | 0.17 | | | 0.45 | | | | | | | 0.39 | |
| | | | | | | | | |
| | | | | | | | | |
| Net interest rate spread | 2.85 | | | 2.51 | | | | | | | 2.83 | |
| Impact of noninterest-bearing funds on margin | 0.05 | | | 0.15 | | | | | | | 0.13 | |
| Net interest margin | 2.90 | % | | 2.66 | % | | | | | | 2.96 | % |
(1)Average yield rates include the impact of applicable derivatives. Loan and lease and deposit average yield rates also include impact of applicable non-deferrable and amortized fees.
(2) FTE yields are calculated assuming a 21% tax rate.
(3) For purposes of this analysis, NALs are reflected in the average balances of loans.
(4) Includes consumer certificates of deposit of $250,000 or more.
(5) Reflects the mark-to-market impact of interest rate caps of a detriment of $55 million, or 318 bps, for 2Q 2021. There was no impact for 3Q 2021 or 2020.
2021 Third Quarter versus 2020 Third Quarter
Net interest income for the 2021 third quarter increased $343 million, or 42%, from the 2020 third quarter. FTE net interest income, a non-GAAP financial measure, for the 2021 third quarter increased $345 million, or 42%, from the 2020 third quarter. The increase in FTE net interest income reflected a $48.7 billion, or 44%, increase in average earning assets, partially offset by a 6 basis point decrease in the FTE net interest margin to 2.90%. Net interest income in the 2021 third quarter was impacted by the TCF acquisition, including purchase accounting net accretion, which favorably impacted the NIM by approximately 9 basis points, and also included $30 million of deferred PPP loan fees recognized upon receipt of forgiveness payments from the SBA, which favorably impacted the NIM by approximately 8 basis points. The year-over-year decreases in earning asset yields and average liability costs also reflected the impact of lower interest rates and changes in balance sheet mix, including elevated average deposits at the FRB.
Average earning assets for the 2021 third quarter increased $48.7 billion, or 44%, from the year-ago quarter, primarily reflecting a $29.4 billion, or 36%, increase in average total loans and leases, a $13.1 billion, or 57%, increase in average securities and $5.7 billion, or 97%, increase in interest-bearing deposits at the FRB. The $29.4 billion, or 36%, increase in average total loans and leases was impacted by the TCF acquisition and robust portfolio mortgage production, partially offset by a decrease in average PPP loans. Average securities increased $13.1 billion, or 57%, primarily due to the TCF acquisition and the purchase of securities to deploy excess liquidity.
Average total interest-bearing liabilities for the 2021 third quarter increased $28.5 billion, or 37%, from the year-ago quarter. Average total deposits increased $47.3 billion, or 50%, while average total core deposits increased $47.1 billion, or 52%. Increases across categories reflect the impact of the TCF acquisition, the increase in average total deposits was additionally driven by elevated balances in core deposits largely related to residual government stimulus balances and improved retention. Specifically within core deposits, average total demand deposits increased $29.0 billion, or 57%, average savings and other domestic deposits increased $9.8 billion, or 88%, average money market deposits increased $7.1 billion, or 27%, and average core CDs increased $1.3 billion, or 63%. The increase in average core CDs due to the acquisition of TCF was partially offset by the maturity of balances related to the 2018 consumer deposit growth initiatives. Average total debt decreased $1.6 billion, or 17%, primarily reflecting the repayment and maturity of long-term debt over the past five quarters due to the strong core deposit growth, partially offset by $2.8 billion of debt assumed in the TCF acquisition.
2021 Third Quarter versus 2021 Second Quarter
Net interest income increased $322 million, or 38%, compared to the 2021 second quarter. FTE net interest income, a non-GAAP financial measure, increased $323 million, or 38%, compared to the 2021 second quarter, reflecting a $32.0 billion, or 25% increase in average earning assets and a 24 basis point increase in the FTE net interest margin. Net interest income for the 2021 third quarter included a full-quarter impact from the TCF acquisition, compared to the partial quarter impact to the 2021 second quarter. The NIM increase reflected the negative $55 million, or a 17 basis point, 2021 second quarter mark-to-market of interest rate caps and a $26 million, or a 6 basis point, third quarter 2021 increase in purchase accounting net accretion from the TCF acquisition, partially offset by larger average deposit balances at the FRB. The interest rate caps were exited in the 2021 second quarter. Accelerated recognition of deferred PPP loan fees were $30 million in both the 2021 third quarter and 2021 second quarter.
Average earning assets increased $32.0 billion, or 25%, primarily reflecting a $22.5 billion, or 26%, increase in average loans and leases and a $5.2 billion, or 17%, increase in average securities. Average balances across earning assets categories reflect the full-quarter impact from the TCF acquisition. The increase in average loan and lease growth was partially offset by the reduction of PPP loans due to forgiveness. Additionally, the increase in average securities reflected the purchase of securities to deploy excess liquidity.
Average total interest-bearing liabilities increased $20.4 billion, or 24%, when compared to the 2021 second quarter. Average total deposits increased $29.6 billion, or 26%, and average total core deposits increased $28.4 billion, or 26%. The increase in average total interest-bearing liabilities and deposits was primarily due to the full-quarter impact from the TCF acquisition. Specifically, within core deposits, average total demand deposits increased $16.0 billion, or 25%.
12 Huntington Bancshares Incorporated
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Table 4 - Consolidated YTD Average Balance Sheets and Net Interest Margin Analysis |
| (dollar amounts in millions) | | | | | | | | | | | |
| | YTD Average Balances | | YTD Average Rates (1) |
| Nine Months Ended September 30, | | Change | | Nine Months Ended September 30, |
| Fully-taxable equivalent basis (2) | 2021 | | 2020 | | Amount | | Percent | | 2021 | | 2020 |
| Assets: | | | | | | | | | | | |
| Interest-bearing deposits at Federal Reserve Bank | $ | 8,432 | | | $ | 3,326 | | | $ | 5,106 | | | 154 | % | | 0.13 | % | | 0.17 | % |
| Interest-bearing deposits in banks | 322 | | | 166 | | | 156 | | | 94 | | | 0.04 | | | 0.62 | |
| Securities: | | | | | | | | | | | |
| Trading account securities | 50 | | | 61 | | | (11) | | | (18) | | | 3.21 | | | 2.94 | |
| Available-for-sale securities: | | | | | | | | | | | |
| Taxable | 18,376 | | | 11,171 | | | 7,205 | | | 64 | | | 1.33 | | | 2.28 | |
| Tax-exempt | 2,868 | | | 2,743 | | | 125 | | | 5 | | | 2.43 | | | 2.92 | |
| Total available-for-sale securities | 21,244 | | | 13,914 | | | 7,330 | | | 53 | | | 1.48 | | | 2.41 | |
| Held-to-maturity securities—taxable | 9,185 | | | 9,384 | | | (199) | | | (2) | | | 1.81 | | | 2.39 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Other securities | 524 | | | 450 | | | 74 | | | 16 | | | 1.57 | | | 1.28 | |
| Total securities | 31,003 | | | 23,809 | | | 7,194 | | | 30 | | | 1.58 | | | 2.38 | |
| Loans held for sale | 1,404 | | | 1,055 | | | 349 | | | 33 | | | 2.90 | | | 3.11 | |
| Loans and leases: (3) | | | | | | | | | | | |
| Commercial: | | | | | | | | | | | |
| Commercial and industrial | 35,657 | | | 31,328 | | | 4,329 | | | 14 | | | 3.90 | | | 3.67 | |
| Commercial real estate: | | | | | | | | | | | |
| Construction | 1,392 | | | 1,180 | | | 212 | | | 18 | | | 3.58 | | | 3.93 | |
| Commercial | 8,953 | | | 5,833 | | | 3,120 | | | 53 | | | 3.02 | | | 3.17 | |
| Commercial real estate | 10,345 | | | 7,013 | | | 3,332 | | | 48 | | | 3.09 | | | 3.29 | |
| Lease financing | 3,336 | | | 2,276 | | | 1,060 | | | 47 | | | 4.96 | | | 5.44 | |
| Total commercial | 49,338 | | | 40,617 | | | 8,721 | | | 21 | | | 3.80 | | | 3.71 | |
| Consumer: | | | | | | | | | | | |
| Automobile | 12,891 | | | 12,832 | | | 59 | | | — | | | 3.65 | | | 3.94 | |
| Residential mortgage | 14,941 | | | 11,558 | | | 3,383 | | | 29 | | | 3.02 | | | 3.54 | |
| Home equity | 9,771 | | | 8,933 | | | 838 | | | 9 | | | 3.86 | | | 4.09 | |
| RV and marine | 4,549 | | | 3,773 | | | 776 | | | 21 | | | 4.26 | | | 4.73 | |
| Other consumer | 1,161 | | | 1,105 | | | 56 | | | 5 | | | 9.52 | | | 11.60 | |
| Total consumer | 43,313�� | | | 38,201 | | | 5,112 | | | 13 | | | 3.70 | | | 4.15 | |
| Total loans and leases | 92,651 | | | 78,818 | | | 13,833 | | | 18 | | | 3.75 | | | 3.92 | |
| Allowance for loan and lease losses | (1,953) | | | (1,506) | | | (447) | | | (30) | | | | | |
| Net loans and leases | 90,698 | | | 77,312 | | | 13,386 | | | 17 | | | | | |
| Total earning assets | 133,812 | | | 107,174 | | | 26,638 | | | 25 | | | 3.03 | % | | 3.47 | % |
| Cash and due from banks | 1,242 | | | 1,128 | | | 114 | | | 10 | | | | | |
| Goodwill and other intangible assets | 3,615 | | | 2,206 | | | 1,409 | | | 64 | | | | | |
| All other assets | 8,356 | | | 6,966 | | | 1,390 | | | 20 | | | | | |
| Total assets | $ | 145,072 | | | $ | 115,968 | | | $ | 29,104 | | | 25 | % | | | | |
| Liabilities and Shareholders’ Equity: | | | | | | | | | | | |
| Interest-bearing deposits: | | | | | | | | | | | |
| Demand deposits—interest-bearing | $ | 30,776 | | | $ | 22,985 | | | $ | 7,791 | | | 34 | % | | 0.04 | % | | 0.17 | % |
| Money market deposits | 29,243 | | | 25,544 | | | 3,699 | | | 14 | | | 0.07 | | | 0.49 | |
| Savings and other domestic deposits | 16,165 | | | 10,468 | | | 5,697 | | | 54 | | | 0.03 | | | 0.11 | |
| Core certificates of deposit (4) | 2,186 | | | 2,990 | | | (804) | | | (27) | | | 0.05 | | | 1.59 | |
| Other domestic deposits of $250,000 or more | 320 | | | 242 | | | 78 | | | 32 | | | 0.23 | | | 1.31 | |
| Negotiable CDs, brokered and other deposits | 3,417 | | | 3,728 | | | (311) | | | (8) | | | 0.16 | | | 0.45 | |
| | | | | | | | | | | |
| Total interest-bearing deposits | 82,107 | | | 65,957 | | | 16,150 | | | 24 | | | 0.05 | | | 0.37 | |
| Short-term borrowings | 256 | | | 1,452 | | | (1,196) | | | (82) | | | 0.26 | | | 1.23 | |
| Long-term debt (5) | 7,413 | | | 9,730 | | | (2,317) | | | (24) | | | 0.10 | | | 2.39 | |
| Total interest-bearing liabilities | 89,776 | | | 77,139 | | | 12,637 | | | 16 | | | 0.06 | | | 0.64 | |
| Demand deposits—noninterest-bearing | 36,139 | | | 24,394 | | | 11,745 | | | 48 | | | — | | | — | |
| All other liabilities | 2,952 | | | 2,347 | | | 605 | | | 26 | | | | | |
| Total Huntington Bancshares Inc shareholders’ equity | 16,196 | | | 12,088 | | | 4,108 | | | 34 | | | | | |
| Non-controlling interest | 9 | | | — | | | 9 | | | 100 | | | | | |
| Total Equity | 16,205 | | | 12,088 | | | 4,117 | | | 34 | | | | | |
| Total liabilities and shareholders’ equity | $ | 145,072 | | | $ | 115,968 | | | $ | 29,104 | | | 25 | % | | | | |
| Net interest rate spread | | | | | | | | | 2.97 | | | 2.83 | |
| Impact of noninterest-bearing funds on margin | | | | | | | | | 0.02 | | | 0.18 | |
| Net interest margin | | | | | | | | | 2.99 | % | | 3.01 | % |
(1)Average yield rates include the impact of applicable derivatives. Loan and lease and deposit average yield rates also include impact of applicable non-deferrable and amortized fees.
(2)FTE yields are calculated assuming a 21% tax rate.
(3)For purposes of this analysis, NALs are reflected in the average balances of loans.
(4)Includes consumer certificates of deposit of $250,000 or more.
10(5) Huntington Bancshares Incorporated
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Table 3 - Consolidated Average Balance Sheet and Net Interest Margin Analysis (Continued) |
| | | | | | | | | |
| | Average Yield Rates (2) |
| | Three Months Ended |
| March 31, | | December 31, | | September 30, | | June 30, | | March 31, |
| Fully-taxable equivalent basis (1) | 2021 | | 2020 | | 2020 | | 2020 | | 2020 |
| Assets: | | | | | | | | | |
| Interest-bearing deposits in Federal Reserve Bank | 0.10 | % | | 0.10 | % | | 0.10 | % | | 0.10 | % | | 1.08 | % |
| Interest-bearing deposits in banks | 0.08 | | | 0.12 | | | 0.13 | | | 0.33 | | | 1.52 | |
| Securities: | | | | | | | | | |
| Trading account securities | 3.64 | | | 3.65 | | | 3.18 | | | 1.99 | | | 3.21 | |
| Available-for-sale securities: | | | | | | | | | |
| Taxable | 1.32 | | | 1.53 | | | 1.89 | | | 2.30 | | | 2.62 | |
| Tax-exempt | 2.52 | | | 2.59 | | | 2.71 | | | 2.75 | | | 3.30 | |
| Total available-for-sale securities | 1.50 | | | 1.72 | | | 2.06 | | | 2.39 | | | 2.75 | |
| Held-to-maturity securities—taxable | 2.02 | | | 2.11 | | | 2.28 | | | 2.39 | | | 2.50 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Other securities | 1.66 | | | 1.85 | | | 1.23 | | | 0.57 | | | 2.07 | |
| Total securities | 1.67 | | | 1.87 | | | 2.13 | | | 2.35 | | | 2.64 | |
| Loans held for sale | 2.64 | | | 2.96 | | | 2.82 | | | 3.22 | | | 3.39 | |
| Loans and leases: (3) | | | | | | | | | |
| Commercial: | | | | | | | | | |
| Commercial and industrial | 3.99 | | | 3.64 | | | 3.67 | | | 3.62 | | | 4.12 | |
| Commercial real estate: | | | | | | | | | |
| Construction | 3.41 | | | 3.36 | | | 3.40 | | | 3.66 | | | 4.75 | |
| Commercial | 2.64 | | | 2.62 | | | 2.63 | | | 2.94 | | | 4.00 | |
| Commercial real estate | 2.75 | | | 2.73 | | | 2.75 | | | 3.06 | | | 4.13 | |
| Total commercial | 3.78 | | | 3.48 | | | 3.52 | | | 3.53 | | | 4.12 | |
| Consumer: | | | | | | | | | |
| Automobile | 3.71 | | | 3.88 | | | 3.93 | | | 3.84 | | | 4.05 | |
| Home equity | 3.71 | | | 3.76 | | | 3.79 | | | 3.73 | | | 4.75 | |
| Residential mortgage | 3.13 | | | 3.27 | | | 3.41 | | | 3.51 | | | 3.70 | |
| RV and marine | 4.30 | | | 4.53 | | | 4.60 | | | 4.71 | | | 4.91 | |
| Other consumer | 11.17 | | | 11.12 | | | 11.23 | | | 11.10 | | | 12.39 | |
| Total consumer | 3.78 | | | 3.93 | | | 4.00 | | | 4.00 | | | 4.45 | |
| Total loans and leases | 3.78 | | | 3.70 | | | 3.75 | | | 3.75 | | | 4.29 | |
| Total earning assets | 3.11 | | | 3.13 | | | 3.22 | | | 3.35 | | | 3.88 | |
| Liabilities: | | | | | | | | | |
| Interest-bearing deposits: | | | | | | | | | |
| Demand deposits—interest-bearing | 0.04 | | | 0.04 | | | 0.05 | | | 0.07 | | | 0.43 | |
| Money market deposits | 0.06 | | | 0.10 | | | 0.28 | | | 0.40 | | | 0.81 | |
| Savings and other domestic deposits | 0.04 | | | 0.05 | | | 0.06 | | | 0.10 | | | 0.17 | |
| Core certificates of deposit (4) | 0.51 | | | 0.56 | | | 1.03 | | | 1.55 | | | 1.91 | |
| Other domestic time deposits of $250,000 or more | 0.22 | | | 0.51 | | | 0.92 | | | 1.25 | | | 1.56 | |
| Brokered deposits and negotiable CDs | 0.18 | | | 0.19 | | | 0.19 | | | 0.18 | | | 1.22 | |
| | | | | | | | | |
| Total interest-bearing deposits | 0.06 | | | 0.08 | | | 0.18 | | | 0.28 | | | 0.68 | |
| Short-term borrowings | 0.19 | | | 0.26 | | | 0.30 | | | 0.47 | | | 1.46 | |
| Long-term debt (5) | (5.88) | | | 1.72 | | | 1.87 | | | 2.58 | | | 2.70 | |
| Total interest-bearing liabilities | (0.53) | | | 0.27 | | | 0.39 | | | 0.57 | | | 0.98 | |
| | | | | | | | | |
| | | | | | | | | |
| Net interest rate spread | 3.64 | | | 2.86 | | | 2.83 | | | 2.78 | | | 2.90 | |
| Impact of noninterest-bearing funds on margin | (0.16) | | | 0.08 | | | 0.13 | | | 0.16 | | | 0.24 | |
| Net interest margin | 3.48 | % | | 2.94 | % | | 2.96 | % | | 2.94 | % | | 3.14 | % |
(1)FTE yields are calculated assuming a 21% tax rate.
(2) Average yield rates include the impact of applicable derivatives. Loan and lease and deposit average yield rates also include impact of applicable non-deferrable and amortized fees.
(3) For purposes of this analysis, NALs are reflected in the average balances of loans.
(4) Includes consumer certificates of deposit of $250,000 or more.
(5) Reflects the net mark-to-market impact of interest rate caps, a benefit of $144$89 million, or 741 bps and $5 million or 23161 bps, for 1Q 2021 and 4Q 2020, respectively.the first nine-month period of 2021. There was no impact for the first nine-month period of 2020.
2021 First QuarterNine Months versus 2020 First QuarterNine Months
Net interest income for the first nine-month period of 2021 increased $571 million, or 24%. FTE net interest income, a non-GAAP financial measure, for the first nine-month period of 2021 first quarter increased $182$574 million, or 23%, from24%. The increase in FTE net interest income reflected the 2020 first quarter. This increase reflectedbenefit of a $12.3$26.6 billion, or 12%25%, increase in average total earning assets, andpartially offset by a 342 basis point increasedecrease in the FTE net interest margin to 3.48%. Net interest incomemargin. The increase in the 2021 first quarteraverage total earning assets included a $144 million net mark-to-market of interest rate caps, which favorably impacted the NIM by approximately 51 basis points (and long-term debt costs by approximately 741 basis points), and $45 million of deferred PPP loan fees recognized upon receipt of forgiveness payments from the SBA, which favorably impacted the NIM by approximately 16 basis points. The year-over-year decrease in earning asset yields and average liability costs also reflected the impact of lower interest rates and changes in balance sheet mix, including elevated deposits at the Federal Reserve Bank.
Average earning assets for the 2021 first quarter increased $12.3$13.8 billion, or 12%, from the year-ago quarter, primarily reflecting a $5.4 billion, or 792%, increase in interest-bearing deposits at the Federal Reserve Bank, a $4.6 billion, or 6%18%, increase in average total loans and leases and a $1.8$7.2 billion, or 7%30%, increase in average securities. Average C&I loans increased $3.5 billion, or 11%, primarily reflectingbalances across earning assets categories reflect the $5.8 billion of average PPP loans partially offset by lower C&I and dealer floorplan utilization rates. Average residential mortgage loans increased $0.7 billion, or 6%, reflecting continued robust portfolio mortgage production. Average RV and marine loans increased $0.6 billion, or 17%, reflecting strong consumer demand and continued strong production levels.
Average total interest-bearing liabilities for thelate second-quarter 2021 first quarter increased $2.0 billion, or 3%, from the year-ago quarter. Average total deposits increased $16.6 billion, or 20%, while average total core deposits increased $16.3 billion, or 20%.TCF acquisition. The increase in average total core deposits was primarily driven by increased liquidity levels in reaction to the economic downturn, businessloans and commercial growth related to the PPP loans, 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 $14.7 billion, or 36%, average savings and other domestic deposits increased $2.6 billion, or 27%, and average money market deposits increased $1.6 billion, or 6%. Partially offsetting these increases, average core CDs decreased $2.6 billion, or 65%, reflecting the maturity of balances related to the 2018 consumer deposit growth initiatives. Average total debt decreased $5.5 billion, or 41%, reflecting the repayment of short-term borrowings, the maturity and issuance of $3.2 billion and $1.3 billion of long-term debt, respectively, over the past five quarters, and the purchase of $0.5 billion of long-term debt under the tender offer completed in November 2020, all due to the strong core deposit growth.
2021 First Quarter versus 2020 Fourth Quarter
Compared to the 2020 fourth quarter, FTE net interest income increased $148 million, or 18%, reflecting a $1.9 billion, or 2%leases additionally includes an increase in average earning assetsPPP loans and 54 basis points of NIM expansion. Both the net interest income increase and the NIM expansion primarily reflected the net impacts of the mark-to-market of interest rate caps and the deferred PPP loan fees recognized upon receipt of forgiveness payments from the SBA. The mark-to-market of interest rate caps was $144 million in the 2021 first quarter compared to $5 million in the 2020 fourth quarter. The accelerated recognition of deferred PPP loan fees were $45 million in the 2021 first quarter compared to $5 million in the 2020 fourth quarter.
Average earning assets increased $1.9 billion, or 2%, primarily reflecting a $2.1 billion, or 9%, increase in average securities partially offset by a $0.9 billion, or 1%, decrease in average loans and leases. The increase in average securitiesadditionally reflected the purchase of securities to deploy excess liquidity. Average C&Iearning asset yields decreased 44 basis points due to lower interest rates on loans (down 17 basis points), a decline in securities yields and elevated deposits at the Federal Reserve Bank. Average funding costs decreased $0.5 billion, or 1%, primarily reflecting the $0.4 billion decrease in average PPP loans.
Average total interest-bearing liabilities increased $0.7 billion, or 1%, when compared to the 2020 fourth quarter. Average total deposits increased $2.7 billion, or 3%, and average total core deposits increased $3.5 billion, or 4%. The increase in average total core deposits was58 basis points, primarily driven by consumer growth largely related to government stimulus, increased liquidity levels among our commercial customers, seasonality in government banking, and improved consumer and business banking account retention. Specifically, within corelower cost of interest-bearing deposits average total demand deposits increased $2.7 billion, or 5%. Average total debt decreased $1.1 billion, or 12%, primarily reflecting the maturity of $1.1 billion of long-term debt, the purchase of $0.5 billion of long-term debt under the tender offer completed in November 2020,(down 32 basis points) and the repaymentimpact of short-term borrowings, all due to the strong core deposit growth.
12 Huntington Bancshares Incorporated
Provision for Credit Losses
(This section should be read in conjunction with the “Credit Risk” section.) The provision for credit losses is the expense necessary to maintain the ALLL and the AULC at levels appropriate to absorb our estimate of credit losses expected over the life of the loan and lease portfolio and the portfolio of unfunded loan commitments and letters of credit.lending commitments.
The provision for credit losses for the 2021 firstthird quarter was $(60)a benefit of $62 million, a decrease of $501$239 million, or 114%135%, compared to the 2020 third quarter. On a year-to-date basis, provision for credit losses for the first quarter.nine-month period of 2021 was $89 million, a decrease of $856 million, or 91%, compared to the year-ago period. The reduction in provision expense over the prior year quarter was primarily attributed to the improvement in the macroeconomic scenarios resulting primarily from lower forecasted unemployment. The reduction in provision expense over prior year-to-date was primarily attributed to the improvement in the macroeconomic environment resultingscenarios, partially offset by the TCF acquisition initial provision for credit losses of $294 million ($234 million from anticipated lower unemploymentnon-PCD loans and higher GDP.leases and $60 million from acquired unfunded lending commitments).
14 Huntington Bancshares Incorporated
Noninterest Income
The following table reflects noninterest income for each of the periods presented:
| | Table 4 - Noninterest Income | |
| Table 5 - Noninterest Income | | Table 5 - Noninterest Income |
| | Three Months Ended | | 1Q21 vs. 1Q20 | | 1Q21 vs. 4Q20 | | Three Months Ended | | 3Q21 vs. 3Q20 | | 3Q21 vs. 2Q21 |
| | March 31, | | December 31, | | | March 31, | | Change | | Change | | September 30, | | June 30, | | | September 30, | | Change | | Change |
| (dollar amounts in millions) | (dollar amounts in millions) | 2021 | | 2020 | | | 2020 | | Amount | | Percent | | Amount | | Percent | (dollar amounts in millions) | 2021 | | 2021 | | | 2020 | | Amount | | Percent | | Amount | | Percent |
| Mortgage banking income | Mortgage banking income | $ | 100 | | | $ | 90 | | | | $ | 58 | | | $ | 42 | | | 72 | % | | $ | 10 | | | 11 | % | Mortgage banking income | $ | 81 | | | $ | 67 | | | | $ | 122 | | | $ | (41) | | | (34) | % | | $ | 14 | | | 21 | % |
| Service charges on deposit accounts | Service charges on deposit accounts | 69 | | | 78 | | | | 87 | | | (18) | | | (21) | | | (9) | | | (12) | | Service charges on deposit accounts | 114 | | | 88 | | | | 76 | | | 38 | | | 50 | | | 26 | | | 30 | |
| Card and payment processing income | Card and payment processing income | 65 | | | 65 | | | | 58 | | | 7 | | | 12 | | | — | | | — | | Card and payment processing income | 96 | | | 80 | | | | 66 | | | 30 | | | 45 | | | 16 | | | 20 | |
| Trust and investment management services | Trust and investment management services | 52 | | | 49 | | | | 47 | | | 5 | | | 11 | | | 3 | | | 6 | | Trust and investment management services | 61 | | | 56 | | | | 48 | | | 13 | | | 27 | | | 5 | | | 9 | |
| Leasing revenue | | Leasing revenue | 42 | | | 12 | | | | 3 | | | 39 | | | 1,300 | | | 30 | | | 250 | |
| Capital markets fees | Capital markets fees | 29 | | | 34 | | | | 33 | | | (4) | | | (12) | | | (5) | | | (15) | | Capital markets fees | 40 | | | 35 | | | | 27 | | | 13 | | | 48 | | | 5 | | | 14 | |
| Insurance income | Insurance income | 27 | | | 25 | | | | 23 | | | 4 | | | 17 | | | 2 | | | 8 | | Insurance income | 25 | | | 25 | | | | 24 | | | 1 | | | 4 | | | — | | | — | |
| Bank owned life insurance income | Bank owned life insurance income | 16 | | | 14 | | | | 16 | | | — | | | — | | | 2 | | | 14 | | Bank owned life insurance income | 15 | | | 16 | | | | 17 | | | (2) | | | (12) | | | (1) | | | (6) | |
| Gain on sale of loans | Gain on sale of loans | 3 | | | 13 | | | | 8 | | | (5) | | | (63) | | | (10) | | | (77) | | Gain on sale of loans | 2 | | | 3 | | | | 13 | | | (11) | | | (85) | | | (1) | | | (33) | |
| Net (losses) gains on sales of securities | — | | | — | | | | — | | | — | | | — | | | — | | | — | | |
| Net gains (losses) on sales of securities | | Net gains (losses) on sales of securities | — | | | 10 | | | | — | | | — | | | — | | | (10) | | | (100) | |
| Other noninterest income | Other noninterest income | 34 | | | 41 | | | | 31 | | | 3 | | | 10 | | | (7) | | | (17) | | Other noninterest income | 59 | | | 52 | | | | 34 | | | 25 | | | 74 | | | 7 | | | 13 | |
| Total noninterest income | Total noninterest income | $ | 395 | | | $ | 409 | | | | $ | 361 | | | $ | 34 | | | 9 | % | | $ | (14) | | | (3) | % | Total noninterest income | $ | 535 | | | $ | 444 | | | | $ | 430 | | | $ | 105 | | | 24 | % | | $ | 91 | | | 20 | % |
2021 FirstThird Quarter versus 2020 FirstThird Quarter
Total noninterest income for the 2021 firstthird quarter increased $34$105 million, or 9%24%, from the year-ago quarter. Mortgage banking incomeLeasing revenue increased $42$39 million, primarily reflecting the addition of TCF’s portfolio of products. Service charges on deposit accounts increased $38 million, or 72%50%, due primarily reflecting an 89% increase in salable mortgage originationsto the addition of TCF customers prior to conversion to Huntington’s product and higher secondary marketing spreads offset by lower net mortgage servicing income.service set. Card and payment processing income increased $7$30 million, or 12%45%, reflecting higher debit card usage.interchange income that was primarily the result of the acquisition, but also higher customer transaction volumes. Other noninterest income increased $25 million, or 74%, primarily reflecting purchase accounting accretion from acquired unfunded loan commitments, a $6 million gain from branch divestiture, and increased amortization of upfront card-related contract renewal fees. Trust and investment management services increased $5$13 million, or 11%27%, reflecting recordcontinued strong net asset flows, and positive equity market performance, overand the prior twelve months.TCF acquisition. Capital markets fees increased $13 million, or 48%, primarily reflecting higher loan syndication and interest rate derivatives. Partially offsetting these increases, servicemortgage banking income decreased $41 million, or 34%, primarily reflecting lower secondary marketing spreads.
2021 Third Quarter versus 2021 Second Quarter
Compared to the 2021 second quarter, total noninterest income increased $91 million, or 20%. Leasing revenue increased $30 million, primarily reflecting TCF’s leasing activities following the acquisition. Service charges on deposit accounts decreased $18increased $26 million, or 30%, due primarily to the first full-quarter addition of TCF customers prior to the conversion to Huntington’s product and service set. Card and payment processing income increased $16 million, or 20%, primarily reflecting higher interchange income as a result of the TCF acquisition. Mortgage banking income increased $14 million, or 21%, primarily reflecting an increase in secondary marketing spreads and an increase in salable mortgage originations due to a full-quarter of volume added from the TCF acquisition. Other noninterest income increased $7 million, or 13%, primarily reflecting purchase accounting accretion from acquired unfunded loan commitments and a $6 million gain from branch divestitures. Partially offsetting these increases, gains on sales of securities decreased $10 million, reflecting securities portfolio optimization in the 2021 second quarter.
| | | | | | | | | | | | | | | | | | | | | | | |
| Table 6 - Noninterest Income—2021 First Nine Months Ended vs. 2020 First Nine Months Ended |
| | Nine Months Ended September 30, | | Change |
| (dollar amounts in millions) | 2021 | | 2020 | | Amount | | Percent |
| Mortgage banking income | $ | 248 | | | $ | 277 | | | $ | (29) | | | (10) | % |
| Service charges on deposit accounts | 271 | | | 223 | | | 48 | | | 22 | |
| Card and payment processing income | 241 | | | 183 | | | 58 | | | 32 | |
| Trust and investment management services | 169 | | | 140 | | | 29 | | | 21 | |
| Leasing revenue | 58 | | | 14 | | | 44 | | | 314 | |
| Capital markets fees | 104 | | | 91 | | | 13 | | | 14 | |
| Insurance income | 77 | | | 72 | | | 5 | | | 7 | |
| Bank owned life insurance income | 47 | | | 49 | | | (2) | | | (4) | |
| Gain on sale of loans | 8 | | | 30 | | | (22) | | | (73) | |
| Net gains (losses) on sales of securities | 10 | | | (1) | | | 11 | | | 1,100 | |
| Other noninterest income | 141 | | | 104 | | | 37 | | | 36 | |
| Total noninterest income | $ | 1,374 | | | $ | 1,182 | | | $ | 192 | | | 16 | % |
Noninterest income for the first nine-month period of 2021 increased $192 million, or 16%, from the year-ago period. The first nine-month period of 2021 noninterest income across categories was impacted by the June 2021 acquisition of TCF. Card and payment processing income increased $58 million, or 32%, primarily reflecting higher interchange income resulting from the TCF acquisition in addition to reduced customer activity as a result of the pandemic stay-at-home orders in the beginning of the prior year period. Service charges on deposit accounts increased $48 million, or 22%, primarily due to the impact of the addition of TCF customers prior to the conversion to Huntington’s product and elevated deposits. Gainservice set, in addition to prior year period reflected pandemic-related fee waivers occurring through June. Leasing revenue increased $44 million primarily reflecting the addition of TCF’s portfolio of products. Other noninterest income increased $37 million, or 36%, primarily reflecting increased mezzanine investment income, increased amortization of upfront card-related contract renewal fees, purchase accounting accretion from acquired unfunded loan commitments and a $6 million gain from branch divestiture, partially offset by the prior year period gain on the annuitization of a retiree health plan. Trust and investment management services increased $29 million, or 21%, primarily reflecting higher sales production and overall market performance. Net gains (losses) on sales of securities increased $11 million, reflecting securities portfolio optimization. These increases were offset by a decrease in mortgage banking of $29 million, or 10%, primarily reflecting decreased spreads on salable originations, partially offset by an increase in volume added from the TCF acquisition, and a $22 million decrease in gain on sale of loans decreased $5 million, or 63%, primarily reflecting the lower SBA loan sales resulting from the strategic decision to retain SBA loans on the balance sheet.
2021 First Quarter versus 2020 Fourth Quarter
Compared to the 2020 fourth quarter, total noninterest income decreased $14 million, or 3%. Gain on sale of loans decreased $10 million, or 77%, primarily reflecting lower SBA loan sales resulting from the strategic decision to retain SBA loans on the balance sheet. Service charges on deposit accounts decreased $9 million, or 12%, primarily reflecting reduced customer activity and elevated deposits. Other noninterest income decreased $7 million, or 17%, primarily reflecting a $6 million reduction in the Visa Class B derivative fair value adjustment. Capital markets fees decreased $5 million, or 15%, reflecting lower loan syndication fees and customer derivatives activity. Partially offsetting these decreases, mortgage banking income increased $10 million, or 11%, primarily reflecting a $10 million increase in net MSR risk management activities.
Noninterest Expense
The following table reflects noninterest expense for each of the periods presented:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Table 5 - Noninterest Expense |
| Three Months Ended | | 1Q21 vs. 1Q20 | | 1Q21 vs. 4Q20 |
| March 31, | | December 31, | | | | | | March 31, | | Change | | Change |
| (dollar amounts in millions) | 2021 | | 2020 | | | | | | 2020 | | Amount | | Percent | | Amount | | Percent |
| Personnel costs | $ | 468 | | | $ | 426 | | | | | | | $ | 395 | | | $ | 73 | | | 18 | % | | $ | 42 | | | 10 | % |
| Outside data processing and other services | 115 | | | 111 | | | | | | | 85 | | | 30 | | | 35 | | | 4 | | | 4 | |
| Equipment | 46 | | | 49 | | | | | | | 41 | | | 5 | | | 12 | | | (3) | | | (6) | |
| Net occupancy | 42 | | | 39 | | | | | | | 40 | | | 2 | | | 5 | | | 3 | | | 8 | |
| Professional services | 17 | | | 21 | | | | | | | 11 | | | 6 | | | 55 | | | (4) | | | (19) | |
| Amortization of intangibles | 10 | | | 10 | | | | | | | 11 | | | (1) | | | (9) | | | — | | | — | |
| Marketing | 14 | | | 15 | | | | | | | 9 | | | 5 | | | 56 | | | (1) | | | (7) | |
| Deposit and other insurance expense | 8 | | | 8 | | | | | | | 9 | | | (1) | | | (11) | | | — | | | — | |
| Other noninterest expense | 73 | | | 77 | | | | | | | 51 | | | 22 | | | 43 | | | (4) | | | (5) | |
| Total noninterest expense | $ | 793 | | | $ | 756 | | | | | | | $ | 652 | | | $ | 141 | | | 22 | % | | $ | 37 | | | 5 | % |
| Number of employees (average full-time equivalent) | 15,449 | | | 15,477 | | | | | | | 15,386 | | | 63 | | | — | % | | (28) | | | — | % |
Impacts of Significant Items:
| | Table 7 - Noninterest Expense | | Table 7 - Noninterest Expense |
| | Three Months Ended | | Three Months Ended | | 3Q21 vs. 3Q20 | | 3Q21 vs. 2Q21 |
| | March 31, | | December 31, | | March 31, | | September 30, | | June 30, | | | September 30, | | Change | | Change |
| (dollar amounts in millions) | (dollar amounts in millions) | 2021 | | 2020 | | 2020 | (dollar amounts in millions) | 2021 | | 2021 | | | 2020 | | Amount | | Percent | | Amount | | Percent |
| | Personnel costs | | Personnel costs | $ | 643 | | | $ | 592 | | | | $ | 453 | | | $ | 190 | | | 42 | % | | $ | 51 | | | 9 | % |
| Outside data processing and other services | Outside data processing and other services | 8 | | | — | | | — | | Outside data processing and other services | 304 | | | 162 | | | | 98 | | | 206 | | | 210 | | | 142 | | | 88 | |
| Equipment | | Equipment | 79 | | | 55 | | | | 44 | | | 35 | | | 80 | | | 24 | | | 44 | |
| Net occupancy | Net occupancy | 3 | | | — | | | — | | Net occupancy | 95 | | | 72 | | | | 40 | | | 55 | | | 138 | | | 23 | | | 32 | |
| Equipment | 1 | | | — | | | — | | |
| Lease financing equipment depreciation | | Lease financing equipment depreciation | 19 | | | 5 | | | | — | | | 19 | | | 100 | | | 14 | | | 280 | |
| Professional services | Professional services | 8 | | | — | | | — | | Professional services | 26 | | | 48 | | | | 12 | | | 14 | | | 117 | | | (22) | | | (46) | |
| | Amortization of intangibles | | Amortization of intangibles | 13 | | | 11 | | | | 10 | | | 3 | | | 30 | | | 2 | | | 18 | |
| Marketing | | Marketing | 25 | | | 15 | | | | 9 | | | 16 | | | 178 | | | 10 | | | 67 | |
| Deposit and other insurance expense | | Deposit and other insurance expense | 17 | | | 8 | | | | 6 | | | 11 | | | 183 | | | 9 | | | 113 | |
| Other noninterest expense | Other noninterest expense | 1 | | | — | | | — | | Other noninterest expense | 68 | | | 104 | | | | 40 | | | 28 | | | 70 | | | (36) | | | (35) | |
| Total noninterest expense adjustments | $ | 21 | | | $ | — | | | $ | — | | |
| Total noninterest expense | | Total noninterest expense | $ | 1,289 | | | $ | 1,072 | | | | $ | 712 | | | $ | 577 | | | 81 | % | | $ | 217 | | | 20 | % |
| Number of employees (average full-time equivalent) | | Number of employees (average full-time equivalent) | 20,908 | | | 17,018 | | | | 15,680 | | | 5,228 | | | 33 | % | | 3,890 | | | 23 | % |
Adjusted Noninterest Expense (ISee Non-GAAP Financial Measures in the Additional Disclosures section):mpacts of TCF acquisition-related expenses:
| | | Three Months Ended | | 1Q21 vs. 1Q20 | | 1Q21 vs. 4Q20 | | Three Months Ended |
| | March 31, | | December 31, | | March 31, | | Change | | Change | | September 30, | | June 30, | | September 30, |
| (dollar amounts in millions) | (dollar amounts in millions) | 2021 | | 2020 | | 2020 | | Amount | | Percent | | Amount | | Percent | (dollar amounts in millions) | 2021 | | 2021 | | 2020 |
| Personnel costs | Personnel costs | $ | 468 | | | $ | 426 | | | $ | 395 | | | $ | 73 | | | 18 | % | | $ | 42 | | | 10 | % | Personnel costs | $ | 36 | | | $ | 110 | | | $ | — | |
| Outside data processing and other services | Outside data processing and other services | 107 | | | 111 | | | 85 | | | 22 | | | 26 | | | (4) | | | (4) | | Outside data processing and other services | 140 | | | 33 | | | — | |
| Net occupancy | Net occupancy | 39 | | | 39 | | | 40 | | | (1) | | | (3) | | | — | | | — | | Net occupancy | 36 | | | 35 | | | — | |
| Equipment | Equipment | 45 | | | 49 | | | 41 | | | 4 | | | 10 | | | (4) | | | (8) | | Equipment | 5 | | | 3 | | | — | |
| Deposit and other insurance expense | 8 | | | 8 | | | 9 | | | (1) | | | (11) | | | — | | | — | | |
| Professional services | Professional services | 9 | | | 21 | | | 11 | | | (2) | | | (18) | | | (12) | | | (57) | | Professional services | 9 | | | 36 | | | — | |
| Marketing | Marketing | 14 | | | 15 | | | 9 | | | 5 | | | 56 | | | (1) | | | (7) | | Marketing | 3 | | | — | | | — | |
| Amortization of intangibles | 10 | | | 10 | | | 11 | | | (1) | | | (9) | | | — | | | — | | |
| Other noninterest expense | Other noninterest expense | 72 | | | 77 | | | 51 | | | 21 | | | 41 | | | (5) | | | (6) | | Other noninterest expense | 5 | | | 52 | | | — | |
| Total adjusted noninterest expense (Non-GAAP) | $ | 772 | | | $ | 756 | | | $ | 652 | | | $ | 120 | | | 18 | % | | $ | 16 | | | 2 | % | |
| Total noninterest expense adjustments | | Total noninterest expense adjustments | $ | 234 | | | $ | 269 | | | $ | — | |
2021 FirstThird Quarter versus 2020 FirstThird Quarter
Total noninterest expense for the 2021 firstthird quarter increased $141$577 million, or 22%81%, from the year-ago quarter. Personnel costs increased $73 million, or 18%,quarter, primarily reflecting increased incentivesthe impact of the TCF acquisition and commissions, a timing change implemented in the 2021 first quarter with respect to moving forward the annual grant of equity compensation from May to March, and higher benefits costs.TCF acquisition-related expenses. Outside data processing and other services increased $30$206 million, or 35%210%, reflecting TCF acquisition-related expenses and an increase in technology investmentsinvestments. Personnel costs increased $190 million, or 42%, primarily reflecting higher salaries and incentives related to support our strategic growth initiativesa 33% increase in average full-time equivalent employees as a result of the TCF acquisition, as well as TCF acquisition-related expenses. Net occupancy expense increased $55 million, or 138%, and $8professional services expense increased $14 million, ofor 117%, both primarily due to TCF acquisition-related expense. Equipment expense increased $35 million, or 80%, and lease financing equipment depreciation increased $19 million, primarily as a result of the impact of the TCF acquisition. Other noninterest expense increased $22$28 million, or 43%70%, primarily reflecting a $25 million donationprior year quarter benefit to The Columbus Foundation. Professional serviceslegal expense, and an increase in expenses due to the impact of the TCF acquisition and TCF acquisition-related expenses. Marketing expense increased $6$16 million, or 55%178%, reflecting $8 million of acquisition-related legal expense. Equipment expense increased $5 million, or 12%, primarily reflectingan increase in acquisition, deepening, and spend in new markets.
142021 3Q Form 10-Q Huntington Bancshares Incorporated17
technology investments. Marketing expense increased $5 million, or 56%, reflecting a return to pre-pandemic levels and additional investment in strategic marketing initiatives including new Fair Play product launches.
2021 FirstThird Quarter versus 2020 Fourth2021 Second Quarter
Total noninterest expense increased $37$217 million, or 5%20%, from the 2020 fourth2021 second quarter. Noninterest expense in the 2021 third quarter across categories was impacted by a full-quarter impact from the TCF acquisition, compared to the late-quarter impact to the 2021 second quarter. TCF acquisition-related expenses totaled $234 million in 2021 third quarter, compared to $269 million in 2021 second quarter. Outside data processing and other services increased $142 million, or 88%, primarily due to an increase in TCF acquisition-related expenses. Personnel costs increased $42$51 million, or 10%9%, as the full quarter impact from the TCF acquisition was partially offset by a decrease in TCF acquisition-related expenses. Equipment expense increased $24 million, or 44%, net occupancy expenses increased $23 million, or 32%, and lease financing equipment depreciation increased $14 million, all primarily due to the impact from the TCF acquisition. Partially offsetting these increases, other noninterest expense decreased $36 million, or 35%, and professional services expense decreased $22 million, or 46%, both primarily due to a decrease in TCF acquisition-related expenses.
| | | | | | | | | | | | | | | | | | | | | | | |
| Table 8 - Noninterest Expense—2021 First Nine Months Ended vs. 2020 First Nine Months Ended |
| | | | | | | |
| | Nine Months Ended September 30, | | Change |
| (dollar amounts in millions) | 2021 | | 2020 | | Amount | | Percent |
| Personnel costs | $ | 1,703 | | | $ | 1,267 | | | $ | 436 | | | 34 | % |
| Outside data processing and other services | 581 | | | 273 | | | 308 | | | 113 | |
| Equipment | 180 | | | 132 | | | 48 | | | 36 | |
| Net occupancy | 209 | | | 119 | | | 90 | | | 76 | |
| Lease financing equipment depreciation | 24 | | | 1 | | | 23 | | | 2,300 | |
| Professional services | 91 | | | 34 | | | 57 | | | 168 | |
| Amortization of intangibles | 34 | | | 31 | | | 3 | | | 10 | |
| Marketing | 54 | | | 23 | | | 31 | | | 135 | |
| Deposit and other insurance expense | 33 | | | 24 | | | 9 | | | 38 | |
| Other noninterest expense | 245 | | | 135 | | | 110 | | | 81 | |
| Total noninterest expense | $ | 3,154 | | | $ | 2,039 | | | $ | 1,115 | | | 55 | % |
Impacts of TCF acquisition-related expenses:
| | | | | | | | | | | |
| | Nine Months Ended September 30, |
| (dollar amounts in millions) | 2021 | | 2020 |
| Personnel costs | $ | 146 | | | $ | — | |
| Outside data processing and other services | 181 | | | — | |
| Net occupancy | 74 | | | — | |
| Equipment | 9 | | | — | |
| Professional services | 53 | | | — | |
| Marketing | 3 | | | — | |
| Other noninterest expense | 58 | | | — | |
| Total noninterest expense adjustments | $ | 524 | | | $ | — | |
Noninterest expense increased $1.1 billion, or 55%, from the year-ago period, primarily reflecting the impact of the TCF acquisition and the TCF acquisition-related expenses. Personnel costs increased $436 million, or 34%, primarily reflecting the impact of the TCF acquisition, as well as TCF acquisition-related expenses. Outside data processing and other services increased incentives$308 million, or 113%, primarily reflecting TCF acquisition-related expense and commissions,an increase in technology investments. Other noninterest expense increased $110 million, or 81%, primarily as a timing change implementedresult of TCF acquisition-related expense and an increase in foundation donations. Net occupancy expense increased $90 million, or 76%, and professional services expense increased $57 million, or 168%, both primarily reflecting TCF acquisition-related expense. Marketing expense increased $31 million, or 135%, primarily reflecting investment in new product launches and brand marketing in new markets and a return to pre-pandemic levels. Lease financing equipment depreciation increased $23 million, primarily due to the 2021 first quarter with respect to moving forwardimpact of the annual grant of equity compensation from May to March, and higher benefits costs.TCF acquisition.
18 Huntington Bancshares Incorporated
Provision for Income Taxes
The provision for income taxes in the 2021 firstthird quarter was $102$90 million, compared with $55 million in the 2020 third quarter and $14 million in the 2021 second quarter. The provision for income taxes of $10for the nine-month period ended September 30, 2021 and September 30, 2020 was $206 million in the 2020 first quarter and $59$96 million, in the 2020 fourth quarter.respectively. All periods included the benefits from tax-exempt income, tax-advantaged investments, general business credits, investments in qualified affordable housing projects, and capital losses. The effective tax rates for the 2021 firstthird quarter, 2020 firstthird quarter, and 2020 fourth2021 second quarter were 16.1%19.0%, 17.0%15.2%, and 15.8%(2,353.3)%, respectively. Excluding TCF acquisition-related expenses of $269 million, the related tax benefit of $51 million and discrete tax expenses of $16 million, the effective tax rate in the 2021 second quarter would have been 18.8%. The effective tax rates for the nine-month periods ended September 30, 2021 and September 30, 2020 were 18.7% and 16.0%, respectively. The variance between the 2021 firstthird quarter compared to the 2020 firstthird quarter, and the nine-month period ended September 30, 2021 compared to the nine-month period ended September 30, 2020 fourth quarterin the provision for income taxes and effective tax rates relates primarily to higher pre-tax income, discrete tax expenses and the impact of stock-based compensation. The net federal deferred tax liability was $149$151 million and the net state deferred tax asset was $24$20 million at March 31,September 30, 2021.
We file income tax returns with the IRS and various state, city, and cityforeign jurisdictions. Federal income tax audits have been completed for tax years through 2009. The 2010 and 2011 tax years remain under exam by the IRS. While the statute of limitations remains open for tax years 2012 through 2019, the IRS has advised that tax years 2012 through 2014 will not be audited and is currently examining the 2015 and 2016 federal income tax returns. Also, with few exceptions, the Company iswe are no longer subject to state and local income tax examinations for tax years before 2016.
RISK MANAGEMENT AND CAPITAL
We use a multi-faceted approach to risk governance. It begins with the Board of Directors defining our risk appetite as aggregate moderate-to-low.moderate-to-low, through-the-cycle. Risk awareness, identification and assessment, reporting, and active management are key elements in overall risk management. Controls include, among others, effective segregation of duties, access management, and authorization and reconciliation procedures, as well as staff education and a disciplined assessment process.
We believe that our primary risk exposures are credit, market, liquidity, operational and compliance. More information on risk can be found in the Risk Factors section included in Item 1A of our 2020 Annual Report on Form 10-K and subsequent filings with the SEC. The MD&A included in our 2020 Annual Report on Form 10-K should be read in conjunction with this MD&A as this discussion provides only material updates to the 2020 Annual Report on Form 10-K. This MD&A should also be read in conjunction with the Unaudited Condensed Consolidated Financial Statements, Notes to Unaudited Condensed Consolidated Financial Statements, and other information contained in this report. Our definition, philosophy, and approach to risk management have not materially changed from the discussion presented in the 2020 Annual Report on Form 10-K.
Credit Risk
Credit risk is the risk of financial loss if a counterparty is not able to meet the agreed upon terms of the financial obligation. The majority of our credit risk is associated with lending activities, as the acceptance and management of credit risk is central to profitable lending. We also have credit risk associated with our investment securities portfolios (see(see Note 3 “Investment Securities and Other Securities” of the Notes to the Unaudited Condensed Consolidated Financial Statements). We engage with other financial counterparties for a variety of purposes including investing, asset and liability management, mortgage banking, and trading activities. A variety of derivative financial instruments, principally interest rate swaps, caps, floors, and collars, are used in asset and liability management activities to protect against the risk of adverse price or interest rate movements. We also use derivatives, principally loan sale commitments, in hedging our mortgage loan interest rate lock commitments and its mortgage loans held for sale. While there is credit risk associated with derivative activity, we believe this exposure is minimal.
We focus on the early identification, monitoring, and management of all aspects of our credit risk. In addition to the traditional credit risk mitigation strategies of credit policies and processes, market risk management activities, and portfolio diversification, we use quantitative measurement capabilities utilizing external data sources, enhanced modeling technology, and internal stress testing processes. Our ongoing expansion of portfolio management resources is central to our commitment to maintaining an aggregate moderate-to-low, through-the-cycle risk profile.appetite. In our efforts to identify risk mitigation techniques, we have focused on product design features, origination policies, and solutions for delinquent or stressed borrowers.
Over the course of 2020 and into 2021, we have assessed the impact of the COVID-19 pandemic on our loan portfolio, as we would with any natural disaster or significant economic decline. The longer term impact of our response is dependent upon a number of variables, including the prolonged impact of the COVID-19 pandemic and its impact on the economic recovery. Continued weakness in the labor market could lead to increased delinquencies and defaults in our consumer portfolio. Additionally, increased economic deterioration could lead to elevated default rates in our Commercial portfolio, especially for industries highly impacted by the COVID-19 pandemic.
The payment deferral program that Huntington initiated for its customers in March 2020 has largely ended, with less than 1% of the total deferrals remaining in place as of March 31, 2021. The remaining deferrals in the Consumer portfolio are in the Residential secured portfolio, consistent with the longer term payment deferral time frames available on those loans. For the few commercial borrowers requiring additional financial help, the expired deferrals were replaced with modified terms and conditions as we continue to work closely with our customers. The post deferral payment activity has been positive across both the Commercial and Consumer portfolios to date.
16 Huntington Bancshares Incorporated
Loan and Lease Credit Exposure Mix
Refer to the “Loan and Lease Credit Exposure Mix” section of our 2020 Annual Report on Form 10-K for a brief description of each portfolio segment.
The table below provides the composition of our total loan and lease portfolio:
| | Table 6 - Loan and Lease Portfolio Composition | |
| Table 9 - Loan and Lease Portfolio Composition | | Table 9 - Loan and Lease Portfolio Composition |
| | (dollar amounts in millions) | (dollar amounts in millions) | March 31,
2021 | | December 31,
2020 | | September 30,
2020 | | June 30,
2020 | | March 31,
2020 | (dollar amounts in millions) | September 30,
2021 | | | December 31,
2020 | |
| Commercial: | Commercial: | | | | | | | | | | Commercial: | | | | | |
| Commercial and industrial | Commercial and industrial | $ | 34,464 | | | 43 | % | | $ | 35,373 | | | 43 | % | | $ | 34,895 | | | 43 | % | | $ | 34,879 | | | 44 | % | | $ | 32,959 | | | 42 | % | Commercial and industrial | $ | 40,452 | | | 36 | % | | | $ | 33,151 | | | 40 | % | |
| Commercial real estate: | Commercial real estate: | | Commercial real estate: | | | | |
| Construction | Construction | 1,083 | | | 1 | | | 1,035 | | | 1 | | | 1,154 | | | 1 | | | 1,200 | | | 1 | | | 1,180 | | | 2 | | Construction | 1,812 | | | 2 | | | | 1,035 | | | 1 | | |
| Commercial | Commercial | 6,096 | | | 8 | | | 6,164 | | | 8 | | | 6,055 | | | 7 | | | 5,979 | | | 7 | | | 5,793 | | | 7 | | Commercial | 12,882 | | | 12 | | | | 6,164 | | | 8 | | |
| Commercial real estate | Commercial real estate | 7,179 | | | 9 | | | 7,199 | | | 9 | | | 7,209 | | | 8 | | | 7,179 | | | 8 | | | 6,973 | | | 9 | | Commercial real estate | 14,694 | | | 14 | | | | 7,199 | | | 9 | | |
| Lease financing | | Lease financing | 4,991 | | | 5 | | | | 2,222 | | | 3 | | |
| Total commercial | Total commercial | 41,643 | | | 52 | | | 42,572 | | | 52 | | | 42,104 | | | 51 | | | 42,058 | | | 52 | | | 39,932 | | | 51 | | Total commercial | 60,137 | | | 55 | | | | 42,572 | | | 52 | | |
| Consumer: | Consumer: | | | | | | | | | | | | | | | | | | | | Consumer: | | | | | | | | | |
| Automobile | Automobile | 12,591 | | | 16 | | | 12,778 | | | 16 | | | 12,925 | | | 17 | | | 12,678 | | | 16 | | | 12,907 | | | 17 | | Automobile | 13,305 | | | 12 | | | | 12,778 | | | 16 | | |
| Residential mortgage | | Residential mortgage | 18,922 | | | 17 | | | | 12,141 | | | 15 | | |
| Home equity | Home equity | 8,727 | | | 11 | | | 8,894 | | | 11 | | | 8,904 | | | 11 | | | 8,866 | | | 11 | | | 9,010 | | | 11 | | Home equity | 10,919 | | | 10 | | | | 8,894 | | | 11 | | |
| Residential mortgage | 12,092 | | | 15 | | | 12,141 | | | 15 | | | 12,031 | | | 15 | | | 11,621 | | | 15 | | | 11,398 | | | 15 | | |
| RV and marine | RV and marine | 4,218 | | | 5 | | | 4,190 | | | 5 | | | 4,146 | | | 5 | | | 3,843 | | | 5 | | | 3,643 | | | 5 | | RV and marine | 5,052 | | | 4 | | | | 4,190 | | | 5 | | |
| Other consumer | Other consumer | 959 | | | 1 | | | 1,033 | | | 1 | | | 1,046 | | | 1 | | | 1,073 | | | 1 | | | 1,145 | | | 1 | | Other consumer | 2,232 | | | 2 | | | | 1,033 | | | 1 | | |
| Total consumer | Total consumer | 38,587 | | | 48 | | | 39,036 | | | 48 | | | 39,052 | | | 49 | | | 38,081 | | | 48 | | | 38,103 | | | 49 | | Total consumer | 50,430 | | | 45 | | | | 39,036 | | | 48 | | |
| Total loans and leases | Total loans and leases | $ | 80,230 | | | 100 | % | | $ | 81,608 | | | 100 | % | | $ | 81,156 | | | 100 | % | | $ | 80,139 | | | 100 | % | | $ | 78,035 | | | 100 | % | Total loans and leases | $ | 110,567 | | | 100 | % | | | $ | 81,608 | | | 100 | % | |
Our loan portfolio is a managed mix of consumer and commercial credits. At the corporate level, weWe manage the overall credit exposure and portfolio composition via a credit concentration policy. The policy designates specific loan types, collateral types, and loan structures to be formally tracked and assigned maximum exposure limits as a percentage of capital. C&I lending by NAICS categories, specific limits for CRE project types, loans secured by residential real estate, large dollar exposures, and designated high risk loan categories represent examples of specifically tracked components of our concentration management process. There are no identified portfolio level concentrations that exceed the assigned exposure limit. Our concentration management policy is approved by the ROC of the Board of Directors and is used to ensure a high quality, well diversified portfolio that is consistent with our overall objective of maintaining an aggregate moderate-to-low, through-the-cycle risk profile.appetite. Changes to existing concentration limits, incorporating specific information relating to the potential impact on the overall portfolio composition and performance metrics, require the approval of the ROC prior to implementation.
Commercial Credit
Refer to the “Commercial Credit” section of our 2020 Annual Report on Form 10-K for our commercial credit underwriting and on-going credit management processes.
Consumer Credit
Refer to the “Consumer Credit” section of our 2020 Annual Report on Form 10-K for our consumer credit underwriting and on-going credit management processes.
2021 1Q Form 10-Q 2017 Huntington Bancshares Incorporated
The table below provides our total loan and lease portfolio segregated by industry type. The changes in the industry composition from December 31, 2020 are consistentprimarily relate to the TCF acquisition along with the portfolio growth metrics.growth.
| | Table 7 - Loan and Lease Portfolio by Industry Type | | |
| Table 10 - Loan and Lease Portfolio by Industry Type | | Table 10 - Loan and Lease Portfolio by Industry Type | |
| | (dollar amounts in millions) | (dollar amounts in millions) | March 31,
2021 | | December 31,
2020 | | September 30,
2020 | | June 30,
2020 | | March 31,
2020 | | (dollar amounts in millions) | September 30,
2021 | | December 31,
2020 | |
| Commercial loans and leases: | Commercial loans and leases: | | | | | | | | | | | Commercial loans and leases: | | | | |
| Real estate and rental and leasing | Real estate and rental and leasing | $ | 6,854 | | | 9 | % | | $ | 6,962 | | | 9 | % | | $ | 7,056 | | | 9 | % | | $ | 7,117 | | | 9 | % | | $ | 6,991 | | | 9 | % | | Real estate and rental and leasing | $ | 13,791 | | | 12 | % | | $ | 6,962 | | | 9 | % | |
| Manufacturing | Manufacturing | 5,523 | | | 7 | | | 5,556 | | | 7 | | | 5,658 | | | 7 | | | 6,147 | | | 8 | | | 5,846 | | | 7 | | | Manufacturing | 7,153 | | | 6 | | | 5,556 | | | 7 | | |
| Retail trade (1) | Retail trade (1) | 4,694 | | | 6 | | | 5,111 | | | 6 | | | 4,922 | | | 6 | | | 5,053 | | | 6 | | | 5,886 | | | 8 | | | Retail trade (1) | 5,591 | | | 5 | | | 5,111 | | | 6 | | |
| Health care and social assistance | Health care and social assistance | 3,672 | | | 5 | | | 3,646 | | | 4 | | | 3,566 | | | 4 | | | 3,534 | | | 4 | | | 2,815 | | | 4 | | | Health care and social assistance | 4,874 | | | 4 | | | 3,646 | | | 4 | | |
| Finance and insurance | Finance and insurance | 3,343 | | | 4 | | | 3,389 | | | 4 | | | 3,197 | | | 4 | | | 3,345 | | | 4 | | | 3,670 | | | 5 | | | Finance and insurance | 4,357 | | | 4 | | | 3,389 | | | 4 | | |
| Accommodation and food services | Accommodation and food services | 3,281 | | | 4 | | | 3,100 | | | 4 | | | 3,012 | | | 4 | | | 2,877 | | | 4 | | | 2,081 | | | 3 | | | Accommodation and food services | 3,904 | | | 4 | | | 3,100 | | | 4 | | |
| Wholesale trade | Wholesale trade | 2,545 | | | 3 | | | 2,652 | | | 3 | | | 2,529 | | | 3 | | | 2,352 | | | 3 | | | 2,555 | | | 3 | | | Wholesale trade | 3,700 | | | 3 | | | 2,652 | | | 3 | | |
| Professional, scientific, and technical services | 1,972 | | | 2 | | | 2,051 | | | 3 | | | 2,086 | | | 3 | | | 2,177 | | | 3 | | | 1,615 | | | 2 | | | |
| Transportation and warehousing | | Transportation and warehousing | 3,246 | | | 3 | | | 1,401 | | | 2 | | |
| Other services | Other services | 1,578 | | | 2 | | | 1,613 | | | 2 | | | 1,641 | | | 2 | | | 1,510 | | | 2 | | | 1,358 | | | 2 | | | Other services | 2,138 | | | 2 | | | 1,613 | | | 2 | | |
| Construction | Construction | 1,412 | | | 2 | | | 1,389 | | | 2 | | | 1,425 | | | 2 | | | 1,492 | | | 2 | | | 962 | | | 1 | | | Construction | 2,133 | | | 2 | | | 1,389 | | | 2 | | |
| Transportation and warehousing | 1,307 | | | 2 | | | 1,401 | | | 2 | | | 1,408 | | | 2 | | | 1,338 | | | 2 | | | 1,211 | | | 2 | | | |
| Professional, scientific, and technical services | | Professional, scientific, and technical services | 1,985 | | | 2 | | | 2,051 | | | 3 | | |
| Arts, entertainment, and recreation | | Arts, entertainment, and recreation | 1,595 | | | 1 | | | 744 | | | 1 | | |
| Admin./Support/Waste Mgmt. and Remediation Services | Admin./Support/Waste Mgmt. and Remediation Services | 949 | | | 1 | | | 975 | | | 1 | | | 932 | | | 1 | | | 916 | | | 1 | | | 693 | | | 1 | | | Admin./Support/Waste Mgmt. and Remediation Services | 1,347 | | | 1 | | | 975 | | | 1 | | |
| Information | Information | 793 | | | 1 | | | 829 | | | 1 | | | 817 | | | 1 | | | 759 | | | 1 | | | 728 | | | 1 | | | Information | 868 | | | 1 | | | 829 | | | 1 | | |
| Utilities | Utilities | 754 | | | 1 | | | 793 | | | 1 | | | 647 | | | 1 | | | 573 | | | 1 | | | 629 | | | 1 | | | Utilities | 797 | | | 1 | | | 793 | | | 1 | | |
| Arts, entertainment, and recreation | 725 | | | 1 | | | 744 | | | 1 | | | 738 | | | 1 | | | 732 | | | 1 | | | 694 | | | 1 | | | |
| Educational services | Educational services | 686 | | | 1 | | | 735 | | | 1 | | | 752 | | | — | | | 559 | | | — | | | 465 | | | — | | | Educational services | 793 | | | 1 | | | 735 | | | 1 | | |
| Public administration | Public administration | 640 | | | 1 | | | 662 | | | 1 | | | 645 | | | — | | | 302 | | | — | | | 259 | | | — | | | Public administration | 761 | | | 1 | | | 662 | | | 1 | | |
| Mining, quarrying, and oil and gas extraction | Mining, quarrying, and oil and gas extraction | 511 | | | — | | | 601 | | | — | | | 674 | | | 1 | | | 930 | | | 1 | | | 1,162 | | | 1 | | | Mining, quarrying, and oil and gas extraction | 496 | | | 1 | | | 601 | | | — | | |
| Agriculture, forestry, fishing and hunting | Agriculture, forestry, fishing and hunting | 139 | | | — | | | 157 | | | — | | | 158 | | | — | | | 140 | | | — | | | 141 | | | — | | | Agriculture, forestry, fishing and hunting | 449 | | | — | | | 157 | | | — | | |
| Management of companies and enterprises | Management of companies and enterprises | 123 | | | — | | | 144 | | | — | | | 132 | | | — | | | 115 | | | — | | | 104 | | | — | | | Management of companies and enterprises | 129 | | | — | | | 144 | | | — | | |
| Unclassified/Other | 142 | | | — | | | 62 | | | — | | | 109 | | | — | | | 90 | | | — | | | 67 | | | — | | | |
| Unclassified/other | | Unclassified/other | 30 | | | — | | | 62 | | | — | | |
| Total commercial loans and leases by industry category | Total commercial loans and leases by industry category | 41,643 | | | 52 | | | 42,572 | | | 52 | | | 42,104 | | | 51 | | | 42,058 | | | 52 | | | 39,932 | | | 51 | | | Total commercial loans and leases by industry category | 60,137 | | | 54 | | | 42,572 | | | 52 | | |
| Automobile | Automobile | 12,591 | | | 16 | | | 12,778 | | | 16 | | | 12,925 | | | 17 | | | 12,678 | | | 16 | | | 12,907 | | | 17 | | | Automobile | 13,305 | | | 12 | | | 12,778 | | | 16 | | |
| Home Equity | 8,727 | | | 11 | | | 8,894 | | | 11 | | | 8,904 | | | 11 | | | 8,866 | | | 11 | | | 9,010 | | | 11 | | | |
| Residential Mortgage | 12,092 | | | 15 | | | 12,141 | | | 15 | | | 12,031 | | | 15 | | | 11,621 | | | 15 | | | 11,398 | | | 15 | | | |
| Residential mortgage | | Residential mortgage | 18,922 | | | 17 | | | 12,141 | | | 15 | | |
| Home equity | | Home equity | 10,919 | | | 10 | | | 8,894 | | | 11 | | |
| RV and marine | RV and marine | 4,218 | | | 5 | | | 4,190 | | | 5 | | | 4,146 | | | 5 | | | 3,843 | | | 5 | | | 3,643 | | | 5 | | | RV and marine | 5,052 | | | 5 | | | 4,190 | | | 5 | | |
| Other consumer loans | Other consumer loans | 959 | | | 1 | | | 1,033 | | | 1 | | | 1,046 | | | 1 | | | 1,073 | | | 1 | | | 1,145 | | | 1 | | | Other consumer loans | 2,232 | | | 2 | | | 1,033 | | | 1 | | |
| Total loans and leases | Total loans and leases | $ | 80,230 | | | 100 | % | | $ | 81,608 | | | 100 | % | | $ | 81,156 | | | 100 | % | | $ | 80,139 | | | 100 | % | | $ | 78,035 | | | 100 | % | | Total loans and leases | $ | 110,567 | | | 100 | % | | $ | 81,608 | | | 100 | % | |
(1) Amounts include $2.0 billion, $2.4 billion, $2.2 billion, $2.8$1.1 billion and $4.0$2.4 billion of auto dealer services loans at March 31, 2021, December 31, 2020, September 30, 2020, June 30, 20202021 and MarchDecember 31, 2020, respectively.
Credit Quality
We believe the most meaningful way to assess overall credit quality performance is through an analysis of specific performance ratios. This approach forms the basis of the discussion in the sections immediately following: NPAs, NALs, TDRs, ACL, and NCOs. In addition, we utilize delinquency rates, risk distribution and migration patterns, product segmentation, and origination trends in the analysis of our credit quality performance.
18 Huntington Bancshares Incorporated
Credit quality performance in the 2021 firstthird quarter reflected total NCOs as a percent of average loans, annualized, of 0.32%0.20%, an decreasedown from 0.55%0.28% in the prior quarter. Total NCOs were $64$55 million, a decrease of $48$7 million from the prior quarter, driven by a $41$12 million decrease in Commercial NCOs, andpartially offset by a $7$5 million decreaseincrease in Consumer NCOs. NPAs decreased from the prior quarter by $19$121 million, or 3%12%, largely driven by reductionsdecreases in the commercial portfolio.C&I and residential mortgage portfolios.
NPAs, NALs, AND TDRs
(This section should be read in conjunction with Note 45 “Loans / Leases” and Note 56 “Allowance for Credit Losses” of the Notes to Unaudited Condensed Consolidated Financial Statements and “Credit Quality” section of ourappearing in Huntington’s 2020 Annual Report on Form 10-K.) NPAs and NALs
Commercial loans are placed on nonaccrual status at 90-days past due, or earlier if repayment of principal and interest is in doubt. Of the $351$657 million of commercial related NALs at March 31,September 30, 2021, $241$421 million, or 69%64%, represented loans that were less than 30-days past due, demonstrating our continued commitment to proactive credit risk management.
The following table reflects period-end NALs and NPAs detail for each of the last five quarters:detail.
| | Table 8 - Nonaccrual Loans and Leases and Nonperforming Assets | |
| Table 11 - Nonaccrual Loans and Leases and Nonperforming Assets | | Table 11 - Nonaccrual Loans and Leases and Nonperforming Assets |
| | (dollar amounts in millions) | (dollar amounts in millions) | March 31,
2021 | | December 31,
2020 | | September 30,
2020 | | June 30,
2020 | | March 31,
2020 | (dollar amounts in millions) | September 30,
2021 | | | December 31,
2020 | |
| Nonaccrual loans and leases (NALs): | Nonaccrual loans and leases (NALs): | | | | | | | | | | Nonaccrual loans and leases (NALs): | | | | | |
| Commercial and industrial | Commercial and industrial | $ | 343 | | | $ | 353 | | | $ | 388 | | | $ | 485 | | | $ | 396 | | Commercial and industrial | $ | 494 | | | | $ | 349 | | |
| Commercial real estate | Commercial real estate | 8 | | | 15 | | | 16 | | | 28 | | | 30 | | Commercial real estate | 103 | | | | 15 | | |
| Lease financing | | Lease financing | 60 | | | | 4 | | |
| Automobile | Automobile | 3 | | | 4 | | | 5 | | | 8 | | | 6 | | Automobile | 3 | | | | 4 | | |
| Residential mortgage | | Residential mortgage | 108 | | | | 88 | | |
| Home equity | Home equity | 71 | | | 70 | | | 71 | | | 59 | | | 58 | | Home equity | 87 | | | | 70 | | |
| Residential mortgage | 90 | | | 88 | | | 88 | | | 66 | | | 66 | | |
| RV and marine | RV and marine | 1 | | | 2 | | | 1 | | | 2 | | | 2 | | RV and marine | 6 | | | | 2 | | |
| Other consumer | Other consumer | — | | | — | | | — | | | — | | | — | | Other consumer | — | | | | — | | |
| Total nonaccrual loans and leases | Total nonaccrual loans and leases | 516 | | | 532 | | | 569 | | | 648 | | | 558 | | Total nonaccrual loans and leases | 861 | | | | 532 | | |
| Other real estate, net: | Other real estate, net: | | Other real estate, net: | | | | |
| Residential | Residential | 2 | | | 4 | | | 4 | | | 5 | | | 8 | | Residential | 6 | | | | 4 | | |
| Commercial | Commercial | — | | | — | | | 1 | | | 2 | | | 2 | | Commercial | 1 | | | | — | | |
| Total other real estate, net | Total other real estate, net | 2 | | | 4 | | | 5 | | | 7 | | | 10 | | Total other real estate, net | 7 | | | | 4 | | |
| Other NPAs (1) | Other NPAs (1) | 26 | | | 27 | | | 28 | | | 58 | | | 18 | | Other NPAs (1) | 25 | | | | 27 | | |
| Total nonperforming assets | Total nonperforming assets | $ | 544 | | | $ | 563 | | | $ | 602 | | | $ | 713 | | | $ | 586 | | Total nonperforming assets | $ | 893 | | | | $ | 563 | | |
| | Nonaccrual loans and leases as a % of total loans and leases | Nonaccrual loans and leases as a % of total loans and leases | 0.64 | % | | 0.65 | % | | 0.70 | % | | 0.81 | % | | 0.72 | % | Nonaccrual loans and leases as a % of total loans and leases | 0.78 | % | | | 0.65 | % | |
| NPA ratio (2) | NPA ratio (2) | 0.68 | | | 0.69 | | | 0.74 | | | 0.89 | | | 0.75 | | NPA ratio (2) | 0.81 | | | | 0.69 | | |
|
(1) Other nonperforming assets include certain impaired investment securities and/or nonaccrual loans held-for-sale.
(2) Nonperforming assets divided by the sum of loans and leases, other real estate owned, and other NPAs.
2021 FirstThird Quarter versus 2020 Fourth Quarter.
Total NPAs decreased $19increased $330 million, or 3%59%, compared with December 31, 2020, largely driven by driven by reductions in C&I and CRE nonaccrual loans.the TCF acquisition.
TDR Loans
(This section should be read in conjunction with Note 45 “Loans / Leases” of the Notes to Unaudited Condensed Consolidated Financial Statements and TDR Loans section of ourappearing in Huntington’s 2020 Annual Report on Form 10-K.) Over the past five quarters, the accruing component of the total TDR balance has been consistently over 75%, indicating there is no identified credit loss and the borrowers continue to make their monthly payments. As of March 31,September 30, 2021, over 81%80% of the $428$407 million of accruing TDRs secured by residential real estate (residential mortgage and home equity in Table 9)12) are current on their required payments, with over 55%59% of the accruing pool
having had no delinquency in the past 12 months. There is limited migration from the accruing to nonaccruing components, and virtually all of the charge-offs come from the nonaccruing TDR balances.
TDRs identified by TCF prior to acquisition date are not included in our TDR disclosures as all such loans and leases were recorded at fair value as of the acquisition date. Subsequent modifications are evaluated for potential treatment as TDRs in accordance with Huntington’s accounting policies.
22 Huntington Bancshares Incorporated
The table below presents our accruing and nonaccruing TDRs at period-end for each of the past five quarters:TDRs.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Table 9 - Accruing and Nonaccruing Troubled Debt Restructured Loans (1) |
| (dollar amounts in millions) | March 31,
2021 | | December 31,
2020 | | September 30,
2020 | | June 30,
2020 | | March 31,
2020 |
| TDRs—accruing: | | | | | | | | | |
| Commercial and industrial | $ | 127 | | | $ | 193 | | | $ | 189 | | | $ | 192 | | | $ | 219 | |
| Commercial real estate | 32 | | | 33 | | | 34 | | | 35 | | | 37 | |
| Automobile | 51 | | | 50 | | | 53 | | | 52 | | | 42 | |
| Home equity | 179 | | | 187 | | | 199 | | | 209 | | | 219 | |
| Residential mortgage | 249 | | | 248 | | | 256 | | | 229 | | | 227 | |
| RV and marine | 7 | | | 6 | | | 6 | | | 6 | | | 3 | |
| Other consumer | 8 | | | 9 | | | 10 | | | 10 | | | 11 | |
| Total TDRs—accruing | 653 | | | 726 | | | 747 | | | 733 | | | 758 | |
| TDRs—nonaccruing: | | | | | | | | | |
| Commercial and industrial | 101 | | | 95 | | | 146 | | | 169 | | | 119 | |
| Commercial real estate | 3 | | | 3 | | | 3 | | | 3 | | | 4 | |
| Automobile | 2 | | | 2 | | | 2 | | | 2 | | | 2 | |
| Home equity | 30 | | | 30 | | | 29 | | | 26 | | | 25 | |
| Residential mortgage | 51 | | | 51 | | | 48 | | | 43 | | | 42 | |
| RV and marine | 1 | | | 1 | | | 1 | | | 1 | | | 2 | |
| | | | | | | | | |
| Total TDRs—nonaccruing | 188 | | | 182 | | | 229 | | | 244 | | | 194 | |
| Total TDRs | $ | 841 | | | $ | 908 | | | $ | 976 | | | $ | 977 | | | $ | 952 | |
| | | | | | | | | | | | | | | | | |
| Table 12 - Accruing and Nonaccruing Troubled Debt Restructured Loans (1) |
| (dollar amounts in millions) | September 30,
2021 | | | | | | December 31,
2020 | | |
| TDRs—accruing: | | | | | | | | | |
| Commercial and industrial | $ | 113 | | | | | | | $ | 193 | | | |
| Commercial real estate | 25 | | | | | | | 33 | | | |
| | | | | | | | | |
| Automobile | 45 | | | | | | | 50 | | | |
| Residential mortgage | 244 | | | | | | | 248 | | | |
| Home equity | 162 | | | | | | | 187 | | | |
| RV and marine | 7 | | | | | | | 6 | | | |
| Other consumer | 7 | | | | | | | 9 | | | |
| Total TDRs—accruing | 603 | | | | | | | 726 | | | |
| TDRs—nonaccruing: | | | | | | | | | |
| Commercial and industrial | 78 | | | | | | | 95 | | | |
| Commercial real estate | 1 | | | | | | | 3 | | | |
| | | | | | | | | |
| Automobile | 2 | | | | | | | 2 | | | |
| Residential mortgage | 48 | | | | | | | 51 | | | |
| Home equity | 25 | | | | | | | 30 | | | |
| RV and marine | 1 | | | | | | | 1 | | | |
| | | | | | | | | |
| Total TDRs—nonaccruing | 155 | | | | | | | 182 | | | |
| Total TDRs | $ | 758 | | | | | | | $ | 908 | | | |
(1)Loan modifications under the CARES Act, as amended and interagency regulatory guidance are not considered TDRs.
Overall TDRs decreased $150 million, compared with December 31, 2020, with declines in all portfolios with the quarter, primarily related to a decline in the C&I portfolio.exception of RV and marine. Huntington continues to proactively work with our borrowing relationships that require assistance. The resulting loan structures enable our borrowers to meet their commitments and Huntington to retain earning assets. The accruing TDRs meet the well secured definition and have demonstrated a period of satisfactory payment performance.
ACL
(This section should be read in conjunction with Note 5 “Allowance for Credit Losses” of the Notes to Unaudited Condensed Consolidated Financial Statements.) Our total credit reserveACL is comprised of two different components, both of which in our judgment are appropriate to absorb lifetime expected credit losses in our loan and lease portfolio: the ALLL and the AULC. Combined, these reserves comprise the total ACL.
The models used within our loan and lease portfolio incorporate historical loss experience, as well as current and future economic conditions over a reasonable and supportable period beyond the balance sheet date. We make various judgments combined with historical loss experience to generate a loss rate that is applied to the outstanding loan or receivable balance to produce a reserve for expected credit losses.
We use a combination of statistically-based models that utilize assumptions about current and future economic conditions throughout the contractual life of the loan. The process of estimating expected credit losses is based on several key parameters: Probability of Default (PD), Exposure at Default (EAD),PD, EAD, and Loss Given Default (LGD).LGD. Beyond the reasonable and supportable period (two to three years), the economic variables revert to a historical equilibrium at a pace dependent on the state of the economy reflected within the economic scenario.
These three parameters, PD, EAD, and LGD are utilized to estimate the cumulative credit losses over the remaining expected life of the loan. We also consider the likelihood a previously charged-off account will be recovered. This calculation is dependent on how long ago the account was charged-off and future economic conditions, which estimate the likelihood and magnitude of recovery. Our models are developed using internal historical loss experience covering the full economic cycle and consider the impact of account characteristics on expected losses.
202021 3Q Form 10-Q Huntington Bancshares Incorporated23
Future economic conditions consider multiple macroeconomic scenarios provided to us by an independent third party and are reviewed through the appropriate committee governance channels discussed below. These macroeconomic scenarios contain certain geography based variables that are influential to our modeling process, the most significant being unemployment rates and Gross Domestic Product (GDP). The probability weights assigned to each scenario are generally expected to be consistent from period to period. Any changes in probability weights must be supported by appropriate documentation and approval of senior management. Additionally, we consider whether to adjust the modeled estimates to address possible limitations within the models or factors not captured within the macroeconomic scenarios. Lifetime losses for most of our loans and receivablesleases are evaluated collectively based on similar risk characteristics, risk ratings, origination credit bureau scores, delinquency status, and remaining months within loan agreements, among other factors.
The macroeconomic scenarios evaluated by Huntington during the 2021 firstthird quarter continued to reflect the impact of the COVID-19 pandemic. The baseline scenario used for the quarter assumes that the worst of the economic disruption from the pandemic has passed, with the expectation that subsequent waves of the virus will not carry the same level of economic disruption experienced to date. The unemployment variable is incorporated within our models as both a rate of change variable and an absolute level variable. Historically, changes in unemployment have taken gradual paths resulting in more measured impacts each quarter.
The table below is intended to show how the forecasted path of these key macroeconomic variables has changed since the end of 2020:
| | Table 10 - Forecasted Key Macroeconomic Variables | |
| Table 13 - Forecasted Key Macroeconomic Variables | | Table 13 - Forecasted Key Macroeconomic Variables |
| Baseline scenario forecast | Baseline scenario forecast | 2020 | | 2021 | | 2022 | Baseline scenario forecast | 2020 | | 2021 | | 2022 |
| | Q4 | | Q2 | | Q4 | | Q2 | | Q4 | | Q4 | | Q2 | | Q4 | | Q2 | | Q4 |
| | Unemployment rate (1) | Unemployment rate (1) | | | | | | | | Unemployment rate (1) | | | | | | | |
| 4Q 2020 | 4Q 2020 | 7.2 | % | | 7.5 | % | | 7.2 | % | | 6.4 | % | | 5.5 | % | 4Q 2020 | 7.2 | % | | 7.5 | % | | 7.2 | % | | 6.4 | % | | 5.5 | % |
| 1Q 2021 | 1Q 2021 | N/A | | 6.3 | | | 5.7 | | | 5.0 | | | 4.5 | | 1Q 2021 | N/A | | 6.3 | | | 5.7 | | | 5.0 | | | 4.5 | |
| | 2Q 2021 | | 2Q 2021 | N/A | | 5.9 | | | 4.5 | | | 3.7 | | | 3.5 | |
| 3Q 2021 | | 3Q 2021 | N/A | | N/A | | 4.6 | | | 3.7 | | | 3.5 | |
| | Gross Domestic Product (1) | Gross Domestic Product (1) | | Gross Domestic Product (1) | |
| 4Q 2020 | 4Q 2020 | 3.0 | % | | 3.8 | % | | 5.8 | % | | 4.4 | % | | 3.9 | % | 4Q 2020 | 3.0 | % | | 3.8 | % | | 5.8 | % | | 4.4 | % | | 3.9 | % |
| 1Q 2021 | 1Q 2021 | N/A | | 5.2 | | | 5.8 | | | 5.3 | | | 3.5 | | 1Q 2021 | N/A | | 5.2 | | | 5.8 | | | 5.3 | | | 3.5 | |
| | 2Q 2021 | | 2Q 2021 | N/A | | 10.6 | | | 6.5 | | | 2.7 | | | 1.9 | |
| 3Q2021 | | 3Q2021 | N/A | | N/A | | 6.4 | | | 2.4 | | | 1.9 | |
| | (1) Values reflect the baseline scenario forecast inputs for each period presented, not updated for subsequent actual amounts. | (1) Values reflect the baseline scenario forecast inputs for each period presented, not updated for subsequent actual amounts. | (1) Values reflect the baseline scenario forecast inputs for each period presented, not updated for subsequent actual amounts. |
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TheManagement continues to assess the uncertainty in the macroeconomic environment related to the COVID-19 pandemic prompted management to continue to assess the macroeconomic environment through the end of the quarter.pandemic. Management considered multiple macroeconomic forecasts that reflected a range of possible outcomes in order to capture the severity of and the economic disruption associated with the pandemic. While we have incorporated our estimated impact of COVID-19 into our allowance for credit losses (“ACL”),ACL, the ultimate impact of COVID-19 is stillremains uncertain, including how long economic activities will be impacted and what effect the unprecedented levels of government fiscal and monetary actions will have on the economy and our credit losses.
Given significant COVID-19 specific government relief programs established during 2020 and additional stimulus spending enacted into law during the first quarter, as well as certain limitations of our models in the current economic environment particularly the level of unemployment,2021, management developed additional analytics to support adjustments to our modeled results. The Bank’sOur governance committees reviewed model results of each economic scenario for appropriate usage, concluding that the quantitative transactional reserve (collectively assessed) will continue to utilize the scenario weighting approach established in prior quarters. Given the impact of the unemployment variable utilized within the models and the uncertainty associated with key economic scenario assumptions, the March 31,September 30, 2021 ACL included a material general reserve component as well as additional industry specific risk profiles, including profiles related to the commercial real estate portfolio, to capture economic uncertainty not addressed within the quantitative transaction reserve.
24 Huntington Bancshares Incorporated
Our ACL methodology committee is responsible for developing the methodology, assumptions and estimates used in the calculation, as well as determining the appropriateness of the ACL. The ALLL represents the estimate of lifetime expected losses in the loan and lease portfolio at the reported date. The loss modeling process uses an EAD concept to calculate total expected losses on both funded balances and unfunded lending commitments, where appropriate.
Losses related to the unfunded lending commitments are then recorded as AULC within other liabilities in the Unaudited Condensed Consolidated Balance Sheet. A liability for expected credit losses for off-balance sheet credit exposures is recognized if Huntington has a present contractual obligation to extend the credit and the obligation is not unconditionally cancelable.
The table below reflects the allocation of our ALLL among our various loan categories during each of the past five quarters: categories.
| | Table 11 - Allocation of Allowance for Credit Losses (1) | |
| Table 14 - Allocation of Allowance for Credit Losses (1) | | Table 14 - Allocation of Allowance for Credit Losses (1) |
| | (dollar amounts in millions) | (dollar amounts in millions) | March 31,
2021 | | December 31,
2020 | | September 30,
2020 | | June 30,
2020 | | March 31,
2020 | (dollar amounts in millions) | September 30,
2021 | | | December 31,
2020 | |
| ALLL | ALLL | | | | | | | | | | ALLL | | | | | |
| Commercial | Commercial | | Commercial | | | | |
| Commercial and industrial | Commercial and industrial | $ | 865 | | | 43 | % | | $ | 939 | | | 43 | % | | $ | 912 | | | 43 | % | | $ | 923 | | | 44 | % | | $ | 837 | | | 42 | % | Commercial and industrial | $ | 801 | | | 36 | % | | | $ | 879 | | | 40 | % | |
| Commercial real estate | Commercial real estate | 332 | | | 9 | | | 297 | | | 9 | | | 351 | | | 8 | | | 246 | | | 8 | | | 159 | | | 9 | | Commercial real estate | 678 | | | 14 | | | | 297 | | | 9 | | |
| Lease financing | | Lease financing | 70 | | | 5 | | | | 60 | | | 3 | | |
| Total commercial | Total commercial | 1,197 | | | 52 | | | 1,236 | | | 52 | | | 1,263 | | | 51 | | | 1,169 | | | 52 | | | 996 | | | 51 | | Total commercial | 1,549 | | | 55 | | | | 1,236 | | | 52 | | |
| Consumer | Consumer | | | | | | | | | | | | | | | | | | | | Consumer | | | | |
| Automobile | Automobile | 156 | | | 16 | | | 166 | | | 16 | | | 163 | | | 17 | | | 177 | | | 16 | | | 148 | | | 17 | | Automobile | 122 | | | 12 | | | | 166 | | | 16 | | |
| Residential mortgage | | Residential mortgage | 127 | | | 17 | | | | 79 | | | 15 | | |
| Home equity | Home equity | 90 | | | 11 | | | 124 | | | 11 | | | 103 | | | 11 | | | 105 | | | 11 | | | 120 | | | 11 | | Home equity | 108 | | | 10 | | | | 124 | | | 11 | | |
| Residential mortgage | 73 | | | 15 | | | 79 | | | 15 | | | 69 | | | 15 | | | 44 | | | 15 | | | 53 | | | 15 | | |
| RV and marine | RV and marine | 114 | | | 5 | | | 129 | | | 5 | | | 116 | | | 5 | | | 125 | | | 5 | | | 97 | | | 5 | | RV and marine | 111 | | | 4 | | | | 129 | | | 5 | | |
| Other consumer | Other consumer | 73 | | | 1 | | | 80 | | | 1 | | | 82 | | | 1 | | | 82 | | | 1 | | | 90 | | | 1 | | Other consumer | 90 | | | 2 | | | | 80 | | | 1 | | |
| Total consumer | Total consumer | 506 | | | 48 | | | 578 | | | 48 | | | 533 | | | 49 | | | 533 | | | 48 | | | 508 | | | 49 | | Total consumer | 558 | | | 45 | | | | 578 | | | 48 | | |
| Total ALLL | Total ALLL | 1,703 | | | 100 | % | | 1,814 | | | 100 | % | | 1,796 | | | 100 | % | | 1,702 | | | 100 | % | | 1,504 | | | 100 | % | Total ALLL | 2,107 | | | 100 | % | | | 1,814 | | | 100 | % | |
| AULC | AULC | 38 | | | | | 52 | | | | | 82 | | | | | 119 | | | | | 99 | | | | AULC | 98 | | | | | | 52 | | | | |
| Total ACL | Total ACL | $ | 1,741 | | | $ | 1,866 | | | $ | 1,878 | | | $ | 1,821 | | | $ | 1,603 | | | Total ACL | $ | 2,205 | | | | $ | 1,866 | | | |
| Total ALLL as a % of | Total ALLL as a % of | Total ALLL as a % of |
| Total loans and leases | Total loans and leases | | 2.12% | | 2.22% | | 2.21% | | 2.12% | | 1.93% | Total loans and leases | | 1.91% | | | | 2.22% | |
| Nonaccrual loans and leases | Nonaccrual loans and leases | | 330 | | 341 | | 316 | | 263 | | 270 | Nonaccrual loans and leases | | 245 | | | | 341 | |
| NPAs | NPAs | | 313 | | 323 | | 298 | | 239 | | 257 | NPAs | | 236 | | | | 323 | |
| Total ACL as % of | Total ACL as % of | Total ACL as % of |
| Total loans and leases | Total loans and leases | | 2.17% | | 2.29% | | 2.31% | | 2.27% | | 2.06% | Total loans and leases | | 1.99% | | | | 2.29% | |
| Nonaccrual loans and leases | Nonaccrual loans and leases | | 338 | | 351 | | 330 | | 281 | | 287 | Nonaccrual loans and leases | | 256 | | | | 351 | |
| NPAs | NPAs | | 320 | | 332 | | 311 | | 255 | | 273 | NPAs | | 247 | | | | 332 | |
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(1)Percentages represent the percentage of each loan and lease category to total loans and leases.
2021 FirstThird Quarter versus 2020 Fourth Quarter
At March 31,September 30, 2021, the ALLL was $1.7$2.1 billion, a decreasean increase of $111$293 million compared to the December 31, 2020 balance of $1.8 billion.billion, primarily reflecting the impact of the TCF acquisition. The ALLL to total loans and leases ratio decreased 1031 basis points to 2.12%1.91%.
The ACL to total loans and leases ratio was 2.17%1.99% at March 31,September 30, 2021 compared to 2.29% at December 31, 2020. The decrease was primarily related to a reduction in credit reserves reflectingreflects an improvement in the economic outlook.
222021 3Q Form 10-Q Huntington Bancshares Incorporated25
NCOs
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| Table 12 - Quarterly Net Charge-off Analysis |
| Three Months Ended |
| March 31, | | December 31, | | | | | | March 31, |
| (dollar amounts in millions) | 2021 | | 2020 | | | | | | 2020 |
| Net charge-offs (recoveries) by loan and lease type: |
| Commercial: | | | | | | | | | |
| Commercial and industrial | $ | 52 | | | $ | 58 | | | | | | | $ | 84 | |
| Commercial real estate: | | | | | | | | | |
| Construction | — | | | — | | | | | | | — | |
| Commercial | (3) | | | 32 | | | | | | | (1) | |
| Commercial real estate | (3) | | | 32 | | | | | | | (1) | |
| Total commercial | 49 | | | 90 | | | | | | | 83 | |
| Consumer: | | | | | | | | | |
| Automobile | 2 | | | 6 | | | | | | | 7 | |
| Home equity | — | | | 1 | | | | | | | 5 | |
| Residential mortgage | — | | | 1 | | | | | | | 1 | |
| RV and marine | 3 | | | 2 | | | | | | | 2 | |
| Other consumer | 10 | | | 12 | | | | | | | 19 | |
| Total consumer | 15 | | | 22 | | | | | | | 34 | |
| Total net charge-offs | $ | 64 | | | $ | 112 | | | | | | | $ | 117 | |
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| Net charge-offs (recoveries) - annualized percentages: |
| Commercial: | | | | | | | | | |
| Commercial and industrial | 0.60 | % | | 0.67 | % | | | | | | 1.09 | % |
| Commercial real estate: | | | | | | | | | |
| Construction | (0.04) | | | (0.04) | | | | | | | 0.08 | |
| Commercial | (0.17) | | | 2.14 | | | | | | | (0.06) | |
| Commercial real estate | (0.15) | | | 1.81 | | | | | | | (0.03) | |
| Total commercial | 0.47 | | | 0.86 | | | | | | | 0.89 | |
| Consumer: | | | | | | | | | |
| Automobile | 0.05 | | | 0.21 | | | | | | | 0.22 | |
| Home equity | 0.02 | | | 0.01 | | | | | | | 0.19 | |
| Residential mortgage | 0.01 | | | 0.05 | | | | | | | 0.02 | |
| RV and marine | 0.29 | | | 0.21 | | | | | | | 0.27 | |
| Other consumer | 3.99 | | | 4.35 | | | | | | | 6.45 | |
| Total consumer | 0.16 | | | 0.22 | | | | | | | 0.35 | |
| Net charge-offs as a % of average loans | 0.32 | % | | 0.55 | % | | | | | | 0.62 | % |
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| Table 15 - Quarterly Net Charge-off Analysis |
| Three Months Ended |
| September 30, | | June 30, | | | | | | September 30, |
| (dollar amounts in millions) | 2021 | | 2021 | | | | | | 2020 |
| Net charge-offs (recoveries) by loan and lease type: |
| Commercial: | | | | | | | | | |
| Commercial and industrial | $ | 28 | | | $ | 37 | | | | | | | $ | 70 | |
| Commercial real estate: | | | | | | | | | |
| Construction | (1) | | | — | | | | | | | (1) | |
| Commercial | 8 | | | 17 | | | | | | | 13 | |
| Commercial real estate | 7 | | | 17 | | | | | | | 12 | |
| Lease financing | 12 | | | 5 | | | | | | | 7 | |
| Total commercial | 47 | | | 59 | | | | | | | 89 | |
| Consumer: | | | | | | | | | |
| Automobile | (4) | | | (4) | | | | | | | 10 | |
| Residential mortgage | — | | | — | | | | | | | 1 | |
| Home equity | (3) | | | (1) | | | | | | | — | |
| RV and marine | — | | | — | | | | | | | 4 | |
| Other consumer | 15 | | | 8 | | | | | | | 9 | |
| Total consumer | 8 | | | 3 | | | | | | | 24 | |
| Total net charge-offs | $ | 55 | | | $ | 62 | | | | | | | $ | 113 | |
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| Net charge-offs (recoveries) - annualized percentages: |
| Commercial: | | | | | | | | | |
| Commercial and industrial | 0.28 | % | | 0.43 | % | | | | | | 0.88 | % |
| Commercial real estate: | | | | | | | | | |
| Construction | (0.14) | | | (0.04) | | | | | | | (0.25) | |
| Commercial | 0.26 | | | 0.81 | | | | | | | 0.80 | |
| Commercial real estate | 0.21 | | | 0.69 | | | | | | | 0.63 | |
| Lease financing | 0.87 | | | 0.93 | | | | | | | 1.10 | |
| Total commercial | 0.31 | | | 0.51 | | | | | | | 0.85 | |
| Consumer: | | | | | | | | | |
| Automobile | (0.10) | | | (0.13) | | | | | | | 0.31 | |
| Residential mortgage | — | | | — | | | | | | | 0.03 | |
| Home equity | (0.08) | | | (0.08) | | | | | | | (0.02) | |
| RV and marine | (0.01) | | | 0.02 | | | | | | | 0.38 | |
| Other consumer | 3.97 | | | 3.13 | | | | | | | 3.55 | |
| Total consumer | 0.07 | | | 0.02 | | | | | | | 0.24 | |
| Net charge-offs as a % of average loans | 0.20 | % | | 0.28 | % | | | | | | 0.56 | % |
2021 FirstThird Quarter versus 2020 Fourth2021 Second Quarter
NCOs were an annualized 0.32%0.20% of average loans and leases in the current quarter, decreasingdown from 0.55%0.28% in the 2020 fourth2021 second quarter, and below our average through-the-cycle target range of 0.35% - 0.55%. Annualized NCOs for the commercial portfolios were 0.47%0.31% in the current quarter compared to 0.86%0.51% in the 2020 fourth2021 second quarter. Consumer charge-offs were lower forhigher in the quarter, across the consumer portfolio, consistent with our expectations.expectations, but still well below the longer term run rate.
26 Huntington Bancshares Incorporated
The table below reflects NCO detail for the nine-month periods ended September 30, 2021 and 2020:
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| Table 16 - Year to Date Net Charge-off Analysis |
| (dollar amounts in millions) | | | |
| Nine months ended September 30, |
| 2021 | | 2020 |
| Net charge-offs (recoveries) by loan and lease type: | | | |
| Commercial: | | | |
| Commercial and industrial | $ | 93 | | | $ | 233 | |
| Commercial real estate: | | | |
| Construction | (1) | | | — | |
| Commercial | 22 | | | 11 | |
| Commercial real estate | 21 | | | 11 | |
| Lease financing | 41 | | | 8 | |
| Total commercial | 155 | | | 252 | |
| Consumer: | | | |
| Automobile | (6) | | | 27 | |
| Residential mortgage | — | | | 2 | |
| Home equity | (4) | | | 5 | |
| RV and marine | 3 | | | 10 | |
| Other consumer | 33 | | | 41 | |
| Total consumer | 26 | | | 85 | |
| Total net charge-offs | $ | 181 | | | $ | 337 | |
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| Nine months ended September 30, |
| 2021 | | 2020 |
| Net charge-offs (recoveries) - annualized percentages: | | | |
| Commercial: | | | |
| Commercial and industrial | 0.35 | % | | 1.00 | % |
| Commercial real estate: | | | |
| Construction | (0.08) | | | (0.06) | |
| Commercial | 0.32 | | | 0.25 | |
| Commercial real estate | 0.27 | | | 0.20 | |
| Lease financing | 1.64 | | | 0.43 | |
| Total commercial | 0.42 | | | 0.83 | |
| Consumer: | | | |
| Automobile | (0.06) | | | 0.28 | |
| Residential mortgage | — | | | 0.02 | |
| Home equity | (0.05) | | | 0.09 | |
| RV and marine | 0.09 | | | 0.34 | |
| Other consumer | 3.72 | | | 4.99 | |
| Total consumer | 0.08 | | | 0.30 | |
| Net charge-offs as a % of average loans | 0.26 | % | | 0.57 | % |
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2021 First Nine Months versus 2020 First Nine Months
NCOs decreased $156 million in the first nine-month period of 2021 to $181 million. The decrease was evident across both the commercial and consumer portfolios.The commercial decrease was primarily a function of elevated losses associated within the oil and gas portfolio in 2020, while the consumer decrease was broad based due to positive portfolio performance throughout 2021.
Market Risk
(This section should be read in conjunction with the “Market Risk” section of ourappearing in Huntington’s 2020 Annual Report on Form 10-K for our on-going market risk management processes.)
Market risk refers to potential losses arising from changes in interest rates, foreign exchange rates, equity prices and commodity prices, including the correlation among these factors and their volatility.When the value of an instrument is tied to such external factors, the holder faces market risk.We are primarily exposed to interest rate risk as a result of offering a wide array of financial products to our customers and secondarily to price risk from trading securities, securities owned by our broker-dealer subsidiaries, foreign exchange positions, equity
investments, and investments in securities backed by mortgage loans.
Huntington measures market risk exposure via financial simulation models, which provide management with insights on the potential impact to net interest income and other key metrics as a result of changes in market interest rates.Models are used to simulate cash flows and accrual characteristics of the balance sheet based on assumptions regarding the slope or shape of the yield curve, the direction and volatility of interest rates, and the changing composition and characteristics of the balance sheet resulting from strategic objectives and customer behavior.Assumptions and models provide insight on forecasted balance sheet growth and composition, and the pricing and maturity characteristics of current and future business.
In measuring the financial risks associated with interest rate sensitivity in Huntington’s balance sheet, Huntington compares a set of alternative interest rate scenarios to the results of a base case scenario derived using market forward rates.The market forward reflects the market consensus regarding the future level and slope of the yield curve across a range of tenor points.The standard set of interest rate scenarios includes two types: “shock” scenarios which are instantaneous parallel rate shifts, and “ramp” scenarios where the parallel shift is applied gradually over the first 12 months of the forecast on a pro rata basis.In both shock and ramp scenarios with falling rates, Huntington presumes that market rates cannotwill not go below 0%.The forecasted scenarios are inclusive of realized income ofall executed interest rate risk hedging activities.Forward starting hedges are included to the extent that they have been transacted and that they start within the measurement horizon.
| | Table 14 - Net Interest Income at Risk | |
| Table 17 - Net Interest Income at Risk | | Table 17 - Net Interest Income at Risk |
| | | | Net Interest Income at Risk (%) | | Net Interest Income at Risk (%) |
| Basis point change scenario | Basis point change scenario | -25 | | +100 | | +200 | Basis point change scenario | -25 | | +100 | | +200 |
| Board policy limits | Board policy limits | -1.3 | % | | -2.0 | % | | -4.0 | % | Board policy limits | -1.3 | % | | -2.0 | % | | -4.0 | % |
| March 31, 2021 | -0.6 | | | 3.0 | | | 6.6 | | |
| September 30, 2021 | | September 30, 2021 | -1.9 | | | 4.0 | | | 8.2 | |
| December 31, 2020 | December 31, 2020 | -1.1 | | | 3.4 | | | 7.3 | | December 31, 2020 | -1.1 | | | 3.4 | | | 7.3 | |
The NII at Risk results included in the table above reflect the analysis used monthly by management. It models gradual (“ramp” as defined above) +100 and +200 basis point parallel shifts in market interest rates, implied by the forward yield curve over the next twelve months as well as an instantaneous parallel shock of -25 basis points.
OurHuntington’s NII at Risk is within ourthe Board of Directors’ policy limits for the -25, +100 and +200 basis point scenarios.NII at Risk was operating outside the Board of Directors’ policy limit for the -25 basis point scenario at September 30, 2021. This breach was escalated to the Board of Directors’ ROC. On October 19, 2021, as part of our annual Corporate Risk Appetite review process, the ROC reviewed all established limits and determined an update to the limit was appropriate. The ROC approved an increase to the -25 basis point policy limit bringing this metric back into compliance.
The NII at Risk shows that ourthe balance sheet is asset sensitive at both March 31,September 30, 2021, and December 31, 2020. The change in sensitivity is primarily driven by changes in market rate expectations, and the size and mix of the balance sheet.
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| Table 15 - Economic Value of Equity at Risk |
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| | Economic Value of Equity at Risk (%) |
| Basis point change scenario | -25 | | +100 | | +200 |
| Board policy limits | -1.5 | % | | -6.0 | % | | -12.0 | % |
| March 31, 2021 | — | | | -1.3 | | | -4.4 | |
| December 31, 2020 | -0.7 | | | 1.4 | | | -0.1 | |
28 Huntington Bancshares Incorporated
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| Table 18 - Economic Value of Equity at Risk |
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| | Economic Value of Equity at Risk (%) |
| Basis point change scenario | -25 | | +100 | | +200 |
| Board policy limits | -1.5 | % | | -6.0 | % | | -12.0 | % |
| September 30, 2021 | -0.7 | | | 0.7 | | | -1.7 | |
| December 31, 2020 | -0.7 | | | 1.4 | | | -0.1 | |
The EVE results included in the table above reflect the analysis used monthly by management. It models immediate -25, +100 and +200 basis point parallel shifts (“shocks” as defined above) in market interest rates.
We areHuntington is within ourthe Board of Directors’ policy limits for the -25, +100 and +200 basis point scenarios. As of March 31st,September 30, 2021, EVE depicts a liability sensitive (long duration) balance sheet profile. The change in sensitivity from December 31st31, 2020’s asset sensitive (short duration) position was driven primarily by changes in the spot market rate curve impacting forecasted runoff expectations, and the size and shapecomposition of the balance sheet.
24 Huntington Bancshares Incorporated
Use of Derivatives to Manage Interest Rate Risk
An integral component of our interest rate risk management strategy is use of derivative instruments to minimize significant fluctuations in earnings caused by changes in market interest rates. Examples of derivative instruments that we may use as part of our interest rate risk management strategy include interest rate swaps, caps and floors, forward contracts, and forward starting interest rate swaps.
Table 1619 shows all swap, floor and cap and floor positions that are utilized for purposes of managing our exposures to the variability of interest rates. The interest rates variability may impact either the fair value of the assets and liabilities or impact the cash flows attributable to net interest margin. These positions are used to protect the fair value of asset and liabilities by converting the contractual interest rate on a specified amount of assets and liabilities (i.e., notional amounts) to another interest rate index. The positions are also used to hedge the variability in cash flows attributable to the contractually specified interest rate by converting the variable rate index into a fixed rate. The volume, maturity and mix of derivative positions change frequently as we adjust our broader interest rate risk management objectives and the balance sheet positions to be hedged. For further information, including the notional amount and fair values of these derivatives, refer to Note 1214 “Derivative Financial Instruments” of the Notes to Unaudited Condensed Consolidated Financial Statements. The following table presents additional information about the interest rate swaps, and caps and floors used in Huntington’s asset and liability management activities at March 31,September 30, 2021 and December 31, 2020.
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| Table 16 - Weighted-Average Maturity, Receive Rate and LIBOR Reset Rate on Asset Liability Management Instruments |
| March 31, 2021 |
| | | Average Maturity (years) | | | | Weighted-Average Fixed Rate | | Weighted-Average LIBOR Reset Rate |
| (dollar amounts in millions) | Notional Value | | | Fair Value | | |
| Asset conversion swaps | | | | | | | | | |
| Receive Fixed - Pay 1 month LIBOR | $ | 6,525 | | | 1.78 | | | $ | 219 | | | 1.81 | % | | 0.11 | % |
| Pay Fixed - Receive 1 month LIBOR (1) | 2,957 | | | 2.48 | | | 38 | | | 0.22 | | | 0.11 | |
| Receive Fixed - Pay 1 month LIBOR - forward starting (2) | 750 | | | 3.04 | | | 18 | | | 1.24 | | | — | |
| Pay Fixed - Receive 1 month LIBOR - forward starting (3) | 233 | | | 9.35 | | | 9 | | | 1.12 | | | |
| Liability conversion swaps | | | | | | | | | |
| Receive Fixed - Pay 1 month LIBOR | 5,397 | | | 1.77 | | | 217 | | | 2.28 | | | 0.11 | |
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| Basis Swaps | | | | | | | | | |
| Pay SOFR- Receive Fed Fund (economic hedges) (4) | 230 | | | 4.41 | | | — | | | 0.07 | | | 0.02 | |
| Pay Fed Fund - Receive SOFR (economic hedges) (4) | 41 | | | 1.73 | | | — | | | 0.01 | | | 0.07 | |
| Total swap portfolio | $ | 16,133 | | | | | $ | 501 | | | | | |
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| March 31, 2021 |
| | | Average Maturity (years) | | | | Weighted-Average Strike | | Weighted-Average LIBOR Reset Rate |
| (dollar amounts in millions) | Notional Value | | | Fair Value | | |
| Interest rate floors | | | | | | | | | |
| Purchased Interest Rate Floors - 1 month LIBOR | $ | 6,175 | | | 0.15 | | | $ | 28 | | | 1.76 | % | | 0.11 | % |
| Purchased Floor Spread - 1 month LIBOR | 525 | | | 1.57 | | | 8 | | | 2.50 / 1.50 | | 0.11 | |
| Purchased Floor Spread - 1 month LIBOR forward starting (5) | 2,375 | | | 3.56 | | | 59 | | | 1.56 / 0.65 | | — | |
| Purchased Floor Spread - 1 month LIBOR (economic hedges) | 1,000 | | | 2.04 | | | 16 | | | 1.75 / 1.00 | | 0.11 | |
| Interest rate caps | | | | | | | | | |
| Purchased Cap - 1 month LIBOR (economic hedges) | 5,000 | | | 6.66 | | | 244 | | | 0.98 | | | 0.11 | |
| Written Cap - 1 month LIBOR (economic hedges) | 1,500 | | | 6.58 | | | (25) | | | 2.94 | | | 0.11 | |
| Written Cap - 1 month LIBOR forward starting (economic hedges) (2) | 1,500 | | | 6.59 | | | (24) | | | 3.00 | | | — | |
| Total floors and caps portfolio | $ | 18,075 | | | | | $ | 306 | | | | | |
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| | Table 19 - Weighted-Average Maturity, Receive Rate and LIBOR Reset Rate on Asset Liability Management Instruments | | Table 19 - Weighted-Average Maturity, Receive Rate and LIBOR Reset Rate on Asset Liability Management Instruments |
| | December 31, 2020 | | September 30, 2021 |
| | | Average Maturity (years) | | Weighted-Average Fixed Rate | | Weighted-Average LIBOR Reset Rate | | | Average Maturity (years) | | Weighted-Average Fixed Rate | | Weighted-Average LIBOR Reset Rate |
| (dollar amounts in millions) | (dollar amounts in millions) | Notional Value | | Fair Value | | (dollar amounts in millions) | Notional Value | | Fair Value | |
| Asset conversion swaps | Asset conversion swaps | | | | | | | | | | Asset conversion swaps | | | | | | | | | |
| Receive Fixed - Pay 1 month LIBOR | Receive Fixed - Pay 1 month LIBOR | $ | 6,525 | | | 2.03 | | | $ | 231 | | | 1.81 | % | | 0.15 | % | Receive Fixed - Pay 1 month LIBOR | $ | 7,275 | | | 1.41 | | | $ | 188 | | | 1.75 | % | | 0.08 | % |
| Pay Fixed - Receive 1 month LIBOR (1) | Pay Fixed - Receive 1 month LIBOR (1) | 3,076 | | | 1.99 | | | 3 | | | 0.17 | | | 0.15 | | Pay Fixed - Receive 1 month LIBOR (1) | 1,330 | | | 9.11 | | | 27 | | | 0.99 | | | 0.09 | |
| Receive Fixed - Pay 1 month LIBOR - forward starting (2) | 750 | | | 3.29 | | | 23 | | | 1.24 | | | — | | |
| Pay Fixed - Receive 1 month LIBOR - forward starting (6) | 408 | | | 9.08 | | | 2 | | | 0.68 | | | — | | |
| | Pay Fixed - Receive 1 month LIBOR - forward starting (2) | | Pay Fixed - Receive 1 month LIBOR - forward starting (2) | 6,042 | | | 3.89 | | | 15 | | | 0.84 | | | — | |
| Liability conversion swaps | Liability conversion swaps | | Liability conversion swaps | |
| Receive Fixed - Pay 1 month LIBOR | Receive Fixed - Pay 1 month LIBOR | 5,397 | | | 2.02 | | | 262 | | | 2.28 | | | 0.15 | | Receive Fixed - Pay 1 month LIBOR | 4,756 | | | 1.60 | | | 165 | | | 2.17 | | | 0.08 | |
| Receive Fixed - Pay 3 month LIBOR | 800 | | | 0.21 | | | 5 | | | 1.31 | | | 0.22 | | |
| | Basis Swaps | Basis Swaps | | Basis Swaps | |
| Pay SOFR- Receive Fed Fund (economic hedges) (4) | 230 | | | 4.66 | | | — | | | 0.09 | | | 0.10 | | |
| Pay Fed Fund - Receive SOFR (economic hedges) (4) | 41 | | | 1.98 | | | — | | | 0.09 | | | 0.09 | | |
| Pay SOFR- Receive Fed Fund (economic hedges) (3) | | Pay SOFR- Receive Fed Fund (economic hedges) (3) | 230 | | | 3.91 | | | — | | | 0.08 | | | 0.06 | |
| Pay Fed Fund - Receive SOFR (economic hedges) (3) | | Pay Fed Fund - Receive SOFR (economic hedges) (3) | 41 | | | 1.23 | | | — | | | 0.05 | | | 0.08 | |
| Total swap portfolio | Total swap portfolio | $ | 17,227 | | | $ | 526 | | | Total swap portfolio | $ | 19,674 | | | $ | 395 | | |
| | | December 31, 2020 | | September 30, 2021 |
| | | Average Maturity (years) | | Weighted-Average Floor Strike | | Weighted-Average LIBOR Reset Rate | | | Average Maturity (years) | | Weighted-Average Strike | | Weighted-Average LIBOR Reset Rate |
| (dollar amounts in millions) | (dollar amounts in millions) | Notional Value | | Fair Value | | (dollar amounts in millions) | Notional Value | | Fair Value | |
| Interest rate floors | Interest rate floors | | | | | | | | | | Interest rate floors | | | | | | | | | |
| Purchased Interest Rate Floors - 1 month LIBOR | Purchased Interest Rate Floors - 1 month LIBOR | $ | 7,200 | | | 0.37 | | | $ | 59 | | | 1.81 | % | | 0.15 | % | Purchased Interest Rate Floors - 1 month LIBOR | $ | 375 | | | 0.31 | | | $ | 3 | | | 1.93 | % | | 0.09 | % |
| Purchased Floor Spread - 1 month LIBOR | Purchased Floor Spread - 1 month LIBOR | 400 | | | 1.74 | | | 7 | | | 2.50 / 1.50 | | 0.15 | | Purchased Floor Spread - 1 month LIBOR | 275 | | | 1.38 | | | 3 | | | 1.00 / 1.75 | | 0.09 | |
| Purchased Floor Spread - 1 month LIBOR forward starting (7) | 2,500 | | | 3.72 | | | 76 | | | 1.65 / 0.70 | | — | | |
| Purchased Floor Spread - 1 month LIBOR (economic hedges) | 1,000 | | | 2.29 | | 18 | | | 1.75 / 1.00 | | 0.16 | | |
| Interest rate caps | | |
| Purchased Cap - 1 month LIBOR (economic hedges) | 5,000 | | | 6.91 | | 91 | | | 0.98 | | | 0.15 | | |
| Total floors and caps portfolio | $ | 16,100 | | | $ | 251 | | | |
| | Total floors portfolio | | Total floors portfolio | $ | 650 | | | $ | 6 | | |
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| December 31, 2020 |
| | | Average Maturity (years) | | | | Weighted-Average Fixed Rate | | Weighted-Average LIBOR Reset Rate |
| (dollar amounts in millions) | Notional Value | | | Fair Value | | |
| Asset conversion swaps | | | | | | | | | |
| Receive Fixed - Pay 1 month LIBOR | $ | 6,525 | | | 2.03 | | | $ | 231 | | | 1.81 | % | | 0.15 | % |
| Pay Fixed - Receive 1 month LIBOR (1) | 3,076 | | | 1.99 | | | 3 | | | 0.17 | | | 0.15 | |
| Receive Fixed - Pay 1 month LIBOR - forward starting (4) | 750 | | | 3.29 | | | 23 | | | 1.24 | | | — | |
| Pay Fixed - Receive 1 month LIBOR - forward starting (5) | 408 | | | 9.08 | | | 2 | | | 0.68 | | | — | |
| Liability conversion swaps | | | | | | | | | |
| Receive Fixed - Pay 1 month LIBOR | 5,397 | | | 2.02 | | | 262 | | | 2.28 | | | 0.15 | |
| Receive Fixed - Pay 3 month LIBOR | 800 | | | 0.21 | | | 5 | | | 1.31 | | | 0.22 | |
| Basis Swaps | | | | | | | | | |
| Pay SOFR- Receive Fed Fund (economic hedges) (3) | 230 | | | 4.66 | | | — | | | 0.09 | | | 0.10 | |
| Pay Fed Fund - Receive SOFR (economic hedges) (3) | 41 | | | 1.98 | | | — | | | 0.09 | | | 0.09 | |
| Total swap portfolio | $ | 17,227 | | | | | $ | 526 | | | | | |
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| Interest rate floors | | | | | | | | | |
| Purchased Interest Rate Floors - 1 month LIBOR | $ | 7,200 | | | 0.37 | | | $ | 59 | | | 1.81 | % | | 0.15 | % |
| Purchased Floor Spread - 1 month LIBOR | 400 | | | 1.74 | | | 7 | | | 2.50 / 1.50 | | 0.15 | |
| Purchased Floor Spread - 1 month LIBOR forward starting (6) | 2,500 | | | 3.72 | | | 76 | | | 1.65 / 0.70 | | — | |
| Purchased Floor Spread - 1 month LIBOR (economic hedges) | 1,000 | | | 2.29 | | 18 | | | 1.75 / 1.00 | | 0.16 | |
| Interest rate caps | | | | | | | | | |
| Purchased Cap - 1 month LIBOR (economic hedges) | 5,000 | | | 6.91 | | 91 | | | 0.98 | | | 0.15 | |
| Total floors and caps portfolio | $ | 16,100 | | | | | $ | 251 | | | | | |
(1)Amounts include interest rate swaps as fair value hedges of fixed-rate investment securities using the last-of-layer method.
(2)Forward starting swaps and caps effective starting in April 2021.
(3)Forward starting swaps effective starting from AprilOctober 2021 to May 2021.October 2022.
(4)(3)Swaps have variable pay and variable receive resets. Weighted Average Fixed Rate column represents pay rate reset.
(5)(4)Forward starting floor spreads becomeswaps and caps effective starting fromin April 2021 to June 2021.
(6)(5)Forward starting swaps become effective starting from January 2021 to May 2021.
(7)(6)Forward starting floors become effective starting from March 2021 to June 2021.
During the fourth quarter30 Huntington Bancshares Incorporated
Net interest income in the current quarternine-month period ended September 30, 2021 included a $144positive $89 million mark-to-market of interest rate caps (including caps written in the first quarter of 2021).caps. The mark-to-market is not included in the NII at Risk calculations above. As these positions are marked-to-market through netThe interest income eachrate caps were terminated in the 2021 second quarter we expect impact in our reported netand were replaced with $4.0 billion of forward starting interest margin. However, the partial collar-like positionrate swaps that was created by selling the interest caps is expected to dampen those impacts.qualify for hedge accounting.
26 Huntington Bancshares Incorporated
MSRs
At March 31,September 30, 2021, we had a total of $274$338 million of capitalized MSRs representing the right to service $24$30.6 billion in mortgage loans.
MSR fair values are sensitive to movements in interest rates as expected future net servicing income depends on the projected outstanding principal balances of the underlying loans, which can be reduced by prepayments.prepayments and declines in credit quality. Prepayments usually increase when mortgage interest rates decline and decrease when mortgage interest rates rise. We also employ hedging strategies to reduce the risk of MSR fair value changes or impairment. However, volatile changes in interest rates can diminish the effectiveness of these economic hedges. We report changes in the MSR value net of hedge-related trading activity in the mortgage banking income category of noninterest income.
MSR assets are included in servicing rights and other intangible assets in the Unaudited Condensed Consolidated Financial Statements.
Price Risk
Price risk represents the risk of loss arising from adverse movements in the prices of financial instruments that are carried at fair value and are subject to fair value accounting. We have price risk from trading securities, securities owned by our broker-dealer subsidiaries, foreign exchange positions, derivative instruments, and equity investments. We have established loss limits on the trading portfolio, on the amount of foreign exchange exposure that can be maintained, and on the amount of marketable equity securities that can be held.
Liquidity Risk
(This section should be read in conjunction with the “Liquidity Risk” section of ourappearing in Huntington’s 2020 Annual Report on Form 10-K for our on-going liquidity risk management processes.)
Our primary source of liquidity is our core deposit base. Core deposits comprised approximately 97% of total deposits at March 31,September 30, 2021. We also have available unused wholesale sources of liquidity, including advances from the FHLB, issuance through dealers in the capital markets, and access to certificates of deposit issued through brokers. Liquidity is further provided by unencumbered, or unpledged, investment securities that totaled $13.4$14.8 billion as of March 31,September 30, 2021.
Bank Liquidity and Sources of Funding
Our primary sources of funding for the Bank are retail and commercial core deposits. At March 31,September 30, 2021, these core deposits funded 79% of total assets (124% of total loans). Other sources of liquidity include non-core deposits, FHLB advances, wholesale debt instruments, and securitizations. Demand deposit overdrafts that have been reclassified as loan balances were $16$29 million and $14 million at March 31,September 30, 2021 and December 31, 2020, respectively.
The following table reflects deposit composition detail for each of the last five quarters:details.
| | Table 17 - Deposit Composition | |
| Table 20 - Deposit Composition | | Table 20 - Deposit Composition |
| | | March 31, | | December 31, | | September 30, | | June 30, | | March 31, | | September 30, | | | December 31, | |
| (dollar amounts in millions) | (dollar amounts in millions) | 2021 | | 2020 | | 2020 | | 2020 | | 2020 | (dollar amounts in millions) | 2021 | | | 2020 | |
| By Type: | By Type: | | | | | | | | | | By Type: | | | | | |
| Demand deposits—noninterest-bearing | Demand deposits—noninterest-bearing | $ | 31,226 | | | 30 | % | | $ | 28,553 | | | 29 | % | | $ | 27,466 | | | 29 | % | | $ | 27,574 | | | 29 | % | | $ | 21,039 | | | 24 | % | Demand deposits—noninterest-bearing | $ | 44,560 | | | 31 | % | | | $ | 28,553 | | | 29 | % | |
| Demand deposits—interest-bearing | Demand deposits—interest-bearing | 27,493 | | | 27 | | | 26,757 | | | 27 | | | 24,242 | | | 25 | | | 22,961 | | | 25 | | | 23,115 | | | 27 | | Demand deposits—interest-bearing | 36,423 | | | 26 | | | | 26,757 | | | 27 | | |
| Money market deposits | Money market deposits | 26,268 | | | 26 | | | 26,248 | | | 27 | | | 26,230 | | | 28 | | | 25,312 | | | 27 | | | 25,068 | | | 29 | | Money market deposits | 32,662 | | | 23 | | | | 26,248 | | | 27 | | |
| Savings and other domestic deposits | Savings and other domestic deposits | 13,115 | | | 13 | | | 11,722 | | | 12 | | | 11,268 | | | 12 | | | 11,034 | | | 12 | | | 9,845 | | | 11 | | Savings and other domestic deposits | 20,773 | | | 15 | | | | 11,722 | | | 12 | | |
| Core certificates of deposit (1) | Core certificates of deposit (1) | 1,329 | | | 1 | | | 1,425 | | | 1 | | | 1,586 | | | 2 | | | 2,478 | | | 3 | | | 3,599 | | | 4 | | Core certificates of deposit (1) | 3,080 | | | 2 | | | | 1,425 | | | 1 | | |
| Total core deposits: | Total core deposits: | 99,431 | | | 97 | | | 94,705 | | | 96 | | | 90,792 | | | 96 | | | 89,359 | | | 96 | | | 82,666 | | | 95 | | Total core deposits: | 137,498 | | | 97 | | | | 94,705 | | | 96 | | |
| Other domestic deposits of $250,000 or more | Other domestic deposits of $250,000 or more | 105 | | | — | | | 131 | | | — | | | 156 | | | — | | | 209 | | | — | | | 276 | | | — | | Other domestic deposits of $250,000 or more | 521 | | | — | | | | 131 | | | — | | |
| Brokered deposits and negotiable CDs | 2,648 | | | 3 | | | 4,112 | | | 4 | | | 4,206 | | | 4 | | | 4,123 | | | 4 | | | 3,888 | | | 5 | | |
| Negotiable CDs, brokered and other deposits | | Negotiable CDs, brokered and other deposits | 3,879 | | | 3 | | | | 4,112 | | | 4 | | |
| | Total deposits | Total deposits | $ | 102,184 | | | 100 | % | | $ | 98,948 | | | 100 | % | | $ | 95,154 | | | 100 | % | | $ | 93,691 | | | 100 | % | | $ | 86,830 | | | 100 | % | Total deposits | $ | 141,898 | | | 100 | % | | | $ | 98,948 | | | 100 | % | |
| Total core deposits: | Total core deposits: | | | | | | | | | | | | | | | | | | | | Total core deposits: | | | | | | | | | |
| Commercial | Commercial | $ | 46,539 | | | 47 | % | | $ | 44,698 | | | 47 | % | | $ | 43,018 | | | 47 | % | | $ | 41,630 | | | 47 | % | | $ | 38,064 | | | 46 | % | Commercial | $ | 61,210 | | | 45 | % | | | $ | 44,698 | | | 47 | % | |
| Consumer | Consumer | 52,892 | | | 53 | | | 50,007 | | | 53 | | | 47,774 | | | 53 | | | 47,729 | | | 53 | | | 44,602 | | | 54 | | Consumer | 76,288 | | | 55 | | | | 50,007 | | | 53 | | |
| Total core deposits | Total core deposits | $ | 99,431 | | | 100 | % | | $ | 94,705 | | | 100 | % | | $ | 90,792 | | | 100 | % | | $ | 89,359 | | | 100 | % | | $ | 82,666 | | | 100 | % | Total core deposits | $ | 137,498 | | | 100 | % | | | $ | 94,705 | | | 100 | % | |
(1)Includes consumer certificates of deposit of $250,000 or more.
The Bank maintains borrowing capacity at the FHLB and the Federal Reserve Bank Discount Window. The Bank does not consider borrowing capacity from the Federal Reserve Bank Discount Window as a primary source of liquidity. Total loans and securities pledged to the Federal Reserve Bank Discount Window and the FHLB are $48.2$56.2 billion and $53.4 billion at March 31,September 30, 2021 and December 31, 2020, respectively.
At March 31,September 30, 2021, the market value of investment securities pledged to secure public and trust deposits, trading account liabilities, U.S. Treasury demand notes, and security repurchase agreements totaled $4.8$6.4 billion. There were no securities of a single issuer, which are not governmental or government-sponsored, that exceeded 10% of shareholders’ equity at March 31,September 30, 2021.
To the extent we are unable to obtain sufficient liquidity through core deposits, we may meet our liquidity needs through sources of wholesale funding, asset securitization or sale. Sources of wholesale funding include other domestic deposits of $250,000 or more, brokered deposits and negotiable CDs, brokered and other deposits, short-term borrowings, and long-term debt. At March 31,September 30, 2021, total wholesale funding was $10.2$12.6 billion, a decrease from $12.8 billion at December 31, 2020. The decrease from year-end is primarily due to a decrease in brokered deposits and negotiable CD and long-term debt.
At March 31,September 30, 2021, we believe the Bank has sufficient liquidity to meet its cash flow obligations for the foreseeable future.
Parent Company Liquidity
The parent company’s funding requirements consist primarily of dividends to shareholders, debt service, income taxes, operating expenses, funding of nonbank subsidiaries, repurchases of our stock, and acquisitions. The parent company obtains funding to meet obligations from dividends and interest received from the Bank, interest and dividends received from direct subsidiaries, net taxes collected from subsidiaries included in the federal consolidated tax return, fees for services provided to subsidiaries, and the issuance of debt securities.
During the 2021 first quarter, Huntington issued $500 million of Series H Preferred Stock. On June 9, 2021, each share of TCF’s Series C Non-Cumulative Perpetual Preferred Stock was converted into a share of a Series I Preferred Stock of Huntington having substantially the same terms as TCF’s preferred stock. See Note 810 “Shareholders’ Equity” and Note 14 of ourappearing in Huntington’s 2020 Annual Report on Form 10-K for further information. At March 31,September 30, 2021 and December 31, 2020, the parent company had $4.1$3.7 billion and $4.4 billion, respectively, in cash and cash equivalents.
32 Huntington Bancshares Incorporated
On April 21,October 20, 2021, the Board of Directors declared a quarterly common stock cash dividend of $0.15$0.155 per common share. The dividend is payable on July 1, 2021,January 3, 2022, to shareholders of record on JuneDecember 17, 2021. Based on the
28 Huntington Bancshares Incorporated
current quarterly dividend of $0.15$0.155 per common share, cash demands required for common stock dividends are estimated to be approximately $153$224 million per quarter. On April 21,Additionally, on October 20, 2021, the Board of Directors also declared a quarterly Series B, Series C, Series D, Series E, Series F, Series G and Series H Preferred Stock dividend payable on JulyJanuary 18, 2022 to shareholders of record on January 1, 2022. On September 15, 2021, the Board of Directors declared a quarterly dividend for the Series I Preferred Stock payable on December 1, 2021 to shareholders of record on July 1,November 15, 2021. Total cash demands required for Series B, Series C, Series D, Series E, Series F, Series G, Series H and Series HI are expected to be approximately $37$28 million per quarter.
During the first threenine months of 2021, the Bank paid preferred and common dividends of $11$34 million and $0.3 billion,$875 million, respectively. To meet any additional liquidity needs, the parent company may issue debt or equity securities from time to time.
Off-Balance Sheet Arrangements
In the normal course of business, we enter into various off-balance sheet arrangements. These arrangements include commitments to extend credit, interest rate swaps, floors and caps, financial guarantees contained in standby letters-of-credit issued by the Bank, and commitments by the Bank to sell mortgage loans.
Operational Risk
Operational risk is the risk of loss due to human error, third-party performance failures, inadequate or failed internal systems and controls, including the use of financial or other quantitative methodologies that may not adequately predict future results; violations of, or noncompliance with, laws, rules, regulations, prescribed practices, or ethical standards; and external influences such as market conditions, fraudulent activities, disasters, failed business contingency plans and security risks. We continuously strive to strengthen our system of internal controls to ensure compliance with significant contracts, agreements, laws, rules, and regulations, and to improve the oversight of our operational risk.
We actively monitor cyberattacks such as attempts related to online deception and loss of sensitive customer data. We evaluate internal systems, processes and controls to mitigate loss from cyber-attacks and, to date, have not experienced any material losses. Cybersecurity threats have increased, primarily through COVID-19 themed phishing campaigns. We are actively monitoring our email gateways for malicious phishing email campaigns. We have also increased our cybersecurity and fraud monitoring activities through the implementation of specific monitoring of remote connections by geography and volume of connections to detect anomalous remote logins, since a significant portion of our workforce is now working remotely.
Our objective for managing cyber security risk is to avoid or minimize the impacts of external threat events or other efforts to penetrate our systems. We work to achieve this objective by hardening networks and systems against attack, and by diligently managing visibility and monitoring controls within our data and communications environment to recognize events and respond before the attacker has the opportunity to plan and execute on its own goals. To this end we employ a set of defense in-depth strategies, which include efforts to make us less attractive as a target and less vulnerable to threats, while investing in threat analytic capabilities for rapid detection and response. Potential concerns related to cyber security may be escalated to our board-level Technology Committee, as appropriate. As a complement to the overall cyber security risk management, we use a number of internal training methods, both formally through mandatory courses and informally through written communications and other updates. Internal policies and procedures have been implemented to encourage the reporting of potential phishing attacks or other security risks. We also use third-party services to test the effectiveness of our cyber security risk management framework, and any such third parties are required to comply with our policies regarding information security and confidentiality.
To mitigate operational risks, we have an Operational Risk Committee, a Legal, Regulatory, and Compliance Committee, a Funds Movement Committee, and a Third Party Risk Management Committee. The responsibilities of these committees, among other duties, include establishing and maintaining management information systems to monitor material risks and to identify potential concerns, risks, or trends that may have a significant impact and ensuring that recommendations are developed to address the identified issues. In addition, we have a Model Risk Oversight Committee that is responsible for policies and procedures describing how model risk is evaluated and managed and the application of the governance process to implement these practices throughout the enterprise. These committees report any significant findings and remediation recommendations to the Risk Management Committee. Potential concerns may be escalated to our ROC and the Audit Committee, as appropriate. Significant findings or issues are escalated by the Third Party Risk Management Committee to the Technology Committee of the
Board, as appropriate. A
The TCF integration is inherently large and complex. Our objective for managing execution risk is to minimize impact to daily operations. We have an established Integration Management Office led by senior management. Responsibilities include central management, reporting, and escalation of key integration deliverables. In addition, a separate Board Committee, on Conversions andthe Integration Oversight Committee, is in place to assist in the oversight and to monitor the integration activities, risks and progress of the TCF merger.acquisition.
The goal of this framework is to implement effective operational risk monitoring techniques and strategies;monitoring; minimize operational, fraud, and legal losses; minimize the impact of inadequately designed models and enhance our overall performance.
Compliance Risk
Financial institutions are subject to many laws, rules, and regulations at both the federal and state levels. These broad-based laws, rules, and regulations include, but are not limited to, expectations relating to anti-money laundering, lending limits, client privacy, fair lending, prohibitions against unfair, deceptive or abusive acts or practices, protections for military members as they enter active duty, and community reinvestment. The volume and complexity of recent regulatory changes have increased our overall compliance risk. As such, we utilize various resources to help ensure expectations are met, including a team of compliance experts dedicated to ensuring our conformance with all applicable laws, rules, and regulations. Our colleagues receive training for several broad-based laws and regulations including, but not limited to, anti-money laundering and customer privacy. Additionally, colleagues engaged in lending activities receive training for laws and regulations related to flood disaster protection, equal credit opportunity, fair lending, and/or other courses related to the extension of credit. We set a high standard of expectation for adherence to compliance management and seek to continuously enhance our performance.
Capital
Both regulatory capital and shareholders’ equity are managed at the Bank and on a consolidated basis. We have an active program for managing capital and maintain a comprehensive process for assessing the Company’s overall capital adequacy. We believe our current levels of both regulatory capital and shareholders’ equity are adequate.
34 Huntington Bancshares Incorporated
The following table presents certain regulatory capital data at both the consolidated and Bank levels for each of the periods presented:
| | Table 18 - Regulatory Capital Data (1) | | | | |
| Table 21 - Regulatory Capital Data (1) | | Table 21 - Regulatory Capital Data (1) | | | | |
| | | | | Basel III | | | | Basel III | |
| (dollar amounts in millions) | (dollar amounts in millions) | | | March 31, 2021 | | December 31, 2020 | | | March 31, 2020 | (dollar amounts in millions) | | | September 30, 2021 | | | December 31,
2020 | |
| Total risk-weighted assets | Total risk-weighted assets | Consolidated | | $ | 89,494 | | | $ | 88,878 | | | | $ | 90,193 | | Total risk-weighted assets | Consolidated | | $ | 128,023 | | | | $ | 88,878 | | |
| | Bank | | 89,140 | | | 88,601 | | | | 90,016 | | | Bank | | 127,537 | | | | 88,601 | | |
| CET I risk-based capital | Consolidated | | 9,240 | | | 8,887 | | | | 8,538 | | |
| CET 1 risk-based capital | | CET 1 risk-based capital | Consolidated | | 12,250 | | | | 8,887 | | |
| | Bank | | 9,667 | | | 9,438 | | | | 9,887 | | | Bank | | 13,284 | | | | 9,438 | | |
| Tier 1 risk-based capital | Tier 1 risk-based capital | Consolidated | | 11,920 | | | 11,083 | | | | 9,746 | | Tier 1 risk-based capital | Consolidated | | 14,531 | | | | 11,083 | | |
| | Bank | | 10,831 | | | 10,601 | | | | 10,760 | | | Bank | | 14,466 | | | | 10,601 | | |
| Tier 2 risk-based capital | Tier 2 risk-based capital | Consolidated | | 1,729 | | | 1,774 | | | | 1,746 | | Tier 2 risk-based capital | Consolidated | | 2,842 | | | | 1,774 | | |
| | Bank | | 1,436 | | | 1,431 | | | | 1,481 | | | Bank | | 1,996 | | | | 1,431 | | |
| Total risk-based capital | Total risk-based capital | Consolidated | | 13,649 | | | 12,856 | | | | 11,492 | | Total risk-based capital | Consolidated | | 17,373 | | | | 12,856 | | |
| | Bank | | 12,267 | | | 12,032 | | | | 12,241 | | | Bank | | 16,462 | | | | 12,032 | | |
| CET I risk-based capital ratio | Consolidated | | 10.32 | % | | 10.00 | % | | | 9.47 | % | |
| CET 1 risk-based capital ratio | | CET 1 risk-based capital ratio | Consolidated | | 9.57 | % | | | 10.00 | % | |
| | Bank | | 10.85 | | | 10.65 | | | | 10.98 | | | Bank | | 10.42 | | | | 10.65 | | |
| Tier 1 risk-based capital ratio | Tier 1 risk-based capital ratio | Consolidated | | 13.32 | | | 12.47 | | | | 10.81 | | Tier 1 risk-based capital ratio | Consolidated | | 11.35 | | | | 12.47 | | |
| | Bank | | 12.15 | | | 11.97 | | | | 11.95 | | | Bank | | 11.34 | | | | 11.97 | | |
| Total risk-based capital ratio | Total risk-based capital ratio | Consolidated | | 15.25 | | | 14.46 | | | | 12.74 | | Total risk-based capital ratio | Consolidated | | 13.57 | | | | 14.46 | | |
| | Bank | | 13.76 | | | 13.58 | | | | 13.60 | | | Bank | | 12.91 | | | | 13.58 | | |
| Tier 1 leverage ratio | Tier 1 leverage ratio | Consolidated | | 9.85 | | | 9.32 | | | | 9.01 | | Tier 1 leverage ratio | Consolidated | | 8.62 | | | | 9.32 | | |
| | Bank | | 8.98 | | | 8.94 | | | | 9.98 | | | Bank | | 8.60 | | | | 8.94 | | |
(1) 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. The CECL transition amount includes the impact of Huntington’s adoption of the new CECL accounting standards on January 1, 2020 and 25% for the cumulative change in the reported ACL since adopting CECL, excluding the allowance established at acquisition for purchased credit deteriorated loans.
At March 31,September 30, 2021, we maintained Basel III capital ratios in excess of the well-capitalized standards established by the FRB. The increasedecrease in regulatory capital ratios was driven by the repurchase of 33.4 million common shares over the last three quarters, cash dividends, partially offset by earnings, adjusted for the CECL transition, offset by the repurchase of $5 million of common stock over the last four quarters (all during 2020 fourth quarter) and cash
30 Huntington Bancshares Incorporated
dividends.transition. The balance sheet growth impact on regulatory capital ratiosas a result of the TCF acquisition was largely offset by a change in asset mix during 2020the common stock issued related to PPP loansthe acquisition, net of goodwill and other intangibles, as well as elevated deposits at the Federal Reserve Bank (both of which are 0% risk weighted). The year-over-year change in regulatory Tier 1 risk-based capital and total risk-based capital ratios also reflectfor the first nine-month period of 2021 reflects the issuance of $500 million of Series F preferred stock, $500 million of Series G preferred stock and $500 million of Series H preferred stock in the 2020 second quarter, 2020 third quarter and 2021 first quarter, respectively.the issuance of $175 million of Series I preferred stock in the 2021 second quarter resulting from the conversion of TCF preferred stock, partially offset by the redemption of $600 million of Series D preferred stock in the 2021 third quarter, which represented all of the Series D preferred stock issued and outstanding. Additionally, the total risk-based capital ratio reflects the issuance of $558 million of subordinated notes in the 2021 third quarter.
Shareholders’ Equity
We generate shareholders’ equity primarily through the retention of earnings, net of dividends and share repurchases. Other potential sources of shareholders’ equity include issuances of common and preferred stock. Our objective is to maintain capital at an amount commensurate with our risk profileappetite and risk tolerance objectives, to meet both regulatory and market expectations, and to provide the flexibility needed for future growth and business opportunities.
Shareholders’ equity totaled $13.6$19.5 billion at March 31,September 30, 2021, an increase of $0.6$6.5 billion or 5%50% when compared with December 31, 2020.
On February 2, 2021, Huntington issued $500 million of preferred stock. Huntington issued 20,000,000 depositary shares, each representing a 1/40th ownership interest in a share of 4.50% Series H Non-Cumulative Perpetual Preferred Stock (Preferred H Stock), par value $0.01 per share, with a liquidation preference of $1,000 per share (equivalent to $25 per depositary share).
On June 25, 2020, we were notified by9, 2021, each share of TCF Financial Corporation 5.70% Series C Non-Cumulative Perpetual Preferred Stock, $0.01 par value per share, outstanding immediately prior to acquisition of TCF Financial Corporation was converted into the FRB that that certain large BHCs, including Huntington, were requiredright to update and resubmit their capital plans because changes in financial markets and the macroeconomic outlook that could havereceive a material impact on the BHC’s risk profile and financial condition required the use of updated scenarios. On December 18, 2020, we were notified by the FRB that under bothshare of the severely adverse and the alternative severely adverse economic stress scenarios in the supervisory stress tests, our modeled capital ratios would continue to exceed the minimum requirements under the FRB's capital adequacy rules. In addition, the FRB also announced that certain large BHCs, includingnewly created Huntington will be permitted to make both dividend and share repurchases during the first quarter of 2021, subject to limits based on the amount of dividends paid in the second quarter of 2020 and the Bank's average net income for the four preceding quarters and that the FRB was extending through March 31, 2021, the time period for the FRB to notify certain large BHCs, including Huntington, whether the FRB will recalculate a large BHC’s stress capital buffer.5.70% Series I Non-Cumulative Perpetual Preferred Stock, par value $0.01 per share.
On March 25,July 15, 2021, all 24,000,000 outstanding depositary shares, each representing a 1/40th interest in a share of Huntington’s 6.250% Series D Non-Cumulative Perpetual Preferred Stock, par value $0.01 per share, were redeemed.
Subsequent to quarter end, all 4,000,000 outstanding depositary shares, each representing a 1/40th interest in a share of Huntington’s 5.875% Series C Non-Cumulative Perpetual Preferred Stock, par value $0.01 per share, were redeemed.
On June 24, 2021, we were notified by the FRB that certain large BHCs, includingHuntington’s stress capital buffer (SCB) requirement would not be recalculated and that beginning on July 1, 2021, Huntington would continue to be permittedwas authorized to make both dividend and share repurchases duringcapital distributions that are consistent with the second quarter of 2021, subject to limits based on the amount of dividends paidrequirements in the second quarterFRB’s capital rule, inclusive of 2020 and the Bank's average net income for the four preceding quarters. Our second quarter dividend that was declared by the Boardfinal SCB requirement of Directors2.5% provided to Huntington on April 22, 2021 complies with these limits.August 7, 2020. In addition, the FRB announcednotified us that it was extending, through June 30, 2021, the time periodour preliminary SCB effective for the FRB to notify certain large BHCs including Huntington, whetherperiod October 1, 2021, until September 30, 2022 would remain at 2.5%, which is the FRB will recalculate a large BHCsminimum under the stress capital buffer.
While the FRB reserves the authority to revoke or amend the amount of the distributions, or to further extend the restrictions on second quarter capital distributions to future quarters, the FRB announced, on March 25, 2021, that for a bank, such as Huntington, that is not subject to the supervisory stress test in 2021 and on a two-year supervisory stress testing cycle, the restrictions on capital distributions will end after June 30, 2021 and the Bank’s SCB requirements based on the June 2020 stress test will remain in place.buffer framework.
Dividends
We consider disciplined capital management as a key objective, with dividends representing one component. Our strong capital ratios position us to take advantage of additional capital management opportunities.
Share Repurchases
From time to time, the Board of Directors authorizes the Company to repurchase shares of our common stock. Although we announce when the Board of Directors authorizes share repurchases, we typically do not give any public notice before we repurchase our shares. Future stock repurchases may be private or open-market
repurchases, including block transactions, accelerated or delayed block transactions, forward transactions, and similar transactions. Various factors determine the amount and timing of our share repurchases, including our capital requirements, the number of shares we expect to issue for employee benefit plans and acquisitions, market conditions (including the trading price of our stock), and regulatory and legal considerations.
BUSINESS SEGMENT DISCUSSION
Overview
Our business segments are based on our internally-aligned segment leadership structure, which is how we monitor results and assess performance. We have four major business segments: Consumer and Business Banking, Commercial Banking, Vehicle Finance, and Regional Banking and The Huntington Private Client Group (RBHPCG). The Treasury / Other function includes technology and operations, other unallocated assets, liabilities, revenue, and expense.
Business segment results are determined based upon our management practices, which assigns balance sheet and income statement items to each of the business segments. The process is designed around our organizational and management structure and, accordingly, the results derived are not necessarily comparable with similar information published by other financial institutions.
Revenue Sharing
Revenue is recorded in the business segment responsible for the related product or service. Fee sharing is recorded to allocate portions of such revenue to other business segments involved in selling to or providing service to customers. Results of operations for the business segments reflect these fee sharing allocations.
36 Huntington Bancshares Incorporated
Expense Allocation
The management process that develops the business segment reporting utilizes various estimates and allocation methodologies to measure the performance of the business segments. Expenses are allocated to business segments using a two-phase approach. The first phase consists of measuring and assigning unit costs (activity-based costs) to activities related to product origination and servicing. These activity-based costs are then extended, based on volumes, with the resulting amount allocated to business segments that own the related products. The second phase consists of the allocation of overhead costs to all four business segments from Treasury / Other. We utilize a full-allocation methodology, where all Treasury / Other expenses, except reported Significant Items,acquisition-related net expenses, if any, and a small amount of other residual unallocated expenses, are allocated to the four business segments.
Funds Transfer Pricing (FTP)
We use an active and centralized FTP methodology to attribute appropriate net interest income to the business segments. The intent of the FTP methodology is to transfer interest rate risk from the business segments by providing matched duration funding of assets and liabilities. The result is to centralize the financial impact, management, and reporting of interest rate risk in the Treasury / Other function where it can be centrally monitored and managed. The Treasury / Other function charges (credits) an internal cost of funds for assets held in (or pays for funding provided by) each business segment. The FTP rate is based on prevailing market interest rates for comparable duration assets (or liabilities).
32 Huntington Bancshares Incorporated
Net Income (Loss) by Business Segment
Net income (loss) by business segment for the past three-monthnine-month periods ending March 31,September 30, 2021 and March 31,September 30, 2020 is presented in the following table:
| | Table 19 - Net Income by Business Segment | |
| Table 22 - Net Income (Loss) by Business Segment | | Table 22 - Net Income (Loss) by Business Segment |
| | | Three Months Ended March 31, | | Nine Months Ended September 30, |
| (dollar amounts in millions) | (dollar amounts in millions) | 2021 | | 2020 | (dollar amounts in millions) | 2021 | | 2020 |
| Consumer and Business Banking | Consumer and Business Banking | $ | 111 | | | $ | 60 | | Consumer and Business Banking | $ | 231 | | | $ | 249 | |
| Commercial Banking | Commercial Banking | 118 | | | (86) | | Commercial Banking | 446 | | | (45) | |
| Vehicle Finance | Vehicle Finance | 76 | | | 11 | | Vehicle Finance | 243 | | | 81 | |
| RBHPCG | RBHPCG | 25 | | | 24 | | RBHPCG | 47 | | | 60 | |
| Treasury / Other | Treasury / Other | 202 | | | 39 | | Treasury / Other | (73) | | | 156 | |
| Net income | Net income | $ | 532 | | | $ | 48 | | Net income | $ | 894 | | | $ | 501 | |
Treasury / Other
The Treasury / Other function includes revenue and expense related to assets, liabilities, derivatives (including the mark-to-market of interest rate caps), and equity not directly assigned or allocated to one of the four business segments. Assets include investment securities and bank owned life insurance.
Net interest income includes the impact of administering our investment securities portfolios, the net impact of derivatives used to hedge interest rate sensitivity as well as the financial impact associated with our FTP methodology, as described above. Noninterest income includes miscellaneous fee income not allocated to other business segments, such as bank owned life insurance income and securities and trading asset gains or losses. Noninterest expense includes certain TCF acquisition-related expenses in the current period, certain corporate administrative, and other miscellaneous expenses not allocated to other business segments. The provision for income taxes for the business segments is calculated at a statutory 21% tax rate, although our overall effective tax rate is lower.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Consumer and Business Banking | | | | | |
| | | | | | | | | | | | |
| Table 20 - Key Performance Indicators for Consumer and Business Banking | | | | | |
| | Three Months Ended March 31, | | Change | | | | | |
| (dollar amounts in millions) | 2021 | | 2020 | | Amount | | Percent | | | | | |
| Net interest income | $ | 337 | | | $ | 364 | | | $ | (27) | | | (7) | % | | | | | |
| Provision for credit losses | (36) | | | 82 | | | (118) | | | (144) | | | | | | |
| Noninterest income | 236 | | | 212 | | | 24 | | | 11 | | | | | | |
| Noninterest expense | 469 | | | 418 | | | 51 | | | 12 | | | | | | |
| Provision for income taxes | 29 | | | 16 | | | 13 | | | 81 | | | | | | |
| Net income | $ | 111 | | | $ | 60 | | | $ | 51 | | | 85 | % | | | | | |
| Number of employees (average full-time equivalent) | 7,808 | | | 7,769 | | | 39 | | | 1 | % | | | | | |
| Total average assets | $ | 30,718 | | | $ | 24,677 | | | $ | 6,041 | | | 24 | | | | | | |
| Total average loans/leases | 27,069 | | | 21,593 | | | 5,476 | | | 25 | | | | | | |
| Total average deposits | 62,333 | | | 51,296 | | | 11,037 | | | 22 | | | | | | |
| Net interest margin | 2.16 | % | | 2.81 | % | | (0.65) | % | | (23) | | | | | | |
| NCOs | $ | 14 | | | $ | 32 | | | $ | (18) | | | (56) | | | | | | |
| NCOs as a % of average loans and leases | 0.21 | % | | 0.60 | % | | (0.39) | % | | (65) | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Consumer and Business Banking | | | | | |
| | | | | | | | | | | | |
| Table 23 - Key Performance Indicators for Consumer and Business Banking | | | | | |
| | Nine Months Ended September 30, | | Change | | | | | |
| (dollar amounts in millions) | 2021 | | 2020 | | Amount | | Percent | | | | | |
| Net interest income | $ | 1,187 | | | $ | 1,099 | | | $ | 88 | | | 8 | % | | | | | |
| Provision for credit losses | 57 | | | 200 | | | (143) | | | (72) | | | | | | |
| Noninterest income | 780 | | | 704 | | | 76 | | | 11 | | | | | | |
| Noninterest expense | 1,617 | | | 1,288 | | | 329 | | | 26 | | | | | | |
| Provision for income taxes | 62 | | | 66 | | | (4) | | | (6) | | | | | | |
| Net income | $ | 231 | | | $ | 249 | | | $ | (18) | | | (7) | % | | | | | |
| Number of employees (average full-time equivalent) | 8,905 | | | 7,914 | | | 991 | | | 13 | % | | | | | |
| Total average assets | $ | 35,470 | | | $ | 28,161 | | | $ | 7,309 | | | 26 | | | | | | |
| Total average loans/leases | 30,640 | | | 24,772 | | | 5,868 | | | 24 | | | | | | |
| Total average deposits | 76,806 | | | 55,884 | | | 20,922 | | | 37 | | | | | | |
| Net interest margin | 2.03 | % | | 2.59 | % | | (0.56) | % | | (22) | | | | | | |
| NCOs | $ | 68 | | | $ | 69 | | | $ | (1) | | | (1) | | | | | | |
| NCOs as a % of average loans and leases | 0.30 | % | | 0.37 | % | | (0.07) | % | | (19) | | | | | | |
2021 First ThreeNine Months versus 2020 First ThreeNine Months
Consumer and Business Banking, including Home Lending, reported net income of $111$231 million in the first three-monthnine-month period of 2021, an increasea decrease of $51$18 million, or 85%7%, compared to the year-ago period. Segment net interest income decreased $27increased $88 million, or 7%8%, primarily due to the impact of the TCF acquisition and PPP revenue, partially offset by decreased spread on deposits and decreased loan margin, partially offset by PPP revenues.margin. The provision for credit losses decreased $118$143 million, or 144%72%, primarily due to changes in the forecasted economic outlook compared to the year-ago period.period, partially offset by the TCF acquisition initial provision for credit losses. Noninterest income increased $24$76 million, or 11%, primarily due to increased mortgage bankinghigher interchange income and increased debitservice charge income resulting from the TCF acquisition in addition to reduced customer activity and ATM interchangefee-waivers as a result of the pandemic in the beginning of the prior year period and a $6 million gain from higher
transaction volumes,branch divestitures, partially offset by lower service charge income reflecting reduced customer overdrafts.decreased mortgage banking income. Noninterest expense increased $51$329 million, or 12%26%, mostlyprimarily due to the impact of the TCF acquisition, in addition to increased allocated expense and personnel and incentives as a result ofcosts due to higher levels of production and origination volume.
Home Lending, an operating unit of Consumer and Business Banking, reflects the result of the origination, sale, and servicing of mortgage loans less referral fees and net interest income for mortgage banking products distributed by the retail branch network and other business segments. Home Lending reported net income of $24$19 million in the first three-monthnine-month period of 2021, compared with net income of $11$75 million in the year-ago period. Noninterest income increased $32decreased $63 million, driven primarily by an increase indecreased spreads on salable mortgage originations, andpartially offset by higher secondary marketing spreads.salable originations. Noninterest expense increased $21$41 million due to primarily due to higher personnel expense as a result of the TCF acquisition and higher origination volumes.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Commercial Banking | | | | | |
| | | | | | | | | | | | |
| Table 21 - Key Performance Indicators for Commercial Banking | | | | | |
| | Three Months Ended March 31, | | Change | | | | | |
| (dollar amounts in millions) | 2021 | | 2020 | | Amount | | Percent | | | | | |
| Net interest income | $ | 199 | | | $ | 232 | | | $ | (33) | | | (14) | % | | | | | |
| Provision for credit losses | 5 | | | 298 | | | (293) | | | (98) | | | | | | |
| Noninterest income | 88 | | | 86 | | | 2 | | | 2 | | | | | | |
| Noninterest expense | 133 | | | 129 | | | 4 | | | 3 | | | | | | |
| Provision for income taxes | 31 | | | (23) | | | 54 | | | 235 | | | | | | |
| Net income (loss) | $ | 118 | | | $ | (86) | | | $ | 204 | | | 237 | % | | | | | |
| Number of employees (average full-time equivalent) | 1,271 | | | 1,273 | | | (2) | | | — | % | | | | | |
| Total average assets | $ | 35,918 | | | $ | 34,810 | | | $ | 1,108 | | | 3 | | | | | | |
| Total average loans/leases | 26,694 | | | 27,238 | | | (544) | | | (2) | | | | | | |
| Total average deposits | 25,100 | | | 21,525 | | | 3,575 | | | 17 | | | | | | |
| Net interest margin | 2.78 | % | | 3.15 | % | | (0.37) | % | | (12) | | | | | | |
| NCOs | $ | 46 | | | $ | 75 | | | $ | (29) | | | (39) | | | | | | |
| NCOs as a % of average loans and leases | 0.68 | % | | 1.11 | % | | (0.43) | % | | (39) | | | | | | |
38 Huntington Bancshares Incorporated
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Commercial Banking | | | | | |
| | | | | | | | | | | | |
| Table 24 - Key Performance Indicators for Commercial Banking | | | | | |
| | Nine Months Ended September 30, | | Change | | | | | |
| (dollar amounts in millions) | 2021 | | 2020 | | Amount | | Percent | | | | | |
| Net interest income | $ | 873 | | | $ | 693 | | | $ | 180 | | | 26 | % | | | | | |
| Provision for credit losses | 107 | | | 611 | | | (504) | | | (82) | | | | | | |
| Noninterest income | 353 | | | 261 | | | 92 | | | 35 | | | | | | |
| Noninterest expense | 553 | | | 400 | | | 153 | | | 38 | | | | | | |
| Provision (benefit) for income taxes | 119 | | | (12) | | | 131 | | | 1,092 | | | | | | |
| Income attributable to non-controlling interest | 1 | | | — | | | 1 | | | 100 | | | | | | |
| Net income (loss) | $ | 446 | | | $ | (45) | | | $ | 491 | | | 1,091 | % | | | | | |
| Number of employees (average full-time equivalent) | 1,652 | | | 1,280 | | | 372 | | | 29 | % | | | | | |
| Total average assets | $ | 40,941 | | | $ | 35,454 | | | $ | 5,487 | | | 15 | | | | | | |
| Total average loans/leases | 34,995 | | | 27,405 | | | 7,590 | | | 28 | | | | | | |
| Total average deposits | 28,475 | | | 23,076 | | | 5,399 | | | 23 | | | | | | |
| Net interest margin | 3.11 | % | | 3.09 | % | | 0.02 | % | | 1 | | | | | | |
| NCOs | $ | 116 | | | $ | 232 | | | $ | (116) | | | (50) | | | | | | |
| NCOs as a % of average loans and leases | 0.44 | % | | 1.13 | % | | (0.69) | % | | (61) | | | | | | |
2021 First ThreeNine Months versus 2020 First ThreeNine Months
Commercial Banking reported net income of $118$446 million in the first three-monthnine-month period of 2021, compared to a net loss of $86$45 million in the year-ago period. Segment net interest income increased $180 million, or 26%, primarily due to an increase in average loans and leases reflecting the impact of the TCF acquisition, an increase in average PPP loans, and a 2 basis point increase in net interest margin driven by an increase in loan spread as the benefit from purchase accounting net accretion was partially offset by declines in yields. Partially offsetting these benefits was the impact of the continued decline in the benefit of deposits. The provision for credit losses decreased $293$504 million, or 98%82%, primarily due to changes in the forecasted economic outlook compared to the year-ago period, partially offset by the TCF acquisition initial provision for credit losses. Noninterest income increased $92 million, or 35%, reflecting the impact of the TCF acquisition, purchase accounting accretion from acquired unfunded loan commitments, and an increase in equipment finance revenue reflecting higher gains on terminations and sales. Noninterest expense increased $153 million, or 38%, primarily due to higher personnel expense and lease financing equipment depreciation as a result of the TCF acquisition.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Vehicle Finance | | | | | |
| | | | | | | | | | | | |
| Table 25 - Key Performance Indicators for Vehicle Finance | | | | | |
| | Nine Months Ended September 30, | | Change | | | | | |
| (dollar amounts in millions) | 2021 | | 2020 | | Amount | | Percent | | | | | |
| Net interest income | $ | 340 | | | $ | 316 | | | $ | 24 | | | 8 | % | | | | | |
| Provision for credit losses | (77) | | | 118 | | | (195) | | | (165) | | | | | | |
| Noninterest income | 9 | | | 7 | | | 2 | | | 29 | | | | | | |
| Noninterest expense | 119 | | | 103 | | | 16 | | | 16 | | | | | | |
| Provision for income taxes | 64 | | | 21 | | | 43 | | | 205 | | | | | | |
| Net income | $ | 243 | | | $ | 81 | | | $ | 162 | | | 200 | % | | | | | |
| Number of employees (average full-time equivalent) | 259 | | | 268 | | | (9) | | | (3) | % | | | | | |
| Total average assets | $ | 19,593 | | | $ | 19,766 | | | $ | (173) | | | (1) | | | | | | |
| Total average loans/leases | 19,836 | | | 19,926 | | | (90) | | | — | | | | | | |
| Total average deposits | 1,046 | | | 618 | | | 428 | | | 69 | | | | | | |
| Net interest margin | 2.29 | % | | 2.11 | % | | 0.18 | % | | 9 | | | | | | |
| NCOs | $ | (3) | | | $ | 37 | | | $ | (40) | | | (108) | | | | | | |
| NCOs as a % of average loans and leases | (0.02) | % | | 0.24 | % | | (0.26) | % | | (108) | | | | | | |
2021 First Nine Months versus 2020 First Nine Months
Vehicle Finance reported net income of $243 million in the nine-month period of 2021, an increase of $162 million, compared to the year-ago period. Segment net interest income increased $24 million, or 8%, primarily due to an 18 basis point increase in the net interest margin. The provision for credit losses decreased $195 million to a benefit of $77 million, primarily due to strong credit performance and improvement in the economic outlook as compared to the year ago period. Noninterest income increased $2 million, or 29%, primarily due to increases in fee income from commercial relationships. Noninterest expense increased $16 million, or 16%, largely attributable to higher production related costs.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Regional Banking and The Huntington Private Client Group | | | | | |
| | | | | | | | | | | | |
| Table 26 - Key Performance Indicators for Regional Banking and The Huntington Private Client Group | | | | | |
| | Nine Months Ended September 30, | | Change | | | | | |
| (dollar amounts in millions) | 2021 | | 2020 | | Amount | | Percent | | | | | |
| Net interest income | $ | 113 | | | $ | 122 | | | $ | (9) | | | (7) | % | | | | | |
| Provision for credit losses | 2 | | | 16 | | | (14) | | | (88) | | | | | | |
| Noninterest income | 165 | | | 151 | | | 14 | | | 9 | | | | | | |
| Noninterest expense | 217 | | | 181 | | | 36 | | | 20 | | | | | | |
| Provision for income taxes | 12 | | | 16 | | | (4) | | | (25) | | | | | | |
| Net income | $ | 47 | | | $ | 60 | | | $ | (13) | | | (22) | % | | | | | |
| Number of employees (average full-time equivalent) | 1,051 | | | 1,024 | | | 27 | | | 3 | % | | | | | |
| Total average assets | $ | 7,278 | | | $ | 6,793 | | | $ | 485 | | | 7 | | | | | | |
| Total average loans/leases | 6,982 | | | 6,515 | | | 467 | | | 7 | | | | | | |
| Total average deposits | 7,742 | | | 6,424 | | | 1,318 | | | 21 | | | | | | |
| Net interest margin | 1.90 | % | | 2.44 | % | | (0.54) | % | | (22) | | | | | | |
| NCOs | $ | — | | | $ | — | | | $ | — | | | — | | | | | | |
| NCOs as a % of average loans and leases | — | % | | — | % | | — | % | | — | | | | | | |
| Total assets under management (in billions)—eop | $ | 23.9 | | | $ | 18.1 | | | $ | 5.8 | | | 32 | | | | | | |
| Total trust assets (in billions)—eop | 133.6 | | | 121.7 | | | 11.9 | | | 10 | | | | | | |
eop - End of Period.
2021 First Nine Months versus 2020 First Nine Months
RBHPCG reported net income of $47 million for the first nine-month period of 2021, a decrease of $13 million, or 22%, compared to the year-ago period. Segment net interest income decreased $33$9 million, or 14%7%, due to a 3754 basis point decrease in net interest margin, driven by a sharp decline in the benefit of deposits. Noninterest income increased $2 million, or 2%, largely driven by an increaselower benefit in treasury management related revenue reflecting the impact of lower earnings credit rates on commercial deposits, partially offset by a decline in capital markets driven by decline in interest rate derivative income. Noninterest expensedeposit spreads. Average loans and leases increased $4 million,$0.5 billion, or 3%7%, primarily due to personnel expense reflecting an increase in incentives, partially offsetresidential mortgage loans and the impact of the TCF acquisition. Average deposits increased $1.3 billion, or 21%, primarily related to higher customer liquidity levels, and impact of the acquired TCF deposit portfolio. The provision for credit losses decreased $14 million, primarily due to changes in the economic outlook compared to the year-ago period. Noninterest income increased $14 million, or 9%, reflecting higher sales production and overall market performance, and the impact of the TCF acquisition. The comparable period in 2020 included the sale of Retirement Plan Services recordkeeping and administrative services. Total assets under management increased 32% due to positive net asset flows, equity markets, and the impact of the TCF acquisition. Noninterest expense increased $36 million primarily due to an increase in personnel expense impacted by a reduction in business development expense primarily reflecting reduced travel stemming from the COVID-19 pandemic. TCF acquisition.
3440 Huntington Bancshares Incorporated
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Vehicle Finance | | | | | |
| | | | | | | | | | | | |
| Table 22 - Key Performance Indicators for Vehicle Finance | | | | | |
| | Three Months Ended March 31, | | Change | | | | | |
| (dollar amounts in millions) | 2021 | | 2020 | | Amount | | Percent | | | | | |
| Net interest income | $ | 107 | | | $ | 106 | | | $ | 1 | | | 1 | % | | | | | |
| Provision for credit losses | (22) | | | 60 | | | (82) | | | (137) | | | | | | |
| Noninterest income | 3 | | | 3 | | | — | | | — | | | | | | |
| Noninterest expense | 35 | | | 35 | | | — | | | — | | | | | | |
| Provision for income taxes | 21 | | | 3 | | | 18 | | | 600 | | | | | | |
| Net income | $ | 76 | | | $ | 11 | | | $ | 65 | | | 591 | % | | | | | |
| Number of employees (average full-time equivalent) | 254 | | | 263 | | | (9) | | | (3) | % | | | | | |
| Total average assets | $ | 19,468 | | | $ | 20,215 | | | $ | (747) | | | (4) | | | | | | |
| Total average loans/leases | 19,735 | | | 20,307 | | | (572) | | | (3) | | | | | | |
| Total average deposits | 768 | | | 366 | | | 402 | | | 110 | | | | | | |
| Net interest margin | 2.20 | % | | 2.08 | % | | 0.12 | % | | 6 | | | | | | |
| NCOs | $ | 5 | | | $ | 10 | | | $ | (5) | | | (50) | | | | | | |
| NCOs as a % of average loans and leases | 0.10 | % | | 0.19 | % | | (0.09) | % | | (47) | | | | | | |
2021 First Three Months versus 2020 First Three Months
Vehicle Finance reported net income of $76 million in the first three-month period of 2021, an increase of $65 million, or 591%, compared to the year-ago period. The provision for credit losses decreased $82 million due to changes in the forecasted economic outlook as compared to the year ago period. Segment net interest income increased $1 million, or 1%, due to a 12 basis point increase in the net interest margin partially offset by a 3% decrease in average loan balances. The decrease in average loan balances of $0.6 billion is driven by average commercial balances as dealership inventory levels and the resulting floor plan line utilization remain low. Additionally, RV / Marine balances increased $0.6 billion year over year, reflecting strong production levels over the past year, partially offset by a decline of $0.3 billion of auto balances. Noninterest income and expense were both comparable to year ago levels.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Regional Banking and The Huntington Private Client Group | | | | | |
| | | | | | | | | | | | |
| Table 23 - Key Performance Indicators for Regional Banking and The Huntington Private Client Group | | | | | |
| | Three Months Ended March 31, | | Change | | | | | |
| (dollar amounts in millions) | 2021 | | 2020 | | Amount | | Percent | | | | | |
| Net interest income | $ | 34 | | | $ | 43 | | | $ | (9) | | | (21) | % | | | | | |
| Provision for credit losses | (7) | | | 1 | | | (8) | | | (800) | | | | | | |
| Noninterest income | 53 | | | 50 | | | 3 | | | 6 | | | | | | |
| Noninterest expense | 62 | | | 62 | | | — | | | — | | | | | | |
| Provision for income taxes | 7 | | | 6 | | | 1 | | | 17 | | | | | | |
| Net income | $ | 25 | | | $ | 24 | | | $ | 1 | | | 4 | % | | | | | |
| Number of employees (average full-time equivalent) | 998 | | | 1,025 | | | (27) | | | (3) | % | | | | | |
| Total average assets | $ | 6,815 | | | $ | 6,707 | | | $ | 108 | | | 2 | | | | | | |
| Total average loans/leases | 6,568 | | | 6,415 | | | 153 | | | 2 | | | | | | |
| Total average deposits | 7,059 | | | 6,100 | | | 959 | | | 16 | | | | | | |
| Net interest margin | 1.92 | % | | 2.69 | % | | (0.77) | % | | (29) | | | | | | |
| NCOs | $ | — | | | $ | — | | | $ | — | | | — | | | | | | |
| NCOs as a % of average loans and leases | — | % | | — | % | | — | % | | — | | | | | | |
| Total assets under management (in billions)—eop | $ | 20.7 | | | $ | 15.8 | | | $ | 4.9 | | | 31 | | | | | | |
| Total trust assets (in billions)—eop | 136.0 | | | 123.7 | | | 12.3 | | | 10 | | | | | | |
eop - End of Period.
2021 First Three Months versus 2020 First Three Months
RBHPCG reported net income of $25 million for the first three-month period of 2021, an increase of $1 million, or 4%, compared to the year-ago period. Segment net interest income decreased $9 million, or 21%, due to a 77 basis point decrease in net interest margin, reflecting both lower deposit and loan spreads. Average loans increased $0.2 billion, or 2%, primarily due to residential real estate mortgage loans, and average deposits increased $1.0 billion, or 16%, primarily related to PPP, stimulus, and higher customer liquidity levels. Noninterest income increased $3 million, or 6%, due to a 31% increase in assets under management reflecting record net asset flows and positive equity markets. In addition, the title insurance business reported record fee income. Noninterest expenses were flat to prior year reflecting lower discretionary expense and continued cost controls.
ADDITIONAL DISCLOSURES
Forward-Looking Statements
This report, including MD&A, 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; the occurrence of any event, change or other circumstances that could give rise to the right of one or both of the parties to terminate the merger agreement between Huntington and TCF; the outcome of any legal proceedings that may be instituted against Huntington or TCF; delays in completing the transaction; the failure to obtain necessary regulatory approvals (and the risk that such approvals may result in the imposition of conditions that could adversely affect the combined company or the expected benefits of the transaction); the failure to satisfy any of the conditions to the transaction on a timely basis or at all; the possibility that the anticipated benefits of the transaction with TCF are not realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of the two companies or as a result of the strength of the economy and competitive factors in the areas where Huntington and TCF dodoes business; the possibility that the transactionbranch divestiture may be more expensive to complete than anticipated, including as a result of unexpected factors or events; diversion of management’s attention from ongoing business operations and opportunities; potential adverse reactions or changes to business or employee relationships, including those resulting from the announcement or completion of the transaction; the ability to complete the transaction and integration of Huntington and TCF successfully; the dilution caused by Huntington’s issuance of additional shares of its capital stock in connection with the transaction;branch divestiture; and other factors that may affect the future results of Huntington and TCF.Huntington.
All forward-looking statements speak only as of the date they are made and are based on information available at that time. Neither Huntington nor TCF assumesdoes 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.
36 Huntington Bancshares Incorporated
Non-GAAP Financial Measures
This document contains GAAP financial measures and non-GAAP financial measures where management believes it to be helpful in understanding our 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 herein.
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, one-time tax assessments / refunds, litigation actions, etc. In other cases, they may result from Management decisions associated with significant corporate actions outside of the ordinary course of business; e.g., merger / restructuring charges, recapitalization actions, goodwill impairment, etc.
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, asset valuation writedowns, etc., 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, 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.
Fully-Taxable Equivalent Basis
Interest income, yields, and ratios on a FTE basis are considered non-GAAP financial measures. Management believes net interest income on a FTE basis provides an insightful picture of the interest margin for comparison purposes. The FTE basis also allows management to assess the comparability of revenue arising from both taxable and tax-exempt sources. The FTE basis assumes a federal statutory tax rate of 21 percent. We encourage readers to consider the Unaudited Condensed Consolidated Financial Statements and other financial information contained in this Form 10-Q in their entirety, and not to rely on any single financial measure.
Non-Regulatory Capital Ratios
In addition to capital ratios defined by banking regulators, the Company considers various other measures when evaluating capital utilization and adequacy, including:
•Tangible common equity to tangible assets,
•Tangible equity to tangible assets, and
•Tangible common equity to risk-weighted assets using Basel III definitions.
These non-regulatory capital ratios are viewed by management as useful additional methods of reflecting the level of capital available to withstand unexpected market conditions. Additionally, presentation of these ratios allows readers to compare our capitalization to other financial services companies. These ratios differ from capital ratios defined by banking regulators principally in that the numerator excludes goodwill and other intangible assets, the nature and extent of which varies among different financial services companies. These ratios are not defined in GAAP or federal banking regulations. As a result, these non-regulatory capital ratios disclosed by the Company are considered non-GAAP financial measures.
Because there are no standardized definitions for these non-regulatory capital ratios, the Company’s calculation methods may differ from those used by other financial services companies. Also, there may be limits in the usefulness of these measures to investors. As a result, we encourage readers to consider the Unaudited Condensed Consolidated Financial Statements and other financial information contained in this Form 10-Q in their entirety, and not to rely on any single financial measure.
Risk Factors
More information on risk can be found in Item 1A Risk Factors below and in the Risk Factors section included in Item 1A of our 2020 Annual Report on Form 10-K. Additional information regarding risk factors can also be found in the Risk Management and Capital discussion of this report.
Critical Accounting Policies and Use of Significant Estimates
Our Consolidated Financial Statements are prepared in accordance with GAAP. The preparation of financial statements in conformity with GAAP requires us to establish accounting policies and make estimates that affect amounts reported in our Consolidated Financial Statements. Note 1 of the Notes to Consolidated Financial Statements included in our December 31, 2020 Annual Report on Form 10-K, as supplemented by this report including this MD&A, describes the significant accounting policies we used in our Consolidated Financial Statements.
An accounting estimate requires assumptions and judgments about uncertain matters that could have a material effect on the Consolidated Financial Statements. Estimates are made under facts and circumstances at a point in time, and changes in those facts and circumstances could produce results substantially different from those estimates. Our most significant accounting policies and estimates and their related application are discussed in our December 31, 2020 Annual Report on Form 10-K.
Allowance for Credit Losses
Our ACL at March 31,September 30, 2021 represents our current estimate of the lifetime credit losses expected from our loan and lease portfolio and our unfunded loan commitments and letters of credit.lending commitments. Management estimates the allowance for credit lossesACL by projecting probability of default, loss given default and exposure at default conditional on economic parameters, for the remaining contractual term. Internal factors that impact the quarterly allowance estimate include the level of outstanding balances, the portfolio performance and assigned risk ratings.
One of the most significant judgments influencing the allowance for credit lossesACL estimate is the macro-economicmacroeconomic forecasts. Key external economic parameters that directly impact our loss modeling framework include forecasted footprint unemployment rates and Gross Domestic Product. Changes in the economic forecasts could significantly affect the estimated credit losses, which could potentially lead to materially different allowance levels from one reporting period to the next.
Given the dynamic relationship between macro-economicmacroeconomic variables within our modeling framework, it is difficult to estimate the impact of a change in any one individual variable on the allowance. As a result, management uses a probability-weighted approach that incorporates a baseline, an adverse and a more favorable economic scenario when formulating the quantitative estimate.
42 Huntington Bancshares Incorporated
However, to illustrate a hypothetical sensitivity analysis, management calculated a quantitative allowance using a 100% weighting applied to an adverse scenario. This scenario includes assumptions around new infections and COVID-19 deaths being significantly aboverising again. Additionally, consumer confidence falls with the baseline projections, leading to a much slower re-opening ofresulting drop in consumer spending sending the economy.economy back into recession in fourth quarter 2021. Under this scenario, as an example, the unemployment rate increases once more and remains elevated for a prolonged period, andthe rate is estimated to remain at 8.0%9.1% and 6.5%6.9% at the end of 2022 and 2023 respectively. These numbers represent approximately 3.5%5.6% and 3.4% higher unemployment estimates than baseline scenario projections of 4.5%3.5% and 4.2%3.5%, respectively for the same time periods.
To demonstrate the sensitivity to key economic parameters used in the calculation of our ACL at September 30, 2021, management calculated the difference between a 100% baseline weightingour quantitative ACL and a 100% adverse scenario weighting for modeled results. Thisscenario. Excluding consideration of qualitative adjustments, this sensitivity analysis would result in an incremental quantitative allowance impacta hypothetical increase in our ACL of approximately $600 million.
38 Huntington Bancshares Incorporated
$700 million at September 30, 2021. The resulting difference is not intended to represent an expected increase in allowance levels for a number of reasons including the following:
•Management uses a weighted approach applied to multiple economic scenarios for its allowance estimation process;
•The highly uncertain economic environment;
•The difficulty in predicting the inter-relationships between the economic parameters used in the various economic scenarios; and
•The sensitivity estimate does not account for any general reserve components and associated risk profile adjustments incorporated by management as part of its overall allowance framework.
We regularly review our ACL for appropriateness by performing on-going evaluations of the loan and lease portfolio. In doing so, we consider factors such as the differing economic risks associated with each loan category, the financial condition of specific borrowers, the level of delinquent loans, the value of any collateral and, where applicable, the existence of any guarantees or other documented support. We also evaluate the impact of changes in key economic parameters and overall economic conditions on the ability of borrowers to meet their financial obligations when quantifying our exposure to credit losses and assessing the appropriateness of our ACL at each reporting date. There is no certainty that our ACL will be appropriate over time to cover losses in our portfolio as economic and market conditions may ultimately differ from our reasonable and supportable forecast. Additionally, events adversely affecting specific customers, industries, or our markets such as the current COVID-19 pandemic, could severely impact our current expectations. If the credit quality of our customer base materially deteriorates or the risk profile of a market, industry, or group of customers changes materially, our net income and capital could be materially adversely affected which, in turn could have a material adverse effect on our financial condition and results of operations. The extent to which the current COVID-19 pandemic will continue to negatively impact our businesses, financial condition, liquidity and results will depend on future developments, which are highly uncertain and cannot be forecasted with precision at this time. For more information, see Note 4 “Loans and Leases” and Note 5 “Allowance for Credit Losses” of the Notes to Unaudited Condensed Consolidated Financial Statements. Acquisition Method of Accounting
The acquisition method of accounting requires that acquired assets and liabilities in a business combination are recorded at their fair values as of the date of acquisition. This method often involves estimates based on third party valuations or internal valuations based on discounted cash flow analyses or other valuation techniques, all of which are inherently subjective. Acquisition-related restructuring costs are expensed as incurred. The acquisition method of accounting does allow for a measurement period to make adjustments to acquisition accounting for up to one year after the acquisition date, for new information that existed at the acquisition date but may not have been known or available at that time. For further information, refer to Note 2 “Acquisition of TCF Financial Corporation” of the Notes to Unaudited Condensed Consolidated Financial Statements.
Fair Value Measurement
Certain assets and liabilities are measured at fair value on a recurring basis, including securities, and derivative instruments. Assets and liabilities carried at fair value inherently include subjectivity and may require the use of significant assumptions, adjustments and judgment including, among others, discount rates, rates of return on assets, cash flows, default rates, loss rates, terminal values and liquidation values. A significant change in assumptions may result in a significant change in fair value, which in turn, may result in a higher degree of financial statement volatility and could result in significant impact on our results of operations, financial condition or disclosures of fair value information.
In addition to the above mentioned on-going fair value measurements, fair value is also used for recording business combinations and measuring other non-recurring financial assets and liabilities. At June 9, 2021, approximately $46 billion of our assets and $43 billion of our liabilities were recorded at fair value as a result of applying the acquisition method of accounting.
The fair value hierarchy requires use of observable inputs first and subsequently unobservable inputs when observable inputs are not available. Our fair value measurements involve various valuation techniques and models, which involve inputs that are observable (Level 1 or Level 2 in fair value hierarchy), when available. The level of judgment required to determine fair value is dependent on the methods or techniques used in the process. Assets and liabilities that are measured at fair value using quoted prices in active markets (Level 1) do not require significant judgment while the valuation of assets and liabilities when quoted market prices are not available (Levels 2 and 3) may require significant judgment to assess whether observable or unobservable inputs for those assets and liabilities provide reasonable determination of fair value. The fair values measured at each level of the fair value hierarchy, additional discussion regarding fair value measurements, and a brief description of how fair value is determined for categories that have unobservable inputs, can be found in Note 1113 “Fair Values of Assets and Liabilities” of the Notes to Unaudited Condensed Consolidated Financial Statements. Goodwill and Other Intangible Assets
The acquisition method of accounting requires that acquired assets and liabilities are recorded at their fair values as of the date of acquisition. This often involves estimates based on third party valuations or internal valuations based on discounted cash flow analyses or other valuation techniques, all of which are inherently subjective. Acquisitions typically result in goodwill, the amount by which the cost of net assets acquired in a business combination exceeds their fair value, which is subject to impairment testing at least annually. The
amortization of identified intangible assets recognized in a business combination is based upon the estimated economic benefits to be received over their economic life, which is also subjective. Customer attrition rates that are based on historical experience are used to determine the estimated economic life of certain intangibles assets, including but not limited to, customer deposit intangibles.
4044 Huntington Bancshares Incorporated
Item 1: Financial Statements
Huntington Bancshares Incorporated
Condensed Consolidated Balance Sheets
(Unaudited)
| | | | | | | | | | | |
| March 31, | | December 31, |
| (dollar amounts in millions) | 2021 | | 2020 |
| Assets | | | |
| Cash and due from banks | $ | 1,096 | | | $ | 1,319 | |
| Interest-bearing deposits at Federal Reserve Bank | 7,493 | | | 5,276 | |
| Interest-bearing deposits in banks | 52 | | | 117 | |
| Trading account securities | 51 | | | 62 | |
| Available-for-sale securities | 19,375 | | | 16,485 | |
| Held-to-maturity securities | 7,815 | | | 8,861 | |
| | | |
| | | |
| Other securities | 411 | | | 418 | |
| Loans held for sale (includes $1,531 and $1,198 respectively, measured at fair value)(1) | 1,537 | | | 1,275 | |
| Loans and leases (includes $118 and $94 respectively, measured at fair value)(1) | 80,230 | | | 81,608 | |
| Allowance for loan and lease losses | (1,703) | | | (1,814) | |
| Net loans and leases | 78,527 | | | 79,794 | |
| Bank owned life insurance | 2,581 | | | 2,577 | |
| Premises and equipment | 747 | | | 757 | |
| Goodwill | 1,990 | | | 1,990 | |
| Servicing rights and other intangible assets | 480 | | | 428 | |
| Other assets | 3,613 | | | 3,679 | |
| Total assets | $ | 125,768 | | | $ | 123,038 | |
| Liabilities and shareholders’ equity | | | |
| Liabilities | | | |
| Deposits | $ | 102,184 | | | $ | 98,948 | |
| Short-term borrowings | 219 | | | 183 | |
| Long-term debt | 7,210 | | | 8,352 | |
| Other liabilities | 2,555 | | | 2,562 | |
| Total liabilities | 112,168 | | | 110,045 | |
| Commitments and Contingent Liabilities (Note 14) | 0 | | 0 |
| Shareholders’ equity | | | |
| Preferred stock | 2,676 | | | 2,191 | |
| Common stock | 10 | | | 10 | |
| Capital surplus | 8,806 | | | 8,781 | |
| Less treasury shares, at cost | (59) | | | (59) | |
| Accumulated other comprehensive (loss) gain | (56) | | | 192 | |
| Retained earnings | 2,223 | | | 1,878 | |
| Total shareholders’ equity | 13,600 | | | 12,993 | |
| Total liabilities and shareholders’ equity | $ | 125,768 | | | $ | 123,038 | |
| Common shares authorized (par value of $0.01) | 1,500,000,000 | | | 1,500,000,000 | |
| | | |
| Common shares outstanding | 1,018,052,923 | | | 1,017,196,776 | |
| Treasury shares outstanding | 5,041,104 | | | 5,062,054 | |
| Preferred stock, authorized shares | 6,617,808 | | | 6,617,808 | |
| | | |
| Preferred shares outstanding | 1,250,500 | | | 750,500 | |
| | | | | | | | | | | |
| September 30, | | December 31, |
| (dollar amounts in millions) | 2021 | | 2020 |
| Assets | | | |
| Cash and due from banks | $ | 1,611 | | | $ | 1,319 | |
| Interest-bearing deposits at Federal Reserve Bank | 8,134 | | | 5,276 | |
| Interest-bearing deposits in banks | 443 | | | 117 | |
| Trading account securities | 77 | | | 62 | |
| Available-for-sale securities | 25,654 | | | 16,485 | |
| Held-to-maturity securities | 12,455 | | | 8,861 | |
| | | |
| | | |
| Other securities | 649 | | | 418 | |
| Loans held for sale (includes $1,297 and $1,198 respectively, measured at fair value)(1) | 1,335 | | | 1,275 | |
| Loans and leases (includes $139 and $94 respectively, measured at fair value)(1) | 110,567 | | | 81,608 | |
| Allowance for loan and lease losses | (2,107) | | | (1,814) | |
| Net loans and leases | 108,460 | | | 79,794 | |
| Bank owned life insurance | 2,771 | | | 2,577 | |
| Premises and equipment | 1,126 | | | 757 | |
| Goodwill | 5,316 | | | 1,990 | |
| Servicing rights and other intangible assets | 614 | | | 428 | |
| Other assets | 5,233 | | | 3,679 | |
| Total assets | $ | 173,878 | | | $ | 123,038 | |
| Liabilities and shareholders’ equity | | | |
| Liabilities | | | |
| Deposits: | | | |
| Demand deposits—noninterest-bearing | $ | 44,560 | | | $ | 28,553 | |
| Interest-bearing | 97,338 | | | 70,395 | |
| Total deposits | 141,898 | | | 98,948 | |
| Short-term borrowings | 435 | | | 183 | |
| Long-term debt | 7,779 | | | 8,352 | |
| Other liabilities | 4,267 | | | 2,562 | |
| Total liabilities | 154,379 | | | 110,045 | |
| Commitments and Contingent Liabilities (Note 16) | 0 | | 0 |
| Shareholders’ equity | | | |
| Preferred stock | 2,267 | | | 2,191 | |
| Common stock | 15 | | | 10 | |
| Capital surplus | 15,350 | | | 8,781 | |
| Less treasury shares, at cost | (79) | | | (59) | |
| Accumulated other comprehensive (loss) gain | (125) | | | 192 | |
| Retained earnings | 2,051 | | | 1,878 | |
| Total Huntington Bancshares Inc shareholders’ equity | 19,479 | | | 12,993 | |
| Non-controlling interest | 20 | | | — | |
| Total equity | 19,499 | | | 12,993 | |
| Total liabilities and shareholders’ equity | $ | 173,878 | | | $ | 123,038 | |
| Common shares authorized (par value of $0.01) | 2,250,000,000 | | | 1,500,000,000 | |
| | | |
| Common shares outstanding | 1,446,461,249 | | | 1,017,196,776 | |
| Treasury shares outstanding | 6,306,127 | | | 5,062,054 | |
| Preferred stock, authorized shares | 6,617,808 | | | 6,617,808 | |
| | | |
| Preferred shares outstanding | 657,500 | | | 750,500 | |
See Notes to Unaudited Condensed Consolidated Financial Statements
| | Huntington Bancshares Incorporated | Huntington Bancshares Incorporated | | | Huntington Bancshares Incorporated | |
| Condensed Consolidated Statements of Income | Condensed Consolidated Statements of Income | | | Condensed Consolidated Statements of Income | |
| (Unaudited) | (Unaudited) | | | (Unaudited) | |
| | Three Months Ended
March 31, | | | | Three Months Ended
September 30, | | Nine Months Ended
September 30, |
| (dollar amounts in millions, except per share data, share count in thousands) | (dollar amounts in millions, except per share data, share count in thousands) | 2021 | | 2020 | | | (dollar amounts in millions, except per share data, share count in thousands) | 2021 | | 2020 | | 2021 | | 2020 |
| Interest and fee income: | Interest and fee income: | | | | | | Interest and fee income: | | | | | | | |
| Loans and leases | Loans and leases | $ | 752 | | | $ | 809 | | | | Loans and leases | $ | 1,056 | | | $ | 764 | | | $ | 2,614 | | | $ | 2,327 | |
| Available-for-sale securities | Available-for-sale securities | | | Available-for-sale securities | |
| Taxable | Taxable | 49 | | | 76 | | | | Taxable | 68 | | | 50 | | | 184 | | | 191 | |
| Tax-exempt | Tax-exempt | 13 | | | 18 | | | | Tax-exempt | 15 | | | 15 | | | 41 | | | 47 | |
| Held-to-maturity securities—taxable | Held-to-maturity securities—taxable | 42 | | | 59 | | | | Held-to-maturity securities—taxable | 47 | | | 51 | | | 124 | | | 169 | |
| Other securities—taxable | Other securities—taxable | 2 | | | 2 | | | | Other securities—taxable | 2 | | | 1 | | | 6 | | | 4 | |
| | Other | Other | 11 | | | 11 | | | | Other | 17 | | | 11 | | | 40 | | | 31 | |
| Total interest income | Total interest income | 869 | | | 975 | | | | Total interest income | 1,205 | | | 892 | | | 3,009 | | | 2,769 | |
| Interest expense: | Interest expense: | | | | | | Interest expense: | | | | | | | |
| Deposits | Deposits | 11 | | | 105 | | | | Deposits | 11 | | | 31 | | | 34 | | | 182 | |
| Short-term borrowings | Short-term borrowings | 0 | | | 12 | | | | Short-term borrowings | — | | | — | | | — | | | 13 | |
| | Long-term debt | Long-term debt | (114) | | | 68 | | | | Long-term debt | 34 | | | 44 | | | 5 | | | 175 | |
| Total interest expense | Total interest expense | (103) | | | 185 | | | | Total interest expense | 45 | | | 75 | | | 39 | | | 370 | |
| Net interest income | Net interest income | 972 | | | 790 | | | | Net interest income | 1,160 | | | 817 | | | 2,970 | | | 2,399 | |
| Provision for credit losses | Provision for credit losses | (60) | | | 441 | | | | Provision for credit losses | (62) | | | 177 | | | 89 | | | 945 | |
| Net interest income after provision for credit losses | Net interest income after provision for credit losses | 1,032 | | | 349 | | | | Net interest income after provision for credit losses | 1,222 | | | 640 | | | 2,881 | | | 1,454 | |
| Mortgage banking income | Mortgage banking income | 100 | | | 58 | | | | Mortgage banking income | 81 | | | 122 | | | 248 | | | 277 | |
| Service charges on deposit accounts | Service charges on deposit accounts | 69 | | | 87 | | | | Service charges on deposit accounts | 114 | | | 76 | | | 271 | | | 223 | |
| Card and payment processing income | Card and payment processing income | 65 | | | 58 | | | | Card and payment processing income | 96 | | | 66 | | | 241 | | | 183 | |
| Trust and investment management services | Trust and investment management services | 52 | | | 47 | | | | Trust and investment management services | 61 | | | 48 | | | 169 | | | 140 | |
| Leasing revenue | | Leasing revenue | 42 | | | 3 | | | 58 | | | 14 | |
| Capital markets fees | Capital markets fees | 29 | | | 33 | | | | Capital markets fees | 40 | | | 27 | | | 104 | | | 91 | |
| Insurance income | Insurance income | 27 | | | 23 | | | | Insurance income | 25 | | | 24 | | | 77 | | | 72 | |
| Bank owned life insurance income | Bank owned life insurance income | 16 | | | 16 | | | | Bank owned life insurance income | 15 | | | 17 | | | 47 | | | 49 | |
| Gain on sale of loans | Gain on sale of loans | 3 | | | 8 | | | | Gain on sale of loans | 2 | | | 13 | | | 8 | | | 30 | |
| | Net gains (losses) on sales of securities | | Net gains (losses) on sales of securities | — | | | — | | | 10 | | | (1) | |
| | Other noninterest income | Other noninterest income | 34 | | | 31 | | | | Other noninterest income | 59 | | | 34 | | | 141 | | | 104 | |
| Total noninterest income | Total noninterest income | 395 | | | 361 | | | | Total noninterest income | 535 | | | 430 | | | 1,374 | | | 1,182 | |
| Personnel costs | Personnel costs | 468 | | | 395 | | | | Personnel costs | 643 | | | 453 | | | 1,703 | | | 1,267 | |
| Outside data processing and other services | Outside data processing and other services | 115 | | | 85 | | | | Outside data processing and other services | 304 | | | 98 | | | 581 | | | 273 | |
| Equipment | Equipment | 46 | | | 41 | | | | Equipment | 79 | | | 44 | | | 180 | | | 132 | |
| Net occupancy | Net occupancy | 42 | | | 40 | | | | Net occupancy | 95 | | | 40 | | | 209 | | | 119 | |
| Lease financing equipment depreciation | | Lease financing equipment depreciation | 19 | | | — | | | 24 | | | 1 | |
| Professional services | Professional services | 17 | | | 11 | | | | Professional services | 26 | | | 12 | | | 91 | | | 34 | |
| Amortization of intangibles | Amortization of intangibles | 10 | | | 11 | | | | Amortization of intangibles | 13 | | | 10 | | | 34 | | | 31 | |
| Marketing | Marketing | 14 | | | 9 | | | | Marketing | 25 | | | 9 | | | 54 | | | 23 | |
| Deposit and other insurance expense | Deposit and other insurance expense | 8 | | | 9 | | | | Deposit and other insurance expense | 17 | | | 6 | | | 33 | | | 24 | |
| | Other noninterest expense | Other noninterest expense | 73 | | | 51 | | | | Other noninterest expense | 68 | | | 40 | | | 245 | | | 135 | |
| Total noninterest expense | Total noninterest expense | 793 | | | 652 | | | | Total noninterest expense | 1,289 | | | 712 | | | 3,154 | | | 2,039 | |
| Income before income taxes | Income before income taxes | 634 | | | 58 | | | | Income before income taxes | 468 | | | 358 | | | 1,101 | | | 597 | |
| Provision for income taxes | Provision for income taxes | 102 | | | 10 | | | | Provision for income taxes | 90 | | | 55 | | | 206 | | | 96 | |
| Net income | 532 | | | 48 | | | | |
| Income after income taxes | | Income after income taxes | 378 | | | 303 | | | 895 | | | 501 | |
| Income attributable to non-controlling interest | | Income attributable to non-controlling interest | 1 | | | — | | | 1 | | | — | |
| Net income attributable to Huntington Bancshares Inc | | Net income attributable to Huntington Bancshares Inc | 377 | | | 303 | | | 894 | | | 501 | |
| Dividends on preferred shares | Dividends on preferred shares | 31 | | | 18 | | | | Dividends on preferred shares | 29 | | | 28 | | | 103 | | | 65 | |
| Impact of preferred stock redemption | | Impact of preferred stock redemption | 15 | | | — | | | 15 | | | $ | — | |
| Net income applicable to common shares | Net income applicable to common shares | $ | 501 | | | $ | 30 | | | | Net income applicable to common shares | $ | 333 | | | $ | 275 | | | $ | 776 | | | $ | 436 | |
| Average common shares—basic | Average common shares—basic | 1,017,512 | | | 1,017,643 | | | | Average common shares—basic | 1,462,736 | | | 1,017,253 | | | 1,201,763 | | | 1,017,052 | |
| Average common shares—diluted | Average common shares—diluted | 1,041,003 | | | 1,034,576 | | | | Average common shares—diluted | 1,487,335 | | | 1,031,460 | | | 1,225,428 | | | 1,031,573 | |
| Per common share: | Per common share: | | | Per common share: | |
| Net income—basic | Net income—basic | $ | 0.49 | | | $ | 0.03 | | | | Net income—basic | $ | 0.23 | | | $ | 0.27 | | | $ | 0.65 | | | $ | 0.43 | |
| Net income—diluted | Net income—diluted | 0.48 | | | 0.03 | | | | Net income—diluted | 0.22 | | | 0.27 | | | 0.63 | | | 0.42 | |
| | See Notes to Unaudited Condensed Consolidated Financial Statements |
4246 Huntington Bancshares Incorporated
Huntington Bancshares Incorporated
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
| | | | Three Months Ended
March 31, | | | Three Months Ended
September 30, | | Nine Months Ended
September 30, |
| (dollar amounts in millions) | (dollar amounts in millions) | 2021 | | 2020 | | (dollar amounts in millions) | 2021 | | 2020 | | 2021 | | 2020 |
| Net income | $ | 532 | | | $ | 48 | | | |
| Net income attributable to Huntington Bancshares Inc | | Net income attributable to Huntington Bancshares Inc | $ | 377 | | | $ | 303 | | | $ | 894 | | | $ | 501 | |
| | Unrealized net gains (losses) on available-for-sale securities arising during the period, net of reclassification for net realized gains and losses | (216) | | | 173 | | | |
| Net unrealized gains (losses) on available-for-sale securities | | Net unrealized gains (losses) on available-for-sale securities | (82) | | | 5 | | | (220) | | | 240 | |
| | Change in fair value related to cash flow hedges | Change in fair value related to cash flow hedges | (34) | | | 308 | | | Change in fair value related to cash flow hedges | (29) | | | (40) | | | (102) | | | 279 | |
| | | Translation adjustments, net of hedges | | Translation adjustments, net of hedges | 2 | | | — | | | (4) | | | — | |
| Change in accumulated unrealized gains (losses) for pension and other post-retirement obligations | Change in accumulated unrealized gains (losses) for pension and other post-retirement obligations | 2 | | | 2 | | | Change in accumulated unrealized gains (losses) for pension and other post-retirement obligations | 3 | | | 2 | | | 9 | | | (6) | |
| Other comprehensive income, net of tax | (248) | | | 483 | | | |
| Other comprehensive income (loss), net of tax | | Other comprehensive income (loss), net of tax | (106) | | | (33) | | | (317) | | | 513 | |
| Comprehensive income | Comprehensive income | $ | 284 | | | $ | 531 | | | Comprehensive income | $ | 271 | | | $ | 270 | | | $ | 577 | | | $ | 1,014 | |
See Notes to Unaudited Condensed Consolidated Financial Statements
Huntington Bancshares Incorporated
Condensed Consolidated Statements of Changes in Shareholders’ Equity
(Unaudited)
| | (dollar amounts in millions, share amounts in thousands) | (dollar amounts in millions, share amounts in thousands) | Preferred Stock | | Common Stock | | Capital Surplus | | Treasury Stock | | Accumulated Other Comprehensive Gain (Loss) | | Retained Earnings | | | (dollar amounts in millions, share amounts in thousands) | Preferred Stock | | Common Stock | | Capital Surplus | | Treasury Stock | | Accumulated Other Comprehensive Gain (Loss) | | Retained Earnings | | Non-controlling | | Total |
| Amount | | Shares | | Amount | | Shares | | Amount | | Total | Amount | | Shares | | Amount | | Shares | | Amount | | Total | | interest | | Equity |
| Three Months Ended March 31, 2021 | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, 2021 | | Three Months Ended September 30, 2021 | | | | | | | | | | | | | | | | | | | | | |
| Balance, beginning of period | Balance, beginning of period | $ | 2,191 | | | 1,022,258 | | | $ | 10 | | | $ | 8,781 | | | (5,062) | | | $ | (59) | | | $ | 192 | | | $ | 1,878 | | | $ | 12,993 | | Balance, beginning of period | $ | 2,851 | | | 1,484,614 | | | $ | 15 | | | $ | 15,830 | | | (8,056) | | | $ | (105) | | | $ | (19) | | | $ | 1,939 | | | $ | 20,511 | | | $ | 20 | | | $ | 20,531 | |
| | Net income | Net income | | | | | | | | | | | | | | | 532 | | | 532 | | Net income | | | | | | | | | | | | | | | 377 | | | 377 | | | 1 | | | 378 | |
| Other comprehensive income (loss), net of tax | | (248) | | | (248) | | |
| | Net proceeds from issuance of Series H Preferred Stock | 485 | | | 485 | | |
| | Cash dividends declared: | | |
| Common ($0.15 per share) | | (156) | | | (156) | | |
| Other comprehensive income, net of tax | | Other comprehensive income, net of tax | | (106) | | | (106) | | | (106) | |
| | Redemption of Preferred Series D Stock | | Redemption of Preferred Series D Stock | (585) | | | (15) | | | (600) | | | (600) | |
| Repurchases of common stock | | Repurchases of common stock | | (33,409) | | | — | | | (500) | | | (500) | | | (500) | |
| Cash dividends declared: | | Cash dividends declared: | |
| Common ($0.15 per share) | | Common ($0.15 per share) | | (221) | | | (221) | | | (221) | |
| Preferred | Preferred | | (31) | | | (31) | | Preferred | | (29) | | | (29) | | | (29) | |
| Recognition of the fair value of share-based compensation | Recognition of the fair value of share-based compensation | | 28 | | | 28 | | Recognition of the fair value of share-based compensation | | 32 | | | 32 | | | 32 | |
| | Other share-based compensation activity | Other share-based compensation activity | | 836 | | | — | | | (3) | | | — | | | (3) | | Other share-based compensation activity | | 1,562 | | | — | | | (12) | | | — | | | (12) | | | (12) | |
| | Other | Other | | 21 | | | — | | | — | | | — | | Other | 1 | | — | | | 1,750 | | | 26 | | | — | | | 27 | | | (1) | | | 26 | |
| Balance, end of period | Balance, end of period | $ | 2,676 | | | 1,023,094 | | | $ | 10 | | | $ | 8,806 | | | (5,041) | | | $ | (59) | | | $ | (56) | | | $ | 2,223 | | | $ | 13,600 | | Balance, end of period | $ | 2,267 | | | 1,452,767 | | | $ | 15 | | | $ | 15,350 | | | (6,306) | | | $ | (79) | | | $ | (125) | | | $ | 2,051 | | | $ | 19,479 | | | $ | 20 | | | $ | 19,499 | |
| | Three Months Ended March 31, 2020 | | |
| Three Months Ended September 30, 2020 | | Three Months Ended September 30, 2020 | |
| Balance, beginning of period | Balance, beginning of period | $ | 1,203 | | | 1,024,541 | | | $ | 10 | | | $ | 8,806 | | | (4,537) | | | $ | (56) | | | $ | (256) | | | $ | 2,088 | | | $ | 11,795 | | Balance, beginning of period | $ | 1,697 | | | 1,022,309 | | | $ | 10 | | | $ | 8,743 | | | (4,999) | | | $ | (59) | | | $ | 290 | | | $ | 1,633 | | | $ | 12,314 | | | $ | — | | | $ | 12,314 | |
| Cumulative-effect adjustment (ASU 2016-01) | | | | | | | | | | | | | | | (306) | | | (306) | | |
| | Net income | Net income | | 48 | | | 48 | | Net income | | | | | | | | | | | | | | | 303 | | | 303 | | | — | | | 303 | |
| Other comprehensive income (loss), net of tax | | 483 | | | 483 | | |
| Other comprehensive loss, net of tax | | Other comprehensive loss, net of tax | | (33) | | | (33) | | | (33) | |
| Net proceeds from issuance of Preferred Stock | | Net proceeds from issuance of Preferred Stock | 494 | | 494 | | | 494 | |
| | Repurchase of common stock | | (7,088) | | | — | | | (88) | | | (88) | | |
| Cash dividends declared: | Cash dividends declared: | | Cash dividends declared: | |
| Common ($0.15 per share) | Common ($0.15 per share) | | (155) | | | (155) | | Common ($0.15 per share) | | (156) | | | (156) | | | (156) | |
| | Preferred | Preferred | | (18) | | | (18) | | Preferred | | (28) | | | (28) | | | (28) | |
| | Recognition of the fair value of share-based compensation | Recognition of the fair value of share-based compensation | | 15 | | | 15 | | Recognition of the fair value of share-based compensation | | 21 | | | 21 | | | 21 | |
| | Other share-based compensation activity | Other share-based compensation activity | | 1,299 | | | — | | | (5) | | | — | | | (5) | | Other share-based compensation activity | | 68 | | | — | | | 2 | | | — | | | 2 | | | 2 | |
| Other | Other | | 3 | | | — | | | — | | Other | | (67) | | | — | | | 0 | | — | | | — | |
| Balance, end of period | Balance, end of period | $ | 1,203 | | | 1,018,752 | | | $ | 10 | | | $ | 8,728 | | | (4,534) | | | $ | (56) | | | $ | 227 | | | $ | 1,657 | | | $ | 11,769 | | Balance, end of period | $ | 2,191 | | | 1,022,377 | | | $ | 10 | | | $ | 8,766 | | | (5,066) | | | $ | (59) | | | $ | 257 | | | $ | 1,752 | | | $ | 12,917 | | | $ | — | | | $ | 12,917 | |
|
See Notes to Unaudited Condensed Consolidated Financial Statements
4448 Huntington Bancshares Incorporated
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| (dollar amounts in millions, share amounts in thousands) | Preferred Stock | | Common Stock | | Capital Surplus | | Treasury Stock | | Accumulated Other Comprehensive Gain (Loss) | | Retained Earnings | | | | Non-controlling | | |
| Amount | | Shares | | Amount | | | Shares | | Amount | | | | Total | | interest | | Total |
| Nine Months Ended September 30, 2021 | | | | | | | | | | | | | | | | | | | | | |
| Balance, beginning of period | $ | 2,191 | | | 1,022,258 | | | $ | 10 | | | $ | 8,781 | | | (5,062) | | | $ | (59) | | | $ | 192 | | | $ | 1,878 | | | $ | 12,993 | | | $ | — | | | $ | 12,993 | |
| | | | | | | | | | | | | | | | | | | | | |
| Net income | | | | | | | | | | | | | | | 894 | | | 894 | | | 1 | | | 895 | |
| Other comprehensive income (loss), net of tax | | | | | | | | | | | | | (317) | | | | | (317) | | | | | (317) | |
| TCF Financial Corp acquisition: | | | | | | | | | | | | | | | | | | | | | |
| Issuance of common stock | | | 458,171 | | | 5 | | | 6,993 | | | | | (37) | | | | | | | 6,961 | | | | | 6,961 | |
| Issuance of Series I preferred stock | 175 | | | | | | | 10 | | | | | | | | | | | 185 | | | | | 185 | |
| Non-controlling interest acquired | | | | | | | | | | | | | | | | | | | 22 | | | 22 | |
| Net proceeds from issuance of preferred stock | 486 | | | | | | | | | | | | | | | | | 486 | | | | | 486 | |
| Redemption of Preferred Series D Stock | (585) | | | | | | | | | | | | | | | (15) | | | (600) | | | | | (600) | |
| | | | | | | | | | | | | | | | | | | | | |
| Repurchases of common stock | | | (33,409) | | | — | | | (500) | | | | | | | | | | | (500) | | | | | (500) | |
| Cash dividends declared: | | | | | | | | | | | | | | | | | | | | | |
| Common ($0.45 per share) | | | | | | | | | | | | | | | (601) | | | (601) | | | | | (601) | |
| Preferred | | | | | | | | | | | | | | | (103) | | | (103) | | | | | (103) | |
| | | | | | | | | | | | | | | | | | | | | |
| Recognition of the fair value of share-based compensation | | | | | | | 97 | | | | | | | | | | | 97 | | | | | 97 | |
| Other share-based compensation activity | | | 5,747 | | | — | | | (31) | | | | | | | | | — | | | (31) | | | | | (31) | |
| | | | | | | | | | | | | | | | | | | | | |
| Other | | | | | | | — | | | (1,244) | | | 17 | | | — | | | (2) | | | 15 | | | (3) | | | 12 | |
| Balance, end of period | $ | 2,267 | | | 1,452,767 | | | $ | 15 | | | $ | 15,350 | | | (6,306) | | | $ | (79) | | | $ | (125) | | | $ | 2,051 | | | $ | 19,479 | | | $ | 20 | | | $ | 19,499 | |
| | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2020 | | | | | | | | | | | | | | | | | | | | | |
| Balance, beginning of period | $ | 1,203 | | | 1,024,541 | | | $ | 10 | | | $ | 8,806 | | | (4,537) | | | $ | (56) | | | $ | (256) | | | $ | 2,088 | | | $ | 11,795 | | | $ | — | | | $ | 11,795 | |
| Cumulative-effect of change in accounting principle, net of tax | | | | | | | | | | | | | | | (306) | | | (306) | | | | | (306) | |
| Net income | | | | | | | | | | | | | | | 501 | | | 501 | | | — | | | 501 | |
| Other comprehensive income, net of tax | | | | | | | | | | | | | 513 | | | | | 513 | | | | | 513 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Net proceeds from issuance of preferred stock | 988 | | | | | | | | | | | | | | | | | 988 | | | | | 988 | |
| | | | | | | | | | | | | | | | | | | | | |
| Repurchases of common stock | | | (7,088) | | | — | | | (88) | | | | | | | | | | | (88) | | | | | (88) | |
| Cash dividends declared: | | | | | | | | | | | | | | | | | | | | | |
| Common ($0.45 per share) | | | | | | | | | | | | | | | (466) | | | (466) | | | | | (466) | |
| Preferred | | | | | | | | | | | | | | | (65) | | | (65) | | | | | (65) | |
| | | | | | | | | | | | | | | | | | | | | |
| Recognition of the fair value of share-based compensation | | | | | | | 60 | | | | | | | | | | | 60 | | | | | 60 | |
| Other share-based compensation activity | | | 4,924 | | | — | | | (12) | | | | | | | | | — | | | (12) | | | | | (12) | |
| | | | | | | | | | | | | | | | | | | | | |
| Other | | | 0 | | 0 | | — | | | (529) | | | (3) | | | | | — | | | (3) | | | | | (3) | |
| Balance, end of period | $ | 2,191 | | | 1,022,377 | | | $ | 10 | | | $ | 8,766 | | | (5,066) | | | $ | (59) | | | $ | 257 | | | $ | 1,752 | | | $ | 12,917 | | | $ | — | | | $ | 12,917 | |
| | | | | | | | | | | | | | | | | | | | | |
See Notes to Unaudited Condensed Consolidated Financial Statements
Huntington Bancshares Incorporated
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| | | | Three Months Ended March 31, | | Nine Months Ended September 30, |
| (dollar amounts in millions) | (dollar amounts in millions) | 2021 | | 2020 | (dollar amounts in millions) | 2021 | | 2020 |
| Operating activities | Operating activities | | Operating activities | |
| Net income | Net income | $ | 532 | | | $ | 48 | | Net income | $ | 895 | | | $ | 501 | |
| Adjustments to reconcile net income to net cash (used in) provided by operating activities: | | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | Adjustments to reconcile net income to net cash provided by operating activities: | |
| | Provision for credit losses | Provision for credit losses | (60) | | | 441 | | Provision for credit losses | 89 | | | 945 | |
| Depreciation and amortization | Depreciation and amortization | 71 | | | 119 | | Depreciation and amortization | 299 | | | 258 | |
| Share-based compensation expense | Share-based compensation expense | 28 | | | 15 | | Share-based compensation expense | 97 | | | 60 | |
| Deferred income tax expense (benefit) | Deferred income tax expense (benefit) | 61 | | | (37) | | Deferred income tax expense (benefit) | 40 | | | (123) | |
| | Net change in: | Net change in: | | Net change in: | |
| Trading account securities | Trading account securities | 11 | | | 63 | | Trading account securities | (15) | | | 45 | |
| Loans held for sale | Loans held for sale | (406) | | | (20) | | Loans held for sale | (115) | | | (395) | |
| Other assets | Other assets | 80 | | | (1,023) | | Other assets | (247) | | | (919) | |
| Other liabilities | Other liabilities | (428) | | | 892 | | Other liabilities | 455 | | | 890 | |
| | Net cash (used in) provided by operating activities | (111) | | | 498 | | |
| Other, net | | Other, net | 67 | | | (3) | |
| Net cash provided by operating activities | | Net cash provided by operating activities | 1,565 | | | 1,259 | |
| Investing activities | Investing activities | | Investing activities | |
| Change in interest bearing deposits in banks | Change in interest bearing deposits in banks | 189 | | | (26) | | Change in interest bearing deposits in banks | 611 | | | (80) | |
| | Net cash received from business combination | | Net cash received from business combination | 466 | | | — | |
| Proceeds from: | Proceeds from: | | Proceeds from: | |
| Maturities and calls of available-for-sale securities | Maturities and calls of available-for-sale securities | 1,758 | | | 669 | | Maturities and calls of available-for-sale securities | 5,408 | | | 3,657 | |
| Maturities and calls of held-to-maturity securities | Maturities and calls of held-to-maturity securities | 1,043 | | | 398 | | Maturities and calls of held-to-maturity securities | 3,073 | | | 2,028 | |
| | Sales of available-for-sale securities | Sales of available-for-sale securities | 10 | | | 19 | | Sales of available-for-sale securities | 5,860 | | | 392 | |
| | Purchases of available-for-sale securities | Purchases of available-for-sale securities | (4,857) | | | (2,476) | | Purchases of available-for-sale securities | (14,995) | | | (5,988) | |
| Purchases of held-to-maturity securities | | Purchases of held-to-maturity securities | (3,685) | | | — | |
| | Net proceeds from sales of portfolio loans | 158 | | | 191 | | |
| Net proceeds from sales of portfolio loans and leases | | Net proceeds from sales of portfolio loans and leases | 479 | | | 696 | |
| Principal payments received under direct finance and sales-type leases | Principal payments received under direct finance and sales-type leases | 188 | | | 171 | | Principal payments received under direct finance and sales-type leases | 899 | | | 518 | |
| Net loan and lease activity, excluding sales and purchases | Net loan and lease activity, excluding sales and purchases | 1,402 | | | (2,926) | | Net loan and lease activity, excluding sales and purchases | 4,121 | | | (6,099) | |
| | Purchases of premises and equipment | Purchases of premises and equipment | (22) | | | (11) | | Purchases of premises and equipment | (157) | | | (82) | |
| | Purchases of loans and leases | Purchases of loans and leases | (266) | | | (311) | | Purchases of loans and leases | (771) | | | (1,248) | |
| | Net cash paid for branch disposition | | Net cash paid for branch disposition | (618) | | | — | |
| Other, net | Other, net | 21 | | | (20) | | Other, net | 98 | | | 54 | |
| Net cash used in investing activities | (376) | | | (4,322) | | |
| Net cash provided by (used in) investing activities | | Net cash provided by (used in) investing activities | 789 | | | (6,152) | |
| Financing activities | Financing activities | | | | Financing activities | | | |
| Increase in deposits | Increase in deposits | 3,236 | | | 4,483 | | Increase in deposits | 5,136 | | | 12,807 | |
| Increase in short-term borrowings | 53 | | | 458 | | |
| Decrease in short-term borrowings | | Decrease in short-term borrowings | (1,062) | | | (2,306) | |
| | Net proceeds from issuance of long-term debt | Net proceeds from issuance of long-term debt | 35 | | | 1,286 | | Net proceeds from issuance of long-term debt | 646 | | | 1,348 | |
| Maturity/redemption of long-term debt | Maturity/redemption of long-term debt | (1,135) | | | (1,540) | | Maturity/redemption of long-term debt | (2,649) | | | (2,218) | |
| Dividends paid on preferred stock | Dividends paid on preferred stock | (35) | | | (18) | | Dividends paid on preferred stock | (109) | | | (55) | |
| Dividends paid on common stock | Dividends paid on common stock | (153) | | | (155) | | Dividends paid on common stock | (531) | | | (460) | |
| Repurchases of common stock | Repurchases of common stock | 0 | | | (88) | | Repurchases of common stock | (500) | | | (88) | |
| | Payment to repurchase preferred stock | | Payment to repurchase preferred stock | (600) | | | — | |
| Net proceeds from issuance of preferred stock | Net proceeds from issuance of preferred stock | 485 | | | 0 | | Net proceeds from issuance of preferred stock | 486 | | | 988 | |
| | Payments related to tax-withholding for share based compensation awards | (5) | | | (6) | | |
| | Other, net | Other, net | 0 | | | 1 | | Other, net | (21) | | | (18) | |
| Net cash provided by financing activities | Net cash provided by financing activities | 2,481 | | | 4,421 | | Net cash provided by financing activities | 796 | | | 9,998 | |
| Increase in cash and cash equivalents | Increase in cash and cash equivalents | 1,994 | | | 597 | | Increase in cash and cash equivalents | 3,150 | | | 5,105 | |
| Cash and cash equivalents at beginning of period | Cash and cash equivalents at beginning of period | 6,595 | | | 1,170 | | Cash and cash equivalents at beginning of period | 6,595 | | | 1,170 | |
| Cash and cash equivalents at end of period | Cash and cash equivalents at end of period | $ | 8,589 | | | $ | 1,767 | | Cash and cash equivalents at end of period | $ | 9,745 | | | $ | 6,275 | |
2021 1Q Form 10-Q 5045 Huntington Bancshares Incorporated
| | | | Three Months Ended March 31, | | Nine Months Ended September 30, |
| (dollar amounts in millions) | (dollar amounts in millions) | 2021 | | 2020 | (dollar amounts in millions) | 2021 | | 2020 |
| Supplemental disclosures: | Supplemental disclosures: | | Supplemental disclosures: | |
| Interest paid | Interest paid | $ | 49 | | | $ | 197 | | Interest paid | $ | 135 | | | $ | 307 | |
| Income taxes paid | Income taxes paid | 3 | | | 2 | | Income taxes paid | 262 | | | 48 | |
| | Non-cash activities | Non-cash activities | | Non-cash activities | |
| Loans transferred to held-for-sale from portfolio | Loans transferred to held-for-sale from portfolio | 84 | | | 313 | | Loans transferred to held-for-sale from portfolio | 385 | | | 839 |
| Loans transferred to portfolio from held-for-sale | Loans transferred to portfolio from held-for-sale | 37 | | | 4 | | Loans transferred to portfolio from held-for-sale | 83 | | | 37 |
| | Transfer of securities from available-for-sale to held-to-maturity | Transfer of securities from available-for-sale to held-to-maturity | 0 | | | 1,520 | | Transfer of securities from available-for-sale to held-to-maturity | 3,007 | | | 1,520 | |
| | Business Combination | | Business Combination | |
| Fair value of tangible assets acquired | | Fair value of tangible assets acquired | 46,256 | | | — | |
| Goodwill and other intangible assets | | Goodwill and other intangible assets | 3,483 | | | — | |
| Liabilities assumed | | Liabilities assumed | 42,534 | | | — | |
| Preferred stock issued in business combination | | Preferred stock issued in business combination | 185 | | | — | |
| Common Stock issued in business combination | | Common Stock issued in business combination | 6,998 | | | — | |
See Notes to Unaudited Condensed Consolidated Financial Statements
462021 3Q Form 10-Q Huntington Bancshares Incorporated51
Huntington Bancshares Incorporated
Notes to Unaudited Condensed Consolidated Financial Statements
1. BASIS OF PRESENTATION
The accompanying Unaudited Condensed Consolidated Financial Statements of Huntington reflect all adjustments consisting of normal recurring accruals which are, in the opinion of Management,management, necessary for a fair statement of the consolidated financial position, the results of operations, and cash flows for the periods presented. These Unaudited Condensed Consolidated Financial Statements have been prepared according to the rules and regulations of the SEC and, therefore, certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been omitted. The Notes to Consolidated Financial Statements appearing in Huntington’s 2020 Annual Report on Form 10-K, which include descriptions of significant accounting policies, as updated by the information contained in this report, should be read in conjunction with these interim financial statements.
For statement of cash flow purposes, cash and cash equivalents are defined as the sum of cash and due from banks and interest-bearing deposits at Federal Reserve Bank.
Certain prior period amounts have been reclassified to conform to current year’s presentation.
In conjunction with applicable accounting standards, all material subsequent events have been either recognized in the Unaudited Condensed Consolidated Financial Statements or disclosed in the Notes to Unaudited Condensed Consolidated Financial Statements. No subsequent events were disclosed for the current period.
2. PENDING ACQUISITION OF TCF FINANCIAL CORPORATION
On December 13, 2020,June 9, 2021, Huntington announcedclosed the signingacquisition of a definitive merger agreement (the “ Merger Agreement”). Under the terms of the Merger Agreement, which was unanimously approved by the boards of directors of both companies, TCF Financial Corporation (“TCF”), the parent company of TCF National Bank, will merge into Huntington in an all-stock transaction valued at approximately $6.0 billion based on the closing stock price on the day preceding the announcement.$7.2 billion. TCF iswas a financial holding company headquartered in Detroit, Michigan with reported total assets of $47.8 billion based on their balance sheet at December 31, 2020.operations across the Midwest. The acquisition added depth in existing markets and new markets for expansion and brings complimentary businesses together to drive synergies and growth.
Under the terms of the Merger Agreement,agreement, TCF shareholders will receivereceived 3.0028 shares of Huntington common stock for each share of TCF common stock. Holders of TCF common stock will also receivereceived cash in lieu of fractional shares. EachIn addition, each outstanding share of 5.70% Series C Non-Cumulative Perpetual Preferred Stock of TCF will bewas converted into the right to receive 1 share of a newly created series of preferred stock of Huntington.Huntington, Series I Preferred Stock.
On March 25,The acquisition of TCF has been accounted for as a business combination. We recorded the estimate of fair value based on initial valuations available at June 9, 2021. We continue to review these valuations and certain of these estimated fair values are considered preliminary as of September 30, 2021, Huntington and TCF shareholders approved the merger. Huntington anticipates the transaction will be completed late in the second quarter of 2021, subject to regulatory approvaladjustment for up to one year after June 9, 2021. While we believe that the information available on June 9, 2021 provided a reasonable basis for estimating fair value, we expect that we may obtain additional information and evidence during the satisfaction ofmeasurement period that would result in changes to the estimated fair value amounts. Valuations subject to change include, but are not limited to, loans and leases, certain deposits, deferred tax assets and liabilities and certain other customary closing conditions set forth in the Merger Agreement.assets and other liabilities.
4852 Huntington Bancshares Incorporated
The following table provides a preliminary allocation of consideration paid for the fair value of assets acquired and liabilities and equity assumed from TCF as of June 9, 2021.
| | | | | | | | | | | | | | |
| | TCF |
| (dollar amounts in millions) | | UPB | | Fair Value |
| Assets acquired: | | | | |
| Cash and due from banks | | | | $ | 466 | |
| Interest-bearing deposits at Federal Reserve Bank | | | | 719 | |
| Interest-bearing deposits in banks | | | | 312 | |
| Available-for-sale securities | | | | 8,900 | |
| | | | |
| Other securities | | | | 358 | |
| Loans held for sale | | | | 363 | |
| Loans and leases: | | | | |
| Commercial: | | | | |
| Commercial and industrial | | $ | 12,726 | | | 12,441 | |
| Commercial real estate | | 8,125 | | | 7,869 | |
| Lease financing | | 2,929 | | | 2,912 | |
| Total commercial | | 23,780 | | | 23,222 | |
| Consumer: | | | | |
| Automobile | | 322 | | | 317 | |
| Residential mortgage | | 6,267 | | | 6,273 | |
| Home equity | | 2,644 | | | 2,607 | |
| RV and marine | | 581 | | | 570 | |
| Other consumer | | 179 | | | 167 | |
| Total consumer | | 9,993 | | | 9,934 | |
| Total loans and leases | | $ | 33,773 | | | 33,156 | |
| Bank owned life insurance | | | | 181 | |
| Premises and equipment | | | | 360 | |
| Core deposit intangible | | | | 92 | |
| Other intangible assets | | | | 6 | |
| Servicing rights | | | | 59 | |
| Servicing rights and other intangible assets | | | | 157 | |
| Other assets | | | | 1,441 | |
| Total assets acquired | | | | 46,413 | |
| Liabilities and equity assumed: | | | | |
| Deposits | | | | 38,663 | |
| Short-term borrowings | | | | 1,306 | |
| Long-term debt | | | | 1,516 | |
| Other liabilities | | | | 1,049 | |
| Total liabilities | | | | 42,534 | |
| Non-controlling interest | | | | 22 | |
| Net assets acquired | | | | $ | 3,857 | |
| | | | |
| Consideration: | | | | |
| | | | |
| Fair value of common stock issued | | | | $ | 6,998 | |
| Fair value of preferred stock exchange | | | | 185 | |
| Total consideration | | | | $ | 7,183 | |
| Goodwill | | | | $ | 3,326 | |
In connection with the acquisition, the Company recorded approximately $3.3 billion of goodwill. The goodwill was the result of expected synergies, operational efficiencies and other factors. Information regarding the allocation of goodwill recorded as a result of the acquisition to the Company’s reportable segments, as well as the carrying amounts and amortization of core deposit and other intangible assets, are provided in Note 7 “Goodwill and Other Intangible Assets” of the Notes to Unaudited Condensed Consolidated Financial Statements.
The following is a description of the methods used to determine the fair values of significant assets and liabilities presented above.
Cash and due from banks and interest-bearing deposits in banks: The carrying amount of these assets is a reasonable estimate of fair value based on the short-term nature of these assets.
Securities: Fair values for securities are based on quoted market prices, where available. If quoted market prices are not available, fair value estimates are based on observable inputs including quoted market prices for similar instruments, quoted market prices that are not in an active market or other inputs that are observable in the market. In the absence of observable inputs, fair value is estimated based on pricing models and/or discounted cash flow methodologies.
Loans and leases: Fair values for loans and leases are based on a discounted cash flow methodology that considered factors including the type of loan and lease and related collateral, classification status, fixed or variable interest rate, term, amortization status and current discount rates. Loans and leases are grouped together according to similar characteristics when applying various valuation techniques. The discount rates used for loans and leases are based on current market rates for new originations of comparable loans and leases and include adjustments for liquidity. The discount rate does not include a factor for credit losses as that has been included as a reduction to the estimated cash flows.
CDI: This intangible asset represents the low cost of funding acquired core deposits provide relative to the Company’s marginal cost of funds. The fair value was estimated based on a discounted cash flow methodology that gave appropriate consideration to expected customer attrition rates, net maintenance cost of the deposit base, alternative cost of funds, and the interest costs associated with customer deposits. The CDI is being amortized over 10 years based upon the period over which estimated economic benefits are estimated to be received.
Deposits: The fair values used for the demand and savings deposits by definition equal the amount payable on demand at the acquisition date. The fair values for time deposits are estimated using a discounted cash flow calculation that applies interest rates currently being offered to the contractual interest rates on such time deposits.
Debt: The fair values of long-term debt instruments are estimated based on quoted market prices for the instrument if available, or for similar instruments if not available, or by using discounted cash flow analyses, based on current incremental borrowing rates for similar types of instruments.
Premises and equipment: The fair values of premises are based on a market approach, with Huntington obtaining third-party appraisals and broker opinions of value for land, office and branch space.
Servicing rights: Servicing rights are valued using an option-adjusted spread valuation model to project cash flows over multiple interest rate scenarios which are then discounted at risk-adjusted rates. The model considers portfolio characteristics, prepayment rates, delinquency rates, contractually specified servicing fees, late charges, other ancillary revenue, costs to service and other economic factors.
PCD loans and leases
Purchased loans and leases that reflect a more-than-insignificant deterioration of credit from origination are considered PCD. For PCD loans and leases, the initial estimate of expected credit losses is recognized in the ALLL on the date of acquisition using the same methodology as other loans and leases held-for-investment. The following table provides a summary of loans and leases purchased as part of the TCF acquisition with credit deterioration at acquisition:
| | | | | | | | | | | | | | | | | |
| (dollar amounts in millions) | Commercial | | Consumer | | Total |
| Par value (UPB) | $ | 7,931 | | | $ | 1,333 | | | $ | 9,264 | |
| ALLL at acquisition | (374) | | | (58) | | | (432) | |
| Non-credit (discount) | (219) | | | (68) | | | (287) | |
| Fair value | $ | 7,338 | | | $ | 1,207 | | | $ | 8,545 | |
54 Huntington Bancshares Incorporated
Huntington's operating results for the quarter and year-to-date periods ended September 30, 2021 include the operating results of the acquired assets and assumed liabilities of TCF Financial Corporation subsequent to the acquisition on June 9, 2021. Due to the various conversions of TCF systems during the second quarter 2021, as well as other streamlining and integration of the operating activities into those of the Company, historical reporting for the former TCF operations is impracticable and thus disclosures of the revenue from the assets acquired and income before income taxes is impracticable for the period subsequent to acquisition.
The following table presents unaudited pro forma information as if the acquisition of TCF had occurred on January 1, 2020 under the “Unaudited Pro Forma” columns. The pro forma adjustments give effect to any change in interest income due to the accretion of the discount (premium) associated with the fair value adjustments to acquired loans and leases, any change in interest expense due to estimated premium amortization/discount accretion associated with the fair value adjustment to acquired interest-bearing deposits and long-term debt and the amortization of the CDI that would have resulted had the deposits been acquired as of January 1, 2020. Pro forma results include Huntington acquisition-related expenses which primarily included, but were not limited to, severance costs, professional services, data processing fees, marketing and advertising expenses totaling $234 million and $524 million for the three and nine-months ended September 30, 2021, respectively. Pro forma results also include adjustments for the elimination of TCF’s accretion of the discount (premium) associated with the fair value adjustments to acquired loans and leases, deposits and long-term debt, elimination of TCF's intangible amortization expense, and related income tax effects. The pro forma information does not necessarily reflect the results of operations that would have occurred had Huntington acquired TCF on January 1, 2020. Furthermore, cost savings and other business synergies related to the acquisition are not reflected in the pro forma amounts.
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Unaudited Pro Forma for |
| | | Three months ended | | Nine months ended |
| | | September 30, | | September 30, |
| (dollar amounts in millions) | | | 2021 | | 2020 | | 2021 | | 2020 |
| Net interest income | | | $ | 1,160 | | | $ | 1,197 | | | $ | 3,625 | | | $ | 3,581 | |
| Noninterest income | | | 535 | | | 554 | | | 1,604 | | | 1,586 | |
| Net income attributable to Huntington Bancshares Inc | | | 377 | | | 364 | | | 1,268 | | | 433 | |
Branch divestiture: In September 2021, Huntington completed the divestiture of 14 branches acquired in the acquisition of TCF and certain related assets and deposit liabilities to Horizon Bank, to satisfy regulatory requirements in connection with the acquisition. Total deposits and loans that were divested to Horizon Bank for the transaction were $847 million and $209 million, respectively.
3. INVESTMENT SECURITIES AND OTHER SECURITIES
Debt securities purchased in which Huntington has the intent and ability to hold to their maturity are classified as held-to-maturity securities. All other debt and equity securities are classified as either available-for-sale or other securities.
The following tables provide amortized cost, fair value, and gross unrealized gains and losses by investment category at March 31,September 30, 2021 and December 31, 2020:
| | | Unrealized | | | Unrealized | |
| (dollar amounts in millions) | (dollar amounts in millions) | Amortized
Cost (1) | | Gross Gains | | Gross Losses | | Fair Value | (dollar amounts in millions) | Amortized
Cost (1) | | Gross
Gains | | Gross
Losses | | Fair Value |
| March 31, 2021 | | | | | | | | |
| September 30, 2021 | | September 30, 2021 | | | | | | | |
| Available-for-sale securities: | Available-for-sale securities: | | Available-for-sale securities: | |
| U.S. Treasury | U.S. Treasury | $ | 5 | | | $ | 0 | | | $ | 0 | | | $ | 5 | | U.S. Treasury | $ | 5 | | | $ | — | | | $ | — | | | $ | 5 | |
| Federal agencies: | Federal agencies: | | Federal agencies: | |
| Residential CMO | Residential CMO | $ | 3,081 | | | $ | 100 | | | $ | (9) | | | $ | 3,172 | | Residential CMO | 3,683 | | | 63 | | | (12) | | | 3,734 | |
| Residential MBS | Residential MBS | 10,708 | | | 61 | | | (124) | | | 10,645 | | Residential MBS | 14,413 | | | 47 | | | (123) | | | 14,337 | |
| Commercial MBS | Commercial MBS | 1,277 | | | 13 | | | (63) | | | 1,227 | | Commercial MBS | 1,522 | | | 11 | | | (35) | | | 1,498 | |
| Other agencies | Other agencies | 44 | | | 2 | | | 0 | | | 46 | | Other agencies | 263 | | | 1 | | | — | | | 264 | |
| Total U.S. Treasury, federal agency and other agency securities | Total U.S. Treasury, federal agency and other agency securities | 15,115 | | | 176 | | | (196) | | | 15,095 | | Total U.S. Treasury, federal agency and other agency securities | 19,886 | | | 122 | | | (170) | | | 19,838 | |
| Municipal securities | Municipal securities | 3,050 | | | 91 | | | (19) | | | 3,122 | | Municipal securities | 3,570 | | | 82 | | | (18) | | | 3,634 | |
| Private-label CMO | Private-label CMO | 50 | | | 0 | | | 0 | | | 50 | | Private-label CMO | 120 | | | — | | | — | | | 120 | |
| Asset-backed securities | Asset-backed securities | 244 | | | 4 | | | (1) | | | 247 | | Asset-backed securities | 284 | | | 3 | | | (2) | | | 285 | |
| Corporate debt | Corporate debt | 888 | | | 0 | | | (31) | | | 857 | | Corporate debt | 1,789 | | | 5 | | | (21) | | | 1,773 | |
| Other securities/Sovereign debt | Other securities/Sovereign debt | 4 | | | 0 | | | 0 | | | 4 | | Other securities/Sovereign debt | 4 | | | — | | | — | | | 4 | |
| Total available-for-sale securities | Total available-for-sale securities | $ | 19,351 | | | $ | 271 | | | $ | (247) | | | $ | 19,375 | | Total available-for-sale securities | $ | 25,653 | | | $ | 212 | | | $ | (211) | | | $ | 25,654 | |
| | Held-to-maturity securities: | Held-to-maturity securities: | | Held-to-maturity securities: | |
| Federal agencies: | Federal agencies: | | Federal agencies: | |
| Residential CMO | Residential CMO | $ | 1,604 | | | $ | 74 | | | $ | 0 | | | $ | 1,678 | | Residential CMO | $ | 2,701 | | | $ | 56 | | | $ | (4) | | | $ | 2,753 | |
| Residential MBS | Residential MBS | 3,259 | | | 69 | | | (18) | | | 3,310 | | Residential MBS | 7,079 | | | 62 | | | (33) | | | 7,108 | |
| Commercial MBS | Commercial MBS | 2,719 | | | 114 | | | 0 | | | 2,833 | | Commercial MBS | 2,468 | | | 77 | | | (1) | | | 2,544 | |
| Other agencies | Other agencies | 230 | | | 8 | | | 0 | | | 238 | | Other agencies | 205 | | | 7 | | | — | | | 212 | |
| Total federal agency and other agency securities | Total federal agency and other agency securities | 7,812 | | | 265 | | | (18) | | | 8,059 | | Total federal agency and other agency securities | 12,453 | | | 202 | | | (38) | | | 12,617 | |
| Municipal securities | Municipal securities | 3 | | | 0 | | | 0 | | | 3 | | Municipal securities | 2 | | | — | | | — | | | 2 | |
| Total held-to-maturity securities | Total held-to-maturity securities | $ | 7,815 | | | $ | 265 | | | $ | (18) | | | $ | 8,062 | | Total held-to-maturity securities | $ | 12,455 | | | $ | 202 | | | $ | (38) | | | $ | 12,619 | |
| | Other securities, at cost: | Other securities, at cost: | | Other securities, at cost: | |
| Non-marketable equity securities: | Non-marketable equity securities: | | Non-marketable equity securities: | |
| Federal Home Loan Bank stock | Federal Home Loan Bank stock | $ | 52 | | | $ | 0 | | | $ | 0 | | | $ | 52 | | Federal Home Loan Bank stock | $ | 52 | | | $ | — | | | $ | — | | | $ | 52 | |
| Federal Reserve Bank stock | Federal Reserve Bank stock | 300 | | | 0 | | | 0 | | | 300 | | Federal Reserve Bank stock | 511 | | | — | | | — | | | 511 | |
| Other securities, at fair value | Other securities, at fair value | | Other securities, at fair value | |
| Mutual funds | Mutual funds | 42 | | | 0 | | | 0 | | | 42 | | Mutual funds | 62 | | | — | | | — | | | 62 | |
| Equity securities | Equity securities | 16 | | | 1 | | | 0 | | | 17 | | Equity securities | 24 | | | — | | | — | | | 24 | |
| Total other securities | Total other securities | $ | 410 | | | $ | 1 | | | $ | 0 | | | $ | 411 | | Total other securities | $ | 649 | | | $ | — | | | $ | — | | | $ | 649 | |
|
(1)Amortized cost amounts excludes accrued interest receivable, which is recorded within other assets on the Consolidated Balance Sheets. At March 31,September 30, 2021, accrued interest receivable on available-for-sale securities and held-to-maturity securities totaled $40$60 million and $18$26 million, respectively.
2021 1Q Form 10-Q 5649 Huntington Bancshares Incorporated
| | | | | | | | | | | | | | | | | | | | | | | |
| | | Unrealized | | |
| (dollar amounts in millions) | Amortized
Cost (1) | | Gross
Gains | | Gross
Losses | | Fair Value |
| December 31, 2020 | | | | | | | |
| Available-for-sale securities: | | | | | | | |
| U.S. Treasury | $ | 5 | | | $ | 0 | | | $ | 0 | | | $ | 5 | |
| Federal agencies: | | | | | | | |
| Residential CMO | $ | 3,550 | | | $ | 121 | | | $ | (5) | | | $ | 3,666 | |
| Residential MBS | 7,843 | | | 97 | | | (5) | | | 7,935 | |
| Commercial MBS | 1,151 | | | 21 | | | (9) | | | 1,163 | |
| Other agencies | 60 | | | 2 | | | 0 | | | 62 | |
| Total U.S. Treasury, federal agency and other agency securities | 12,609 | | | 241 | | | (19) | | | 12,831 | |
| Municipal securities | 2,928 | | | 91 | | | (15) | | | 3,004 | |
| Private-label CMO | 9 | | | 0 | | | 0 | | | 9 | |
| Asset-backed securities | 185 | | | 7 | | | 0 | | | 192 | |
| Corporate debt | 440 | | | 5 | | | 0 | | | 445 | |
| Other securities/Sovereign debt | 4 | | | 0 | | | 0 | | | 4 | |
| Total available-for-sale securities | $ | 16,175 | | | $ | 344 | | | $ | (34) | | | $ | 16,485 | |
| | | | | | | |
| Held-to-maturity securities: | | | | | | | |
| Federal agencies: | | | | | | | |
| Residential CMO | $ | 1,779 | | | $ | 88 | | | $ | 0 | | | $ | 1,867 | |
| Residential MBS | 3,715 | | | 103 | | | 0 | | | 3,818 | |
| Commercial MBS | 3,118 | | | 191 | | | 0 | | | 3,309 | |
| Other agencies | 246 | | | 12 | | | 0 | | | 258 | |
| Total federal agency and other agency securities | 8,858 | | | 394 | | | 0 | | | 9,252 | |
| Municipal securities | 3 | | | 0 | | | 0 | | | 3 | |
| Total held-to-maturity securities | $ | 8,861 | | | $ | 394 | | | $ | 0 | | | $ | 9,255 | |
| | | | | | | |
| Other securities, at cost: | | | | | | | |
| Non-marketable equity securities: | | | | | | | |
| Federal Home Loan Bank stock | $ | 60 | | | $ | 0 | | | $ | 0 | | | $ | 60 | |
| Federal Reserve Bank stock | 299 | | | 0 | | | 0 | | | 299 | |
| Other securities, at fair value | | | | | | | |
| Mutual funds | 50 | | | 0 | | | 0 | | | 50 | |
| Equity securities | 8 | | | 1 | | | 0 | | | 9 | |
| Total other securities | $ | 417 | | | $ | 1 | | | $ | 0 | | | $ | 418 | |
| | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | Unrealized | | |
| (dollar amounts in millions) | Amortized
Cost (1) | | Gross
Gains | | Gross
Losses | | Fair Value |
| December 31, 2020 | | | | | | | |
| Available-for-sale securities: | | | | | | | |
| U.S. Treasury | $ | 5 | | | $ | — | | | $ | — | | | $ | 5 | |
| Federal agencies: | | | | | | | |
| Residential CMO | 3,550 | | | 121 | | | (5) | | | 3,666 | |
| Residential MBS | 7,843 | | | 97 | | | (5) | | | 7,935 | |
| Commercial MBS | 1,151 | | | 21 | | | (9) | | | 1,163 | |
| Other agencies | 60 | | | 2 | | | — | | | 62 | |
| Total U.S. Treasury, federal agency and other agency securities | 12,609 | | | 241 | | | (19) | | | 12,831 | |
| Municipal securities | 2,928 | | | 91 | | | (15) | | | 3,004 | |
| Private-label CMO | 9 | | | — | | | — | | | 9 | |
| Asset-backed securities | 185 | | | 7 | | | — | | | 192 | |
| Corporate debt | 440 | | | 5 | | | — | | | 445 | |
| Other securities/Sovereign debt | 4 | | | — | | | — | | | 4 | |
| Total available-for-sale securities | $ | 16,175 | | | $ | 344 | | | $ | (34) | | | $ | 16,485 | |
| | | | | | | |
| Held-to-maturity securities: | | | | | | | |
| Federal agencies: | | | | | | | |
| Residential CMO | $ | 1,779 | | | $ | 88 | | | $ | — | | | $ | 1,867 | |
| Residential MBS | 3,715 | | | 103 | | | — | | | 3,818 | |
| Commercial MBS | 3,118 | | | 191 | | | — | | | 3,309 | |
| Other agencies | 246 | | | 12 | | | — | | | 258 | |
| Total federal agency and other agency securities | 8,858 | | | 394 | | | — | | | 9,252 | |
| Municipal securities | 3 | | | — | | | — | | | 3 | |
| Total held-to-maturity securities | $ | 8,861 | | | $ | 394 | | | $ | — | | | $ | 9,255 | |
| | | | | | | |
| Other securities, at cost: | | | | | | | |
| Non-marketable equity securities: | | | | | | | |
| Federal Home Loan Bank stock | $ | 60 | | | $ | — | | | $ | — | | | $ | 60 | |
| Federal Reserve Bank stock | 299 | | | — | | | — | | | 299 | |
| Other securities, at fair value | | | | | | | |
| Mutual funds | 50 | | | — | | | — | | | 50 | |
| Equity securities | 8 | | | 1 | | | — | | | 9 | |
| Total other securities | $ | 417 | | | $ | 1 | | | $ | — | | | $ | 418 | |
| | | | | | | |
(1)Amortized cost amounts excludes accrued interest receivable, which is recorded within other assets on the Consolidated Balance Sheets. At December 31, 2020, accrued interest receivable on available-for-sale securities and held-to-maturity securities totaled $32 million and $20 million, respectively.
502021 3Q Form 10-Q Huntington Bancshares Incorporated57
The following table provides the amortized cost and fair value of securities by contractual maturity at March 31,September 30, 2021 and December 31, 2020. Expected maturities may differ from contractual maturities as issuers may have the right to call or prepay obligations with or without incurring penalties.
| | | March 31, 2021 | | December 31, 2020 | | September 30, 2021 | | December 31, 2020 |
| (dollar amounts in millions) | (dollar amounts in millions) | Amortized Cost | | Fair Value | | Amortized Cost | | Fair Value | (dollar amounts in millions) | Amortized Cost | | Fair Value | | Amortized Cost | | Fair Value |
| Available-for-sale securities: | Available-for-sale securities: | | | | | | | | Available-for-sale securities: | | | | | | | |
| Under 1 year | Under 1 year | $ | 366 | | | $ | 357 | | | $ | 308 | | | $ | 304 | | Under 1 year | $ | 354 | | | $ | 351 | | | $ | 308 | | | $ | 304 | |
| After 1 year through 5 years | After 1 year through 5 years | 1,228 | | | 1,237 | | | 1,145 | | | 1,154 | | After 1 year through 5 years | 1,665 | | | 1,668 | | | 1,145 | | | 1,154 | |
| After 5 years through 10 years | After 5 years through 10 years | 2,127 | | | 2,144 | | | 1,607 | | | 1,654 | | After 5 years through 10 years | 2,935 | | | 2,962 | | | 1,607 | | | 1,654 | |
| After 10 years | After 10 years | 15,630 | | | 15,637 | | | 13,115 | | | 13,373 | | After 10 years | 20,699 | | | 20,673 | | | 13,115 | | | 13,373 | |
| Total available-for-sale securities | Total available-for-sale securities | $ | 19,351 | | | $ | 19,375 | | | $ | 16,175 | | | $ | 16,485 | | Total available-for-sale securities | $ | 25,653 | | | $ | 25,654 | | | $ | 16,175 | | | $ | 16,485 | |
| | Held-to-maturity securities: | Held-to-maturity securities: | | Held-to-maturity securities: | |
| | After 1 year through 5 years | After 1 year through 5 years | $ | 142 | | | $ | 148 | | | $ | 160 | | | $ | 169 | | After 1 year through 5 years | $ | 80 | | | $ | 83 | | | $ | 160 | | | $ | 169 | |
| After 5 years through 10 years | After 5 years through 10 years | 121 | | | 126 | | | 131 | | | 138 | | After 5 years through 10 years | 70 | | | 72 | | | 131 | | | 138 | |
| After 10 years | After 10 years | 7,552 | | | 7,788 | | | 8,570 | | | 8,948 | | After 10 years | 12,305 | | | 12,464 | | | 8,570 | | | 8,948 | |
| Total held-to-maturity securities | Total held-to-maturity securities | $ | 7,815 | | | $ | 8,062 | | | $ | 8,861 | | | $ | 9,255 | | Total held-to-maturity securities | $ | 12,455 | | | $ | 12,619 | | | $ | 8,861 | | | $ | 9,255 | |
|
The following tables provide detail on investment securities with unrealized losses aggregated by investment category and the length of time the individual securities have been in a continuous loss position at March 31,September 30, 2021 and December 31, 2020:
| | | Less than 12 Months | | Over 12 Months | | Total | | Less than 12 Months | | Over 12 Months | | Total |
| (dollar amounts in millions) | (dollar amounts in millions) | Fair
Value | | Gross Unrealized
Losses | | Fair
Value | | Gross Unrealized
Losses | | Fair
Value | | Gross Unrealized
Losses | (dollar amounts in millions) | Fair
Value | | Gross Unrealized
Losses | | Fair
Value | | Gross Unrealized
Losses | | Fair
Value | | Gross Unrealized
Losses |
| March 31, 2021 | | | | | | | | | | | | |
| September 30, 2021 | | September 30, 2021 | | | | | | | | | | | |
| Available-for-sale securities: | Available-for-sale securities: | | Available-for-sale securities: | |
| Federal agencies: | Federal agencies: | | Federal agencies: | |
| Residential CMO | Residential CMO | $ | 413 | | | $ | (9) | | | $ | 0 | | | $ | 0 | | | $ | 413 | | | $ | (9) | | Residential CMO | 1,064 | | | (7) | | | 120 | | | (5) | | | 1,184 | | | (12) | |
| Residential MBS | Residential MBS | 7,919 | | | (124) | | | 0 | | | 0 | | | 7,919 | | | (124) | | Residential MBS | 10,212 | | | (123) | | | — | | | — | | | 10,212 | | | (123) | |
| Commercial MBS | Commercial MBS | 761 | | | (63) | | | 0 | | | 0 | | | 761 | | | (63) | | Commercial MBS | 900 | | | (31) | | | 25 | | | (4) | | | 925 | | | (35) | |
| | Other agencies | | Other agencies | 119 | | | — | | | — | | | — | | | 119 | | | — | |
| Total federal agency and other agency securities | Total federal agency and other agency securities | 9,093 | | | (196) | | | 0 | | | 0 | | | 9,093 | | | (196) | | Total federal agency and other agency securities | 12,295 | | | (161) | | | 145 | | | (9) | | | 12,440 | | | (170) | |
| Municipal securities | Municipal securities | 163 | | | (7) | | | 463 | | | (12) | | | 626 | | | (19) | | Municipal securities | 339 | | | (8) | | | 377 | | | (10) | | | 716 | | | (18) | |
| | Private-label CMO | | Private-label CMO | 58 | | — | | — | | — | | 58 | | — |
| Asset-backed securities | Asset-backed securities | 65 | | | (1) | | | 0 | | | 0 | | | 65 | | | (1) | | Asset-backed securities | 186 | | | (1) | | | 7 | | | (1) | | | 193 | | | (2) | |
| Corporate debt | Corporate debt | 816 | | | (31) | | | 0 | | | 0 | | | 816 | | | (31) | | Corporate debt | 1,184 | | | (20) | | | 28 | | | (1) | | | 1,212 | | | (21) | |
| | Total temporarily impaired available-for-sale securities | Total temporarily impaired available-for-sale securities | $ | 10,137 | | | $ | (235) | | | $ | 463 | | | $ | (12) | | | $ | 10,600 | | | $ | (247) | | Total temporarily impaired available-for-sale securities | $ | 14,062 | | | $ | (190) | | | $ | 557 | | | $ | (21) | | | $ | 14,619 | | | $ | (211) | |
| | Held-to-maturity securities: | Held-to-maturity securities: | | Held-to-maturity securities: | |
| Federal agencies: | Federal agencies: | | Federal agencies: | |
| Residential CMO | | Residential CMO | $ | 1,032 | | | $ | (4) | | | $ | — | | | $ | — | | | $ | 1,032 | | | $ | (4) | |
| Residential MBS | | Residential MBS | $ | 4,398 | | | $ | (33) | | | $ | — | | | $ | — | | | $ | 4,398 | | | $ | (33) | |
| Commercial MBS | | Commercial MBS | 271 | | | (1) | | | — | | | — | | | 271 | | | (1) | |
| | Residential MBS | $ | 1,235 | | | (18) | | | 0 | | | 0 | | | 1,235 | | | (18) | | |
| | Total federal agency and other agency securities | | Total federal agency and other agency securities | 5,701 | | | (38) | | | — | | | — | | | 5,701 | | | (38) | |
| | Total temporarily impaired held-to-maturity securities | Total temporarily impaired held-to-maturity securities | $ | 1,235 | | | $ | (18) | | | $ | 0 | | | $ | 0 | | | $ | 1,235 | | | $ | (18) | | Total temporarily impaired held-to-maturity securities | $ | 5,701 | | | $ | (38) | | | $ | — | | | $ | — | | | $ | 5,701 | | | $ | (38) | |
2021 1Q Form 10-Q 5851 Huntington Bancshares Incorporated
| | | Less than 12 Months | | Over 12 Months | | Total | | Less than 12 Months | | Over 12 Months | | Total |
| (dollar amounts in millions) | (dollar amounts in millions) | Fair
Value | | Gross Unrealized
Losses | | Fair
Value | | Gross Unrealized
Losses | | Fair
Value | | Gross Unrealized
Losses | (dollar amounts in millions) | Fair
Value | | Gross Unrealized
Losses | | Fair
Value | | Gross Unrealized
Losses | | Fair
Value | | Gross Unrealized
Losses |
| December 31, 2020 | December 31, 2020 | | | | | | | | | | | | December 31, 2020 | | | | | | | | | | | |
| Available-for-sale securities: | Available-for-sale securities: | | Available-for-sale securities: | |
| Federal agencies: | Federal agencies: | | Federal agencies: | |
| Residential CMO | Residential CMO | $ | 302 | | | $ | (5) | | | $ | 0 | | | $ | 0 | | | $ | 302 | | | $ | (5) | | Residential CMO | $ | 302 | | | $ | (5) | | | $ | — | | | $ | — | | | $ | 302 | | | $ | (5) | |
| Residential MBS | Residential MBS | 1,633 | | | (5) | | | 0 | | | 0 | | | 1,633 | | | (5) | | Residential MBS | 1,633 | | | (5) | | | — | | | — | | | 1,633 | | | (5) | |
| Commercial MBS | Commercial MBS | 321 | | | (9) | | | 0 | | | 0 | | | 321 | | | (9) | | Commercial MBS | 321 | | | (9) | | | — | | | — | | | 321 | | | (9) | |
| | Total federal agency and other agency securities | Total federal agency and other agency securities | 2,256 | | | (19) | | | 0 | | | 0 | | | 2,256 | | | (19) | | Total federal agency and other agency securities | 2,256 | | | (19) | | | — | | | — | | | 2,256 | | | (19) | |
| Municipal securities | Municipal securities | 110 | | | (3) | | | 490 | | | (12) | | | 600 | | | (15) | | Municipal securities | 110 | | | (3) | | | 490 | | | (12) | | | 600 | | | (15) | |
| | Asset-backed securities | Asset-backed securities | 15 | | | 0 | | | 0 | | | 0 | | | 15 | | | 0 | | Asset-backed securities | 15 | | | — | | | — | | | — | | | 15 | | | — | |
| Corporate debt | Corporate debt | 51 | | | 0 | | | 0 | | | 0 | | | 51 | | | 0 | | Corporate debt | 51 | | | — | | | — | | | — | | | 51 | | | — | |
| | Total temporarily impaired available-for-sale securities | Total temporarily impaired available-for-sale securities | $ | 2,432 | | | $ | (22) | | | $ | 490 | | | $ | (12) | | | $ | 2,922 | | | $ | (34) | | Total temporarily impaired available-for-sale securities | $ | 2,432 | | | $ | (22) | | | $ | 490 | | | $ | (12) | | | $ | 2,922 | | | $ | (34) | |
|
During the 2021 second quarter, Huntington transferred $3.0 billion of securities from the AFS portfolio to the HTM portfolio. At the time of the transfer, AOCI included $2 million of unrealized gains attributed to these securities. This gain will be amortized into interest income over the remaining life of the securities.
At March 31,September 30, 2021 and December 31, 2020, the carrying value of investment securities pledged to secure public and trust deposits, trading account liabilities, U.S. Treasury demand notes, security repurchase agreements and to support borrowing capacity totaled $13.9$23.2 billion and $14.4 billion, respectively. There were no securities of a single issuer, which were not governmental or government-sponsored, that exceeded 10% of shareholders’ equity at either March 31,September 30, 2021 or December 31, 2020. At March 31,September 30, 2021, all HTM debt securities are considered AAA rated. In addition, there were no HTM debt securities considered past due at March 31,September 30, 2021.
AFS Securities Impairment/HTM Securities Allowance for Credit Losses
Based on an evaluation of available information including security type, counterparty credit quality, past events, current conditions, and reasonable and supportable forecasts that are relevant to collectability, Huntington has concluded that it expects to receive all contractual cash flows from each security held in its AFS and HTM debt securities portfolio. As such, no allowance or impairment is recorded with respect to securities as of March 31,September 30, 2021 and December 31, 2020.
522021 3Q Form 10-Q Huntington Bancshares Incorporated59
4. LOANS /AND LEASES
Loans and leases which Huntington has the intent and ability to hold for the foreseeable future, or until maturity or payoff, are classified in the Unaudited Condensed Consolidated Balance Sheets as loans and leases. The total balance of unamortized premiums, discounts, fees, and costs, recognized as part of loans and leases, was a net premium of $473 million and $491 million at March 31, 2021 and December 31, 2020, respectively.
Loan and Lease Portfolio Composition
The following table provides a detailed listing of Huntington’s loan and lease portfolio at March 31,September 30, 2021 and December 31, 2020.
| | (dollar amounts in millions) | (dollar amounts in millions) | March 31, 2021 | | December 31, 2020 | (dollar amounts in millions) | September 30, 2021 | | December 31, 2020 |
| | Loans and leases: | | | | |
| Commercial loan and lease portfolio: | | Commercial loan and lease portfolio: | | | |
| Commercial and industrial | Commercial and industrial | $ | 34,464 | | | $ | 35,373 | | Commercial and industrial | $ | 40,452 | | | $ | 33,151 | |
| Commercial real estate | Commercial real estate | 7,179 | | | 7,199 | | Commercial real estate | 14,694 | | | 7,199 | |
| Lease financing | | Lease financing | 4,991 | | | 2,222 | |
| Total commercial loan and lease portfolio | | Total commercial loan and lease portfolio | 60,137 | | | 42,572 | |
| Consumer loan portfolio: | | Consumer loan portfolio: | |
| Automobile | Automobile | 12,591 | | | 12,778 | | Automobile | 13,305 | | | 12,778 | |
| Residential mortgage | | Residential mortgage | 18,922 | | | 12,141 | |
| Home equity | Home equity | 8,727 | | | 8,894 | | Home equity | 10,919 | | | 8,894 | |
| Residential mortgage | 12,092 | | | 12,141 | | |
| RV and marine | RV and marine | 4,218 | | | 4,190 | | RV and marine | 5,052 | | | 4,190 | |
| Other consumer | Other consumer | 959 | | | 1,033 | | Other consumer | 2,232 | | | 1,033 | |
| Loans and leases | $ | 80,230 | | | $ | 81,608 | | |
| Total consumer loan portfolio | | Total consumer loan portfolio | 50,430 | | | 39,036 | |
| Total loans and leases (1) (2) | | Total loans and leases (1) (2) | 110,567 | | | 81,608 | |
| Allowance for loan and lease losses | Allowance for loan and lease losses | (1,703) | | | (1,814) | | Allowance for loan and lease losses | (2,107) | | | (1,814) | |
| Net loans and leases | Net loans and leases | $ | 78,527 | | | $ | 79,794 | | Net loans and leases | $ | 108,460 | | | $ | 79,794 | |
Equipment Leases(1)Loans and leases are reported at principal amount outstanding including unamortized purchase premiums and discounts, unearned income, and net direct fees and costs associated with originating and acquiring loans and leases. The aggregate amount of these loan and lease adjustments was a net (discount) premium of $(85) million and $171 million at September 30, 2021 and December 31, 2020, respectively.
(2)The total amount of accrued interest recorded for these loans and leases at September 30, 2021, was $146 million and $143 million of commercial and consumer loan and lease portfolios, respectively, and at December 31, 2020, was $146 million and $123 million of commercial and consumer loan and lease portfolios, respectively. Accrued interest is presented in other assets within the Condensed Consolidated Balance Sheets.
Lease Financing
Huntington leases equipment to customers, and substantially all such arrangements are classified as either sales-type or direct financing leases, which are included in C&I loans.commercial loans and leases. These leases are reported at the aggregate of lease payments receivable and estimated residual values, net of unearned and deferred income, and any initial direct costs incurred to originate these leases.
Huntington assesses net investments in leases (including residual values) for impairment and recognizes any impairment losses in accordance with the impairment guidance for financial instruments. As such, net investments in leases may be reduced by an allowance for credit losses,ACL, with changes recognized as provision expense.
The following table presents net investments in lease financing receivables by category at March 31,September 30, 2021 and December 31, 2020.
| | (dollar amounts in millions) | (dollar amounts in millions) | March 31,
2021 | | December 31,
2020 | (dollar amounts in millions) | September 30,
2021 | | December 31,
2020 |
| Commercial and industrial: | | | | |
| | Lease payments receivable | Lease payments receivable | $ | 1,714 | | | $ | 1,737 | | Lease payments receivable | $ | 4,622 | | | $ | 1,737 | |
| Estimated residual value of leased assets | Estimated residual value of leased assets | 622 | | | 664 | | Estimated residual value of leased assets | 781 | | | 664 | |
| Gross investment in commercial and industrial lease financing receivables | 2,336 | | | 2,401 | | |
| Gross investment in lease financing receivables | | Gross investment in lease financing receivables | 5,403 | | | 2,401 | |
| Deferred origination costs | Deferred origination costs | 21 | | | 21 | | Deferred origination costs | 24 | | | 21 | |
| Deferred fees | (190) | | | (200) | | |
| Total net investment in commercial and industrial lease financing receivables | $ | 2,167 | | | $ | 2,222 | | |
| Deferred fees, unearned income and other | | Deferred fees, unearned income and other | (436) | | | (200) | |
| Total lease financing receivables | | Total lease financing receivables | $ | 4,991 | | | $ | 2,222 | |
The carrying value of residual values guaranteed was $77$463 million and $93 million as of March 31,September 30, 2021 and December 31, 2020, respectively. The future lease rental payments due from customers on sales-type and direct financing leases at March 31,September 30, 2021, totaled $1.7$4.6 billion and were due as follows: $0.6$0.8 billion in 2021, $0.4$0.8 billion in 2022, $0.3$0.8 billion in 2023, $0.2$0.8 billion in 2024, $0.1$0.7 billion in 2025, and $0.1$0.7 billion thereafter. Interest income recognized for these types of leases was $24$73 million and $27$26 million for the three-month periods ended March 31,September 30, 2021 and 2020, respectively. For the nine-month periods ended September 30, 2021 and 2020, interest income recognized was $154 million and $81 million, respectively.
2021 1Q Form 10-Q 6053 Huntington Bancshares Incorporated
Nonaccrual and Past Due Loans and Leases
The following table presents NALs by loan class at March 31,September 30, 2021 and December 31, 2020 (1):2020:
| | | | | | | | | | | | | | | | | |
| March 31, 2021 | | December 31, 2020 |
| (dollar amounts in millions) | Nonaccrual loans with no ACL | Total nonaccrual loans | | Nonaccrual loans with no ACL | Total nonaccrual loans |
| Commercial and industrial | $ | 103 | | $ | 343 | | | $ | 69 | | $ | 353 | |
| Commercial real estate | 0 | | 8 | | | 8 | | 15 | |
| Automobile | 0 | | 3 | | | 0 | | 4 | |
| Home equity | 0 | | 71 | | | 0 | | 70 | |
| Residential mortgage | 0 | | 90 | | | 0 | | 88 | |
| RV and marine | 0 | | 1 | | | 0 | | 2 | |
| | | | | |
| Total nonaccrual loans | $ | 103 | | $ | 516 | | | $ | 77 | | $ | 532 | |
| | | | | |
(1) Generally excludes loans that were under payment deferral or granted other assistance, including amendments or waivers of financial covenants in response to the COVID-19 pandemic. | | | | | | | | | | | | | | | | | |
| September 30, 2021 | | December 31, 2020 |
| (dollar amounts in millions) | Nonaccrual loans and leases with no ACL | Total nonaccrual loans and leases | | Nonaccrual loans and leases with no ACL | Total nonaccrual loans and leases |
| Commercial and industrial | $ | 141 | | $ | 494 | | | $ | 69 | | $ | 349 | |
| Commercial real estate | 27 | | 103 | | | 8 | | 15 | |
| Lease financing | 2 | | 60 | | | — | | 4 | |
| Automobile | — | | 3 | | | — | | 4 | |
| Residential mortgage | — | | 108 | | | — | | 88 | |
| Home equity | — | | 87 | | | — | | 70 | |
| RV and marine | — | | 6 | | | — | | 2 | |
| Other consumer | — | | — | | | — | | — | |
| Total nonaccrual loans and leases | $ | 170 | | $ | 861 | | | $ | 77 | | $ | 532 | |
| | | | | |
The following table presents an aging analysis of loans and leases, including past due loans and leases, by loan class at March 31,September 30, 2021 and December 31, 2020:
| | | March 31, 2021 | | | September 30, 2021 | |
| | Past Due (1) | | | Loans Accounted for Under FVO | | Total Loans
and Leases | | 90 or
more days
past due
and accruing | | | Past Due (1) | | | Loans Accounted for Under FVO | | Total Loans
and Leases | | 90 or
more days
past due
and accruing | |
| (dollar amounts in millions) | (dollar amounts in millions) | 30-59
Days | | 60-89
Days | | 90 or
more days | | Total | | Current | | | | (dollar amounts in millions) | 30-59
Days | | 60-89
Days | | 90 or
more days | | Total | | Current | | | |
| Commercial and industrial | Commercial and industrial | $ | 37 | | | $ | 20 | | | $ | 96 | | | $ | 153 | | | $ | 34,311 | | | | $ | 0 | | | $ | 34,464 | | | $ | 8 | | (3) | Commercial and industrial | $ | 86 | | | $ | 28 | | | $ | 80 | | | $ | 194 | | | $ | 40,258 | | | | $ | — | | | $ | 40,452 | | | $ | 6 | | |
| Commercial real estate | Commercial real estate | 1 | | | 1 | | | 2 | | | 4 | | | 7,175 | | | | 0 | | | 7,179 | | | 0 | | | Commercial real estate | 9 | | | 5 | | | 18 | | | 32 | | | 14,662 | | | | — | | | 14,694 | | | — | | |
| Lease financing | | Lease financing | 87 | | | 20 | | | 19 | | | 126 | | | 4,865 | | | | — | | | 4,991 | | | 12 | | (2) |
| Automobile | Automobile | 50 | | | 12 | | | 6 | | | 68 | | | 12,523 | | | | 0 | | | 12,591 | | | 5 | | | Automobile | 61 | | | 13 | | | 7 | | | 81 | | | 13,224 | | | | — | | | 13,305 | | | 5 | | |
| Residential mortgage | | Residential mortgage | 106 | | | 44 | | | 212 | | | 362 | | | 18,422 | | | | 138 | | | 18,922 | | | 138 | | (3) |
| Home equity | Home equity | 23 | | | 11 | | | 58 | | | 92 | | | 8,634 | | | | 1 | | | 8,727 | | | 10 | | | Home equity | 42 | | | 14 | | | 65 | | | 121 | | | 10,797 | | | | 1 | | | 10,919 | | | 10 | | |
| Residential mortgage | 78 | | | 26 | | | 194 | | | 298 | | | 11,677 | | | | 117 | | | 12,092 | | | 128 | | (4) | |
| RV and marine | RV and marine | 11 | | | 3 | | | 2 | | | 16 | | | 4,202 | | | | 0 | | | 4,218 | | | 1 | | | RV and marine | 12 | | | 2 | | | 3 | | | 17 | | | 5,035 | | | | — | | | 5,052 | | | 2 | | |
| Other consumer | Other consumer | 6 | | | 2 | | | 2 | | | 10 | | | 949 | | | | 0 | | | 959 | | | 2 | | | Other consumer | 11 | | | 3 | | | 2 | | | 16 | | | 2,216 | | | | — | | | 2,232 | | | 2 | | |
| Total loans and leases | Total loans and leases | $ | 206 | | | $ | 75 | | | $ | 360 | | | $ | 641 | | | $ | 79,471 | | | | $ | 118 | | | $ | 80,230 | | | $ | 154 | | | Total loans and leases | $ | 414 | | | $ | 129 | | | $ | 406 | | | $ | 949 | | | $ | 109,479 | | | | $ | 139 | | | $ | 110,567 | | | $ | 175 | | |
| | | December 31, 2020 | | | December 31, 2020 | |
| | Past Due (1)(2) | | | Loans Accounted for Under FVO | | Total Loans
and Leases | | 90 or
more days
past due
and accruing | | | Past Due (1)(4) | | | Loans Accounted for Under FVO | | Total Loans
and Leases | | 90 or
more days
past due
and accruing | |
| (dollar amounts in millions) | (dollar amounts in millions) | 30-59
Days | | 60-89
Days | | 90 or
more days | | Total | | Current | | | | (dollar amounts in millions) | 30-59
Days | | 60-89
Days | | 90 or
more days | | Total | | Current | | | | Loans Accounted for Under FVO | Total Loans
and Leases | 90 or
more days
past due
and accruing |
| Commercial and industrial | Commercial and industrial | $ | 60 | | | $ | 38 | | | $ | 95 | | | $ | 193 | | | $ | 35,180 | | | | $ | 0 | | | $ | 35,373 | | | $ | 10 | | (3) | Commercial and industrial | $ | 38 | | | $ | 33 | | | $ | 82 | | | $ | 153 | | | $ | 32,998 | | | | $ | — | | $ | 33,151 | | $ | — | | |
| Commercial real estate | Commercial real estate | 0 | | | 1 | | | 11 | | | 12 | | | 7,187 | | | | 0 | | | 7,199 | | | 0 | | | Commercial real estate | — | | | 1 | | | 11 | | | 12 | | | 7,187 | | | | — | | | 7,199 | | | — | | |
| Lease financing | | Lease financing | 22 | | | 5 | | | 13 | | | 40 | | | 2,182 | | | | — | | | 2,222 | | | 10 | | (2) |
| Automobile | Automobile | 84 | | | 22 | | | 12 | | | 118 | | | 12,660 | | | | 0 | | | 12,778 | | | 9 | | | Automobile | 84 | | | 22 | | | 12 | | | 118 | | | 12,660 | | | | — | | | 12,778 | | | 9 | | |
| Residential mortgage | | Residential mortgage | 114 | | | 38 | | | 194 | | | 346 | | | 11,702 | | | | 93 | | | 12,141 | | | 132 | | (3) |
| Home equity | Home equity | 35 | | | 15 | | | 61 | | | 111 | | | 8,782 | | | | 1 | | | 8,894 | | | 14 | | | Home equity | 35 | | | 15 | | | 61 | | | 111 | | | 8,782 | | | | 1 | | | 8,894 | | | 14 | | |
| Residential mortgage | 114 | | | 38 | | | 194 | | | 346 | | | 11,702 | | | | 93 | | | 12,141 | | | 132 | | (4) | |
| RV and marine | RV and marine | 17 | | | 3 | | | 3 | | | 23 | | | 4,167 | | | | 0 | | | 4,190 | | | 3 | | | RV and marine | 17 | | | 3 | | | 3 | | | 23 | | | 4,167 | | | | — | | | 4,190 | | | 3 | | |
| Other consumer | Other consumer | 9 | | | 4 | | | 3 | | | 16 | | | 1,017 | | | | 0 | | | 1,033 | | | 3 | | | Other consumer | 9 | | | 4 | | | 3 | | | 16 | | | 1,017 | | | | — | | | 1,033 | | | 3 | | |
| Total loans and leases | Total loans and leases | $ | 319 | | | $ | 121 | | | $ | 379 | | | $ | 819 | | | $ | 80,695 | | | | $ | 94 | | | $ | 81,608 | | | $ | 171 | | | Total loans and leases | $ | 319 | | | $ | 121 | | | $ | 379 | | | $ | 819 | | | $ | 80,695 | | | | $ | 94 | | | $ | 81,608 | | | $ | 171 | | |
(1)NALs are included in this aging analysis based on the loan’s past due status.
(2)Amounts include Huntington Technology Finance administrative lease delinquencies.
(3)Amounts include mortgage loans insured by U.S. government agencies.
(4)The principal balance of loans in payment deferral programs offered in response to the COVID-19 pandemic which are performing according to their modified terms are generally not considered delinquent.
(3)Amounts include Huntington Technology Finance administrative lease delinquencies.
(4)Amounts include mortgage loans insured by U.S. government agencies.
542021 3Q Form 10-Q Huntington Bancshares Incorporated61
Credit Quality Indicators
See Note 5 “Loans / Leases and Allowance for Credit Losses”“Loans/Leases” to the Consolidated Financial Statements of theappearing in Huntington’s 2020 Annual Report on Form 10-K for the year ended December 31, 2020 for a description of the credit quality indicators Huntington utilizes for monitoring credit quality and for determining an appropriate ACL level.
To facilitate the monitoring of credit quality for commercial loans, and for purposes of determining an appropriate ACL level for these loans, Huntington utilizes the following internally defined categories of credit grades:
•Pass - Higher quality loans that do not fit any of the other categories described below.
•OLEM - The credit risk may be relatively minor yet represents a risk given certain specific circumstances. If the potential weaknesses are not monitored or mitigated, the loan may weaken or the collateral may be inadequate to protect Huntington’s position in the future. For these reasons, Huntington considers the loans to be potential problem loans.
•Substandard - Inadequately protected loans resulting from the borrower’s ability to repay, equity, and/or the collateral pledged to secure the loan. These loans have identified weaknesses that could hinder normal repayment or collection of the debt. It is likely Huntington will sustain some loss if any identified weaknesses are not mitigated.
•Doubtful - Loans that have all of the weaknesses inherent in those loans classified as Substandard, with the added elements of the full collection of the loan is improbable and that the possibility of loss is high.
Loans are generally assigned a category of “Pass” rating upon initial approval and subsequently updated as appropriate based on the borrower’s financial performance.
Commercial loans categorized as OLEM, Substandard, or Doubtful are considered Criticized loans. Commercial loans categorized as Substandard or Doubtful are both considered Classified loans.
For all classes within the consumer loan portfolios, loans are assigned pool level PD factors based on the FICO range within which the borrower’s credit bureau score falls. A credit bureau score is a credit score developed by FICO based on data provided by the credit bureaus. The credit bureau score is widely accepted as the standard measure of consumer credit risk used by lenders, regulators, rating agencies, and consumers. The higher the credit bureau score, the higher likelihood of repayment and therefore, an indicator of higher credit quality.
Huntington assesses the risk in the loan portfolio by utilizing numerous risk characteristics. The classifications described above, and also presented in the table below, represent one of those characteristics that are closely monitored in the overall credit risk management processes.
2021 1Q Form 10-Q 6255 Huntington Bancshares Incorporated
The following tables present each loanthe amortized cost basis of loans and lease classleases by vintage and credit quality indicator at March 31,September 30, 2021 and December 31, 2020 respectively:
| | | As of March 31, 2021 | | As of September 30, 2021 |
| | Term Loans Amortized Cost Basis by Origination Year | | Revolver Total at Amortized Cost Basis | | Revolver Total Converted to Term Loans | | | Term Loans Amortized Cost Basis by Origination Year | | Revolver Total at Amortized Cost Basis | | Revolver Total Converted to Term Loans | |
| (dollar amounts in millions) | (dollar amounts in millions) | | 2021 | | 2020 | | 2019 | | 2018 | | 2017 | | Prior | | Total (3) | (dollar amounts in millions) | | 2021 | | 2020 | | 2019 | | 2018 | | 2017 | | Prior | | Total |
| Commercial and industrial | Commercial and industrial | | | | | | | | | | | | | | | | | | | Commercial and industrial | | | | | | | | | | | | | | | | | | |
| Credit Quality Indicator (1): | Credit Quality Indicator (1): | | Credit Quality Indicator (1): | |
| Pass | Pass | | $ | 4,040 | | | $ | 10,291 | | | $ | 4,087 | | | $ | 2,369 | | | $ | 1,215 | | | $ | 1,605 | | | $ | 8,656 | | | $ | 2 | | | $ | 32,265 | | Pass | | $ | 10,821 | | | $ | 6,941 | | | $ | 4,246 | | | $ | 2,626 | | | $ | 1,222 | | | $ | 1,320 | | | $ | 10,698 | | | $ | 3 | | | $ | 37,877 | |
| OLEM | OLEM | | 122 | | | 282 | | | 98 | | | 91 | | | 41 | | | 92 | | | 128 | | | 0 | | | 854 | | OLEM | | 148 | | | 204 | | | 176 | | | 122 | | | 33 | | | 81 | | | 133 | | | — | | | 897 | |
| Substandard | Substandard | | 54 | | | 216 | | | 110 | | | 176 | | | 184 | | | 212 | | | 386 | | | 0 | | | 1,338 | | Substandard | | 182 | | | 171 | | | 266 | | | 244 | | | 146 | | | 193 | | | 469 | | | — | | | 1,671 | |
| Doubtful | Doubtful | | 1 | | | 4 | | | 0 | | | 1 | | | 0 | | | 0 | | | 1 | | | 0 | | | 7 | | Doubtful | | 1 | | | — | | | — | | | 4 | | | — | | | 1 | | | 1 | | | — | | | 7 | |
| Total Commercial and industrial | Total Commercial and industrial | | $ | 4,217 | | | $ | 10,793 | | | $ | 4,295 | | | $ | 2,637 | | | $ | 1,440 | | | $ | 1,909 | | | $ | 9,171 | | | $ | 2 | | | $ | 34,464 | | Total Commercial and industrial | | $ | 11,152 | | | $ | 7,316 | | | $ | 4,688 | | | $ | 2,996 | | | $ | 1,401 | | | $ | 1,595 | | | $ | 11,301 | | | $ | 3 | | | $ | 40,452 | |
| | Commercial real estate | Commercial real estate | | Commercial real estate | |
| Credit Quality Indicator (1): | Credit Quality Indicator (1): | | Credit Quality Indicator (1): | |
| Pass | Pass | | $ | 406 | | | $ | 1,605 | | | $ | 1,475 | | | $ | 1,077 | | | $ | 454 | | | $ | 999 | | | $ | 624 | | | $ | 0 | | | $ | 6,640 | | Pass | | $ | 2,561 | | | $ | 2,813 | | | $ | 2,939 | | | $ | 1,769 | | | $ | 929 | | | $ | 1,286 | | | $ | 613 | | | $ | — | | | $ | 12,910 | |
| OLEM | OLEM | | 2 | | | 88 | | | 31 | | | 62 | | | 68 | | | 35 | | | 1 | | | 0 | | | 287 | | OLEM | | 57 | | | 172 | | | 77 | | | 78 | | | 82 | | | 46 | | | 1 | | | — | | | 513 | |
| Substandard | Substandard | | 4 | | | 23 | | | 114 | | | 7 | | | 27 | | | 38 | | | 39 | | | 0 | | | 252 | | Substandard | | 280 | | | 284 | | | 329 | | | 134 | | | 149 | | | 77 | | | 18 | | | — | | | 1,271 | |
| | Total Commercial real estate | Total Commercial real estate | | $ | 412 | | | $ | 1,716 | | | $ | 1,620 | | | $ | 1,146 | | | $ | 549 | | | $ | 1,072 | | | $ | 664 | | | $ | 0 | | | $ | 7,179 | | Total Commercial real estate | | $ | 2,898 | | | $ | 3,269 | | | $ | 3,345 | | | $ | 1,981 | | | $ | 1,160 | | | $ | 1,409 | | | $ | 632 | | | $ | — | | | $ | 14,694 | |
| Lease financing | | Lease financing | |
| Credit Quality Indicator (1): | | Credit Quality Indicator (1): | |
| Pass | | Pass | | $ | 1,383 | | | $ | 1,655 | | | $ | 915 | | | $ | 499 | | | $ | 282 | | | $ | 168 | | | $ | — | | | $ | — | | | $ | 4,902 | |
| OLEM | | OLEM | | 8 | | | 10 | | | 9 | | | 4 | | | 4 | | | 1 | | | — | | | — | | | 36 | |
| Substandard | | Substandard | | 3 | | | 14 | | | 18 | | | 1 | | | 8 | | | 9 | | | — | | | — | | | 53 | |
| | Total Lease financing | | Total Lease financing | | $ | 1,394 | | | $ | 1,679 | | | $ | 942 | | | $ | 504 | | | $ | 294 | | | $ | 178 | | | $ | — | | | $ | — | | | $ | 4,991 | |
| Automobile | Automobile | | Automobile | |
| Credit Quality Indicator (2): | Credit Quality Indicator (2): | | Credit Quality Indicator (2): | |
| 750+ | 750+ | | $ | 771 | | | $ | 2,381 | | | $ | 1,817 | | | $ | 991 | | | $ | 608 | | | $ | 279 | | | $ | 0 | | | $ | 0 | | | $ | 6,847 | | 750+ | | $ | 2,250 | | | $ | 2,112 | | | $ | 1,563 | | | $ | 785 | | | $ | 441 | | | $ | 174 | | | $ | — | | | $ | — | | | $ | 7,325 | |
| 650-749 | 650-749 | | 479 | | | 1,895 | | | 1,161 | | | 642 | | | 315 | | | 163 | | | 0 | | | 0 | | | 4,655 | | 650-749 | | 1,879 | | | 1,442 | | | 867 | | | 458 | | | 212 | | | 96 | | | — | | | — | | | 4,954 | |
| <650 | <650 | | 44 | | | 336 | | | 271 | | | 216 | | | 132 | | | 90 | | | 0 | | | 0 | | | 1,089 | | <650 | | 283 | | | 252 | | | 200 | | | 149 | | | 87 | | | 55 | | | — | | | — | | | 1,026 | |
| | Total Automobile | Total Automobile | | $ | 1,294 | | | $ | 4,612 | | | $ | 3,249 | | | $ | 1,849 | | | $ | 1,055 | | | $ | 532 | | | $ | 0 | | | $ | 0 | | | $ | 12,591 | | Total Automobile | | $ | 4,412 | | | $ | 3,806 | | | $ | 2,630 | | | $ | 1,392 | | | $ | 740 | | | $ | 325 | | | $ | — | | | $ | — | | | $ | 13,305 | |
| Residential mortgage | | Residential mortgage | |
| Credit Quality Indicator (2): | | Credit Quality Indicator (2): | |
| 750+ | | 750+ | | $ | 4,359 | | | $ | 4,253 | | | $ | 1,214 | | | $ | 678 | | | $ | 817 | | | $ | 2,132 | | | $ | — | | | $ | — | | | $ | 13,453 | |
| 650-749 | | 650-749 | | 1,443 | | | 960 | | | 420 | | | 301 | | | 270 | | | 975 | | | — | | | — | | | 4,369 | |
| <650 | | <650 | | 39 | | | 56 | | | 99 | | | 125 | | | 102 | | | 541 | | | — | | | — | | | 962 | |
| | Total Residential mortgage | | Total Residential mortgage | | $ | 5,841 | | | $ | 5,269 | | | $ | 1,733 | | | $ | 1,104 | | | $ | 1,189 | | | $ | 3,648 | | | $ | — | | | $ | — | | | $ | 18,784 | |
| Home equity | Home equity | | Home equity | |
| Credit Quality Indicator (2): | Credit Quality Indicator (2): | | Credit Quality Indicator (2): | |
| 750+ | 750+ | | $ | 187 | | | $ | 780 | | | $ | 21 | | | $ | 22 | | | $ | 28 | | | $ | 479 | | | $ | 4,201 | | | $ | 189 | | | $ | 5,907 | | 750+ | | $ | 570 | | | $ | 812 | | | $ | 101 | | | $ | 70 | | | $ | 61 | | | $ | 459 | | | $ | 4,796 | | | $ | 201 | | | $ | 7,070 | |
| 650-749 | 650-749 | | 37 | | | 137 | | | 8 | | | 6 | | | 8 | | | 171 | | | 1,810 | | | 176 | | | 2,353 | | 650-749 | | 138 | | | 156 | | | 98 | | | 62 | | | 38 | | | 232 | | | 2,320 | | | 172 | | | 3,216 | |
| <650 | <650 | | 1 | | | 1 | | | 1 | | | 1 | | | 2 | | | 74 | | | 286 | | | 100 | | | 466 | | <650 | | 5 | | | 10 | | | 30 | | | 28 | | | 23 | | | 114 | | | 331 | | | 91 | | | 632 | |
| | Total Home equity | Total Home equity | | $ | 225 | | | $ | 918 | | | $ | 30 | | | $ | 29 | | | $ | 38 | | | $ | 724 | | | $ | 6,297 | | | $ | 465 | | | $ | 8,726 | | Total Home equity | | $ | 713 | | | $ | 978 | | | $ | 229 | | | $ | 160 | | | $ | 122 | | | $ | 805 | | | $ | 7,447 | | | $ | 464 | | | $ | 10,918 | |
| | Residential mortgage | | |
| Credit Quality Indicator (2): | | |
| 750+ | | $ | 963 | | | $ | 3,204 | | | $ | 1,143 | | | $ | 727 | | | $ | 883 | | | $ | 1,723 | | | $ | 1 | | | $ | 0 | | | $ | 8,644 | | |
| 650-749 | | 254 | | | 836 | | | 355 | | | 255 | | | 249 | | | 621 | | | 0 | | | 0 | | | 2,570 | | |
| <650 | | 7 | | | 37 | | | 90 | | | 113 | | | 106 | | | 408 | | | 0 | | | 0 | | | 761 | | |
| | Total Residential mortgage | | $ | 1,224 | | | $ | 4,077 | | | $ | 1,588 | | | $ | 1,095 | | | $ | 1,238 | | | $ | 2,752 | | | $ | 1 | | | $ | 0 | | | $ | 11,975 | | |
| | RV and marine | RV and marine | | RV and marine | |
| Credit Quality Indicator (2): | Credit Quality Indicator (2): | | Credit Quality Indicator (2): | |
| 750+ | 750+ | | $ | 267 | | | $ | 1,050 | | | $ | 491 | | | $ | 547 | | | $ | 311 | | | $ | 375 | | | $ | 0 | | | $ | 0 | | | $ | 3,041 | | 750+ | | $ | 1,022 | | | $ | 982 | | | $ | 495 | | | $ | 518 | | | $ | 301 | | | $ | 364 | | | $ | — | | | $ | — | | | $ | 3,682 | |
| 650-749 | 650-749 | | 46 | | | 351 | | | 193 | | | 182 | | | 126 | | | 176 | | | 0 | | | 0 | | | 1,074 | | 650-749 | | 312 | | | 303 | | | 190 | | | 173 | | | 117 | | | 167 | | | — | | | — | | | 1,262 | |
| <650 | <650 | | 0 | | | 8 | | | 15 | | | 21 | | | 22 | | | 37 | | | 0 | | | 0 | | | 103 | | <650 | | 5 | | | 11 | | | 17 | | | 20 | | | 22 | | | 33 | | | — | | | — | | | 108 | |
| | Total RV and marine | Total RV and marine | | $ | 313 | | | $ | 1,409 | | | $ | 699 | | | $ | 750 | | | $ | 459 | | | $ | 588 | | | $ | 0 | | | $ | 0 | | | $ | 4,218 | | Total RV and marine | | $ | 1,339 | | | $ | 1,296 | | | $ | 702 | | | $ | 711 | | | $ | 440 | | | $ | 564 | | | $ | — | | | $ | — | | | $ | 5,052 | |
| | Other consumer | Other consumer | | Other consumer | |
| Credit Quality Indicator (2): | Credit Quality Indicator (2): | | Credit Quality Indicator (2): | |
| 750+ | 750+ | | $ | 22 | | | $ | 59 | | | $ | 52 | | | $ | 21 | | | $ | 6 | | | $ | 16 | | | $ | 319 | | | $ | 2 | | | $ | 497 | | 750+ | | $ | 486 | | | $ | 217 | | | $ | 239 | | | $ | 83 | | | $ | 32 | | | $ | 73 | | | $ | 586 | | | $ | 2 | | | $ | 1,718 | |
| 650-749 | 650-749 | | 9 | | | 30 | | | 46 | | | 15 | | | 4 | | | 4 | | | 264 | | | 28 | | | 400 | | 650-749 | | 42 | | | 32 | | | 46 | | | 14 | | | 5 | | | 7 | | | 282 | | | 24 | | | 452 | |
| <650 | <650 | | 0 | | | 2 | | | 7 | | | 3 | | | 1 | | | 1 | | | 25 | | | 23 | | | 62 | | <650 | | 3 | | | 2 | | | 7 | | | 3 | | | 1 | | | 2 | | | 26 | | | 18 | | | 62 | |
| | Total Other consumer | Total Other consumer | | $ | 31 | | | $ | 91 | | | $ | 105 | | | $ | 39 | | | $ | 11 | | | $ | 21 | | | $ | 608 | | | $ | 53 | | | $ | 959 | | Total Other consumer | | $ | 531 | | | $ | 251 | | | $ | 292 | | | $ | 100 | | | $ | 38 | | | $ | 82 | | | $ | 894 | | | $ | 44 | | | $ | 2,232 | |
(1)Consistent with the credit quality disclosures, indicators for the Commercial portfolio are based on internally defined categories of credit grades which are generally refreshed at least semi-annually.
(2)Consistent with the credit quality disclosures, indicators for the Consumer portfolio are based on updated customer credit scores refreshed at least quarterly.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | As of December 31, 2020 |
| | Term Loans Amortized Cost Basis by Origination Year | | Revolver Total at Amortized Cost Basis | | Revolver Total Converted to Term Loans | | |
| (dollar amounts in millions) | | 2020 | | 2019 | | 2018 | | 2017 | | 2016 | | Prior | | | | Total |
| Commercial and industrial | | | | | | | | | | | | | | | | | | |
| Credit Quality Indicator (1): | | | | | | | | | | | | | | | | | | |
| Pass | | $ | 12,599 | | | $ | 4,161 | | | $ | 2,537 | | | $ | 1,192 | | | $ | 837 | | | $ | 815 | | | $ | 8,894 | | | $ | 2 | | | $ | 31,037 | |
| OLEM | | 415 | | | 112 | | | 65 | | | 24 | | | 32 | | | 22 | | | 124 | | | — | | | 794 | |
| Substandard | | 195 | | | 125 | | | 181 | | | 203 | | | 41 | | | 147 | | | 423 | | | — | | | 1,315 | |
| Doubtful | | 2 | | | — | | | 1 | | | — | | | — | | | 1 | | | 1 | | | — | | | 5 | |
| Total Commercial and industrial | | $ | 13,211 | | | $ | 4,398 | | | $ | 2,784 | | | $ | 1,419 | | | $ | 910 | | | $ | 985 | | | $ | 9,442 | | | $ | 2 | | | $ | 33,151 | |
| Commercial real estate | | | | | | | | | | | | | | | | | | |
| Credit Quality Indicator (1): | | | | | | | | | | | | | | | | | | |
| Pass | | $ | 1,742 | | | $ | 1,610 | | | $ | 1,122 | | | $ | 507 | | | $ | 507 | | | $ | 539 | | | $ | 633 | | | $ | — | | | $ | 6,660 | |
| OLEM | | 94 | | | 78 | | | 63 | | | 37 | | | 28 | | | 14 | | | 4 | | | — | | | 318 | |
| Substandard | | 27 | | | 46 | | | 10 | | | 29 | | | 58 | | | 14 | | | 36 | | | — | | | 220 | |
| Doubtful | | — | | | — | | | — | | | — | | | — | | | 1 | | | — | | | — | | | 1 | |
| Total Commercial real estate | | $ | 1,863 | | | $ | 1,734 | | | $ | 1,195 | | | $ | 573 | | | $ | 593 | | | $ | 568 | | | $ | 673 | | | $ | — | | | $ | 7,199 | |
| Lease financing | | | | | | | | | | | | | | | | | | |
| Credit Quality Indicator (1): | | | | | | | | | | | | | | | | | | |
| Pass | | $ | 1,158 | | | $ | 364 | | | $ | 221 | | | $ | 155 | | | $ | 137 | | | $ | 101 | | | $ | — | | | $ | — | | | $ | 2,136 | |
| OLEM | | 6 | | | 4 | | | 4 | | | 6 | | | 1 | | | — | | | — | | | — | | | 21 | |
| Substandard | | 1 | | | 19 | | | 7 | | | 21 | | | 5 | | | 12 | | | — | | | — | | | 65 | |
| | | | | | | | | | | | | | | | | | |
| Total Lease financing | | $ | 1,165 | | | $ | 387 | | | $ | 232 | | | $ | 182 | | | $ | 143 | | | $ | 113 | | | $ | — | | | $ | — | | | $ | 2,222 | |
| Automobile | | | | | | | | | | | | | | | | | | |
| Credit Quality Indicator (2): | | | | | | | | | | | | | | | | | | |
| 750+ | | $ | 2,670 | | | $ | 2,013 | | | $ | 1,144 | | | $ | 742 | | | $ | 317 | | | $ | 81 | | | $ | — | | | $ | — | | | $ | 6,967 | |
| 650-749 | | 1,965 | | | 1,343 | | | 755 | | | 386 | | | 175 | | | 52 | | | — | | | — | | | 4,676 | |
| <650 | | 312 | | | 301 | | | 244 | | | 157 | | | 84 | | | 37 | | | — | | | — | | | 1,135 | |
| | | | | | | | | | | | | | | | | | |
| Total Automobile | | $ | 4,947 | | | $ | 3,657 | | | $ | 2,143 | | | $ | 1,285 | | | $ | 576 | | | $ | 170 | | | $ | — | | | $ | — | | | $ | 12,778 | |
| Residential mortgage | | | | | | | | | | | | | | | | | | |
| Credit Quality Indicator (2): | | | | | | | | | | | | | | | | | | |
| 750+ | | $ | 3,269 | | | $ | 1,370 | | | $ | 891 | | | $ | 1,064 | | | $ | 762 | | | $ | 1,243 | | | $ | 1 | | | $ | — | | | $ | 8,600 | |
| 650-749 | | 991 | | | 435 | | | 307 | | | 278 | | | 171 | | | 495 | | | — | | | — | | | 2,677 | |
| <650 | | 34 | | | 89 | | | 111 | | | 108 | | | 81 | | | 348 | | | — | | | — | | | 771 | |
| | | | | | | | | | | | | | | | | | |
| Total Residential mortgage | | $ | 4,294 | | | $ | 1,894 | | | $ | 1,309 | | | $ | 1,450 | | | $ | 1,014 | | | $ | 2,086 | | | $ | 1 | | | $ | — | | | $ | 12,048 | |
| Home equity | | | | | | | | | | | | | | | | | | |
| Credit Quality Indicator (2): | | | | | | | | | | | | | | | | | | |
| 750+ | | $ | 793 | | | $ | 26 | | | $ | 26 | | | $ | 32 | | | $ | 89 | | | $ | 451 | | | $ | 4,373 | | | $ | 192 | | | $ | 5,982 | |
| 650-749 | | 147 | | | 9 | | | 8 | | | 11 | | | 27 | | | 157 | | | 1,906 | | | 181 | | | 2,446 | |
| <650 | | 1 | | | 1 | | | 1 | | | 1 | | | 6 | | | 70 | | | 286 | | | 99 | | | 465 | |
| | | | | | | | | | | | | | | | | | |
| Total Home equity | | $ | 941 | | | $ | 36 | | | $ | 35 | | | $ | 44 | | | $ | 122 | | | $ | 678 | | | $ | 6,565 | | | $ | 472 | | | $ | 8,893 | |
| RV and marine | | | | | | | | | | | | | | | | | | |
| Credit Quality Indicator (2): | | | | | | | | | | | | | | | | | | |
| 750+ | | $ | 1,136 | | | $ | 525 | | | $ | 589 | | | $ | 337 | | | $ | 153 | | | $ | 254 | | | $ | — | | | $ | — | | | $ | 2,994 | |
| 650-749 | | 348 | | | 215 | | | 201 | | | 136 | | | 64 | | | 129 | | | — | | | — | | | 1,093 | |
| <650 | | 4 | | | 15 | | | 21 | | | 22 | | | 12 | | | 29 | | | — | | | — | | | 103 | |
| | | | | | | | | | | | | | | | | | |
| Total RV and marine | | $ | 1,488 | | | $ | 755 | | | $ | 811 | | | $ | 495 | | | $ | 229 | | | $ | 412 | | | $ | — | | | $ | — | | | $ | 4,190 | |
| Other consumer | | | | | | | | | | | | | | | | | | |
| Credit Quality Indicator (2): | | | | | | | | | | | | | | | | | | |
| 750+ | | $ | 69 | | | $ | 58 | | | $ | 26 | | | $ | 8 | | | $ | 4 | | | $ | 14 | | | $ | 340 | | | $ | 2 | | | $ | 521 | |
| 650-749 | | 36 | | | 56 | | | 17 | | | 5 | | | 2 | | | 3 | | | 294 | | | 30 | | | 443 | |
| <650 | | 2 | | | 8 | | | 3 | | | 1 | | | — | | | 1 | | | 26 | | | 28 | | | 69 | |
| | | | | | | | | | | | | | | | | | |
| Total Other consumer | | $ | 107 | | | $ | 122 | | | $ | 46 | | | $ | 14 | | | $ | 6 | | | $ | 18 | | | $ | 660 | | | $ | 60 | | | $ | 1,033 | |
(1)Consistent with the credit quality disclosures, indicators for the Commercial portfolio are based on internally defined categories of credit grades which are generally refreshed at least semi-annually.
(2)Consistent with the credit quality disclosures, indicators for the Consumer portfolio are based on updated customer credit scores refreshed at least quarterly.
(3)The total amount of accrued interest recorded for these loans at March 31, 2021, presented in other assets within the Condensed Consolidated Balance Sheets, was $140 million and $119 million of commercial and consumer, respectively.
5664 Huntington Bancshares Incorporated
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | As of December 31, 2020 |
| | Term Loans Amortized Cost Basis by Origination Year | | Revolver Total at Amortized Cost Basis | | Revolver Total Converted to Term Loans | | |
| (dollar amounts in millions) | | 2020 | | 2019 | | 2018 | | 2017 | | 2016 | | Prior | | | | Total (3) |
| Commercial and industrial | | | | | | | | | | | | | | | | | | |
| Credit Quality Indicator (1): | | | | | | | | | | | | | | | | | | |
| Pass | | $ | 13,757 | | | $ | 4,525 | | | $ | 2,758 | | | $ | 1,347 | | | $ | 974 | | | $ | 916 | | | $ | 8,894 | | | $ | 2 | | | $ | 33,173 | |
| OLEM | | 421 | | | 116 | | | 69 | | | 30 | | | 33 | | | 22 | | | 124 | | | 0 | | | 815 | |
| Substandard | | 196 | | | 144 | | | 188 | | | 224 | | | 46 | | | 159 | | | 423 | | | 0 | | | 1,380 | |
| Doubtful | | 2 | | | 0 | | | 1 | | | 0 | | | 0 | | | 1 | | | 1 | | | 0 | | | 5 | |
| Total Commercial and industrial | | $ | 14,376 | | | $ | 4,785 | | | $ | 3,016 | | | $ | 1,601 | | | $ | 1,053 | | | $ | 1,098 | | | $ | 9,442 | | | $ | 2 | | | $ | 35,373 | |
| | | | | | | | | | | | | | | | | | |
| Commercial real estate | | | | | | | | | | | | | | | | | | |
| Credit Quality Indicator (1): | | | | | | | | | | | | | | | | | | |
| Pass | | $ | 1,742 | | | $ | 1,610 | | | $ | 1,122 | | | $ | 507 | | | $ | 507 | | | $ | 539 | | | $ | 633 | | | $ | 0 | | | $ | 6,660 | |
| OLEM | | 94 | | | 78 | | | 63 | | | 37 | | | 28 | | | 14 | | | 4 | | | 0 | | | 318 | |
| Substandard | | 27 | | | 46 | | | 10 | | | 29 | | | 58 | | | 14 | | | 36 | | | 0 | | | 220 | |
| Doubtful | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 1 | | | 0 | | | 0 | | | 1 | |
| Total Commercial real estate | | $ | 1,863 | | | $ | 1,734 | | | $ | 1,195 | | | $ | 573 | | | $ | 593 | | | $ | 568 | | | $ | 673 | | | $ | 0 | | | $ | 7,199 | |
| | | | | | | | | | | | | | | | | | |
| Automobile | | | | | | | | | | | | | | | | | | |
| Credit Quality Indicator (2): | | | | | | | | | | | | | | | | | | |
| 750+ | | $ | 2,670 | | | $ | 2,013 | | | $ | 1,144 | | | $ | 742 | | | $ | 317 | | | $ | 81 | | | $ | 0 | | | $ | 0 | | | $ | 6,967 | |
| 650-749 | | 1,965 | | | 1,343 | | | 755 | | | 386 | | | 175 | | | 52 | | | 0 | | | 0 | | | 4,676 | |
| <650 | | 312 | | | 301 | | | 244 | | | 157 | | | 84 | | | 37 | | | 0 | | | 0 | | | 1,135 | |
| | | | | | | | | | | | | | | | | | |
| Total Automobile | | $ | 4,947 | | | $ | 3,657 | | | $ | 2,143 | | | $ | 1,285 | | | $ | 576 | | | $ | 170 | | | $ | 0 | | | $ | 0 | | | $ | 12,778 | |
| | | | | | | | | | | | | | | | | | |
| Home equity | | | | | | | | | | | | | | | | | | |
| Credit Quality Indicator (2): | | | | | | | | | | | | | | | | | | |
| 750+ | | $ | 793 | | | $ | 26 | | | $ | 26 | | | $ | 32 | | | $ | 89 | | | $ | 451 | | | $ | 4,373 | | | $ | 192 | | | $ | 5,982 | |
| 650-749 | | 147 | | | 9 | | | 8 | | | 11 | | | 27 | | | 157 | | | 1,906 | | | 181 | | | 2,446 | |
| <650 | | 1 | | | 1 | | | 1 | | | 1 | | | 6 | | | 70 | | | 286 | | | 99 | | | 465 | |
| | | | | | | | | | | | | | | | | | |
| Total Home equity | | $ | 941 | | | $ | 36 | | | $ | 35 | | | $ | 44 | | | $ | 122 | | | $ | 678 | | | $ | 6,565 | | | $ | 472 | | | $ | 8,893 | |
| | | | | | | | | | | | | | | | | | |
| Residential mortgage | | | | | | | | | | | | | | | | | | |
| Credit Quality Indicator (2): | | | | | | | | | | | | | | | | | | |
| 750+ | | $ | 3,269 | | | $ | 1,370 | | | $ | 891 | | | $ | 1,064 | | | $ | 762 | | | $ | 1,243 | | | $ | 1 | | | $ | 0 | | | $ | 8,600 | |
| 650-749 | | 991 | | | 435 | | | 307 | | | 278 | | | 171 | | | 495 | | | 0 | | | 0 | | | 2,677 | |
| <650 | | 34 | | | 89 | | | 111 | | | 108 | | | 81 | | | 348 | | | 0 | | | 0 | | | 771 | |
| | | | | | | | | | | | | | | | | | |
| Total Residential mortgage | | $ | 4,294 | | | $ | 1,894 | | | $ | 1,309 | | | $ | 1,450 | | | $ | 1,014 | | | $ | 2,086 | | | $ | 1 | | | $ | 0 | | | $ | 12,048 | |
| | | | | | | | | | | | | | | | | | |
| RV and marine | | | | | | | | | | | | | | | | | | |
| Credit Quality Indicator (2): | | | | | | | | | | | | | | | | | | |
| 750+ | | $ | 1,136 | | | $ | 525 | | | $ | 589 | | | $ | 337 | | | $ | 153 | | | $ | 254 | | | $ | 0 | | | $ | 0 | | | $ | 2,994 | |
| 650-749 | | 348 | | | 215 | | | 201 | | | 136 | | | 64 | | | 129 | | | 0 | | | 0 | | | 1,093 | |
| <650 | | 4 | | | 15 | | | 21 | | | 22 | | | 12 | | | 29 | | | 0 | | | 0 | | | 103 | |
| | | | | | | | | | | | | | | | | | |
| Total RV and marine | | $ | 1,488 | | | $ | 755 | | | $ | 811 | | | $ | 495 | | | $ | 229 | | | $ | 412 | | | $ | 0 | | | $ | 0 | | | $ | 4,190 | |
| | | | | | | | | | | | | | | | | | |
| Other consumer | | | | | | | | | | | | | | | | | | |
| Credit Quality Indicator (2): | | | | | | | | | | | | | | | | | | |
| 750+ | | $ | 69 | | | $ | 58 | | | $ | 26 | | | $ | 8 | | | $ | 4 | | | $ | 14 | | | $ | 340 | | | $ | 2 | | | $ | 521 | |
| 650-749 | | 36 | | | 56 | | | 17 | | | 5 | | | 2 | | | 3 | | | 294 | | | 30 | | | 443 | |
| <650 | | 2 | | | 8 | | | 3 | | | 1 | | | 0 | | | 1 | | | 26 | | | 28 | | | 69 | |
| | | | | | | | | | | | | | | | | | |
| Total Other consumer | | $ | 107 | | | $ | 122 | | | $ | 46 | | | $ | 14 | | | $ | 6 | | | $ | 18 | | | $ | 660 | | | $ | 60 | | | $ | 1,033 | |
(1)Consistent with the credit quality disclosures, indicators for the Commercial portfolio are based on internally defined categories of credit grades which are generally refreshed at least semi-annually.
(2)Consistent with the credit quality disclosures, indicators for the Consumer portfolio are based on updated customer credit scores refreshed at least quarterly.
(3)The total amount of accrued interest recorded for these loans at December 31, 2020, presented in other assets within the Condensed Consolidated Balance Sheets, was $146 million and $123 million of commercial and consumer, respectively.
TDR Loans
TDRs are modified loans where a concession was provided to a borrower experiencing financial difficulties. Loan modifications are considered TDRs when the concessions provided would not otherwise be considered. However, not all loan modifications are TDRs. See Note 5 “Loans / Leases and Allowance for Credit Losses”Leases” to the Consolidated Financial Statements of theappearing in Huntington’s 2020 Annual Report on Form 10-K for the year ended December 31, 2020 for an additional discussion of TDRs.
The following table presents, by class and modification type, the number of contracts, post-modification outstanding balance, and the financial effects of the modification for the three-month and nine-month periods ended March 31,September 30, 2021 and 2020.
| | | New Troubled Debt Restructurings (1) | | New Troubled Debt Restructurings (1) |
| | Three Months Ended March 31, 2021 | | Three Months Ended September 30, 2021 |
| | Number of
Contracts | | Post-modification Outstanding Recorded Investment (2) | | | Number of
Contracts | | Post-modification Outstanding Recorded Investment (2) | |
| (dollar amounts in millions) | (dollar amounts in millions) | | Interest rate reduction | | Amortization or maturity date change | | Chapter 7 bankruptcy | | Other | | Total | | (dollar amounts in millions) | Number of
Contracts | Interest rate reduction | | Amortization or maturity date change | | Chapter 7 bankruptcy | | Other | | Total | |
| Commercial and industrial | Commercial and industrial | 12 | | | $ | 0 | | | $ | 5 | | | $ | 0 | | | $ | 0 | | | $ | 5 | | | 16 | | | $ | — | | | $ | 3 | | | $ | — | | | $ | — | | | $ | 3 | | |
| Commercial real estate | | Commercial real estate | 4 | | | — | | | — | | | — | | | — | | | — | | |
| | Automobile | Automobile | 902 | | | 0 | | | 7 | | | 1 | | | 0 | | | 8 | | | Automobile | 498 | | | — | | | 3 | | | 1 | | | — | | | 4 | | |
| Residential mortgage | | Residential mortgage | 74 | | | — | | | 7 | | | 2 | | | — | | | 9 | | |
| Home equity | Home equity | 62 | | | 0 | | | 1 | | | 2 | | | 0 | | | 3 | | | Home equity | 42 | | | — | | | 1 | | | 1 | | | — | | | 2 | | |
| Residential mortgage | 86 | | | 0 | | | 13 | | | 1 | | | 0 | | | 14 | | | |
| RV and marine | RV and marine | 49 | | | 0 | | | 1 | | | 0 | | | 0 | | | 1 | | | RV and marine | 19 | | | — | | | — | | | — | | | — | | | — | | |
| Other consumer | Other consumer | 97 | | | 0 | | | 0 | | | 0 | | | 1 | | | 1 | | | Other consumer | 49 | | | — | | | — | | | — | | | — | | | — | | |
| Total new TDRs | Total new TDRs | 1,208 | | | $ | 0 | | | $ | 27 | | | $ | 4 | | | $ | 1 | | | $ | 32 | | | Total new TDRs | 702 | | | $ | — | | | $ | 14 | | | $ | 4 | | | $ | — | | | $ | 18 | | |
| | | Three Months Ended March 31, 2020 | | Three Months Ended September 30, 2020 |
| | Number of
Contracts | | Post-modification Outstanding Recorded Investment (2) | | | Number of
Contracts | | Post-modification Outstanding Recorded Investment (2) | |
| (dollar amounts in millions) | (dollar amounts in millions) | | Interest rate reduction | | Amortization or maturity date change | | Chapter 7 bankruptcy | | Other | | Total | | (dollar amounts in millions) | Number of
Contracts | Interest rate reduction | | Amortization or maturity date change | | Chapter 7 bankruptcy | | Other | | Total | |
| | Commercial and industrial | Commercial and industrial | 140 | | | $ | 0 | | | $ | 62 | | | $ | 0 | | | $ | 0 | | | $ | 62 | | | Commercial and industrial | 39 | | | $ | — | | | $ | 28 | | | $ | — | | | $ | — | | | $ | 28 | | |
| Commercial real estate | Commercial real estate | 7 | | | 0 | | | 2 | | | 0 | | | 0 | | | 2 | | | Commercial real estate | 2 | | | — | | | — | | | — | | | — | | | — | | |
| | Automobile | Automobile | 798 | | | 0 | | | 6 | | | 2 | | | 0 | | | 8 | | | Automobile | 726 | | | — | | | 5 | | | 2 | | | — | | | 7 | | |
| Residential mortgage | | Residential mortgage | 242 | | | — | | | 40 | | | 2 | | | — | | | 42 | | |
| Home equity | Home equity | 63 | | | 0 | | | 1 | | | 2 | | | 0 | | | 3 | | | Home equity | 90 | | | — | | | 2 | | | 3 | | | 1 | | | 6 | | |
| Residential mortgage | 101 | | | 0 | | | 9 | | | 2 | | | 0 | | | 11 | | | |
| RV and marine | RV and marine | 28 | | | 0 | | | 1 | | | 0 | | | 0 | | | 1 | | | RV and marine | 30 | | | — | | | 1 | | | — | | | — | | | 1 | | |
| Other consumer | Other consumer | 249 | | | 1 | | | 0 | | | 0 | | | 0 | | | 1 | | | Other consumer | 122 | | | 1 | | | — | | | — | | | — | | | 1 | | |
| Total new TDRs | Total new TDRs | 1,386 | | | $ | 1 | | | $ | 81 | | | $ | 6 | | | $ | 0 | | | $ | 88 | | | Total new TDRs | 1,251 | | | $ | 1 | | | $ | 76 | | | $ | 7 | | | $ | 1 | | | $ | 85 | | |
|
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| | | | | | | | | | | | | |
| New Troubled Debt Restructurings (1) |
| Nine Months Ended September 30, 2021 |
| Number of
Contracts | | Post-modification Outstanding Recorded Investment (2) | | |
| (dollar amounts in millions) | | Interest rate reduction | | Amortization or maturity date change | | Chapter 7 bankruptcy | | Other | | Total | |
| Commercial and industrial | 53 | | | $ | 15 | | | $ | 23 | | | $ | — | | | $ | — | | | $ | 38 | | | |
| Commercial real estate | 4 | | | — | | | — | | | — | | | — | | | — | | | |
| | | | | | | | | | | | | |
| Automobile | 1,914 | | | — | | | 13 | | | 3 | | | — | | | 16 | | | |
| Residential mortgage | 232 | | | — | | | 31 | | | 4 | | | — | | | 35 | | | |
| Home equity | 155 | | | — | | | 3 | | | 5 | | | — | | | 8 | | | |
| RV and marine finance | 103 | | | 1 | | | 1 | | | 1 | | | — | | | 3 | | | |
| Other consumer | 214 | | | — | | | — | | | — | | | 1 | | | 1 | | | |
| Total new TDRs | 2,675 | | | $ | 16 | | | $ | 71 | | | $ | 13 | | | $ | 1 | | | $ | 101 | | | |
| | | | | | | | | | | | | |
| Nine Months Ended September 30, 2020 |
| Number of
Contracts | | Post-modification Outstanding Recorded Investment (2) | | |
| (dollar amounts in millions) | | Interest rate reduction | | Amortization or maturity date change | | Chapter 7 bankruptcy | | Other | | Total | |
| Commercial and industrial | 277 | | | $ | — | | | $ | 116 | | | $ | — | | | $ | 58 | | | $ | 174 | | | |
| Commercial real estate | 11 | | | — | | | 3 | | | — | | | — | | | 3 | | | |
| | | | | | | | | | | | | |
| Automobile | 2,582 | | | — | | | 26 | | | 5 | | | — | | | 31 | | | |
| Residential mortgage | 448 | | | — | | | 62 | | | 5 | | | — | | | 67 | | | |
| Home equity | 216 | | | — | | | 5 | | | 6 | | | 2 | | | 13 | | | |
| RV and marine finance | 126 | | | — | | | 4 | | | — | | | — | | | 4 | | | |
| Other consumer | 513 | | | 3 | | | — | | | — | | | — | | | 3 | | | |
| Total new TDRs | 4,173 | | | $ | 3 | | | $ | 216 | | | $ | 16 | | | $ | 60 | | | $ | 295 | | | |
| | | | | | | | | | | | | |
(1)TDRs may include multiple concessions and the disclosure classifications are based on the primary concession provided to the borrower.
(2)Post-modification balances approximate pre-modification balances.
The financial effects of modification on the provision for loan and lease losses for the three-month periods ended March 31, 2021 and 2020, were less than $1 million and $9 million, respectively.
Pledged Loans
The Bank has access to the Federal Reserve’s discount window and advances from the FHLB. As of March 31,September 30, 2021 and December 31, 2020, these borrowings and advances are secured by $44.1$45.9 billion and $43.0 billion, respectively, of loans.
5866 Huntington Bancshares Incorporated
5. ALLOWANCE FOR CREDIT LOSSES
Allowance for Loan and Lease Losses and Allowance for Credit Losses - Roll-forward
The following tables present ALLL and AULCACL activity by portfolio segment for the three-month and nine-month periods ended March 31,September 30, 2021 and 2020.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (dollar amounts in millions) | | | | | | | | | | | | | | | Commercial | | Consumer | | Total |
| Three-month period ended March 31, 2021: | | | | | | | | | | | | | | | | | | | |
| ALLL balance, beginning of period | | | | | | | | | | | | | | | $ | 1,236 | | | $ | 578 | | | $ | 1,814 | |
| | | | | | | | | | | | | | | | | | | |
| Loan charge-offs | | | | | | | | | | | | | | | (61) | | | (34) | | | (95) | |
| Recoveries of loans previously charged-off | | | | | | | | | | | | | | | 12 | | | 19 | | | 31 | |
| Provision for loan and lease losses | | | | | | | | | | | | | | | 10 | | | (57) | | | (47) | |
| | | | | | | | | | | | | | | | | | | |
| ALLL balance, end of period | | | | | | | | | | | | | | | $ | 1,197 | | | $ | 506 | | | $ | 1,703 | |
| AULC balance, beginning of period | | | | | | | | | | | | | | | $ | 34 | | | $ | 18 | | | $ | 52 | |
| | | | | | | | | | | | | | | | | | | |
| Provision (reduction in allowance) for unfunded loan commitments and letters of credit | | | | | | | | | | | | | | | (6) | | | (7) | | | (13) | |
| Unfunded commitment losses | | | | | | | | | | | | | | | (1) | | | 0 | | | (1) | |
| AULC balance, end of period | | | | | | | | | | | | | | | $ | 27 | | | $ | 11 | | | $ | 38 | |
| ACL balance, end of period | | | | | | | | | | | | | | | $ | 1,224 | | | $ | 517 | | | $ | 1,741 | |
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| (dollar amounts in millions) | | | | | | | | | | | | | | | Commercial | | Consumer | | Total |
| Three-month period ended March 31, 2020: |
| ALLL balance, beginning of period | | | | | | | | | | | | | | | $ | 552 | | | $ | 231 | | | $ | 783 | |
| Cumulative-effect of change in accounting principle for financial instruments - credit losses (1) | | | | | | | | | | | | | | | 180 | | 211 | | 391 |
| Loan charge-offs | | | | | | | | | | | | | | | (88) | | | (48) | | | (136) | |
| Recoveries of loans previously charged-off | | | | | | | | | | | | | | | 5 | | | 14 | | | 19 | |
| Provision for loan and lease losses | | | | | | | | | | | | | | | 347 | | | 100 | | | 447 | |
| | | | | | | | | | | | | | | | | | | |
| ALLL balance, end of period | | | | | | | | | | | | | | | $ | 996 | | | $ | 508 | | | $ | 1,504 | |
| AULC balance, beginning of period | | | | | | | | | | | | | | | $ | 102 | | | $ | 2 | | | $ | 104 | |
| Cumulative-effect of change in accounting principle for financial instruments - credit losses (1) | | | | | | | | | | | | | | | (38) | | | 40 | | | 2 | |
| Provision (reduction in allowance) for unfunded loan commitments and letters of credit | | | | | | | | | | | | | | | (5) | | | (1) | | | (6) | |
| Unfunded commitment losses | | | | | | | | | | | | | | | (1) | | | 0 | | | (1) | |
| AULC balance, end of period | | | | | | | | | | | | | | | $ | 58 | | | $ | 41 | | | $ | 99 | |
| ACL balance, end of period | | | | | | | | | | | | | | | $ | 1,054 | | | $ | 549 | | | $ | 1,603 | |
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| (dollar amounts in millions) | | | | | | | | | | | | | | | Commercial | | Consumer | | Total |
| Three-month period ended September 30, 2021: | | | | | | | | | | | | | | | | | | | |
| ALLL balance, beginning of period | | | | | | | | | | | | | | | $ | 1,618 | | | $ | 600 | | | $ | 2,218 | |
| | | | | | | | | | | | | | | | | | | |
| Loan and lease charge-offs | | | | | | | | | | | | | | | (74) | | | (32) | | | (106) | |
| Recoveries of loans and leases previously charged-off | | | | | | | | | | | | | | | 27 | | | 24 | | | 51 | |
| Provision (benefit) for loan and lease losses | | | | | | | | | | | | | | | (22) | | | (34) | | | (56) | |
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| ALLL balance, end of period | | | | | | | | | | | | | | | $ | 1,549 | | | $ | 558 | | | $ | 2,107 | |
| AULC balance, beginning of period | | | | | | | | | | | | | | | $ | 76 | | | $ | 28 | | | $ | 104 | |
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| Provision for unfunded lending commitments | | | | | | | | | | | | | | | 2 | | | (8) | | | (6) | |
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| AULC balance, end of period | | | | | | | | | | | | | | | $ | 78 | | | $ | 20 | | | $ | 98 | |
| ACL balance, end of period | | | | | | | | | | | | | | | $ | 1,627 | | | $ | 578 | | | $ | 2,205 | |
| Nine-month period ended September 30, 2021: | | | | | | | | | | | | | | | | | | | |
| ALLL balance, beginning of period | | | | | | | | | | | | | | | $ | 1,236 | | | $ | 578 | | | $ | 1,814 | |
| | | | | | | | | | | | | | | | | | | |
| Loan and lease charge-offs | | | | | | | | | | | | | | | (213) | | | (90) | | | (303) | |
| Recoveries of loans and leases previously charged-off | | | | | | | | | | | | | | | 58 | | | 64 | | | 122 | |
| Provision for loan and lease losses (1) | | | | | | | | | | | | | | | 94 | | | (52) | | | 42 | |
| Allowance on loans and leases purchased with credit deterioration | | | | | | | | | | | | | | | 374 | | | 58 | | | 432 | |
| | | | | | | | | | | | | | | | | | | |
| ALLL balance, end of period | | | | | | | | | | | | | | | $ | 1,549 | | | $ | 558 | | | $ | 2,107 | |
| AULC balance, beginning of period | | | | | | | | | | | | | | | $ | 34 | | | $ | 18 | | | $ | 52 | |
| | | | | | | | | | | | | | | | | | | |
| Provision for unfunded lending commitments (2) | | | | | | | | | | | | | | | 45 | | | 2 | | | 47 | |
| | | | | | | | | | | | | | | | | | | |
| Unfunded lending commitment losses | | | | | | | | | | | | | | | (1) | | | — | | | (1) | |
| AULC balance, end of period | | | | | | | | | | | | | | | $ | 78 | | | $ | 20 | | | $ | 98 | |
| ACL balance, end of period | | | | | | | | | | | | | | | $ | 1,627 | | | $ | 578 | | | $ | 2,205 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (dollar amounts in millions) | | | | | | | | | | | | | | | Commercial | | Consumer | | Total |
| Three-month period ended September 30, 2020: |
| ALLL balance, beginning of period | | | | | | | | | | | | | | | $ | 1,169 | | | $ | 533 | | | $ | 1,702 | |
| | | | | | | | | | | | | | | | | | | |
| Loan and lease charge-offs | | | | | | | | | | | | | | | (101) | | | (40) | | | (141) | |
| Recoveries of loans and leases previously charged-off | | | | | | | | | | | | | | | 12 | | | 16 | | | 28 | |
| Provision for loan and lease losses | | | | | | | | | | | | | | | 183 | | | 24 | | | 207 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| ALLL balance, end of period | | | | | | | | | | | | | | | $ | 1,263 | | | $ | 533 | | | $ | 1,796 | |
| AULC balance, beginning of period | | | | | | | | | | | | | | | $ | 81 | | | $ | 38 | | | $ | 119 | |
| | | | | | | | | | | | | | | | | | | |
| Provision (reduction in allowance) for unfunded lending commitments | | | | | | | | | | | | | | | (27) | | | (3) | | | (30) | |
| | | | | | | | | | | | | | | | | | | |
| Unfunded lending commitment losses | | | | | | | | | | | | | | | (7) | | | — | | | (7) | |
| AULC balance, end of period | | | | | | | | | | | | | | | $ | 47 | | | $ | 35 | | | $ | 82 | |
| ACL balance, end of period | | | | | | | | | | | | | | | $ | 1,310 | | | $ | 568 | | | $ | 1,878 | |
| Nine-month period ended September 30, 2020: |
| ALLL balance, beginning of period | | | | | | | | | | | | | | | $ | 552 | | | $ | 231 | | | $ | 783 | |
| Cumulative-effect of change in accounting principle for financial instruments - credit losses (3) | | | | | | | | | | | | | | | 180 | | | 211 | | | 391 | |
| Loan and lease charge-offs | | | | | | | | | | | | | | | (272) | | | (128) | | | (400) | |
| Recoveries of loans and leases previously charged-off | | | | | | | | | | | | | | | 20 | | | 43 | | | 63 | |
| Provision for loan and lease losses | | | | | | | | | | | | | | | 783 | | | 176 | | | 959 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| ALLL balance, end of period | | | | | | | | | | | | | | | $ | 1,263 | | | $ | 533 | | | $ | 1,796 | |
| AULC balance, beginning of period | | | | | | | | | | | | | | | $ | 102 | | | $ | 2 | | | $ | 104 | |
| Cumulative-effect of change in accounting principle for financial instruments - credit losses (3) | | | | | | | | | | | | | | | (38) | | | 40 | | | 2 | |
| Provision (reduction in allowance) for unfunded lending commitments | | | | | | | | | | | | | | | (7) | | | (7) | | | (14) | |
| | | | | | | | | | | | | | | | | | | |
| Unfunded lending commitment losses | | | | | | | | | | | | | | | (10) | | | — | | | (10) | |
| AULC balance, end of period | | | | | | | | | | | | | | | $ | 47 | | | $ | 35 | | | $ | 82 | |
| ACL balance, end of period | | | | | | | | | | | | | | | $ | 1,310 | | | $ | 568 | | | $ | 1,878 | |
(1)Includes $234 million of TCF acquisition initial provision for credit losses related to non-PCD loans and leases.
(2)Includes $60 million from acquired unfunded lending commitments.
(3)Relates to day one impact of the CECL adjustment as a result of the implementation of ASU 2016-13.
At March 31,September 30, 2021, the ACL was $1.7$2.2 billion, a decreasean increase of $125$339 million from the December 31, 2020 balance of $1.9 billion. The decreaseincrease was primarily related to a reduction inthe addition of $432 million of allowance for loans purchased with credit reserves reflecting andeterioration and the TCF acquisition initial provision for credit losses of $294 million ($234 million from non-PCD loans and leases and $60 million from acquired unfunded lending commitments), partially offset by improvement in the economic outlook. NCOs decreased $48 million, or 43%, in for the three-month period ended March 31, 2021. The decrease was driven by both commercialforecasted macroeconomic environment resulting from anticipated lower unemployment and consumer NCOs.higher GDP.
The suite of CECL models are generally dependent on the rate of change in unemployment rather than the absolute unemployment levels. Additionally, the economic scenarios used in the March 31,September 30, 2021 ACL determination contained significant judgmental assumptions aroundand the ultimate numberimpact of COVID-19 casesremains uncertain, including how long economic activities will be impacted and what effect the economic impactunprecedented levels of additional stimulus spending enacted into law duringgovernment fiscal and monetary actions will have on the first quarter.economy and our credit losses. Given the impact of the unemployment variable utilized within the models and the uncertainty associated with key economic scenario assumptions, the March 31,September 30, 2021 ACL included a material general reserve component as well as additional industry specific risk profiles, including profiles relating to the commercial real estate portfolio, to capture economic uncertainty not addressed within the quantitative transaction reserve.
2021 1Q Form 10-Q 6859 Huntington Bancshares Incorporated
6. MORTGAGE LOAN SALES AND SERVICING RIGHTS
Residential Mortgage Portfolio
The following table summarizes activity relating to residential mortgage loans sold with servicing retained for the three-month and nine-month periods ended March 31,September 30, 2021 and 2020:
| | | Three Months Ended
March 31, | | | Three Months Ended
September 30, | | Nine Months Ended
September 30, |
| (dollar amounts in millions) | (dollar amounts in millions) | | 2021 | | 2020 | | (dollar amounts in millions) | | 2021 | | 2020 | | 2021 | | 2020 |
| Residential mortgage loans sold with servicing retained | Residential mortgage loans sold with servicing retained | | $ | 2,256 | | | $ | 1,428 | | | Residential mortgage loans sold with servicing retained | | $ | 2,298 | | | $ | 2,391 | | | $ | 7,302 | | | $ | 6,106 | |
| Pretax gains resulting from above loan sales (1) | Pretax gains resulting from above loan sales (1) | | 93 | | | 39 | | | Pretax gains resulting from above loan sales (1) | | 80 | | | 98 | | | 274 | | | 196 | |
(1)Recorded in mortgage banking incomeincome.
The following table summarizes the changes in MSRs recorded using the fair value method for the three-month and nine-month periods ended March 31,September 30, 2021 and 2020 (1):2020:
| | | Three Months Ended
March 31, | | | Three Months Ended
September 30, | | Nine Months Ended
September 30, |
| (dollar amounts in millions) | (dollar amounts in millions) | | 2021 | | 2020 (1) | | (dollar amounts in millions) | | 2021 | | 2020 | | 2021 | | 2020 |
| Fair value, beginning of period | Fair value, beginning of period | | $ | 210 | | | $ | 7 | | | Fair value, beginning of period | | $ | 327 | | | $ | 172 | | | $ | 210 | | | $ | 7 | |
Fair value election for servicing assets previously measured using the amortized method | Fair value election for servicing assets previously measured using the amortized method | | — | | | 205 | | | Fair value election for servicing assets previously measured using the amortized method | | — | | | — | | | — | | | 205 | |
| Servicing assets obtained in acquisition | | Servicing assets obtained in acquisition | | — | | `` | — | | | 59 | | | — | |
| New servicing assets created | New servicing assets created | | 33 | | | 14 | | | New servicing assets created | | 31 | | | 30 | | | 103 | | | 70 | |
| Change in fair value during the period due to: | Change in fair value during the period due to: | | | Change in fair value during the period due to: | |
| Time decay (2) | Time decay (2) | | (3) | | | (2) | | | Time decay (2) | | (4) | | | (2) | | | (11) | | | (6) | |
| Payoffs (3) | Payoffs (3) | | (17) | | | (6) | | | Payoffs (3) | | (17) | | | (13) | | | (50) | | | (29) | |
| Changes in valuation inputs or assumptions (4) | Changes in valuation inputs or assumptions (4) | | 51 | | | (53) | | | Changes in valuation inputs or assumptions (4) | | 1 | | | 4 | | | 27 | | | (56) | |
| Fair value, end of period | Fair value, end of period | | $ | 274 | | | $ | 165 | | | Fair value, end of period | | $ | 338 | | | $ | 191 | | | $ | 338 | | | $ | 191 | |
| Weighted-average life (years) | Weighted-average life (years) | | 7.0 | | 6.4 | | Weighted-average life (years) | | 7.0 | | 6.4 | | 7.0 | | 6.4 |
(1)Prior to January 1, 2020, substantially all of Huntington’s MSR assets were recorded at amortized cost.
(2)Represents decrease in value due to passage of time, including the impact from both regularly scheduled principal payments and partial loan paydowns.
(3)Represents decrease in value associated with loans that paid off during the period.
(4)Represents change in value resulting primarily from market-driven changes in interest rates.
MSRs do not trade in an active, open market with readily observable prices. Therefore, the fair value of MSRs is estimated using a discounted future cash flow model. Changes in the assumptions used may have a significant impact on the valuation of MSRs. MSR values are highly sensitive to movement in interest rates as expected future net servicing income depends on the projected outstanding principal balances of the underlying loans, which can be greatly impacted by the level of prepayments.
For MSRs under the fair value method, aA summary of key assumptions and the sensitivity of the MSR value to changes in these assumptions at March 31,September 30, 2021, and December 31, 2020 follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2021 | | December 31, 2020 (1) |
| | | | Decline in fair value due to | | | | | Decline in fair value due to |
| (dollar amounts in millions) | Actual | | 10%
adverse
change | | 20%
adverse
change | | Actual | | 10%
adverse
change | | 20%
adverse
change |
Constant prepayment rate (annualized) | 12.30 | % | | | $ | (15) | | | $ | (28) | | | 17.36 | % | | | $ | (12) | | | $ | (23) | |
| Spread over forward interest rate swap rates | 509 | | bps | | (6) | | | (12) | | | 519 | | bps | | (4) | | | (8) | |
(1)Prior to January 1, 2020, substantially all of Huntington’s MSR assets were recorded at amortized cost. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2021 | | December 31, 2020 |
| | | | Decline in fair value due to | | | | | Decline in fair value due to |
| (dollar amounts in millions) | Actual | | 10%
adverse
change | | 20%
adverse
change | | Actual | | 10%
adverse
change | | 20%
adverse
change |
Constant prepayment rate (annualized) | 12.21 | % | | | $ | (16) | | | $ | (30) | | | 17.36 | % | | | $ | (12) | | | $ | (23) | |
| Spread over forward interest rate swap rates | 545 | | bps | | (7) | | | (14) | | | 519 | | bps | | (4) | | | (8) | |
Total servicing, late fees and other ancillary fees included in mortgage banking income was $18$22 million and $17$16 million for the three-month periods ended March 31,September 30, 2021 and 2020, respectively. For the nine-month periods ended September 30, 2021 and 2020, total servicing, late fees and other ancillary fees included in mortgage banking income was $57 million and $47 million, respectively.
The unpaid principal balance of residential mortgage loans serviced for third parties was $23.6$30.6 billion and $23.5 billion at March 31,September 30, 2021 and December 31, 2020, respectively.
7. GOODWILL AND OTHER INTANGIBLE ASSETS
Business segments are based on segment leadership structure, which reflects how segment performance is monitored and assessed. We have 4 major business segments: Consumer and Business Banking, Commercial Banking, Vehicle Finance, and Regional Banking and The Huntington Private Client Group (RBHPCG). The Treasury / Other function includes technology and operations, other unallocated assets, liabilities, revenue, and expense.
A rollforward of goodwill by business segment for the first nine-month period of 2021 is presented in the table below.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| (dollar amounts in millions) | Consumer & Business Banking | | Commercial Banking | | Vehicle Finance | | RBHPCG | | | | Treasury / Other | | Huntington
Consolidated |
| Balance, December 31, 2020 | $ | 1,393 | | | $ | 427 | | | $ | — | | | $ | 170 | | | | | $ | — | | | $ | 1,990 | |
| TCF acquisition | 2,006 | | | 1,260 | | | — | | | 60 | | | | | — | | | 3,326 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Balance, September 30, 2021 | $ | 3,399 | | | $ | 1,687 | | | $ | — | | | $ | 230 | | | | | $ | — | | | $ | 5,316 | |
At September 30, 2021 and December 31, 2020, Huntington’s other intangible assets consisted of the following:
| | | | | | | | | | | | | | | | | |
| | | | | |
| (dollar amounts in millions) | Gross
Carrying
Amount | | Accumulated
Amortization | | Net
Carrying
Value |
| September 30, 2021 | | | | | |
| Core deposit intangible | $ | 389 | | | $ | (165) | | | $ | 224 | |
| Customer relationship | 108 | | | (77) | | | 31 | |
| | | | | |
| Total other intangible assets | $ | 497 | | | $ | (242) | | | $ | 255 | |
| December 31, 2020 | | | | | |
| Core deposit intangible | $ | 310 | | | $ | (150) | | | $ | 160 | |
| Customer relationship | 101 | | | (70) | | | 31 | |
| | | | | |
| Total other intangible assets | $ | 411 | | | $ | (220) | | | $ | 191 | |
The estimated amortization expense of other intangible assets for the remainder of 2021 and the next five years is as follows:
| | | | | |
| (dollar amounts in millions) | Amortization Expense |
| 2021 | $ | 14 | |
| 2022 | 53 | |
| 2023 | 49 | |
| 2024 | 45 | |
| 2025 | 42 | |
| 2026 | 29 | |
70 Huntington Bancshares Incorporated
7.8. BORROWINGS
Borrowings with original maturities of one year or less are classified as short-term and were comprised of the following at September 30, 2021 and December 31, 2020, respectively:
| | | | | | | | | | | |
| (dollar amounts in millions) | September 30,
2021 | | December 31,
2020 |
| Federal funds purchased and securities sold under agreements to repurchase | $ | 401 | | | $ | 71 | |
| | | |
| | | |
| Other borrowings | 34 | | | 112 | |
| Total short-term borrowings | $ | 435 | | | $ | 183 | |
Huntington’s long-term debt consisted of the following at September 30, 2021 and December 31, 2020, respectively:
| | | | | | | | | | | |
| (dollar amounts in millions) | September 30,
2021 | | December 31,
2020 |
| The Parent Company: | | | |
| Senior Notes | $ | 2,802 | | | $ | 3,635 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| Subordinated Notes | 1,037 | | | 507 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| Total notes issued by the parent | 3,839 | | | 4,142 | |
| The Bank: | | | |
| Senior Notes | 2,451 | | | 3,533 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| Subordinated Notes | 813 | | | 233 | |
| | | |
| | | |
| Total notes issued by the bank | 3,264 | | | 3,766 | |
| FHLB Advances | 216 | | | 3 | |
| | | |
| Other | 460 | | | 441 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| Total long-term debt | $ | 7,779 | | | $ | 8,352 | |
As a result of the TCF acquisition, Huntington assumed long-term debt totaling $1.5 billion, of which a FHLB advance of $213 million and subordinated notes of $598 million remain outstanding at September 30, 2021. The assumed long-term FHLB advance has a maturity date in 2025 and carried interest rate of 1.03% at September 30, 2021. The assumed subordinated notes included $8 million of parent company obligations due in 2034 carrying variable interest rates based on three-month LIBOR plus 2.85% and $590 million of Bank obligations due in 2022 to 2030 carrying interest rates ranging from 0.64% to 3.75% outstanding at September 30, 2021.
During the 2021 third quarter, Huntington issued $558 million of fixed-to-fixed rate subordinated notes at par (the “2036 Notes”). The fixed-to-fixed rate subordinated notes, maturing on August 15, 2036, bear an initial fixed interest rate of 2.487% per annum, payable semi-annually in arrears on February 15 and August 15, commencing on February 15, 2022. Commencing August 15, 2031 (the “Reset Date”), the interest rate will reset to an annual interest rate equal to the five-year U.S. Treasury Rate as of the day falling two business days prior to the Reset Date, plus 1.170%.
Also during the 2021 third quarter, Huntington completed the exchange of the Parent Company’s 4.350% subordinated notes due 2023 and the Bank’s 6.250% subordinated notes due 2022, 4.60% subordinated notes due 2025, and the 4.270% subordinated notes due 2026 utilizing a portion of the 2036 Notes.
9. OTHER COMPREHENSIVE INCOME
The components of Huntington’s OCI for the three-month and nine-month periods ended March 31,September 30, 2021 and 2020, were as follows:
| | | | Three Months Ended
March 31, 2021 | | Three Months Ended
September 30, 2021 |
| | Tax (expense) | | Tax (expense) |
| (dollar amounts in millions) | (dollar amounts in millions) | Pretax | | Benefit | | After-tax | (dollar amounts in millions) | Pretax | | benefit | | After-tax |
| | Unrealized gains (losses) on available-for-sale securities arising during the period | Unrealized gains (losses) on available-for-sale securities arising during the period | $ | (287) | | | $ | 64 | | | $ | (223) | | Unrealized gains (losses) on available-for-sale securities arising during the period | $ | (112) | | | $ | 26 | | | $ | (86) | |
| Less: Reclassification adjustment for realized net losses (gains) included in net income | Less: Reclassification adjustment for realized net losses (gains) included in net income | 9 | | | (2) | | | 7 | | Less: Reclassification adjustment for realized net losses (gains) included in net income | 5 | | | (1) | | | 4 | |
| Net change in unrealized holding gains (losses) on available-for-sale securities | Net change in unrealized holding gains (losses) on available-for-sale securities | (278) | | | 62 | | | (216) | | Net change in unrealized holding gains (losses) on available-for-sale securities | (107) | | | 25 | | | (82) | |
| | Net change in fair value on cash flow hedges | Net change in fair value on cash flow hedges | (44) | | | 10 | | | (34) | | Net change in fair value on cash flow hedges | (43) | | | 14 | | | (29) | |
| Foreign currency translation adjustment (1) | | Foreign currency translation adjustment (1) | (7) | | | — | | | (7) | |
| Net unrealized gains (losses) on net investment hedges | | Net unrealized gains (losses) on net investment hedges | 9 | | | — | | | 9 | |
| Translation adjustments, net of hedges (1) | | Translation adjustments, net of hedges (1) | 2 | | | — | | | 2 | |
| Net change in pension and other post-retirement obligations | Net change in pension and other post-retirement obligations | 3 | | | (1) | | | 2 | | Net change in pension and other post-retirement obligations | 3 | | | — | | | 3 | |
| Total other comprehensive income (loss) | $ | (319) | | | $ | 71 | | | $ | (248) | | |
| Total other comprehensive income | | Total other comprehensive income | $ | (145) | | | $ | 39 | | | $ | (106) | |
| | | | Three Months Ended
March 31, 2020 | | Three Months Ended
September 30, 2020 |
| | Tax (expense) | | Tax (expense) |
| (dollar amounts in millions) | (dollar amounts in millions) | Pretax | | Benefit | | After-tax | (dollar amounts in millions) | Pretax | | benefit | | After-tax |
| | Unrealized gains (losses) on available-for-sale securities arising during the period | Unrealized gains (losses) on available-for-sale securities arising during the period | $ | 217 | | | $ | (48) | | | $ | 169 | | Unrealized gains (losses) on available-for-sale securities arising during the period | $ | — | | | $ | — | | | $ | — | |
| Less: Reclassification adjustment for realized net losses (gains) included in net income | Less: Reclassification adjustment for realized net losses (gains) included in net income | 5 | | | (1) | | | 4 | | Less: Reclassification adjustment for realized net losses (gains) included in net income | 6 | | | (1) | | | 5 | |
| Net change in unrealized gains (losses) on available-for-sale securities | Net change in unrealized gains (losses) on available-for-sale securities | 222 | | | (49) | | | 173 | | Net change in unrealized gains (losses) on available-for-sale securities | 6 | | | (1) | | | 5 | |
| | Net change in fair value on cash flow hedges | Net change in fair value on cash flow hedges | 396 | | | (88) | | | 308 | | Net change in fair value on cash flow hedges | (52) | | | 12 | | | (40) | |
| | Net change in pension and other post-retirement obligations | Net change in pension and other post-retirement obligations | 2 | | | 0 | | | 2 | | Net change in pension and other post-retirement obligations | 3 | | | (1) | | | 2 | |
| Total other comprehensive income (loss) | $ | 620 | | | $ | (137) | | | $ | 483 | | |
| Total other comprehensive income | | Total other comprehensive income | $ | (43) | | | $ | 10 | | | $ | (33) | |
| | | | | | | | | | | | | | | | | |
| | | | | |
| Nine Months Ended
September 30, 2021 |
| Tax (expense) |
| (dollar amounts in millions) | Pretax | | benefit | | After-tax |
| | | | | |
| Unrealized gains (losses) on available-for-sale securities arising during the period | $ | (311) | | | $ | 70 | | | $ | (241) | |
| Less: Reclassification adjustment for realized net losses (gains) included in net income | 27 | | | (6) | | | 21 | |
| Net change in unrealized holding gains (losses) on available-for-sale securities | (284) | | | 64 | | | (220) | |
| | | | | |
| | | | | |
| | | | | |
| Net change in fair value on cash flow hedges | (135) | | | 33 | | | (102) | |
| Foreign currency translation adjustment (1) | (13) | | | — | | | (13) | |
| Net unrealized gains (losses) on net investment hedges | 9 | | | — | | | 9 | |
| Translation adjustments, net of hedges (1) | (4) | | | — | | | (4) | |
| Net change in pension and other post-retirement obligations | 12 | | | (3) | | | 9 | |
| Total other comprehensive loss | $ | (411) | | | $ | 94 | | | $ | (317) | |
| | | | | | | | | | | | | | | | | |
| | | | | |
| Nine Months Ended
September 30, 2020 |
| Tax (expense) |
| (dollar amounts in millions) | Pretax | | benefit | | After-tax |
| | | | | |
| Unrealized gains (losses) on available-for-sale securities arising during the period | $ | 274 | | | $ | (61) | | | $ | 213 | |
| Less: Reclassification adjustment for realized net losses (gains) included in net income | 35 | | | (8) | | | 27 | |
| Net change in unrealized holding gains (losses) on available-for-sale securities | 309 | | | (69) | | | 240 | |
| | | | | |
| | | | | |
| | | | | |
| Net change in fair value on cash flow hedges | 358 | | | (79) | | | 279 | |
| | | | | |
| | | | | |
| | | | | |
| Net change in pension and other post-retirement obligations (2) | (8) | | | 2 | | | (6) | |
| Total other comprehensive income | $ | 659 | | | $ | (146) | | | $ | 513 | |
(1)Foreign investments are deemed to be permanent in nature and, therefore, Huntington does not provide for taxes on foreign currency translation adjustments.
(2)Includes a settlement gain recognized in other noninterest income on the Unaudited Condensed Consolidated Statements of Income.
72 Huntington Bancshares Incorporated
Activity in accumulated OCI for the three-month and nine-month periods ended March 31,September 30, 2021 and 2020, were as follows:
| | | (dollar amounts in millions) | (dollar amounts in millions) | Unrealized gains (losses) on debt securities (1) | | Change in fair value related to cash flow hedges | | | Unrealized gains (losses) for pension and other post- retirement obligations (2) | | Total | (dollar amounts in millions) | Unrealized gains (losses) on debt securities (1) | | Change in fair value related to cash flow hedges | | | Translation adjustments, net of hedges | | Unrealized gains (losses) for pension and other post- retirement obligations (2) | | Total |
| Three Months Ended March 31, 2021 | | | | | | | | | |
| Three Months Ended September 30, 2021 | | Three Months Ended September 30, 2021 | | | | | | | | | | |
| Balance, beginning of period | Balance, beginning of period | $ | 188 | | | $ | 257 | | | | $ | (253) | | | $ | 192 | | Balance, beginning of period | $ | 50 | | | $ | 184 | | | | $ | (6) | | | $ | (247) | | | $ | (19) | |
| | Other comprehensive income before reclassifications | (223) | | | (34) | | | | 0 | | | (257) | | |
| | Other comprehensive income (loss) before reclassifications | | Other comprehensive income (loss) before reclassifications | (86) | | | (29) | | | | 2 | | | — | | | (113) | |
| Amounts reclassified from accumulated OCI to earnings | Amounts reclassified from accumulated OCI to earnings | 7 | | | 0 | | | | 2 | | | 9 | | Amounts reclassified from accumulated OCI to earnings | 4 | | | — | | | | — | | | 3 | | | 7 | |
| Period change | Period change | (216) | | | (34) | | | | 2 | | | (248) | | Period change | (82) | | | (29) | | | | 2 | | | 3 | | | (106) | |
| Balance, end of period | Balance, end of period | $ | (28) | | | $ | 223 | | | | $ | (251) | | | $ | (56) | | Balance, end of period | $ | (32) | | | $ | 155 | | | | $ | (4) | | | $ | (244) | | | $ | (125) | |
| | Three Months Ended March 31, 2020 | | | | |
| Three Months Ended September 30, 2020 | | Three Months Ended September 30, 2020 | | | |
| Balance, beginning of period | Balance, beginning of period | $ | (28) | | | $ | 23 | | | | $ | (251) | | | $ | (256) | | Balance, beginning of period | $ | 207 | | | $ | 342 | | | | $ | — | | | $ | (259) | | | $ | 290 | |
| | Other comprehensive income before reclassifications | Other comprehensive income before reclassifications | 169 | | | 308 | | | | 0 | | | 477 | | Other comprehensive income before reclassifications | — | | | (40) | | | | — | | | — | | | (40) | |
| Amounts reclassified from accumulated OCI to earnings | Amounts reclassified from accumulated OCI to earnings | 4 | | | 0 | | | | 2 | | | 6 | | Amounts reclassified from accumulated OCI to earnings | 5 | | | — | | | | — | | | 2 | | | 7 | |
| Period change | Period change | 173 | | | 308 | | | | 2 | | | 483 | | Period change | 5 | | | (40) | | | | — | | | 2 | | | (33) | |
| | Balance, end of period | Balance, end of period | $ | 145 | | | $ | 331 | | | | $ | (249) | | | $ | 227 | | Balance, end of period | $ | 212 | | | $ | 302 | | | | $ | — | | | $ | (257) | | | $ | 257 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| (dollar amounts in millions) | Unrealized gains (losses) on debt securities (1) | | Change in fair value related to cash flow hedges | | | | | | Translation adjustments, net of hedges | | Unrealized gains (losses) for pension and other post- retirement obligations (2) | | Total |
| Nine Months Ended September 30, 2021 | | | | | | | | | | | | | |
| Balance, beginning of period | $ | 188 | | | $ | 257 | | | | | | | $ | — | | | $ | (253) | | | $ | 192 | |
| | | | | | | | | | | | | |
| Other comprehensive loss before reclassifications | (241) | | | (102) | | | | | | | (4) | | | — | | | (347) | |
| Amounts reclassified from accumulated OCI to earnings | 21 | | | — | | | | | | | — | | | 9 | | | 30 | |
| Period change | (220) | | | (102) | | | | | | | (4) | | | 9 | | | (317) | |
| Balance, end of period | $ | (32) | | | $ | 155 | | | | | | | $ | (4) | | | $ | (244) | | | $ | (125) | |
| | | | | | | | | | | | | |
| Nine Months Ended September 30, 2020 | | | | | | | | | | | | | |
| Balance, beginning of period | $ | (28) | | | $ | 23 | | | | | | | $ | — | | | $ | (251) | | | $ | (256) | |
| | | | | | | | | | | | | |
| Other comprehensive income before reclassifications | 213 | | | 279 | | | | | | | — | | | — | | | 492 | |
| Amounts reclassified from accumulated OCI to earnings | 27 | | | — | | | | | | | — | | | (6) | | | 21 | |
| Period change | 240 | | | 279 | | | | | | | — | | | (6) | | | 513 | |
| Balance, end of period | $ | 212 | | | $ | 302 | | | | | | | $ | — | | | $ | (257) | | | $ | 257 | |
(1)AOCI amounts at March 31,September 30, 2021 December 31, 2020 and March 31,September 30, 2020 include $60 million, $69$41 million and $87$74 million, respectively, of net of unrealized losses on securities transferred from the available-for-sale securities portfolio to the held-to-maturity securities portfolio. The net unrealized losses will be recognized in earnings over the remaining life of the security using the effective interest method.
8.10. SHAREHOLDERS’ EQUITY
Preferred Stock
The following is a summary of Huntington’s non-cumulative, non-voting, perpetual preferred stock outstanding as of March 31,September 30, 2021.
| | | (dollar amounts in millions) | (dollar amounts in millions) | | (dollar amounts in millions) | |
| Series | Series | | | Issuance Date | | Total Shares Outstanding | | Carrying Amount | | Dividend Rate | | Earliest Redemption Date | Series | | | Issuance Date | | Total Shares Outstanding | | Amount | | Dividend Rate | | Earliest Redemption Date |
| | Series B | Series B | | | 12/28/2011 | | 35,500 | | | $ | 23 | | | 3-mo. LIBOR + 270 bps | | 1/15/2017 | Series B | | | 12/28/2011 | | 35,500 | | | $ | 23 | | | 3-mo. LIBOR + 270 bps | | 1/15/2017 |
| Series D | | | 3/21/2016 | | 400,000 | | | 386 | | | 6.25 | % | | 4/15/2021 | |
| Series D | | | 5/5/2016 | | 200,000 | | | 199 | | | 6.25 | % | | 4/15/2021 | |
| | Series C | Series C | | | 8/16/2016 | | 100,000 | | | 100 | | | 5.875 | % | | 10/15/2021 | Series C | | | 8/16/2016 | | 100,000 | | | 100 | | | 5.875 | % | | 10/15/2021 |
| Series E | Series E | | | 2/27/2018 | | 5,000 | | | 495 | | | 5.700 | % | | 4/15/2023 | Series E | | | 2/27/2018 | | 5,000 | | | 495 | | | 5.700 | | | 4/15/2023 |
| Series F | Series F | | | 5/27/2020 | | 5,000 | | | 494 | | | 5.625 | % | | 7/15/2030 | Series F | | | 5/27/2020 | | 5,000 | | | 494 | | | 5.625 | | | 7/15/2030 |
| Series G | Series G | | | 8/3/2020 | | 5,000 | | | 494 | | | 4.450 | % | | 10/15/2027 | Series G | | | 8/3/2020 | | 5,000 | | | 494 | | | 4.450 | | | 10/15/2027 |
| Series H | Series H | | | 2/2/2021 | | 500,000 | | | 485 | | | 4.500 | % | | 4/15/2026 | Series H | | | 2/2/2021 | | 500,000 | | | 486 | | | 4.500 | | | 4/15/2026 |
| Series I | | Series I | | | 6/9/2021 | | 7,000 | | | 175 | | | 5.700 | | | 12/01/2022 |
| Total | Total | | | | 1,250,500 | | | $ | 2,676 | | | Total | | | | 657,500 | | | $ | 2,267 | | |
Series B, D, C and H of preferred stock have a liquidation value and redemption price per share of $1,000, plus any declared and unpaid dividends. Series E, F, G, and GI stock have a liquidation value and redemption price per share of $100,000, plus any declared and unpaid dividends. All preferred stock has no stated maturity and redemption is solely at ourHuntington’s option. Under current rules, any redemption of the preferred stock is subject to prior approval of the FRB.
On July 15, 2021, all 24,000,000 outstanding depositary shares, each representing a 1/40th interest in a share of Huntington’s 6.250% Series D Non-Cumulative Perpetual Preferred Stock, par value $0.01 per share, were redeemed. The depositary shares were redeemed at a price of $25.00 per depositary share (equivalent to $1,000 per share of Series D Preferred Stock) plus declared and unpaid dividends of $0.390625 per depositary share (equivalent to $15.625 per share of Series D Preferred Stock) for the period beginning on April 15, 2021 to, but not including, July 15, 2021. All dividends on the shares of Series D Preferred Stock ceased to accrue.
On October 15, 2021, all 4,000,000 outstanding depositary shares, each representing a 1/40th interest in a share of Huntington’s 5.875% Series C Non-Cumulative Perpetual Preferred Stock, par value $0.01 per share, were redeemed. The depositary shares were redeemed at a price of $25.00 per depositary share (equivalent of $1,000 per share of Series C Preferred Stock) plus declared unpaid dividends of $0.36725 per depositary share (equivalent to $14.69 per share of Series C Preferred Stock) for the period beginning on July 15, 2021 to, but not including, October 15, 2021. All dividends on the shares of Series C Preferred Stock will cease to accrue.
Preferred Series I Stock issued and outstanding
On June 9, 2021, each share of TCF Financial Corporation 5.70% Series C Non-Cumulative Perpetual Preferred Stock, $0.01 par value per share, outstanding immediately prior to the acquisition of TCF Financial Corporation was converted into the right to receive a share of the newly created Huntington 5.70% Series I Non-Cumulative Perpetual Preferred Stock, par value $0.01 per share.
74 Huntington Bancshares Incorporated
The following table presents the dividends declared for each series of Preferred shares for the three-month and nine-month periods ended March 31,September 30, 2021 and 2020:
| | | Three Months Ended March 31, | | | Three Months Ended September 30, | | Nine months ended September 30, |
| 2021 | | 2020 | | |
| (amounts in millions, except per share data) | | (amounts in millions, except per share data) | | 2021 | | 2020 | | 2021 | | 2020 |
| (amounts in millions, except per share data) | | Cash Dividend Declared Per Share | | | | Cash Dividend Declared Per Share | | | | Cash Dividend Declared Per Share | | | Cash Dividend Declared Per Share | | Cash Dividend Declared Per Share | | | Cash Dividend Declared Per Share | |
| Preferred Series | Preferred Series | | Amount ($) | | Amount ($) | | Preferred Series | | Amount ($) | | Amount ($) | | Amount ($) | | Amount ($) |
| Series B | Series B | | $ | 7.35 | | | $ | 0 | | | $ | 11.33 | | $ | (1) | | | Series B | | $ | 7.07 | | | $ | — | | | $ | 7.44 | | | $ | — | | | $ | 21.63 | | | $ | — | | | $ | 28.56 | | | $ | (1) | |
| Series C | Series C | | 14.69 | | | (2) | | | 14.69 | | (1) | | | Series C | | 14.69 | | | (1) | | | 14.69 | | | (1) | | | 44.07 | | | (4) | | | 44.07 | | | (4) | |
| Series D | Series D | | 15.63 | | | (9) | | | 15.63 | | (9) | | | Series D | | — | | | — | | | 15.63 | | | (10) | | | 31.25 | | | (18) | | | 46.88 | | | (29) | |
| Series E | Series E | | 1,425.00 | | | (7) | | | 1,425.00 | | (7) | | | Series E | | 1,425.00 | | | (7) | | | 1,425.00 | | | (7) | | | 4,275.00 | | | (21) | | | 4,275.00 | | | (21) | |
| Series F | Series F | | 1,406.25 | | | (7) | | | 0 | | 0 | | | Series F | | 1,406.25 | | | (7) | | | 2,062.50 | | | (10) | | | 4,218.75 | | | (21) | | | 2,062.50 | | | (10) | |
| Series G | Series G | | 1,112.50 | | | (6) | | | 0 | | 0 | | | Series G | | 1,112.50 | | | (6) | | | — | | | — | | | 3,337.50 | | | (18) | | | — | | | — | |
| | Series H | | Series H | | 11.25 | | | (6) | | | — | | | — | | | 30.75 | | | (16) | | | — | | | — | |
| Series I | | Series I | | 356.25 | | | (2) | | | — | | | — | | | 712.50 | | | (5) | | | — | | | — | |
| Total | Total | | $ | (31) | | | $ | (18) | | | Total | | $ | (29) | | | $ | (28) | | | $ | (103) | | | $ | (65) | |
| | | | | | |
Change in Common Shares Authorized
During the second quarter of 2021, Huntington amended its charter to increase the number of authorized shares of common stock from 1.5 billion shares to 2.25 billion shares.
Share Repurchases
On July 21, 2021, the Board authorized the repurchase of up to $800 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. During the 2021 third quarter, Huntington repurchased a total of $500 million common stock, representing 33.4 million common shares, at a weighted average price of $14.96.
Treasury shares
Treasury shares includes shares held for deferred compensation plans, at cost, of $79 million at September 30, 2021 and $59 million at December 31, 2020.
Non-controlling Interest in Subsidiaries
Through the acquisition of TCF, Huntington acquired a joint venture with The Toro Company ("Toro") called Red Iron Acceptance, LLC ("Red Iron"). Red Iron provides U.S. distributors and dealers and select Canadian distributors of the Toro and Exmark branded products with sources of financing. Huntington and Toro maintain a 55% and 45% ownership interest, respectively, in Red Iron. As Huntington has a controlling financial interest in Red Iron, its financial results are consolidated in Huntington's financial statements. Toro's interest is reported as a non-controlling interest within equity.
9.11. EARNINGS PER SHARE
Basic earnings per share is the amount of earnings (adjusted for dividends declared on preferred stock)stock and impact of preferred stock redemption) available to each share of common stock outstanding during the reporting period. Diluted earnings per share is the amount of earnings available to each share of common stock outstanding during the reporting period adjusted to include the effect of potentially dilutive common shares. Potentially dilutive common shares include incremental shares issued for stock options, restricted stock units and awards, and distributions from deferred compensation plans. Potentially dilutive common shares are excluded from the computation of diluted earnings per share in periods in which the effect would be antidilutive.
622021 3Q Form 10-Q Huntington Bancshares Incorporated75
The calculation of basic and diluted earnings per share for the three-month and nine-month periods ended March 31,September 30, 2021 and 2020 was as follows:
| | | Three Months Ended
March 31, | | | Three Months Ended
September 30, | | Nine Months Ended
September 30, |
| (dollar amounts in millions, except per share data, share count in thousands) | (dollar amounts in millions, except per share data, share count in thousands) | 2021 | | 2020 | | (dollar amounts in millions, except per share data, share count in thousands) | 2021 | | 2020 | | 2021 | | 2020 |
| Basic earnings per common share: | Basic earnings per common share: | | | | | Basic earnings per common share: | | | | | | | |
| Net income | $ | 532 | | | $ | 48 | | | |
| Net income attributable to Huntington Bancshares Inc | | Net income attributable to Huntington Bancshares Inc | $ | 377 | | | $ | 303 | | | $ | 894 | | | $ | 501 | |
| Preferred stock dividends | Preferred stock dividends | (31) | | | (18) | | | Preferred stock dividends | 29 | | | 28 | | | 103 | | | 65 | |
| Impact of preferred stock redemption | | Impact of preferred stock redemption | 15 | | | — | | | 15 | | | — | |
| Net income available to common shareholders | Net income available to common shareholders | $ | 501 | | | $ | 30 | | | Net income available to common shareholders | $ | 333 | | | $ | 275 | | | $ | 776 | | | $ | 436 | |
| Average common shares issued and outstanding | Average common shares issued and outstanding | 1,017,512 | | | 1,017,643 | | | Average common shares issued and outstanding | 1,462,736 | | | 1,017,253 | | | 1,201,763 | | | 1,017,052 | |
| Basic earnings per common share | Basic earnings per common share | $ | 0.49 | | | $ | 0.03 | | | Basic earnings per common share | $ | 0.23 | | | $ | 0.27 | | | $ | 0.65 | | | $ | 0.43 | |
| Diluted earnings per common share: | Diluted earnings per common share: | | | Diluted earnings per common share: | |
| | Dilutive potential common shares: | Dilutive potential common shares: | | | Dilutive potential common shares: | |
| Stock options and restricted stock units and awards | Stock options and restricted stock units and awards | 18,397 | | | 12,363 | | | Stock options and restricted stock units and awards | 17,536 | | | 9,005 | | | 17,623 | | | 9,628 | |
| Shares held in deferred compensation plans | Shares held in deferred compensation plans | 5,094 | | | 4,570 | | | Shares held in deferred compensation plans | 7,063 | | | 5,202 | | | 6,042 | | | 4,893 | |
| | Dilutive potential common shares | Dilutive potential common shares | 23,491 | | | 16,933 | | | Dilutive potential common shares | 24,599 | | | 14,207 | | | 23,665 | | | 14,521 | |
| Total diluted average common shares issued and outstanding | Total diluted average common shares issued and outstanding | 1,041,003 | | | 1,034,576 | | | Total diluted average common shares issued and outstanding | 1,487,335 | | | 1,031,460 | | | 1,225,428 | | | 1,031,573 | |
| Diluted earnings per common share | Diluted earnings per common share | $ | 0.48 | | | $ | 0.03 | | | Diluted earnings per common share | $ | 0.22 | | | $ | 0.27 | | | $ | 0.63 | | | $ | 0.42 | |
| Anti-dilutive awards (1) | Anti-dilutive awards (1) | 1,666 | | | 8,045 | | | Anti-dilutive awards (1) | 4,609 | | | 13,954 | | | 4,410 | | | 12,420 | |
(1)Reflects the total number of shares related to outstanding options and awards that have been excluded from the computation of diluted earnings per share because the impact would have been anti-dilutive.
10.12. NONINTEREST INCOME
Huntington earns a variety of revenue including interest and fees from customers as well as revenues from non-customers. Certain sources of revenue are recognized within interest or fee income and are outside of the scope of ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). Other sources of revenue fall within the scope of ASC 606 and are generally recognized within noninterest income. These revenues are included within various sections of the Unaudited Condensed Consolidated Financial Statements. The following table shows Huntington’s total noninterest income segregated between contracts with customers within the scope of ASC 606 and those within the scope of other GAAP Topics.
| | | | | | | | | | | | | | | | | | |
| (dollar amounts in millions) | | Three Months Ended March 31, | | |
| Noninterest income | | 2021 | | 2020 | | | | |
| Noninterest income from contracts with customers | | $ | 222 | | | $ | 227 | | | | | |
| Noninterest income within the scope of other GAAP topics | | 173 | | | 134 | | | | | |
| Total noninterest income | | $ | 395 | | | $ | 361 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| (dollar amounts in millions) | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| Noninterest income | | 2021 | | 2020 | | 2021 | | 2020 |
| Noninterest income from contracts with customers | | $ | 315 | | | $ | 224 | | | $ | 794 | | | $ | 652 | |
| Noninterest income within the scope of other GAAP topics | | 220 | | | 206 | | | 580 | | | 530 | |
| Total noninterest income | | $ | 535 | | | $ | 430 | | | $ | 1,374 | | | $ | 1,182 | |
The following table illustrates the disaggregation by operating segment and major revenue stream and reconciles disaggregated revenue to segment revenue presented in Note 1517 “Segment Reporting”. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | |
| Three Months Ended March 31, 2021 |
| (dollar amounts in millions) | Consumer & Business Banking | | Commercial Banking | | Vehicle Finance | | RBHPCG | | Treasury / Other | | Huntington Consolidated |
| Major Revenue Streams | | | | | |
| Service charges on deposit accounts | $ | 48 | | | $ | 19 | | | $ | 2 | | | $ | 0 | | | $ | 0 | | | $ | 69 | |
| Card and payment processing income | 58 | | | 4 | | | 0 | | | 0 | | | 0 | | | 62 | |
| Trust and investment management services | 13 | | | 1 | | | 0 | | | 38 | | | 0 | | | 52 | |
| Insurance income | 12 | | | 2 | | | 0 | | | 13 | | | 0 | | | 27 | |
| Other noninterest income | 6 | | | 2 | | | 1 | | | 1 | | | 2 | | | 12 | |
| Net revenue from contracts with customers | $ | 137 | | | $ | 28 | | | $ | 3 | | | $ | 52 | | | $ | 2 | | | $ | 222 | |
Noninterest income within the scope of other GAAP topics | 99 | | | 60 | | | 0 | | | 1 | | | 13 | | | 173 | |
| Total noninterest income | $ | 236 | | | $ | 88 | | | $ | 3 | | | $ | 53 | | | $ | 15 | | | $ | 395 | |
| | | | | | | | | | | |
| Three Months Ended March 31, 2020 |
| (dollar amounts in millions) | Consumer & Business Banking | | Commercial Banking | | Vehicle Finance | | RBHPCG | | Treasury / Other | | Huntington Consolidated |
| Major Revenue Streams | | | | | |
| Service charges on deposit accounts | $ | 68 | | | $ | 17 | | | $ | 1 | | | $ | 1 | | | $ | 0 | | | $ | 87 | |
| Card and payment processing income | 52 | | | 4 | | | 0 | | | 0 | | | 0 | | | 56 | |
| Trust and investment management services | 10 | | | 1 | | | 0 | | | 36 | | | 0 | | | 47 | |
| Insurance income | 8 | | | 2 | | | 0 | | | 12 | | | 1 | | | 23 | |
| Other noninterest income | 8 | | | 3 | | | 1 | | | 1 | | | 1 | | | 14 | |
| Net revenue from contracts with customers | $ | 146 | | | $ | 27 | | | $ | 2 | | | $ | 50 | | | $ | 2 | | | $ | 227 | |
Noninterest income within the scope of other GAAP topics | 66 | | | 59 | | | 1 | | | 0 | | | 8 | | | 134 | |
| Total noninterest income | $ | 212 | | | $ | 86 | | | $ | 3 | | | $ | 50 | | | $ | 10 | | | $ | 361 | |
76 Huntington Bancshares Incorporated
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | |
| Three Months Ended September 30, 2021 |
| (dollar amounts in millions) | Consumer & Business Banking | | Commercial Banking | | Vehicle Finance | | RBHPCG | | Treasury / Other | | Huntington Consolidated |
| Major Revenue Streams | | | | | |
| Service charges on deposit accounts | $ | 89 | | | $ | 23 | | | $ | 1 | | | $ | 1 | | | $ | — | | | $ | 114 | |
| Card and payment processing income | 85 | | | 6 | | | — | | | — | | | — | | | 91 | |
| Trust and investment management services | 17 | | | — | | | — | | | 44 | | | — | | | 61 | |
| Insurance income | 12 | | | 2 | | | — | | | 11 | | | — | | | 25 | |
| Other noninterest income | 8 | | | 5 | | | 1 | | | 2 | | | 8 | | | 24 | |
| Net revenue from contracts with customers | $ | 211 | | | $ | 36 | | | $ | 2 | | | $ | 58 | | | $ | 8 | | | $ | 315 | |
Noninterest income within the scope of other GAAP topics | 91 | | | 114 | | | 2 | | | — | | | 13 | | | 220 | |
| Total noninterest income | $ | 302 | | | $ | 150 | | | $ | 4 | | | $ | 58 | | | $ | 21 | | | $ | 535 | |
| | | | | | | | | | | |
| Three Months Ended September 30, 2020 |
| (dollar amounts in millions) | Consumer & Business Banking | | Commercial Banking | | Vehicle Finance | | RBHPCG | | Treasury / Other | | Huntington Consolidated |
| Major Revenue Streams | | | | | |
| Service charges on deposit accounts | $ | 54 | | | $ | 19 | | | $ | 2 | | | $ | 1 | | | $ | — | | | $ | 76 | |
| Card and payment processing income | 59 | | | 4 | | | — | | | — | | | — | | | 63 | |
| Trust and investment management services | 13 | | | 1 | | | — | | | 34 | | | — | | | 48 | |
| Insurance income | 12 | | | 2 | | | — | | | 11 | | | (1) | | | 24 | |
| Other noninterest income | 6 | | | 6 | | | 1 | | | 3 | | | (3) | | | 13 | |
| Net revenue from contracts with customers | $ | 144 | | | $ | 32 | | | $ | 3 | | | $ | 49 | | | $ | (4) | | | $ | 224 | |
Noninterest income within the scope of other GAAP topics | 130 | | | 58 | | | (1) | | | (2) | | | 21 | | | 206 | |
| Total noninterest income | $ | 274 | | | $ | 90 | | | $ | 2 | | | $ | 47 | | | $ | 17 | | | $ | 430 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | |
| Nine Months Ended September 30, 2021 |
| (dollar amounts in millions) | Consumer & Business Banking | | Commercial Banking | | Vehicle Finance | | RBHPCG | | Treasury / Other | | Huntington Consolidated |
| Major Revenue Streams | | | | | |
| Service charges on deposit accounts | $ | 201 | | | $ | 64 | | | $ | 4 | | | $ | 2 | | | $ | — | | | $ | 271 | |
| Card and payment processing income | 211 | | | 14 | | | — | | | — | | | — | | | 225 | |
| Trust and investment management services | 45 | | | 1 | | | — | | | 122 | | | — | | | 168 | |
| Insurance income | 38 | | | 5 | | | — | | | 33 | | | 1 | | | 77 | |
| Other noninterest income | 19 | | | 14 | | | 2 | | | 7 | | | 11 | | | 53 | |
| Net revenue from contracts with customers | $ | 514 | | | $ | 98 | | | $ | 6 | | | $ | 164 | | | $ | 12 | | | $ | 794 | |
Noninterest income within the scope of other GAAP topics | 266 | | | 255 | | | 3 | | | 1 | | | 55 | | | 580 | |
| Total noninterest income | $ | 780 | | | $ | 353 | | | $ | 9 | | | $ | 165 | | | $ | 67 | | | $ | 1,374 | |
| | | | | | | | | | | |
| Nine Months Ended September 30, 2020 |
| (dollar amounts in millions) | Consumer & Business Banking | | Commercial Banking | | Vehicle Finance | | RBHPCG | | Treasury / Other | | Huntington Consolidated |
| Major Revenue Streams | | | | | |
| Service charges on deposit accounts | $ | 161 | | | $ | 54 | | | $ | 4 | | | $ | 3 | | | $ | — | | | $ | 222 | |
| Card and payment processing income | 163 | | | 11 | | | — | | | — | | | — | | | 174 | |
| Trust and investment management services | 33 | | | 3 | | | — | | | 104 | | | — | | | 140 | |
| Insurance income | 32 | | | 5 | | | — | | | 34 | | | 1 | | | 72 | |
| Other noninterest income | 18 | | | 14 | | | 2 | | | 11 | | | (1) | | | 44 | |
| Net revenue from contracts with customers | $ | 407 | | | $ | 87 | | | $ | 6 | | | $ | 152 | | | $ | — | | | $ | 652 | |
Noninterest income within the scope of other GAAP topics | 297 | | | 174 | | | 1 | | | (1) | | | 59 | | | 530 | |
| Total noninterest income | $ | 704 | | | $ | 261 | | | $ | 7 | | | $ | 151 | | | $ | 59 | | | $ | 1,182 | |
Huntington generally provides services for customers in which it acts as principal. Payment terms and conditions vary amongst services and customers, and thus impact the timing and amount of revenue recognition. Some fees may be paid before any service is rendered and accordingly, such fees are deferred until the obligations pertaining to those fees are satisfied. Most Huntington contracts with customers are cancelable by either party without penalty or they are short-term in nature, with a contract duration of less than one year. Accordingly, most revenue deferred for the reporting period ended March 31,September 30, 2021 is expected to be earned within one year. Huntington does not have significant balances of contract assets or contract liabilities and any change in those balances during the reporting period ended March 31,September 30, 2021 was determined to be immaterial.
64 Huntington Bancshares Incorporated
11.13. FAIR VALUES OF ASSETS AND LIABILITIES
See Note 20 “Fair Value of Assets and Liabilities” to the Consolidated Financial Statements of theappearing in Huntington’s 2020 Annual Report on Form 10-K for the year ended December 31, 2020 for a description of the valuation methodologies used for instruments measured at fair value. Assets and liabilities measured at fair value rarely transfer between Level 1 and Level 2 measurements. There were no such transfers during the three-month and nine-month periods ended March 31,September 30, 2021 and 2020.
Assets and Liabilities measured at fair value on a recurring basis
Assets and liabilities measured at fair value on a recurring basis at March 31,September 30, 2021 and December 31, 2020 are summarized below:in the following tables:
| | | Fair Value Measurements at Reporting Date Using | | Netting Adjustments (1) | | March 31, 2021 | | Fair Value Measurements at Reporting Date Using | | Netting Adjustments (1) | | September 30, 2021 |
| (dollar amounts in millions) | (dollar amounts in millions) | Level 1 | | Level 2 | | Level 3 | | (dollar amounts in millions) | Level 1 | | Level 2 | | Level 3 | |
| Assets | Assets | | | | | | | | | | Assets | | | | | | | | | |
| Trading account securities: | Trading account securities: | | Trading account securities: | |
| | Municipal securities | Municipal securities | $ | 0 | | | $ | 48 | | | $ | 0 | | | $ | — | | | $ | 48 | | Municipal securities | $ | — | | | $ | 77 | | | $ | — | | | $ | — | | | $ | 77 | |
| Corporate debt | 0 | | | 3 | | | 0 | | | — | | | 3 | | |
| | | 0 | | | 51 | | | 0 | | | — | | | 51 | | | — | | | 77 | | | — | | | — | | | 77 | |
| Available-for-sale securities: | Available-for-sale securities: | | Available-for-sale securities: | |
| U.S. Treasury securities | U.S. Treasury securities | 5 | | | 0 | | | 0 | | | — | | | 5 | | U.S. Treasury securities | 5 | | | — | | | — | | | — | | | 5 | |
| Residential CMOs | Residential CMOs | 0 | | | 3,172 | | | 0 | | | — | | | 3,172 | | Residential CMOs | — | | | 3,734 | | | — | | | — | | | 3,734 | |
| Residential MBS | Residential MBS | 0 | | | 10,645 | | | 0 | | | — | | | 10,645 | | Residential MBS | — | | | 14,337 | | | — | | | — | | | 14,337 | |
| Commercial MBS | Commercial MBS | 0 | | | 1,227 | | | 0 | | | — | | | 1,227 | | Commercial MBS | — | | | 1,498 | | | — | | | — | | | 1,498 | |
| Other agencies | Other agencies | 0 | | | 46 | | | 0 | | | — | | | 46 | | Other agencies | — | | | 264 | | | — | | | — | | | 264 | |
| Municipal securities | Municipal securities | 0 | | | 52 | | | 3,070 | | | — | | | 3,122 | | Municipal securities | — | | | 52 | | | 3,582 | | | — | | | 3,634 | |
| Private-label CMO | Private-label CMO | 0 | | | 39 | | | 11 | | | — | | | 50 | | Private-label CMO | — | | | 102 | | | 18 | | | — | | | 120 | |
| Asset-backed securities | Asset-backed securities | 0 | | | 200 | | | 47 | | | — | | | 247 | | Asset-backed securities | — | | | 250 | | | 35 | | | — | | | 285 | |
| Corporate debt | Corporate debt | 0 | | | 857 | | | 0 | | | — | | | 857 | | Corporate debt | — | | | 1,773 | | | — | | | — | | | 1,773 | |
| Other securities/sovereign debt | Other securities/sovereign debt | 0 | | | 4 | | | 0 | | | — | | | 4 | | Other securities/sovereign debt | — | | | 4 | | | — | | | — | | | 4 | |
| | 5 | | | 16,242 | | | 3,128 | | | — | | | 19,375 | | | 5 | | | 22,014 | | | 3,635 | | | — | | | 25,654 | |
| Other securities | Other securities | 42 | | | 17 | | | 0 | | | — | | | 59 | | Other securities | 62 | | | 24 | | | — | | | — | | | 86 | |
| Loans held for sale | Loans held for sale | 0 | | | 1,531 | | | 0 | | | — | | | 1,531 | | Loans held for sale | — | | | 1,297 | | | — | | | — | | | 1,297 | |
| Loans held for investment | Loans held for investment | 0 | | | 96 | | | 22 | | | — | | | 118 | | Loans held for investment | — | | | 119 | | | 20 | | | — | | | 139 | |
| MSRs | MSRs | 0 | | | 0 | | | 274 | | | — | | | 274 | | MSRs | — | | | — | | | 338 | | | — | | | 338 | |
| Other assets: | | Other assets: | |
| Derivative assets | Derivative assets | 0 | | | 1,808 | | | 21 | | | (816) | | | 1,013 | | Derivative assets | — | | | 1,567 | | | 19 | | | (686) | | | 900 | |
| Assets held in trust for deferred compensation plans | | Assets held in trust for deferred compensation plans | 151 | | | — | | | — | | | — | | | 151 | |
| Liabilities | Liabilities | | Liabilities | |
| | Other liabilities: | | Other liabilities: | |
| | Derivative liabilities | Derivative liabilities | 0 | | | 863 | | | 11 | | | (703) | | | 171 | | Derivative liabilities | — | | | 1,056 | | | 7 | | | (813) | | | 250 | |
|
2021 1Q Form 10-Q 7865 Huntington Bancshares Incorporated
| | | Fair Value Measurements at Reporting Date Using | | Netting Adjustments (1) | | December 31, 2020 | | Fair Value Measurements at Reporting Date Using | | Netting Adjustments (1) | | December 31, 2020 |
| (dollar amounts in millions) | (dollar amounts in millions) | Level 1 | | Level 2 | | Level 3 | | (dollar amounts in millions) | Level 1 | | Level 2 | | Level 3 | |
| Assets | Assets | | | | | | | | | | Assets | | | | | | | | | |
| Trading account securities: | Trading account securities: | | Trading account securities: | |
| | Municipal securities | Municipal securities | $ | 0 | | | $ | 62 | | | $ | 0 | | | $ | — | | | $ | 62 | | Municipal securities | $ | — | | | $ | 62 | | | $ | — | | | $ | — | | | $ | 62 | |
| | Available-for-sale securities: | Available-for-sale securities: | | Available-for-sale securities: | |
| U.S. Treasury securities | U.S. Treasury securities | 5 | | | 0 | | | 0 | | | — | | | 5 | | U.S. Treasury securities | 5 | | | — | | | — | | | — | | | 5 | |
| Residential CMOs | Residential CMOs | 0 | | | 3,666 | | | 0 | | | — | | | 3,666 | | Residential CMOs | — | | | 3,666 | | | — | | | — | | | 3,666 | |
| Residential MBS | Residential MBS | 0 | | | 7,935 | | | 0 | | | — | | | 7,935 | | Residential MBS | — | | | 7,935 | | | — | | | — | | | 7,935 | |
| Commercial MBS | Commercial MBS | 0 | | | 1,163 | | | 0 | | | — | | | 1,163 | | Commercial MBS | — | | | 1,163 | | | — | | | — | | | 1,163 | |
| Other agencies | Other agencies | 0 | | | 62 | | | 0 | | | — | | | 62 | | Other agencies | — | | | 62 | | | — | | | — | | | 62 | |
| Municipal securities | Municipal securities | 0 | | | 53 | | | 2,951 | | | — | | | 3,004 | | Municipal securities | — | | | 53 | | | 2,951 | | | — | | | 3,004 | |
| Private-label CMO | Private-label CMO | 0 | | | 0 | | | 9 | | | — | | | 9 | | Private-label CMO | — | | | — | | | 9 | | | — | | | 9 | |
| Asset-backed securities | Asset-backed securities | 0 | | | 182 | | | 10 | | | — | | | 192 | | Asset-backed securities | — | | | 182 | | | 10 | | | — | | | 192 | |
| Corporate debt | Corporate debt | 0 | | | 445 | | | 0 | | | — | | | 445 | | Corporate debt | — | | | 445 | | | — | | | — | | | 445 | |
| Other securities/sovereign debt | Other securities/sovereign debt | 0 | | | 4 | | | 0 | | | — | | | 4 | | Other securities/sovereign debt | — | | | 4 | | | — | | | — | | | 4 | |
| | 5 | | | 13,510 | | | 2,970 | | | — | | | 16,485 | | | 5 | | | 13,510 | | | 2,970 | | | — | | | 16,485 | |
| Other securities | Other securities | 59 | | | 0 | | | 0 | | | — | | | 59 | | Other securities | 59 | | | — | | | — | | | — | | | 59 | |
| Loans held for sale | Loans held for sale | 0 | | | 1,198 | | | 0 | | | — | | | 1,198 | | Loans held for sale | — | | | 1,198 | | | — | | | — | | | 1,198 | |
| Loans held for investment | Loans held for investment | 0 | | | 71 | | | 23 | | | — | | | 94 | | Loans held for investment | — | | | 71 | | | 23 | | | — | | | 94 | |
| MSRs | MSRs | 0 | | | 0 | | | 210 | | | — | | | 210 | | MSRs | — | | | — | | | 210 | | | — | | | 210 | |
| Other assets: | | Other assets: | |
| Derivative assets | Derivative assets | 0 | | | 1,903 | | | 43 | | | (889) | | | 1,057 | | Derivative assets | — | | | 1,903 | | | 43 | | | (889) | | | 1,057 | |
| Assets held in trust for deferred compensation plans | | Assets held in trust for deferred compensation plans | 73 | | | — | | | — | | | — | | | 73 | |
| Liabilities | Liabilities | | Liabilities | |
| | Other liabilities: | | Other liabilities: | |
| | Derivative liabilities | Derivative liabilities | 0 | | | 1,031 | | | 2 | | | (917) | | | 116 | | Derivative liabilities | — | | | 1,031 | | | 2 | | | (917) | | | 116 | |
(1)Amounts represent the impact of legally enforceable master netting agreements that allow the Company to settle positive and negative positions and cash collateral held or placed with the same counterparties.
The following tables below present a rollforward of the balance sheet amounts for the three-month and nine-month periods ended March 31,September 30, 2021 and 2020, for financial instruments measured on a recurring basis and classified as Level 3. The classification of an item as Level 3 is based on the significance of the unobservable inputs to the overall fair value measurement. However, Level 3 measurements may also include observable components of value that can be validated externally. Accordingly, the gains and losses in the table below include changes in fair value due in part to observable factors that are part of the valuation methodology.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Level 3 Fair Value Measurements
Three Months Ended March 31, 2021 |
| | | | | Available-for-sale securities | | Loans held for investment | |
| (dollar amounts in millions) | MSRs | | Derivative instruments | | Municipal securities | | Private-
label CMO | | Asset-backed securities | | |
| Opening balance | $ | 210 | | | $ | 41 | | | $ | 2,951 | | | $ | 9 | | | $ | 10 | | | $ | 23 | | |
| | | | | | | | | | | | |
| Transfers out of Level 3 (1) | 0 | | | (39) | | | 0 | | | 0 | | | 0 | | | 0 | | |
| Total gains/losses for the period: | | | | | | | | | | | | |
| Included in earnings | 51 | | | 8 | | | 0 | | | 0 | | | 0 | | | 0 | | |
| Included in OCI | 0 | | | 0 | | | (4) | | | 0 | | | 0 | | | 0 | | |
| Purchases/originations | 33 | | | 0 | | | 209 | | | 2 | | | 37 | | | 0 | | |
| | | | | | | | | | | | |
| Repayments | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | (1) | | |
| | | | | | | | | | | | |
| Settlements | (20) | | | 0 | | | (86) | | | 0 | | | 0 | | | 0 | | |
| Closing balance | $ | 274 | | | $ | 10 | | | $ | 3,070 | | | $ | 11 | | | $ | 47 | | | $ | 22 | | |
| Change in unrealized gains or losses for the period included in earnings for assets held at end of the reporting date | $ | 51 | | | $ | (26) | | | $ | — | | | $ | — | | | $ | — | | | $ | 0 | | |
| Change in unrealized gains or losses for the period included in other comprehensive income for assets held at the end of the reporting period | — | | | — | | | (5) | | | 0 | | | 0 | | | — | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Level 3 Fair Value Measurements
Three Months Ended September 30, 2021 |
| | | | | Available-for-sale securities | | Loans held for investment | |
| (dollar amounts in millions) | MSRs | | Derivative instruments | | Municipal securities | | Private-
label CMO | | Asset-backed securities | | | | |
| Opening balance | $ | 327 | | | $ | 23 | | | $ | 3,609 | | | $ | 18 | | | $ | 46 | | | | | $ | 21 | | |
| | | | | | | | | | | | | | |
| Transfers out of Level 3 (1) | — | | | (39) | | | — | | | — | | | — | | | | | — | | |
| Total gains/losses for the period: | | | | | | | | | | | | | | |
| Included in earnings | 1 | | | 28 | | | (1) | | | — | | | — | | | | | — | | |
| Included in OCI | — | | | — | | | (8) | | | — | | | — | | | | | — | | |
| Purchases/originations | 31 | | | — | | | 260 | | | — | | | — | | | | | — | | |
| Sales | — | | | — | | | (17) | | | — | | | — | | | | | — | | |
| Repayments | — | | | — | | | — | | | — | | | — | | | | | (1) | | |
| | | | | | | | | | | | | | |
| Settlements | (21) | | | — | | | (261) | | | — | | | (11) | | | | | — | | |
| Closing balance | $ | 338 | | | $ | 12 | | | $ | 3,582 | | | $ | 18 | | | $ | 35 | | | | | $ | 20 | | |
| Change in unrealized gains or losses for the period included in earnings for assets held at end of the reporting date | $ | 1 | | | $ | (12) | | | $ | — | | | $ | — | | | $ | — | | | | | $ | — | | |
| Change in unrealized gains or losses for the period included in other comprehensive income for assets held at the end of the reporting period | — | | | — | | | (10) | | | — | | | — | | | | | — | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Level 3 Fair Value Measurements
Three Months Ended September 30, 2020 |
| MSRs | | Derivative instruments | | Available-for-sale securities | | Loans held for investment |
| (dollar amounts in millions) | | | Municipal securities | | Private- label CMO | | Asset-backed securities | |
| Opening balance | $ | 172 | | | $ | 40 | | | $ | 3,102 | | | $ | 5 | | | $ | 56 | | | $ | 25 | |
| | | | | | | | | | | |
| Transfers out of Level 3 (1) | — | | | (64) | | | — | | | — | | | — | | | — | |
| Total gains/losses for the period: | | | | | | | | | | | |
| Included in earnings | 19 | | | 72 | | | (1) | | | — | | | — | | | — | |
| Included in OCI | — | | | — | | | 60 | | | — | | | — | | | — | |
| Purchases/originations | — | | | — | | | 154 | | | — | | | — | | | — | |
| | | | | | | | | | | |
| Repayments | — | | | — | | | — | | | — | | | — | | | (1) | |
| | | | | | | | | | | |
| Settlements | — | | | — | | | (226) | | | — | | | (7) | | | — | |
| Closing balance | $ | 191 | | | $ | 48 | | | $ | 3,089 | | | $ | 5 | | | $ | 49 | | | $ | 24 | |
| Change in unrealized gains or losses for the period included in earnings for assets held at end of the reporting date | $ | 18 | | | $ | 8 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| Change in unrealized gains or losses for the period included in other comprehensive income for assets held at the end of the reporting period | — | | | — | | | 62 | | | — | | | — | | | — | |
6680 Huntington Bancshares Incorporated
| | | | Level 3 Fair Value Measurements
Three Months Ended March 31, 2020 | | Level 3 Fair Value Measurements Nine Months Ended September 30, 2021 | |
| | MSRs | | Derivative instruments | | Available-for-sale securities | | Loans held for investment | | | Available-for-sale securities | | Loans held for investment | |
| (dollar amounts in millions) | (dollar amounts in millions) | | Municipal securities | | Private- label CMO | | Asset-backed securities | | (dollar amounts in millions) | MSRs | | Derivative instruments | | Municipal securities | | Private- label CMO | | Asset-backed securities | | |
| Opening balance | Opening balance | $ | 7 | | | $ | 6 | | | $ | 2,999 | | | $ | 2 | | | $ | 48 | | | $ | 26 | | Opening balance | $ | 210 | | | $ | 41 | | | $ | 2,951 | | | $ | 9 | | | $ | 10 | | | | $ | 23 | | |
| Fair value election for servicing assets previously measured using the amortized method | 205 | | | — | | | — | | | — | | | — | | | — | | |
| | Transfers out of Level 3 (1) | Transfers out of Level 3 (1) | 0 | | | (20) | | | 0 | | | 0 | | | 0 | | | 0 | | Transfers out of Level 3 (1) | — | | | (109) | | | — | | | — | | | — | | | | — | | |
| Total gains/losses for the period: | Total gains/losses for the period: | | Total gains/losses for the period: | | | | |
| Included in earnings | Included in earnings | (47) | | | 53 | | | (1) | | | 0 | | | 0 | | | 0 | | Included in earnings | 27 | | | 73 | | | (1) | | | — | | | — | | | | — | | |
| Included in OCI | Included in OCI | 0 | | | 0 | | | (68) | | | 0 | | | 0 | | | 0 | | Included in OCI | — | | | — | | | (13) | | | — | | | — | | | | — | | |
| Purchases/originations | 0 | | | 0 | | | 73 | | | 0 | | | 27 | | | 0 | | |
| | Purchases/originations/acquisitions | | Purchases/originations/acquisitions | 162 | | | 7 | | | 1,613 | | | 8 | | | 75 | | | | — | | |
| Sales | | Sales | — | | | — | | | (369) | | | — | | | — | | | | — | | |
| Repayments | | Repayments | — | | | — | | | — | | | — | | | — | | | | (3) | | |
| | Settlements | Settlements | 0 | | | 0 | | | (66) | | | 0 | | | (6) | | | 0 | | Settlements | (61) | | | — | | | (599) | | | 1 | | | (50) | | | | — | | |
| Closing balance | Closing balance | $ | 165 | | | $ | 39 | | | $ | 2,937 | | | $ | 2 | | | $ | 69 | | | $ | 26 | | Closing balance | $ | 338 | | | $ | 12 | | | $ | 3,582 | | | $ | 18 | | | $ | 35 | | | | $ | 20 | | |
| Change in unrealized gains or losses for the period included in earnings for assets held at end of the reporting date | Change in unrealized gains or losses for the period included in earnings for assets held at end of the reporting date | $ | (47) | | | $ | 34 | | | $ | — | | | $ | — | | | $ | — | | | $ | 0 | | Change in unrealized gains or losses for the period included in earnings for assets held at end of the reporting date | $ | 27 | | | $ | (33) | | | $ | — | | | $ | — | | | $ | — | | | | $ | — | | |
| Change in unrealized gains or losses for the period included in other comprehensive income for assets held at the end of the reporting period | Change in unrealized gains or losses for the period included in other comprehensive income for assets held at the end of the reporting period | $ | — | | | $ | — | | | (68) | | | $ | 0 | | 0 | $ | 0 | | | $ | — | | Change in unrealized gains or losses for the period included in other comprehensive income for assets held at the end of the reporting period | — | | | — | | | (14) | | | — | | | — | | | | — | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | |
| Level 3 Fair Value Measurements Nine Months Ended September 30, 2020 |
| | | | | Available-for-sale securities | | Loans held for investment |
| (dollar amounts in millions) | MSRs | | Derivative instruments | | Municipal securities | | Private- label CMO | | Asset- backed securities | |
| Opening balance | $ | 7 | | | $ | 6 | | | $ | 2,999 | | | $ | 2 | | | $ | 48 | | | $ | 26 | |
| Fair value election for servicing assets previously measured using the amortized method | 205 | | | — | | | — | | | — | | | — | | | — | |
| Transfers out of Level 3 (1) | — | | | (139) | | | — | | | — | | | — | | | — | |
| Total gains/losses for the period: | | | | | | | | | | | |
| Included in earnings | (21) | | | 181 | | | (2) | | | — | | | — | | | — | |
| Included in OCI | — | | | — | | | 61 | | | — | | | — | | | — | |
| Purchases/originations | — | | | — | | | 491 | | | 3 | | | 28 | | | — | |
| | | | | | | | | | | |
| Repayments | — | | | — | | | — | | | — | | | — | | | (2) | |
| | | | | | | | | | | |
| Settlements | — | | | — | | | (460) | | | — | | | (27) | | | — | |
| Closing balance | $ | 191 | | | $ | 48 | | | $ | 3,089 | | | $ | 5 | | | $ | 49 | | | $ | 24 | |
| Change in unrealized gains or losses for the period included in earnings for assets held at end of the reporting date | $ | (22) | | | $ | 42 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| Change in unrealized gains or losses for the period included in other comprehensive income for assets held at the end of the reporting period | — | | | — | | | 64 | | — | | — | | | — | | | — | |
(1)Transfers out of Level 3 represent the settlement value of the derivative instruments (i.e. interest rate lock agreements) that isare transferred to loans held for sale, which is classified as Level 2.
The following tables below summarize the classification of gains and losses due to changes in fair value, recorded in earnings for Level 3 assets and liabilities for the three-month and nine-month periods ended March 31,September 30, 2021 and 2020:
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Level 3 Fair Value Measurements
Three Months Ended March 31, 2021 | | | | | | | | |
| | | | | | | | | | | | | |
| (dollar amounts in millions) | MSRs | | Derivative instruments | | | | | | | | | | |
| Classification of gains and losses in earnings: | | | | | | | | | | | | | |
| Mortgage banking income | $ | 51 | | | $ | 8 | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Total | $ | 51 | | | $ | 8 | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Level 3 Fair Value Measurements
Three Months Ended March 31, 2020 | | |
| | | | | Available-for-sale securities | | | | | | | | |
| (dollar amounts in millions) | MSRs | | Derivative instruments | | Municipal securities | | | | | | | | |
| Classification of gains and losses in earnings: | | | | | | | | | | | | | |
| Mortgage banking income | $ | (47) | | | $ | 53 | | | $ | 0 | | | | | | | | | |
| | | | | | | | | | | | | |
| Interest and fee income | 0 | | | 0 | | | (1) | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Total | $ | (47) | | | $ | 53 | | | $ | (1) | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Level 3 Fair Value Measurements
Three Months Ended September 30, 2021 | | | | | | | | |
| | | | | Available-for-sale securities | | | | | | | | |
| (dollar amounts in millions) | MSRs | | Derivative instruments | | Municipal securities | | | | | | | | |
| Classification of gains and losses in earnings: | | | | | | | | | | | | | |
| Mortgage banking income | $ | 1 | | | $ | 28 | | | $ | — | | | | | | | | | |
| | | | | | | | | | | | | |
| Interest and fee income | — | | | — | | | (1) | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Total | $ | 1 | | | $ | 28 | | | $ | (1) | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Level 3 Fair Value Measurements
Three Months Ended September 30, 2020 | | |
| | | | | Available-for-sale securities | | | | | | | | |
| (dollar amounts in millions) | MSRs | | Derivative instruments | | Municipal securities | | | | | | | | |
| Classification of gains and losses in earnings: | | | | | | | | | | | | | |
| Mortgage banking income | $ | 19 | | | $ | 72 | | | $ | — | | | | | | | | | |
| | | | | | | | | | | | | |
| Interest and fee income | — | | | — | | | (1) | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Total | $ | 19 | | | $ | 72 | | | $ | (1) | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Level 3 Fair Value Measurements
Nine Months Ended September 30, 2021 | | | | | | | | |
| | | | | | | | | | | | | |
| (dollar amounts in millions) | MSRs | | Derivative instruments | | Municipal securities | | | | | | | | |
| Classification of gains and losses in earnings: | | | | | | | | | | | | | |
| Mortgage banking income | $ | 27 | | | $ | 73 | | | $ | — | | | | | | | | | |
| | | | | | | | | | | | | |
| Interest and fee income | — | | | — | | | (1) | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Total | $ | 27 | | | $ | 73 | | | $ | (1) | | | | | | | | | |
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| Level 3 Fair Value Measurements
Nine Months Ended September 30, 2020 | | |
| | | | | Available-for-sale securities | | | | | | | | |
| (dollar amounts in millions) | MSRs | | Derivative instruments | | Municipal securities | | | | | | | | |
| Classification of gains and losses in earnings: | | | | | | | | | | | | | |
| Mortgage banking income | $ | (21) | | | $ | 181 | | | $ | — | | | | | | | | | |
| | | | | | | | | | | | | |
| Interest and fee income | — | | | — | | | (2) | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Total | $ | (21) | | | $ | 181 | | | $ | (2) | | | | | | | | | |
| | | | | | | | | | | | | |
Assets and liabilities under the fair value option
The following tables present the fair value and aggregate principal balance of certain assets and liabilities under the fair value option:
| | | March 31, 2021 | | September 30, 2021 |
| (dollar amounts in millions) | (dollar amounts in millions) | Total Loans | | Loans that are 90 or more days past due | (dollar amounts in millions) | Total Loans | | Loans that are 90 or more days past due |
| Assets | Assets | Fair value carrying amount | | Aggregate unpaid principal | | Difference | | Fair value carrying amount | | Aggregate unpaid principal | | Difference | Assets | Fair value carrying amount | | Aggregate unpaid principal | | Difference | | Fair value carrying amount | | Aggregate unpaid principal | | Difference |
| Loans held for sale | Loans held for sale | $ | 1,531 | | | $ | 1,501 | | | $ | 30 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | Loans held for sale | $ | 1,297 | | | $ | 1,260 | | | $ | 37 | | | $ | — | | | $ | — | | | $ | — | |
| Loans held for investment | Loans held for investment | 118 | | | 123 | | | (5) | | | 4 | | | 5 | | | (1) | | Loans held for investment | 139 | | | 143 | | | (4) | | | 3 | | | 4 | | | (1) | |
|
| | | December 31, 2020 | | December 31, 2020 |
| (dollar amounts in millions) | (dollar amounts in millions) | Total Loans | | Loans that are 90 or more days past due | (dollar amounts in millions) | Total Loans | | Loans that are 90 or more days past due |
| Assets | Assets | Fair value carrying amount | | Aggregate unpaid principal | | Difference | | Fair value carrying amount | | Aggregate unpaid principal | | Difference | Assets | Fair value carrying amount | | Aggregate unpaid principal | | Difference | | Fair value carrying amount | | Aggregate unpaid principal | | Difference |
| Loans held for sale | Loans held for sale | $ | 1,198 | | | $ | 1,134 | | | $ | 64 | | | $ | 2 | | | $ | 2 | | | $ | 0 | | Loans held for sale | $ | 1,198 | | | $ | 1,134 | | | $ | 64 | | | $ | 2 | | | $ | 2 | | | $ | — | |
| Loans held for investment | Loans held for investment | 94 | | | 99 | | | (5) | | | 7 | | | 8 | | | (1) | | Loans held for investment | 94 | | | 99 | | | (5) | | | 7 | | | 8 | | | (1) | |
|
82 Huntington Bancshares Incorporated
The following table present the net gains (losses) from fair value changes for the three-month and nine-month periods ended March 31,September 30, 2021 and 2020.
| | | Net gains (losses) from fair value changes | | | Net gains (losses) from fair value changes |
| (dollar amounts in millions) | (dollar amounts in millions) | | Three Months Ended March 31, | | (dollar amounts in millions) | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| Assets | Assets | | 2021 | | 2020 | | Assets | | 2021 | | 2020 | | 2021 | | 2020 |
| Loans held for sale (1) | Loans held for sale (1) | | $ | (34) | | | $ | 19 | | | Loans held for sale (1) | | $ | (4) | | | $ | 13 | | | $ | (30) | | | $ | 35 | |
|
(1)The net gains (losses) from fair value changes are included in Mortgage banking income on the Unaudited Condensed Consolidated Statements of Income.
Assets and Liabilities measured at fair value on a nonrecurring basis
Certain assets and liabilities may be required to be measured at fair value on a nonrecurring basis in periods subsequent to their initial recognition. These assets and liabilities are not measured at fair value on an ongoing basis; however, they are subject to fair value adjustments in certain circumstances, such as when there is evidence of impairment. The amounts presented represent the fair value on the various measurement dates throughout the period. The gains (losses) represent the amounts recorded during the period regardless of whether the asset is still held at period end.
The amounts measured at fair value on a nonrecurring basis at March 31,September 30, 2021 were as follows:
| | | Fair Value Measurements Using | | | | | Fair Value Measurements Using | | | Total
Gains/(Losses)
Nine Months Ended
September 30, 2021
|
| (dollar amounts in millions) | (dollar amounts in millions) | Fair Value | | Quoted Prices In Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Other Unobservable Inputs (Level 3) | | | Total
Gains/(Losses)
Three Months Ended
March 31, 2021
| (dollar amounts in millions) | Fair Value | | Quoted Prices
In Active
Markets for
Identical Assets
(Level 1) | | Significant
Other
Observable
Inputs
(Level 2) | | Significant
Other
Unobservable
Inputs
(Level 3) | | |
| | Collateral-dependent loans | Collateral-dependent loans | 12 | | | 0 | | | 0 | | | 12 | | | | (1) | | Collateral-dependent loans | $ | 18 | | | $ | — | | | $ | — | | | $ | 18 | | | | $ | (2) | |
| | Loans held for sale | | Loans held for sale | — | | | — | | | — | | | — | | | | 1 | |
Huntington records nonrecurring adjustments of collateral-dependent loans held for investment. Such amounts are generally based on the fair value of the underlying collateral supporting the loan. Appraisals are generally obtained to support the fair value of the collateral and incorporate measures such as recent sales prices for comparable properties and cost of construction. Periodically, in cases where the carrying value exceeds the fair value of the collateral less cost to sell, an impairment charge is recognized in the form of a charge-off.
68 Huntington Bancshares Incorporated
Significant unobservable inputs for assets and liabilities measured at fair value on a recurring and nonrecurring basis
The table below presents quantitative information about the significant unobservable inputs for assets and liabilities measured at fair value on a recurring and nonrecurring basis at March 31,September 30, 2021 and December 31, 2020:
| | | Quantitative Information about Level 3 Fair Value Measurements at March 31, 2021 (1) (1) | | Quantitative Information about Level 3 Fair Value Measurements at September 30, 2021 (1) |
| (dollar amounts in millions) | (dollar amounts in millions) | Fair Value | | Valuation Technique | | Significant Unobservable Input | | Range | | Weighted Average | (dollar amounts in millions) | Fair Value | | Valuation Technique | | Significant Unobservable Input | | Range | | Weighted Average |
| Measured at fair value on a recurring basis: | Measured at fair value on a recurring basis: | Measured at fair value on a recurring basis: |
| MSRs | MSRs | $ | 274 | | | Discounted cash flow | | Constant prepayment rate | | 6 | % | - | 22% | | 12 | % | MSRs | $ | 338 | | | Discounted cash flow | | Constant prepayment rate | | 8 | % | - | 21% | | 12 | % |
| | Spread over forward interest rate swap rates | | 3 | % | - | 11% | | 5 | % | | Spread over forward interest rate swap rates | | 3 | % | - | 11% | | 5 | % |
| Derivative assets | Derivative assets | 21 | | | Consensus Pricing | | Net market price | | (5) | % | - | 12% | | 1 | % | Derivative assets | 19 | | | Consensus Pricing | | Net market price | | (4) | % | - | 10% | | 1 | % |
| | Estimated Pull through % | | 6 | % | - | 100% | | 90 | % | | Estimated pull through % | | 6 | % | - | 100% | | 90 | % |
| | Municipal securities | Municipal securities | 3,070 | | | Discounted cash flow | | Discount rate | | 0 | % | - | 2% | | 1 | % | Municipal securities | 3,582 | | | Discounted cash flow | | Discount rate | | — | % | - | 2% | | 1 | % |
| Asset-backed securities | Asset-backed securities | 47 | | | Cumulative default | | 0 | % | - | 39% | | 4 | % | Asset-backed securities | 35 | | | Cumulative default | | — | % | - | 64% | | 5 | % |
| | Loss given default | | 5 | % | - | 80% | | 25 | % | | Loss given default | | 5 | % | - | 90% | | 24 | % |
| | Measured at fair value on a nonrecurring basis: | Measured at fair value on a nonrecurring basis: | Measured at fair value on a nonrecurring basis: |
| | Collateral-dependent loans | Collateral-dependent loans | 12 | | | Appraisal value | | N/A | | | | N/A | Collateral-dependent loans | 18 | | | Appraisal value | | N/A | | | | N/A |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Quantitative Information about Level 3 Fair Value Measurements at December 31, 2020 (1) |
| (dollar amounts in millions) | Fair Value | | Valuation Technique | | Significant Unobservable Input | | Range | | Weighted Average |
| Measured at fair value on a recurring basis: | | | | |
| MSRs | $ | 210 | | | Discounted cash flow | | Constant prepayment rate | | 8 | % | - | 24% | | 17 | % |
| | | | | Spread over forward interest rate swap rates | | 4 | % | - | 11% | | 5 | % |
| Derivative assets | 43 | | | Consensus Pricing | | Net market price | | (4) | % | - | 11% | | 3 | % |
| | | | | Estimated Pull through % | | 1 | % | - | 100% | | 88 | % |
| | | | | | | | | | | |
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| | | | | | | | | | | |
| | | | | | | | | | | |
| Municipal securities | 2,951 | | | Discounted cash flow | | Discount rate | | 0 | % | | 1% | | 1 | % |
| Asset-backed securities | 10 | | | | | Cumulative default | | 0 | % | | 39% | | 4 | % |
| | | | | Loss given default | | 5 | % | | 80% | | 25 | % |
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| Measured at fair value on a nonrecurring basis: | | | | |
| Collateral-dependent loans | 144 | | | Appraisal value | | N/A | | | | | | NA |
| | | | | | | | | | | |
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| Quantitative Information about Level 3 Fair Value Measurements at December 31, 2020 (1) |
| (dollar amounts in millions) | Fair Value | | Valuation Technique | | Significant Unobservable Input | | Range | | Weighted Average |
| Measured at fair value on a recurring basis: | | | | |
| MSRs | $ | 210 | | | Discounted cash flow | | Constant prepayment rate | | 8 | % | - | 24% | | 17 | % |
| | | | | Spread over forward interest rate swap rates | | 4 | % | - | 11% | | 5 | % |
| Derivative assets | 43 | | | Consensus Pricing | | Net market price | | (4) | % | - | 11% | | 3 | % |
| | | | | Estimated pull through % | | 1 | % | - | 100% | | 88 | % |
| | | | | | | | | | | |
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| Municipal securities | 2,951 | | | Discounted cash flow | | Discount rate | | — | % | | 1% | | 1 | % |
| Asset-backed securities | 10 | | | | | Cumulative default | | — | % | | 39% | | 4 | % |
| | | | | Loss given default | | 5 | % | | 80% | | 25 | % |
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| Measured at fair value on a nonrecurring basis: | | | | |
| Collateral-dependent loans | 144 | | | Appraisal value | | N/A | | | | | | NA |
| | | | | | | | | | | |
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(1) Certain disclosures related to quantitative level 3 fair value measurements do not include those deemed to be immaterial.
The following provides a general description of the impact of a change in an unobservable input on the fair value measurement and the interrelationship between unobservable inputs, where relevant/significant. Interrelationships may also exist between observable and unobservable inputs.
Credit loss estimates, such as probability of default, constant default, cumulative default, loss given default, cure given deferral, and loss severity, are driven by the ability of the borrowers to pay their loans and the value of the underlying collateral and are impacted by changes in macroeconomic conditions, typically increasing when economic conditions worsen and decreasing when conditions improve. An increase in the estimated prepayment rate typically results in a decrease in estimated credit losses and vice versa. Higher credit loss estimates generally result in lower fair values. Credit spreads generally increase when liquidity risks and market volatility increase and decrease when liquidity conditions and market volatility improve.
Discount rates and spread over forward interest rate swap rates typically increase when market interest rates increase and/or credit and liquidity risks increase and decrease when market interest rates decline and/or credit and liquidity conditions improve. Higher discount rates and credit spreads generally result in lower fair market values.
Net market price and pull through percentages generally increase when market interest rates increase and decline when market interest rates decline. Higher net market price and pull through percentages generally result in higher fair values.
2021 1Q Form 10-Q 8469 Huntington Bancshares Incorporated
Fair values of financial instruments
The following table provides the carrying amounts and estimated fair values of Huntington’s financial instruments at March 31,September 30, 2021 and December 31, 2020:
| | | March 31, 2021 | | September 30, 2021 |
| (dollar amounts in millions) | (dollar amounts in millions) | Amortized Cost | | Lower of Cost or Market | | Fair Value or Fair Value Option | | Total Carrying Amount | | Estimated Fair Value | (dollar amounts in millions) | Amortized Cost | | Lower of Cost or Market | | Fair Value or Fair Value Option | | Total Carrying Amount | | Estimated Fair Value |
| Financial Assets | Financial Assets | | | | Financial Assets | | | |
| Cash and short-term assets | Cash and short-term assets | $ | 8,641 | | | $ | — | | | $ | — | | | $ | 8,641 | | | $ | 8,641 | | Cash and short-term assets | $ | 10,188 | | | $ | — | | | $ | — | | | $ | 10,188 | | | $ | 10,188 | |
| Trading account securities | Trading account securities | — | | | — | | | 51 | | | 51 | | | 51 | | Trading account securities | — | | | — | | | 77 | | | 77 | | | 77 | |
| Available-for-sale securities | Available-for-sale securities | — | | | — | | | 19,375 | | | 19,375 | | | 19,375 | | Available-for-sale securities | — | | | — | | | 25,654 | | | 25,654 | | | 25,654 | |
| Held-to-maturity securities | Held-to-maturity securities | 7,815 | | | — | | | — | | | 7,815 | | | 8,062 | | Held-to-maturity securities | 12,455 | | | — | | | — | | | 12,455 | | | 12,619 | |
| Other securities | Other securities | 352 | | | — | | | 59 | | | 411 | | | 411 | | Other securities | 563 | | | — | | | 86 | | | 649 | | | 649 | |
| Loans held for sale | Loans held for sale | — | | | 6 | | | 1,531 | | | 1,537 | | | 1,537 | | Loans held for sale | — | | | 38 | | | 1,297 | | | 1,335 | | | 1,335 | |
| Net loans and leases (1) | Net loans and leases (1) | 78,409 | | | — | | | 118 | | | 78,527 | | | 78,603 | | Net loans and leases (1) | 108,321 | | | — | | | 139 | | | 108,460 | | | 108,385 | |
| Derivative assets | Derivative assets | — | | | — | | | 1,013 | | | 1,013 | | | 1,013 | | Derivative assets | — | | | — | | | 900 | | | 900 | | | 900 | |
| Assets held in trust for deferred compensation plans | | Assets held in trust for deferred compensation plans | — | | | — | | | 151 | | | 151 | | | 151 | |
| Financial Liabilities | Financial Liabilities | | Financial Liabilities | |
| Deposits | Deposits | 102,184 | | | — | | | — | | | 102,184 | | | 102,231 | | Deposits | 141,898 | | | — | | | — | | | 141,898 | | | 142,261 | |
| Short-term borrowings | Short-term borrowings | 219 | | | — | | | — | | | 219 | | | 219 | | Short-term borrowings | 435 | | | — | | | — | | | 435 | | | 435 | |
| Long-term debt | Long-term debt | 7,210 | | | — | | | — | | | 7,210 | | | 7,305 | | Long-term debt | 7,779 | | | — | | | — | | | 7,779 | | | 7,908 | |
| Derivative liabilities | Derivative liabilities | — | | | — | | | 171 | | | 171 | | | 171 | | Derivative liabilities | — | | | — | | | 250 | | | 250 | | | 250 | |
| | | December 31, 2020 | | December 31, 2020 |
| (dollar amounts in millions) | (dollar amounts in millions) | Amortized Cost | | Lower of Cost or Market | | Fair Value or Fair Value Option | | Total Carrying Amount | | Estimated Fair Value | (dollar amounts in millions) | Amortized Cost | | Lower of Cost or Market | | Fair Value or Fair Value Option | | Total Carrying Amount | | Estimated Fair Value |
| Financial Assets | Financial Assets | | | | Financial Assets | | | |
| Cash and short-term assets | Cash and short-term assets | $ | 6,712 | | | $ | — | | | $ | — | | | $ | 6,712 | | | $ | 6,712 | | Cash and short-term assets | $ | 6,712 | | | $ | — | | | $ | — | | | $ | 6,712 | | | $ | 6,712 | |
| Trading account securities | Trading account securities | — | | | — | | | 62 | | | 62 | | | 62 | | Trading account securities | — | | | — | | | 62 | | | 62 | | | 62 | |
| Available-for-sale securities | Available-for-sale securities | — | | | — | | | 16,485 | | | 16,485 | | | 16,485 | | Available-for-sale securities | — | | | — | | | 16,485 | | | 16,485 | | | 16,485 | |
| Held-to-maturity securities | Held-to-maturity securities | 8,861 | | | — | | | — | | | 8,861 | | | 9,255 | | Held-to-maturity securities | 8,861 | | | — | | | — | | | 8,861 | | | 9,255 | |
| Other securities | Other securities | 359 | | | — | | | 59 | | | 418 | | | 418 | | Other securities | 359 | | | — | | | 59 | | | 418 | | | 418 | |
| Loans held for sale | Loans held for sale | — | | | 77 | | | 1,198 | | | 1,275 | | | 1,275 | | Loans held for sale | — | | | 77 | | | 1,198 | | | 1,275 | | | 1,275 | |
| Net loans and leases (1) | Net loans and leases (1) | 79,700 | | | — | | | 94 | | | 79,794 | | | 80,477 | | Net loans and leases (1) | 79,700 | | | — | | | 94 | | | 79,794 | | | 80,477 | |
| Derivative assets | Derivative assets | — | | | — | | | 1,057 | | | 1,057 | | | 1,057 | | Derivative assets | — | | | — | | | 1,057 | | | 1,057 | | | 1,057 | |
| Assets held in trust for deferred compensation plans | | Assets held in trust for deferred compensation plans | — | | | — | | | 73 | | | 73 | | | 73 | |
| Financial Liabilities | Financial Liabilities | | Financial Liabilities | |
| Deposits | Deposits | 98,948 | | | — | | | — | | | 98,948 | | | 99,021 | | Deposits | 98,948 | | | — | | | — | | | 98,948 | | | 99,021 | |
| Short-term borrowings | Short-term borrowings | 183 | | | — | | | — | | | 183 | | | 183 | | Short-term borrowings | 183 | | | — | | | — | | | 183 | | | 183 | |
| Long-term debt | Long-term debt | 8,352 | | | — | | | — | | | 8,352 | | | 8,568 | | Long-term debt | 8,352 | | | — | | | — | | | 8,352 | | | 8,568 | |
| Derivative liabilities | Derivative liabilities | — | | | — | | | 116 | | | 116 | | | 116 | | Derivative liabilities | — | | | — | | | 116 | | | 116 | | | 116 | |
(1)Includes collateral-dependent loans.
702021 3Q Form 10-Q Huntington Bancshares Incorporated85
The following table presents the level in the fair value hierarchy for the estimated fair values at March 31,September 30, 2021 and December 31, 2020:
| | | Estimated Fair Value Measurements at Reporting Date Using | | Netting Adjustments (1) | March 31, 2021 | | Estimated Fair Value Measurements at Reporting Date Using | | Netting Adjustments (1) | September 30, 2021 |
| (dollar amounts in millions) | (dollar amounts in millions) | Level 1 | | Level 2 | | Level 3 | | (dollar amounts in millions) | Level 1 | | Level 2 | | Level 3 | |
| Financial Assets | Financial Assets | | | | | | | | Financial Assets | | | | | | | |
| Trading account securities | Trading account securities | $ | 0 | | | $ | 51 | | | $ | 0 | | | $ | 51 | | Trading account securities | $ | — | | | $ | 77 | | | $ | — | | | $ | 77 | |
| Available-for-sale securities | Available-for-sale securities | 5 | | | 16,242 | | | 3,128 | | | 19,375 | | Available-for-sale securities | 5 | | | 22,014 | | | 3,635 | | | 25,654 | |
| Held-to-maturity securities | Held-to-maturity securities | 0 | | | 8,062 | | | 0 | | | 8,062 | | Held-to-maturity securities | — | | | 12,619 | | | — | | | 12,619 | |
| Other securities (2) | Other securities (2) | 42 | | | 17 | | | 0 | | | 59 | | Other securities (2) | 62 | | | 24 | | | — | | | 86 | |
| Loans held for sale | Loans held for sale | 0 | | | 1,531 | | | 6 | | | 1,537 | | Loans held for sale | — | | | 1,297 | | | 38 | | | 1,335 | |
| Net loans and direct financing leases | Net loans and direct financing leases | 0 | | | 96 | | | 78,507 | | | 78,603 | | Net loans and direct financing leases | — | | | 119 | | | 108,266 | | | 108,385 | |
| Derivative assets | Derivative assets | 0 | | | 1,808 | | | 21 | | | $ | (816) | | 1,013 | | Derivative assets | — | | | 1,567 | | | 19 | | | $ | (686) | | 900 | |
| Financial Liabilities | Financial Liabilities | | Financial Liabilities | |
| Deposits | Deposits | 0 | | | 99,998 | | | 2,233 | | | 102,231 | | Deposits | — | | | 137,142 | | | 5,119 | | | 142,261 | |
| Short-term borrowings | Short-term borrowings | 0 | | | 219 | | | 0 | | | 219 | | Short-term borrowings | — | | | 435 | | | — | | | 435 | |
| Long-term debt | Long-term debt | 0 | | | 6,736 | | | 569 | | | 7,305 | | Long-term debt | — | | | 7,147 | | | 761 | | | 7,908 | |
| Derivative liabilities | Derivative liabilities | 0 | | | 863 | | | 11 | | | (703) | | 171 | | Derivative liabilities | — | | | 1,056 | | | 7 | | | (813) | | 250 | |
| | | Estimated Fair Value Measurements at Reporting Date Using | | Netting Adjustments (1) | December 31, 2020 | | Estimated Fair Value Measurements at Reporting Date Using | | Netting Adjustments (1) | December 31, 2020 |
| (dollar amounts in millions) | (dollar amounts in millions) | Level 1 | | Level 2 | | Level 3 | | (dollar amounts in millions) | Level 1 | | Level 2 | | Level 3 | |
| Financial Assets | Financial Assets | | | | | | | | Financial Assets | | | | | | | |
| Trading account securities | Trading account securities | $ | 0 | | | $ | 62 | | | $ | 0 | | | $ | 62 | | Trading account securities | $ | — | | | $ | 62 | | | $ | — | | | $ | 62 | |
| Available-for-sale securities | Available-for-sale securities | 5 | | | 13,510 | | | 2,970 | | | 16,485 | | Available-for-sale securities | 5 | | | 13,510 | | | 2,970 | | | 16,485 | |
| Held-to-maturity securities | Held-to-maturity securities | 0 | | | 9,255 | | | 0 | | | 9,255 | | Held-to-maturity securities | — | | | 9,255 | | | — | | | 9,255 | |
| Other securities (2) | Other securities (2) | 59 | | | 0 | | | 0 | | | 59 | | Other securities (2) | 59 | | | — | | | — | | | 59 | |
| Loans held for sale | Loans held for sale | 0 | | | 1,198 | | | 77 | | | 1,275 | | Loans held for sale | — | | | 1,198 | | | 77 | | | 1,275 | |
| Net loans and direct financing leases | Net loans and direct financing leases | 0 | | | 71 | | | 80,406 | | | 80,477 | | Net loans and direct financing leases | — | | | 71 | | | 80,406 | | | 80,477 | |
| Derivative assets | Derivative assets | 0 | | | 1,903 | | | 43 | | | $ | (889) | | 1,057 | | Derivative assets | — | | | 1,903 | | | 43 | | | $ | (889) | | 1,057 | |
| Financial Liabilities | Financial Liabilities | | Financial Liabilities | |
| Deposits | Deposits | 0 | | | 96,656 | | | 2,365 | | | 99,021 | | Deposits | — | | | 96,656 | | | 2,365 | | | 99,021 | |
| Short-term borrowings | Short-term borrowings | 0 | | | 183 | | | 0 | | | 183 | | Short-term borrowings | — | | | 183 | | | — | | | 183 | |
| Long-term debt | Long-term debt | 0 | | | 7,999 | | | 569 | | | 8,568 | | Long-term debt | — | | | 7,999 | | | 569 | | | 8,568 | |
| Derivative liabilities | Derivative liabilities | 0 | | | 1,031 | | | 2 | | | (917) | | 116 | | Derivative liabilities | — | | | 1,031 | | | 2 | | | (917) | | 116 | |
(1)Amounts represent the impact of legally enforceable master netting agreements that allow the Company to settle positive and negative positions and cash collateral held or placed with the same counterparties.
(2)Excludes securities without readily determinable fair values.
The short-term nature of certain assets and liabilities result in their carrying value approximating fair value. These include trading account securities, customers’ acceptance liabilities, short-term borrowings, bank acceptances outstanding, FHLB advances, and cash and short-term assets, which include cash and due from banks, interest-bearing deposits in banks, interest-bearing deposits at Federal Reserve Bank,FRB, federal funds sold, and securities purchased under resale agreements. Loan commitments and letters-of-credit generally have short-term, variable-rate features and contain clauses that limit Huntington’s exposure to changes in customer credit quality. Accordingly, their carrying values, which are immaterial at the respective balance sheet dates, are reasonable estimates of fair value.
86 Huntington Bancshares Incorporated
Certain assets, the most significant being operating lease assets, bank owned life insurance, and premises and equipment, do not meet the definition of a financial instrument and are excluded from this disclosure. Similarly, mortgage servicing rights, deposit base, and other customer relationship intangibles are not considered financial instruments and are not included above. Accordingly, this fair value information is not intended to, and does not,
represent Huntington’s underlying value. Many of the assets and liabilities subject to the disclosure requirements are not actively traded, requiring fair values to be estimated by Management.management. These estimations necessarily involve the use of judgment about a wide variety of factors, including but not limited to, relevancy of market prices of comparable instruments, expected future cash flows, and appropriate discount rates.
12.14. DERIVATIVE FINANCIAL INSTRUMENTS
Derivative financial instruments are recorded in the Unaudited Condensed Consolidated Balance Sheets as either an asset or a liability (in other assets or other liabilities, respectively) and measured at fair value.
Derivative financial instruments can be designated as accounting hedges under GAAP. Designating a derivative as an accounting hedge allows Huntington to recognize gains and losses on the hedging instruments in the income statement line item where the gains and losses on the hedged item are recognized. Gains and losses on derivatives that are not designated in an effective hedge relationship under GAAP immediately impact earnings within the period they occur.
The following table presents the fair values and notional values of all derivative instruments included in the Unaudited Condensed Consolidated Balance Sheets at March 31,September 30, 2021 and December 31, 2020. Amounts in the table below are presented gross without the impact of any net collateral arrangements.
| | | March 31, 2021 | | December 31, 2020 | | September 30, 2021 | | December 31, 2020 |
| (dollar amounts in millions) | (dollar amounts in millions) | Notional Value | | Asset | | Liability | | Notional Value | | Asset | | Liability | (dollar amounts in millions) | Notional Value | | Asset | | Liability | | Notional Value | | Asset | | Liability |
| Derivatives designated as Hedging Instruments | Derivatives designated as Hedging Instruments | | | | | | | | | | Derivatives designated as Hedging Instruments | | | | | | | | | |
| Interest rate contracts | Interest rate contracts | $ | 24,937 | | | $ | 638 | | | $ | 42 | | | $ | 27,056 | | | $ | 719 | | | $ | 51 | | Interest rate contracts | $ | 20,053 | | | $ | 413 | | | $ | 12 | | | $ | 27,056 | | | $ | 719 | | | $ | 51 | |
| Foreign exchange contracts | | Foreign exchange contracts | 209 | | | — | | | — | | | — | | | — | | | — | |
| Derivatives not designated as Hedging Instruments | Derivatives not designated as Hedging Instruments | | Derivatives not designated as Hedging Instruments | |
| Interest rate contracts | Interest rate contracts | 55,792 | | | 1,034 | | | 686 | | | 44,495 | | | 1,074 | | | 828 | | Interest rate contracts | 54,089 | | | 772 | | | 665 | | | 44,495 | | | 1,074 | | | 828 | |
| Foreign exchange contracts | Foreign exchange contracts | 2,737 | | | 44 | | | 42 | | | 2,718 | | | 46 | | | 47 | | Foreign exchange contracts | 3,568 | | | 35 | | | 30 | | | 2,718 | | | 46 | | | 47 | |
| Commodities contracts | Commodities contracts | 1,660 | | | 101 | | | 98 | | | 1,952 | | | 107 | | | 103 | | Commodities contracts | 1,255 | | | 353 | | | 351 | | | 1,952 | | | 107 | | | 103 | |
| Equity contracts | Equity contracts | 502 | | | 12 | | | 6 | | | 517 | | | 0 | | | 4 | | Equity contracts | 705 | | | 13 | | | 5 | | | 517 | | | — | | | 4 | |
| Total Contracts | Total Contracts | $ | 85,628 | | | $ | 1,829 | | | $ | 874 | | | $ | 76,738 | | | $ | 1,946 | | | $ | 1,033 | | Total Contracts | $ | 79,879 | | | $ | 1,586 | | | $ | 1,063 | | | $ | 76,738 | | | $ | 1,946 | | | $ | 1,033 | |
The following table presents the amount of gain or loss recognized in income for derivatives not designated as hedging instruments under ASC Subtopic 815-10 in the Unaudited Condensed Consolidated Income Statement for the three-month and nine-month periods ended March 31,September 30, 2021 and 2020, respectively.
| | | Location of Gain or (Loss) Recognized in Income on Derivative | | Amount of Gain or (Loss) Recognized in Income on Derivative | | Location of Gain or (Loss) Recognized in Income on Derivative | | Amount of Gain or (Loss) Recognized in Income on Derivative |
| | Three Months Ended
March 31, | | | Location of Gain or (Loss) Recognized in Income on Derivative | | Three Months Ended
September 30, | | Nine Months Ended
September 30, |
| (dollar amounts in millions) | (dollar amounts in millions) | | 2021 | | 2020 | | | Location of Gain or (Loss) Recognized in Income on Derivative | | 2021 | | 2020 | | 2021 | | 2020 |
| Interest rate contracts: | Interest rate contracts: | | | | | | | | | | | | | |
| Customer | Customer | | Capital markets fees | | $ | 12 | | | $ | 18 | | | Customer | | $ | 13 | | | $ | 10 | | | $ | 37 | | | $ | 39 | |
| Mortgage Banking | | Mortgage banking income | | (6) | | | 96 | | | |
| Mortgage banking | | Mortgage banking | | Mortgage banking income | | 5 | | | 47 | | | (24) | | | 109 | |
| Interest rate floors | Interest rate floors | | Interest and fee income on loans and leases | | (2) | | | 0 | | | Interest rate floors | | Interest and fee income on loans and leases | | (4) | | | — | | | (8) | | | — | |
| Interest rate caps | Interest rate caps | | Interest expense on long-term debt | | 144 | | | 0 | | | Interest rate caps | | Interest expense on long-term debt | | — | | | — | | | 89 | | | — | |
| Foreign exchange contracts | Foreign exchange contracts | | Capital markets fees | | 6 | | | 6 | | | Foreign exchange contracts | | Capital markets fees | | 9 | | | 7 | | | 22 | | | 18 | |
| Commodities contracts | Commodities contracts | | Capital markets fees | | 0 | | | 2 | | | Commodities contracts | | Capital markets fees | | (1) | | | — | | | (1) | | | 2 | |
| | Equity contracts | Equity contracts | | Other noninterest expense | | (7) | | | (2) | | | Equity contracts | | Other noninterest expense | | (2) | | | (1) | | | (6) | | | (3) | |
| Total | Total | | $ | 147 | | | $ | 120 | | | Total | | $ | 20 | | | $ | 63 | | | $ | 109 | | | $ | 165 | |
Derivatives used in asset and liability management activities
Huntington engages in balance sheet hedging activity, principally for asset and liability management purposes. Balance sheet hedging activity is generally arranged to receive hedge accounting treatment that can be classified as either fair value or cash flow hedges. Fair value hedges are executed to hedge changes in fair value of outstanding fixed-rate debt and investment securities caused by fluctuations in market interest rates. Cash flow hedges are
72 Huntington Bancshares Incorporated
executed to modify interest rate characteristics of designated commercial loans in order to reduce the impact of changes in future cash flows due to market interest rate changes.
The following table presents the gross notional values of derivatives used in Huntington’s asset and liability management activities at March 31,September 30, 2021 and December 31, 2020, identified by the underlying interest rate-sensitive instruments.
| | | March 31, 2021 | | September 30, 2021 |
| (dollar amounts in millions) | (dollar amounts in millions) | Fair Value Hedges | | Cash Flow Hedges | | Economic Hedges | | Total | (dollar amounts in millions) | Fair Value Hedges | | Cash Flow Hedges | | Economic Hedges | | Total |
| Instruments associated with: | Instruments associated with: | | | | | | | | Instruments associated with: | | | | | | | |
| Investment securities | Investment securities | $ | 3,190 | | | $ | 0 | | | $ | 0 | | | $ | 3,190 | | Investment securities | $ | 7,372 | | | $ | — | | | $ | — | | | $ | 7,372 | |
| Loans | Loans | 0 | | | 16,350 | | | 1,271 | | | 17,621 | | Loans | — | | | 7,925 | | | 271 | | | 8,196 | |
| | Long-term debt | Long-term debt | 5,397 | | | 0 | | | 8,000 | | | 13,397 | | Long-term debt | 4,756 | | | — | | | — | | | 4,756 | |
| | Total notional value at March 31, 2021 | $ | 8,587 | | | $ | 16,350 | | | $ | 9,271 | | | $ | 34,208 | | |
| Total notional value at September 30, 2021 | | Total notional value at September 30, 2021 | $ | 12,128 | | | $ | 7,925 | | | $ | 271 | | | $ | 20,324 | |
| | | December 31, 2020 | | December 31, 2020 |
| (dollar amounts in millions) | (dollar amounts in millions) | Fair Value Hedges | | Cash Flow Hedges | | Economic Hedges | | Total | (dollar amounts in millions) | Fair Value Hedges | | Cash Flow Hedges | | Economic Hedges | | Total |
| Instruments associated with: | Instruments associated with: | | | | | | | | Instruments associated with: | | | | | | | |
| Investment securities | Investment securities | $ | 3,484 | | | $ | 0 | | | $ | 0 | | | $ | 3,484 | | Investment securities | $ | 3,484 | | | $ | — | | | $ | — | | | $ | 3,484 | |
| Loans | Loans | 0 | | | 17,375 | | | 1,271 | | | 18,646 | | Loans | — | | | 17,375 | | | 1,271 | | | 18,646 | |
| | Long-term debt | Long-term debt | 6,197 | | | 0 | | | 5,000 | | | 11,197 | | Long-term debt | 6,197 | | | — | | | 5,000 | | | 11,197 | |
| Total notional value at December 31, 2020 | Total notional value at December 31, 2020 | $ | 9,681 | | | $ | 17,375 | | | $ | 6,271 | | | $ | 33,327 | | Total notional value at December 31, 2020 | $ | 9,681 | | | $ | 17,375 | | | $ | 6,271 | | | $ | 33,327 | |
These derivative financial instruments were entered into for the purpose of managing the interest rate risk of assets and liabilities. Net amounts receivable or payable on contracts hedging either interest earning assets or interest bearing liabilities were accrued as an adjustment to either interest income or interest expense. Also, recorded as an adjustmentAdjustments to interest income were also recorded for the amounts related to the amortization of floors and forward-starting floors that were excluded from the hedge effectiveness, changes in the fair value of economic hedges, as well as the amounts related to terminated hedges reclassified from AOCI. The net amounts resulted in an increase (decrease) to net interest income of $225$61 million and $16$82 million for the three-month periods ended March 31,September 30, 2021, and 2020, respectively. For the nine-month periods ended September 30, 2021, and 2020, the net amounts resulted in an increase to net interest income of $291 million and $151 million, respectively.
Fair Value Hedges
The changes in fair value of the fair value hedges are recorded through earnings and offset against changes in the fair value of the hedged item.
Huntington has designated $2.8$7.0 billion of interest rate swaps as fair value hedges of fixed-rate investment securities using the last-of-layer method. This approach allows the Company to designate as the hedged item a stated amount of the assets that are not expected to be affected by prepayments, defaults and other factors affecting the timing and amount of cash flows. The fair value basis adjustment on our hedged mortgage-backed securities is included in available-for-sale securities on our Unaudited Condensed Consolidated Statements of Financial Condition. Huntington has also designated $0.4 billion of interest rate swaps as fair value hedges of fixed-rate corporate bonds.
2021 1Q Form 10-Q 8873 Huntington Bancshares Incorporated
The following table presents the change in fair value for derivatives designated as fair value hedges as well as the offsetting change in fair value on the hedged item for the three-month and nine-month periods ended March 31,September 30, 2021 and 2020.
| | | | Three Months Ended
March 31, | | | | Three Months Ended
September 30, | | Nine Months Ended
September 30, |
| (dollar amounts in millions) | (dollar amounts in millions) | | 2021 | | 2020 | | (dollar amounts in millions) | | 2021 | | 2020 | | 2021 | | 2020 |
| Interest rate contracts | Interest rate contracts | | | | | | Interest rate contracts | | | | | | | | |
| Change in fair value of interest rate swaps hedging investment securities (1) | Change in fair value of interest rate swaps hedging investment securities (1) | | $ | 43 | | | $ | 0 | | | Change in fair value of interest rate swaps hedging investment securities (1) | | $ | 2 | | | $ | — | | | $ | 39 | | | $ | (1) | |
| Change in fair value of hedged investment securities (1) | Change in fair value of hedged investment securities (1) | | (44) | | | 0 | | | Change in fair value of hedged investment securities (1) | | — | | | — | | | (40) | | | 1 | |
| | Change in fair value of interest rate swaps hedging long-term debt (2) | Change in fair value of interest rate swaps hedging long-term debt (2) | | (50) | | | 200 | | | Change in fair value of interest rate swaps hedging long-term debt (2) | | (22) | | | (36) | | | (95) | | | 159 | |
| Change in fair value of hedged long term debt (2) | Change in fair value of hedged long term debt (2) | | 52 | | | (190) | | | Change in fair value of hedged long term debt (2) | | 22 | | | 35 | | | 96 | | | (160) | |
As of March 31,September 30, 2021, and December 31, 2020, the following amounts were recorded on the balance sheet related to cumulative basis adjustments for fair value hedges.
| | | Amortized Cost | | Cumulative Amount of Fair Value Hedging Adjustment To Hedged Items | | Amortized Cost | | Cumulative Amount of Fair Value Hedging Adjustment To Hedged Items |
| (dollar amounts in millions) | (dollar amounts in millions) | March 31, 2021 | | December 31, 2020 | | March 31, 2021 | | December 31, 2020 | (dollar amounts in millions) | September 30, 2021 | | December 31, 2020 | | September 30, 2021 | | December 31, 2020 |
| Assets | Assets | | | | | | | | Assets | | | | | | | |
| Investment securities (1) | Investment securities (1) | $ | 5,713 | | | $ | 6,637 | | | $ | 1 | | | $ | 3 | | Investment securities (1) | $ | 17,630 | | | $ | 6,637 | | | $ | 2 | | | $ | 3 | |
| | Liabilities | Liabilities | | Liabilities | |
| Long-term debt | Long-term debt | 5,538 | | | 6,383 | | | 180 | | | 232 | | Long-term debt | 4,882 | | | 6,383 | | | 135 | | | 232 | |
|
(1)Amounts include the amortized cost basis of closed portfolios used to designate hedging relationships in which the hedged item is the last layer expected to be remaining at the end of the hedging relationship. As of March 31,September 30, 2021, the amortized cost basis of the closed portfolios used in these hedging relationships was $5.3$17.2 billion, the cumulative basis adjustments associated with these hedging relationships was $1 million, and the amounts of the designated hedged itemshedging instruments were $2.8$7.0 billion.
The cumulative amount of fair value hedging adjustments remaining for any hedged assets and liabilities for which hedge accounting has been discontinued was $(50)$(35) million and $(62) million at March 31,September 30, 2021 and December 31, 2020, respectively.
Cash Flow Hedges
At March 31,September 30, 2021, Huntington has $16.4$7.9 billion of interest rate floors, floor spreads and swaps. These are designated as cash flow hedges for variable rate commercial loans indexed to LIBOR. The change in the fair value of a derivative instrument designated as a cash flow hedge is initially recognized in OCI and is reclassified into income when the hedged item impacts earnings. The initial premium paid for the interest rate floor contracts represents the time value of the contracts and is not included in the measurement of hedge effectiveness. Any change in fair value related to time value is recognized in OCI. The initial premium paid is amortized on a straight line basis as a reduction to interest income over the contractual life of these contracts.
Gains and (losses) on interest rate floors, floor spreads, and swaps recognized in other comprehensive income were $(34)$(29) million and $308$(40) million for the three-monthsthree-month periods ended March 31,September 30, 2021 and 2020, respectively. For the nine-month periods ended September 30, 2021 and 2020, gains and losses on interest rate floors and swaps recognized in other comprehensive income were $(102) million and $279 million, respectively.
Net investment Hedges
Huntington has entered into forward foreign exchange contracts to hedge the value of the Company’s investments in non-U.S. dollar functional currency entities. The total notional amount of forward foreign exchange contracts at September 30, 2021 was $209 million.
Derivatives used in mortgage banking activities
Mortgage loan origination hedging activity
Huntington’s mortgage origination hedging activity is related to economically hedging Huntington’s mortgage pricing commitments to customers and the secondary sale to third parties. The value of a newly originated mortgage is not firm until the interest rate is committed or locked. Forward commitments to sell economically hedge the possible loss on interest rate lock commitments due to interest rate change. The net asset position of these derivatives at March 31,September 30, 2021 and December 31, 2020 are $65were $34 million and $26 million, respectively. At March 31,September 30, 2021 and December 31, 2020, Huntington had commitments to sell residential real estate loans of $2.9$2.7 billion and $2.9 billion, respectively. These contracts mature in less than one year.
74 Huntington Bancshares Incorporated
MSR hedging activity
Huntington’s MSR economic hedging activity uses securities and derivatives to manage the value of the MSR asset and to mitigate the various types of risk inherent in the MSR asset, including risks related to duration, basis, convexity, volatility, and yield curve. The hedging instruments include forward commitments, TBA securities, Treasury futures contracts, interest rate swaps, and options on interest rate swaps.
The notional value of the derivative financial instruments, the corresponding net asset (liability) position recognized in other assets and/or other liabilities, and net trading gains (losses) related to MSR hedging activity is summarized in the following table:
| | | | | | | | | | | |
| | |
| (dollar amounts in millions) | March 31,
2021 | December 31,
2020 |
| Notional value | $ | 875 | | | $ | 1,170 | |
| Trading assets | 9 | | | 43 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | Three Months Ended
March 31, 2021 | | |
| (dollar amounts in millions) | (dollar amounts in millions) | 2021 | | 2020 | | (dollar amounts in millions) | September 30,
2021 | December 31,
2020 |
| Trading gains | $ | (46) | | | $ | 57 | | | |
| Notional value | | Notional value | $ | 1,153 | | | $ | 1,170 | |
| Trading assets | | Trading assets | 17 | | | 43 | |
|
| | | | | | | | | | | | | | | | | | | | |
| Three Months Ended
September 30, 2021 | | Nine Months Ended
September 30, 2021 |
| (dollar amounts in millions) | 2021 | | 2020 | | 2021 | 2020 |
| Trading gains | $ | (4) | | | $ | (1) | | | $ | (28) | | $ | 61 | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
MSR hedging trading assets and liabilities are included in other assets and other liabilities, respectively, in the Unaudited Condensed Balance Sheets. Trading gains (losses) are included in mortgage banking income in the Unaudited Condensed Consolidated Statement of Income.
Derivatives used in customer related activities
Various derivative financial instruments are offered to enable customers to meet their financing and investing objectives and for their risk management purposes. Derivative financial instruments used in trading activities consist of commodity, interest rate, and foreign exchange contracts. Huntington enters into offsetting third-party contracts with approved, reputable counterparties with substantially matching terms and currencies in order to economically hedge significant exposure related to derivatives used in trading activities.
The interest rate or price risk of customer derivatives is mitigated by entering into similar derivatives having offsetting terms with other counterparties. The credit risk to these customers is evaluated and included in the calculation of fair value. Foreign currency derivatives help the customer hedge risk and reduce exposure to fluctuations in exchange rates. Transactions are primarily in liquid currencies with Canadian dollars and Euros comprising a majority of all transactions. Commodity derivatives help the customer hedge risk and reduce exposure to fluctuations in the price of various commodities. Hedging of energy-related products and base metals comprise the majority of these transactions.
The net fair values of these derivative financial instruments, for which the gross amounts are included in other assets or other liabilities at both March 31,September 30, 2021 and December 31, 2020, were $73$53 million and $70 million, respectively. The total notional values of derivative financial instruments used by Huntington on behalf of customers, including offsetting derivatives, were $46$53 billion and $37 billion at March 31,September 30, 2021 and December 31, 2020, respectively. Huntington’s credit risk from customer derivatives was $593$787 million and $882 million at the same dates, respectively.
90 Huntington Bancshares Incorporated
Financial assets and liabilities that are offset in the Unaudited Condensed Consolidated Balance Sheets
Derivative balances are presented on a net basis taking into consideration the effects of legally enforceable master netting agreements. Additionally, collateral exchanged with counterparties is also netted against the applicable derivative fair values. Huntington enters into derivative transactions with 2 primary groups: broker-dealers and banks, and Huntington’s customers. Different methods are utilized for managing counterparty credit exposure and credit risk for each of these groups.
Huntington enters into transactions with broker-dealers and banks for various risk management purposes. These types of transactions generally are high dollar volume. Huntington enters into collateral and master netting agreements with these counterparties, and routinely exchanges cash and high quality securities collateral.
Huntington enters into transactions with customers to meet their financing, investing, payment and risk management needs. These types of transactions generally are low dollar volume. Huntington enters into master netting agreements with customer counterparties; however, collateral is generally not exchanged with customer counterparties.
In addition to the customer derivative credit exposure, aggregate credit risk associated with broker-dealer and bank derivative transactions, net of collateral that has been pledged by the counterparty, was $420$113 million and $175 million at March 31,September 30, 2021 and December 31, 2020, respectively. The credit risk associated with derivatives is calculated after considering master netting agreements.
At March 31,September 30, 2021, Huntington pledged $69$486 million of investment securities and cash collateral to counterparties, while other counterparties pledged $434$264 million of investment securities and cash collateral to Huntington to satisfy collateral netting agreements. In the event of credit downgrades, Huntington would not be required to provide additional collateral.
The following tables present the gross amounts of these assets and liabilities with any offsets to arrive at the net amounts recognized in the Unaudited Condensed Consolidated Balance Sheets at March 31,September 30, 2021 and December 31, 2020.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Offsetting of Financial Assets and Derivative Assets |
| | | | Gross amounts
offset in the unaudited
condensed
consolidated
balance sheets | | Net amounts of
assets
presented in
the unaudited condensed
consolidated
balance sheets | | Gross amounts not offset in the
unaudited condensed consolidated
balance sheets | | |
| (dollar amounts in millions) | | Gross amounts of recognized assets | | | | Financial instruments | | Cash collateral received | | Net amount |
| March 31, 2021 | | $ | 1,829 | | | $ | (816) | | | $ | 1,013 | | | $ | (82) | | | $ | (190) | | | $ | 741 | |
| December 31, 2020 | | 1,946 | | | (889) | | | 1,057 | | | (112) | | | (142) | | | 803 | |
| | Offsetting of Financial Liabilities and Derivative Liabilities | |
| Offsetting of Financial Assets and Derivative Assets | | Offsetting of Financial Assets and Derivative Assets |
| | | | Gross amounts offset in the unaudited condensed consolidated balance sheets | | Net amounts of liabilities presented in the unaudited condensed consolidated balance sheets | | Gross amounts not offset in the unaudited condensed consolidated balance sheets | | | | | Gross amounts
offset in the unaudited
condensed
consolidated
balance sheets | | Net amounts of
assets
presented in
the unaudited condensed
consolidated
balance sheets | | Gross amounts not offset in the
unaudited condensed consolidated
balance sheets | |
| (dollar amounts in millions) | (dollar amounts in millions) | | Gross amounts of recognized liabilities | | Financial instruments | | Cash collateral delivered | | Net amount | (dollar amounts in millions) | | Gross amounts of recognized assets | | Financial instruments | | Cash collateral received | | Net amount |
| March 31, 2021 | | $ | 874 | | | $ | (703) | | | $ | 171 | | | $ | (17) | | | $ | (173) | | | $ | (19) | | |
| September 30, 2021 | | September 30, 2021 | | $ | 1,586 | | | $ | (686) | | | $ | 900 | | | $ | (81) | | | $ | (61) | | | $ | 758 | |
| December 31, 2020 | December 31, 2020 | | 1,033 | | | (917) | | | 116 | | | (9) | | | (105) | | | 2 | | December 31, 2020 | | 1,946 | | | (889) | | | 1,057 | | | (112) | | | (142) | | | 803 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Offsetting of Financial Liabilities and Derivative Liabilities |
| | | | Gross amounts offset in the unaudited condensed consolidated balance sheets | | Net amounts of liabilities presented in the unaudited condensed consolidated balance sheets | | Gross amounts not offset in the unaudited condensed consolidated balance sheets | | |
| (dollar amounts in millions) | | Gross amounts of recognized liabilities | | | | Financial instruments | | Cash collateral delivered | | Net amount |
| September 30, 2021 | | $ | 1,063 | | | $ | (813) | | | $ | 250 | | | $ | — | | | $ | (225) | | | $ | 25 | |
| December 31, 2020 | | 1,033 | | | (917) | | | 116 | | | (9) | | | (105) | | | 2 | |
15. VIEs
Unconsolidated VIEs
The following tables provide a summary of the assets and liabilities included in Huntington’s Unaudited Condensed Consolidated Financial Statements, as well as the maximum exposure to losses, associated with its interests related to unconsolidated VIEs for which Huntington holds an interest in, but is not the primary beneficiary, of the VIE at March 31,September 30, 2021, and December 31, 2020:
| | | March 31, 2021 | | September 30, 2021 |
| (dollar amounts in millions) | (dollar amounts in millions) | Total Assets | | Total Liabilities | | Maximum Exposure to Loss | (dollar amounts in millions) | Total Assets | | Total Liabilities | | Maximum Exposure to Loss |
| Trust Preferred Securities | Trust Preferred Securities | $ | 14 | | | $ | 253 | | | $ | 0 | | Trust Preferred Securities | $ | 14 | | | $ | 256 | | | $ | — | |
| Affordable Housing Tax Credit Partnerships | Affordable Housing Tax Credit Partnerships | 945 | | | 445 | | | 945 | | Affordable Housing Tax Credit Partnerships | 1,436 | | | 774 | | | 1,436 | |
| Other Investments | Other Investments | 329 | | | 72 | | | 329 | | Other Investments | 426 | | | 145 | | | 426 | |
| Total | Total | $ | 1,288 | | | $ | 770 | | | $ | 1,274 | | Total | $ | 1,876 | | | $ | 1,175 | | | $ | 1,862 | |
76 Huntington Bancshares Incorporated
| | | December 31, 2020 | | December 31, 2020 |
| (dollar amounts in millions) | (dollar amounts in millions) | Total Assets | | Total Liabilities | | Maximum Exposure to Loss | (dollar amounts in millions) | Total Assets | | Total Liabilities | | Maximum Exposure to Loss |
| Trust Preferred Securities | Trust Preferred Securities | $ | 14 | | | $ | 252 | | | $ | 0 | | Trust Preferred Securities | $ | 14 | | | $ | 252 | | | $ | — | |
| Affordable Housing Tax Credit Partnerships | Affordable Housing Tax Credit Partnerships | 956 | | | 500 | | | 956 | | Affordable Housing Tax Credit Partnerships | 956 | | | 500 | | | 956 | |
| Other Investments | Other Investments | 308 | | | 72 | | | 308 | | Other Investments | 308 | | | 72 | | | 308 | |
| Total | Total | $ | 1,278 | | | $ | 824 | | | $ | 1,264 | | Total | $ | 1,278 | | | $ | 824 | | | $ | 1,264 | |
Trust-Preferred Securities
Huntington has certain wholly-owned trusts whose assets, liabilities, equity, income, and expenses are not included within Huntington’s Unaudited Condensed Consolidated Financial Statements. These trusts have been formed for the sole purpose of issuing trust-preferred securities, from which the proceeds are then invested in Huntington junior subordinated debentures, which are reflected in Huntington’s Unaudited Condensed Consolidated Balance Sheet as long-term debt. The trust securities are the obligations of the trusts, and as such, are not consolidated within Huntington’s Unaudited Condensed Consolidated Financial Statements.
A list of trust preferred securities outstanding at March 31,September 30, 2021 follows:
| | (dollar amounts in millions) | (dollar amounts in millions) | Rate | | Principal amount of subordinated note/ debenture issued to trust (1) | | Investment in unconsolidated subsidiary | (dollar amounts in millions) | Rate | | Principal amount of subordinated note/ debenture issued to trust (1) | | Investment in unconsolidated subsidiary |
| Huntington Capital I | Huntington Capital I | 0.81 | % | (2) | $ | 70 | | | $ | 6 | | Huntington Capital I | 0.83 | % | (2) | $ | 70 | | | $ | 7 | |
| Huntington Capital II | Huntington Capital II | 0.74 | | (3) | 32 | | | 3 | | Huntington Capital II | 0.76 | | (3) | 32 | | | 3 | |
| Sky Financial Capital Trust III | Sky Financial Capital Trust III | 1.51 | | (4) | 72 | | | 2 | | Sky Financial Capital Trust III | 1.53 | | (4) | 72 | | | 2 | |
| Sky Financial Capital Trust IV | Sky Financial Capital Trust IV | 1.51 | | (4) | 74 | | | 2 | | Sky Financial Capital Trust IV | 1.53 | | (4) | 74 | | | 2 | |
| Camco Financial Trust | 1.44 | | (5) | 5 | | | 1 | | |
| | First Place Capital Trust I | | First Place Capital Trust I | 3.00 | | (5) | 4 | | | — | |
| First Place Capital Trust II | | First Place Capital Trust II | 6.45 | | | 4 | | | — | |
| | Total | Total | | $ | 253 | | | $ | 14 | | Total | | $ | 256 | | | $ | 14 | |
(1)Represents the principal amount of debentures issued to each trust, including unamortized original issue discount.
(2)Variable effective rate at March 31,September 30, 2021, based on three-month LIBOR +0.70%.
(3)Variable effective rate at March 31,September 30, 2021, based on three-month LIBOR +0.625%.
(4)Variable effective rate at March 31,September 30, 2021, based on three-month LIBOR +1.40%.
(5)Variable effective rate at March 31,September 30, 2021, based on three-month LIBOR +1.33%+2.85%.
92 Huntington Bancshares Incorporated
Each issue of the junior subordinated debentures has an interest rate equal to the corresponding trust securities distribution rate. Huntington has the right to defer payment of interest on the debentures at any time, or from time-to-time for a period not exceeding five years provided that no extension period may extend beyond the stated maturity of the related debentures. During any such extension period, distributions to the trust securities will also be deferred and Huntington’s ability to pay dividends on its common stock will be restricted. Periodic cash payments and payments upon liquidation or redemption with respect to trust securities are guaranteed by Huntington to the extent of funds held by the trusts. The guarantee ranks subordinate and junior in right of payment to all indebtedness of the Company to the same extent as the junior subordinated debt. The guarantee does not place a limitation on the amount of additional indebtedness that may be incurred by Huntington.
Affordable Housing Tax Credit Partnerships
Huntington makes certain equity investments in various limited partnerships that sponsor affordable housing projects utilizing the LIHTC pursuant to Section 42 of the Internal Revenue Code. The purpose of these investments is to achieve a satisfactory return on capital, to facilitate the sale of additional affordable housing product offerings, and to assist in achieving goals associated with the Community Reinvestment Act. The primary activities of the limited partnerships include the identification, development, and operation of multi-family housing that is leased to qualifying residential tenants. Generally, these types of investments are funded through a combination of debt and equity.
Huntington uses the proportional amortization method to account for a majority of its investments in these entities. These investments are included in other assets. Investments that do not meet the requirements of the proportional amortization method are accounted for using the equity method. Investment losses related to these investments are included in noninterest income in the Unaudited Condensed Consolidated Statements of Income.
The following table presents the balances of Huntington’s affordable housing tax credit investments and related unfunded commitments at March 31,September 30, 2021 and December 31, 2020.
| | (dollar amounts in millions) | (dollar amounts in millions) | March 31,
2021 | | December 31,
2020 | (dollar amounts in millions) | September 30,
2021 | | December 31,
2020 |
| Affordable housing tax credit investments | Affordable housing tax credit investments | $ | 1,582 | | | $ | 1,568 | | Affordable housing tax credit investments | $ | 2,134 | | | $ | 1,568 | |
| Less: amortization | Less: amortization | (637) | | | (612) | | Less: amortization | (698) | | | (612) | |
| Net affordable housing tax credit investments | Net affordable housing tax credit investments | $ | 945 | | | $ | 956 | | Net affordable housing tax credit investments | $ | 1,436 | | | $ | 956 | |
| Unfunded commitments | Unfunded commitments | $ | 445 | | | $ | 500 | | Unfunded commitments | $ | 774 | | | $ | 500 | |
The following table presents other information relating to Huntington’s affordable housing tax credit investments for the three-month and nine-month periods ended March 31,September 30, 2021 and 2020.
| | | Three Months Ended
March 31, | | | Three Months Ended
September 30, | | Nine Months Ended
September 30, |
| (dollar amounts in millions) | (dollar amounts in millions) | | 2021 | | 2020 | | (dollar amounts in millions) | | 2021 | | 2020 | | 2021 | | 2020 |
| Tax credits and other tax benefits recognized | Tax credits and other tax benefits recognized | | $ | 33 | | | $ | 29 | | | Tax credits and other tax benefits recognized | | $ | 36 | | | $ | 29 | | | $ | 113 | | | $ | 88 | |
| | Proportional amortization expense included in provision for income taxes | Proportional amortization expense included in provision for income taxes | | 28 | | | 25 | | | Proportional amortization expense included in provision for income taxes | | 34 | | | 25 | | | 92 | | | 75 | |
| |
There were no sales of affordable housing tax credit investments during the three-month and nine-month periods ended March 31,September 30, 2021 and 2020. There was no impairment recognized for the three-month and nine-month periods ended March 31,September 30, 2021 and 2020.
Other investments
Other investments determined to be VIE’s include investments in Small Business Investment Companies, Historic Tax Credit Investments, certain equity method investments, renewable energy financings, and other miscellaneous investments.
16. COMMITMENTS AND CONTINGENT LIABILITIES
Commitments to extend credit
In the ordinary course of business, Huntington makes various commitments to extend credit that are not reflected in the Unaudited Condensed Consolidated Financial Statements. The contract amounts of these financial agreements at March 31,September 30, 2021 and December 31, 2020, were as follows:
| | (dollar amounts in millions) | (dollar amounts in millions) | March 31,
2021 | | December 31,
2020 | (dollar amounts in millions) | September 30,
2021 | | December 31,
2020 |
| Contract amount representing credit risk | Contract amount representing credit risk | | | | Contract amount representing credit risk | | | |
| Commitments to extend credit: | Commitments to extend credit: | | Commitments to extend credit: | |
| Commercial | Commercial | $ | 21,580 | | | $ | 20,701 | | Commercial | $ | 28,226 | | | $ | 20,701 | |
| Consumer | Consumer | 14,966 | | | 14,808 | | Consumer | 18,982 | | | 14,808 | |
| Commercial real estate | Commercial real estate | 1,315 | | | 1,313 | | Commercial real estate | 2,576 | | | 1,313 | |
| Standby letters of credit | 632 | | | 581 | | |
| Standby letters of credit and guarantees on industrial revenue bonds | | Standby letters of credit and guarantees on industrial revenue bonds | 904 | | | 581 | |
| Commercial letters of credit | Commercial letters of credit | 12 | | | 21 | | Commercial letters of credit | 15 | | | 21 | |
Commitments to extend credit generally have fixed expiration dates, are variable-rate, and contain clauses that permit Huntington to terminate or otherwise renegotiate the contracts in the event of a significant deterioration in the customer’s credit quality. These arrangements normally require the payment of a fee by the customer, the pricing of which is based on prevailing market conditions, credit quality, probability of funding, and other relevant factors. Since many of these commitments are expected to expire without being drawn upon, the contract amounts are not necessarily indicative of future cash requirements. The interest rate risk arising from these financial instruments is insignificant as a result of their predominantly short-term, variable-rate nature.
78 Huntington Bancshares Incorporated
these commitments predominately consists of residential and commercial real estate mortgage loans. Standby letters-of-credit and guarantees on industrial revenue bonds are conditional commitments issued to guarantee the performance of a customer to a third-party. These guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing, and similar transactions. Most of these arrangements mature within two years. Since the conditions under which Huntington is required to fund these commitments may not materialize, the cash requirements are expected to be less than the total outstanding commitments. The carrying amount of deferred revenue associated with these guarantees was $6 million and $5 million at March 31,September 30, 2021 and December 31, 2020, respectively.
Commercial letters-of-credit represent short-term, self-liquidating instruments that facilitate customer trade transactions and generally have maturities of no longer than 90 days. The goods or cargo being traded normally secure these instruments.
Litigation and Regulatory Matters
In the ordinary course of business, Huntington is routinely a defendant in or party to pending and threatened legal and regulatory actions and proceedings.
In view of the inherent difficulty of predicting the outcome of such matters, particularly where the claimants seek very large or indeterminate damages or where the matters present novel legal theories or involve a large number of parties, Huntington generally cannot predict what the eventual outcome of the pending matters will be, what the timing of the ultimate resolution of these matters will be, or what the eventual loss, fines or penalties related to each matter may be.
Huntington establishes an accrued liability when those matters present loss contingencies that are both probable and estimable. In such cases, there may be an exposure to loss in excess of any amounts accrued. Huntington thereafter continues to monitor the matter for further developments that could affect the amount of the accrued liability that has been previously established.
94 Huntington Bancshares Incorporated
For certain matters, Huntington is able to estimate a range of possible loss. In cases in which Huntington possesses information to estimate a range of possible loss, that estimate is aggregated and disclosed below. There may be other matters for which a loss is probable or reasonably possible but such an estimate of the range of possible loss may not be possible. For those matters where an estimate of the range of possible loss is possible, management currently estimates the aggregate range of reasonably possible loss is $0 to $10$15 million at March 31,September 30, 2021 in excess of the accrued liability (if any) related to those matters. This estimated range of possible loss is based upon currently available information and is subject to significant judgment, a variety of assumptions, and known and unknown uncertainties. The matters underlying the estimated range will change from time to time, and actual results may vary significantly from the current estimate. The estimated range of possible loss does not represent Huntington’s maximum loss exposure.
Based on current knowledge, management does not believe that loss contingencies arising from pending matters will have a material adverse effect on the consolidated financial position of Huntington. Further, management believes that amounts accrued are adequate to address Huntington’s contingent liabilities. However, in light of the inherent uncertainties involved in these matters, some of which are beyond Huntington’s control, and the large or indeterminate damages sought in some of these matters, an adverse outcome in one or more of these matters could be material to Huntington’s results of operations for any particular reporting period.
15.17. SEGMENT REPORTING
Huntington’s business segments are based on our internally-aligned segment leadership structure, which is how management monitors results and assesses performance. The Company has 4 major business segments: Consumer and Business Banking, Commercial Banking, Vehicle Finance, and Regional Banking and The Huntington Private Client Group (RBHPCG). The Treasury / Other function includes technology and operations, other unallocated assets, liabilities, revenue, and expense. For a description of our business segments, see Note 26 - Segment Reporting to the Consolidated Financial Statements of the Corporation’sappearing in Huntington’s 2020 Annual Report on Form 10-K.
Listed in the following tables is certain operating basis financial information reconciled to Huntington’s September 30, 2021, December 31, 2020, and September 30, 2020, reported results by business segment.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | |
| Three Months Ended September 30, |
| Income Statements | Consumer & Business Banking | | Commercial Banking | | Vehicle Finance | | RBHPCG | | Treasury / Other | | Huntington Consolidated |
| (dollar amounts in millions) | | | | | |
| 2021 | | | | | | | | | | | |
| Net interest income | $ | 483 | | | $ | 416 | | | $ | 123 | | | $ | 42 | | | $ | 96 | | | $ | 1,160 | |
| Provision for credit losses | (7) | | | (34) | | | (25) | | | 4 | | | — | | | (62) | |
| Noninterest income | 302 | | | 150 | | | 4 | | | 58 | | | 21 | | | 535 | |
| Noninterest expense | 637 | | | 247 | | | 48 | | | 84 | | | 273 | | | 1,289 | |
| Provision (benefit) for income taxes | 33 | | | 73 | | | 22 | | | 3 | | | (41) | | | 90 | |
| Income attributable to non-controlling interest | — | | | 1 | | | — | | | — | | | — | | | 1 | |
| Net income (loss) attributable to Huntington Bancshares Inc | $ | 122 | | | $ | 279 | | | $ | 82 | | | $ | 9 | | | $ | (115) | | | $ | 377 | |
| 2020 | | | | | | | | | | | |
| Net interest income | $ | 367 | | | $ | 221 | | | $ | 110 | | | $ | 39 | | | $ | 80 | | | $ | 817 | |
| Provision for credit losses | 87 | | | 87 | | | (12) | | | 15 | | | — | | | 177 | |
| Noninterest income | 274 | | | 90 | | | 2 | | | 47 | | | 17 | | | 430 | |
| Noninterest expense | 450 | | | 135 | | | 34 | | | 56 | | | 37 | | | 712 | |
| Provision (benefit) for income taxes | 22 | | | 19 | | | 19 | | | 3 | | | (8) | | | 55 | |
| Income attributable to non-controlling interest | — | | | — | | | — | | | — | | | — | | | — | |
| Net income attributable to Huntington Bancshares Inc | $ | 82 | | | $ | 70 | | | $ | 71 | | | $ | 12 | | | $ | 68 | | | $ | 303 | |
Business segment results are determined based upon Huntington’s management reporting system, which assigns balance sheet and income statement items to each of the business segments. The process is designed around the organizational and management structure and, accordingly, the results derived are not necessarily comparable with similar information published by other financial institutions. Additionally, because of the interrelationships of the various segments, the information presented is not indicative of how the segments would perform if they operated as independent entities. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine months ended September 30, |
| Income Statements | Consumer & Business Banking | | Commercial Banking | | Vehicle Finance | | RBHPCG | | Treasury / Other | | Huntington Consolidated |
| (dollar amounts in millions) | | | | | |
| 2021 | | | | | | | | | | | |
| Net interest income | $ | 1,187 | | | $ | 873 | | | $ | 340 | | | $ | 113 | | | $ | 457 | | | $ | 2,970 | |
| Provision for credit losses | 57 | | | 107 | | | (77) | | | 2 | | | — | | | 89 | |
| Noninterest income | 780 | | | 353 | | | 9 | | | 165 | | | 67 | | | 1,374 | |
| Noninterest expense | 1,617 | | | 553 | | | 119 | | | 217 | | | 648 | | | 3,154 | |
| Provision (benefit) for income taxes | 62 | | | 119 | | | 64 | | | 12 | | | (51) | | | 206 | |
| Income attributable to non-controlling interest | — | | | 1 | | | — | | | — | | | — | | | 1 | |
| Net income (loss) attributable to Huntington Bancshares Inc | $ | 231 | | | $ | 446 | | | $ | 243 | | | $ | 47 | | | $ | (73) | | | $ | 894 | |
| 2020 | | | | | | | | | | | |
| Net interest income | $ | 1,099 | | | $ | 693 | | | $ | 316 | | | $ | 122 | | | $ | 169 | | | $ | 2,399 | |
| Provision for credit losses | 200 | | | 611 | | | 118 | | | 16 | | | — | | | 945 | |
| Noninterest income | 704 | | | 261 | | | 7 | | | 151 | | | 59 | | | 1,182 | |
| Noninterest expense | 1,288 | | | 400 | | | 103 | | | 181 | | | 67 | | | 2,039 | |
| Provision (benefit) for income taxes | 66 | | | (12) | | | 21 | | | 16 | | | 5 | | | 96 | |
| Income attributable to non-controlling interest | — | | | — | | | — | | | — | | | — | | | — | |
| Net income (loss) attributable to Huntington Bancshares Inc | $ | 249 | | | $ | (45) | | | $ | 81 | | | $ | 60 | | | $ | 156 | | | $ | 501 | |
Huntington uses an active and centralized FTP methodology to attribute appropriate net interest income to the business segments. The intent of the FTP methodology is to transfer interest rate risk from the business segments by providing matched duration funding of assets and liabilities. The result is to centralize the financial impact, management, and reporting of interest rate risk in the Treasury / Other function where it can be centrally monitored and managed. The Treasury / Other function charges (credits) an internal cost of funds for assets held in (or pays for funding provided by) each business segment. The FTP rate is based on prevailing market interest rates for comparable duration assets (or liabilities).
Listed in the table below is certain operating basis financial information reconciled to Huntington’s March 31, 2021, December 31, 2020, and March 31, 2020, reported results by business segment.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | |
| Three Months Ended March 31, |
| Income Statements | Consumer & Business Banking | | Commercial Banking | | Vehicle Finance | | RBHPCG | | Treasury / Other | | Huntington Consolidated |
| (dollar amounts in millions) | | | | | |
| 2021 | | | | | | | | | | | |
| Net interest income | $ | 337 | | | $ | 199 | | | $ | 107 | | | $ | 34 | | | $ | 295 | | | $ | 972 | |
| Provision (benefit) for credit losses | (36) | | | 5 | | | (22) | | | (7) | | | 0 | | | (60) | |
| Noninterest income | 236 | | | 88 | | | 3 | | | 53 | | | 15 | | | 395 | |
| Noninterest expense | 469 | | | 133 | | | 35 | | | 62 | | | 94 | | | 793 | |
| Provision (benefit) for income taxes | 29 | | | 31 | | | 21 | | | 7 | | | 14 | | | 102 | |
| Net income (loss) | $ | 111 | | | $ | 118 | | | $ | 76 | | | $ | 25 | | | $ | 202 | | | $ | 532 | |
| 2020 | | | | | | | | | | | |
| Net interest income | $ | 364 | | | $ | 232 | | | $ | 106 | | | $ | 43 | | | $ | 45 | | | $ | 790 | |
| Provision (benefit) for credit losses | 82 | | | 298 | | | 60 | | | 1 | | | 0 | | | 441 | |
| Noninterest income | 212 | | | 86 | | | 3 | | | 50 | | | 10 | | | 361 | |
| Noninterest expense | 418 | | | 129 | | | 35 | | | 62 | | | 8 | | | 652 | |
| Provision (benefit) for income taxes | 16 | | | (23) | | | 3 | | | 6 | | | 8 | | | 10 | |
| Net income (loss) | $ | 60 | | | $ | (86) | | | $ | 11 | | | $ | 24 | | | $ | 39 | | | $ | 48 | |
| | | Assets at | | Deposits at | | Assets at | | Deposits at |
| (dollar amounts in millions) | (dollar amounts in millions) | March 31,
2021 | | December 31,
2020 | | March 31,
2021 | | December 31,
2020 | (dollar amounts in millions) | September 30,
2021 | | December 31,
2020 | | September 30,
2021 | | December 31,
2020 |
| Consumer & Business Banking | Consumer & Business Banking | $ | 30,627 | | | $ | 30,758 | | | $ | 65,437 | | | $ | 60,910 | | Consumer & Business Banking | $ | 41,656 | | | $ | 30,758 | | | $ | 94,439 | | | $ | 60,910 | |
| Commercial Banking | Commercial Banking | 36,797 | | | 36,311 | | | 25,420 | | | 24,766 | | Commercial Banking | 54,671 | | | 36,311 | | | 32,531 | | | 24,766 | |
| Vehicle Finance | Vehicle Finance | 19,208 | | | 19,789 | | | 849 | | | 722 | | Vehicle Finance | 20,122 | | | 19,789 | | | 1,437 | | | 722 | |
| RBHPCG | RBHPCG | 6,837 | | | 7,064 | | | 7,163 | | | 7,635 | | RBHPCG | 8,114 | | | 7,064 | | | 9,025 | | | 7,635 | |
| Treasury / Other | Treasury / Other | 32,299 | | | 29,116 | | | 3,315 | | | 4,915 | | Treasury / Other | 49,315 | | | 29,116 | | | 4,466 | | | 4,915 | |
| Total | Total | $ | 125,768 | | | $ | 123,038 | | | $ | 102,184 | | | $ | 98,948 | | Total | $ | 173,878 | | | $ | 123,038 | | | $ | 141,898 | | | $ | 98,948 | |
8096 Huntington Bancshares Incorporated
Item 3: Quantitative and Qualitative Disclosures about Market Risk
Quantitative and qualitative disclosures for the current period can be found in the Market Risk section of this report, which includes changes in market risk exposures from disclosures presented in Huntington’s 2020 Annual Report on Form 10-K.
Item 4: Controls and Procedures
Disclosure Controls and Procedures
Huntington maintains disclosure controls and procedures designed to ensure that the information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934, as amended (the Exchange Act), are recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Huntington’s Management,management, with the participation of its Chief Executive Officer and the Chief Financial Officer, evaluated the effectiveness of Huntington’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of March 31,September 30, 2021. Based upon such evaluation, Huntington’s Chief Executive Officer and Chief Financial Officer have concluded that, as of March 31,September 30, 2021, Huntington’s disclosure controls and procedures were effective.
TCF was acquired on June 9, 2021. We have extended oversight and monitoring processes that support internal control over financial reporting to include the acquired operations. There have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended March 31,September 30, 2021, that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting.
PART II. OTHER INFORMATION
In accordance with the instructions to Part II, the other specified items in this part have been omitted because they are not applicable or the information has been previously reported.
Item 1: Legal Proceedings
Item 1A: Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(a) and (b)
Not Applicable
(c)
| | | | | | | | | | | | | | | | | | |
Period | Total Number of Shares Purchased (1) | | Average
Price Paid
Per Share | | Maximum Number of Shares (or Approximate Dollar Value) that May Yet Be Purchased Under the Plans or Programs (2) | |
January 1, 2021 to January 31, 2021 | — | | | — | | | — | | |
February 1, 2020 to February 28, 2021 | — | | | — | | | — | | |
March 1, 2021 to March 31, 2021 | — | | | — | | | — | | |
Total | — | | | $ | — | | | $ | — | | |
| | | | | | | | | | | | | | | | | | |
| Period | Total Number of Shares Purchased (1) | | Average
Price Paid
Per Share | | Maximum Number of Shares (or Approximate Dollar Value) that May Yet Be Purchased Under the Plans or Programs (2) | |
| July 1, 2021 to July 31, 2021 | — | | | $ | — | | | $ | 800,000,000 | | |
| August 1, 2021 to August 31, 2021 | 23,360,291 | | | 14.94 | | | 399,250,131 | | |
| September 1, 2021 to September 30, 2021 | 10,048,565 | | | 15.05 | | | 300,051,032 | | |
| Total | 33,408,856 | | | $ | 14.96 | | | $ | 300,051,032 | | |
(1)The reported shares were repurchased pursuant to Huntington’s publicly-announced share repurchase authorization.
(2)The number shown represents, as of the end of each period, the approximate dollar value of Common Stock that may yet be purchased under publicly-announced share repurchase authorizations. The shares may be purchased, from time-to-time, depending on market conditions.
On July 21, 2021, the Board authorized the repurchase of up to $800 million of common shares over the next four quarters. During the 2021 third quarter, Huntington repurchased a total of 33.4 million shares at a weighted average share price of $14.96, with 23.5 million shares repurchased under the accelerated share repurchase program discussed below, and the remaining 9.9 million shares through open-market repurchases.
2021 1Q Form 10-Q 9881 Huntington Bancshares Incorporated
Item 6. Exhibits
Exhibit Index
This report incorporates by reference the documents listed below that we have previously filed with the SEC. The SEC allows us to incorporate by reference information in this document. The information incorporated by reference is considered to be a part of this document, except for any information that is superseded by information that is included directly in this document.
The SEC maintains an Internet web site that contains reports, proxy statements, and other information about issuers, like us, who file electronically with the SEC. The address of the site is http://www.sec.gov. The reports and other information filed by us with the SEC are also available free of charge at our internet web site. The address of the site is http://www.huntington.com. Except as specifically incorporated by reference into this Quarterly Report on Form 10-Q, information on those web sites is not part of this report. You also should be able to inspect reports, proxy statements, and other information about us at the offices of the Nasdaq National Market at 33 Whitehall Street, New York, New York 10004.
| Exhibit
Number | Exhibit
Number | Document Description | Report or Registration Statement | SEC File or
Registration
Number | Exhibit
Reference | Exhibit
Number | Document Description | Report or Registration Statement | SEC File or
Registration
Number | Exhibit
Reference |
| 3.1 | 3.1 | | | | | 3.1 | | | | |
| 3.2 | 3.2 | | | | | 3.2 | | | | |
| 3.3 | 3.3 | | | | | 3.3 | | | | |
| 3.4 | 3.4 | | | | | 3.4 | | | | |
| 3.5 | 3.5 | | | | | 3.5 | | | | |
| 3.6 | 3.6 | | | | | 3.6 | | | | |
| 3.7 | | 3.7 | | | | |
| 3.8 | | 3.8 | | | | |
| 10.1 | 10.1 | | | | | 10.1 | | | | |
| | 4.1(P) | 4.1(P) | Instruments defining the Rights of Security Holders—reference is made to Articles Fifth, Eighth, and Tenth of Articles of Restatement of Charter, as amended and supplemented. Instruments defining the rights of holders of long-term debt will be furnished to the Securities and Exchange Commission upon request. | | 4.1(P) | Instruments defining the Rights of Security Holders—reference is made to Articles Fifth, Eighth, and Tenth of Articles of Restatement of Charter, as amended and supplemented. Instruments defining the rights of holders of long-term debt will be furnished to the Securities and Exchange Commission upon request. | |
| | 31.1 | 31.1 | | | 31.1 | | |
| 31.2 | 31.2 | | | 31.2 | | |
| 32.1 | 32.1 | | | 32.1 | | |
| 32.2 | 32.2 | | | 32.2 | | |
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| 101.CAL | 101.CAL | *Inline XBRL Taxonomy Extension Calculation Linkbase Document | | 101.CAL | *Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF | 101.DEF | *Inline XBRL Taxonomy Extension Definition Linkbase Document | | 101.DEF | *Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB | 101.LAB | *Inline XBRL Taxonomy Extension Label Linkbase Document | | 101.LAB | *Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | 101.PRE | *Inline XBRL Taxonomy Extension Presentation Linkbase Document | | 101.PRE | *Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
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| * | Filed herewith |
| ** | Furnished herewith |
| *** | |
822021 3Q Form 10-Q Huntington Bancshares Incorporated99
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
HUNTINGTON BANCSHARES INCORPORATED
(Registrant)
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| Date: | April 30,November 5, 2021 | | /s/ Stephen D. Steinour |
| | | Stephen D. Steinour |
| | | Chairman, President, and Chief Executive Officer (Principal Executive Officer) |
| | |
| Date: | April 30,November 5, 2021 | | /s/ Zachary Wasserman |
| | | Zachary Wasserman |
| | | Chief Financial Officer (Principal Financial Officer) |
2021 1Q Form 10-Q 10083 Huntington Bancshares Incorporated
