HBAN - Earnings call transcript Q3 2017 | Huntington Bancshares Incorporated

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Operator

Greetings, and welcome to the Huntington Bancshares' Third Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation.

As a reminder, this conference is being recorded. I would now like to turn the conference call over to your host, Mark Muth, Director of Investor Relations.

Mark Muth

welcome. and Michelle, you, Thank I'm Mark for Investor Director of Relations Huntington. Muth, reviewing the the found slides of can Huntington we'll www.huntington.com. of Copies section be be IR on website, the a recorded close the the call. be is hour of and call about one being available This as rebroadcast starting from will

Our are the call. will Officer, also Chairman, participating in Steve President Mac the CEO; and Credit presenters Chief our Financial Chief portion today Q&A of McCullough, Officer. Steinour, and Dan Neumeyer, be

including discussion, the the period, As statements. available obligation noted uncertainties, today's on cause results statements subject on X, forward-looking which contain based at are actual no Such to and to information Q&A update statements. changes, and slide will assumptions risks differ such to may assume this materially. are time and We

risks and discussion our SEC, filings. the and please complete filed and XX-Q refer including slide a of XX-K, to X-K material Forms uncertainties, this For with most recent the

overview to Let's financials. turning get started Mac? by and slide of the an X

Howell D. McCullough III

thanks Thanks, Mark, today. to call the and joining for everyone

interest appreciate As always, and support. we your

are the two quarter FirstMerit, including substantial for in net income integration of integration quarter, financial second the and with third consecutive We record the of completion progress performance organizations. of our the cultural pleased fiscal

charge In third quarter of for addition, of the we FirstMerit incurred final XXXX. integration the in the

equity of items of in quarter including started to per of equity per common the turning as quarter XX.X%; This of keep and on on comparisons common the was quarter. reported significant get the $X.XX share that items, XX.X%. was on earnings mind the the return FirstMerit of of review XXXX, the XXX% over the FirstMerit for Also common is return inclusive third Please X.XX%; up of assets return was the tangible impact to acquisition. $X.XX during by related results. year-over-year inclusion let's impacted significant year-ago third Huntington So, slide X share acquisition quarter to XXXX. third are closed by

Our for XX.X%. quarter the ratio efficiency was reported

for slide However, items, this value XX. percentage adjusted related and X% Consistent quarter. on $X.XX, the ratio from quarter X.X with efficiency the Adjusting significant in was a the X% XXXX share, week, or expense ratio. declared and the from submission, XX% sequentially net the share increased of last acquisition XX.X%, be increase $X.XX board year-ago added Tangible book reconciliation can to share per found the points up to $X.XX the second from a the CCAR our dividend $X.XX per quarter. prior per was

we average stock, quarter, shares million representing $XX.XX at common per million also $XXX During repurchased of the X.X an third cost of share.

X, was income to up point Noninterest the statement, increase increase in summary which margin. Turning up year-ago was XX% year-over-year. income increased revenue the reflecting X% assets and earning net XX the addition average in of income the primarily due quarter. slide of FirstMerit, from XX% XX% total the Net interest year-over-year a shows an to interest basis

expenses. Noninterest XXXX A and of Significant execution on and third well card markets strong card and as focus driven revenue, acquisition good expanding quarter capital year-over-year. strategic see commercial increased existing payment which the reflect as impact of deepening both both for service growth activity was customers. on items the of record to organic and and debit continue fees accounts our deposit We by from processing credit relationships. business decreased FirstMerit in charges XXXX in expense quarter customer and X%

quarter increased to X%. third $XX from noninterest noninterest XXXX, acquisition-related third the quarter FirstMerit. or the totaled of in of $X For of the inclusion adjusted quarter, XX% the or quarter expense the expense year-ago expense million million. grew primarily $XX Compared XXXX, second Adjusted million from

This late consolidation quarter. offices in of previously in XX of included $XX quarter the certain announced nonrecurring the included for and with XXXX and XXXX. the locations, associated efforts, third million of not the three to expense personnel, expense expenses of million third of significant corporate $XX branches, quarter improvement efficiency traditional related operational approximately and drive-through The items seven

closer behind to contained these XX the release. look or calculations, slides details the reconciliations in a operating well the please For to positive leverage are on in at that XXXX. illustrates of page our refer the X Slide again presentation on way we delivering

operating XXXX of balance us us confident that grew accustomed positive a a year-over-year to talk increase company. in Average qualifying quarter as the to FirstMerit's LCR average additional fourth by securities a average was from the in year-ago of our ratio of We will driven important in X how about reflected Slide The leverage. positive loans of the hearing XX% This XXXX trends. operating be auto including fifth proceeds this increase sheet illustrates investments securities cash consecutive are and You every XX% leases. assets flows, year and and XX% in addition leverage increase reinvestment portfolio; securitization Level stressing annual remain quarter; is securities. quarter. in increase average the earning primarily X the the the

quarter, loans the X% increased During compared average prior to third quarter. the

As quarters budget you credit. in XXXX from the than this of loan were each emphasize us, three expectation. originations lower have last our remain come our of to we To approach the for expect to disciplined point, extension

we volumes favorability for more up disciplined core income. lower interest in year-to-date loan to through pricing, resulting than made net net However,

execute later will XXXX securitization our on for elaborate period-end guidance we that growth of presentation, an X%. in loan the will X% have guidance in auto new a reduced range to This XXXX. to we Steve not As assumes

on very continues more of we until our have loan that XXX%, asset portfolio retain of our but still are on mid-XXXX our guideline our loan below capital Based the At operating more Tier is we continued X particularly to competition concentration commercial growth limit origination represented high-quality concentration in expectations, guideline. XXX% growth for our quarter into the intensify, portfolio the pleased space our ACL. just indirect well current an This side, XXX% of of remaining auto capacity as competition auto to we operating the become below of earning XXX%. option rational. while commercial see plus end, As volume for below substitute

know, CCAR testing, our are best-performing loans you our and originate auto in stress hold. the we As category the loan

So, we very elsewhere. comfortable sheet are growth riskier carrying balance opposed to on chasing our loan as

We also and business loans auto acquisition increases the of market, well like profile the in reflecting the floor effective risk C&I as securities. primarily Average plan. middle to return alternative XX% FirstMerit as banking, lending loans duration investment year-over-year, and verticals, core relative increased specialty the these

certain to banking to corporate by debt drive a rates. real the have markets companies were as pay As impacted downs FirstMerit nonperforming in of further we order face decreased we loans, year-over-year. period-end in in nonperforming estate seen throughout commercial access and acquisition. sequential a current continue low assets. lock-in X% year-over-year headwinds balances commercial of payoffs helping decline basis, real XXXX, the Average loans On increased to estate X% a result as XX% loans C&I

disciplined the pulled representing ensure X% Average Originations moderate have totaled retail year-over-year, production. construction multifamily, consistent strategically with third back to quarter to another with on auto the our in returns appetite lending, quarter in specifically and demand consistent capital. in for loans new from loan aggregate strong residential FirstMerit originations risk the $X.X CRE appropriate the of increased We quarter and low of the billion were solid XX% up remain to third continued more quarter, in basis yields and Average XX the third points from year-over-year quarter. auto year-over-year. on from X% Average of money year-ago loans addition footprint. up increased quarter, X.XX% XXXX, X.XX% across and our prior than up mortgage reflecting mortgages our

As jumbo typical, mortgages quarter agency production sold retained and and mortgage (XX:XX) mortgage we specialty in products. the qualified the the

funding remain focus in mix, pleased XX% slide average trend in the chart total checking year-ago XX% the deposits attention side right core year-over-year. including addition relationship deposit deposits. increase on account the of Average our low-cost with in increase our Turning base, We quarter, increased from X, as well the This deposits reflects continuing the demand particularly of DDA. as average a to on FirstMerit's acquisition. low-cost the XX% increased

our quarters, ability XX heavily link-quarter interest basis compared After the quarter. core more where funds and the point margin basis point increase a point in for the net interest-bearing the in X benefit XX noninterest-bearing increase earning basis a against margin slide third in up of basis from benefit X basis and interest increase X quarter. yields XX basis, a yields in points decreased point the the X asset a to by the year-ago balanced On was interest basis offset of noninterest-bearing Moving by basis funds, earning this rate the liabilities. cost points asset in interest-bearing increase of point The contributed adjusting basis sequentially. XX remain in of in to basis to Purchase for deposit points XX to quarter the funding funding with prior NIM especially prior was pleased in XXXX. X.XX% third deposits to pricing, continue Core as X the successfully third points quarter, X.XX% and liabilities. in the consumer down increased in point on cost basis accounting increase our lag quarter cost margin was wholesale the point a X in the increase the basis The a reflected from a net impact X, of to by improvement net we all weighted X.XX% driven partially in X.XX% quarter, increase

X and your attention successfully to increase was we bottom mentioned sequentially, third of our point increase consumer ability a strong and at cost on represents deposit deposits for X pricing. lag deposit basis the a points core orange calling the This the point core year of the quarter to just illustrating the I the basis our basis enjoy ago left, As and line, graph quarter. the over XX base consumer

consumer the recent hikes. relatively rate and deposit business steady seen have small fed in pricing face remain interest We of

earning pre-tax On loan X X of consumer while we yields been government XX were basis we've slide is commercial for expected providing quarter. relative side, of important has adjustments and is year-over-year the funding. basis forward-looking annual to majority XX limited pricing accounting yields a of Slide our linked-quarter basis, up this basis. the It experienced purchase helping on estimates the when market quarters basis current the note selectively the accounting early year-over-year, and end about loan flat retain middle points shows from banking, X relationships deposit fall periods. bank that accretion it yields in on are introduced include accelerated last loan commercial. accretion while except prior increased increased In payoffs grow first accretion increased or increased an and what the three the quarter, and believes loan Security banking in economics not based do the basis extensions better rates accounting the think through purchase impacts yields certain points. X this slide of useful pressure We commercial corporate yields purchase core basis cost corporate you upper While points. for points consumer XXXX, in wholesale forward. scheduled recapture to points for and to an the were asset On of accretion going projected balances on the increased to the on

to As previously, past are green modifications payoffs to our to reality, and revenue in and likely likely Therefore, accretion. pulled occur. the continue payoffs extensions in out five see the result it's been the have early in we early as in and experience bars accretion you we forward stated loan accelerated for resulting be are proven quarters,

this to on originally run five-year our strategic GAAP fourth of XXXX Adjusting the schedule. achieve acquisition our cost were of the the ongoing the illustrates set goals, and these realizing both board will and of metrics for year return current the us on already also basis long-term these adjusted full the deal. cost reconciliation synergies the tangible as financial of in Year-to-date details slide closing but XXXX on performance for slides costs, the distinguish transaction. the basis. rate expectations we ratio integration. of the set XXXX benefits in two-plus were efficiency economic XX depicts from these These these the on from We which a results of of ahead on as point on financial benefits we XXXX a anniversary a fourth by FirstMerit our the scale and time equity. the common and column you XXXX the XX XX X, peers. years financial our and slide one goals our planning allow a and provides I year particular reflect are in long-term fall We to goals horizon the the full mind, for for shown to for in would basis, acquisition our believe process. quarter expectations with August, part FirstMerit full-year celebrated appendix, Turning savings reported of in the revenue year will additional non-GAAP The the in GAAP results expect the of

implemented and of cost originally enhancement the saves, of all fully million than primary on more of planned now have million We now focus the of organization revenue the is executing $XXX opportunities. $XXX

Turning to slide XX.

commitment savings on details in slide for the details from expense upper our call, bottom the will quarter fourth earnings quarter quarter from we well $XXX in our all specifically $XX You fourth run XXXX. second initiatives, as expense should chart implemented, revenue target which the our on XXXX. The and this The fourth noninterest the an reiterates year deliver incremental right With this of of save cost recognize of XXXX. cost the page rate. implementing million this chart $XX the quarter on million million the

As the initiatives naturally of in expect incremental revenue ramp in ratio we last XXXX. The quarter's incremental some approximately efficiency XX% the conference in will efficiency up-front revenues an of call, have higher the ratio expense. I mentioned was as XXXX lag during to

additional before, You've corresponds revenue the FirstMerit-related production from necessary opportunities. and XX targets also bar of XXXX, the grow provides revenue with increase seen top detail initiatives. the slide displays the on on chart our is hiring In the current portfolios. that the ramp The for slide enhancement which to additional revenue

ratios points targeting we year-over-year. from at continued are made ended XXXX. X we've total increase Tier the XXXX, capital million X.XX%, rebuilding Common is up in enhancements. the at million expected For acquisition. FirstMerit least XX of million This the illustrates $XXX basis in our a revenue $XX progress quarter Slide $XX following equity the XX

quarter guideline operating We year-over-year. Tier mentioned is common previously the X XX%. that to X.XX%, XX have up at in Tangible of points equity the range our for basis ended common X% equity

million. Moving the Credit disciplined provision core million points We annualized XX leases, of expense quarter underwriting points $XX basis charge-offs one from in basis and basis our of quarter. results to which the quality principles, of target XX. and quarter. of to Net average the management charge-offs X net our an financial and third and prudent remained to to to strong credit our long-term approach loans were Huntington's XX our is compared slide year-ago $XX from up charge-offs booked in Consistent Net below low represented the continue aggregate remains XX moderate prior down of to risk X appetite. reflect point basis risk quarter points.

Nonperforming coverage loans for but increased as points ratio a in of loans. nonaccrual strong. million ratio criticized in The delinquencies or $XX asset slightly. metrics basis from quality to XX The decreased eased asset assets additional granularity the As charge-offs percentage the result loan a usual, basis by is sequentially as and Overall XX-day-plus linked-quarter X% analyst XXX% basis nonaccrual our XX portfolio to points X of nonperforming The there slides. allowance increased on package asset X.XX%, And decline X.XX% linked-quarter linked-quarter. X.XX%. the ratio to the decreased losses credit point to X to X% declined points. basis remained

asset to in inflows a We for experience the – also continue lower row. quarter expect to nonperforming fourth

now the presentation me over Steve. Let turn to

Stephen D. Steinour

Mac. Thanks,

selective to XX economic Moving our slide economy, indicators for key the illustrates footprint.

footprint in optimistic illustrates of near outlook the rest footprint at local of has MSAs as footprint previously, noted on Rapids, see, trends nation of has lows. bottom the market several largest or XX unemployment and large we for Grand rates Columbus you our and The such proven meaningful our chart across last footprint, labor of Indianapolis left I end illustrates XX-year with during the the at lows economic majority the across rates our and here be unemployment years, eight deposit economies in can see historical our the for shortages. across trends strong Slide markets recovery outperformed XX in remain the the we've the As the near and rates unemployment Many remain in of in as August. for footprint the states. labor unemployment markets. The to where our remain in several our

We have home while broad-based continue to noted in inflation are and previously markets the of the across inflation too. price our U.S. some remaining that wage in expense we're Housing footprint seeing our the affordable base, markets display most customers

consumer our our into customer recent economic the our for optimism in – Finally, support score economic our with somewhat XXXX. across expectation we the highest business continued been through see continue factors region its consumer uneven. though translation confidence has These across investment footprint and to the base business at since growth

deal. profile reinstitute We year, to long for increase many closing messages. turn through-the-cycle another delivering franchise We short-term aggregate cash entails to buyback us consistent, to With some we actions top-tier low good maintaining quarter were reducing the the the the third to fronts, risk the economics perform and of on term, and remarks well performance core shareholder consecutive strategy returns. now pleased to Let's continues remain dividend very focused net integration and record in slide completed income, have over our including achieve our the This throughout. volatility, program. XX for to necessary moderate quarter, on achieving the our for and FirstMerit significantly fourth remaining important

in goal this well achieve acquisition the next substantially noted, Mac against to our our ability And long-term goals. with year we integration year. complete, the financial the as accelerated to FirstMerit deliver As expect as

cost the cost implemented with third targeted originally communicated. to $XXX from savings all are quarter million savings the our realize during acquisition as of annual We set remaining

also execute to SBA and the We home expansions. RV revenue lending, marine lending, including significant enhancement on continue and lending opportunities the

expect growth basis. on Our goal, operating we a Consistent GAAP total XXXX full XX% with of to are year outlook continues long-term leverage. targeting annual financial revenue our positive

outlook. Importantly, within manage our we revenue expenses appropriately our continue to

XX%. excess We expect average in balance of sheet also growth

over We growth loan we year-to-date. our end remainder expect Consumer throughout Consistent the several of X% period outpace years, commercial loan steady X% full-year of expect XXXX. past to remained loan XXXX. experience the growth with has growth for what the we for to year experienced the

remained pipelines strong. commercial our However,

competitive loan from However, the extremely remaining appetite, appropriate guidance. with expectations to overall on reduced growth structures low-risk XXXX aggregate previous ensuring We're rate. environment discipline our is We've commercial lending and capital. both returns our on moderate

asset basis we Finally, near quality levels metrics target below to remaining remain current XX points. long-term of net expect our to including charge-offs XX

Now, over so to it I'll Mark? to Mark, can get questions. turn back we your

Mark Muth

will or ask question only person that additional and you. Thank queue. add peers, ask questions. courtesy each your follow-up. questions, the person back into we one to she now related We then Michelle, take he if themselves one And can a that as has

Operator

you. Thank

Siefers Our with question. line first question Please your from comes the Sandler of proceed O'Neill with & Scott Partners.

R. Scott Siefers

Good morning, guys.

Stephen D. Steinour

Scott. Hi,

Howell D. McCullough III

Hi, Scott.

R. Scott Siefers

quick environment relatively commercial have, might a just as not than where had the I more – you the Mac, auto question, on holding it is.

keep the So, playing on as had or margin market, have that And sheet? expected? first, the been versus to decision did just anything in – C&I any then, on securitization out balance been putting what of it you auto walk with to do through can either did sale pricing ramifications would

Howell D. McCullough III

Thanks, Scott. Yeah.

any you and that wasn't tell would the I really market. given the yeah, securitization there consideration So, pricing

we feel give performance yield the get the is as balance do on guideline tell having process, would a loan book, through that always up these adjusted their as the on we are C&I risk relative through within returns growth. when securitize, well basis mid-XXXX. and we I on auto even we with that historically, CCAR the margin you because economics our impact of We comfortable that well I to think operating auto on immaterial get said book. I've we As any sheet assets go-forward the like the

do assets. be to to and keeping able comfortable that, prepared we're we're So, very the

R. Scott Siefers

limits, as can portfolios? RV And what And then, you into opposed RV how's marine guys you remind like and your pricing Thanks. then, the lines, and and just along Perfect. auto the pop the indirect. those limit you on concentration to other is indirect right, or is specifically marine like opportunity all auto vis-à-vis don't there the me, guys Okay. see

Daniel J. Neumeyer

Scott. is Hey, Okay. This Dan.

concentration So, you're is The just limit correct. auto auto. for

boat there for RVs average business. acquisition, our a the RV We with. and and plus XXX. very that customer And really is size that the owners. strong, have the team is in up that think is The size We're experience through vehicle. of strong returns that the boat that We profile model we that RV we're hires real and a These be who have to are we talking the of separate We've RV. very and very And limit tend book. supplemented purchasing boats a and boat picked the are asset FICOs XXX to experienced given they're external with of business a in skilled. $XX,XXX of like The range well. comfortable profile, as a

So, the very us. for just nice whole, class asset on

R. Scott Siefers

All Okay. very guys, That great. sounds you, Thank much. right.

Stephen D. Steinour

Thanks, Scott.

Operator

you. Thank

Our comes from question. Usdin of the Ken next Jefferies. proceed with line with Please your question

Kenneth M. Usdin

Thanks, guys. in clarifying the quarter. third Thanks million $XX that for

to as saves you're addition a us seen anything cost think forward? to that contemplating the can you've up million that means help rate to on is gap forward hold in operating to already? what you that now, the And So, about a just $XXX about continue expenses, else point you've going the question run leverage held there starting

Howell D. McCullough III

So Ken, Mac. it's

So, the as scripts, quarter. the we're target $XXX and very in stated achieving million the we've in in release the press comfortable fourth

what cost about because not means of in save adjust full if the we've the basis. million the did for full Clearly, we year quarter, recognize the to a the in that, that pretty think third opportunity got can go-forward And you we've for $XX already recognize you see XXXX. much XXXX there. cost on save I talked full amount

we every is year committed the thinking we go-forward a will an it. the back a to our leverage. our achieve important some to This flat expense on row recognize benefit basis. forward on of as for to leverage, to expect well. in positive understanding we're are goal environment fifth revenue building a what and rate This base going positive us, operating do be and basically plan we year about operating And build that that So operating provide is, then leverage opportunity going

So, very objective that committed to to confident we're feel and going that that. deliver

Kenneth M. Usdin

And question the is in on you is, built row the my charge-offs. have top Okay. second second of this a quarter provision where not

you indicated, the as provisions would've had from move way matching thing you doing here, regular a loans or been we post-merger of change the As here from from book. charge-offs? past the into not? are if FirstMerit book would now that And now and what Is

Daniel J. Neumeyer

Yeah. is This Dan.

seen what we There quarter. couple I the of not you what in lot So, look a the at a you've are would basis. at ACL a factors go-forward last is expect of when on play quarters think given

type NPAs. have expect to don't big that by of We our continue. been reduction reduction sequentially aided in a I recently

we Those them. contributed. these would I loans non-accrual certainly at that that reserves expect loans, is points XX has to of even what that below think large So, And attached in are times. would have certainly basis

think And factor into to that's take we so, I a account. have

think as addition charge-offs think plus the basis go-forward I a covering for way quarter, on about provision growth. referenced So, is last to I some

is last not what of not expect not go-forward you've what seen basis. couple quarters – and the on think is norm the I you a that So, should

Kenneth M. Usdin

be There's stuff. delinquencies of in not in what underlying? the might would NPAs be down, Dan. trends positive but all what's then, terms there and clarification the going quick replacing back a charge-offs Just

why inflection So, see even the charge-off you any on would side?

Daniel J. Neumeyer

movement expect Well, on movements. said Yeah. been – below going long-term positive and for time, think charge-offs see very going think I to drift think we we operating upwards. goal are I and from – over that We've gradually quarter-to-quarter, our we've time, be to there's had some do I very some quite we've

So, work at another here. think that's I element

Kenneth M. Usdin

Thanks, Okay. guys.

Operator

you. Thank

Our comes question. with proceed RBC. Jon the your with next Arfstrom from Please question of line

Jon Arfstrom

Hey. Thanks. Good morning.

Stephen D. Steinour

Jon. Hi,

Howell D. McCullough III

Jon. Hey,

Jon Arfstrom

maybe us what is Can where something and for comments. Hey. bothering next to into it middle Is is you of what or Maybe, lending just large you might at Dan, Steve environment? you, an your business give all on linked that of a that then year? think you corporate idea expect it change market, small is commercial improve you some and question

Stephen D. Steinour

is Thanks, Steve. Jon. This

terms good have in We had the board. across of a RV/marine, loans, auto, home consumer year mortgage, equity,

So, portfolio. sort to we're that X% of on running X% year-to-date, combination of spot the

shown consistency quarter-to-quarter has a and performance. good So, that

Our year-to-date, X% to has up lending grown middle X%. market

So, the fighting of our being fixed little are the bit rates, activity, can extraordinarily of provided. certain relationships of what there's market cetera. and upsizing essentially reduced And banks a a off we've headwinds so in where coming new corporate. been that's is this large combination income on year it's been dynamic a particular cross-sell involved has number add terms, in just gotten be that that et I'd to competitive, of

we might ways And – so, to in previously. that some that not ways have extent, have we wouldn't have of in backed out we

property as our market markets, real of in in of bit commercial percent pulled in a have from some particular year-over-year And asset couple it types, estate is a actually those we a and Mac, you we're And also we cautious have Finally, we constrained categories. purpose. frothy. types, on have, in heard back lending

We're shareholders. long-term we're locked again, in. So,

don't is this parade. think capital not moderate-to-low. to whatever have substitute, We If profile, like discipline prudent or we We'll things, asset it. aggregate to going hold other more we're around follow the than return risk do just look to just with we go-forward the

Operator

you. Thank

Our next of question. America. Please your from Najarian with line Bank Erika of proceed question comes with the

Erika Penala Najarian

morning. Good Hi.

Stephen D. Steinour

Erika. Hi,

Howell D. McCullough III

Erika. Hey,

Erika Penala Najarian

balance side about of the sheet. to wanted the Just other ask

retail your low competition shaping tightening competition pricing in larger keep deposits I'm able corporate? footprint up very wondering into or this and to cycle. year, in for You've how market rate been core And is through as SME terms versus of next middle we look

Howell D. McCullough III

a we're so pleased with core perspective. the repricing in we've Erika, to Yeah. what – very able in deposits from been particular accomplish very, with

fair terms X customers benefits put to slide about core and, the and we've I play footprint. us. deliver, and in and I good different actually that competitors think, think that go rational think place in see testing you and pricing. the with the our around and the really back the commercial And of We core just what pull very doing trends with see we've we illustrate won customers pilots have see around done number that them that for environment or our that strategy see take satisfaction have in the think And of have loyalty I some think, experience our a test of some back. we that we you awards different our shows that, place certainly I products and consumer said of you we do Having deposits.

So, what do continue. very and to I is from perspective. expect that is would rational, a in see say we Everyone liquidity that good shape we

pricing case the be our products think lack in price to ready just asset make in of very we'll monitor not sure we're and excessive testing different piloting and happening growth requiring raise think different something we're but does that that deposits. that also as footprint and opportunities paid And I is what change, I that is be we well, see so rational. to

Erika Penala Najarian

that ratio to real service sort that to? is what really rate we the a benchmark next interest I'm follow-up, for coverage that. Steve, industry for And of coverage you I heard minimums, service you clear, your concern estate standards as origination and about and real of at commercial wondering, investors as year, set a Dan, lot try you estate it you. share to debt ratio for debt and I Thank possible commercial you credit with think some share loud underwriting concern, of

Daniel J. Neumeyer

Sure.

once markets on may where those amortization. a to although, So, the in. in there probably been building, the X.XX%, particularly we've XX% up looking the be terms in of at coverage going recently going but of underwriting lower you're we looking over ratio multifamily, but a those our standards majority of And think rates equity at gone top have we're to one, debt-service range. of recourse. bit our with really we little then vast We In actually in have type have instances changed, some in LTV. XX% that, about requirements – generally, we stress XXX haven't personal tightened at some XX-year a

requirements, underwriting last said, of I stable very years. maintained over or either as – very couple tightened that modestly the have so, And

Stephen D. Steinour

less real core the give of of Our consistency it a the relationships you than and in XXX granularity strategy. sense base is commercial to still estate customer of

Daniel J. Neumeyer

Yeah. X what call majority we're I on And, is is who our to. lending would developers also all built one Tier the Erika, that this of we thing, add

looking the very a to underwriting So, addition we the wherewithal flow, they we're their in counting and to on global individual closely our have cash fact the are that support worth their loans properties, at in their net because downturn. liquidity,

Erika Penala Najarian

it. Got you. Thank

Operator

you. Thank

Zerbe Please Stanley. Ken question next the your with Morgan with question. of proceed line Our from comes

Ken Zerbe

vice low we Great. the you of sort auto Thanks. do versa? when you your about that get or is would of obviously, there outlook changes this in same But to driving guess Thanks. about it Like, term expect changes better next terms I'm to take broadly challenging to like pretty or to expect and did factors? think best? the when commercial loan sense environment for accelerate year think the or growth commercial what longer you of year, any trying the this down, single-digit speaking. just I growth what a are change growth, like get guidance sounds factors you are the

Stephen D. Steinour

data. I unusual have very and I expansion seen year, least think, year period, the a At one down for for of extended over where been commercial increasing in HA as has the commercial look career, course activity, flat loan to you at of my haven't an being GDP lending. you This that sort

that of principally believe timing on related impact marginal we policy factors, an but issues having and combination around uncertainty investment. So, are a to

about beyond, we're to in of be we There's opportunities And what a stimulative in the that we we're we on we much I addressed, think get had as never and these as We've about of we're the up foreign our the going investment issues are like see today. series of activity inquiry most that terms sets XXXX contemplated. next whole. beyond. in policy think in as the planning And the experiencing lot here and diversification markets will optimistic year so, a and think footprint. and The of direct as economy of

in this been issues restrained of the So, some will that once policy clarity Ken, we're help and get outlook, terms what's year. think unlock bullish these addressed, of

Ken Zerbe

it. Got

definitely I keep crossed forward. about going fingers will Okay. clarity policy my

much. very So, thank you

Stephen D. Steinour

Thanks.

Howell D. McCullough III

Ken. Thanks,

Operator

Thank you.

line the from comes of question Evercore. next question. with Our Pancari John with your Please proceed

John Pancari

morning. Good

Stephen D. Steinour

John. morning, Good

John Pancari

of just some policy it pullback this of mentioned already the So, is of expectation your markets pressures? have, and it about is borrowers in your competitive the same softening topic, that you or some pullback things and all Is what growth getting is reticence Thanks. influence flagged loan growth how demand? cap on CRE that given worse may on by that primarily it On terms in changing? borrowers expectation your you of front-end much apprehension and in influenced side, the some that

Stephen D. Steinour

activity we cap of tax that, we Well, But see revisions believe, occurred the do abating. code while market range the deferred is so of activities. think pending, we are the has much

to cetera, trying how you're for next, this If or out year to going example. figure sell to et (XX:XX) a business,

quarter. especially return we loans consciously a coming just real commercial and We this of estate on pulled out as leasing. XXXX like out looking So, the this were back when construction beyond these be would of we and past not risk profiles number into and year did

So, are impacts market at John. broader that this point, that our decision, policy-related much but there more was are

John Pancari

way there line to I Okay. quarter? you get data dig do – And another is the then, updated utilization guess have for to

Howell D. McCullough III

Basically flat the side quarter. on the commercial for

John Pancari

right. Okay. All

Stephen D. Steinour

auto model low So, a change-out. is typically at with seasonal

a this So, we but, year on every overall, flat. have

John Pancari

low pace how the also last one growth Okay. horse. of GDP? then, should terms we range, going it loan in X% multiple of it of think think should think dead that? do it to And the X% Got we XXXX, where or about Got is thing – could think How On it. growth go? you about this beat to if you of it to it. loan in Is – GDP is about

Stephen D. Steinour

X% the Pipeline occurred, We think got looks we spots. activity so we up looks corporate actually, We low consumer X% this it up of think a in lot X% good has think A going commercial year-to-date, middle pipeline on of X% to year-to-date bond as of to – quarter. now. market multiple GDP. it's stabilizing

we the burst spur this of almost will think deferral hope if a John. addressed, extent, the policy I that like activity, up can we So, to incremental issue tax some activity, spigot get opens

John Pancari

Thank Okay. you.

Stephen D. Steinour

Thank you.

Howell D. McCullough III

John. Thanks,

Operator

Thank you.

your Our Mosby next Marty line Vining-Sparks. proceed question with question. the comes of from with Please

Marty Mosby III

Thanks.

Stephen D. Steinour

Hi, Marty.

Marty Mosby III

$XX you I've slides that on the that decline $XX times, spillover if in net Good – you like morning. into of synergies, like but slide generates XX that look over way at when about and $XX to is the at decline, you XX, million the Slide really presents next Hey. net looking $XXX benefit get of X about the just showing $XX you out a what kind million, the $XX one the I you're several of and by you're told is that synergies that you're synergies. and take about you million from don't million that results. gets a of revenue this expense look then year the deal, the itself, prepayment you at roll the from just the getting what million to side million when When that's positives

you go of I to XXXX netting things into thinking you out in of am So, get as a that when from really bottom-line two impact the XXXX? right sense those

Howell D. McCullough III

Marty. Yeah,

X appreciate, and margin give on the right has And But absolutely synergies the in through that obviously X out what's the like as you're happening slide been I with continue is offsetting does think effective. the important we We definitely fighting you of into do that point. in to because are noise visibility particular. impact. point it that some communicate I the slide some message, fact I think the margin

Marty Mosby III

thinking move really the to going the you on thing equity were really you're made go return And benefit end you XX%. out of is paying rates is, one was think other look And a as the actually about that you acquisition you target weren't up. or higher, And rates on which I margin pieces of your the leaving a the is XX% that FirstMerit to on, was revenue common is it at to anticipating started counting that show that for now tangible I something result the deposits of there bigger enhancements, was was, when revenue weren't which when have enhancement. the when you

and You're be roll you kind to XX% saying you're year. into into around up already kind as net benefits I at next you're of you of rounding XXXX, going think to look these XX%

the the of deposits delta I of the being out on that So, to some that favorable you're think be could able from. just get profitability

Howell D. McCullough III

point. That's another great

benefits real was deposit quality the acquisition FirstMerit the the base. of of one the of core think I

the particular, going. also about side, And base commercial rate retail where tremendous value deposit creation, in think the is that but On the you if and in that, environment side.

So the about probably more. that a and of value clearly, we the big benefit transaction, talk to should

Marty Mosby III

– portfolio really if the some just of general just until last suggest And a one low that humor kind deterioration. credit, think assumes your of we question, there's of the kind you get mid-XXs of the be deterioration, the guidance XX should in nothing kind in but charge-offs

this XX current that of where really of at this basis time? that period is there going you if isn't to this at cycle, look over a sustains we're So, somewhere kind below guided and general opportunity itself, environment basis And the in for be to really points a an range we're just to points? XX remain

Daniel J. Neumeyer

we believe Yeah. that do range. Marty, the Dan. I is this below remain will

keep we are charge-offs last thing if charge-offs have years. had in Although, gross the materially, because mind us over is available one have significant just the that to increase to shrinking not even few don't recoveries we

component, So, that term. sustain don't long increase these levels to I and we're think be again, going that that's think anticipate nonetheless, reasonable the I I will gradual. it's think one modest But to

Marty Mosby III

Thanks.

Stephen D. Steinour

Thanks, Marty.

Howell D. McCullough III

Thanks, Marty.

Operator

you. Thank

Securities. with from proceed Harmon question. comes JMP your question Please next the line of Our Emlen with

Emlen Harmon

be of would you you need – – you appetite for interested? with could effectively a to what talk Steve, of integrated about morning. And FirstMerit your Good kind kind here? see little opportunity bit Steve, could hey to fully M&A

Stephen D. Steinour

the synergy, And the let's a have back very, is completed been assimilation, sharing, we're not up, we this. the expense also of have revenue we of complete. and company there's we side lot that Well, set, getting full the culture so as very But focused.

get as go to is that FirstMerit revenue through priority first XXXX. we Our

Emlen Harmon

the country hang-up thought Ohio, demand, two it America, building we've exporters how loan kind – I'm But reform NAFTA your as and also horse community? are Seems with status that's at borrowers of all the if for as least you on borrower beat to terms to of you on kind about little of dead of the exporting have headlines at kind bigger if regarding there And few of uncertainty I demand. Thanks. base got are the to Michigan times and guess, you guys the going impacting in just like guys bit. demand far talking a in concerned. those North just tax maybe exposure you of on a a John mentioned then Okay. just kick as

Stephen D. Steinour

a in That's a optimism our that conclusion. point. impact the an going footprint. There's There's great get negotiations to to clearly of rational NAFTA a sense are

So, I is earlier, would we with have that. this auto mentioned history. think start year, fifth its believe, going I I best And to in

of just And forward. scale the in economies the So, the terms the optimism going are here that of in of diversification help forward. some there's about think a to then, engines factors we going economy, our on our stability as contribute huge the sheer of footprint

Emlen Harmon

taking for Thanks the questions. Great. Thanks.

Stephen D. Steinour

Emlen. Thanks,

Operator

Thank you.

comes of with Steve Moss proceed Please with the next question line your Markets. question. from Capital FBR Our

Kyle Peterson

guys. Kyle This is morning, Good for Peterson on today. actually Steve Hey.

Stephen D. Steinour

Hi, Kyle.

Kyle Peterson

GAAP take a in wondered given and GAAP looking the the you I that? stable-ish like touch accretion – it given down I are about accretion or the if of core both will that could of then goes fourth how and leg looks kind down kind guess NIM, on maybe we the at a here. we core NIM outlook, the quarter should with think the

Howell D. McCullough III

expand NIM to to or core here. say we're But decline going decline see environment NIM continue I accretion in a to assumption going from going rate would the I reported think Yeah. is that is flat the change that to even making. to because continue we're

move expansion believe. in trend, as I really, will And into XXXX scenario, even into So, we think the unchanged I fourth rate quarter see in the we fall that core.

Kyle Peterson

Okay.

flat core I to are or core rate up seeing favorable driving that is kind So, that, guys on or environment? the what's of in shift a the mix expansion, follow you NIM expansion guess pricing, is

Howell D. McCullough III

Yeah.

we at yields So, we to basically see replaced we so being ago. and runoff as yields at just we're higher originating were have a relative higher asset portfolios where year replacement,

driver So, we're I think seeing. the primary what in that's

Kyle Peterson

that is or on loans other? both that's And the or – Okay. just the one securities and

Howell D. McCullough III

securities. and loans categories, Both

Kyle Peterson

All guys. Thank you, right. Great.

Howell D. McCullough III

Thanks.

Stephen D. Steinour

Thanks, Kyle.

Operator

you. Thank

from question line question. next comes David Our the proceed Long Please your with of with James. Raymond

David J. Long

morning, Good everyone.

Stephen D. Steinour

Good morning, Dave.

David J. Long

a Moving of deposit that you'd may very could have to about side in see growth deposits, deposit talk impacted any loan the guys of promotions slowdown pricing growth expect there expectations, that you liability I what balance the or you on if had the given at going quarter good sheet, out changes to the And and in looking there, wanted then growth. forward.

Howell D. McCullough III

Yeah. Dave, it's Mac.

and really the there the good We we I wholesale balances grow in our order some funding. pricing in look thought at of tradeoff to side was retain So, nothing this script. I relative way that to some would a did some balances on say in of promotions we did, commercial the and mentioned

increases, I if perspective, you depend, would going on tell not did cost and nice on we side right side on we've rate mentioned liquidity doing about of And see seen, price of the stable lot in steady we a you of think and pressure we earlier, a on perspective that our going wholesale in from what the would forward. see that tell pricing I consumer what So, forward, benefit side with how the on core saw see a increases, commercial to margin, it's funding. I relative commercial and course, the as a now. very from rational the of the that, But increase the and quarter. but we Fed probably will think funding both terms market rate the I the and happens when we That we being from

David J. Long

have. Excellent. the I Thanks That's color, for Mac. all

Howell D. McCullough III

Dave. Thanks, Yeah.

Stephen D. Steinour

Dave. Thanks,

Operator

you. Thank

the of proceed your Our Stephens, McEvoy Inc. next with from question Please with Terry comes question. line

Terry J. McEvoy

Thanks. Good morning.

Stephen D. Steinour

Hey, Terry.

Terry J. McEvoy

Hi.

me annual X%, to you as merger number and good call XXXX, expenses, core assumed of and relates up there implying the in the the line you expense is first a a as Will year, operating understand we help XQ bump on that could FirstMerit next still the would quarters original below lower in then earlier the it about growth? increase drift seasonality maybe a be half be the of core just year? that then, And Within year? XXXX of think the it, model, to maybe use

Howell D. McCullough III

Terry. Yeah,

in, environment, unchanged right working and get now, the see we've through we some we're in we rate I revenue of with we obviously, growth and FirstMerit the made side of where we budget the investments loan upon the right start a make equation and about think and And that we want income So, nine think business. expense coming building cost we XXXX based way what fee spend and on the we with normal can an the investments then, infrastructure go yards. to the right associated of based we in perspective And an the make. do investments categories. determine course, continue colleagues our And from we whole to the in

So to think a FirstMerit model. a assume merger we about X% in basis. on long-term the That's number did not bad

mentioned on As a XXXX. the I we benefits earlier, take-outs do full-year from basis cost in get additional

with basis, On higher couple a the has quarter see in be that So that to second considered a well. do and as we seasonality things. expenses should of typically

We change have the the Merit colleagues our in quarter. for second

bit the the compensation, lower quarters. than little is from typically, And well. hitting equity as quarter first have the some second and a third We onetime quarter fourth also compensation impacts in then, the

then, first, about think So, fourth, seasonality way perspective, the lower probably a it's, in this I in and to it. would third from in the is higher down the and say, drifting the second,

Terry J. McEvoy

didn't one million I XX acquisition-related and question press FirstMerit that a The out I originally the the see follow-up is, Great. ask of them Thank – consolidated Was and branches the part guess And $XXX terms in reason in those cost expenses merger taken call the release of expense. saves. I of in you. question. And the in quarter. then that were transaction just locations drive-through third

Howell D. McCullough III

our the were colleagues. we back into a digital a did $XXX and Yeah, million. of we're not good portion we Terry. reinvesting When of this, Those part that there original the savings announced disclose

that a transaction. in see material run wouldn't rate from impact would I you the that So, expect

Terry J. McEvoy

again. Thanks Great.

Howell D. McCullough III

Okay. Thank you.

Stephen D. Steinour

Terry. Thanks,

Operator

you. Thank

Kevin the Barker Please Our line proceed comes next of from with your with question. question Jaffray. Piper

Kevin J. Barker

Thanks.

you You environment for brought the your also expectations up just X talk but classified Could higher a about XQ here. a the not and then deal, net big loans charge-off XXXX? you guidance, saw point, your to move basis overall credit into and bit into

Daniel J. Neumeyer

Yes.

– So, is I this think Dan.

stable. results did SNC but think in the seen, you the most (XX:XX) the up I incorporate didn't go noted, fairly We've recent from are criticized quarter, expectations as that review.

haven't We conservative to proactive then feel nonaccruals, that rating. into continue the we that's ultimately underscored into have very seen and a charge-offs. fact I and by you think risk the migration And

quarters criticized up, that really And good feel So, that, I lows many were is historic the less a feel in loans come. the overall, charge-off the as on that portfolio think with recoveries about still we're is gradual shape, front, metrics. we're going and to good to the the there. look mild – earlier of increase mentioned stability although But, portfolio I we very in and for see at in while our

Kevin J. Barker

ability have loan of the the programs you growth type that the even into in lower XXXX, revenue generate loan continue then, Okay. on to or your questions that in mid-single you operating comes your been leverage leverage some the have a growth if generate numbers going place you end to expectations? continue the to at given loan of can asked. in or of And in operating expense that some still follow-up growth digits regards least require In at do to growth saving

Howell D. McCullough III

the that are FirstMerit. do hold. in continue And believe of revenue Huntington consider growth that XXXX, fee can in And to you to high loan in Yeah. the the we we're synergies in we we've income getting Kevin, positive operating I attractive particular, good side very and have leverage. continue made to consumer on of generate taking rates. there growth businesses out particular quality Investments have

So, feel that operating we'll confident leverage. positive see

Kevin J. Barker

you. Thank

Howell D. McCullough III

you. Thank

Stephen D. Steinour

Thanks, Kevin.

Operator

Thank you.

final Securities. with your from with comes proceed Winter Please Our the Peter question. Wedbush question of line

Peter J. Winter

morning. Good

Stephen D. Steinour

morning, Peter. Good

Peter J. Winter

the expansion cautious other on ramping you've Just the you estate – of bit markets. auto that going think success little that that more commercial something markets? had real about auto up a Is into would and the that newer you good comments to indirect expanding indirect given you're

Stephen D. Steinour

it's Peter, We new expanding like we do not time. Steinour. presence have. the We this any into markets anticipate Steve at footprint

Peter J. Winter

more it's talk Okay. markets And are opportunities very newer you potential going Wisconsin, you revenue there? then, how the just of Chicago quickly, in and about Can and seeing follow-up.

Stephen D. Steinour

Well, we units and and a business lending, in in start had dollars, three number two units Wisconsin lending, start. do in a two on number see on we're from growth good very particular, to and revenue and opportunities. zero Chicago, and small We've SBA that's and dollars,

ramped So quickly. that has up

then and commercial FirstMerit, branches holding how how businesses, team that deposits with Our our adding resi on We'll we consumer customer residential mortgage seen talent teams, the be from commercial doing are teams. We And quarter us mortgage. lending is pleased is they're so performing, well from We including the feel ramping what had up. joining growing great to the in really fourth some themselves, team, the like and have performing. the base. the

in both So, the we've pleased positions with inherited states.

Peter J. Winter

you. Thank Great.

Stephen D. Steinour

Thanks, Peter.

Operator

Steinour reached remarks. to we the gentlemen, end our the session. Ladies back have any closing and turn question-and-answer would like call to over for of Steve I

Stephen D. Steinour

So, the year finish and we're produced the third quarter confident strong. in results I'm solid we going to

of strategies our Our to results. goals working and the drive execution continue are positive

gain expect grow to continue share share We wallet. to of and market

The expense from is with are the FirstMerit growing of priorities integration and businesses FirstMerit. realizing top our synergies fully announced reductions Our the substantially complete core revenue implemented.

rate quarter expect of XXXX. of and and all these long-term benefits, We fourth our the run quarter we in goals to into achieve to the XXXX expect financial demonstrate fourth

colleagues, reminder Finally, the colleagues one management collectively our our The there's and and shareholders. shareholders that are Huntington. like and our a of the include board, always high board to largest of between level I of alignment

we continue so today. the all are manage long-term We joining interest sustained day. Huntington. have you focused Thank Have your volatility appreciate risks driving to great in performance. retirement certain a hold will us on you for on shares, requirements and proactively We appropriately and

Operator

This concludes today's conference.

a this and Thank You day. lines for at wonderful your participation, time. may your have you disconnect

Huntington Bancshares (HBAN) 25 Oct 172017 Q3 Earnings call transcript