HBAN - Earnings call transcript Q4 2017 | Huntington Bancshares Incorporated

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Operator

Greetings, and welcome to the Huntington Bancshares’ Fourth Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Investor of Director Muth, Relations. Mark Please go ahead.

Mark Muth

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

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

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

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

overview Let an to turn over financials. the Mac it for now me of

Mac McCullough

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

As your support. interest always, and appreciate we

performance are of our third our We with quarter record goals in accelerated fourth financial the long-term pleased income net all for consecutive financial the very and of quarter including achievement five quarter. the

on for inclusion tax the from and was significant XXXX, and impacted X.XX%, on the We the XX.X% of share of per share year on Also XX.X%. of items, the acquisition common return XX% per FirstMerit keep during impact $X full in please of federal equity by including reasonably XXXX. return results, was was FirstMerit, significant mind $X.XX acquisition estimated to XXXX. the on $X.XX full to up items equity per related As reported review return turn assets share common comparisons XXXX to year common quarter over includes I are to three slide benefit at reform. This of third that earnings close, of the

reported the common We includes four. benefit ago tangible items, of including return on up slide of for was common quarter. earnings common XX.X%. return reform. to XX% of return $X.XX share and tax on share impact federal per Also quarter, estimated per on reasonably $X.XX Turning significant assets was equity the from over the was This year equity fourth XX% X.XX%,

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

As third of the value having incur a did reminder, $X.XX and quarter is year-over-year FirstMerit the increased to not expense, acquisition that X% quarter per share. XXXX. FirstMerit since in of Tangible merger-related integration X% sequentially physical this the the we share book first of completed per

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

integration year-over-year of in reduction a fourth expense expense revenue, from year-over-year in interest and Noninterest processing of items the in partially up increase the basis-point earning in and the revenue increased X% capital XXXX sale significant executed million fourth trust income interest quarter X% quarter slide related was the strategy X% in Noninterest of gains to in fourth significant by XXXX. offset X% no FirstMerit items investment to decreased card of sheet payment of balance the on Turning loans optimization due year-over-year was of related versus management expense income average ago to in X% fees, the the increase fees, assets net a margin. $XX entirely Total quarter Net and on quarter. to up five. year markets a the XXXX. strength to X% due and

of XXXX the annual fourth to the from year-ago X% due items, expense grew the noninterest $X impact quarter, primarily or in significant quarter the Excluding of compensation million increases.

behind that details for slides the delivered six and we the pages illustrates closer the a annual in goal Slide positive This the XX or of refer the accomplished calculations, year. presentation release. contained that at are to us we in we for and the fifth pleased please an important For on operating XX reconciliations look again consecutive is XXXX. leverage this

of in quarter slide seven. and increase sheet fourth average quarters optimization to X% due the X X% from the quarter liquidity strategy sale Average Level to offset were of leases, assets proceeds headwinds grew reflecting qualifying in the Turning including held earning banking, partially first increase securitization loans C&I The XXXX of X% the XXXX. X% was reinvestment which Average in an quarter the increase in and securities XXXX. the XXXX. assets in and auto average a coverage ratio primarily of year-over-year year-over-year, the three securities. flows loans driven of fourth decreased additional This increase by average and fourth corporate discussed securities the of in by cash the reflects executed in balance reduction for investments a in

While was ended We or balances regarding not the in final the with a X.X% that loans quarter from federal sales late growth Average over a the fourth but tax production we just prior the ongoing XXXX, XX% removal year-over-year, resulting originations bulk the growth loans down yields the saw expansion average shift $X.X particularly of materially, quarter, commercial impacting decline the increased growth the money balances in the of auto quarter’s up the increased likely of normal reform, loans successful quarter and X.XX% note weeks weakest few This X% part a over by on in seasonally strong C&I with uncertainty year-over-year, period-end FirstMerit the the quarter-end. billion quarter and XX new for residential across the strong the XXXX. loan as for balances mortgages business normal versus Average into geographies, year-over-year, our increased business our few seasonal XX% the annualized reflecting capital. Average driven in plan solid and the fourth moderate remain Average production. production to car specifically RV in exceeded loans the fourth we returns prior quarter flat to we of year. quarter. tightened of and with Originations as have totaled in up optimistic mortgage risk primarily X% appetite from marine disciplined to representing low reflecting states lending, benefit this appropriate quarter. well that new and our fourth to continued loan in our strategically commercial as in mix estate aggregate former consistent CRE were another to year-over-year past Chicago. quarter footprint Average demand fourth of remain of retail ensure year-over-year. years. the for for experienced XX% on the multifamily, have in business Note this quarter for with were the on auto new consistent the loans quarter, investments in construction is real the X.XX% past coupled

the typical, As mortgage X% a driven jumbo we sold lending. the consumer period-end products. year-ago, retained and from a quarter in qualified basis, mortgage and specialty by On in agency mortgages total strength production the loans increased

demand expected deposits, slide remain the particularly increased X% the low attention X% Turning chart the from Average with deposits We including on increase the increase cost deposits X% in core total a deposits. increased as as relationship decreases the within right quarter, seven, the period-end side year-over-year. in of average core pleased average continuing year-ago deposits checking in to trend our on fluctuations reflects deposit acquisition. of addition This the FirstMerit’s and low The cost well our total focus government due base banking from relationships. quarter was in seasonal decline banking DDA. deposit primarily account in specialty prior to

slide to eight. Moving

interest in the and the fourth increase XX in X quarter. non-interest earning liabilities. funds net asset balanced XX yields basis-point interest-bearing quarter, was a against, Our basis-point points This basis increase increase X.XX% year-ago reflects benefit a X of increase for basis-point a margin cost the in the of up bearing from

purchase cost of interest-bearing by basis of improvement a was Purchase basis driven quarter, X deposits core increased only by paid sequentially. core up points. linked our benefit year remained compared consumer asset X in increase the the of was for accounting accounting point interest point, XXXX. benefit On and earning has fourth yields a than the XX basis, X XX and in a basis deposits margin in in points net quarter quarter. basis-point Importantly, NIM fourth core non-interest continue our NIM over quarter to reduction X.XX% in wholesale to contributed remain the adjusting from quarters, funding in accretion to the basis we from prior deposit a more the ability especially all purchase liabilities. in heavily was increase the core down lag net flat increase offset Growth of the cost to fourth interest X accretion. points to the accretion bearing basis with the the in by successfully the where rate bearing offset margin funding After of on as past quarter basis-point pricing, the quarter in the weighted accounting X.XX% XXXX, cost funds, pleased X.XX% partially XX more prior in The interest in in

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

limited We and face hikes the commercial pressure corporate majority and deposit we quarter, end being deposit cost fed upper to have retain seen market. providing steady economics remain banking, relative consumer the certain better relationships, of corporate bank to of interest increased in balances of the banking relatively of middle to the with business government core wholesale rates the recent for In banking pricing rate the pricing grow selectively funding. on and

loan the primarily consumer our to basis XX commercial points impact earning points yields increased X loan yields a loan to linked-quarter loan points yields prior basis On up purchase the quarter. XX Security points. side, the X and consumer yields yields point, commercial compared asset were of basis basis were X On while while basis, increased year-over-year year-over-year, increased up accounting. decreased X basis related points basis

note on this experienced what it payoffs nine. based FirstMerit period. extensions the the any accretion include XXXX in XXXX to and recent do at regarding the for are in except accounting And which that updated recapture estimates It from purchase we accretion information purchase on not slide, we is projected accelerated have of slide XXXX, bars, impact expanded accretion. current early are scheduled a accounting from and conference to the for we green or important Moving We the here. provided

accretion. accelerated results have loan to revenue our in in out reality, headwind extensions past previously, net payoffs six is approximately put Therefore, for to As early see forward likely likely in XXXX for quarters, you’re represent experience be continue schedule we stated of the been in payoffs interest as accretion currently it of and XXXX proven accounting has we’re $XX expected income million modifications accretion to Purchase a early to compared XXXX. occur. to resulting

million is yellow by purchase in in However, provision accounting related the million majority loans $XX $XX is decline the the revenue reduction FirstMerit be a acquired to in offset bars. to of expected which shown expense

Importantly, million expected XXXX. quality as is million approximately $X in accounting net earnings, two currently the $XX of only circled think pretax orange at income looking decline of and in from impact about the purchase bars, XXXX to we was

benefit the goals we acquisition. FirstMerit slide benefits quarter planning reported time results basis in financial look fourth reform. due goals set with which XXXX XX Turning benefit, take the XXXX tax XXXX as financial process. the in the on Even long-term achieved originally let’s adjusting the shown GAAP realization of the of of appendix, quarter to financial benefits on a reflect of for in the These long-term goals the basis in slide and quarterly scale are Board progress this at yet fall our acquisition. the horizon mind, part of with against by we Fourth strategic on a the of federal economic XX, a to realizing were of were these five-year approved the as a our

results achieved to our reported of shown items, cost appendix, basis. XX on are XXXX proud the year have are a We and reflect quarter on basis. on both all the basis long-term financial goals five GAAP GAAP we this tax non-GAAP the benefit. integration for on Adjusting the slide the these targets an in meeting XX already as FirstMerit of the annual Full and and

expect goals to all ahead two the we on achieve of for GAAP basis Importantly, year five years schedule. full financial XXXX,

Slide goals we’ll have strategic our We this synergies. long-term planning recently XX savings Company sharing and revenue financial year. new later strategic process highlights and the begun for cost XXXX and the be FirstMerit-related

annualized by original realizing quarter cost beating are million $XXX savings XXXX. As noninterest million of evidenced of target promised, our announced for fourth expense as fully the $XXX we the

basis to product suite on optimal revenue and CETX, executing and Early growth. XX XXXX expansions strong $XX ended on our points expense FirstMerit ratio marine Going continued XXXX, deliver FirstMerit of capital in capital quarter strength forward, the full success of of is the following lending million more Common the revenue Huntington In on deal-related Tier home X.XX% with initiatives revenue the or Slide provide introduction remain X million equity realized strategy XX The track $XX year-over-year. customer guidance. RV at our focus than of our enhancement for illustrates an we optimism these million opportunities. the included These through relationship of projections $XXX ratios of XXXX replenishment up XX%. in continued the our from are and efficiency ratio our the acquisition. successful and and a and SBA, of results revenue initiatives.

guideline the at quarter a X.XX%, X% reminder, up to our for As is points XX%. basis equity CETX year-over-year. common Tangible ended XX operating

our since draw mandatory optimize to potential equity on included shares have common Series attention the A the is impact immaterial with our a actually for subject positive quarter I albeit shares preferred ratio of on calculation, On is ratios, to in why opportunity of diluted force that the tangible and common This currently would the would capital third time shares take non-objection conversion to to submission. an share. per that capital stock diluted preferred an fully our fully common conversion fact your fourth a unrelated want The by trading Should would ratio the conversion of slide increased impact A average level per at XXXX. Xth. conversion the Moving be to allow would in earnings convertible dilutive convertible our amount. early the first to XX. share as separate immaterial XXXX to we approximately is XX as the our quarter us the CETX note, and by earnings million happen, from Series CCAR XXXX our a February capital common

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

granularity As allowance credit the increased point portfolio non-accrual as charge-offs the loans a for ratio in and XXX%. on remained and slides. basis usual, loan percentage to at X.XX%, the there by of flat The is analyst an package coverage linked-quarter losses X additional

XX-day basis Turning criticized to metrics decreased points XX NPA linked-quarter. million remain points. point XX. NPA The increased to Overall asset slide strong. increased our basis assets X.XX% XX eased or delinquencies to asset Nonperforming declined. X And X points. sequentially ratio ratio inflows X% X.XX%. basis quality $X The basis from slightly

turn now over Steve. me presentation to Let the

Steve Steinour

Mac. Thanks,

remained the several for Indianapolis The across for The Grand markets of our the as on footprint Rapids, optimistic markets near economic selected of strong our chart footprint illustrate XX the slide several XX have XX key last our Columbus, Moving to noted have labor unemployment footprint. left I meaningful chart slide recovery And And in majority to we’ve such you for economies our rest with nation economic across and economy, labor slides local as And outperformed bottom remain footprint unemployment years. trends proven across lows. in shortages. during as states the the where the footprint. in see, here the states. the the and outlook illustrate rates be indicators see XX our and previously, our can on eight historical on we rates in

the economic indicators favorable base six our that of the on your in a to eight very state of indicator illustrates in as on seeing which the previously point direct expense well. confirm footprint. see activity the confidence customers. commercial remaining region the certainly XXXX more leading its next bankers our These the would the noted leading right U.S. display with highest bottom as illustrated interactions Consumer expected throughout have for to inflation to We the optimism by we’re like our optimism price acceleration our our have our and which level months. over fed’s at based while daily small markets inflation operating consumer home slide importantly, map footprint in Philadelphia environment own customers indicators, attention in wage is economic leading since some are continue toward most The indices markets across are our and to is And of XXXX. I six business, our an Housing affordable XX our states perhaps broad-based

Our have segments. of confidence customer calling efforts widespread across found customer all these

Huntington. and of pipelines of predictable, impact impact for the is enactment customers, and reform pipelines year remain commercial our positive for stronger longer good region ago. which loan less term be while than And may a the tax including were today near-term our federal Our are our business believe they we

tax to privately businesses focus from it’s and expenditures of going and impact importantly, These of improved profitability of growth. a from statutory likely by addition, earnings materially impact across see stereotypically these business are important industries a more array likely number those corporations. tax to businesses and businesses corporate repatriation And the the economic rate as footprint manufacturing tax reinvest well into pay increased businesses. our commercial our in to expansion are flow. their full remember capital of the held reduced as wide are from on burdens, fund positive expect We foreign therefore And benefits to cash primarily that is also to to companies and

entails communicated performance through-the-cycle strategy low maintaining represents pretax pre-provision shareholder This to graph top XX. focused slide moderate would profile the consistent the result and fund to top returns, FirstMerit. and organic the long-term to growth of over reducing of to our to in Huntington’s in tiered strong our deliver strategies, priorities. to aggregate the Moving achieving This highlight execution a continued revenue generation the and results core strong volatility I consistent our returns. of us throughout. which risk positioned of quadrant, position to left our previously level plus net of return capital with shareholders, our well growth as economics capital capital like

to expectations. XXXX to review turn now slide our XX Let’s

As to to the Full X%. of growth X% in forward is we full inclusive X% half range loan loan auto securitization expected be the of X% expect average $XXX year. to XXXX, growth year in a deposit we average the look back to year of million over

change rates as We in expecting years. continue to for we have budget last the few interest no

us plan and to to this year. more the of this year, And our take for it with act budget conservative budgeting While served might accordingly. respect process it continue said has and a to we do as our approach well again appears fed in likely plans so that

to assumptions. be NIM X%; and core modestly up in be growth We to full under X% we’re XXXX, year those revenue the to expect GAAP flat the NIM projecting of

X% the of the billion. noninterest side, decrease we’re expense X% XXXX from to On expecting $X.X a expense GAAP

we to reflective of cash in ratio leverage be expectations rate the operating goal to fully XX% reform. basis will in sixth to And year. to range for Our the charge-offs include our XX the XX% below basis towards range, of consecutive anticipate long-term improvement efficiency effective federal expect net XX% a XX tax of the to remains positive points the XX% We tax points.

our closing perform we on some third income So, let’s core quarter, turn fronts, record important please. messages, including continues to but consecutive had We good franchise we very to well remarks can many believe slide and XX core performance. for further the improve quarter. fourth for net The

We’re optimistic economies local for our on the the across outlook footprint.

accelerated to fourth we on And time goals noted, our for our bases those in financial goals. Mac achieve on first ability As a the acquisition the FirstMerit delivered the GAAP long-term quarter.

a sooner on in XXXX, goals full of XXXX. revised We when years the basis expect to we in achieve we December GAAP originally two than them announced planned year

realizing $XXX million the are of from originally savings We communicated. annual acquisition, fully the cost as

$XX continue business, marine revenue also significant million enhancement opportunities, on We RV XXXX through OCR, delivering in small lending the and to and lending execute home initiatives.

XXX announcement back by look ago, tangible our of by points basis XXX our on efficiency and points. we to return promises our the greater improve promise on on our FirstMerit points, As common on return improve equity promises, our acquisition by more assets years delivered basis than XX ratio basis promise I two improve to than the to

versus quarter, core points our by fact, improved we before announced to deal, by points XXX basis more ROTC our right fourth XX%. ratio the than basis and XXXX efficiency In XXX improved the

expect an and fully them to performing perform at well. And continue they’re today, are integrated, even So, we our focused, level. to they’re teams higher

the We’re line performance time shareholder throughout. into with aggregate consistent and short-term tier risk over the to returns. We volatility, momentum. our on optimistic reducing -- through-the-cycle The year into achieving year top XXXX business and low remain focused maintaining delivering about coming entails moderate strategy profile

I’ll turn Thank get we over to Mark, back questions. your you. now so it So, can

Mark Muth

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

Operator

comes with your [Operator Matt question line Instructions] from O’Connor Our you. first the question. of with Deutsche Bank. Thank proceed Please

Ricky Dodds

Matt’s for team. Ricky actually It’s guys. Hey,

you some wondering the specifically I maybe capital you the outlooks. on maybe then, But touch you fee gave the Just over touch your for know of past could in of that. wondering if talk And the some few if you’ve quarters. was expectations business I strengths about could on revenue had year, quickly markets

I had nice step up you think a there.

maybe you about well. talk can if Thanks. So, is that

Steve Steinour

we seeing, strength businesses. good So, in think fee a are the I

made to I the of think mind SBA the and keep for are particular, mortgage would some FirstMerit those you around we and banking lending need ahead in we’re in but very acquisition little on off I we’re have say, in of that And good a behind I catching investments markets, well. might bit SBA. XXXX. mortgage. been us paying think shape We in investments we’re I up we think think hiring enter in terms some as of I

And seeing a Huntington ties which from the entire our stronger, opportunities continue customer I a expect about terms quarter customer So, to the Capital in the think that to in would with revenue. sell much optimal when we those They record quarter all think about had there organization. we’re sales base, think the real the into our expertise side customer lines. focus of management, on capital opportunity see is penetrating across have into fourth we base. It better. growth to perspective, on opportunities a products I real we is much our And relationship treasury markets strategy markets in us. as for we good FirstMerit

believe we we are as the opportunities opportunities side, While FirstMerit definitely well. on for have Huntington higher the side

we’ve those of historically be for because income of growth to good So, a year what and investments I focus because would fee to our XXXX on going that seen OCR. is relative say

Operator

you. Thank

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

Sam Ross

just guys the is of this your rate about the actually the morning, your John Pancari. you about what may know of line and are loans Ross your seeing maybe can talk line ended at at Sam up you where currently? utilization utilization sort for Good end talked on I’m you quarter. be picking I quarter hoping

Dan Neumeyer

down utilization a tick. Yes. Dan. This is Actually just was line

had where I dynamics changed think to we the course a we the of down year-end much close of of of very throughout the year in quarter. the quarter kind a percent activity, lot were end. two-tenths The

built-up was year. that delayed demand been throughout the there I think a of lot had

we difficult on. there’s there. to don’t that know you whether And be I so, is might to immediate first seen see with it expect going pinpoint the benefits of utilization you tax quarter an would uptick have later an if the in impact reform, or and

I see an think estimate quarter. we the I year will in goes hard utilization uptick really but to the as on, in expect would first

Sam Ross

And just then, expectations your are XXXX. for But expectation gave cleanup full the for NIM seeing maybe reform, tax year know it. following Got you I a your from what question. of guys NIM impacts guys you given QX?

Mac McCullough

impact change. to for one to in impact the reduction think that, need about basis-point I material is So, FTE the you on about X reform think the the a adjustment. related expect FTEs; But just it’s the of tax NIM normalizing than other wouldn’t I

Operator

you. Thank

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

Scott Siefers

could increased benefits flow through allowing balance if Steve, versus to hoping reinvestment basically tax bit offering two the bottom-line just look ongoing your morning, at little if or or just Good thoughts a investments? the spend of it guys. on kind I was moment or of you of any, you the how maybe a

Steve Steinour

now working our set been terms try XXXX. almost of we’ve in Scott, and for we’ve of businesses certainly conservatively I it year And has with changes. plans interest XXXX. long-term no the every mentioned, as that a a assuming been to And decade rate in informs in investing since every it approach strategies we year,

do to continue will We that.

in change we’re our with tax way plans and any meaningful So, not those. set does reform the

expect think in we So, we it relatively to of NIM. strong bottom-line. reforms time, If performance the tax benefits we tremendous and the position are tends the get some to the competed both returns to with would respond of away to flow very, in substantially very over a

how substantially market see So, very to expecting the reacts that goes we’ll time. bottom-line for and over XXXX it the

Scott Siefers

then, a you. on Thank preferred. Series Okay, just ask the quick the just was Mac, of And A to conversion hoping I perfect. question potential

it’s and period something force have if you next it next correctly, CCAR wanted price resubmit to part circumstances as be conversion for purposes could any all conversion you the process you you movements? it soon occur. guys stock as is whether just if it potentially or force maybe or year this of the based can So, right the do understand regardless to if not that month, would intents Would CCAR of I on

Mac McCullough

Yes, Scott.

wouldn’t XXXX we order resubmit So, to force to the seem CCAR in conversion. our

we process. terms of be capital a XXXX opportunities the In might forward and that going creates, that through how part that of thinking optimize would the

Scott Siefers

understand. I Okay

you do choose have should to in potentially. you flexibility plenty So, of order -- short very

Steve Steinour

Absolutely.

Operator

Thank you.

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

Ken Usdin

that Follow-up capital structure question, on Mac.

So, just the to out. understand and trying ins

point we count currently, and and new then consider flat I this those the XX think out on share would about your preferred as issuance? the to would shares leave neutral. to potential also in were additional But line if we be about that preferred got in that So, take

Mac McCullough

Yes. so, it, about convert is think first back on X.X% the here Pref A to to shares paying the on basically Ken, potential EPS we’re that that because And those of neutral bring we’re so, the in it pref. way we paying the the has as to yield in quarter. that

common we the likely where us to going issue on with in and to then, obviously to increase similar when paying that process. our it created a at is CCAR this for versus CCAR pref the preferred does that process -- opportunity we we’re because be CCAR about And what market rate impact in CETX we’re neutral that in to going thinking if of again about no it we’re give offset converting, our use XXXX been the to current the instrument, us capital to process, additional we EPS equity the is even ratios, EPS. will for and high XXXX TCE that’s XXXX think how preferred So, optimize the currently the

think I of we So, it’s or where positive. terms in today, neutral sit

Ken Usdin

Understood.

got Okay, it.

So, we you the more CCAR about but preferred could side and the should equity also. on think also the potential do potential that both

it. -- So got it’s just I more than okay,

still would provision footprint. portfolio. be good, which mostly the up question about just Steve’s did was the then, that of Second the legacy taking bit to assume continues credit strength points the of to across continued related outlook It have I step a very all

provision long time. that you us underlying So, I but and a that know the understand such how help and for to below XX the book old XX credit? can push it’s on just pull you been then about movement just expect

legacy So, the how the you about provision the think for just then just core. book also differentiate and kind

Dan Neumeyer

is Dan. Ken. Sure, This

are So, provision a and one loan in on primary the We quarter-end balances quarter, did up. there which reserves drivers, We weren’t good just were period-end the have did growth, that average that’s three a basis fact have surge despite loan based. is the really at on growth.

But nothing would loans you component established. them. reserves couple that we renewals. were with credits no they attached were had but second And are nonetheless the now And had know, driver some specific a as huge have these third to FirstMerit the the extend So, when reserves, there. we marked, then, of be a that a restructure, reserve

year when charge-off. this $XX look as those there you million three process, up and point average, about quarter make at we it’s dynamic to quarter-to-quarter. had of fluctuation provision going is whole a on out $XX from I per that for that expense components clearly that million of So in quarter quarter. But, is about a be happened would because what the

that said So, the would build we very reserve. slowly we slowly,

a we think ended year you ACL I year X.XX. at we X.XX an the on if ago, basis were looked at coverage and

as that I slow qualifies build. a think So,

dynamics that’s So, there. the going really on

Ken Usdin

that’s And you what continue?

Dan Neumeyer

there and and is is impact to going The Yes. FirstMerit lessen on go book impact to The is continues Huntington by. the more that more and lessen years slipped mature to as origination.

Operator

Thank you.

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

Peter Winter

what interest -- I income to outlook no net margin the and with interest XX rate just basis-point be just hikes. your would was curious hike? net know the I’m impact assumes rate I

Mac McCullough

Yes. Peter, it’s Mac.

is think So, think in the neighborhood the pick-up for XX full for short if about you basis $XX points the probably way million to it’s of the full year, it. end about year,

Peter Winter

and two sorry assuming I’m that’s rate hikes?

Mac McCullough

XX the points. of that Well, would impact be basis

be twice that. will So, if hikes, it’s rate it two

Peter Winter

more quarter? And you increased the talked then, and us be you deposit the in little color impact selectively would you deposit just how cost costs. what much first about secondly, a Could Got your increasing it. the certain bit give

Mac McCullough

pass any relationships the relationships through side, increases. think depth we So, closely just the commercial at how think of additional and on -- we’re about we the the I when price more looking

And with the value our know, about you relationships customers. As we’re thinking bank a we those exactly deep and we’re that’s deeply it. way relationship

our pretty doing I in with rate we’re thing side hike. be right the of might There still on increase focused we’re sure recently opportunities additional a making our way worked relationships. the customer terms think, deep that from much that most the we’re we’ve through perspective a few considering. But, commercial very

Peter Winter

Thank you. Okay.

Mac McCullough

back I full if the what was XX go gave points. first basis question, you Peter, of And could to impact I year just your

XXXX. timing So, you of decide the that year would in impact to full need kind and how factor

Operator

Thank you.

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

Marty Mosby

from quarter want I the but saying impact those there, it or into year you to was tax goals want in or thought just of even you it to about five need I for XXXX getting sure you’re benefit goals, get while you you in taxes, about XXXX. wasn’t the would I that in ask that the sure, the fourth Steve, I have going this without right, would to do talked that make accomplish accomplished I XXXX? you those

Mac McCullough

accomplished the clarify tax accomplish to we excluding then, in benefit. embellished have further tax in Marty, them with will, tax And you only No, would will quarter to fourth be we excluding XXXX benefit. They expected those if benefit.

Marty Mosby

think a the reduction slide of forward, there where some you bit want but on sense of a we a in accounting and the I accretion, in kind way show go can were I convoluted of also -- showed provision, that I what that second. this little back just you for kind of I in at that’s the confused you get got of thought million. That’s the got Okay. a reduction to in purchase $XX the provision then getting Mac, walk to that,

$XX take we charge-offs, guidance. next would your kind the million and same, a net or income itemizing that So, when the interest so, thing at we for as are so million GAAP being provision with on less. year a $XXX do, if and The this roughly, of that at up all to else we end basis, you look saying basically take we flat margins

million So, of in $XXX that guidance. you from and kind of would to assumptions $XXX have down of a provision cocoon walk million a

I So, kind the make sure of to was that just way want to that. look at

Mac McCullough

year-over-year loans Marty. the originated to portfolio from about the portfolio. That Yes, less in provision have mean, I reduction the million correct. impact we to FirstMerit, acquired is related moving simply because is $XX

Marty Mosby

and And that you that’s layering wondering where missing weren’t up estimates effect some think people probably catching I was if where can That’s what thought. But, of the I models then the you clear to build sort as that allowance okay next of well, into pretty the the that is in really guidance at NII extra provisioning looking is but your got was of start to think get I why other I that $XX go lower pull of XXXX. million were. piece helps kind you kind thinking we down

I appreciate thanks. So, clarity. that

Mac McCullough

we it’s the And as of to forward. I and obviously XXXX. build, mean build expect on that going loan working the going depend to of a we’re depend do the reserve reserve going into think to in the kind of going growth gradual be Dan XXXX about how we strength it’s provision Marty, the described on on environment;

So, factors that. go lot I you a into would tell that

XXXX the the of saw equation. side we the both expected better think, performance I than we probably FirstMerit in on and Huntington

think think shaping have about XXXX. well longer are up term a things graphical we reserve I So, as we But, build. do

Operator

Thank you.

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

Kevin Barker

you. Thank

growth down Your rate to of that that with run operating X%. see we’re X%, -- big transaction and given the FirstMerit from roughly EPS X% going be out assumes expense expenses, any guidance by operating growing a to other that at expect you X% some you to With fall-through do for expenses up the have core operating two to GAAP on core there? expenses going investments about three-year go core

Mac McCullough

Mac. Yes, It’s Kevin.

So, in clearly, of we’re getting the XXXX. full takeouts from FirstMerit cost year benefit

think quote about the way be that’s I longer would term that expect that forward. you So in to XXXX. I going growth not would rate X% the

the to continue in invest business. We

increases biggest give continue to As types merit personnel of the expense know up, component you we our costs those and are and of things. line

core get achieved efficiency continue when So, And assumed and to just rate we forward. expense growth rate the we expense takeouts, in the that from the cost will modeled we expected point out that ROTCE benefit FirstMerit, we’ve and and XXXX. achieved going the metrics kind of X% I growth we’ve in we

Kevin Barker

horizon that it of other fully? large Do million, digested that see as made was you’ve any roughly, be following additional made you the you’ve FirstMerit then, reinvestment $XXX on to generate need revenue. And investments Okay.

Mac McCullough

back, the the FirstMerit million. $XX go to made Just we in is investment revenue initiatives

biggest transaction of coming these initiatives in which believe as opportunity out to going the and see the expected coming actually incremental revenue the we initiatives we million $XX FirstMerit. in mature and we in assumption as So, revenue of opportunities do is at we million the that revenue particular additional that $XXX XX% would $XXX OCR million revenue a on expect going efficiency the And we’re be we the made was out ratio; assuming execute of to FirstMerit number then the that and back minimum. all

out, happening pointed what what a what’s we upon make I of and we we do from in we’ve need think a done based to from Steve the based colleague business environment And that we really the a do to upon time. perspective, good need As investments customer feel in over prospective. job

about the leverage and customer on is to process The that to evaluating also, going positive revenue We’re focus kicking Steve on customer to do what growth off just can as focus process; thinking opportunities our experience. business. different of forward. we’re And we’re improve the continue thinking primary operating and to strategic going mentioned we about grow planning

Operator

Thank you.

line comes question next Reevey D.A. with of Our your Please Kevin question. with the from Davidson. proceed

Kevin Reevey

Steve or So, is Mac. this for question

to is given was revenue tax than last for for XXXX more have higher year. revenue we not curious lot have is why outlook I’m So, your is a similar And you your last fact And to X%, like the outlook corporate there outlook, X% now reform? there stronger it seems year. -- that which today optimism just

Mac McCullough

think and appetite we our on range we risk in X% late how think it how loan is we on to knew don’t still about X% sheet. get did given think terms we XXXX until about it we the growth we that the was The the although in mean, reasonable, exactly strong put passed. want side Mac. to of in reform obviously, in tax XXXX, a going And particular. to balance to year it’s I the to what commercial wasn’t Kevin, know see close

around X% we opportunities in we’re investments. FirstMerit just some we first and we accounting growth better than we’ve accretion about economy. we’re Offsetting have the expected. what So, to think those perform GDP that X% a still the around to And that on got definitely going talked we headwinds

particular X% is we risk on I appropriately X% as the think balance of put us, the in for to sheet. think range terms managing right So, about what we in

Kevin Reevey

more or -- then, about to loaded back up is Synergies. that’s spread going think how of FirstMerit going synergies spread the XXXX? on And out? just $XXX think that we out should How more -- that you are should to we million come Do evenly to follow the half more be in was

Mac McCullough

second and those be well. Kevin, marine. mortgage some quarter, performing should certain those RV by seasonality But, be of to the there products, will

first So, the said quarter $XXX revenue plus in a then, remember, side. short million we’ve seasonality and

the $XX base million into so, of of lot line year. kind And expense. back of We we had this $XXX coming million, but the expense earlier a $XX of a revenue, lock million question we to very in, good put

initiatives get how has about as obviously, so operating FirstMerit now, integration we on leverage the goes we’re achieved. bullish we And of the And move forward. of been pretty

Operator

Thank you.

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

Terry McEvoy

retail just fourth maybe relates and loans some as I’m it exposure. trends on comments your question to with C&I A the and CRE for the outlook for looking Dan. quarter

Dan Neumeyer

Sure.

exposures about in Many entities filing any for very think out, part, et I good bankruptcy we we C&I those pointed are -- the exposures cetera. very on well as cetera. we are So, didn’t time, investment exposures have to feel side, grade our auto et over one, supply of our diversified;

So, feel good there. really

because a a that’s new properties. of impact CRE, challenging, of with the announcement obviously little some to every our going bankruptcy more With

of labor projects. credits in We’ve migration there behind. some of slow up Now, a bankruptcies. of seeing some we’re that shortages until very point, of to areas fall projects challenges are also seen some because terms into Frankly, delayed causing this in these is criticized status

due of of we’ve there. developers some feel good portfolio, we’re our seen et we again, deterioration diversification the about strength our So, to where the very But really modest sitting core cetera, today.

Terry McEvoy

markets, in look Thanks. at when most a I a at comes the Indianapolis; up revenue synergies, And I just Huntington, your look as of whereas follow-up, Chicago then, five, major when And, couple your of Ohio, times. top that is Detroit, have I that’s Chicago generate you’re been that call the synergies revenue XX. scale about to specific we’ve market? question you my and on guess do to necessary the closer the talking And to accomplish

Steve Steinour

Well, we remember initiatives -- business on have very focus different this is Chicago, select board, in the but Steve. our The there. synergies across are revenue

distribution. the to trying given example, play a limited broad-based strategy, consumer not for We’re

So, definitely good we we’re we what feel feel accomplishing -- Chicago. in very about

how there, keep team that’s on obviously to playing. synergies ability our like bullish these million in and this have set the a Chicago, there, we’re We year great $XXX we a niches about expect have get FirstMerit plus going. to are of and to and teams We

Operator

Instructions] Thank you [Operator

Steve Steinour

operator? Any questions,

Operator

proceed We from Please Markets. question RBC Capital Jon have one question. with your Arfstrom with

Jon Arfstrom

Hey, thanks. Steve, question but you may anyway. ask not I this will like it

on the and again? Steinour do and it have guys Willing proved down just little get With on picture had to Terry’s question get acquisition through a Board it’s big thinking picture is integrate bit, expenses FirstMerit, that and and Just do can M&A? Company. thinking, strategic you now and revenues. the you’ve the you following it, up thinking the for coming big really but obviously, What an ups Steve

Steve Steinour

revenue Jon, we we plan XXXX completed; in us always then, getting look strategic and robustly for well sure is at secondarily, priority the things metrics. these really and the making process but deliver

of referenced it cautious things. we’re We it have Dan commercial terms the game; real extended construction, into looks late some we innings. think that host been things we estate, and of in a around doing in we’re on earlier years saying limits just like were had that extra But pasture. of innings of in several for in the prior calls

will We continue those.

We that have the to cycles we good we where the and need will will continue. during other think areas through lower with volatility for and adjust, view we look times

So, M&A strategic core, as is we advance that’s our the the and not emphasis plan, on focus.

Jon Arfstrom

Thank enough. Fair you.

Steve Steinour

Jon. Thanks,

wrap have we’re for stretch. So very to into I much you up coming the the Thank think joining home here, we call.

in our produced you momentum tell, confident As we you can can year come in see, of working. full very into are as are we Strategies fourth that and the have we And XXXX XXXX. quarter the results businesses. for we

we to wallet. drive continue gain market results are grow expect share positive XXXX. to for of and We to share believe going We

from the Our and businesses growing are which $XXX our capped core FirstMerit million. top are not continuing priorities at synergies to realize revenue

always we’ve plus. XXX So, said a million

of benefits of Our quarter demonstrate FirstMerit. acquisition fourth results core the economic the

all financial We there opportunity long-term and XXXX beyond. goals our have is more achieved and hand at of in

shares I and our would to largest a unique The like finally, So, and high on We unique. alignment colleagues uphold collectively reminder of just include shareholders. between in colleagues Huntington. are which very Board and the a that requirements is shareholders our certain level there’s the one and the Board management, retirement

we and on long-term focused sustained, to will We performance. proactively volatility. risk manage are And driving continue appropriately

today, for have appreciate Huntington. and day. us a great interest I Thanks your So, joining again in

Operator

you, Thank gentlemen. and ladies today’s concludes conference. This

may time. You disconnect at this your lines

Huntington Bancshares (HBAN) 23 Jan 182017 Q4 Earnings call transcript