2014 Third Quarter Earnings Review Basis of Presentation October 17, 2014

2014 Third Quarter
Earnings Review
October 17, 2014
1
Basis of Presentation
Do we
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Use of non-GAAP financial measures
This document may contain GAAP financial measures and non-GAAP financial measures where management believes
it to be helpful in understanding Huntington’s results of operations or financial position. Where non-GAAP financial
measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP
financial measure, can be found in this document, the 2014 third quarter earnings press release, or the Form 8-K
related to this document, all of which can be found on Huntington’s website at www.huntington-ir.com.
Annualized data
Certain returns, yields, performance ratios, or quarterly growth rates are presented on an “annualized” basis. This is
done for analytical and decision-making purposes to better discern underlying performance trends when compared to
full year or year-over-year amounts. For example, loan and deposit growth rates, as well as net charge-off percentages,
are most often expressed in terms of an annual rate like 8%. As such, a 2% growth rate for a quarter would represent
an annualized 8% growth rate.
Fully-taxable equivalent interest income and net interest margin
Income from tax-exempt earning assets is increased by an amount equivalent to the taxes that would have been paid if
this income had been taxable at statutory rates. This adjustment puts all earning assets, most notably tax-exempt
municipal securities and certain lease assets, on a common basis that facilitates comparison of results to results of
competitors.
Earnings per share equivalent data
Significant income or expense items may be expressed on a per common share basis. This is done for analytical and
decision-making purposes to better discern underlying trends in total corporate earnings per share performance
excluding the impact of such items. Investors may also find this information helpful in their evaluation of the company’s
financial performance against published earnings per share mean estimate amounts, which typically exclude the impact
of Significant Items. Earnings per share equivalents are usually calculated by applying a 35% effective tax rate to a pretax amount to derive an after-tax amount, which is divided by the average shares outstanding during the respective
reporting period. Occasionally, when the item involves special tax treatment, the after-tax amount is disclosed
separately, with this then being the amount used to calculate the earnings per share equivalent.
Rounding
Please note that columns of data in the presentation may not add due to rounding.
2
Basis of Presentation
Significant Items
From time to time, revenue, expenses, or taxes are impacted by items judged by Management to be outside of ordinary
banking activities and/or by items that, while they may be associated with ordinary banking activities, are so unusually
large that their outsized impact is believed by Management at that time to be infrequent or short term in nature. We refer
to such items as "Significant Items". Most often, these Significant Items result from factors originating outside the
company – e.g., regulatory actions/assessments, windfall gains, changes in accounting principles, one-time tax
assessments/refunds, litigation actions, etc. In other cases they may result from Management decisions associated
with significant corporate actions out of the ordinary course of business – e.g., merger/restructuring charges,
recapitalization actions, goodwill impairment, etc.
Even though certain revenue and expense items are naturally subject to more volatility than others due to changes in
market and economic environment conditions, as a general rule volatility alone does not define a Significant Item. For
example, changes in the provision for credit losses, gains/losses from investment activities, asset valuation write downs,
etc., reflect ordinary banking activities and are, therefore, typically excluded from consideration as a Significant Item.
Management believes the disclosure of “Significant Items”, when appropriate, aids analysts/investors in better
understanding corporate performance and trends so that they can ascertain which of such items, if any, they may wish
to include/exclude from their analysis of the company’s performance - i.e., within the context of determining how that
performance differed from their expectations, as well as how, if at all, to adjust their estimates of future performance
accordingly. To this end, Management has adopted a practice of listing “Significant Items” in its external disclosure
documents (e.g., earnings press releases, quarterly performance discussions, investor presentations, Forms 10-Q and
10 K).
"Significant Items" for any particular period are not intended to be a complete list of items that may materially impact
current or future period performance. A number of items could materially impact these periods, including those
described in Huntington’s 2013 Annual Report on Form 10-K and other factors described from time to time in
Huntington’s other filings with the Securities and Exchange Commission.
3
Forward Looking Statements
This document contains certain forward-looking statements, including certain plans, expectations, goals, projections,
and statements, which are subject to numerous assumptions, risks, and uncertainties. Forward-looking statements may
be identified by words such as expect, anticipate, believe, intend, estimate, plan, target, goal, or similar expressions, or
future or conditional verbs such as will, may, might, should, would, could, or similar variations.
While there is no assurance that any list of risks and uncertainties or risk factors is complete, below are certain factors
which could cause actual results to differ materially from those contained or implied in the forward-looking statements:
(1) worsening of credit quality performance due to a number of factors such as the underlying value of collateral that
could prove less valuable than otherwise assumed and assumed cash flows may be worse than expected; (2) changes
in general economic, political, or industry conditions; uncertainty in U.S. fiscal and monetary policy, including the interest
rate policies of the Federal Reserve Board; volatility and disruptions in global capital and credit markets; (3) movements
in interest rates; (4) competitive pressures on product pricing and services; (5) success, impact, and timing of our
business strategies, including market acceptance of any new products or services implementing our “Fair Play” banking
philosophy; (6) changes in accounting policies and principles and the accuracy of our assumptions and estimates used
to prepare our financial statements; (7) extended disruption of vital infrastructure; (8) the final outcome of significant
litigation; (9) the nature, extent, timing, and results of governmental actions, examinations, reviews, reforms,
regulations, and interpretations, including those related to the Dodd-Frank Wall Street Reform and Consumer Protection
Act and the Basel III regulatory capital reforms, as well as those involving the OCC, Federal Reserve, FDIC, and CFPB;
and (10) the outcome of judicial and regulatory decisions regarding practices in the residential mortgage industry,
including among other things the processes followed for foreclosing residential mortgages. Additional factors that could
cause results to differ materially from those described above can be found in Huntington’s 2013 Annual Report on Form
10-K, and documents subsequently filed by Huntington with the Securities and Exchange Commission. All forwardlooking statements included in this document are based on information available at the time of the release. Huntington
assumes no obligation to update any forward-looking statement.
4
Presenters
Steve Steinour
•
Chairman, President, and Chief Executive Officer
Mac McCullough
•
Senior Executive Vice President – Chief Financial Officer
Other Participants
Dan Neumeyer
•
Senior Executive Vice President – Chief Credit Officer
Todd Beekman
•
Executive Vice President – Managing Director of Strategy and
Investor Relations
5
2014 Third Quarter Highlights
• Net income of $155 MM, or $0.18 per common share
– Impacted by $23 MM of noninterest expense related Significant Items(1)
• 0.97% return on average assets
• 9.9% return on equity
Compared with 2013 Third Quarter
• $4.1 B, or 10%, increase in average loans and leases
• $0.44, or 7%, increase in tangible book value per share to $6.53
• $36 MM, or 5%, increase in fully-taxable equivalent revenue to $721 MM
– $42 MM, or 10%, increase in fully-taxable equivalent net interest income to $474 MM
• 15% average earning assets growth
• 3.20% fully-taxable equivalent net interest margin (NIM), down 14 basis points
– $6 MM, or 3%, decrease in noninterest income
• $57 MM, or 13%, increase in noninterest expense
– Net $40 MM impact related to Significant Items(1)
• Positive operative leverage YTD
• Continued customer growth and OCR(2) success
– Consumer checking account households
• 10.6% growth since 3Q13, 48.8% with 6+ products or services penetration(3)
– Commercial relationships
• 2.6% growth since 3Q13, 41.2% with 4+ products or services penetration(3)
6
(1) Details on slides 22 & 23 (2) Optimal Customer Relationship (3) The definitions and measurements used in our OCR process are periodically reviewed
3Q14 Highlights (cont.)
Compared with 2013 Third Quarter
• Credit quality
– $26 MM, or 46%, decrease in net charge-offs (NCOs), 26 bp of loans & leases
– $7 MM, or 2%, decrease in nonaccrual loans (NALs), 70 bp of loans & leases
• Capital
– 8.35% Tangible common equity ratio, down 66 bp
– 10.31% Tier 1 common risk-based capital ratio, down 54 bp
Compared with 2014 Second Quarter
• $10 MM, or 6%, decrease in net income and $0.01 decrease in earnings
per common share
• $7 MM, or 2%, increase in fully-taxable equivalent net interest income
– 3% average earning asset growth
– 3.20% fully-taxable equivalent net interest margin, down 8 basis points
• $3 MM, or 1%, decrease in noninterest income
• $22 MM, or 5%, increase in noninterest expense
• 5.4 million common shares repurchased at an average price of $9.70
per share
7
Other Highlights
•
Acquired and converted 24 branches in Michigan from Bank of America:
$0.7 B of deposits, no loans
•
Announcing the planned consolidation of 26 branches by year end
•
Accelerating in-store branch expansion: approximately 50 in-store
branches expected to open in 2015, substantially completing build-out
of in-store strategy
•
Completed installation of a new teller platform and deposit automated
ATMs across the complete retail franchise
•
Largest SBA lender, by number of 7(a) loans, in the country for SBA’s
2014 Fiscal Year
•
Mary Navarro recognized as one of American Banker’s 2014 25 Most
Powerful Women in Banking
•
Helga Houston recognized as one of American Banker’s 2014 25 Women
to Watch in Banking
•
Announced 4Q14 common dividend of $0.06 per share, a 20% increase
8
Quarterly Performance Highlights
3Q14
2Q14
1Q14
4Q13
3Q13
EPS
$0.18
$0.19
$0.17
$0.18
$0.20
Cash dividends declared per common share
$0.05
$0.05
$0.05
$0.05
$0.05
Book value per common share at end of period
$7.24
$7.17
$6.99
$6.86
$6.70
Tangible book value per common share at end of period
$6.53
$6.48
$6.31
$6.26
$6.09
Net interest margin
Efficiency ratio(1)
3.20%
65.3%
3.28%
62.7%
3.27%
66.4%
3.28%
63.4%
3.34%
60.6%
Return on average assets
0.97%
1.07%
1.01%
1.09%
1.27%
Return on equity
9.9%
10.8%
9.9%
10.5%
12.3%
Loan and lease growth(2)
10%
15%
3%
11%
7%
5%
4%
4%
9%
0%
Net charge-off ratio(3)
0.26%
0.25%
0.40%
0.43%
0.53%
90-day delinquency ratio xld. US govt. guaranteed loans(4)
0.19%
0.19%
0.22%
0.18%
0.22%
Nonaccrual loans / total loans and leases(4)
0.70%
0.71%
0.74%
0.75%
0.78%
Nonperforming assets ratio(4,5)
0.78%
0.79%
0.82%
0.82%
0.88%
Nonaccrual loans coverage ratio(4,6)
194%
195%
193%
201%
200%
Core deposit growth(2)
Tangible common equity ratio(4)
8.35%
8.38%
8.63%
8.82%
9.01%
Tier 1 common risk-based capital ratio(4)
10.31%
10.26%
10.60%
10.90%
10.85%
Tier 1 risk-based capital ratio(4)
11.61%
11.56%
11.95%
12.28%
12.36%
Total risk-based capital ratio(4)
13.72%
13.67%
14.13%
14.57%
14.67%
(1)
(2)
(3)
(4)
(5)
(6)
Noninterest expense less amortization of intangibles / FTE net interest income + noninterest income excluding securities (losses) gains
Linked-quarter annualized average balance growth rate
Annualized
End of period
Nonperforming assets / (total loans and leases + impaired loans held for sale + net other real estate owned)
Allowance for loan and lease losses / nonaccrual loans
9
3Q14 YoY Summary Income Statement & Notables
2013
2014
(in millions)
Net interest income - FTE
Third
Second
First
Fourth
Third
Quarter
Quarter
Quarter
Quarter
Quarter
LQ
$ 473.8
$ 466.7
$ 443.4
$ 438.8
$ 431.5
2 %
Change
YOY
10 %
Total noninterest income
247.3
250.1
248.5
249.9
253.8
(1)
(3)
Total Revenue - FTE
721.2
716.8
691.9
688.7
685.3
1
5
Total noninterest expense
480.3
458.6
460.1
446.0
423.3
5
13
Provision for credit losses
24.5
29.4
24.6
24.3
11.4
(17)
115
216.4
228.7
207.1
218.4
250.5
(5)
(14)
$ 155.0
$ 164.6
$ 149.1
$ 158.2
$ 178.8
(6) %
(13) %
Pre-tax income - FTE
Net Incom e
Noninterest Income
Noninterest Expense
•
$6 MM decrease in other income
•
$4 MM decrease in service charges
•
•
$3 MM decrease in capital markets fees •
$3 MM increase in gain on sale of loans •
•
$3 MM increase in electronic banking
(1) Details on slides 22 & 23
•
$46 MM increase in personnel costs
– $43 MM of Significant Items (1)
$5 MM increase in other expense
$4 MM increase in outside data processing
Adjusted Noninterest Expense(1)
•
$17 MM, or 4%, increase compared to 3Q13
•
$1 MM, or less than 1%, decrease compared
to 2Q14
10
Net Interest Income and Margin(1)
Average Earning Asset Mix
Net Interest Margin (FTE)
FTE Net Interest Income ($MM)
431.5 438.8 443.4 466.7 473.8
100%
90%
1%
1%
1%
1%
1%
10%
10%
10%
10%
10%
3.60%
Other Earning
Assets
80%
16%
15%
15%
14%
Other Consumer
12%
12%
12%
13%
14%
Residential
Mortgage
10%
9%
9%
9%
8%
16%
3.45%
3.42%
3.40%
70%
60%
3.38%
3.38%
3.34%
Home Equity
3.28%
50%
Automobile
40%
CRE
3.28%
3.27%
3.20%
33%
32%
33%
32%
32%
30%
3.20%
Commercial &
Industrial
20%
Total Securities
10%
17%
18%
20%
20%
21%
3Q13
4Q13
1Q14
2Q14
3Q14
3Q14
2Q14
1Q14
4Q13
3Q13
2Q13
1Q13
3Q12
4Q12
3.00%
0%
11
(1) Fully-taxable equivalent basis
Deposits
Core CD Maturities &
Avg. Maturity Rate
Avg. Total Deposits – Rate / Mix
Rate
$4.0
100%
$3.5
1.75%
$3.0
1.50%
1.30%
0.33% 0.32% 0.28% 0.25% 0.23%
90%
5%
13%
5%
4%
5%
5%
9%
8%
8%
7%
6%
6%
Noncore
11% 11% 10% 11% 10% Core
80%
11%
CDs
70%
$2.5
1.25%
60%
$2.0
0.48%
2.00%
($B)
1.12%
1.00%
Savings
31%
34% 36% 37% 37% 37% / Other
50%
MMA
0.75%
40%
0.51%
0.50%
0.40%
30%
$1.5
$1.0
$0.5
$0.9
0.52%
$0.7 $0.8
0.51%
$0.6
0.60%
$0.7
13%
13% 12% 12% 12% 12%
DDA-Int.
Bearing
20%
$0.5 $0.5
$0.0
0.25%
0.00%
1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15
10%
27%
28% 29% 28% 28% 29% DDANonint.
Bearing
0%
3Q12
3Q13 4Q13 1Q14 2Q14 3Q14
Estimates
12
Capital(1)
3Q14
8.35%
2Q14
8.38%
1Q14
8.63%
4Q13
8.82%
3Q13
9.01%
Tier 1 common
10.31
10.26
10.60
10.90
10.85
Tier 1 leverage
9.83
10.01
10.32
10.67
10.85
Tier 1 risk-based capital
11.61
11.56
11.95
12.28
12.36
Total risk-based capital
13.72
13.67
14.13
14.57
14.67
Total risk-weighted assets ($B)
$53.2
$53.0
$51.1
$49.7
$48.7
Double leverage(2)
103%
105%
104%
101%
100%
Tang. common equity / tang. assets
13
(1) End of period (2) (Parent company investments in subsidiaries + goodwill) / equity
Credit Quality Trends Overview
3Q14
2Q14
1Q14
4Q13
3Q13
3Q12
0.26%
0.25%
0.40%
0.43%
0.53%
1.05%
90+ days PD and accruing
0.30
0.30
0.35
0.38
0.42
0.27
NAL ratio(1)
0.70
0.71
0.74
0.75
0.78
1.11
0.78
0.79
0.82
0.82
0.88
1.26
3.43
3.58
3.78
3.91
4.31
5.45
ALLL ratio
1.35
1.38
1.42
1.50
1.57
1.96
ALLL / NAL coverage
194
195
193
201
200
177
ALLL / NPA coverage
173
175
174
184
178
155
ACL ratio
1.47
1.50
1.56
1.65
1.72
2.09
ACL / Criticized assets(3)
42.77
41.88
41.17
42.13
39.96
38.38
ACL / NAL coverage
211
213
211
221
220
189
ACL / NPA coverage
188
191
191
202
196
165
Net charge-off ratio
(2)
NPA ratio
Criticized asset
(1)
(2)
(3)
ratio(3)
NALs divided by total loans and leases
NPAs divided by the sum of loans and leases, impaired loans held for sale, net other real estate and other NPAs
Criticized assets = commercial criticized loans + consumer loans >60 DPD + OREO; Total criticized assets divided by the sum of
loans and leases, impaired loans held for sale, net other real estate and other NPAs
14
Nonperforming Asset Trends
NPAs – EOP
($MM)
$1,000
$900
$800
$700
$600
$500
$400
$300
$200
$100
$0
3Q14 vs.
% Chg
$350
3Q12
-28%
$300
3Q13
-3%
$250
2Q14
1%
NPA Inflows
($MM)
$200
$150
$100
(1)% (3)% (13)% (7)% (5)% (6)% (6)%
(1)%
4%
$50
1%
1.00%
NPA Ratio – EOP
2.00%
3Q14
2Q14
1Q14
4Q13
3Q13
2Q13
1Q13
4Q12
NPA Inflows % of BOP Loans
0.80%
0.95% 0.88%
0.82% 0.79%
1.01%
0.82%
0.78%
1.00%
(18)%
0.60%
1.09%
(3)%
(8)%
(4)% (15)%
0.53%
0.43%
0.54%
0.40%
0.20% (19)%
0.00%
0.33%
0.28%
10%
0.27%
(27)%
0.25%
0.26%
23%
4Q13
1.26%
1.31%
2Q13
1.57%
1.50%
0.50%
3Q12
2Q12
3Q14
2Q14
1Q14
4Q13
3Q13
2Q13
1Q13
4Q12
2.50%
3Q12
2Q12
$0
0.28%
(38)%0.22%
3Q14
2Q14
1Q14
3Q13
1Q13
4Q12
3Q12
2Q12
3Q14
2Q14
1Q14
4Q13
3Q13
2Q13
1Q13
4Q12
3Q12
2Q12
3Q11
0.00%
15
Provision, NCO, and ACL
($MM)
Loan Loss Provision vs.
Net Charge-offs
% Chg.
3Q14 vs.
$105.1
$130
$110
Allowance for Credit Losses
vs. NALs
LLP
NCO
3Q12
-34% -71%
3Q13
115% -46%
2Q14
-17%
5%
2.09%
2.0%
214%
1.99%
1.91%
1.86%
213%
207%
$24.5
$30.0
$29.4
$28.6
$43.0
$24.6
$24.3
$11.4
$10
1.0%
215%
211%
1.72%
199%
$46.4
$55.7
$37.0
$30
211%
1.56%
205%
1.50%
1.47%
1.5%
$70
225%
221%
220%
1.65%
$90
$50
2.5%
195%
189%
185%
0.5%
ACL % Lns / Lse
ACL % NALs
175%
-$10
165%
3Q14
2Q14
1Q14
4Q13
3Q13
2Q13
1Q13
4Q12
3Q14
2Q14
1Q14
4Q13
3Q12
3Q13
LLP
3Q12
0.0%
-$30
NCO
16
Consumer Checking Account Household Growth
•
•
•
3Q14: 17.9% annualized linked quarter growth, 10.6% YoY growth
48.8% with 6+ products or services penetration(1), up from 47.3% a year ago
3Q14 revenue of $260 MM, up $3 MM LQ, up $23 MM YoY
1,500
Consumer Checking Households (000s)
1,400
1,300
1,200
1,100
1,000
900
2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14
17
(1) The definitions and measurements used in our OCR process are periodically reviewed
Commercial Relationship(1) Growth
165
160
•
•
•
3Q14: 12.0% annualized linked quarter growth, 2.6% YoY growth(2)
41.2% with 4+ products or services penetration(3), up from 36.8% a year ago.
3Q14 revenue of $213 MM, up $1 MM LQ, up $19 MM YoY
Commercial Relationships (000s)
155
150
145
140
135
130
125
120
2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14
(1) Checking account required (2) 1Q14 implementation of fee changes on Business Banking checking products accelerated the closing of certain lower
balance business checking accounts (3) The definitions and measurements used in our OCR process are periodically reviewed
18
4Q14 Expectations
Challenge /
Opportunity
HBAN
Disciplined
Loan
Growth
Modest economic
recovery and intense
market competition
• C&I growth due to customer activity and positive impact from our investments in
specialized commercial verticals, automotive dealer relationships, and continued
support of small and middle market businesses.
• Indirect automobile loans are expected to grow as originations remain strong.
• Residential mortgages, home equity, and CRE are expected to grow modestly.
Interest
Rates
Prolonged low interest
rate environment &
recent long-end
volatility
• Net interest income to increase slightly as earning asset growth more than
offsets NIM compression.
• Moderate growth in total loans, and modest growth in investment securities.
• Continued downward pressure on NIM.
Noninterest
Income
Strategic positioning
and competitive
pressures
• Excluding the impact of net MSR activity, noninterest income is expected to
remain near the current quarter’s level.
Noninterest
Expense
Modest continued
investment and
continued cost saving
opportunities
• We are committed to delivering positive operating leverage for the 2014 full year.
• Noninterest expense, excluding Significant Items, is expected to remain near the
current quarter’s adjusted level.
• 4Q14 is expected to include approximately $10 million of significant items
related to the previously announced franchise repositioning actions.
Credit
Quality
Stabilization
• Expect moderate quarterly volatility.
• NCOs expected in or below our long-term expected range of 35 to 55 bps.
19
Positive Operating Leverage YTD
2014
Actual
2013
Actual
Net interest income
FTE adjustment
FTE Net interest income
$ 1,363.9
20.0
$ 1,383.9
$ 1,274.0
19.1
$ 1,293.1
Noninterest income
Net gain MSR hedging
Merger-related gain
Adjusted noninterest income
$ 745.9
0.2
0.8
$ 744.9
$
Adjusted total revenue
$ 2,128.8
Noninterest expense
Merger and acquisition expenses
Addition to litigation reserves
Goodwill impairment
Franchise repositioning expenses
Pension gain
Adjusted noninterest expense
$ 1,399.1
16.9
9.0
3.0
19.3
$ 1,350.9
Y/Y Change
$
%
90.8
7.0 %
(8.8)
(1.2) %
$ 2,046.8
82.0
4.0 %
$ 1,312.0
$
16.6
$ (33.9)
$ 1,329.3
21.6
1.6 %
$
762.3
8.6
753.7
20
21
Reconciliation
Noninterest Expense from Continuing Operations (GAAP)
Impacts of Significant Items
2013
Third
Quarter
$ (27.3)
0.5
7.9
1.5
$ (17.4)
2014
Second
Third
Quarter
Quarter
$
$
15.3
0.3
5.2
0.1
0.8
1.1
$
$
22.8
(in millions)
Personnel costs
Outside data processing and other services
Net occupancy
Equipment
Marketing
Other expense
Total noninterest expense adjustments
Adjusted Noninterest Expense (Non-GAAP)
2013
2014
(in millions)
Personnel costs
Third
Second
Third
Quarter
Quarter
Quarter
$
260.1
$ 260.6
$
256.6
Change %
LQ
(0) %
Change $
LQ
YOY
1 %
$
(0.5)
Outside data processing and other services
52.8
54.3
48.8
(3)
8
(1.6)
Net occupancy
29.2
28.7
27.7
2
6
0.5
YOY
$
3.4
3.9
1.6
Equipment
30.1
28.7
26.7
5
13
1.3
3.4
Marketing
11.8
14.8
12.3
(20)
(4)
(3.0)
(0.5)
Deposit and other insurance expense
Other expense
Total adjusted noninterest expense
1.0
0.5
9.8
9.5
10.4
3
(5)
0.3
(0.5)
13.8
17.9
12.5
(23)
10
(4.1)
1.3
38.4
457.6
33.4
$ 458.6
11.6
Amortization of intangibles
Professional services
$
10.6
11.2
$
34.6
440.8
10
15
(0) %
4
11
4 %
$
5.0
(1.0)
$
3.7
16.8
22
Reconciliation
Significant Items Impacting Financial Performance Comparisons
(in millions, except per share amounts)
3Q14
After-tax
EPS
155.0
147.1 $ 0.18
Net incom e - reported earnings
Net incom e applicable to com m on shares
$
$
Significant item s - favorable (unfavorable) im pact:
Merger and acquisition related expenses
Addition to litigation reserves
Franchise repositioning related expense
EPS
Earnings (2)
$
(3.0)
(0.00)
(19.0) $ (0.02)
(in millions, except per share amounts)
4Q13
$
158.2
Net incom e applicable to com m on shares
$
150.2
Significant item s - favorable (unfavorable) im pact:
Pension curtailment gain
Franchise repositioning related expense
(1) After-tax
(2) Pre-tax
Earnings
$
EPS
$ 0.18
(2)
(6.9)
EPS
$
-
After-tax
$
178.8
$
170.9
Earnings
$
(0.01)
(2)
2Q14
After-tax
EPS
164.6
156.7 $ 0.19
Earnings (2)
$
-
3Q13
After-tax
Net incom e - reported earnings
$
$
$
EPS
-
$
$
Earnings (2)
EPS
$
(11.8) $ (0.01)
(9.0)
(0.01)
-
2Q13
EPS
$ 0.20
EPS
34.0
0.03
(16.6)
(0.01)
1Q13
After-tax
$
151.0
$
143.0
Earnings
$
EPS
$ 0.17
(2)
-
1Q14
After-tax
EPS
149.1
141.2 $ 0.17
EPS
$
-
After-tax
$
153.3
$
145.3
Earnings
$
EPS
$
(2)
-
0.17
EPS
$
-
-
23
Appendix
24
Table of Contents
OCR Performance Review
Income Statement
Mortgage banking income
Balance Sheet
26
Total Consumer Loans and Leases
52
32
Indirect Auto
53
33
Home equity
55
34
Deposits
37
Capital
39
Investment Securities
41
Securities mix & yield
42
Loan Portfolio Overview
45
Total Commercial Loans
46
Granularity
47
Commercial & industrial
48
Commercial real estate
50
Residential mortgages
Credit Quality Review
56
57
Delinquencies
58
Net charge-offs
61
Franchise and Leadership
64
25
OCR Performance
Review
26
OCR Drives Higher Customer Profitability
The Optimal Customer Relationship (OCR) Model
Sales
Management
& Execution
“Welcome”
Culture
•
•
•
•
•
Higher
Customer
Profitability
OCR
Clearly outlined activities by segment
Defined accountability for relationships, by segment
Aligned goals and incentives at all levels and in all business
segments
One relationship management system – MAX
Weekly executive results tracking, accountability, and action
meetings
Competitive Advantage
One Bank / One Team for the Customer
27
Consumer Relationship Product Penetration
•
Over 20 potential products or services counted: checking, savings, online
bill pay, credit card, mortgage, brokerage account, insurance, etc.(1)
Product Penetration – 1-3 Services / HH
Product Penetration – 1 Services / HH
8%
6%
4.3%
4%
2%
3Q12
1Q13
3Q13
1Q14
22%
21%
20%
19%
3.3% 18%
17%
16%
3Q14
Product Penetration – 2-3 Services / HH
19.8%
18.4%
3Q12
1Q13
3Q13
1Q14
3Q14
Product Penetration – 4+ Services / HH
Product Penetration – 4-5 Services / HH
32%
55%
Product Penetration – 6+ Services / HH
31.3%
50.7%
31%
50%
30%
29.6% 45%
29%
40%
28%
47.2%
44.6%
46.7% 47.3% 47.7% 48.0%
48.8% 48.8%
35%
3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14
3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14
28
(1) The definitions and measurements used in our OCR process are periodically reviewed
Consumer Checking Household Revenue
•
•
$265
3Q14, adjusted for debit card interchange fee impact, exceeds pre-”Fair
Play” and Reg E level
Includes net interest income and noninterest income
($MM)
$260
Pre-Reg E
Post-Durbin
$252
$245
$257
$251
$250
$249
$260
Posting
Order
$255
$246
$245
$240 $240
$240
$239 $239
$235
$237
$237
$233
$231
$225
$215
$205
2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14
29
1Q13 revenue was impacted by a change to posting order of consumer transactions
Commercial Relationship(1)(2)
Product Penetration
•
30%
Deepening relationships and accelerating product or service cross-sell
Product Penetration – 1 Services / Relationship
46%
25.9%
Product Penetration – 2-3 Services / Relationship
44%
25%
42.2%
42%
20%
40.6%
16.6% 40%
15%
38%
3Q12
1Q13
3Q13
1Q14
3Q14
3Q12
1Q13
3Q13
Product Penetration – 4+ Services / Relationship
40%
35%
33.5%
35.0%
36.1%
36.3%
36.8%
37.5%
1Q13
2Q13
3Q13
4Q13
39.5%
1Q14
3Q14
41.3%
41.2%
2Q14
3Q14
30%
25%
20%
3Q12
4Q12
1Q14
30
(1) Checking account (2) The definitions and measurements used in our OCR process are periodically reviewed
Commercial Relationship(1) Revenue
•
$215
Migration from credit-dependent to relationship-based / cross-sell culture
($MM)
$212 $213
$205
$195
$197
$194
$190
$189
$185
$175
$176
$176 $175
$191
$179
$175
$170
$165
$167
$161
$155
$158
$152
$145
$143
$135
$125
$115
2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14
31
(1) Checking account
Income Statement
32
Mortgage Banking Income Summary
($MM)
3Q14
2Q14
1Q14
4Q13
3Q13
Origination and secondary marketing
$15.5
$14.3
$14.5
$14.2
$15.6
Servicing fees
10.8
10.9
10.9
10.8
10.9
Amortization of capitalized servicing
Other mortgage banking income
(6.1)
4.1
(6.0)
4.2
(6.0)
3.5
(6.1)
3.4
(6.8)
3.7
24.3
23.4
23.0
22.3
23.3
1.0
(3.0)
(1.6)
3.5
0.2
(0.2)
2.3
1.7
(1.5)
0.1
$25.1
$22.7
$23.1
$24.3
$23.6
$15.6
$15.6
$15.6
$15.2
$15.2
4.39%
4.41%
4.43%
4.46%
4.49%
$1.0
$1.0
$0.7
$0.8
$1.2
Mortgage servicing rights(1)
$161.9
$159.9
$163.3
$162.3
$158.8
MSR % of investor servicing portfolio(1)
1.04%
1.03%
1.05%
1.07%
1.04%
Sub-total
MSR recovery (impairment)
Net trading gains (losses)
Total
Investor servicing portfolio(1) ($B)
Weighted average coupon
Originations ($B)
33
(1) End-of-period
Balance Sheet
34
Assets
($ in millions)
2013
2014
Jun. 30,
Sep. 30,
Change (%)
Sep. 30,
LQ
YOY
$
(28) %
(21) %
Assets
Cash and due from banks
$
$
880
1,218
1,108
Interest bearing deposits in banks
73
70
63
5
16
Trading account securities
66
51
74
31
(10)
19
Loans held for sale
411
318
346
29
Available-for-sale securities
8,722
8,491
6,447
3
35
Held-to-maturity securities
3,496
3,622
2,236
(3)
56
18,791
18,899
17,335
(1)
8
4,990
4,990
4,873
---
2
Total commercial
23,781
23,890
22,207
---
7
Automobile
8,322
7,686
6,317
8
32
Home equity loans
8,436
8,405
8,347
---
1
Residential mortgage loans
5,788
5,707
5,307
1
9
397
392
378
1
5
Loans and leases:
Commercial and industrial loans and leases
Commercial real estate loans
Other consumer loans
Total consumer
22,942
22,190
20,349
3
13
Loans and leases
46,723
46,080
42,556
1
10
Allow ance for loan and lease losses
Net loans and leases
Bank ow ned life insurance
(635)
(631)
(666)
46,092
45,445
41,890
(1)
(5)
1
10
1,704
1,694
1,633
1
4
Premises and equipment
613
622
640
(1)
(4)
Goodw ill
523
505
444
3
18
85
81
104
5
(18)
Other intangible assets
Accrued income and other assets
Total assets
1,665
1,680
1,655
$ 64,331
$ 63,797
$ 56,639
(1)
1
1 %
14 %
35
Liabilities & Shareholders’ Equity
2013
2014
($ in millions)
Change (%)
Sep. 30,
Jun. 30,
Sep. 30,
LQ
YOY
$ 14,754
$ 14,151
$ 13,421
6,052
5,921
5,856
2
3
18,174
17,563
16,212
3
12
Savings and other domestic deposits
5,038
5,036
4,946
---
2
Core certificates of deposit
3,150
3,272
4,108
(4)
(23)
47,168
45,943
44,542
202
241
268
2,357
2,198
402
367
50,130
Short-term borrow ings
Liabilities
Demand deposits - non-interest bearing
Demand deposits - interest bearing
Money market deposits
Total core deposits
4 %
10 %
3
6
(16)
(24)
1,366
7
73
388
10
4
48,749
46,564
3
8
1,531
1,252
661
22
132
Federal Home Loan Bank advances
1,658
2,883
333
(42)
397
Other long-term debt
2,590
2,603
905
---
186
976
983
1,112
(1)
(12)
1,161
1,086
1,112
7
4
58,046
57,556
50,687
1
15
Other domestic deposits of $250,000 or more
Brokered deposits and negotiable CDs
Deposits in foreign offices
Total deposits
Subordinated notes
Accrued expenses and other liabilities
Total liabilities
Shareholders' equity
Preferred stock
386
386
386
-
Common stock
8
8
8
---
Capital surplus
7,244
7,279
7,387
Less treasury shares, at cost
Accumulated other comprehensive loss
Retained earnings
Total shareholders' equity
Total liabilities and shareholders' equity
(13)
(9)
(2)
---
(2)
(11)
43
19
(182)
(160)
(231)
14
(21)
(1,159)
(1,264)
(1,588)
(8)
(27)
6,284
6,241
5,952
1
$ 64,331
$ 63,797
$ 56,639
1 %
6
14 %
36
Deposits
37
Total Core Deposit Trends
Annualized Grow th (1)
Average ($B)
3Q14
Com m ercial
Demand deposits - non-interest bearing $ 11.6
Demand deposits - interest bearing
1.1
(2)
Other core deposits
8.2
Total
20.9
Consum er
Demand deposits - non-interest bearing
Demand deposits - interest bearing
Other core deposits (2)
Total
2.5
4.8
17.9
25.2
Total
Demand deposits - non-interest bearing
14.1
Demand deposits - interest bearing
5.9
Other core deposits (2)
26.1
Total
$ 46.1
3Q14 v
2Q14
22 %
30
20
22
1
(9)
(10)
(9)
19
(2)
(1)
4 %
2Q14 v
1Q14
3Q14 v
3Q13
5 %
48
1
6
6 %
6
20
11
24
5
(1)
2
18
2
(1)
1
8
12
4 %
8
3
5
5 %
(1) Linked-quarter percent change annualized
(2) M oney market deposits, savings / other deposits, and core certificates of deposit
38
Capital
39
Capital Ratios(1)
14.00%
13.00%
11.88%
12.02%
12.16%
12.24%
12.36%
12.28%
11.95%
12.00%
11.56%
11.61%
10.26%
10.31%
8.38%
8.35%
11.00%
10.00%
10.28%
10.48%
8.74%
8.76%
10.62%
10.71%
10.85%
10.90%
10.60%
9.00%
8.00%
8.91%
8.76%
9.01%
8.82%
8.63%
7.00%
Tier 1 Risk-Based Capital Ratio
6.00%
Tier 1 Common Risk-Based Capital
Ratio
5.00%
Tangible Common Equity / Tangible
Assets (TCE Ratio)
4.00%
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
40
(1) End-of-period
Investment Securities
41
Securities Mix & Yield(1)
Securities Portfolio Mix
Securities Portfolio Yield
5.00%
($ MM)
$14,000
Available-for-sale
Held-to-maturity
Held-to-maturity
$12,000
4.00%
3,556
$10,000
3,677
3,783
3.00%
796
1,652
$8,000
1,717
1,711
2,139
2.48%
2.43% 2.43%2.42%
2.00%
8,437
7,623
7,513
7,355
7,319
6,605
2.81%
3,038
$6,000
$4,000
Available-for-sale
7,952
2.72%
2.63% 2.59%
2.55%
2.42% 2.47% 2.46% 2.45%
2.39%
2.24%2.29% 2.29%2.29%
8,555
6,366
1.00%
$2,000
3Q14
2Q14
1Q14
4Q13
3Q13
2Q13
1Q13
4Q12
3Q14
2Q14
1Q14
4Q13
3Q13
2Q13
1Q13
4Q12
3Q12
3Q12
0.00%
$-
42
(1) Average balances
Securities Overview – 9/30/14
• Portfolio weighted average life of 4.7 years, average duration of 3.9 years
Available-for-sale, and other securities
Credit Rating of Fair Value Am ount (1)
($M M )
Fair Value
US Treasury
$
Agency (Debt, P/T, & CMO's)
AAA
5
AA +/-
$
---
$
A +/5
$
BBB +/---
$
---
<BBB$
Not Rated
---
$
---
5,176
---
5,176
---
---
---
---
---
Asset Backed
Alt-A mortgage-backed securities
---
---
---
---
---
---
Auto/Fleet Lease backed securities
7
7
---
---
---
---
---
Pooled-trust-preferred securities (2)
89
---
7
---
---
82
---
277
277
---
---
---
---
---
64
64
---
---
---
---
---
497
357
---
140
---
---
---
44
13
---
---
11
20
---
Floorplan/Rental Fleet backed securities
Credit Card backed securities
All other asset backed securities
Private label CMO securities
Municipal securities (3)(4)
1,670
221
239
---
---
---
1,210
FHLB/FRB Stock
331
---
---
---
---
---
331
Other
518
0
5
58
429
11
Total
$
8,677
Variable rate demand notes (3)
$
45
Total available-for-sale, and other
$
8,722
$
938
$
5,432
$
198
$
439
$
113
15
$
1,557
Held-to-maturity securities
Amortized
Cost
3,488
8
$
3,496
Agency (Debt, P/T, & CMO's)
Municipal securities
Total held-to-m aturity
(1)
(2)
(3)
(4)
Credit Rating of Am ortized Cost Am ount (1)
AA +/A +/BBB +/<BBB3,488
------8
------$
3,496 $
--- $
--- $
---
AAA
-------
$
Not Rated
----$
---
Credit ratings reflect the low est current rating assigned by a nationally recognized credit rating agency.
Primarily trust preferred for banks/insurance companies
Variable rate demand notes included in municipal securities in external reporting.
Loans that w ere reclassified to securities included.
43
Managing Interest Rate Risk
8/30/2014
6.0%
4.0%
Net Interest Income at Risk(1)
Forward Curve +2%, +1%, & -1% Gradual Change in Rates
3.3%
3.2%
2.8%
2.9%
1.4%
2.0%
1.6%
1.5%
1.9%
0.8%
1.7%
0.1%
0.9%
0.0%
0.7%
0.3%
0.0%
$3.3 MM
0.2%
0.3%
0.0% $(0.8) MM
-0.6%
-2.0%
-1.8%
-1.6%
-1.6%
-1.6%
$(25.8) MM
-1.6%
-1.6%
-1.3%
-1.3%
-4.0%
2% Rate Rise
1% Rate Rise
1% Rate Fall
(1) Estimated impact on annualized net interest income over the next 12-month period assuming a gradual change in rates over the
next 12-month period above and beyond any rate change already implied in the current yield curve.
3Q14
2Q14
1Q14
4Q13
3Q13
2Q13
1Q13
4Q12
3Q12
-6.0%
44
Loan Portfolio Overview
45
Total Commercial Loans
46
Total Commercial Loans – Granularity
EOP Outstandings – $23.8 Billion
# of Loans by Size
Loans by Dollar Size
1,119
3%
13%
3%
38%
34,261
97%
30%
< $5 MM
$5+ MM
$5 MM - < $10 MM
$10 MM - < $25 MM
$25 MM - < $50 MM
> $50 MM
Total
17%
< $5 MM
$5 MM - < $10 MM
$10 MM - <$25 MM
$25 MM - < $50 MM
$50 MM +
556
459
94
10
1,119
47
Commercial and Industrial: $18.8 Billion(1)
•
Diversified by sector and geographically within our Midwest footprint
•
Focuses on middle market companies with $20-$500 MM in sales and
Business Banking <$25 MM in sales
•
Lend to defined relationship oriented clients where we understand our
client's market / industry and their durable competitive advantage
•
Underwrite to historical cash flows with collateral as a secondary repayment
source while stress testing for lower earnings / higher interest rates
•
Follow disciplined credit policies and processes with monthly review of
criticized and classified loans
Period end balance ($MM)
30+ days PD & accruing
accruing(2)
3Q14
2Q14
1Q14
4Q13
3Q13
$18,791
$18,899
$18,046
$17,594
$17,335
0.16%
0.14%
0.26%
0.19%
0.23%
0.04%
0.05%
0.06%
0.08%
0.11%
NCOs(3)
0.27%
0.23%
0.20%
0.22%
0.04%
NALs
0.48%
0.40%
0.32%
0.32%
0.39%
ACL
1.78%
1.71%
1.74%
1.79%
1.81%
90+ days PD &
(1) End of period (2) All amounts represent accruing purchased impaired loans acquired in the Fidelity transaction. Under the applicable
accounting guidance (ASC 310-30), the loans were recorded at fair value upon acquisition and remain in accruing status.
(3) Annualized
48
C&I – Auto Industry
End of period balances
Outstandings
($MM)
Suppliers(1)
Domestic
Foreign
3Q14
$
Total suppliers
Dealers
Floorplan-domestic
Floorplan-foreign
Total floorplan
Other
Total dealers
Total auto industry
2Q14
273
0
273
$
1,011
516
1,527
541
2,068
$2,341
1Q14
258
12
270
$
1,141
562
1,704
537
2,240
$2,511
4Q13
226
20
246
$
1,131
621
1,752
521
2,273
$2,519
3Q13
255
0
255
$
1,141
620
1,761
517
2,278
$2,533
258
24
282
908
510
1,418
486
1,904
$2,186
NALs
Suppliers
Dealers
0.03 %
0.00
0.00 %
0.00
0.00 %
0.00
0.03 %
0.00
0.06 %
0.00
0.08 %
0.0
0.12 %
0.0
0.11 %
0.0
0.00 %
0.0
0.14 %
0.0
Net charge-offs(2)
Suppliers
Dealers
49
(1) Companies with > 25% of their revenue from the auto industry
(2) Annualized
Commercial Real Estate: $5.0 Billion(1)
Long-term meaningful relationships with opportunities for additional cross-sell
•
Primarily Midwest footprint projects generating adequate return on capital
•
Proven CRE participants… 28+ years average CRE experience
•
>95% of the loans have personal guarantees
•
>80% is within our geographic footprint
•
$465 MM of “Special Assets” with a 27% average credit mark
Credit Quality Trends
Period end balance ($MM)
3Q14
2Q14
1Q14
4Q13
3Q13
$4,990
$4,990
$5,031
$4,850
$4,872
30+ days PD & accruing
0.84%
1.00%
1.14%
1.52%
1.30%
90+ days PD & accruing(2)
0.53%
0.55%
0.73%
0.81%
0.90%
NCOs(3)
(0.48)%
(0.17)%
(0.08)%
(0.23)%
1.02%
NALs
1.20%
1.31%
1.42%
1.51%
1.65%
ACL
2.45%
2.90%
3.37%
3.56%
3.64%
(1) End of period (2) All amounts represent accruing purchased impaired loans acquired in the Fidelity transaction. Under the
applicable accounting guidance (ASC 310-30), the loans were recorded at fair value upon acquisition and remain in accruing status.
(3) Annualized
50
CRE – Portfolio Composition
Period-End Balance
$6,000
$5,000
$4,872 $4,850 $5,031 $4,990 $4,990
By Loan Type
$4,000
Lines / Letters of
Credit
Non Project
Construction
4%
Loans
17%
10%
$3,000
$2,000
Permanent
21%
$1,000
Mini-perm
48%
$0
3Q13
4Q13
1Q14
($MM)
New
Takedowns
Net payments / payoffs / other
2Q14
3Q14
vs. 2Q14
$
262
3Q14
3Q14
vs. 3Q13
$
1163
429
1484
(684)
(2498)
Charge-offs
(7)
(30)
Net change
$0
$119
0.0%
2.4%
Mini-perm - Loans with 5 years or less term with properties that
have reached a stabilized physical occupancy and exhibit an
operational cash flow which would qualify for permanent
financing during normalized market conditions.
Permanent – Amortizing loans with terms of up to 10 years,
amortizing up to 25 years.
51
Total Consumer Loans
and Leases
52
Indirect Auto: $8.3 Billion(1)
•
Deep local relationships with high quality Dealers
–
–
–
–
•
Relationships create the flow of auto loans
–
–
–
•
Consistently in the market for over 60 years
#1 Bank in the U.S. in Dealer Satisfaction, with dominant market position in the Midwest with over
3,500 dealers
Floorplan and dealership real estate lending, core deposit relationship, full Treasury Management,
Private Banking, etc.
That deep relationship adds value… buy rates are 20 to 50 basis points higher compared with
other banks competing in the prime space
Super-prime customers, average FICO ~760
Low LTVs, averaging <90%
Custom Score, utilized to further segment FICO eligible to enhance predictive modeling
Operational efficiency and scale leverages expertise
–
–
Highly scalable decision engine evaluates >70% of applications - over 1,000 point pricing matrix
based on FICO and custom score
Underwriters directly compensated on credit performance by vintage
Credit Quality Trends
3Q14
2Q14
1Q14
4Q13
3Q13
Period end balance ($MM)
$8,322
$7,686
$6,999
$6,639
$6,317
30+ days PD & accruing
0.72%
0.65%
0.63%
0.88%
0.72%
90+ days PD & accruing
0.06%
0.04%
0.06%
0.08%
0.06%
NCOs
0.20%
0.16%
0.27%
0.23%
0.18%
NALs
0.06%
0.06%
0.09%
0.09%
0.09%
53
(1) End of period
Auto Loans – Production and Credit Quality Overview
3Q14
2Q14
1Q14
4Q13
3Q13
2Q13
1Q13
4Q12
Amount ($MM)
$1,481
$1,463
$1,068
$994
$1,166
$1,088
$972
$878
% new vehicles
50%
50%
47%
47%
46%
44%
45%
46%
Avg. LTV
Avg. FICO
89%
767
89%
765
89%
759
89%
763
89%
762
89%
759
88%
755
88%
757
0.81%
0.85%
0.88%
0.89%
0.91%
0.92%
0.94%
0.94%
30+ days PD & accruing %
0.72%
0.65%
0.63%
0.88%
0.72%
0.68%
0.61%
1.03%
NCO %
0.20%
0.16%
0.28%
0.23%
0.18%
0.11%
0.21%
0.17%
0.03%
0.05%
0.07%
0.04%
0.04%
0.06%
0.10%
0.13%
0.11%
0.10%
0.13%
0.17%
0.17%
0.18%
0.20%
Originations
Expected cumulative loss
Portfolio Performance
Vintage Performance(1)
6-month losses
9-month losses
12-month losses
54
(1) Annualized
Home Equity: $8.4 Billion(1)
•
Focused on geographies within our Midwest footprint with relationship customers
•
Focused on high quality borrowers… 3Q14 originations:
•
Average FICO scores of >750+
•
Average LTVs of <80% for junior liens and <70% for 1st-liens
•
Approximately 65% are 1st-liens
•
Portfolio: average FICOs >750 with >50% 1st-liens
•
Began exit of broker channel in 2005… <5% of outstandings today
•
Conservative underwriting – manage the probability of default while stress
testing rates
Credit Quality Trends
3Q14
2Q14
1Q14
4Q13
3Q13
Period end balance ($MM)
$8,435
$8,405
$8,373
$8,336
$8,347
30+ days PD & accruing
0.91%
0.89%
1.00%
1.01%
1.00%
90+ days PD & accruing
0.18%
0.18%
0.19%
0.15%
0.16%
NCOs
0.31%
0.41%
0.75%
0.98%
1.30%
NALs
0.86%
0.82%
0.85%
0.79%
0.75%
55
(1) End of Period
Residential Mortgages: $5.8 Billion(1)
•
•
•
•
Focused on geographies within our Midwest footprint
Traditional product mix… very limited nontraditional exposure as we
never originated sub-prime, payment option ARMs, or negative
amortization loans
Early identification of loss mitigation. “Home Savers” program, 25%–30%
recidivism
Average 3Q14 origination: FICO of 737, new / refi mix approx. 55/45%
Credit Quality Trends
3Q14
2Q14
1Q14
4Q13
3Q13
$5,788
$5,707
$5,542
$5,321
$5,307
$997
$982
$658
$841
$1,176
30+ days PD & accruing
3.95%
3.96%
4.16%
4.26%
4.53%
90+ days PD & accruing
1.52%
1.43%
1.55%
1.70%
1.80%
NCOs
0.38%
0.24%
0.58%
0.57%
0.36%
NALs
1.70%
1.94%
2.20%
2.25%
2.19%
Period end balance ($MM)
Originations ($MM)
56
(1) End of Period
Credit Quality Review
57
Consumer Loan Delinquencies(1)
30+ Days
90+ Days
2.00%
6.00%
1.80%
1.70%
5.00%
1.55%
4.53%
4.26%
4.16%
3.96%
1.43%
1.50%
1.52%
3.95%
4.00%
1.00%
3.00%
2.00%
1.00%
1.01%
1.00%
1.00%
0.72%
0.88%
0.50%
0.89%
0.91%
0.16%
0.63%
0.65%
0.72%
0.00%
0.19%
0.17%
0.06%
0.08%
0.06%
0.18%
0.18%
0.04%
0.06%
0.00%
3Q13
4Q13
1Q14
Residential Mortgages
2Q14
3Q14
Auto Loans & Lease
Home Equity
3Q13
4Q13
1Q14
Residential Mortgages
2Q14
3Q14
Auto Loans & Lease
Home Equity
58
(1) End of period; delinquent but accruing as a % of related outstandings at EOP
Total Commercial Loan – Delinquencies
90+ Days(1)
30+ Days
0.80%
1.20%
0.70%
0.70%
0.64%
0.61%
0.60%
1.00%
0.60%
0.80%
0.47%
0.50%
0.45%
0.48%
0.40%
0.60%
0.32%
0.30%
0.40%
0.37% 0.37%
0.32%
0.32%
0.20%
0.30%
0.24%
0.21%
0.16%0.14%
0.20%
3Q14
1Q14
4Q13
3Q13
2Q13
1Q13
0.00%
4Q12
3Q14
2Q14
1Q14
4Q13
3Q13
2Q13
1Q13
4Q12
3Q12
0.00%
3Q12
0.10%
2Q14
0.30%
(1) All delinquencies represent accruing purchased impaired loans acquired in the Fidelity transaction. Under the applicable accounting guidance
(ASC 310-30), the loans were recorded at fair value upon acquisition and remain in accruing status.
59
Total Consumer Loan Delinquencies(1)
30+ Days
90+ Days
3.00%
0.80%
0.70%
2.50%
0.68%
0.64%
2.32%
2.24%
0.60%
0.60%
1.95%
2.00%
0.56% 0.56%
0.53%
2.01%
1.86%1.83%
0.50%
0.50%
0.47%
0.45%
1.62%
1.71%
1.61%
1.50%
0.40%
0.30%
1.00%
0.20%
0.50%
0.10%
Reported Delinquencies
Reported Delinquencies
0.00%
3Q14
2Q14
1Q14
4Q13
3Q13
2Q13
1Q13
4Q12
3Q12
3Q14
2Q14
1Q14
4Q13
3Q13
2Q13
1Q13
4Q12
3Q12
0.00%
60
(1) End of period; delinquent but accruing as a % of related outstandings at EOP
Net Charge-Offs
Commercial Loans
$100
Consumer Loans
Amount
($MM)
1.20%
Annualized %
($MM)
$100
0.90%
0.83%
$90
$90
0.80%
0.77%
1.00%
$80
$80
$70
0.80%
$60
0.68%
$70
0.60%
$60
$50
0.60%
$40
0.42%
$40
0.26%
$20
$10
0.12%
0.14%
0.14%
0.11%
0.20%
$14
$0
3Q13
0.30%
$42
$35
$20
0.20%
$20
$23
2Q14
3Q14
0.10%
$10
$7
$8
4Q13
1Q14
$8
$7
0.00%
2Q14
0.40%
0.37%
$39
$30
0.50%
(2)
$50
0.40%
$30
0.70%
0.00%
$0
3Q13
3Q14
4Q13
1Q14
61
Nonperforming Asset Flow Analysis
($MM)
3Q14
2Q14
1Q14
4Q13
3Q13
$362.1
$365.3
$352.2
$374.3
$396.7
Additions / increases
102.8
123.6
117.8
109.5
139.8
Return to accruing status
(24.9)
(23.0)
(9.3)
(12.4)
(31.3)
Loan and lease losses
(36.4)
(54.6)
(47.6)
(55.8)
(65.8)
0.9
2.3
0.4
0.5
1.1
Payments
(29.1)
(41.9)
(39.2)
(51.3)
(61.1)
Sales & other
(10.9)
(9.5)
(8.9)
(12.6)
(5.0)
$364.5
$362.1
$365.3
$352.2
$374.3
1%
(1)%
4%
(6)%
(6)%
NPA beginning-of-period
OREO gains (losses)
NPA end-of-period
Percent change
62
Total Commercial Loans –
Criticized Loan Flow Analysis
End of Period
3Q14
2Q14
1Q14
4Q13
3Q13
$1,344
$1,345
$1,360
$1,508
$1,448
218
308
214
178
328
69
65
85
31
48
Upgrades to “Pass”
(104)
(125)
(96)
(170)
(143)
Paydowns
(219)
(224)
(194)
(161)
(141)
Charge-offs
(24)
(25)
(25)
(24)
(32)
$1,285
$1,344
$1,345
$1,360
$1,508
(5)%
(0)%
(1)%
(11)%
4%
($MM)
Criticized beginning-of-period
Additions / increases
Advances
Criticized end-of-period
Percent change
63
Franchise and
Leadership
64
Huntington Bancshares Overview
Midwest financial services holding company
Founded
- 1866
Headquarters
- Columbus, Ohio
Total assets
- $64 Billion
(1)
- 11,946
Employees
Franchise:
Branches 754(2)
ATMs
1,501
Deposits - Top 10 MSAs
MSA
Columbus, OH
Cleveland, OH
Rank Branches
1
88
5
89
Deposits
$14,879
4,782
Share
27.6%
8.4
Detroit, MI
6
59
4,753
4.5
Indianapolis, IN
4
45
2,852
7.4
Pittsburgh, PA
8
38
2,487
2.5
Cincinnati, OH
4
41
2,274
2.9
Toledo, OH
2
35
2,238
23.4
Grand Rapids, MI
2
38
2,111
11.8
Youngstown, OH
1
42
2,017
22.9
Canton, OH
1
28
1,610
26.0
Source:
% Deposits
40%
68%
#1 Share markets
#1- #4 Share markets
State
Ohio
Michigan
Pennsylvania
Indiana
West Virginia
Kentucky
Branches
418
181
51
45
31
12
ATMs
921
239
102
68
148
23
SNL Financial, company presentations and filings
FDIC deposit data as of June 30, 2014
65
(1) 3Q14 Average full-time equivalent (FTE) (2) Includes 16 Private Client Group Offices
Combined In-Store Strategy
• Attractive distribution option: 2x acquisition vs traditional, full service, better fee mix
• 52 branches breakeven or better for 3Q14
•
•
•
89 of 104 planned Giant Eagle in-store branches opened
52 Giant Eagle in-store branches were breakeven or
better as of September 2014
Giant Eagle in-stores represent 12% of our branch
network, over delivering on HH growth:
– Delivering 17% of consumer HH growth in last 12
months, ending August 2014
•
•
•
41 of 80+ planned Meijer in-store branches opened
11 Meijer in-store branches were breakeven or better as
of September 2014
Meijer in-stores represent 5% of our branch network,
over delivering on HH growth:
– Delivering 15% of consumer HH growth last 12
months, ending August 2014
#4 in Michigan Branches
#1 in Ohio Branches
% of Branches
% of Branches
MSA
(1)
6/14
Pro
Forma(1)
Akron
13%
14%
#1
Canton
21%
21%
#1
Cleveland
13%
13%
#1
Columbus
16%
16%
#1
Youngstown
22%
22%
#1
MSA
Grand Rapids
6/14(1)
Pro Forma(1)
12%
12%
#2
Detroit
6%
8%
#5
Lansing
6%
8%
#5
Ann Arbor
3%
5%
#8
66
(1) Branch share source, SNL Financial, 6/30/2014; Pro forma assumes full contractual build-out.
Leadership Team
Chairman, President and CEO
Stephen Steinour
Retail and Business Banking
Mary Navarro
Regional Banking and The Private Client Group
Jim Dunlap
Commercial Banking & Insurance
Rick Remiker
Automobile Finance and
Commercial Real Estate
Nick Stanutz
Finance, Strategy, Mergers & Acquisitions
Mac McCullough – Chief Financial Officer
Risk and Legal
Helga Houston – Chief Risk Officer
Credit, Collections, Special Assets
Daniel Neumeyer – Chief Credit Officer
Human Resources & Diversity
Keith Sanders
Corporate Communications & Government Relations
Barbara Benham
Corporate Services
Mark Thompson
Technology, Operations and Mortgage
Home Lending
Paul Heller – Chief Technology and Operations Officer
Continuous Improvement
Jeff Sturm – Chief Continuous Improvement Officer
Business Segments
67
68