UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
QUARTERLY PERIOD ENDED March 31, 2019
Commission File Number 1-34073
Huntington Bancshares Incorporated
|
| |
Maryland | 31-0724920 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Registrant's address: 41 South High Street, Columbus, Ohio 43287
Registrant’s telephone number, including area code: (614) 480-2265
Securities registered pursuant to Section 12(b) of the Act:
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| | |
Title of class | Trading Symbol(s) | Name of exchange on which registered |
5.875% Series C Non-Cumulative, perpetual preferred stock | HBANN
| Nasdaq |
6.250% Series D Non-Cumulative, perpetual preferred stock | HBANO
| Nasdaq |
Common Stock—Par Value $0.01 per Share | HBAN | Nasdaq |
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). x Yes ¨ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
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Large accelerated filer | x | | Accelerated filer | ¨ |
| | | | | |
Non-accelerated filer | ¨ | | Smaller reporting company | ¨ |
| | | | Emerging growth company | ¨ |
| | | | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ¨ Yes x No
There were 1,046,440,116 shares of the Registrant’s common stock ($0.01 par value) outstanding on March 31, 2019.
HUNTINGTON BANCSHARES INCORPORATED
INDEX
Glossary of Acronyms and Terms
The following listing provides a comprehensive reference of common acronyms and terms used throughout the document:
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| | |
ACL | | Allowance for Credit Losses |
AFS | | Available-for-Sale |
ALLL | | Allowance for Loan and Lease Losses |
AOCI | | Accumulated Other Comprehensive Income |
ASC | | Accounting Standards Codification |
AULC | | Allowance for Unfunded Loan Commitments |
Basel III | | Refers to the final rule issued by the FRB and OCC and published in the Federal Register on October 11, 2013 |
C&I | | Commercial and Industrial |
CCAR | | Comprehensive Capital Analysis and Review |
CDs | | Certificates of Deposit |
CET1 | | Common equity tier 1 on a transitional Basel III basis |
CFPB | | Bureau of Consumer Financial Protection |
CMO | | Collateralized Mortgage Obligations |
CRE | | Commercial Real Estate |
EPS | | Earnings Per Share |
EVE | | Economic Value of Equity |
FASB | | Financial Accounting Standards Board |
FDIC | | Federal Deposit Insurance Corporation |
FHLB | | Federal Home Loan Bank |
FICO | | Fair Isaac Corporation |
FirstMerit | | FirstMerit Corporation |
FRB | | Federal Reserve Bank |
FTE | | Fully-Taxable Equivalent |
FTP | | Funds Transfer Pricing |
FVO | | Fair Value Option |
GAAP | | Generally Accepted Accounting Principles in the United States of America |
HTM | | Held-to-Maturity |
IRS | | Internal Revenue Service |
LCR | | Liquidity Coverage Ratio |
LIBOR | | London Interbank Offered Rate |
LIHTC | | Low Income Housing Tax Credit |
MBS | | Mortgage-Backed Securities |
MD&A | | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
MSR | | Mortgage Servicing Right |
NAICS | | North American Industry Classification System |
NALs | | Nonaccrual Loans |
NCO | | Net Charge-off |
NII | | Noninterest Income |
NIM | | Net Interest Margin |
NPAs | | Nonperforming Assets |
OCC | | Office of the Comptroller of the Currency |
OCI | | Other Comprehensive Income (Loss) |
OLEM | | Other Loans Especially Mentioned |
OREO | | Other Real Estate Owned |
OTTI | | Other-Than-Temporary Impairment |
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| | |
RBHPCG | | Regional Banking and The Huntington Private Client Group |
ROC | | Risk Oversight Committee |
SBA | | Small Business Administration |
SEC | | Securities and Exchange Commission |
TDR | | Troubled Debt Restructuring |
U.S. Treasury | | U.S. Department of the Treasury |
UCS | | Uniform Classification System |
VIE | | Variable Interest Entity |
XBRL | | eXtensible Business Reporting Language |
PART I. FINANCIAL INFORMATION
When we refer to “we”, “our”, and “us”, "Huntington," and "the Company" in this report, we mean Huntington Bancshares Incorporated and our consolidated subsidiaries, unless the context indicates that we refer only to the parent company, Huntington Bancshares Incorporated. When we refer to the “Bank” in this report, we mean our only bank subsidiary, The Huntington National Bank, and its subsidiaries.
Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations
INTRODUCTION
We are a multi-state diversified regional bank holding company organized under Maryland law in 1966 and headquartered in Columbus, Ohio. Through the Bank, we have over 150 years of servicing the financial needs of our customers. Through our subsidiaries, we provide full-service commercial and consumer banking services, mortgage banking services, automobile financing, recreational vehicle and marine financing, equipment financing, investment management, trust services, brokerage services, insurance products and services, and other financial products and services. Our 898 full-service branches and private client group offices are located in Ohio, Illinois, Indiana, Kentucky, Michigan, Pennsylvania, West Virginia, and Wisconsin. Select financial services and other activities are also conducted in various other states. International banking services are available through the headquarters office in Columbus, Ohio. Our foreign banking activities, in total or with any individual country, are not significant.
This MD&A provides information we believe necessary for understanding our financial condition, changes in financial condition, results of operations, and cash flows. The MD&A included in our 2018 Form 10-K should be read in conjunction with this MD&A as this discussion provides only material updates to the 2018 Form 10-K. This MD&A should also be read in conjunction with the Unaudited Condensed Consolidated Financial Statements, Notes to Unaudited Condensed Consolidated Financial Statements, and other information contained in this report.
EXECUTIVE OVERVIEW
Summary of 2019 First Quarter Results Compared to 2018 First Quarter
For the quarter, we reported net income of $358 million, or $0.32 per common share, compared with $326 million, or $0.28 per common share, in the year-ago quarter (see Table 1).
Fully-taxable equivalent net interest income was $829 million, up $52 million, or 7%. This reflected the benefit from the $3.8 billion, or 4%, increase in average earning assets coupled with a 9 basis point increase in the FTE net interest margin to 3.39%.
The provision for credit losses increased $1 million year-over-year to $67 million in the 2019 first quarter. Net charge-offs increased $33 million to $71 million. The increase was centered in two specific commercial credit relationships. Consumer charge-offs have remained consistent over the past year. NCOs represented an annualized 0.38% of average loans and leases in the current quarter, up from 0.21% in the year-ago quarter.
Non-interest income was $319 million, up $5 million, or 2%, from the year ago quarter. Gain on sale of loans and leases increased $5 million, or 63%, primarily reflecting the gain on the sale of asset finance leases and higher SBA sales. Mortgage banking income decreased $5 million, or 19%, primarily reflecting net mortgage servicing rights (MSR) risk management-related activities and lower origination volume.
Non-interest expense was $653 million, up $20 million, or 3%, from the year-ago quarter. Personnel costs increased $18 million, or 5%, primarily reflecting strategic hiring, the implementation of annual merit increases in the 2018 second quarter, and increased benefits costs. Outside data processing and other services increased $8 million, or 11%, primarily driven by higher technology investment costs. Deposit and other insurance expense decreased $10 million, or 56%, due to the discontinuation of the FDIC surcharge in the 2018 fourth quarter.
The tangible common equity to tangible assets ratio was 7.57% at March 31, 2019, down 13 basis points from a year ago. Common Equity Tier 1 risk-based capital ratio was 9.84%, down from 10.45% a year ago. The regulatory Tier 1 risk-based capital ratio was 11.25% compared to 11.94% at March 31, 2018. All capital ratios were impacted by the repurchase of $916 million of common stock over the last four quarters.
The Company repurchased $25 million of common stock during the 2019 first quarter at an average cost of $13.64 per share. There is $152 million of share repurchase authorization remaining under the 2018 Capital Plan.
Business Overview
General
Our general business objectives are:
•Consistent organic revenue and balance sheet growth.
•Invest in our businesses, particularly technology and risk management.
•Deliver positive operating leverage.
•Maintain aggregate moderate-to-low risk appetite.
•Disciplined capital management.
Economy
Overall economic activity in our footprint continues to reflect a favorable outlook for both consumers and businesses. Our balance sheet growth expectations for 2019 remain unchanged. Our commercial loan pipelines are steady, and we are seeing the normal seasonal build in our consumer pipelines. Competition for loans and deposits is strong, but rational. We do not foresee a recession in the near term; however, our core earnings power, strong capital, aggregate moderate-to-low risk appetite, and long-term strategic alignment position us to withstand economic headwinds.
DISCUSSION OF RESULTS OF OPERATIONS
This section provides a review of financial performance from a consolidated perspective. Key Unaudited Condensed Consolidated Balance Sheet and Unaudited Condensed Statement of Income trends are discussed. All earnings per share data are reported on a diluted basis. For additional insight on financial performance, please read this section in conjunction with the “Business Segment Discussion”.
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| | | | | | | | | | | | | | | | | | | |
Table 1 - Selected Quarterly Income Statement Data |
| | | | | | | | | |
| Three Months Ended |
| March 31, | | December 31, | | September 30, | | June 30, | | March 31, |
(dollar amounts in millions, share amounts in thousands) | 2019 | | 2018 | | 2018 | | 2018 | | 2018 |
Interest income | $ | 1,070 |
| | $ | 1,056 |
| | $ | 1,007 |
| | $ | 972 |
| | $ | 914 |
|
Interest expense | 248 |
| | 223 |
| | 205 |
| | 188 |
| | 144 |
|
Net interest income | 822 |
| | 833 |
| | 802 |
| | 784 |
| | 770 |
|
Provision for credit losses | 67 |
| | 60 |
| | 53 |
| | 56 |
| | 66 |
|
Net interest income after provision for credit losses | 755 |
| | 773 |
| | 749 |
| | 728 |
| | 704 |
|
Service charges on deposit accounts | 87 |
| | 94 |
| | 93 |
| | 91 |
| | 86 |
|
Card and payment processing income | 56 |
| | 58 |
| | 57 |
| | 56 |
| | 53 |
|
Trust and investment management services | 44 |
| | 42 |
| | 43 |
| | 42 |
| | 44 |
|
Mortgage banking income | 21 |
| | 23 |
| | 31 |
| | 28 |
| | 26 |
|
Capital markets fees | 22 |
| | 34 |
| | 26 |
| | 26 |
| | 21 |
|
Insurance income | 21 |
| | 21 |
| | 19 |
| | 21 |
| | 21 |
|
Bank owned life insurance income | 16 |
| | 16 |
| | 19 |
| | 17 |
| | 15 |
|
Gain on sale of loans and leases | 13 |
| | 16 |
| | 16 |
| | 15 |
| | 8 |
|
Securities gains (losses) | — |
| | (19 | ) | | (2 | ) | | — |
| | — |
|
Other income | 39 |
| | 44 |
| | 40 |
| | 40 |
| | 40 |
|
Total noninterest income | 319 |
| | 329 |
| | 342 |
| | 336 |
| | 314 |
|
Personnel costs | 394 |
| | 399 |
| | 388 |
| | 396 |
| | 376 |
|
Outside data processing and other services | 81 |
| | 83 |
| | 69 |
| | 69 |
| | 73 |
|
Net occupancy | 42 |
| | 70 |
| | 38 |
| | 35 |
| | 41 |
|
Equipment | 40 |
| | 48 |
| | 38 |
| | 38 |
| | 40 |
|
Deposit and other insurance expense | 8 |
| | 9 |
| | 18 |
| | 18 |
| | 18 |
|
Professional services | 12 |
| | 17 |
| | 17 |
| | 15 |
| | 11 |
|
Marketing | 7 |
| | 15 |
| | 12 |
| | 18 |
| | 8 |
|
Amortization of intangibles | 13 |
| | 13 |
| | 13 |
| | 13 |
| | 14 |
|
Other expense | 56 |
| | 57 |
| | 58 |
| | 50 |
| | 52 |
|
Total noninterest expense | 653 |
| | 711 |
| | 651 |
| | 652 |
| | 633 |
|
Income before income taxes | 421 |
| | 391 |
| | 440 |
| | 412 |
| | 385 |
|
Provision for income taxes | 63 |
| | 57 |
| | 62 |
| | 57 |
| | 59 |
|
Net income | 358 |
| | 334 |
| | 378 |
| | 355 |
| | 326 |
|
Dividends on preferred shares | 19 |
| | 19 |
| | 18 |
| | 21 |
| | 12 |
|
Net income applicable to common shares | $ | 339 |
| | $ | 315 |
| | $ | 360 |
| | $ | 334 |
| | $ | 314 |
|
| | | | | | | | | |
Average common shares—basic | 1,046,995 |
| | 1,054,460 |
| | 1,084,536 |
| | 1,103,337 |
| | 1,083,836 |
|
Average common shares—diluted | 1,065,638 |
| | 1,073,055 |
| | 1,103,740 |
| | 1,122,612 |
| | 1,124,778 |
|
Net income per common share—basic | $ | 0.32 |
| | $ | 0.30 |
| | $ | 0.33 |
| | $ | 0.30 |
| | $ | 0.29 |
|
Net income per common share—diluted | 0.32 |
| | 0.29 |
| | 0.33 |
| | 0.30 |
| | 0.28 |
|
Return on average total assets | 1.35 | % | | 1.25 | % | | 1.42 | % | | 1.36 | % | | 1.27 | % |
Return on average common shareholders’ equity | 13.8 |
| | 12.9 |
| | 14.3 |
| | 13.2 |
| | 13.0 |
|
Return on average tangible common shareholders’ equity (1) | 18.3 |
| | 17.3 |
| | 19.0 |
| | 17.6 |
| | 17.5 |
|
Net interest margin (2) | 3.39 |
| | 3.41 |
| | 3.32 |
| | 3.29 |
| | 3.30 |
|
Efficiency ratio (3) | 55.8 |
| | 58.7 |
| | 55.3 |
| | 56.6 |
| | 56.8 |
|
Effective tax rate | 15.0 |
| | 14.6 |
| | 14.1 |
| | 13.8 |
| | 15.3 |
|
| | | | | | | | | |
Revenue—FTE | | | | | | | | | |
Net interest income | $ | 822 |
| | $ | 833 |
| | $ | 802 |
| | $ | 784 |
| | $ | 770 |
|
FTE adjustment | 7 |
| | 8 |
| | 8 |
| | 7 |
| | 7 |
|
Net interest income (2) | 829 |
| | 841 |
| | 810 |
| | 791 |
| | 777 |
|
Noninterest income | 319 |
| | 329 |
| | 342 |
| | 336 |
| | 314 |
|
Total revenue (2) | $ | 1,148 |
| | $ | 1,170 |
| | $ | 1,152 |
| | $ | 1,127 |
| | $ | 1,091 |
|
| |
(1) | Net income excluding expense for amortization of intangibles for the period divided by average tangible common shareholders’ equity. Average tangible common shareholders’ equity equals average total common shareholders’ equity less average intangible assets and goodwill. Expense for amortization of intangibles and average intangible assets are net of deferred tax liability, and calculated assuming a 21% tax rate. |
| |
(2) | On an FTE basis assuming a 21% tax rate. |
| |
(3) | Noninterest expense less amortization of intangibles and goodwill impairment divided by the sum of FTE net interest income and noninterest income excluding securities gains. |
Net Interest Income / Average Balance Sheet
The following tables detail the change in our average balance sheet and the net interest margin:
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Table 2 - Consolidated Average Balance Sheet and Net Interest Margin Analysis |
| Average Balances | | | | |
| Three Months Ended | | Change |
| March 31, | | December 31, | | September 30, | | June 30, | | March 31, | | 1Q19 vs. 1Q18 |
(dollar amounts in millions) | 2019 | | 2018 | | 2018 | | 2018 | | 2018 | | Amount | | Percent |
Assets: | | | | | | | | | | | | | |
Interest-bearing deposits in Federal Reserve Bank (2) | $ | 501 |
| | $ | 483 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 501 |
| | 100 | % |
Interest-bearing deposits in banks | 109 |
| | 97 |
| | 83 |
| | $ | 84 |
| | 90 |
| | 19 |
| | 21 |
|
Securities: | | | | | | | | | | | | |
|
|
Trading account securities | 138 |
| | 131 |
| | 82 |
| | 82 |
| | 87 |
| | 51 |
| | 59 |
|
Available-for-sale securities: | | | | | | | | | | | | |
|
|
Taxable | 10,752 |
| | 10,351 |
| | 10,469 |
| | 10,832 |
| | 11,158 |
| | (406 | ) | | (4 | ) |
Tax-exempt | 3,048 |
| | 3,176 |
| | 3,496 |
| | 3,554 |
| | 3,633 |
| | (585 | ) | | (16 | ) |
Total available-for-sale securities | 13,800 |
| | 13,527 |
| | 13,965 |
| | 14,386 |
| | 14,791 |
| | (991 | ) | | (7 | ) |
Held-to-maturity securities—taxable | 8,653 |
| | 8,433 |
| | 8,560 |
| | 8,706 |
| | 8,877 |
| | (224 | ) | | (3 | ) |
Other securities | 536 |
| | 565 |
| | 567 |
| | 599 |
| | 605 |
| | (69 | ) | | (11 | ) |
Total securities | 23,127 |
| | 22,656 |
| | 23,174 |
| | 23,773 |
| | 24,360 |
| | (1,233 | ) | | (5 | ) |
Loans held for sale | 700 |
| | 694 |
| | 745 |
| | 619 |
| | 478 |
| | 222 |
| | 46 |
|
Loans and leases: (4) | | | | | | | | | | | | |
|
|
Commercial: | | | | | | | | | | | | |
|
|
Commercial and industrial | 30,546 |
| | 29,557 |
| | 28,870 |
| | 28,863 |
| | 28,243 |
| | 2,303 |
| | 8 |
|
Commercial real estate: | | | | | | | | | | | | |
|
|
Construction | 1,174 |
| | 1,138 |
| | 1,132 |
| | 1,126 |
| | 1,189 |
| | (15 | ) | | (1 | ) |
Commercial | 5,686 |
| | 5,806 |
| | 6,019 |
| | 6,233 |
| | 6,142 |
| | (456 | ) | | (7 | ) |
Commercial real estate | 6,860 |
| | 6,944 |
| | 7,151 |
| | 7,359 |
| | 7,331 |
| | (471 | ) | | (6 | ) |
Total commercial | 37,406 |
| | 36,501 |
| | 36,021 |
| | 36,222 |
| | 35,574 |
| | 1,832 |
| | 5 |
|
Consumer: | | | | | | | | | | | | |
|
|
Automobile | 12,361 |
| | 12,423 |
| | 12,368 |
| | 12,271 |
| | 12,100 |
| | 261 |
| | 2 |
|
Home equity | 9,641 |
| | 9,817 |
| | 9,873 |
| | 9,941 |
| | 10,040 |
| | (399 | ) | | (4 | ) |
Residential mortgage | 10,787 |
| | 10,574 |
| | 10,236 |
| | 9,624 |
| | 9,174 |
| | 1,613 |
| | 18 |
|
RV and marine | 3,296 |
| | 3,216 |
| | 3,016 |
| | 2,667 |
| | 2,481 |
| | 815 |
| | 33 |
|
Other consumer | 1,284 |
| | 1,291 |
| | 1,237 |
| | 1,162 |
| | 1,115 |
| | 169 |
| | 15 |
|
Total consumer | 37,369 |
| | 37,321 |
| | 36,730 |
| | 35,665 |
| | 34,910 |
| | 2,459 |
| | 7 |
|
Total loans and leases | 74,775 |
| | 73,822 |
| | 72,751 |
| | 71,887 |
| | 70,484 |
| | 4,291 |
| | 6 |
|
Allowance for loan and lease losses | (780 | ) | | (777 | ) | | (759 | ) | | (742 | ) | | (709 | ) | | (71 | ) | | (10 | ) |
Net loans and leases | 73,995 |
| | 73,045 |
| | 71,992 |
| | 71,145 |
| | 69,775 |
| | 4,220 |
| | 6 |
|
Total earning assets | 99,212 |
| | 97,752 |
| | 96,753 |
| | 96,363 |
| | 95,412 |
| | 3,800 |
| | 4 |
|
Cash and due from banks | 853 |
| | 909 |
| | 1,330 |
| | 1,283 |
| | 1,217 |
| | (364 | ) | | (30 | ) |
Intangible assets | 2,265 |
| | 2,288 |
| | 2,305 |
| | 2,318 |
| | 2,332 |
| | (67 | ) | | (3 | ) |
All other assets | 5,961 |
| | 5,705 |
| | 5,726 |
| | 5,599 |
| | 5,596 |
| | 365 |
| | 7 |
|
Total assets | $ | 107,511 |
| | $ | 105,877 |
| | $ | 105,355 |
| | $ | 104,821 |
| | $ | 103,848 |
| | $ | 3,663 |
| | 4 | % |
Liabilities and Shareholders’ Equity: | | | | | | | | | | | | |
|
|
Deposits: | | | | | | | | | | | | |
|
|
Demand deposits—noninterest-bearing | 19,938 |
| | 20,384 |
| | 20,230 |
| | 20,382 |
| | 20,572 |
| | $ | (634 | ) | | (3 | )% |
Demand deposits—interest-bearing | 19,770 |
| | 19,860 |
| | 19,553 |
| | 19,121 |
| | 18,630 |
| | 1,140 |
| | 6 |
|
Total demand deposits | 39,708 |
| | 40,244 |
| | 39,783 |
| | 39,503 |
| | 39,202 |
| | 506 |
| | 1 |
|
Money market deposits | 22,935 |
| | 22,595 |
| | 21,547 |
| | 20,943 |
| | 20,678 |
| | 2,257 |
| | 11 |
|
Savings and other domestic deposits | 10,338 |
| | 10,534 |
| | 11,434 |
| | 11,146 |
| | 11,219 |
| | (881 | ) | | (8 | ) |
Core certificates of deposit | 6,052 |
| | 5,705 |
| | 4,916 |
| | 3,794 |
| | 2,293 |
| | 3,759 |
| | 164 |
|
Total core deposits | 79,033 |
| | 79,078 |
| | 77,680 |
| | 75,386 |
| | 73,392 |
| | 5,641 |
| | 8 |
|
Other domestic time deposits of $250,000 or more | 335 |
| | 346 |
| | 285 |
| | 243 |
| | 247 |
| | 88 |
| | 36 |
|
Brokered deposits and negotiable CDs | 3,404 |
| | 3,507 |
| | 3,533 |
| | 3,661 |
| | 3,307 |
| | 97 |
| | 3 |
|
Total deposits | 82,772 |
| | 82,931 |
| | 81,498 |
| | 79,290 |
| | 76,946 |
| | 5,826 |
| | 8 |
|
Short-term borrowings | 2,320 |
| | 1,006 |
| | 1,732 |
| | 3,082 |
| | 5,228 |
| | (2,908 | ) | | (56 | ) |
Long-term debt | 8,979 |
| | 8,871 |
| | 8,915 |
| | 9,225 |
| | 8,958 |
| | 21 |
| | — |
|
Total interest-bearing liabilities | 74,133 |
| | 72,424 |
| | 71,915 |
| | 71,215 |
| | 70,560 |
| | 3,573 |
| | 5 |
|
All other liabilities | 2,284 |
| | 2,180 |
| | 2,054 |
| | 1,891 |
| | 1,861 |
| | 423 |
| | 23 |
|
Shareholders’ equity | 11,156 |
| | 10,889 |
| | 11,156 |
| | 11,333 |
| | 10,855 |
| | 301 |
| | 3 |
|
Total liabilities and shareholders’ equity | $ | 107,511 |
| | $ | 105,877 |
| | $ | 105,355 |
| | $ | 104,821 |
| | $ | 103,848 |
| | $ | 3,663 |
| | 4 | % |
|
| | | | | | | | | | | | | | |
Table 2 - Consolidated Average Balance Sheet and Net Interest Margin Analysis (Continued) |
| | | | | | | | | |
| Average Yield Rates (3) |
| Three Months Ended |
| March 31, | | December 31, | | September 30, | | June 30, | | March 31, |
Fully-taxable equivalent basis (1) | 2019 | | 2018 | | 2018 | | 2018 | | 2018 |
Assets: | | | | | | | | | |
Interest-bearing deposits in Federal Reserve Bank (2) | 2.40 | % | | 2.33 | % | | — | % | | — | % | | — | % |
Interest-bearing deposits in banks | 1.75 |
| | 1.97 |
| | 1.95 |
| | 1.95 |
| | 1.97 |
|
Securities: | | | | | | | | | |
Trading account securities | 2.03 |
| | 1.94 |
| | 0.26 |
| | 0.23 |
| | 0.15 |
|
Available-for-sale securities: | | | | | | | | | |
Taxable | 2.82 |
| | 2.71 |
| | 2.61 |
| | 2.63 |
| | 2.51 |
|
Tax-exempt | 3.69 |
| | 4.12 |
| | 3.53 |
| | 3.35 |
| | 3.18 |
|
Total available-for-sale securities | 3.01 |
| | 3.04 |
| | 2.84 |
| | 2.81 |
| | 2.67 |
|
Held-to-maturity securities—taxable | 2.52 |
| | 2.45 |
| | 2.43 |
| | 2.42 |
| | 2.45 |
|
Other securities | 4.51 |
| | 4.24 |
| | 4.58 |
| | 4.58 |
| | 3.98 |
|
Total securities | 2.86 |
| | 2.84 |
| | 2.73 |
| | 2.71 |
| | 2.62 |
|
Loans held for sale | 4.07 |
| | 4.04 |
| | 4.45 |
| | 4.17 |
| | 3.82 |
|
Loans and leases: (4) | | | | | | | | | |
Commercial: | | | | | | | | | |
Commercial and industrial | 4.91 |
| | 4.81 |
| | 4.64 |
| | 4.52 |
| | 4.28 |
|
Commercial real estate: | | | | | | | | | |
Construction | 5.58 |
| | 5.47 |
| | 5.31 |
| | 5.26 |
| | 4.73 |
|
Commercial | 5.00 |
| | 4.99 |
| | 4.63 |
| | 4.58 |
| | 4.24 |
|
Commercial real estate | 5.10 |
| | 5.07 |
| | 4.74 |
| | 4.68 |
| | 4.32 |
|
Total commercial | 4.94 |
| | 4.86 |
| | 4.66 |
| | 4.55 |
| | 4.29 |
|
Consumer: | | | | | | | | | |
Automobile | 3.95 |
| | 3.88 |
| | 3.75 |
| | 3.63 |
| | 3.56 |
|
Home equity | 5.61 |
| | 5.45 |
| | 5.21 |
| | 5.09 |
| | 4.90 |
|
Residential mortgage | 3.86 |
| | 3.82 |
| | 3.78 |
| | 3.69 |
| | 3.66 |
|
RV and marine | 4.96 |
| | 5.10 |
| | 5.06 |
| | 5.11 |
| | 5.11 |
|
Other consumer | 13.07 |
| | 12.35 |
| | 12.16 |
| | 11.90 |
| | 11.78 |
|
Total consumer | 4.75 |
| | 4.67 |
| | 4.54 |
| | 4.43 |
| | 4.34 |
|
Total loans and leases | 4.85 |
| | 4.76 |
| | 4.60 |
| | 4.49 |
| | 4.32 |
|
Total earning assets | 4.43 |
| | 4.34 |
| | 4.16 |
| | 4.07 |
| | 3.91 |
|
Liabilities: | | | | | | | | | |
Deposits: | | | | | | | | | |
Demand deposits—noninterest-bearing | — |
| | — |
| | — |
| | — |
| | — |
|
Demand deposits—interest-bearing | 0.56 |
| | 0.48 |
| | 0.45 |
| | 0.38 |
| | 0.29 |
|
Total demand deposits | 0.28 |
| | 0.24 |
| | 0.22 |
| | 0.18 |
| | 0.14 |
|
Money market deposits | 1.04 |
| | 0.91 |
| | 0.77 |
| | 0.60 |
| | 0.45 |
|
Savings and other domestic deposits | 0.23 |
| | 0.23 |
| | 0.24 |
| | 0.21 |
| | 0.20 |
|
Core certificates of deposit | 2.11 |
| | 2.00 |
| | 1.82 |
| | 1.56 |
| | 1.01 |
|
Total core deposits | 0.85 |
| | 0.75 |
| | 0.65 |
| | 0.51 |
| | 0.36 |
|
Other domestic time deposits of $250,000 or more | 1.82 |
| | 1.67 |
| | 1.40 |
| | 1.01 |
| | 0.69 |
|
Brokered deposits and negotiable CDs | 2.38 |
| | 2.22 |
| | 1.98 |
| | 1.81 |
| | 1.47 |
|
Total deposits | 0.94 |
| | 0.84 |
| | 0.73 |
| | 0.59 |
| | 0.43 |
|
Short-term borrowings | 2.41 |
| | 2.49 |
| | 1.98 |
| | 1.82 |
| | 1.47 |
|
Long-term debt | 3.98 |
| | 3.82 |
| | 3.78 |
| | 3.75 |
| | 2.92 |
|
Total interest-bearing liabilities | 1.35 |
| | 1.23 |
| | 1.13 |
| | 1.05 |
| | 0.82 |
|
Net interest rate spread | 3.08 |
| | 3.11 |
| | 3.03 |
| | 3.02 |
| | 3.09 |
|
Impact of noninterest-bearing funds on margin | 0.31 |
| | 0.30 |
| | 0.29 |
| | 0.27 |
| | 0.21 |
|
Net interest margin | 3.39 | % | | 3.41 | % | | 3.32 | % | | 3.29 | % | | 3.30 | % |
| |
(1) | FTE yields are calculated assuming a 21% tax rate. |
| |
(2) | Deposits in Federal Reserve Bank were treated as non-earning assets prior to 4Q 2018. |
| |
(3) | Loan and lease and deposit average yield rates include impact of applicable derivatives, non-deferrable fees, and amortized fees. |
| |
(4) | For purposes of this analysis, NALs are reflected in the average balances of loans. |
2019 First Quarter versus 2018 First Quarter
FTE net interest income for the 2019 first quarter increased $52 million, or 7%, from the 2018 first quarter. This reflected the benefit from the $3.8 billion, or 4%, increase in average earning assets coupled with a 9 basis point increase in the NIM to 3.39%. Average earning asset yields increased 52 basis points year-over-year, driven by a 53 basis point improvement in loan yields. Average interest-bearing liability costs increased 53 basis points, primarily driven by a 51 basis point increase in average interest-bearing deposit costs. The cost of short-term borrowings and long-term debt increased 94 basis points and 106 basis points, respectively. The benefit from noninterest-bearing funds improved 10 basis points versus the year-ago quarter. Embedded within these yields and costs, FTE net interest income during the 2019 first quarter included $15 million, or approximately 6 basis points, of purchase accounting impact compared to $19 million, or approximately 8 basis points, in the year-ago quarter.
Average earning assets for the 2019 first quarter increased $3.8 billion, or 4%, from the year-ago quarter, primarily reflecting a $4.3 billion, or 6%, increase in average loans and leases. Average C&I loans increased $2.3 billion, or 8%, reflecting growth in corporate banking, asset finance, dealer floorplan, and middle market banking. Average residential mortgage loans increased $1.6 billion, or 18%, driven by the successful expansion of our home lending business over the past two years. Average RV and marine loans increased $0.8 billion, or 33%, primarily reflecting the success of the geographic expansion over the past two years, while maintaining our commitment to super prime originations. Held-for-sale and other earning assets increased $0.7 billion, or 131%, primarily due to the inclusion of deposits in Federal Reserve Bank balances. These balances were treated as non-earning assets prior to the fourth quarter 2018. As of March 31, 2019, approximately $126 million of loans were included in held-for-sale related to the previously announced sale of our Wisconsin branches, which is expected to close in the 2019 second quarter. Average securities decreased $1.2 billion, or 5%, primarily due to runoff in the portfolio in 2018.
Average total interest-bearing liabilities for the 2019 first quarter increased $3.6 billion, or 5%, from the year-ago quarter. Average total deposits increased $5.8 billion, or 8%, from the year-ago quarter, while average total core deposits increased $5.6 billion, or 8%. Average core certificates of deposit increased $3.8 billion, or 164%, reflecting consumer deposit growth initiatives primarily in the first three quarters of 2018. Average money market deposits increased $2.3 billion, or 11%, reflecting the shift in promotional pricing to consumer money market accounts in mid-2018. Average interest-bearing demand deposits increased $1.1 billion, or 6%, primarily driven by the shift in commercial balances from noninterest-bearing to interest-bearing checking. Savings and other domestic deposits decreased $0.9 billion, or 8%, primarily reflecting a continued shift in consumer product mix. Average noninterest-bearing demand deposits decreased $0.6 billion, or 3%, primarily driven by the aforementioned shift in commercial checking balances, partially offset by continued growth in consumer noninterest-bearing checking. Average short-term borrowings decreased $2.9 billion, or 56%, as growth in core deposits reduced reliance on wholesale funding. As of March 31, 2019, approximately $845 million of deposits are held-for-sale associated with the previously-mentioned pending Wisconsin branch sale.
2019 First Quarter versus 2018 Fourth Quarter
Compared to the 2018 fourth quarter, FTE net interest income decreased $12 million, or 1%, primarily reflecting the NIM compression of 2 basis points, more than offsetting the benefit from the $1.5 billion, or 1%, increase in average earning assets. Average earning asset yields increased 9 basis points sequentially, driven by a 9 basis point increase in loan yields. Average interest-bearing liability costs increased 12 basis points, primarily driven by a 10 basis point increase in average interest-bearing deposit costs. The benefit of noninterest-bearing funding improved 1 basis point linked quarter. The purchase accounting impact on the net interest margin was approximately 6 basis points in the 2019 first quarter, down 1 basis point from the prior quarter. The 2018 fourth quarter included an approximately 2 basis point impact from higher commercial interest recoveries.
Compared to the 2018 fourth quarter, average earning assets increased $1.5 billion, or 1%, primarily reflecting the $1.0 billion, or 1%, increase in average loans and leases. Average C&I loans increased $1.0 billion, or 3%, reflecting growth in corporate banking, asset finance, dealer floorplan, and broad-based growth across the specialty lending verticals. Average securities increased $0.5 billion, or 2%, primarily reflecting the timing of purchases in anticipation of future cash flows.
Compared to the 2018 fourth quarter, average total interest-bearing liabilities increased $1.7 billion, or 2%. Average short-term borrowings increased $1.3 billion, or 131%, as loan growth and seasonality in deposits drove increased borrowings in the quarter.
Provision for Credit Losses
(This section should be read in conjunction with the "Credit Risk" section.) The provision for credit losses is the expense necessary to maintain the ALLL and the AULC at levels appropriate to absorb our estimate of credit losses inherent in the loan and lease portfolio and the portfolio of unfunded loan commitments and letters-of-credit.
The provision for credit losses for the 2019 first quarter was $67 million, which increased $1 million, or 2%, compared to the first quarter 2018. The increase from the 2018 first quarter is primarily attributed to higher commercial losses.
Noninterest Income
The following table reflects noninterest income for each of the periods presented:
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
Table 3 - Noninterest Income |
| Three Months Ended | | 1Q19 vs. 1Q18 | | 1Q19 vs. 4Q18 |
| March 31, | | December 31, | | March 31, | | Change | | Change |
(dollar amounts in millions) | 2019 | | 2018 | | 2018 | | Amount | | Percent | | Amount | | Percent |
Service charges on deposit accounts | $ | 87 |
| | $ | 94 |
| | $ | 86 |
| | $ | 1 |
| | 1 | % | | $ | (7 | ) | | (7 | )% |
Card and payment processing income | 56 |
| | 58 |
| | 53 |
| | 3 |
| | 6 |
| | (2 | ) | | (3 | ) |
Trust and investment management services | 44 |
| | 42 |
| | 44 |
| | — |
| | — |
| | 2 |
| | 5 |
|
Mortgage banking income | 21 |
| | 23 |
| | 26 |
| | (5 | ) | | (19 | ) | | (2 | ) | | (9 | ) |
Capital markets fees | 22 |
| | 34 |
| | 21 |
| | 1 |
| | 5 |
| | (12 | ) | | (35 | ) |
Insurance income | 21 |
| | 21 |
| | 21 |
| | — |
| | — |
| | — |
| | — |
|
Bank owned life insurance income | 16 |
| | 16 |
| | 15 |
| | 1 |
| | 7 |
| | — |
| | — |
|
Gain on sale of loans and leases | 13 |
| | 16 |
| | 8 |
| | 5 |
| | 63 |
| | (3 | ) | | (19 | ) |
Securities gains (losses) | — |
| | (19 | ) | | — |
| | — |
| | — |
| | 19 |
| | 100 |
|
Other income | 39 |
| | 44 |
| | 40 |
| | (1 | ) | | (3 | ) | | (5 | ) | | (11 | ) |
Total noninterest income | $ | 319 |
| | $ | 329 |
| | $ | 314 |
| | $ | 5 |
| | 2 | % | | $ | (10 | ) | | (3 | )% |
2019 First Quarter versus 2018 First Quarter
Reported noninterest income for the 2019 first quarter increased $5 million, or 2%, from the year-ago quarter. Gain on sale of loans and leases increased $5 million, or 63%, primarily reflecting the gain on the sale of asset finance leases and higher SBA sales. Mortgage banking income decreased $5 million, or 19%, primarily reflecting net mortgage servicing rights (MSR) risk management-related activities and lower origination volume.
2019 First Quarter versus 2018 Fourth Quarter
Compared to the 2018 fourth quarter, total noninterest income decreased $10 million, or 3%. Securities losses were less than $1 million compared to $19 million in the prior quarter, reflecting the portfolio repositioning completed in the 2018 fourth quarter. Capital market fees decreased $12 million, or 35%, driven by unfavorable commodities derivatives mark-to-market adjustments related to a commercial customer default and decreased interest rate derivative and syndication activity. Service charges on deposit accounts decreased $7 million, or 7%, primarily reflecting seasonality. Other income decreased $5 million, or 11%, primarily reflecting lower income on terminated asset finance leases.
Noninterest Expense
The following table reflects noninterest expense for each of the periods presented:
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
Table 4 - Noninterest Expense |
| Three Months Ended | | 1Q19 vs. 1Q18 | | 1Q19 vs. 4Q18 |
| March 31, | | December 31, | | March 31, | | Change | | Change |
(dollar amounts in millions) | 2019 | | 2018 | | 2018 | | Amount | | Percent | | Amount | | Percent |
Personnel costs | $ | 394 |
| | $ | 399 |
| | $ | 376 |
| | $ | 18 |
| | 5 | % | | $ | (5 | ) | | (1 | )% |
Outside data processing and other services | 81 |
| | 83 |
| | 73 |
| | 8 |
| | 11 |
| | (2 | ) | | (2 | ) |
Net occupancy | 42 |
| | 70 |
| | 41 |
| | 1 |
| | 2 |
| | (28 | ) | | (40 | ) |
Equipment | 40 |
| | 48 |
| | 40 |
| | — |
| | — |
| | (8 | ) | | (17 | ) |
Deposit and other insurance expense | 8 |
| | 9 |
| | 18 |
| | (10 | ) | | (56 | ) | | (1 | ) | | (11 | ) |
Professional services | 12 |
| | 17 |
| | 11 |
| | 1 |
| | 9 |
| | (5 | ) | | (29 | ) |
Marketing | 7 |
| | 15 |
| | 8 |
| | (1 | ) | | (13 | ) | | (8 | ) | | (53 | ) |
Amortization of intangibles | 13 |
| | 13 |
| | 14 |
| | (1 | ) | | (7 | ) | | — |
| | — |
|
Other noninterest expense | 56 |
| | 57 |
| | 52 |
| | 4 |
| | 8 |
| | (1 | ) | | (2 | ) |
Total noninterest expense | $ | 653 |
| | $ | 711 |
| | $ | 633 |
| | $ | 20 |
| | 3 | % | | $ | (58 | ) | | (8 | )% |
Number of employees (average full-time equivalent) | 15,738 |
| | 15,657 |
| | 15,599 |
| | 139 |
| | 1 | % | | 81 |
| | 1 | % |
2019 First Quarter versus 2018 First Quarter
Reported noninterest expense for the 2019 first quarter increased $20 million, or 3%, from the year-ago quarter. Personnel costs increased $18 million, or 5%, primarily reflecting strategic hiring, the implementation of annual merit increases in the 2018 second quarter, and increased benefits costs. Outside data processing and other services increased $8 million, or 11%, primarily driven by higher technology investment costs. Deposit and other insurance expense decreased $10 million, or 56%, due to the discontinuation of the FDIC surcharge in the 2018 fourth quarter.
2019 First Quarter versus 2018 Fourth Quarter
Reported noninterest expense decreased $58 million, or 8%, from the 2018 fourth quarter. Net occupancy decreased $28 million, or 40%, reflecting branch and facility consolidation-related expense in the 2018 fourth quarter. Equipment decreased $8 million, or 17%, reflecting branch and facility consolidation-related expense in the 2018 fourth quarter. Marketing expense decreased $8 million, or 53%, reflecting the timing of marketing campaigns and deposit promotions. Personnel costs decreased $5 million, or 1%, primarily reflecting lower performance-based incentive compensation.
Provision for Income Taxes
The provision for income taxes in the 2019 first quarter was $63 million. This compared with a provision for income taxes of $59 million in the 2018 first quarter and $57 million in the 2018 fourth quarter. All periods included the benefits from tax-exempt income, tax-advantaged investments, general business credits, investments in qualified affordable housing projects, stock-based compensation, and capital losses. The effective tax rates for the 2019 first quarter, 2018 first quarter, and 2018 fourth quarter were 15.0%, 15.3%, and 14.6%, respectively. The net federal deferred tax liability was $159 million and the net state deferred tax asset was $35 million at March 31, 2019.
We file income tax returns with the IRS and various state, city, and foreign jurisdictions. Federal income tax audits have been completed for tax years through 2009. Certain proposed adjustments resulting from the IRS examination of our 2010 through 2011 tax returns have been settled, subject to final approval by the Joint Committee on Taxation of the U.S. Congress. While the statute of limitations remains open for tax years 2012 through 2017, the IRS has advised that tax years 2012 through 2014 will not be audited, and began the examination of the 2015 federal income tax return during 2018. Various state and other jurisdictions remain open to examination, including Ohio, Kentucky, Indiana, Michigan, Pennsylvania, West Virginia, Wisconsin, and Illinois.
RISK MANAGEMENT AND CAPITAL
We use a multi-faceted approach to risk governance. It begins with the Board of Directors defining our risk appetite as aggregate moderate-to-low. Risk awareness, identification and assessment, reporting, and active management are key elements in overall risk management. Controls include, among others, effective segregation of duties, access, authorization and reconciliation procedures, as well as staff education and a disciplined assessment process.
We believe that our primary risk exposures are credit, market, liquidity, operational and compliance. More information on risk can be found in the Risk Factors section included in Item 1A of our 2018 Form 10-K and subsequent filings with the SEC. The MD&A included in our 2018 Form 10-K should be read in conjunction with this MD&A as this discussion provides only material updates to the Form 10-K. This MD&A should also be read in conjunction with the Unaudited Condensed Consolidated Financial Statements, Notes to Unaudited Condensed Consolidated Financial Statements, and other information contained in this report. Our definition, philosophy, and approach to risk management have not materially changed from the discussion presented in the 2018 Form 10-K. Credit Risk
Credit risk is the risk of financial loss if a counterparty is not able to meet the agreed upon terms of the financial obligation. The majority of our credit risk is associated with lending activities, as the acceptance and management of credit risk is central to profitable lending. We also have credit risk associated with our investment securities portfolios (see Note 4 "Investment Securities and Other Securities" of the Notes to the Unaudited Condensed Consolidated Financial Statements). We engage with other financial counterparties for a variety of purposes including investing, asset and liability management, mortgage banking, and trading activities. While there is credit risk associated with derivative activity, we believe this exposure is minimal. We continue to focus on the identification, monitoring, and management of our credit risk. In addition to the traditional credit risk mitigation strategies of credit policies and processes, market risk management activities, and portfolio diversification, we use quantitative measurement capabilities utilizing external data sources, enhanced modeling technology, and internal stress testing processes. Our portfolio management resources demonstrate our commitment to maintaining an aggregate moderate-to-low risk profile. In our efforts to continue to identify risk mitigation techniques, we have focused on product design features, origination policies, and solutions for delinquent or stressed borrowers.
Loan and Lease Credit Exposure Mix
Refer to the “Loan and Lease Credit Exposure Mix” section of our 2018 Form 10-K for a brief description of each portfolio segment.
The table below provides the composition of our total loan and lease portfolio:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Table 5 - Loan and Lease Portfolio Composition |
| | | | | | | | | | | | | | | | | | | |
(dollar amounts in millions) | March 31,
2019 | | December 31,
2018 | | September 30,
2018 | | June 30,
2018 | | March 31,
2018 |
Commercial: | | | | | | | | | | | | | | | | | | | |
Commercial and industrial | $ | 30,972 |
| | 41 | % | | $ | 30,605 |
| | 41 | % | | $ | 29,196 |
| | 40 | % | | $ | 28,850 |
| | 40 | % | | $ | 28,622 |
| | 40 | % |
Commercial real estate: | | | | | | | | | | | | | | | | | | | |
Construction | 1,152 |
| | 2 |
| | 1,185 |
| | 2 |
| | 1,111 |
| | 2 |
| | 1,083 |
| | 1 |
| | 1,167 |
| | 2 |
|
Commercial | 5,643 |
| | 8 |
| | 5,657 |
| | 8 |
| | 5,962 |
| | 8 |
| | 6,118 |
| | 8 |
| | 6,245 |
| | 9 |
|
Commercial real estate | 6,795 |
| | 10 |
| | 6,842 |
| | 10 |
| | 7,073 |
| | 10 |
| | 7,201 |
| | 9 |
| | 7,412 |
| | 11 |
|
Total commercial | 37,767 |
| | 51 |
| | 37,447 |
| | 51 |
| | 36,269 |
| | 50 |
| | 36,051 |
| | 49 |
| | 36,034 |
| | 51 |
|
Consumer: | | | | | | | | | | | | | | | | | | | |
Automobile | 12,272 |
| | 16 |
| | 12,429 |
| | 16 |
| | 12,375 |
| | 17 |
| | 12,390 |
| | 17 |
| | 12,146 |
| | 17 |
|
Home equity | 9,551 |
| | 13 |
| | 9,722 |
| | 13 |
| | 9,850 |
| | 13 |
| | 9,907 |
| | 14 |
| | 9,987 |
| | 14 |
|
Residential mortgage | 10,885 |
| | 14 |
| | 10,728 |
| | 14 |
| | 10,459 |
| | 14 |
| | 10,006 |
| | 14 |
| | 9,357 |
| | 13 |
|
RV and marine | 3,344 |
| | 4 |
| | 3,254 |
| | 4 |
| | 3,152 |
| | 4 |
| | 2,846 |
| | 4 |
| | 2,549 |
| | 3 |
|
Other consumer | 1,260 |
| | 2 |
| | 1,320 |
| | 2 |
| | 1,265 |
| | 2 |
| | 1,206 |
| | 2 |
| | 1,090 |
| | 2 |
|
Total consumer | 37,312 |
| | 49 |
| | 37,453 |
| | 49 |
| | 37,101 |
| | 50 |
| | 36,355 |
| | 51 |
| | 35,129 |
| | 49 |
|
Total loans and leases | $ | 75,079 |
| | 100 | % | | $ | 74,900 |
| | 100 | % | | $ | 73,370 |
| | 100 | % | | $ | 72,406 |
| | 100 | % | | $ | 71,163 |
| | 100 | % |
Our loan portfolio is composed of a managed mix of consumer and commercial credits. At the corporate level, we manage the overall credit exposure and portfolio composition via a credit concentration policy. The policy designates specific loan types, collateral types, and loan structures to be formally tracked and assigned maximum exposure limits as a percentage of capital. C&I lending by NAICS categories, specific limits for CRE project types, loans secured by residential real estate, shared national credit exposure, and designated high risk loan definitions represent examples of specifically tracked components of our concentration management process. There are no identified concentrations that exceed the assigned exposure limit. Our concentration management policy is approved by the ROC of the Board of Directors and is one of the strategies used to ensure a high quality, well diversified portfolio that is consistent with our overall objective of maintaining an aggregate moderate-to-low risk profile. Changes to existing concentration limits require the approval of the ROC prior to implementation, incorporating specific information relating to the potential impact on the overall portfolio composition and performance metrics.
Commercial Credit
Refer to the “Commercial Credit” section of our 2018 Form 10-K for our commercial credit underwriting and on-going credit management processes.
Consumer Credit
Refer to the “Consumer Credit” section of our 2018 Form 10-K for our consumer credit underwriting and on-going credit management processes.
The table below provides our total loan and lease portfolio segregated by industry type. The changes in the industry composition from December 31, 2018 are consistent with the portfolio growth metrics.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Table 6 - Loan and Lease Portfolio by Industry Type |
| | | | | | | | | | | | | | | | | | | |
(dollar amounts in millions) | March 31,
2019 | | December 31,
2018 | | September 30,
2018 | | June 30,
2018 | | March 31,
2018 |
Commercial loans and leases: | | | | | | | | | | | | | | | | | | | |
Real estate and rental and leasing | 6,955 |
| | 9 | % | | $ | 6,964 |
| | 9 | % | | $ | 7,187 |
| | 10 | % | | $ | 7,314 |
| | 10 | % | | $ | 7,509 |
| | 11 | % |
Retail trade (1) | 5,266 |
| | 7 |
| | 5,337 |
| | 7 |
| | 4,987 |
| | 7 |
| | 4,886 |
| | 7 |
| | 5,034 |
| | 7 |
|
Manufacturing | 5,338 |
| | 7 |
| | 5,140 |
| | 7 |
| | 4,817 |
| | 7 |
| | 4,867 |
| | 7 |
| | 4,780 |
| | 7 |
|
Finance and insurance | 3,457 |
| | 5 |
| | 3,377 |
| | 5 |
| | 3,345 |
| | 5 |
| | 3,188 |
| | 4 |
| | 3,216 |
| | 5 |
|
Wholesale trade | 2,725 |
| | 4 |
| | 2,830 |
| | 4 |
| | 2,609 |
| | 4 |
| | 2,575 |
| | 4 |
| | 2,472 |
| | 3 |
|
Health care and social assistance | 2,575 |
| | 3 |
| | 2,533 |
| | 3 |
| | 2,582 |
| | 4 |
| | 2,589 |
| | 4 |
| | 2,649 |
| | 4 |
|
Accommodation and food services | 1,782 |
| | 2 |
| | 1,709 |
| | 2 |
| | 1,636 |
| | 2 |
| | 1,657 |
| | 2 |
| | 1,675 |
| | 2 |
|
Professional, scientific, and technical services | 1,401 |
| | 2 |
| | 1,344 |
| | 2 |
| | 1,269 |
| | 2 |
| | 1,303 |
| | 2 |
| | 1,293 |
| | 2 |
|
Transportation and warehousing | 1,323 |
| | 2 |
| | 1,320 |
| | 2 |
|