Annual report pursuant to Section 13 and 15(d)

OTHER REGULATORY MATTERS

v3.8.0.1
OTHER REGULATORY MATTERS
 12 Months Ended
Dec. 31, 2017
Banking and Thrift [Abstract]  
OTHER REGULATORY MATTERS
OTHER REGULATORY MATTERS
Huntington and the Bank are subject to certain risk-based capital and leverage ratio requirements adopted by the Federal Reserve, for Huntington, and the OCC, for the Bank, to implement the U.S. Basel III capital rules. These quantitative calculations are minimums, and the Federal Reserve and OCC may determine that a banking organization, based on its size, complexity or risk profile, must maintain a higher level of capital in order to operate in a safe and sound manner.
Under the U.S. Basel III capital rules, Huntington’s and the Bank’s assets, exposures and certain off-balance sheet items are subject to risk weights used to determine the institutions’ risk-weighted assets. These risk-weighted assets are used to calculate the following minimum capital ratios for Huntington and the Bank:
•
Tier 1 Leverage Ratio, equal to the ratio of Tier 1 capital to quarterly average assets (net of goodwill, certain other intangible assets and certain other deductions). The Bank’s minimum Tier 1 leverage ratio requirement is 4%.
•
CET1 Risk-Based Capital Ratio, equal to the ratio of CET1 capital to risk-weighted assets. CET1 capital primarily includes common shareholders’ equity subject to certain regulatory adjustments and deductions, including with respect to goodwill, intangible assets, certain deferred tax assets and AOCI. Certain of these adjustments and deductions are subject to phase-in periods that began on January 1, 2015 and ended on January 1, 2018. Together with the FDIC, the Federal Reserve and OCC have issued proposed rules that would simplify the capital treatment of certain capital deductions and adjustments. The final phase-in period for these capital deductions and adjustments has been indefinitely delayed. The minimum CET1 risk-based capital ratio requirement for Huntington and the Bank is 4.5%.
•
Tier 1 Risk-Based Capital Ratio, equal to the ratio of Tier 1 capital to risk-weighted assets. Tier 1 capital is primarily comprised of CET1 capital, perpetual preferred stock and certain qualifying capital instruments. The minimum Tier 1 risk-based capital ratio requirement for Huntington and the Bank is 6%.
•
Total Risk-Based Capital Ratio, equal to the ratio of total capital, including CET1 capital, Tier 1 capital and Tier 2 capital, to risk-weighted assets. Tier 2 capital primarily includes qualifying subordinated debt and qualifying ALLL. Tier 2 capital also includes, among other things, certain trust preferred securities. The minimum total risk-based capital ratio requirement for Huntington and the Bank is 8%.
To be well-capitalized, the Bank must maintain the following capital ratios: CET1 Risk-Based Capital Ratio of 6.5% or greater; Tier 1 Risk-Based Capital Ratio of 8.0% or greater; Total Risk-Based Capital Ratio of 10.0% or greater; and Tier 1 Leverage Ratio of 5.0% or greater.
Failure to be well-capitalized or to meet minimum capital requirements could result in certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have an adverse material effect on our operations or financial condition. Failure to be well-capitalized or to meet minimum capital requirements could also result in restrictions on Huntington’s or the Bank’s ability to pay dividends or otherwise distribute capital or to receive regulatory approval of applications. In addition to meeting the minimum capital requirements, under the U.S. Basel III capital rules Huntington and the Bank must also maintain the required Capital Conservation Buffer to avoid becoming subject to restrictions on capital distributions and certain discretionary bonus payments to management. The Capital Conservation Buffer is calculated as a ratio of CET1 capital to risk-weighted assets, and it effectively increases the required minimum risk-based capital ratios. The Capital Conservation Buffer requirement is being phased in over a three-year period that began on January 1, 2016. When the phase-in period is complete on January 1, 2019, the Capital Conservation Buffer will be 2.5%. Throughout 2017, the required Capital Conservation Buffer was 1.25%, and the required Capital Conservation Buffer throughout 2018 will be 1.875%.
As of December 31, 2017, Huntington’s and the Bank’s regulatory capital ratios were above the well-capitalized standards and met the then-applicable Capital Conservation Buffer. Please refer to the table below for a summary of Huntington’s and the Bank’s regulatory capital ratios as of December 31, 2017, calculated using the regulatory capital methodology applicable to us during 2017.
 
 
Minimum
 
Minimum
 
 
 
December 31,
 
 
Regulatory
 
Ratio+Capital
 
Well-
 
2017
 
2016
 
 
Capital
 
Conservation
 
Capitalized
 
Basel III
(dollar amounts in millions)
 
Ratios
 
Buffer
 
Minimums
 
Ratio
 
Amount
 
Ratio
 
Amount
Tier 1 leverage
Consolidated
4.00
%
 
N/A

 
N/A

 
9.09
%
 
$
9,110

 
8.70
%
 
$
8,547

 
Bank
4.00

 
N/A

 
5.00
%
 
9.70

 
9,727

 
9.29

 
9,086

CET 1 risk-based capital
Consolidated
4.50

 
5.75
%
 
N/A

 
10.01

 
8,041

 
9.56

 
7,486

 
Bank
4.50

 
5.75

 
6.50

 
11.02

 
8,856

 
10.42

 
8,153

Tier 1 risk-based capital
Consolidated
6.00

 
7.25

 
6.00

 
11.34

 
9,110

 
10.92

 
8,547

 
Bank
6.00

 
7.25

 
8.00

 
12.10

 
9,727

 
11.61

 
9,086

Total risk-based capital
Consolidated
8.00

 
9.25

 
10.00

 
13.39

 
10,757

 
13.05

 
10,215

 
Bank
8.00

 
9.25

 
10.00

 
14.33

 
11,517

 
13.83

 
10,818


Huntington and its subsidiaries are also subject to various regulatory requirements that impose restrictions on cash, debt, and dividends. The Bank is required to maintain cash reserves based on the level of certain of its deposits. This reserve requirement may be met by holding cash in banking offices or on deposit at the FRB. During 2017 and 2016, the average balances of these deposits were $0.4 billion and $0.3 billion, respectively.
Under current Federal Reserve regulations, the Bank is limited as to the amount and type of loans it may make to the parent company and nonbank subsidiaries. At December 31, 2017, the Bank could lend $1.1 billion to a single affiliate, subject to the qualifying collateral requirements defined in the regulations.
Dividends from the Bank are one of the major sources of funds for the Company. These funds aid the Company in the payment of dividends to shareholders, expenses, and other obligations. Payment of dividends and/or return of capital to the parent company is subject to various legal and regulatory limitations. During 2017, the Bank paid dividends and returned capital of $723.7 million to the holding company. Also, there are statutory and regulatory limitations on the ability of national banks to pay dividends or make other capital distributions.