Huntington Bancshares Incorporated Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

OPERATING LEASES

OPERATING LEASES

9 Months Ended

Sep. 30, 2019

At September 30, 2019, Huntington was obligated under noncancelable leases for branch and office space. These leases are all classified as operating primarily due to the amount of time such spaces are occupied relative to the underlying assets useful lives. Many of these leases contain renewal options, most of which are not included in measurement of the right-of-use asset as they are not considered reasonably certain of exercise (i.e., Huntington does not currently have a significant economic incentive to exercise these options). Some leases contain escalation clauses calling for rentals to be adjusted for increased real estate taxes and other operating expenses or proportionately adjusted for increases in the consumer or other price indices.

Occasionally, Huntington will sublease the land and buildings for which it has obtained the right to use; substantially all of those sublease arrangements are classified as operating, with sublease income recognized on a straight-line basis over the contractual term of the arrangement. Huntington has elected not to include non-lease components in the measurement of right-of-use assets, and as such allocates the costs attributable to such components, where those costs are not separately identifiable, via per-square-foot costing analysis developed by the entity for owned and leased spaces. Huntington uses a portfolio approach to develop discount rates as its lease portfolio is comprised of substantially all branch space and office space used in the entity’s operations. That rate, an input used in the measurement of the entity’s right-of-use assets, leverages an incremental borrowing rate of appropriate tenor and collateralization.

Net lease assets and liabilities at September 30, 2019 are as follows:



(dollar amounts in millions)	Classification	September 30, 2019
Assets
Operating lease assets	Other assets	$	200
Liabilities
Lease liabilities	Other liabilities	$	225

Net lease cost for the three-month and nine-month periods ended September 30, 2019 is as follows:



(dollar amounts in millions)	Classification	Three Months Ended September 30, 2019			Nine Months Ended September 30, 2019
Operating lease cost	Net occupancy	$	11		$	34
Short term lease cost	Net occupancy	—			1
Sublease income	Net occupancy	(1		)	(2		)
Net lease cost		$	10		$	33

Maturity of lease liabilities at September 30, 2019 are as follows:



(dollar amounts in millions)	Total
Remainder of 2019	$	10
2020	50
2021	39
2022	34
2023	29
Thereafter	105
Total lease payments	$	267
Less: Interest	(42		)
Total lease liabilities	$	225

Lease term and discount rate as of September 30, 2019 are as follows:



	September 30, 2019
Weighted-average remaining lease term (years)
Operating leases	7.41

Weighted-average discount rate
Operating leases	4.67	%

Cash flow supplemental information at September 30, 2019 are as follows:



(dollar amounts in millions)	Nine Months Ended September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	(41	)

Right-of-use assets obtained in exchange for lease obligations
Operating leases	19