Annual report pursuant to Section 13 and 15(d)

LOANS AND LEASES AND ALLOWANCE FOR CREDIT LOSSES

v3.19.3.a.u2
LOANS AND LEASES AND ALLOWANCE FOR CREDIT LOSSES
12 Months Ended
Dec. 31, 2019
Receivables [Abstract]  
LOANS AND LEASES AND ALLOWANCE FOR CREDIT LOSSES LOANS / LEASES AND ALLOWANCE FOR CREDIT LOSSES
Loans and leases which Huntington has the intent and ability to hold for the foreseeable future, or until maturity or payoff, are classified in the Consolidated Balance Sheets as loans and leases. The total balance of unamortized premiums, discounts, fees, and costs, recognized as part of loans and leases, was a net premium of $525 million and $428 million at December 31, 2019 and 2018, respectively.
Loan and Lease Portfolio Composition
The following table provides a detailed listing of Huntington’s loan and lease portfolio at December 31, 2019 and December 31, 2018.
 
At December 31,
(dollar amounts in millions)
2019
 
2018
Loans and leases:
 
 
 
Commercial and industrial
$
30,664

 
$
30,605

Commercial real estate
6,674

 
6,842

Automobile
12,797

 
12,429

Home equity
9,093

 
9,722

Residential mortgage
11,376

 
10,728

RV and marine
3,563

 
3,254

Other consumer
1,237

 
1,320

Loans and leases
75,404

 
74,900

Allowance for loan and lease losses
(783
)
 
(772
)
Net loans and leases
$
74,621

 
$
74,128


Equipment Leases
Huntington leases equipment to customers, and substantially all such arrangements are classified as either sales-type or direct financing leases, which are included in C&I loans. These leases are reported at the aggregate of lease payments receivable and estimated residual values, net of unearned and deferred income, and any initial direct costs incurred to originate these leases. Renewal options for leases are at the option of the lessee, and are not included in the measurement of lease receivables as they are not considered reasonably certain of exercise. Purchase options are typically at fair value, and as such those options are not considered in the measurement of lease receivables or in lease classification.
For leased equipment, the residual component of a direct financing lease represents the estimated fair value of the leased equipment at the end of the lease term. Huntington uses industry data, historical experience, and independent appraisals to establish these residual value estimates. Additional information regarding product life cycle, product upgrades, as well as insight into competing products are obtained through relationships with industry contacts and are factored into residual value estimates where applicable. Upon expiration of a lease, residual assets are remarketed, resulting in an extension of the lease by the lessee, a lease to a new customer, or purchase of the residual asset by the lessee or another party. Huntington also purchases insurance guaranteeing the value of certain residual assets.
The following table presents net investments in lease financing receivables by category at December 31, 2019 and 2018:
 
At December 31,
(dollar amounts in millions)
2019
 
2018
Commercial and industrial:
 
 
 
Lease payments receivable
$
1,841

 
$
1,747

Estimated residual value of leased assets
728

 
726

Gross investment in commercial and industrial lease financing receivables
2,569

 
2,473

Deferred origination costs
19

 
20

Deferred fees
(249
)
 
(250
)
Total net investment in commercial and industrial lease financing receivables
$
2,339

 
$
2,243

The carrying value of residual values guaranteed was $95 million as of December 31, 2019. The future lease rental payments due from customers on sales-type and direct financing leases at December 31, 2019, totaled $1.8 billion and were due as follows: $0.7 billion in 2020, $0.4 billion in 2021, $0.3 billion in 2022, $0.2 billion in 2023, $0.1 billion in 2024, and $0.1 billion thereafter. Interest income recognized for these types of leases was $108 million and $100 million for the years ended December 31, 2019 and December 31, 2018, respectively.
Nonaccrual and Past Due Loans
The following table presents NALs by loan class at December 31, 2019 and 2018: 
 
December 31,
(dollar amounts in millions)
2019
 
2018
Commercial and industrial
$
323

 
$
188

Commercial real estate
10

 
15

Automobile
4

 
5

Home equity
59

 
62

Residential mortgage
71

 
69

RV and marine
1

 
1

Other consumer

 

Total nonaccrual loans
$
468

 
$
340


The amount of interest that would have been recorded under the original terms for total NAL loans was $26 million, $22 million, and $21 million for 2019, 2018, and 2017, respectively. The total amount of interest recorded to interest income for NAL loans was $9 million, $12 million, and $18 million in 2019, 2018, and 2017, respectively.
The following table presents an aging analysis of loans and leases, including past due loans and leases, by loan class at December 31, 2019 and 2018 :
 
December 31, 2019
 
Past Due (1)
 
 
 
 Loans Accounted for Under FVO
 
Total Loans
and Leases
 
90 or
more days
past due
and accruing
 
(dollar amounts in millions)
30-59
Days
 
60-89
 Days
 
90 or 
more days
Total
 
Current
 
 
 
 
Commercial and industrial
$
65

 
$
31

 
$
69

 
$
165

 
$
30,499

 
$

 
$
30,664

 
$
11

(2)
Commercial real estate
3

 
1

 
7

 
11

 
6,663

 

 
6,674

 

 
Automobile
95

 
19

 
11

 
125

 
12,672

 

 
12,797

 
8

 
Home equity
50

 
19

 
51

 
120

 
8,972

 
1

 
9,093

 
14

 
Residential mortgage
103

 
49

 
170

 
322

 
10,974

 
80

 
11,376

 
129

(3)
RV and marine
13

 
4

 
2

 
19

 
3,544

 

 
3,563

 
2

 
Other consumer
13

 
6

 
7

 
26

 
1,211

 

 
1,237

 
7

 
Total loans and leases
$
342

 
$
129

 
$
317

 
$
788

 
$
74,535

 
$
81

 
$
75,404

 
$
171

 
 
December 31, 2018
 
Past Due (1)
 
 
 
Loans Accounted for Under FVO
 
Total Loans
and Leases
 
90 or
more days
past due
and accruing
 
(dollar amounts in millions)
30-59
Days
 
60-89
 Days
 
90 or 
more days
Total
 
Current
 
 
 
 
Commercial and industrial
$
72

 
$
17

 
$
51

 
$
140

 
$
30,465

 
$

 
$
30,605

 
$
7

(2)
Commercial real estate
10

 

 
5

 
15

 
6,827

 

 
6,842

 

 
Automobile
95

 
19

 
10

 
124

 
12,305

 

 
12,429

 
8

 
Home equity
51

 
21

 
56

 
128

 
9,593

 
1

 
9,722

 
17

 
Residential mortgage
108

 
47

 
168

 
323

 
10,327

 
78

 
10,728

 
131

(3)
RV and marine
12

 
3

 
2

 
17

 
3,237

 

 
3,254

 
1

 
Other consumer
14

 
7

 
6

 
27

 
1,293

 

 
1,320

 
6

 
Total loans and leases
$
362

 
$
114

 
$
298

 
$
774

 
$
74,047

 
$
79

 
$
74,900

 
$
170

 

(1)
NALs are included in this aging analysis based on the loan’s past due status.
(2)
Amounts include Huntington Technology Finance administrative lease delinquencies.
(3)
Amounts include mortgage loans insured by U.S. government agencies.
Allowance for Credit Losses
The following table presents ALLL and AULC activity by portfolio segment for the years ended December 31, 2019, 2018, and 2017:
(dollar amounts in millions)
 
Commercial
 
Consumer
 
Total
Year ended December 31, 2019:
 
 
 
 
 
 
ALLL balance, beginning of period
 
$
542

 
$
230

 
$
772

Loan charge-offs
 
(165
)
 
(197
)
 
(362
)
Recoveries of loans previously charged-off
 
40

 
57

 
97

Provision for loan and lease losses
 
135

 
142

 
277

Allowance for loans sold or transferred to loans held for sale
 

 
(1
)
 
(1
)
ALLL balance, end of period
 
$
552

 
$
231

 
$
783

AULC balance, beginning of period
 
$
94

 
$
2

 
$
96

Provision (reduction in allowance) for unfunded loan commitments
and letters of credit
 
10

 

 
10

Unfunded commitment losses
 
(2
)
 

 
(2
)
AULC balance, end of period
 
$
102

 
$
2

 
$
104

ACL balance, end of period
 
$
654

 
$
233

 
$
887

 
 
 
 
 
 
 
Year ended December 31, 2018:
 
 
 
 
 
 
ALLL balance, beginning of period
 
$
482

 
$
209

 
$
691

Loan charge-offs
 
(79
)
 
(189
)
 
(268
)
Recoveries of loans previously charged-off
 
65

 
58

 
123

Provision for loan and lease losses
 
74

 
152

 
226

ALLL balance, end of period
 
$
542

 
$
230

 
$
772

AULC balance, beginning of period
 
$
84

 
$
3

 
$
87

Provision (reduction in allowance) for unfunded loan commitments
and letters of credit
 
10

 
(1
)
 
9

AULC balance, end of period
 
$
94

 
$
2

 
$
96

ACL balance, end of period
 
$
636

 
$
232

 
$
868

 
 
 
 
 
 
 
Year ended December 31, 2017:
 
 
 
 
 
 
ALLL balance, beginning of period
 
$
451

 
$
187

 
$
638

Loan charge-offs
 
(72
)
 
(180
)
 
(252
)
Recoveries of loans previously charged-off
 
41

 
52

 
93

Provision for loan and lease losses
 
62

 
150

 
212

ALLL balance, end of period
 
$
482

 
$
209

 
$
691

AULC balance, beginning of period
 
$
87

 
$
11

 
$
98

Provision (reduction in allowance) for unfunded loan commitments
and letters of credit
 
(3
)
 
(8
)
 
(11
)
AULC balance, end of period
 
$
84

 
$
3

 
$
87

ACL balance, end of period
 
$
566

 
$
212

 
$
778


Credit Quality Indicators
To facilitate the monitoring of credit quality for commercial loans, and for purposes of determining an appropriate ACL level for these loans, Huntington utilizes the following internally defined categories of credit grades:
Pass - Higher quality loans that do not fit any of the other categories described below.
OLEM - The credit risk may be relatively minor yet represents a risk given certain specific circumstances. If the potential weaknesses are not monitored or mitigated, the loan may weaken or the collateral may be inadequate to protect Huntington’s position in the future. For these reasons, Huntington considers the loans to be potential problem loans.
Substandard - Inadequately protected loans resulting from the borrower’s ability to repay, equity, and/or the collateral pledged to secure the loan. These loans have identified weaknesses that could hinder normal repayment or collection of the debt. It is likely Huntington will sustain some loss if any identified weaknesses are not mitigated.
Doubtful - Loans that have all of the weaknesses inherent in those loans classified as Substandard, with the added elements of the full collection of the loan is improbable and that the possibility of loss is high.
Loans are generally assigned a category of “Pass” rating upon initial approval and subsequently updated as appropriate based on the borrower’s financial performance.
Commercial loans categorized as OLEM, Substandard, or Doubtful are considered Criticized loans. Commercial loans categorized as Substandard or Doubtful are both considered Classified loans.
For all classes within the consumer loan portfolios, loans are assigned pool level PD factors based on the FICO range within which the borrower’s most recent credit bureau score falls. A credit bureau score is a credit score developed by FICO based on data provided by the credit bureaus. The credit bureau score is widely accepted as the standard measure of consumer credit risk used by lenders, regulators, rating agencies, and consumers. The higher the credit bureau score, the higher likelihood of repayment and therefore, an indicator of higher credit quality.
Huntington assesses the risk in the loan portfolio by utilizing numerous risk characteristics. The classifications described above, and also presented in the table below, represent one of those characteristics that are closely monitored in the overall credit risk management processes.
The following tables present each loan and lease class by credit quality indicator at December 31, 2019 and 2018:
 
December 31, 2019
 
Credit Risk Profile by UCS Classification
(dollar amounts in millions)
Pass
 
OLEM
 
Substandard
 
Doubtful
 
Total
Commercial and industrial
$
28,477

 
$
634

 
$
1,551

 
$
2

 
$
30,664

Commercial real estate
6,487

 
98

 
88

 
1

 
6,674

 
Credit Risk Profile by FICO Score (1), (2)
 
750+
 
650-749
 
<650
 
Other (3)
 
Total
Automobile
6,759

 
4,661

 
1,377

 

 
12,797

Home equity
5,763

 
2,772

 
557

 

 
9,092

Residential mortgage
7,976

 
2,742

 
578

 

 
11,296

RV and marine
2,391

 
1,053

 
119

 

 
3,563

Other consumer
546

 
571

 
120

 

 
1,237

 
December 31, 2018
 
Credit Risk Profile by UCS Classification
(dollar amounts in millions)
Pass
 
OLEM
 
Substandard
 
Doubtful
 
Total
Commercial and industrial
$
28,807

 
$
518

 
$
1,269

 
$
11

 
$
30,605

Commercial real estate
6,586

 
181

 
74

 
1

 
6,842

 
Credit Risk Profile by FICO Score (1), (2)
 
750+
 
650-749
 
<650
 
Other (3)
 
Total
Automobile
6,254

 
4,520

 
1,373

 
282

 
12,429

Home equity
6,098

 
2,975

 
591

 
56

 
9,720

Residential mortgage
7,159

 
2,801

 
612

 
78

 
10,650

RV and marine
2,074

 
990

 
105

 
85

 
3,254

Other consumer
501

 
633

 
129

 
57

 
1,320

(1)
Excludes loans accounted for under the fair value option.
(2)
Reflects updated customer credit scores.
(3)
As of December 31, 2019, amounts previously reported in Other were identified and aligned with the appropriate loan balance classification. Amounts as of December 31, 2018, reflects deferred fees and costs, loans in process, etc.
Impaired Loans
The following tables present the balance of the ALLL attributable to loans by portfolio segment individually and collectively evaluated for impairment and the related loan and lease balance for the years ended December 31, 2019 and 2018:
(dollar amounts in millions)
 
Commercial
 
Consumer
 
Total
ALLL at December 31, 2019
 
 
 
 
 
 
Portion of ALLL balance:
 
 
 
 
 
 
Attributable to loans individually evaluated for impairment
 
$
61

 
$
8

 
$
69

Attributable to loans collectively evaluated for impairment
 
491

 
223

 
714

Total ALLL balance
 
$
552

 
$
231

 
$
783

Loan and Lease Ending Balances at December 31, 2019 (1)
 
 
 
 
 
 
Portion of loan and lease ending balances:
 
 
 
 
 
 
Individually evaluated for impairment
 
$
600

 
$
574

 
$
1,174

Collectively evaluated for impairment
 
36,738

 
37,411

 
74,149

Total loans and leases evaluated for impairment
 
$
37,338

 
$
37,985

 
$
75,323

(1)
Excludes loans accounted for under the fair value option.
(dollar amounts in millions)
 
Commercial
 
Consumer
 
Total
ALLL at December 31, 2018
 
 
 
 
 
 
Portion of ALLL balance:
 
 
 
 
 
 
Attributable to loans individually evaluated for impairment
 
$
33

 
$
10

 
$
43

Attributable to loans collectively evaluated for impairment
 
509

 
220

 
729

Total ALLL balance:
 
$
542

 
$
230

 
$
772

Loan and Lease Ending Balances at December 31, 2018 (1)
 
 
 
 
 
 
Portion of loan and lease ending balances:
 
 
 
 
 
 
Individually evaluated for impairment
 
$
516

 
$
591

 
$
1,107

Collectively evaluated for impairment
 
36,931

 
36,783

 
73,714

Total loans and leases evaluated for impairment
 
$
37,447

 
$
37,374

 
$
74,821


(1)
Excludes loans accounted for under the fair value option.
The following tables present by class the ending balance, unpaid principal balance, and the related ALLL, along with the average balance and interest income recognized for impaired loans and leases for the years ended December 31, 2019 and 2018 (1):
 
 
 
 
 
 
 
Year Ended
 
December 31, 2019
 
December 31, 2019
(dollar amounts in millions)
Ending
Balance
 
Unpaid
Principal
Balance (2)
 
Related
Allowance (3)
 
Average
Balance
 
Interest
Income
Recognized
With no related allowance recorded:
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
181

 
$
215

 
$

 
$
204

 
$
19

Commercial real estate
25

 
26

 

 
32

 
8

 
 
 
 
 
 
 
 
 
 
With an allowance recorded:
 
 
 
 
 
 
 
 
 
Commercial and industrial
366

 
425

 
60

 
312

 
11

Commercial real estate
28

 
31

 
1

 
31

 
2

Automobile
43

 
46

 
2

 
40

 
3

Home equity
284

 
281

 
9

 
300

 
14

Residential mortgage
293

 
329

 
4

 
288

 
11

RV and marine
4

 
4

 

 
3

 

Other consumer
11

 
11

 
2

 
10

 

 
 
 
 
 
 
 
 
 
 
Total
 
 
 
 
 
 
 
 
 
Commercial and industrial (4)
547

 
640

 
60

 
516

 
30

Commercial real estate (5)
53

 
57

 
1

 
63

 
10

Automobile (6)
43

 
46

 
2

 
40

 
3

Home equity (7)
284

 
281

 
9

 
300

 
14

Residential mortgage (7)
293

 
329

 
4

 
288

 
11

RV and marine (6)
4

 
4

 

 
3

 

Other consumer (6)
11

 
11

 
2

 
10

 

 
 
 
 
 
 
 
Year Ended
 
December 31, 2018
 
December 31, 2018
(dollar amounts in millions)
Ending
Balance
 
Unpaid
Principal
Balance (2)
 
Related
Allowance (3)
 
Average
Balance
 
Interest
Income
Recognized
With no related allowance recorded:
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
224

 
$
261

 
$

 
$
256

 
$
22

Commercial real estate
36

 
45

 

 
47

 
8

 
 
 
 
 
 
 
 
 
 
With an allowance recorded:
 
 
 
 
 
 
 
 
 
Commercial and industrial
221

 
240

 
31

 
272

 
11

Commercial real estate
35

 
39

 
2

 
45

 
2

Automobile
38

 
42

 
2

 
37

 
2

Home equity
314

 
356

 
10

 
326

 
14

Residential mortgage
287

 
323

 
4

 
297

 
11

RV and marine
2

 
3

 

 
2

 

Other consumer
9

 
9

 
3

 
8

 

 
 
 
 
 
 
 
 
 
 
Total
 
 
 
 
 
 
 
 
 
Commercial and industrial (4)
445

 
501

 
31

 
528

 
33

Commercial real estate (5)
71

 
84

 
2

 
92

 
10

Automobile (6)
38

 
42

 
2

 
37

 
2

Home equity (7)
314

 
356

 
10

 
326

 
14

Residential mortgage (7)
287

 
323

 
4

 
297

 
11

RV and marine (6)
2

 
3

 

 
2

 

Other consumer (6)
9

 
9

 
3

 
8

 


(1)
These tables do not include loans fully charged-off.
(2)
The differences between the ending balance and unpaid principal balance amounts primarily represent partial charge-offs.
(3)
Impaired loans in the consumer portfolio are evaluated in pools and not at the loan level. Thus, these loans do not have an individually assigned allowance and as such are all classified as with an allowance in the tables above.
(4)
At December 31, 2019 and December 31, 2018, C&I loans of $322 million and $366 million, respectively, were considered impaired due to their status as a TDR.
(5)
At December 31, 2019 and December 31, 2018, CRE loans of $43 million and $60 million, respectively, were considered impaired due to their status as a TDR.
(6)
All automobile, RV and marine and other consumer impaired loans included in these tables are considered impaired due to their status as a TDR.
(7)
Includes home equity and residential mortgages considered impaired due to their non-accrual status and collateral dependent designation as well as home equity and mortgage loans considered impaired due to their status as a TDR.

TDR Loans
The amount of interest that would have been recorded under the original terms for total accruing TDR loans was $52 million, $51 million, and $49 million for 2019, 2018, and 2017, respectively. The total amount of actual interest recorded to interest income for these loans was $49 million, $48 million, and $45 million for 2019, 2018, and 2017, respectively.
TDR Concession Types
The Company’s standards relating to loan modifications consider, among other factors, minimum verified income requirements, cash flow analyses, and collateral valuations. Each potential loan modification is reviewed individually and the terms of the loan are modified to meet a borrower’s specific circumstances at a point in time. All commercial TDRs are reviewed and approved by our SAD.
Following is a description of TDRs by the different loan types:
Commercial loan TDRs – Our strategy involving commercial TDR borrowers includes working with these borrowers to allow them to refinance elsewhere, as well as allow them time to improve their financial position and remain a Huntington customer through refinancing their notes according to market terms and conditions in the future.  A subsequent refinancing or modification of a loan may occur when either the loan matures according to the terms of the TDR-modified agreement or the borrower requests a change to the loan agreements. At that time, the
loan is evaluated to determine if the borrower is creditworthy. It is subjected to the normal underwriting standards and processes for other similar credit extensions, both new and existing. The refinanced note is evaluated to determine if it is considered a new loan or a continuation of the prior loan. 
Consumer loan TDRs – Residential mortgage TDRs represent loan modifications associated with traditional first-lien mortgage loans in which a concession has been provided to the borrower. The primary concessions given to residential mortgage borrowers are amortization or maturity date changes and interest rate reductions. Residential mortgages identified as TDRs involve borrowers unable to refinance their mortgages through the Company’s normal mortgage origination channels or through other independent sources. Some, but not all, of the loans may be delinquent. The Company may make similar interest rate, term, and principal concessions for Automobile, Home Equity, RV and Marine and Other Consumer loan TDRs.
TDR Impact on Credit Quality
Huntington’s ALLL is largely determined by risk ratings assigned to commercial loans, updated borrower credit scores on consumer loans, and borrower delinquency history in both the commercial and consumer portfolios. These risk ratings and credit scores consider the default history of the borrower, including payment redefaults. As such, the provision for credit losses is impacted primarily by changes in borrower payment performance rather than the TDR classification. TDRs can be classified as either accrual or nonaccrual loans. Nonaccrual TDRs are included in NALs whereas accruing TDRs are excluded from NALs as it is probable that all contractual principal and interest due under the restructured terms will be collected.
The Company’s TDRs may include multiple concessions and the disclosure classifications are presented based on the primary concession provided to the borrower. The majority of the concessions for the C&I and CRE portfolios are the extension of the maturity date, but could also include an interest rate concession. In these instances, the primary concession is the maturity date extension.

The following table presents, by class and modification type, the number of contracts, post-modification outstanding balance, and the financial effects of the modification for the years ended December 31, 2019 and 2018.
 
New Troubled Debt Restructurings (1)
 
Year Ended December 31, 2019
 
Number of
Contracts
 
Post-modification Outstanding Recorded Investment (2)
(dollar amounts in millions)
 
Interest rate reduction
 
Amortization or maturity date change
 
Chapter 7 bankruptcy
 
Other
 
Total
Commercial and industrial
482

 
$

 
$
172

 
$

 
$
7

 
$
179

Commercial real estate
29

 

 
13

 

 

 
13

Automobile
2,971

 

 
19

 
7

 

 
26

Home equity
306

 

 
9

 
8

 

 
17

Residential mortgage
330

 

 
35

 
2

 

 
37

RV and marine
139

 

 
1

 
2

 

 
3

Other consumer
972

 
8

 

 

 

 
8

Total new TDRs
5,229

 
$
8

 
$
249

 
$
19

 
$
7

 
$
283

 
 
 
 
 
 
 
 
 
 
 
 
 
Year Ended December 31, 2018
 
Number of
Contracts
 
Post-modification Outstanding Recorded Investment (2)
(dollar amounts in millions)
 
Interest rate reduction
 
Amortization or maturity date change
 
Chapter 7 bankruptcy
 
Other
 
Total
Commercial and industrial
725

 
$

 
$
352

 
$

 
$

 
$
352

Commercial real estate
102

 

 
82

 

 

 
82

Automobile
2,867

 

 
15

 
8

 

 
23

Home equity
602

 

 
25

 
11

 

 
36

Residential mortgage
345

 

 
34

 
3

 

 
37

RV and marine
117

 

 

 
1

 

 
1

Other consumer
1,633

 
8

 

 

 

 
8

Total new TDRs
6,391

 
$
8

 
$
508

 
$
23

 
$

 
$
539

(1)
TDRs may include multiple concessions. The disclosure classification is based on the primary concession provided to the borrower.
(2)
Post-modification balances approximate pre-modification balances. The aggregate amount of charge-offs as a result of a restructuring are not significant.
The financial effects of modification represent the impact on the provision (recovery) for loan and lease losses. Amounts for the years ended December 31, 2019 and December 31, 2018 were $(2) million and $(15) million, respectively.
Pledged Loans and Leases
The Bank has access to the Federal Reserve’s discount window and advances from the FHLB. As of December 31, 2019 and 2018, these borrowings and advances are secured by $39.6 billion and $46.5 billion, respectively, of loans and securities.