Huntington Bancshares Incorporated Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

LOANS / LEASES

LOANS / LEASES

12 Months Ended

Dec. 31, 2020

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 $491 million and $525 million at December 31, 2020 and 2019, respectively.

Loan and Lease Portfolio Composition

The following table provides a detailed listing of Huntington’s loan and lease portfolio at December 31, 2020 and December 31, 2019.


	At December 31,
(dollar amounts in millions)	2020		2019


















Loans and leases:
Commercial and industrial	$	35,373	$	30,664
Commercial real estate	7,199		6,674
Automobile	12,778		12,797
Home equity	8,894		9,093
Residential mortgage	12,141		11,376
RV and marine	4,190		3,563
Other consumer	1,033		1,237
Total Loans and leases	81,608		75,404
Allowance for loan and lease losses	(1,814)		(783)
Net loans and leases	$	79,794	$	74,621

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.

Huntington assesses net investments in leases (including residual values) for impairment and recognizes any impairment losses in accordance with the impairment guidance for financial instruments. As such, net investments in leases may be reduced by an allowance for credit losses, with changes recognized as provision expense.

The following table presents net investments in lease financing receivables by category at December 31, 2020 and 2019:


	At December 31,
(dollar amounts in millions)	2020		2019
Commercial and industrial:
Lease payments receivable	$	1,737	$	1,841
Estimated residual value of leased assets	664		728
Gross investment in commercial and industrial lease financing receivables	2,401		2,569
Deferred origination costs	21		19
Deferred fees	(200)		(249)
Total net investment in commercial and industrial lease financing receivables	$	2,222	$	2,339

The carrying value of residual values guaranteed was $93 million as of December 31, 2020. The future lease rental payments due from customers on sales-type and direct financing leases at December 31, 2020, totaled $1.7 billion and were due as follows: $0.6 billion in 2021, $0.4 billion in 2022, $0.3 billion in 2023, $0.2 billion in 2024, $0.1 billion in 2025, and $0.1 billion thereafter. Interest income recognized for these types of leases was $106 million, $108 million, and $100 million for the years 2020, 2019, and 2018 respectively.

Nonaccrual and Past Due Loans

The following table presents NALs by loan class at December 31, 2020 and 2019:


	December 31, 2020				December 31, 2019
(dollar amounts in millions)	Nonaccrual loans with no ACL		Total nonaccrual loans		Nonaccrual loans with no ACL		Total nonaccrual loans
Commercial and industrial	$	69	$	353	$	109	$	323
Commercial real estate	8		15		2		10
Automobile	—		4		—		4
Home equity	—		70		—		59
Residential mortgage	—		88		—		71
RV and marine	—		2		—		1
Other consumer	—		—		—		—
Total nonaccrual loans	$	77	$	532	$	111	$	468

The amount of interest that would have been recorded under the original terms for total NAL loans was $33 million, $26 million, and $22 million for 2020, 2019, and 2018, respectively. The total amount of interest recorded to interest income for NAL loans was $6 million, $9 million, and $12 million in 2020, 2019, and 2018, respectively.

The following table presents an aging analysis of loans and leases, including past due loans and leases, by loan class at December 31, 2020 and 2019:


	December 31, 2020
	Past Due (1)(2)										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	$	60	$	38	$	95	$	193	$	35,180	$	—	$	35,373	$	10	(3)
Commercial real estate	—		1		11		12		7,187		—		7,199		—
Automobile	84		22		12		118		12,660		—		12,778		9
Home equity	35		15		61		111		8,782		1		8,894		14
Residential mortgage	114		38		194		346		11,702		93		12,141		132		(4)
RV and marine	17		3		3		23		4,167		—		4,190		3
Other consumer	9		4		3		16		1,017		—		1,033		3
Total loans and leases	$	319	$	121	$	379	$	819	$	80,695	$	94	$	81,608	$	171


	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	(3)
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		(4)
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

(1)NALs are included in this aging analysis based on the loan’s past due status.

(2)At December 31, 2020, the principal balance of loans in payment deferral programs offered in response to the COVID-19 pandemic which are performing according to their modified terms are generally not considered delinquent.

(3)Amounts include Huntington Technology Finance administrative lease delinquencies.

(4)Amounts include mortgage loans insured by U.S. government agencies.

Credit Quality Indicators

To facilitate the monitoring of credit quality for commercial loans, and for the 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 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 table presents each loan and lease class by vintage and credit quality indicator at December 31, 2020:


	As of December 31, 2020
	Term Loans Amortized Cost Basis by Origination Year												Revolver Total at Amortized Cost Basis		Revolver Total Converted to Term Loans
(dollar amounts in millions)	2020		2019		2018		2017		2016		Prior						Total (3)
Commercial and industrial
Credit Quality Indicator (1):
Pass	$	13,757	$	4,525	$	2,758	$	1,347	$	974	$	916	$	8,894	$	2	$	33,173
OLEM	421		116		69		30		33		22		124		—		815
Substandard	196		144		188		224		46		159		423		—		1,380
Doubtful	2		—		1		—		—		1		1		—		5
Total Commercial and industrial	$	14,376	$	4,785	$	3,016	$	1,601	$	1,053	$	1,098	$	9,442	$	2	$	35,373

Commercial real estate
Credit Quality Indicator (1):
Pass	$	1,742	$	1,610	$	1,122	$	507	$	507	$	539	$	633	$	—	$	6,660
OLEM	94		78		63		37		28		14		4		—		318
Substandard	27		46		10		29		58		14		36		—		220
Doubtful	—		—		—		—		—		1		—		—		1
Total Commercial real estate	$	1,863	$	1,734	$	1,195	$	573	$	593	$	568	$	673	$	—	$	7,199

Automobile
Credit Quality Indicator (2):
750+	$	2,670	$	2,013	$	1,144	$	742	$	317	$	81	$	—	$	—	$	6,967
650-749	1,965		1,343		755		386		175		52		—		—		4,676
<650	312		301		244		157		84		37		—		—		1,135

Total Automobile	$	4,947	$	3,657	$	2,143	$	1,285	$	576	$	170	$	—	$	—	$	12,778

Home equity
Credit Quality Indicator (2):
750+	$	793	$	26	$	26	$	32	$	89	$	451	$	4,373	$	192	$	5,982
650-749	147		9		8		11		27		157		1,906		181		2,446
<650	1		1		1		1		6		70		286		99		465

Total Home equity	$	941	$	36	$	35	$	44	$	122	$	678	$	6,565	$	472	$	8,893

Residential mortgage
Credit Quality Indicator (2):
750+	$	3,269	$	1,370	$	891	$	1,064	$	762	$	1,243	$	1	$	—	$	8,600
650-749	991		435		307		278		171		495		—		—		2,677
<650	34		89		111		108		81		348		—		—		771

Total Residential mortgage	$	4,294	$	1,894	$	1,309	$	1,450	$	1,014	$	2,086	$	1	$	—	$	12,048

RV and marine
Credit Quality Indicator (2):
750+	$	1,136	$	525	$	589	$	337	$	153	$	254	$	—	$	—	$	2,994
650-749	348		215		201		136		64		129		—		—		1,093
<650	4		15		21		22		12		29		—		—		103

Total RV and marine	$	1,488	$	755	$	811	$	495	$	229	$	412	$	—	$	—	$	4,190

Other consumer
Credit Quality Indicator (2):
750+	$	69	$	58	$	26	$	8	$	4	$	14	$	340	$	2	$	521
650-749	36		56		17		5		2		3		294		30		443
<650	2		8		3		1		—		1		26		28		69

Total Other consumer	$	107	$	122	$	46	$	14	$	6	$	18	$	660	$	60	$	1,033

(1)Consistent with the credit quality disclosures, indicators for the Commercial portfolio are based on internally defined categories of credit grades which are generally refreshed at least semi-annually.

(2)Consistent with the credit quality disclosures, indicators for the Consumer portfolio are based on updated customer credit scores refreshed at least quarterly.

(3)The total amount of accrued interest recorded for these loans at December 31, 2020, presented in other assets within the Consolidated Balance Sheets, was $146 million and $123 million for commercial and consumer, respectively.

The following tables present each loan and lease class by credit quality indicator at December 31, 2019:


	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		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

(1)Excludes loans accounted for under the fair value option.

(2)Reflects updated customer credit scores.

TDR Loans

On March 22, 2020 and April 7, 2020, the federal bank regulatory agencies including the FRB and OCC released statements encouraging financial institutions to work prudently with borrowers that may be unable to meet their contractual obligations because of the effects of COVID-19. The statements go on to explain that, in consultation with the FASB staff, the federal bank regulatory agencies concluded that short-term modifications (e.g. six months) made on a good faith basis to borrowers who were current as of the implementation date of a relief program are not TDRs. Section 4013 of the CARES Act, as amended by Section 541 of the Consolidated Appropriations Act of 2021, (“CARES Act”) further addresses COVID-19 related modifications occurring between March 1, 2020 through January 1, 2022 and specifies that such COVID-19 related modifications on loans that were current as of December 31, 2019 are not TDRs.

For COVID-19 related loan modifications occurring during 2020, which met the loan modification criteria under the CARES Act, Huntington elected to suspend TDR accounting. For loan modifications not eligible for the CARES Act, Huntington applied the interagency regulatory guidance that was clarified on April 7, 2020. Accordingly, insignificant concessions (related to the current COVID-19 crisis) granted through payment deferrals, fee waivers, or other short-term modifications (generally 6 months or less) and provided to borrowers less than 30 days past due at March 17, 2020 were not deemed to be TDRs. Therefore, modified loans that met the required guidelines for relief are excluded from the TDR disclosures below.

The amount of interest that would have been recorded under the original terms for total accruing TDR loans was $46 million, $52 million, and $51 million for 2020, 2019, and 2018, respectively. The total amount of actual interest recorded to interest income for these loans was $43 million, $49 million, and $48 million for 2020, 2019, and 2018, 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 FRG.

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, 2020 and 2019.


	New Troubled Debt Restructurings (1)
	Year Ended December 31, 2020
	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	317	$	—	$	123	$	—	$	58	$	181
Commercial real estate	13	—		3		—		—		3
Automobile	3,018	—		29		6		—		35
Home equity	273	—		6		8		2		16
Residential mortgage	585	—		79		7		—		86
RV and marine	168	—		4		1		—		5
Other consumer	622	3		—		—		1		4
Total new TDRs	4,996	$	3	$	244	$	22	$	61	$	330

	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

(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, 2020 and December 31, 2019 were $6 million and $(2) million, respectively.

Pledged Loans

The Bank has access to the Federal Reserve’s discount window and advances from the FHLB. As of December 31, 2020 and 2019, these borrowings and advances are secured by $43.0 billion and $39.6 billion, respectively, of loans.