INTRODUCTION
We are a multi-state diversified regional bank holding company organized underMaryland law in 1966 and headquartered inColumbus, 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, inventory finance, investment management, trust services, brokerage services, insurance products and services, and other financial products and services. Our 1,236 full-service branches and private client group offices are primarily located inOhio ,Colorado ,Illinois ,Indiana ,Kentucky ,Michigan ,Minnesota ,Pennsylvania ,South Dakota ,West Virginia andWisconsin . Select financial services and other activities are also conducted in various other states. International banking services are available through the headquarters office inColumbus, 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 2020 Annual Report on Form 10-K should be read in conjunction with this MD&A as this discussion provides only material updates to the 2020 Annual Report on 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 Acquisition ofTCF Financial Corporation OnJune 9, 2021 ,Huntington closed the acquisition ofTCF Financial Corporation in an all-stock transaction valued at$7.2 billion . TCF was a financial holding company headquartered inDetroit, Michigan with operations across the Midwest. The acquisition added depth in existing markets and new markets for expansion and brings complimentary businesses together to drive synergies and growth. Historical periods prior toJune 9, 2021 reflect results of legacyHuntington operations. Subsequent to closing, results reflect all post-acquisition activity. For further information, refer to Note 2 " Acquisition ofTCF Financial Corporation " of the Notes to Unaudited Condensed Consolidated Financial Statements. Summary of 2021 Third Quarter Results Compared to 2020 Third Quarter For the quarter, we reported net income of$377 million , or$0.22 per common share, compared with$303 million , or$0.27 per common share, in the year-ago quarter. The reported net income benefited from a decline in provision for credit losses of$239 million and was impacted by TCF acquisition-related expenses totaling$234 million . After tax TCF acquisition-related expenses were$192 million or$(0.13) per common share. Net interest income was$1.2 billion , up$343 million , or 42% from the year-ago quarter. FTE net interest income was$1.2 billion , up$345 million , or 42%, from the year-ago quarter. The increase in FTE net interest income reflected the benefit from the$48.7 billion , or 44%, increase in average earning assets, partially offset by a 6 basis point decrease in the FTE net interest margin to 2.90%. Average earning asset growth included a$29.4 billion , or 36%, increase in average loans and leases and a$13.1 billion , or 57% increase in average securities, both of which were impacted by the TCF acquisition inJune 2021 . 2021 3Q Form 10-Q 5 -------------------------------------------------------------------------------- Table of Content The provision for credit losses decreased$239 million from the year-ago quarter to a benefit of$62 million in the 2021 third quarter. The decrease reflected the benefit from improvement in the macroeconomic scenarios. NCOs decreased$58 million from the year-ago-quarter to$55 million . Both commercial NCOs of$47 million and consumer NCOs of$8 million were down on a year-over-year basis. Total NCOs represented an annualized 0.20% of average loans and leases in the current quarter, down from 0.56% in the year-ago quarter. Noninterest income was$535 million , up$105 million , or 24%, and noninterest expense increased$577 million , or 81%, from the year ago quarter. The increases in both noninterest income and noninterest expense were primarily impacted by the acquisition of TCF. Common Equity Tier 1 risk-based capital ratio was 9.57%, down from 9.89% a year ago. The regulatory Tier 1 risk-based capital ratio was 11.35% compared to 12.37% atSeptember 30, 2020 . The decrease in regulatory capital ratios was driven by the repurchase of 33.4 million common shares over the last three quarters, cash dividends, partially offset by earnings, adjusted for the CECL transition. The balance sheet growth as a result of the TCF acquisition was largely offset by the common stock issued related to the acquisition, net of goodwill and intangibles, as well as elevated deposits at theFederal Reserve Bank (both of which are 0% risk weighted). The regulatory Tier 1 risk-based capital and total risk-based capital ratios also reflect the issuance of$500 million of Series H preferred stock in the 2021 first quarter, the issuance of$175 million of Series I preferred stock in the 2021 second quarter resulting from the conversion of TCF preferred stock, partially offset by the redemption of$600 million of Series D preferred stock in the 2021 third quarter. Additionally, the total risk-based capital ratio reflects the issuance of$558 million of subordinated notes in the 2021 third quarter. OnJuly 21, 2021 , the Board approved the repurchase of up to$800 million of common shares within the next four quarters. Purchases of common stock under the authorization may include open market purchases, privately negotiated transactions, and accelerated share repurchase programs. During the 2021 third quarter,Huntington repurchased a total of$500 million of common stock, representing 33.4 million common shares, at a weighted average price of$14.96 . Business Overview General Our general business objectives are: •Pursue consistent organic revenue and balance sheet growth. •Invest in our businesses, particularly technology and risk management. •Deliver positive long-term operating leverage. •Maintain an aggregate moderate-to-low, through-the-cycle risk appetite. •Execute disciplined capital management. COVID-19 The COVID-19 pandemic has caused unprecedented disruption that has affected daily living and has negatively impacted the economy. As further discussed in "Discussion of Results of Operations," the volatility in the markets and lingering economic uncertainty caused by the pandemic continue to impact our performance.Huntington was able to react quickly to the changes required by the pandemic because of the commitment and flexibility of its workforce coupled with well-prepared business continuity plans. We continue to monitor the impact of the virus and evolving government guidelines. Throughout the pandemic, we have worked with our customers to originate and renew business loans as well as originate loans made available through the SBA PPP, a lending program established as part of the relief to American consumers and businesses in the CARES Act. Several subsequent congressional acts have reopened and extended the PPP loan program. During the 2021 third quarter, we continued to work with our customers who received PPP loan forgiveness. ThroughSeptember 2021 ,$8.5 billion of the PPP loans have been forgiven by the SBA of the original$11.4 billion of PPP loans originated by bothHuntington and TCF prior to acquisition. Uncertainty remains as to when there will be a return to historical norms of economic and social activity. Should current economic conditions deteriorate or if the pandemic worsens due to various factors, including through the spread of more easily communicable variants of COVID-19, such conditions could have an adverse effect on our business and results of operations and could adversely affect our financial condition. 6Huntington Bancshares Incorporated -------------------------------------------------------------------------------- Table of Content Economy We continued to see increasing momentum in our business strategies during the quarter, delivering loan growth (excluding PPP) and fee income, including areas like wealth, capital markets, and cards and payments. Additionally, we continue to make strategic investments to drive sustained organic growth by dynamically managing expenses.
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