Good morning. My name is Tracy, and I will be your conference operator today. At this time, I would like to welcome everyone to the Huntington Bancshares First Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you, Mr. Mark Muth, you may begin your conference.

Thank you, Tracy, and welcome. I'm Mark Muth, Director of Investor Relations for Huntington. Copies of the slides, we will be reviewing, can be found on our IR website at www.huntington-ir.com or by following the Investor Relations link on www.huntington.com. This call is being recorded and will be available as a rebroadcast starting about one hour from the close of the call. Our presenters today are Steve Steinour, Chairman, President and CEO; and Mac McCullough, Chief Financial Officer. Dan Neumeyer, our Chief Credit Officer, will also be participating in the Q&A portion of today's call. As noted on Slide 2, today's discussion, including the Q&A period, will contain forward-looking statements. Such statements are based on information and assumptions available at this time and are subject to changes, risks and uncertainties, which may cause actual results to differ materially. We assume no obligation to update such statements. For a complete discussion of risks and uncertainties, please refer to this Slide and material filed with the SEC, including our most recent Forms 10-K, 10-Q and 8-K filings. Let's get started by turning to Slide 3 and an overview of the financials. Mac?

Thanks, Mark, good morning everyone, and thank you for joining us today. We're pleased to report another quarter of solid results and believe 2016 is off to a good start. Huntington's customer centric strategy continues to deliver consistent growth in market share and share of wallet through execution of our distinctive fair play philosophy, our welcome culture and our superior customer service. Disciplined execution of our strategy and well timed investments in our businesses over the past several years are producing solid results for our shareholders, our customers, our colleagues and our communities. Slide 3 shows some of the financial highlights for the quarter. Earnings per common share of $0.20, was up 5% from the 2015 first quarter, while tangible book value per share increased 8% to $7.12. Return on tangible common equity was 11.9%, while return on assets was 0.96%. Core fundamental trends remain strong and reflect the benefit of our strategic investments over the past several years. Year-over-year revenue growth was 7%, comprised of 8% increase in net interest income and a 4% increase in non-interest income. We continue to believe that our ability to deliver consistent top-line growth, despite the challenging interest rate environment distinguishes Huntington from our peers. We also believe that our disciplined investment strategy combined with a focus on achieving positive operating leverage on an annual basis is proving to be a key differentiator. While we achieved positive operating leverage for the quarter, non-interest expense increased 7% year-over-year reflecting our ongoing investments including 44 new in-store branches and digital and technology investments such as our new mortgage origination platform that is currently being piloted. Our efficiency ratio for the quarter was 64.6%, which remains well above our long-term financial goal of 56% to 59%. We will continue to work to improve our operating efficiency…

Thank you, Mac. Slide 11 shows the continued progress driving what we believe to be industry leading customer acquisition and associated revenue growth from both acquiring and building meaningful banking relationships with these customers. We owe these results to the unique combination of our Fair Play banking philosophy, our welcome culture, and execution of our optimal customer relationship or OCR focus on relationship banking. Since 2010, we've increased our consumer checking households and business checking relationships by 8% and 5% compound annual growth rates respectively. These robust customer acquisition rates have allowed us to post the associated 5% and 9% compound annual growth rates in consumer and business revenue, which you can see in the two lower charts in the slide. You've heard me say this for a number of years and you'll hear me say it again in the future. Our focus remains on growing revenues. We continue to grow revenues despite the challenging environment. Slide 12 and 13 illustrates the continued success of our OCR strategy and deepening our consumer and commercial relationships. Our strategy has remained consistent since 2010 and has built around two simple objectives gained market share and gained share of wallet. Our track record has illustrated and we will continue to demonstrate that this strategy results both in more loyal, satisfied and stickier customers, as well as revenue growth. As of the quarter end, almost 53% of our consumer checking households use six or more products and services, up from 50% a year ago. Correspondingly, our consumer checking account household revenue was up $33 million or 12% year-over-year in the first quarter. Similarly, almost 48% of our commercial checking customers used four or more products or services at year end, up from 43% a year ago. Commercial revenue increased $4 million or 2% year-over-year…

Operator, we'll now take questions. We ask that as a courtesy to your peers each person ask only one question, and one related follow-up and if that person has additional questions, he or she can add themselves back into the queue. Thank you.

At this time [Operator Instructions]. Your first question comes from the line of Ken Usdin with Jefferies. Your line is now open.

Thanks. Good morning.

Hi, Ken.

Good morning, everybody. I just wanted to follow-up on the credit side and hearing your points about not seeing much else, but expecting the normalization. This is the – your second quarter of a pretty meaningful reserve build and I think for specific reason, so I guess just the questions are, can you help us understand kind of what you think the core charge-offs if we – and the size of that recovery and then just your general premise around building reserves from here. Do you think you've kind of gotten at there for what you need as far as the energy and coal related?

Hey. Good morning. Ken, this is Dan. So, I think, the one thing this was a record quarter for us in terms of recoveries. So that 7 basis points charge-off is obviously very good performance, but it is driven by some really unusual – an unusual level of recovery so that is not going to continue. So if there is going to be one difference in the subsequent quarters, it's going to be a more normalized level of recovery, so that in and of itself will take the net charge-off number up, but we are not seeing anything on the horizon that leads us to conclude that there would be any notable changes other than that we've given guidance that we still expect to be below the 35 to 55, so I think that gives you a pretty good range of what we might see. In terms of the energy build this quarter, we think we've been very conservative in identifying the issues that we about there we are well reserved on that portfolio. We've got our credit mark on that portfolio at 10%, which given the combination – the constitution of our portfolio, no energy services have invested big differentiator when we're looking at energy exposure. Ours is all E&P very well secured exposure. So even if you say, there is going to be continued low energy prices, we think that portfolio on a relative basis is going to hold up quite well.

Okay. Then just to follow up quickly then is just on reserving builds from here, more for growth or what if you think you've gotten the energy right, then what would be the base of seeing builds from here?

I think – I think it will be largely driven by portfolio growth, and then again we do point out always there is – there is always unevenness in the C&I portfolio, so you are going to have episodic movements here and there, but we are not seeing any significant movement. I think you see in our criticize asset number holding fairly steady. We still have in flows, but we have a lot of good resolutions as well. So I don't see any tremendous movement there either.

All right. Got it. Thank you.

Thanks, Ken.

Your next question comes from the line of Scott Siefers, Sandler O'Neill and Partners. Your line is now open.

Good morning, guys.

Good morning, Scott.

Good morning, Scott.

I just wanted to ask just sort of an energy related question. So of the total increase, are you - you guys able to sort of bifurcate how much of that came from the coal versus the E&P side by any chance?

Yes. Absolutely we can and we do, do that. The coal was one transaction and actually it was not even performance related. This is a more of a – there is a lawsuit involved in it, so the coal deal actually is a low cost producer performing very well and we expect a good resolution to that particular situation.

Okay. This might make the same question little less relevant, but as you look at – you have said some understandable increase in nonperformers in the energy area, but based on guidance for the entire portfolio, lost content, of course, looks pretty low and still in the aggregate for everything. Just wondering, as you guys are thinking about the sort of stuff that you would keep on, on watch from the energy portfolio. When or how might actual lost content manifest itself just in the way you guys are thinking about things?

Yes. I mean, it certainly the potential for lost content increases the longer that we have that protected low energy phenomenon. So – but I'll say that the stressed analysis we do, there is still quite a bit of room between where we're at today and where we feel we would incur significant losses. So we do various stressing on the portfolio. Our sensitized case that we use is well below the strip case and we even do modeling that goes well below that and even under those scenario, this is going to be a very manageable series of events for us. Just, we have a very small portfolio – it's one-half of 1% of our entire portfolio for the overall impact. This is not going to be that dramatic.

Yes. Okay. Perfect. If I can sneak one last one in there, Mac you have said, so you guys disclosed the two basis points margin benefit from the CRE recovery, did you say two basis points benefit from day count, so in other words in total four basis points of kind of net benefit of which you would be forecasting the margin for the second quarter?

Scott, that's exactly the way to think about it.

Okay. All right, perfect. Thank you guys.

Thanks, Scott.

Thanks, Scott.

Your next question comes from the line of Geoffrey Elliott with Autonomous Research. Your line is now open.

Hello. Good morning. Thank you for taking the question. I wanted to ask about also – you sound pretty positive, but I guess looking at the year-on-year changes in net charge-offs to strip out some of the seasonality, but that has been a bit of an increase. So, can you talk about the normalization that you're seeing there and what makes you still pretty relaxed on auto credit?

Sure. This is Dan, again. So, one – I think we have to look at – we're looking at very low levels of charge-offs. So, I think if you look to a year ago, probably about 19 basis points and then most recent quarter up to about 28 basis points. That is a very low level of charge-offs and well below what we actually modeled. So, I think that's important. There is a bit of an effect in there from we’ve talked about TCPA, which is the telephone consumer protection act, which limited our ability to make a calls to cellphones, that had a small incremental effect. So, we probably have a couple of basis points of additional charge-offs that was in that number and that the impact of that will dissipate over time. But just as a reminder, our origination strategy on indirect auto has not moved at all. We continue to maintain the same FICO Scores, LTVs terms, it's a very dealer centric model and I think it is important, when we look at our portfolio relative to others. The distinction in terms of our focus on prime and super prime customers, when we expand in the different markets, which we do from time to time. We go in with more conservative origination criteria than for the book as a whole. So, we just feel we have been rock solid in our origination strategies and don't expect to see any significant movement. So, we remain very confident in our performance.

Okay. And then just follow-up, there has been a decline in the Manheim in the last couple of months. What are you budgeting for used car prices and how do you think about that?

Yes. So, we've look – we obviously follow the Manheim closely, and I think their forecast called for the index to decline about 8% cumulatively over the next few years. And even with that adjustment, we don't see this moving the needle significantly in terms of our performance. I would point out that the mix of our vehicles is a little bit different than what industry average would be as well. When you focus on a high FICO borrower, when you have to take the vehicles back you tend to get a vehicle that is in better shape and having a higher resale value. I think the mix of our book also has more trucks and SUVs in it, and those values tend to hold up better than vehicles as a whole. So, those factors also are going to aid us, so we feel very confident even though we know there will be some reduction in the Manheim because we've been at historically high levels for probably the last five years or six years.

Great. Thank you very much.

Thanks, Geoff.

Your next question comes from the line of Bob Ramsey with FBR. Your line is now open.

Hey, good morning guys. This is actually Kyle Peterson speaking for Bob today. I had a question on mortgage banking, kind of your thoughts on that obviously it looks like part of – it was down partly due to kind of seasonal trends. But, notice it was comes down year-over-year as well, I'm not sure if you view that is mostly really to kind of the MSR impairment or I guess kind of how should we look at mortgage banking moving forward?

Yes. Kyle, this is Mac. So, I think if you take a look on a linked-quarter basis there was a fairly substantial decline, that's really – this can be explained by two things. One is the MSR impairment, which was $6 million to $7 million on a linked-quarter basis, and the other portion of the decline was just due to lower origination volume. So that – I think that explains linked-quarter pretty well and actually that's the same explanation for year-over-year it's MSR and lower origination. So we're pleased with origination volume where it is that currently. We do have this seasonal effects and also just the impact of the MSR valuation.

Okay. Thank you. And yes, I guess just one other kind of I guess follow-up kind of modeling question. Is the merger related expense for the HBAN for the FirstMerit merger. Is that following into the other expense line item or kind of I guess where is that $6 million shaking up?

Yes. A fair amount of it's going to be in professional services in that line and other expense as well. So, that's – I think that’s the way to think about it.

Kyle, that's broken out on page seven on the release. There is the table that will give you some guidance there.

Okay. Great. Thank you very much.

Your next question comes from the line of John Pancari with Evercore. Your line is now open.

Good morning. It's actually Steve Moss for John. I wanted to just touch based on the inflows to non-performing status, how much of the $240 million was for E&P?

E&P was about 40% of the inflows.

Okay. And then in terms of also in the E&P credits in what basins are your E&P credits located?

Our entire portfolio is – it's broadly syndicated shared national credit, so the distribution tends to be very granular throughout the country, obviously would include the Permian basin which is probably one of the most profitable, but I would say it's very well diversified, no concentrations within the portfolio.

Okay. Thank you very much.

Thanks, Steve.

Your next question comes from the line of Ricky Dodd of Deutsche Bank. Your line is now open.

Hi, everyone.

Hi, Ricky.

I just had a quick follow-up on energy. Have you guys provided the dollar value as of period end for your total energy and coal portfolios?

The aggregate amount of the loans?

That's right.

We've indicated that it's right around 5% of total loans.

0.5%.

I'm sorry – a big difference. Thank you. 0.5%.

And then you said reserves on those loans are about 10%?

Yes. The credit mark, which on a go-forward basis will reference credit mark that takes into account charge-offs and reserves, but it's yes 10% is the number.

Perfect, and then a quick follow-up on recoveries. I think eight of the past nine quarters you've seen some lumpy recoveries in the CRE portfolio. How should we be thinking about that going forward?

That there will be less.

All right. Perfect. Thanks for the time.

Thanks.

Your next question comes from the line of Kevin Barker of Piper Jaffray. Your line is now open.

Good morning. Thanks for taking my questions.

Hi, Kevin.

Hi, Kevin.

The order growth is very strong this quarter and what – usually the January and February usually seasonally pretty slow. How much of this growth is due to existing markets and how much of it was taking market share in the new markets that you're attempting to target?

Which portfolio?

Auto.

So it’s still on the auto portfolio. So, we're stepping into the new market, as Dan mentioned very, very cautiously, we actually increased our standards and how we underwrite in newer markets.

Yes. And I think, in – of the year-over-year increase in originations, about 25% came from Illinois, North Dakota, South Dakota, which were our newest markets that we entered into.

So, roughly, 25% of your incremental was primarily due to the newer market, is that how you would categorize it?

Correct.

Then – and also, a follow-up on the balance sheet items. You obviously shifted gears and become more asset sensitive when you mentioned some of this last quarter and your NIM has increased this quarter. When we look forward, given your guidance for NIM to decline, how should we look at it, going into back half of the year? And then what your expectations are for the Fed increased rate?

So, starting with the last question first. I mean, we've budget in and continue to forecast 2016 assuming no rate increase. And under that scenario, which is the scenario that we use in order to provide the guidance for the year. As Scott pointed out, earlier, the 3.11% that we reported probably comes down about four basis points, due to four basis points. And whether that compression is been driven just due to the fact that we're adding the LCR compliant securities. And then on the funding side, a lot of that is coming through on the debt side. So that results in some compression as we move. Throughout the year there is some additional compression that will take place on certain asset categories. But, again based on everything we know today and way the forecast looks for the remainder of the year, we do believe we stay above 3% in every quarter of 2016.

Okay. What would drive the additional compression from outside – is it just lower asset yields or other items that were push down and NIM in the back end.

Given the fact that we're at 100% or over 100% for LCR, it's going to be asset compression for the most part, just continued pricing pressure on commercial portfolio. But again, not material as we think about where we are today, and the guidance that were given for the rest of the year.

Thank you.

Thanks, Kevin.

Hey Mac, I want to clarification in Ricky’s question, I didn't realize he asked about our exposure including coal, and oil and gas. And so when we take the E&P and the coal together it still less than 1% of revenues, but the half percent was in relation to just the E&P did not include coal, but our coal portfolio is actually about half of the size of E&P. So, it still well under 1% when we combine those. So, I just want to make that clarification.

Okay. Thanks again.

Your next question comes from the line of Andy Stapp with Hilliard Lyons. Your line is now open.

Good morning.

Good morning, Andy.

Good morning, Andy.

What was driving the sequential increase and other non-interest income other than the general lumpiness that can occur in the side?

So, fourth quarter compared to the first quarter?

Yes, sequentially, yes.

So, on Table 6 of the press release, we actually show other non-interest income going down.

Right, it went down pretty substantially – I’m sorry, yes, that's why I mean to say sequential decline…

Yes, I think exactly.

Yes. I just wonder why it was driving that if that's a good run rate?

It’s a model.

It's a bit difficult of lines of forecast.

Right.

There is a lot of [indiscernible] gains that go through there, there is leased income that goes through there. So, it is a bit lumpy in the scheme things, I think taking a look at just the quarterly progression over time and taking an average might be the best way to think about it.

Okay. And, what was your – what's your reserve or your credit marks on oil and gas versus coal, I want to ask that as well?

Actually, they are equal, 10%.

Okay. Okay. Great. Thank you.

Thanks, Andy.

Your next question comes from the line of Peter Winter with Sterne Agee. Your line is open.

Good morning.

Hi, Peter.

I had a question about the loan growth. So, average loans was pretty solid and then in the period was even stronger. So I was just wondering in terms of the monthly trend, did it start off a little bit slow with all the volatility and then pick up as the year – as the quarter moved on and that would carry over into the second quarter?

Peter, that's a very good conclusion, accurate conclusion, good analogy. And I think the volatility just had people paused as the quarter progressed more confidence emerged. And as we sit here today, our pipelines look reasonably good, going into the second quarter. And frankly they did at the end of the fourth quarter, again that volatility just created, I think a bit of a timing issue.

Okay and just a quick follow-up. Steve, you mentioned on the FirstMerit, as you spend more time you feel better about the FirstMerit deal. I was just wondering if you could add some color to that?

Well we’ve spent considerable amount of time with our team and their team. I mentioned we've gotten through much of the product matching, and mapping, and so the things that would be done early-stage for integration purposes are well underway, terrific cooperation and communication, and we continue to be very impressed with the quality of the people where – from FirstMerit that we have the pleasure of interacting with. So we had outlined a sequential integration plan when we announced the deal. We’re certainly well on track with that and expecting to get approvals necessary to close in the third quarter.

Okay. Thanks very much.

Thank you.

Thanks, Steve.

[Operator Instructions] Your next question comes from the line of Joe Shea with Credit Suisse. Your line is now open.

Good morning. Just related to industry positioning, what's the incremental impact on our asset sensitivity positioning over the next few quarters as the swap book rolls off. And then just more broadly, is there a certain level of asset sensitivity that you are targeting over time, can you just walk us through how your thinking about overall positioning?

So, on the first question Joe, about 70% of our – of the margin benefit from our derivatives actually comes from the debt swaps. So, when you think about the impact of the asset swaps at about 30% of the impact and if you roll that forward, I think we see another $2.4 billion of the asset swaps coming off by the end of 2016, and the remainder come off basically by the end of 2017. That impact is completely manageable when you think about the quarter-over-quarter impact and how slow those are rolling off. On the second question, we really don't have a target in terms of what we’re looking for. We do think eventually it’s going to be good to be asset sensitive. We’re very comfortable with how we’re positioned today, and how we're managing the balance sheet, with the swaps rolling off. And I think some of the changes that we've made in the non-maturity deposits we have seen the increase in asset sensitivity. But, again we’re very comfortable with how the balance sheet is positioned and the outlook for interest rates as we go through 2016.

Okay, very helpful. Thank you.

Thanks, Joe.

Your next question comes from the line of Terry McEvoy with Stephens. Your line is now open.

Thanks. Can you just talk about the 2% C&I growth in the quarter maybe some industries that stand out, as well as maybe some markets that come to mind?

Well, our core markets have done well. So, Ohio and Michigan have had good growth. And we've also had growth on the assets – in the asset finance portfolio Terry. So like what we’re seeing with how the year is progressing at least at this stage, and we're feeling much more confident with the market settling down and this volatility, abating from where it was in early January, February.

And then on the equity you're talking about the efficiency ratio at 65%, above that 56% to 59% long-term target. Can you just remind us what FirstMerit will do to the efficiency ratio? I'm pretty sure it was addressed in the investor handout, once you get to the full run rate of cost saves?

Yes, we had it coming down 300 basis points to 400 basis points I think is what we disclosed in that investor presentation. So clearly a good opportunity for us when you think about 80% of their markets overlapping with ours and the number of consolidations that we're going to be able to achieve.

Great. Thanks for helping me there. I appreciate it.

Thanks, Terry.

There are no further questions at this time. Mr. Steve Steinour I'll turn the call over to you for closing remarks.

Thank you. We are off to a good start in 2016 as our first quarter results provided a solid base to build from. We delivered 7% year-over-year revenue growth, 3% net income growth and 5% growth in EPS and an 8% increase in tangible book value per share. So these are solid fundamentals and we're well-positioned to continue to deliver good results through the remainder of the year. You've heard me say this before and it remains true, our strategies are working and our execution remains focused and strong. We expect to continue to gain market share and improve share wallet in both consumers and businesses. We expect to generate annual revenue growth consistent with our long-term financial goals and manage our continued investments in our businesses, consistent with the revenue environment and our long-term financial goal of positive operating leverage. We’re optimistic on the economic outlook in our footprint and believe the gradual transition to more normalized credit metrics will be effectively managed. Finally, I want to close by reiterating that our Board and this management team are all long-term shareholders and our top priorities include managing risk, reducing volatility and driving solid, consistent long-term performance. So thank you for your interest in Huntington. We appreciate you joining us today. Have a great day everybody.

This concludes today's conference call. You may now disconnect.