Greetings, and welcome to the Huntington Bancshares First Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. Question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Tim Sedabres, Director of Investor Relations. Thank you. You may begin. Thank you, operator. Welcome everyone, and good morning. Copies of the slides we'll be reviewing today can be found on the investor relations section of our website, www.huntington.com. As a reminder, this call is being recorded, and a replay will be available starting about one hour from the close of the call. Our presenters today are Steve Steinour, Chairman, President, and CEO, and Zach Wasserman, Chief Financial Officer. Rich Pohle, Chief Credit Officer, will join us for the Q&A. As noted on slide two, today's discussion, including the Q&A portion, 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 me now turn it over to Steve. Thanks, Tim. Good morning, everyone, and welcome, and thank you for joining the call today. It's been an eventful start to the year. We entered 2022 with momentum, and we carried forward that trend to deliver a strong first quarter. We are managing through a turbulent macroeconomic environment. High inflation, persistent labor and supply chain constraints, debt interest rate tightening, rapid moves in the yield curve, and the devastating crisis in Ukraine all have made for a challenging backdrop. Now on to slide 4. I'm pleased to highlight our excellent first quarter performance. First, our colleagues are delivering on revenue-producing initiatives, supporting our strong results. We're generating profitable growth and building momentum, including executing on our revenue synergies. Second, operating with disciplined expense management, we posted another quarter of sequential reductions in core expenses. Our targeted cost savings are on track for full realization this quarter, and we are capturing these benefits even earlier than originally guided. Third, we had record low net charge offs this quarter with overall exceptional credit quality. Our disciplined risk management continues to be a strength. Lastly, we are confident in our full year outlook and our ability to drive additional profitability. We are revising our guidance higher to incorporate the recent rate curve outlook, and we remain confident that we will achieve our medium-term financial targets in the second half of 2022. On slide 5, let me share more detail on our first quarter performance. Our robust loan growth, higher net interest income, and planned reductions in expenses supported our record PPNR. Average loan balances excluding PPP grew 10% annualized, driven by new loan production across both commercial and consumer portfolios. We continue to see strong customer demand and growing loan pipelines and are confident this momentum will continue over the course of this year. Our teams are fully aligned and executing on the revenue synergy opportunities from TCF. We are seeing terrific momentum in these initiatives as we expand into new markets with enhanced capabilities. In the Twin Cities, our new Wealth Management, Business Banking, and Middle Market teams are already contributing to revenues. Likewise, in Colorado, our Business Banking and Middle Market teams are capturing market share and generating revenue. We're also pleased with our Inventory Finance business, which is seeing seasonal growth and is exceeding our expectations. Additionally, we are seeing increased productivity and positive reception to the Huntington product set and customer service experience. We continue to execute on our strategic initiatives across the bank. In March, we announced the next evolution of our leading Fair Play product set, including the soon-to-be-released Instant Access feature, as well as an enhanced credit card offering through the launch of our Cashback Credit Card. In addition, our continued expense discipline has enabled us to support investments that are yielding results. This is evidenced by our record first quarter of sales in Wealth Management and also by another quarter of robust growth in our Capital Markets businesses. Just last month, we announced the signing of a definitive agreement to acquire Capstone Partners, a top-tier middle market investment bank and advisory firm that will add significant capabilities and expertise to our Capital Markets businesses. The transaction is expected to close late this quarter. Capstone is a terrific fit with Huntington, both strategically and culturally, and we're excited for the synergistic growth opportunities. The addition of Capstone better positions us to serve the full range of needs for clients in our footprint, as well as those we serve on an increasingly national basis. The transaction adds key verticals that complement our existing industry specialization and adds new capabilities in expanded sectors. We expect Capstone will meaningfully increase our capital markets revenues by about 50%, and we're excited to welcome our new colleagues to Huntington. Finally, we are proud to share a few of the awards we received during the quarter. We were honored to be recognized by Forbes in 2022 as one of America's Best Large Employers, where we ranked number 7 in the Banking and Financial Services industry. We were also recognized in Middle market and Small business banking with numerous Greenwich Excellence and Best Brand Awards for 2021. Lastly, we are proud that the National Diversity Council named Donald Dennis, our Chief Diversity, Equity, and Inclusion Officer, as a top 100 diversity officer nationally. Before moving on, I'd like to take a moment to welcome Brant Standridge to Huntington, who joined us earlier this month as our President of Consumer and Business Banking. Brant comes to us with a broad set of experiences, including a customer-focused foundation that aligns well with our strategies. As Brant joins us, a special thank you to Steve Rhodes, who will continue to lead our business banking division. Slide 6 shows our continued trajectory of profitable growth. We've been driving sustainable profitability for years, supported by our prior strategic investments and our long track record of managing the positive operating leverage. We are confident that this increasing trend will continue and will further benefit by the underlying earnings power unlocked from TCF. We are poised to have outsized PPNR growth this year and expect it to expand sequentially over the remainder of the year. Zach, over to you to provide more detail on our financial performance. Thanks, Steve, and good morning, everyone. Slide 7 provides highlights of our first quarter results. We reported earnings per common share of $0.29. Adjusted for notable items, earnings per common share were $0.32. Return on tangible common equity, or ROTCE, came in at 15.8% for the quarter. Adjusted for notable items, ROTCE was 17.1%. We were pleased to see accelerated momentum in our loan balances, with total loans increasing by $1.7 billion. Excluding PPP, loans increased by $2.6 billion. Total average and ending deposits also increased, driven by strong trends in both consumer and commercial balances. Pre-provision net revenue grew 4.2% from last quarter, reflecting our continued focus on self-funding, revenue-producing strategic initiatives, as well as net interest income expansion. Consistent with our plan, we reduced core expenses by $27 million from last quarter, driven by the realization of cost synergies. Credit quality was exceptional, with record low net charge-offs of 7 basis points and non-performing assets reduced to 63 basis points. Turning to slide 8, accelerated loan growth momentum continued with average loan balances increasing 1.5% quarter-over-quarter, totaling $111.1 billion. Excluding PPP, total loan balances increased $2.6 billion or 2.4%, largely driven by commercial loans. Within commercial, excluding PPP, average loans increased by $2.2 billion or 3.8% from the prior quarter. We continue to see broad-based demand across lending categories that is supporting strong new production. We are also benefiting from slowing prepayments and modest increases in line utilization. Middle market, asset finance, corporate, and specialty banking all contributed to higher net balances within commercial and have all expanded for two quarters in a row. Commercial real estate balances also increased during the quarter by $485 million. Inventory finance contributed to growth this quarter, with balances increasing by $666 million, driven by the expansion of client relationships and the expected seasonal increase in utilization levels. Auto dealer floor plan increased with balances up by $251 million as new client relationships and a modest uptick in utilization both supported growth. In consumer, we had a record first quarter performance in indirect Auto and RV marine originations. This drove balances higher in Auto and RV marine by $108 million and $63 million respectively. Additionally, on-sheet residential mortgage increased by $550 million. These were offset by lower home equity balances. Across the enterprise, our bankers are executing disciplined calling strategies, driving sustained growth in both early stage and late stage loan pipelines, both of which are higher from the prior quarter and the prior year. We are seeing strong demand from our customers and the realization of pipelines supports our high degree of confidence in our 2022 outlook. Turning to slide nine, we delivered solid deposit growth with balances higher by $614 million. On a spot basis, total deposit balances increased $3.7 billion or 2.6% from prior quarter. Ending commercial balances increased by $2.5 billion and consumer balances increased by $1.5 billion from the prior quarter. This growth reflects continued consumer deposit gathering and our focused relationship deepening within commercial customers. On slide 10, we reported net interest income and NIM expansion. Core net interest income, excluding PPP and purchase accounting accretion, increased by 3% to $1.119 billion. Consistent with our prior guidance, net interest margin increased versus prior quarter, and we are on track for further NIM expansion throughout 2022. Turning to slide 11. We are dynamically managing the balance sheet to remain asset sensitive and capture the benefit of expected higher rates. While incrementally providing downside protection as opportunities present themselves. We have a peer leading NIM, and we're positioned to expand margin as rates increase. During the quarter, we modestly increased our downside protection by executing a net $2.7 billion of received fixed swaps. As noted on the slide, these explicit hedging actions reduced asset sensitivity in the quarter by 0.3%. The overall estimated asset sensitivity in an up 100 basis point ramp scenario ended the quarter at 3.1%, down from 4.6% at year-end. The remaining change in this metric beyond our hedging actions was driven by other ancillary modeling impacts, such as the denominator impact of higher projected base net interest income, slower prepayments, and other balance sheet mix shifts. On the bottom of the slide is our loan portfolio composition. As you can see, we are well-positioned for the expected higher interest rates throughout the year with an attractive mix of floating and fixed-rate loans. Furthermore, our indirect Auto portfolio has a weighted average life of approximately 25 months, with roughly half of that portfolio repricing each year. Moving to slide 12. Non-interest income was $499 million, up $104 million year-over-year, and down $16 million from last quarter. Fee revenues were impacted by a decline in mortgage banking, primarily due to lower saleable originations, as well as typical seasonality, resulting in lower cards and payments activities compared to the fourth quarter. Given our robust SBA pipelines and attractive market opportunity, we reinitiated our SBA loan sales in the quarter, driving a $27 million increase. In addition, our record first quarter performance in wealth management sales contributed to an increase in investment-related revenues. Overall, we continue to be pleased with the traction and growth outlooks for our key fee-generating businesses within payments, capital markets, and wealth advisory. Moving on to slide 13. Non-interest expense declined $168 million from the prior quarter, and excluding notable items, core expenses declined by $27 million to $1.007 billion as we delivered cost savings from the acquisition. We expect core expenses to be approximately $1 billion by the second quarter. Even as we're driving down expenses, we're also investing in initiatives that are driving sustainable revenue growth throughout the company. Slide 14 highlights our capital position. Common Equity Tier 1 was 9.2% at quarter end. Our dividend yield remains at the top of our peer group at 4.6%. We did not repurchase any shares during the quarter due to our announced signing of a definitive agreement to acquire Capstone. As you can see on Slide 15, credit quality continues to perform very well. As mentioned, net charge-offs were a record low of 7 basis points, benefiting from a net recovery position in commercial portfolios and continued strong consumer credit quality. Non-performing assets and criticized loans both declined from the previous quarter. Our ending allowance for credit losses represented 1.87% of total loans, down from 1.89% at prior quarter end. Slide 16 covers our medium-term financial targets, which remain unchanged. As Steve mentioned, we're fully committed to achieving these by the second half of 2022. As our loan growth momentum continues, our first capital priority remains funding this organic growth, and we are encouraged by these trends. To the extent that our loan growth remains as robust as we expect, I would anticipate share buybacks will be de minimis for the remainder of the year. We are comfortable operating at or around these current capital levels as we balance our expected 2022 growth plans and the possible longer-term scenarios for the global macroeconomic outlook as we head into 2023. Finally, turning to slide 17, let me share our updated outlook. The guidance we provided in January assumed continued economic expansion aligned to market consensus, as well as the interest rate yield curve expectations as of early January. Our updated guidance continues to assume further economic growth and the rate curve as of the end of March. As a result of the rate curve outlook, we are revising upward our guidance in net interest income. We now expect core net interest income on a dollar basis, excluding PPP and purchase accounting accretion, to grow in the mid- to high teens%. This is higher than our previous guidance of high single-digit to low double-digit growth. In fee income, while we are seeing encouraging trends in our Payments, Capital Markets, and Wealth and Advisory businesses, we are also impacted by the industry-wide mortgage banking pressure. Based on this, we have revised our fee guidance lower to flat to down low single digits, excluding the impact of Capstone. On the topic of Capstone, we are anticipating closing the acquisition at the end of this quarter. Based on estimates created during due diligence, we believe the business could add approximately $20 million-$30 million of fee income on a quarterly basis. This would be incremental to the standalone Q4 Huntington guidance. We'll provide further information on the impacts of Capstone as we complete the acquisition and finalize our financial forecast. On expenses, excluding notable items, we are still tracking to our $1 billion run rate for this quarter. Again, this guidance is excluding Capstone. Finally, given our continued exceptional credit performance across our portfolios, we are revising our full year net charge-offs down to approximately 20 basis points from less than 30 basis points previously. Now, let me pass it back to Steve for a couple closing comments before we open for Q&A. Thank you, Zach. Slide 18 recaps what we believe is a compelling opportunity. Huntington stands as a powerful top 10 regional bank with scale and leading market density, as well as a compelling set of capabilities, both in footprint and nationally. We are focused on executing our strategic plan, which we believe will drive substantial value creation for our shareholders. We are well-positioned to deliver sustainable revenue growth, which is bolstered by new markets, new businesses, and expanded capabilities. As our revenue synergies accelerate and gain traction, we also remain committed to our proactive and disciplined expense management. As a result, we are increasingly confident in our robust return profile with expectations for a 17%+ ROTCE as we deliver on our medium-term financial targets in the second half of the year. Tim, let's open up the call for Q&A, please. Thanks, Steve. Operator, we will now take questions. We ask that as a courtesy to your peers, each person ask only one question and one related follow-up, and then if that person has additional questions, he or she can add themselves back in the queue. Thank you. Operator, let's open up for questions. Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for your questions. Our first question has come from the line of Betsy Graseck with Morgan Stanley. Please proceed with your questions. Hi. Good morning. Good morning. Good morning. I just wanted to see if you could unpack the upgraded NII guide a little bit. Give us a sense as to how much of that is coming from the forward curve changes from the loan growth from the cash redeployment. Just to understand those puts and takes a little bit more thoroughly. Thanks. Sure. Betsy, thanks for the question. This is Zach. I'll take that. You know, the main driver is the rate curve, what we're seeing come through with expected forward rates. To give you a sense, at the time of our budget, we had approximately 5 rate hikes baked into our forecast, going from 25 basis points up to 150 basis points in Fed funds by September of 2023, and it was 75 basis points by the end of 2022. Now, obviously, it's significantly changed yield curve up to 300 basis points or 150 basis points better by March 2023 and with 275 by December, so a full 200 basis points better by the end of this year. That's the majority of what's driving it. You know, given our asset sensitivity, we're poised to benefit from that, both from spread and I would say as well from the reduced drag from Fed cash that we saw in Q1, that will help us to drive the forward-looking NIM that we expect at this point. Okay. Then as I think about the flexibility you have in your balance sheet, I'm just wondering how you're planning on funding the loan growth that you're anticipating getting from here. Is there anything left over to, you know, increase the redeployment into the curve? You know, I think at this point, we're expecting continued growth deposits as well. We see nice trends in continued deposit gathering. Commercial growing faster than consumer, but both continue to be a solid producers, and that'll be the main funding source as well as, you know, as I said, utilizing some of the continued excess liquidity we've got on cash at this point. All right. Thank you. You're welcome. Thank you. Our next question has come from the line of John Pancari with Evercore. Please proceed with your questions. Morning. Morning. In terms of the, I know you mentioned that you're seeing some strengthening in loan growth momentum, and you cited an improvement in line utilization. Could you just talk about, you know, exactly what areas are you seeing this strengthening? How much did the line utilization improve? And are you beginning to see CapEx related demand, you know, start to drive growth? Thanks. Sure. This is Zach. I'll take that one, and my colleagues around the room here could tag on if they would like. I mean, generally, you know, we're really pleased what we're seeing in loans. Just taking a big step back, you know, the strength that we're seeing in our pipelines, the realization of that flowing through into bookings, you know, is what gives us confidence that we'll continue to see the momentum drive to that high single-digit loan growth by Q4. The model for it is gonna be pretty similar in the back half of the year as what we've seen the last two quarters. That is production-led with commercial growing faster than consumer, but consumer continuing to drive as well. The sources of it within commercial, we're seeing, you know, just continued strength in mid-market. Our corporate specialty areas, equipment, inventory finance also contributing very well. Commercial real estate and Auto dealer floor plan also delivering. Also on the consumer side, on-balance-sheet residential mortgage is really driven by what we're seeing in the mix of purchase, as well as the continued steady growth in Auto and RV and marine will really be the drivers there. From a utilization perspective, you know, I would characterize what we saw in the quarter as modest, but encouraging. I think a healthy sign for our customers. Saw around 1% increase in general middle market lines. Several percentage point increase in inventory finance, and most of that was seasonal. It is encouraging sign to see the inventory now beginning to flow to those dealers on a more steady basis that allows them to hold the inventory. Then the Auto Dealer Floorplan business also increased by a couple percentage points as well. Again, I think that's a function of just gradually improving the Auto supply chains. Overall, a pretty healthy mix and the model going forward, as I said, is production and very much driven by commercial. John, this is Steve. I would add, we invested since closing with TCF in a number of these lending units. We have a lot of capacity that's been brought on, particularly in Twin Cities and Denver and some of the specialty groups. We're able to scale the businesses as well. We'll be picking up volume from these investments throughout this year and beyond. John, it's Rich. The last part of your question had to do with CapEx spending. We are absolutely seeing an increase in capital spending given just the tightness of the labor market. There's an intense move to Automation, and we'll continue to see that through the course of the year. Got it. Okay, great. Thanks. Sorry if I missed this in your prepared remarks. Can you talk a little bit about the trajectory of your deposit data expectation, how the deposit costs could trend early on for the first 100 basis points of hikes and then thereafter? Thanks. Yep. Yeah, this is Zach. I'll take that one. Generally across the totality of the rate hike cycle, our expectations is that we're gonna see similar dynamics this rate cycle as we saw in the last one. You know, clearly there are some competing forecast forces there with, you know, lower starting rates that might signal a higher beta, but the level of excess liquidity across the industry, you know, would tend to blunt the beta and make it be lower. You know, as I think has been noted by a number of industry participants, over time, I think that the general operating assumption of the industry, and we share this, is that the early impacts around beta for the first several rate moves is gonna be relatively lower and it'll increase as the interest rate environment reaches a higher level. I would say two things. One is, what's really important to us is how we're poised to manage against this with very robust, very detailed product- by- product, segmented client by client management approaches, watching the market very carefully so that we can react and really be incredibly disciplined. I think, you know, secondly, we're poised to benefit quite a bit here through this cycle given the long strategy we've had to drive for primary bank relationships and core operating accounts within our business and commercial accounts. We feel good about how we're positioned and really just staying very vigilant to manage through it as we go forward over the next few quarters. Okay. Zach, what is your through cycle beta that you're assuming in your current outlook assumption? Yeah. It's about 30%. That's what we saw in the last cycle, and it's what's sort of baked into our modeling generally. Got it. All right. Thanks, Zach. You're welcome. Thank you. Our next question has come from the line of Scott Siefers with Piper Sandler. Please proceed with your questions. Morning, guys. Thanks for taking the question. First question I wanted to ask was on the cost side. Once we get down to about $1 billion per quarter in expenses, you know, coming up shortly here, is the plan still to hover around that level for the remainder of the year or are any of these inflationary pressures just sort of overwhelming that prior outlook? Yeah. Generally for the back half of this year, I mean, look, we feel great about where the costs are driving to, and I think we feel we've got the, you know, exceptionally strong line of sight to see the $1 billion of core expense run rate by Q2. That'll leave us then poised to really deliver on those medium-term financial targets we've talked about. You know, my expectation is roughly flat in the back half of this year. We're certainly seeing some inflationary pressures. As we outperform on revenue, there's a bit of expenses that'll drive for that. Generally speaking, it's approximately flat in the back half of the year based on our current outlook. That's really driven by, you know, just very rigorous expense discipline throughout the company and driving for efficiency in our base expenses and with a mindset towards self-funding the investments we're putting into the revenue growth initiatives that we've talked about, and that Steve just mentioned a minute ago. You know, longer term as we get out into 2023, the way we're posturing our long-range planning is really guided by our commitment to operating leverage, which we've delivered, you know, eight of the last nine years and feel confident and proud that we'll be able to do that again as we go into 2023. You might also, Scott, be aware we announced the acquisition of Capstone. Yep. As that closes, that run rate will have to be incorporated in as well. Yeah. Perfect. Thank you. Zach, as we look forward, do you anticipate altering your rate sensitivity kind of synthetically anymore, or will changes in your sensitivity just be a function of kind of changes in the complexion of the balance sheet from here on out? Yeah. Thanks, Scott, for that one. You know, we really like the level of asset sensitivity that we have right now. You know, as you know, we took a series of conservative actions last year to get to the point where we are now, and we're really benefiting from it. But all along that way, we've talked about, you know, when opportunities came up to protect some of the downside, to lock in some of that benefit, we would likely take that. That's what you saw us do in Q1 with the net $2.7 billion of received fixed swaps. You know, pretty modest impact on asset sensitivity as we noted in the prepared remarks, around 0.3%. You know, from here, I would expect us to stay very much net asset sensitive in the near term. Meanwhile, slowly adding to that downside hedge protection book over the course of the coming months, you know, as we watch the environment. We will stay dynamic as that could change, but that's the general operating posture at this point. Perfect. All right. Good. Thank you guys very much. Thanks, Scott. Thank you. Our next question has come from the line of Ken Usdin with Jefferies. Please proceed with your questions. Hey, thanks. Hey, Zach, one follow-up on the cost point. If you're in that billion zone-ish, you know, plus or minus towards the end of the year, would we then add Capstone to that? And do you have an approximate calibration, you know, relative to the revenue outlook, what you'd expect on the cost side from Capstone? Yeah. Thanks for that question. I do want to make sure we clarify that. That guidance is excluding Capstone, to be clear. You know, on Capstone, we're really diving into the modeling right now, and we'll come back with further guidance as we get closer to and through the close. Based on the due diligence modeling and the company's historical run rate that we are aware of, you know, the kind of core efficiency ratio of that business is pretty similar to what other M&A advisory boutique firms would have. On top of that, in the near-term quarters, we'll have a little bit of merger-related costs. I'm not expecting very significant costs there at all. Lastly, some incremental compensation expenses to fund retention payments, which are, you know, really important for a deal like this. More to come. We'll give clear guidance on it as we get closer to the acquisition. Okay, got it. Just one question on fees. In your outlook, can you help us understand what the either incremental or total impact is of Fair Play and other changes to deposit products? Are you also assuming that you continue to sell SBA loans like you got back into this quarter? Thanks, Zach. Yeah. No problem. Those are both important points. As it relates to the Fair Play evolution, nothing has changed from the guidance we provided back in March in the RBC conference, which is around $14 million of net impact on the fee line relative to the Q4 2021 run rate. That was slightly better than the earlier guidance we provided in January and continues to be our expectation of the impact on the fee line. Yeah, as we've noted a number of times over the course of the, you know, 18-24 months after that, we do expect to claw that back and to benefit from higher acquisition, better retention, more account deepening as a result of those changes, but that's the kind of immediate impact. Sorry, the second part of your question was? The SBA loans, and are you baking that into the outlook as well? Yeah. We are expecting to continue to get back to our historical practice of selling the guaranteed portion of our SBA loan production. You know, it bears noting that the team is performing exceptionally strongly right now, and really doing really well driving production. We think that's going to support the sustainment of that sale gains, which is great. In Q1, we had a bit higher gains than we would have expected in the quarter, just given the really high level of premium in the marketplace. It might kind of modulate modestly from that level as we go forward, but generally that run rate will continue and the expectation is that we will continue to in fact sell that production like we have historically done. Ken, we've invested in the SBA unit as well, over the course of last year, adding SBA capabilities in Colorado and Minnesota in particular, and they're off to a great start. We should have a record year in terms of production. Thank you. Thank you. Our next question has come from the line of Jon Arfstrom with RBC. Please proceed with your questions. Hey, good morning. Morning, John. Rich, question for you. Can you give us your assessment of consumer health right now? There's just some mixed messages out on the market. You know, just give us your assessment of what you're thinking right now. Yeah, no, happy to. From our standpoint, the consumer is in very good shape, you know, particularly in the super prime segments where we play. If you look at, you know, the delinquency numbers, you know, from our standpoint it's all seasonal in terms of the normal patterns that we're following there. So we feel good about it, you know, particularly, you know, in the spots where we play. We do expect over the course of 2022 the consumer credit metrics will start to revert a bit to the norm, but we've remained very disciplined with our LTVs and our, you know, FICOs. So, you know, we're very comfortable with that book. It's been a steady state performer over, you know, many cycles. We feel good about it. John, there is a phenomenon sort of lower income where the price of gas at the pump and inflation generally including housing is having an impact. Again, we've been super prime for more than a decade and the consistency of the performance in that, whether it's residential assets or Auto, will hold us in very good shape. We view the portfolio on aggregate to be on the low end of the risk spectrum when we talk about aggregate moderate to low. Yeah. Okay. Fair enough. Wondering if you guys can touch a little bit more on the inventory finance themes. You called that out as a growing area, and obviously it's something we all watch, particularly in Auto. I know that, you know, the TCF business was in a few other sectors. Talk a little bit about the themes and what you're seeing there. Well, this is a group that has been in existence now of even predating TCF, but sort of formed it many years ago. We're doing business with about 14,000 dealers nationally. There's great distribution with the team. It's very high quality, very steady and experienced team. We've got some outstanding dealer relationships. We're able to, with OEMs to be dynamically part of their sales process. There are different agreements depending on the OEM in support of the dealers. It's again this group performs very well. It's gone through cycles with very low loss rates. The dealers will generally support each other. Certainly, the OEMs will support transitions of dealers if that happens from time to time. The big issue for the group right now is just how to and what's the schedule for ramping up supply. You know, as we talk about supply chain disruptions, they're feeling it in many areas, including most of the dealers. This will be a group that just naturally will grow over time because inventories are so low. We expect to do very well over the next few years with the group. It's also a group that provides great customer service and has typically been adding OEMs every year. We would expect that to continue this year based on the discussions that have occurred thus far in this year. Very bullish on the group. Great team. One of the hidden jewels to some extent from TCF. It will allow us to do other things on the consumer finance side, and we'll talk about that probably in an upcoming conference. Okay. Thank you. Thank you. Our next question comes from the line of Matt O'Connor with Deutsche Bank. Please proceed with your questions. Good morning. I think I asked the same question last quarter about LTVs and Auto. I guess I'm just curious, you know, we've seen a little bit of a trend down in the LTVs and really good disclosure on slide 34 I'm looking at. You know, just as we think about used car prices being inflated and kind of new car prices and a lot in like the RV and marine, you know, are there thoughts to kind of further tighten some of these metrics to just insulate yourself from corrections there? Hey, Matt, it's Rich. I'll take that one. You know, we actually think the lower prices, you know, the used car prices coming down is a good thing. If you look at the mix of new to used, it's actually ticking up a little bit, you know, from the third quarter of 2021. We are seeing more new product coming in as part of the mix. You know, from an overall standpoint, you know, we are a super prime lender in that space. We've got a high FICO, and we use a custom scorecard that's been very effective in, you know, keeping us from relying on having to take the cars back in the first place. We aren't really that concerned about the price movement that we've seen in the industry. We've been able to keep the LTVs, as you mentioned, in the mid-80s. You know, our FICOs are in that 770-775 range. You know, we feel good about that. On the RV side, keep in mind too that that loan-to-value is based on the wholesale cost, not the retail cost. That's gonna show a little bit higher. You know, there we're in the 800+ FICO. From our standpoint, we don't see any real need to tighten. We've had great experience in both of those books. The RV marine book, you know, went through its first cycle with us really in the last couple of years and outperformed our expectations from a loss standpoint. You know, we're not concerned at all about either one of those portfolios. We've been in the Auto business, Matt, for more than half a century. We were able to stress test the portfolios in 2009, when we had 10% and 14% unemployment rates. We think we've got this really dialed in, and there's a discipline with this quarterly reporting that goes back over a decade that shows this consistency. While there may be some movement in loss rates, the overall approach has been very low default frequency, based on the underwriting. That's helpful. You know, similar question on the mortgage and home equity book, just in the next slide. Again, really helpful seeing this data over a couple of years. You know, there we've seen a more material change in the LTV in your originations. I guess I'm curious, is that something that you're driving, or is that something that your client base is driving, the you know using more equity against these loans? Thank you. No, I think it's really a combination of both, but I would say it's more the customers driving it than we've done any tightening. I think certainly we've been conscious of, you know, housing prices. I think what you're seeing on slide there shows that we've been disciplined with our originations and making sure that there's, you know, sufficient equity going into the loan to keep us safe if there's a drop in values. Thank you. We like secured consumer lending, Matt, as we've shared in the past. We believe that will put us in comparatively great shape through the cycles. Thank you. Our next question has come from the line of Erika Najarian with UBS. Please proceed with your questions. Hi, good morning. Wanted to follow up with Betsy's earlier line of questioning, Zach. You know, I'm wondering if you could, you know, quantify the earning asset growth that you're expecting. I know you're looking forward to more deposit growth from here, you know, but just thinking about how we should think about earning asset growth relative to that high single-digit loan growth. At what point in absolute rate should we start modeling in or thinking about positive total deposit growth, but perhaps negative mix shift away from non-interest-bearing deposits? Yeah. Good questions both. Let me just see if I can add some incremental color. As it relates to, you know, sort of the earning asset side of your question, you know, there would really be two parts to it. One, that loan growth in the high single digits as we talked about. Secondly is on the securities book. Right now we're standing at about 24, I think precisely it's 24.5% of assets on securities. I think we will stay within the range of 24%-26% of securities to assets here, for the foreseeable future, just as we manage yield and liquidity and just general balance sheet management. So those two factors will drive the, I think, the earning assets likewise to be pretty similar to that loan growth guidance. You know, from a deposit perspective, it's hard to sort of be overly precise in terms of the threshold level where things start to unstick and move. You know, our general assumption is that it's gonna be, you know, as I said, relatively lower beta, initially, higher later. We'll see that trending throughout the period. That's sort of generally the dynamic. The one thing I would just maybe add to my comment around the earning asset growth is just remember as well that we will have the one factor that will draw that down a bit is the cash side, where we're continuing to redeploy our cash into funding the loan growth. That we've got around, you know, $6 billion on average now that'll trend down throughout the course of the year back toward more like the $1 billion typical operating range we'd see, which will pull down on the earning assets growth, but certainly will benefit NIM as we deploy that into higher earning assets. Got it. My follow-up question is for Steve. Steve, you've done a good job in terms of, you know, balancing investing into the franchise and, you know, extracting cost savings, some cost savings to fund that and delivering on the TCF cost savings. I'm wondering as we think about, you know, the revenue set up from here, you know, we clearly got, from Zach the second half outlook. You know, good performing banks are thinking about, you know, that are sort of settled in their investment cycle, you know, have been saying something like 2%-3% expense growth is sort of a core, you know, core expense growth to think about in the future, you know, taking into account inflation. You know, is that something that seems reasonable for your company as you look forward past the second half of 2022? Well, we've guided for the second half of 2022. Earlier you heard Zach's comments of generally being flattish around $1 billion of expense, and that would include the expectations of inflation and other investments that we plan to make. We started with a view of 2022 last August when we did a round of expense reductions to set up and deal with the inflation, Erika, and that included the 62 branches that consolidated in early February this year. We're on track with the plan that we laid out last summer, and we're on track, if not ahead, with TCF at this point. A lot of confidence in this year. We'll be adding Capstone. We think we've got revenue synergies coming with that as well. We're like how we're positioned at this stage and optimistic, certainly very confident for the year and optimistic about going forward. We will be dynamic with operating expenses relative to revenues. We've committed to positive operating leverage, and I think it's eight out of nine years in the past, and you can count on that being part of our 2023 equation. Great. Thank you so much, Steve. Thank you. Thanks, Erika. Thank you. Our next question has come from the line of Ebrahim Poonawala with Bank of America. Please proceed with your questions. Hey, good morning. I just had one question, Steve, and Zach. I think you mentioned you'll hit the 17%+ medium-term ROTCE target back half of the year. Just talk to us in terms of the sustainability of the ROTCE profile from your looking into the medium term, just in terms of the downside risk as we think about maybe getting to a point where the Fed goes back to cutting interest rates, some normalization in credit. What's the level of ROTCE that you think is defensible even in a less conducive revenue backdrop? This is Zach, and I'll take the first shot at that and then let Steve, we'll see if he wants to tack on as well. Generally feel great about the 17% level, so for the foreseeable future. Frankly, I was forecasting that level even if the budgeted rate curve, which I mentioned before, was considerably lower than the current rate curve. I think that feel good about that level, you know, over the medium term, as we said. One of the things that we're frankly and truly really excited about is getting to the second half of the year, delivering these medium term targets that we first put out in December 2020 when we announced the TCF acquisition, and then being able to provide some updated guidance at that point. My expectation is we'll see at or above that level, you know, for that guidance as well. Just to add, we had a very good first quarter. We've talked since the fourth quarter about growing momentum, but we are not hitting on all cylinders. We still see a lot of upside on the TCF synergies and on some of the other investments we've made. There's a revenue dynamic that we hope we'll be able to continue and expect to be able to continue to develop throughout this year. That will provide some cushion for maybe normalized provision as well as somewhat different scenarios. I like the way the businesses are positioned. We're roughly balanced, as you know, consumer and business. On the business side, we've had a lot of scale added with TCF and investments made in new capabilities and products. You'll continue to see that. That's part of the plan, as we go forward this year. I think that's going to position us to have a consistency over the next few years in a variety of scenarios. You know, the one thing I just want to tack onto that just at the end here is, you know, a key contributor to this is not only our balance sheet and capital allocation, which is, you know, just ever more robust and dialed in to drive best-in-class returns, but also the growth of our Fee businesses. You know, notwithstanding our guidance that we provided this quarter where fees will be growing sort of slower than spread by Q4 of this year, just driven by the extraordinary rate environment, driven by some, you know, temporal factors in mortgage and our Fair Play product evolution. Broadly speaking, though, I think in the course of the long term, which was the nature of your question, I expect fee revenues to grow as a percentage of revenues by around a percentage point per year. I think that disciplined capital allocation driving for returns, driving toward fee-intensive businesses and payments in capital markets and our wealth and advisory, those things are the ones that sort of contribute to that sustaining ROE, even under various interest rate scenarios. That's helpful. Just as a quick follow-up to that, I heard you on no buybacks this year. When we think about capital allocation, and you mentioned on the fee side, anything that we should expect in terms of inorganic growth, be it Capstone-like transactions or anything on the fintech side or Wealth Management that you're looking at? Well, there are Fee businesses that if they were available, would be interesting to us. I would characterize them generally on the smaller side and wouldn't change the overall guidance that Zach provided to you. As we continue to build out our capabilities, we will from time to time, as we did with Huntington Technology Finance, I think four or five years ago. There may be some opportunities over the next couple of years to complement our capabilities and build the fee-generating potential to an even greater extent than what Zach portrayed. If we find things that make sense and would be additive to our customer service and our customer growth, then we'd look at that. We're generally very focused on driving the opportunities we have in hand with the TCF combination and the investments we've already made. Got it. Thanks for taking my questions. Thank you. Thanks a lot. Thank you. Our next question has come from the line of Steven Alexopoulos with JP Morgan. Please proceed with your questions. Hey, good morning, everyone. Good morning. Good morning. I wanted to first follow up on deposits. I didn't fully understand your response to Erika's question. What's the deposit growth assumption that's underlying the NII guide for 2022? Well, I haven't provided that guidance precisely, but I do expect continued, you know, let's call it mid-single digits deposit growth overall. Commercial growing faster, consumer growing a little slower, but both growing. I think, you know, on the consumer side, we are not seeing any imminent signs of any change in the level of savings activity and sort of trends around deposits. I think the whole concept of surge balances has been somewhat debunked at this point, that they're fairly sticky and the trends are fairly stable on the consumer side. On the commercial side, we're really benefiting from just, you know, sort of penetrating operating accounts and our focus around treasury management that's driving that, as well as you know, new client acquisition through particularly our growth in middle market and our specialty areas. Generally seeing a positive continued growth in deposits. Again, that kind of mid-single digits level. Okay. That's helpful. Steve, on the Capstone deal, is this really intended to make you more of a one-stop shop, right? Better position you to serve existing clients, or is this a new focus for Huntington, right? Are you going to invest meaningfully in this capability, and do you plan to build your banking capabilities around these new verticals you're picking up? Thanks. Capstone is a, you know, top-ranked middle-market investment banking advisory firm in its own right. We have a significant client base that if the services were made available to them, would help us expand our menu of cross-sell and eventually even feed our Wealth businesses. We felt this was an important additional component to the core delivery. It does give us expertise in a select number of verticals that they have as well, or access to that, and I think that'll help the commercial bank grow overall. I suspect they'll continue to build out their investment banking capabilities on a national basis, so that will be additive. We really think it's synergistic with us at the core of what we're doing and are quite optimistic about this. We have been working with them for over a year in terms of a fee share arrangement for certain referrals both ways and have really gotten insight into the culture of the company and its capabilities. That's what made this opportunity very attractive. Do you plan on building out the banking in areas like fintech services, energy, et cetera? Is that part of the plan? We don't have plans on the build-out yet. We have, you know, we're maybe a couple of months away from even closing on what they have where they have specialty capabilities now, we will take advantage of those. We'll look at if there's some augmentation to scale up to where they have existing capabilities. Over time, we'll assess new areas. Okay, great. Thanks for taking my questions. Thank you. Thank you. Our next question has come from the line of Brian Foran with Autonomous. Please proceed with your questions. Oh, hi. I guess maybe one follow-up on deposits, and I'll preface it, you know, I definitely remember last time or last rising rate cycle, you really outperformed the industry on deposit growth, especially low cost deposit growth. Kind of history's on your side and you've done it before. You know, I guess mid-single digit growth led by commercial, I'd say probably the center of half of your peers is like flattest deposit growth this year with commercial maybe declining a bit. You listed a couple of reasons, but can you just maybe flesh out, you know, kind of your high single digit commercial growth in an environment where peers are down a little bit. You know, what is really. How do you get that much differentiation? You know, it's hard to say much about the comparison with peers just not knowing, you know, what's in their business and the visibility that they've got. All I can tell you is we seem to be gaining market share and winning, particularly on the commercial side. I think it's not surprising to us because we've been investing in our Commercial business and the flow through of deposits is sort of the manifestation of the returns on those investments we've been making, both, you know, exclusive of TCF, and then as of late, really capturing the TCF opportunity to build in the middle market. As we said, we've been building out terrific middle market teams in the Denver and Colorado area and the Twin Cities, and just generally seizing the opportunity that's available within the new TCF geographies for Huntington in that space and also in business banking, I would say. You know, again, it's hard to make the comparison other than say we are seeing those trends manifest and it's encouraging. As I said before, our focus is making sure that this is not hot money. These are really core accounts. We often use treasury as sort of the treasury management as the tip of the spear to really drive penetration of not only those capabilities and those services, but ultimately to cement those operating accounts in terms of the strategy. That's the trends we're seeing. We feel confident about that forecast. Brian, we've had optimal customer relationship or OCR approaches to deepening or cross-sell for more than a decade now. Our, the TCF business lines did not. They just didn't have the capabilities. There's a broad base of customers that we have access to that we're very focused on. We talked about a tool called Edge that we put in place, a data tool, for the commercial teams, and that we put that in place in the fourth quarter. That's given us a lot of insight and traction coming on that overall OCR strategy. Good execution by the teams. We also shared over the fourth quarter, third quarter calls, if I remember correctly, that we were using an investment portal with one of our partners to move some of the deposits off balance sheet with a view that we'd bring some of them back on as the rate cycle changed, and we'll do that as well. Those might be some of the contributing factors in addition to what Zach shared. Thank you for the question. If maybe I could squeeze in one on capital, and it's as much an industry question as Huntington specific, but I guess, does the tangible common equity ratio matter at all this cycle? I mean, it's certainly getting lower for you and a lot of peers than it has been in a long time. But you know, it's driven by rates. AOCI is kind of a funky concept. It fair values one line item, not any other. You know, is it just solely about the CET1 ratio? Is there any level of TCE ratio that you view as a floor? You know, should we care about the TCE ratio at all, I guess, is the crux of the question. Right. In 2008 and 2009, that was the only ratio that we cared about, right? The industry clearly has migrated to CET1. It's surprising to me. You know, your question's the first one in probably a decade I've had of this nature. We're obviously focused on it as well. That's why we have a fairly high HTM percentage of the investment portfolio. We've done certain other actions, including the hedging that Zach described today. We'll continue to look at that, but it does not appear to be a driver. It does not come up in regulatory conversations. It would seem that the investment community and the regulatory community both moved on to CET1. That's great. Thank you. Thank you. Thank you. Our final questions for today will come from Peter Winter with Wedbush Securities. Please proceed with your questions. Thanks. I just had a quick follow-up question on indirect Auto. If you could talk a little bit about the outlook for indirect Auto. Some of the peers are pulling back because of the loan pricing pressures. I'm just wondering what your thoughts are. We really like that asset class, and then we've been with it in and out of cycles. It is a short duration paper on average, as Zach shared earlier, 25 months weighted average life. So even in rising rates, it gets a little tighter, and in declining rates, you know, the spread looks great. We're with it. We will stay with it on a consistent basis, and that's part of the value to the dealers. We have shown in the past a relative premium pricing as a consequence of the consistency in the market. We believe we're still achieving that. We like the asset a lot. It will narrow a bit in terms of spreads in a rising rate environment, but it's a short-lived asset, and it's still better than many of the alternatives. As you heard from Rich, we're confident in the performance. This is from our perspective a good asset, a 1+ ROA asset, historically. Our dealers, our Auto dealers tend to be the deepest cross-sell, total relationship cross-sell that we have in the company. Got it. Thanks, Steve. Thanks, Peter. Ladies and gentlemen, we have reached the end of the question and answer session. I would like to turn the call back over to Mr. Steinour for closing remarks. Thank you very much for joining us today. We're very proud of our colleagues, and I wanna thank them for their commitment to driving results in a great quarter. We have a lot of confidence in our teams and what we can deliver for our customers and especially our shareholders over the course of 2022, as you heard. Appreciate very much your support and interest in Huntington. Have a great day. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation. Enjoy the rest of your day.