Todd Beekman – Senior Vice President and Director-Investor Relations Stephen D. Steinour – Chairman, President and Chief Executive Officer David S. Anderson – Executive Vice President and Controller Dan Neumeyer – Senior Executive Vice President and Chief Credit Officer Howell D.

McCullough III – Senior Executive Vice President and Chief Financial Officer.

Kevin J. St. Pierre – Sanford C. Bernstein & Co. LLC Ken Zerbe – Morgan Stanley & Co. LLC & Co. LLC Tom M. Shearer – Jefferies LLC Scott Siefers – Sandler O’Neill & Partners LP Daniel M. Delmoro – Deutsche Bank Securities, Inc. Bob H. Ramsey – FBR Capital Markets & Co. Steven A. Alexopoulos – JPMorgan Securities LLC Craig W.

Siegenthaler – Credit Suisse Securities LLC Ryan M. Nash – Goldman Sachs & Co. Jon G. Arfstrom – RBC Capital Markets, LLC David J. Long – Raymond James & Associates, Inc. Sameer Gokhale – Janney Montgomery Scott LLC Geoffrey Elliott – Autonomous Research LLP.

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. Todd Beekman, you may begin your conference..

Steve Steinour, Chairman, President and CEO; Dave Anderson, Executive Vice President and Controller; Dan Neumeyer, our Chief Credit Officer, who will also be participating in the Q&A portion of our call and Mac McCullough who has recently joined us as our CFO, is here with us today. So let’s get started.

Dave?.

Turning to Slide 6, Huntington had a good first quarter. We reported net income of $149 million or $0.17 per share. This resulted in a 1.01% return on average assets and in 11.3% return on average tangible common equity. We also achieved positive operating leverage and continue to be committed to having positive operating leverage for the full year.

There were two significant items recorded in the first quarter that I will cover when I discuss noninterest expense. Fully-tax equivalent net interest income was $443 million, an increase of $13 million or 3% from the year-ago quarter. This increase was due to a larger balance sheet partially offset by a decrease in the net interest margin.

Average loans grew by $2.6 billion or 6%. Commercial and industrial loans grew by 4%, auto loans grew by 40% and residential mortgage loans grew by 8%. One item to note is that average commercial and industrial loan growth was negatively impacted by the $600 million reclassification that we made from loans to investment securities at the end of 2013.

Average investment security balances grew $1.9 billion or 20%, as we prepare for the new Basel III liquidity coverage requirements. The net interest margin for the quarter was 3.27%, a decrease of 15 basis points from the year-ago quarter.

The 15 basis point decrease resulted from a change in mix and yield of our earning assets, partially offset by lower funding costs. Noninterest income was $248 million, a decrease of $8 million or 3% from the year-ago quarter. Mortgage banking income decreased by $22 million, or 49%.

The year-ago quarter also included a $9 million gain on sale of low income housing tax credit investments, partially offsetting these items were higher security gains, service charges on deposit accounts and electronic banking fees. Security gains for the quarter were $17 million.

In preparation for the January 2015, LCR requirements, we sold securities that were not qualified for liquidity coverage and reinvested into high quality liquid assets.

The securities we sold had a fairly short remaining life, nearly all had a duration of less than two years and we would have seen more than 70% of this quarter’s gains, flow through its net interest income by the end of this year.

Service charges on deposits increased $4 million, and electronic banking fees increased $3 million over the year-ago quarter. Noninterest expense was $460 million, an increase of $17 million or 4% from the year-ago quarter. The increase resulted from $22 million of significant items.

Significant items in the quarter were $13 million of one-time merger-related expenses for the Camco acquisition and a $9 million increase in litigation reserves. Steve will cover OCR later in the presentation. Turning to Slide 7, I will cover credit trends later in the presentation.

the provision expense was $25 million, a decrease of $5 million or 17% from the year-ago quarter due to improvement in our credit quality. Capital continues to be strong.

at the end of the quarter, our tangible common equity ratio was 8.63%, down 28 basis points from the year ago and our Tier 1 common risk-based capital ratio at 10.63% was close to the year-ago levels. Slide 8 has a few additional first quarter highlights. First, Mac McCullough joined Huntington as our new CFO.

Steve will provide a fuller introduction in a few minutes. Second, we closed and successfully converted the Camco acquisition. Third, last week we announced the acquisition of 11 branches in Michigan from Bank of America. We also received a no objection from the Federal Reserve for our proposed capital actions under CCAR.

Side 9 is a summary of our quarterly earnings trends and key performance metrics. Slide 10 is a summary of the notable items that impact a comparison of the current quarter with the year-ago quarter. I covered most of these items in my previous comments. Slide 11 displays the trends in our net interest income and margin.

Net interest income increased $13 million from the year-ago quarter. The net interest margin decreased 15 basis points due to a 22 basis point change from the mix in yield of our earning assets, partially offset by a 7 basis point reduction in funding costs.

Having to add so many high quality liquid assets hurt the margin, but the larger pressure remains the competitive environment and fixed-rate loans renewing at current market yields. The right side of Slide 12 shows our deposit mix.

On the left side of this slide, you will see the maturity schedule of our CD book, which represents a potential opportunity to continue to lower deposit costs as about $2.3 billion of CDs are maturing in the next 12 months at an average rate of 78 basis points and new CDs are currently coming out between 30 and 40 basis points.

Slide 13 shows the trends in capital. The Tier 1 common risk-based capital ratio decreased from 10.90% at December 31, 2013 to 10.63% at March 31, 2014. The decrease was due to balance sheet growth and share repurchases. They were partially offset by retained earnings and the stock issued in the Camco acquisition.

During the first quarter of 2014, we repurchased 14.6 million shares of stock at an average price of $9.32. This completed the repurchase of $227 million of stock over the last four quarters.

Yesterday, our Board authorized a new repurchase of up to $250 million of stock over the next four quarters that we’ve included as part of our most recent capital plan. Slide 14 provides an overview of our credit quality trends. Credit quality continues to show steady improvement and is in line with our expectation.

Net charge-offs fell to 40 basis points well within our long-term target of 35 to 55 basis points. Loans past due greater than 90 days remain very well controlled at 22 basis points and have been at a similar level over the last year.

The nonaccrual loan ratio fell very slightly, while the nonperforming asset ratio experienced a modest increase due to the addition of $12 million of nonperforming assets from Camco. The criticized asset ratio continued to fall as the quarter saw a reduction from 4.49% to 3.78%..

Reviewing Slide 16, the loan loss provision of $25 million was relatively unchanged from the prior quarter that was $18 million less than net charge-offs of $43 million. Overall asset quality improvement resulted in a reduction in the ACL for loan ratio from 1.65% last quarter to 1.56%.

The ratio of ACL to nonaccrual loans fell modestly from 221% to 211%. We believe these coverage levels remain adequate and appropriate..

Let me turn the presentation over to Steve..

Thank you, Dave. Our Fair Play banking philosophy coupled with our Optimal Customer Relationship or OCR continues to drive new customer growth and increases in product penetration. This slide recaps the continued upward trend in consumer checking. This is Slide 17. Over the last year, consumer checking account households grew by 94,000 households or 7%.

In the last quarter, the annualized growth rate was over 10%, but about a third of those households were from the Camco transaction that closed in March. The mid-to-high single-digit pace remains in line with the expectations we set nearly four years ago.

Over this last year, we’ve continued to focus on increase in the number of products and services we provide to those customers and the corresponding revenue. The charts that you’re accustomed to see are in the appendix that the broader takeaway is that the strategy continues to drive in new customers and we are establishing deeper relationships.

Turning to Slide 18, the new commercial relationships over the last, the net new growth was 2.6% as there are 4,000 new commercial customers banking with Huntington.

You’ll see that the last quarter had very limited growth and that tie directly to some changes that we’ve made in our business banking checking products, which accelerated the closing of lower balance business checking accounts and we expect some additional closings throughout the remainder of the year.

Our underlying growth with new business customers is strong. The customers that remain with Huntington have deeper relationships, the percentage of commercial customers with four plus products and services increased by 2% since December of last year..

Customers in particular businesses are feeling better than they did a year ago. Competition continues to be tough and we’ve continued to selectively reduce large corporate portfolio, but our middle market especially verticals and auto lending businesses continue to see solid growth and strong pipelines.

Auto loan originations volume remains good and had attractive yield of around 3%, the rest of the loan portfolio is expected to grow modestly and investment securities will continue to be rolled in the OCR compliant high liquidity assets. NIMs expected to be under continued pressure, but we expect net interest income to grow.

Noninterest income excluding the net MSR impact and security gains is expected to be slightly lower than the seasonally low first quarter. As we commented on in January, we continue to refine our consumer checking products and in July, we’ll make a change that we expect to negatively impact fee income by around $6 million per quarter.

This approximate impact was in our previous expectations. Now putting these two items together, we expected total revenue to grow.

Continued to the next page, noninterest expense including Significant Items will have some quarterly volatility as second quarter sees the full impact of Camco and this year’s peak marketing expense along with the annual merit increase that occurs in May.

The overall message remains that we’ve remained diligent on controlling expenses and are committed to delivering full year operating leverage..

Turning to Slide 20, and as you’ve heard me say, we’re committed to positive operating leverage for the year. This slide lays out the results for the year-to-date and our adjusted total revenue is up about 2%.

Adjusted expenses were down 1.6% it’s too early in the year to claim our victory on operating leverage, but we wanted to provide with you an update to our progress.

Before I turn it back to Todd for Q&A, I’m very pleased to introduce our recently appointed CFO, Howell McCullough that I think many of you know him as Mac, and we’ll be referring to Mac as we go forward. And some of you would know him through his role of Chief Strategy Officer at U.S.

Bank, which by the way is a bank I admire for their consistency of results and disciplined approach to growth. And he is a great fit for us here at Huntington, Mac although, he earned his MBA from Wharton, he did his undergraduate degree from The Ohio State University and having grown up from in Columbus, he knows our markets well.

That brings with him a commitment to customer advocacy, which has been a hallmark of Huntington since it was founded, he also has expertise in revenue growth, expense management and innovation, all these attributes we’re seeking to take to the next – take Huntington to the next level.

So, I’ll close with a thank you to Dave Anderson, our Controller, did a super job stepping in as interim CFO, along with the accounting and finance teams, which all did outstanding job for the last year. Dave filled that interim CFO role wonderfully. So with that, back to you, Todd..

Tracy, we’ll now take questions. And I ask as a courtesy to your peers, each person ask one question and one related follow-up. for additional questions, he or she can go back to the queue. Thank you..

Operator:.

:.

Good morning. I was wondering if you could talk a bit more about the changes to the consumer checking accounts, it’s almost a 10% hit to the service charges.

could you talk – tell us what those changes are?.

We’re going to be making a couple of changes, Kevin. first, we’re going to allow all of our customers to transact up to midnight to cover any overdraft charges by making transfers again, through midnight in any of our channels, ATM, phone bank, digital whatever channel access they have.

and then secondly, we’re making an adjustment to how we post debit items. it’s a bit involved, but it will work to the consumers to our customers’ advantage, and I think give us even more transparency around that, as we go forward..

So, is it something that you would – is it something that you would anticipate that boost to the brands of the Fair Play strategy, and then you’ll be able to leverage this a bit?.

We certainly think it’s completely in line with our Fair Play strategy, and will be helpful to us. I would point, Kevin, last year, we made a $30 million reduction in overdraft fees related to posting order changes, $30 million approximately. but as you saw the results for the year, the actual service charge fees were up about 6%.

So we’re getting signals that our customers and our ability to attract new customers really appreciate this Fair Play approach. and so that’s in part why we decided to continue to roll out differentiating positions with our checking product..

Great. Thanks very much..

Thank you..

Your next question is from Ken Zerbe with Morgan Stanley..

Great, thanks. First, really quick question on the reclassification of the loans and the securities was the 600 also the impact on average balances, such that if we had average of the 600 to the average, I think loan growth was up about 2.0%.

Is that the right way to think about it?.

Yes, it is. We reclassified $600 million at the end of December and then throughout the quarter as we got, we originated new assets, the balance increased about $673 million. but I think you’re doing the math right..

Got it. And that was all in the commercial line, the C&I line..

Yes. It came out of C&I, and went into available-for-sale securities..

Okay, perfect. And then just the follow-up question on the expense line, obviously comp was I guess very well controlled this quarter.

Can you just run through the ups and downs? I think you have the merit increases in May, you had seasonally higher payroll taxes this quarter, and I know you have the pension expense or curtailment, I guess, when we sort of net that out and we should – we’re sort of at a broadly sustainable level, or do we take up in second quarter and then I’m just wondering how sustainable this level of comp expense is? Thanks..

I mean we will see a merit increase in May. we obviously continue to manage expense as well. but we will see that impact in May as we’ve signaled..

Ken, you’ll also see some increased marketing, our marketing tends to be seasonal. and so that that will be an increase. and then finally, the Camco acquisition was brought in – brought on late in the first quarter. so that that will have some overheads associated with it as well.

But that’s been part of what’s been in the expectations, frankly all of those has been in terms of the expectations and the Camco, there is the revenue as well..

Got it, okay. thank you very much..

Okay..

Thank you..

Your next question is from Ken Usdin with Jefferies..

Yes. Hi, this is Tom Shearer in for Ken. just want to see if I can get a little more color on loan growth within categories. we saw CRE pick up a little bit here.

Is that sort of more of a function of lower runoffs, or are we actually seeing a base set in here, or how should we think about growth in that category and others going forward?.

Yes. I think this is Dan. On CRE, we are seeing a pickup of activity, I think there has been the opportunities, multifamily retail, we’re seeing more properties change hands. So I do think that over the last couple of quarters, we’ve seen more opportunities there, that’s within the profile we’re looking for..

But Tom, to try and answer you more broadly, we’ve had a very good quarter in terms of broad-based growth, we’ve had growth in our middle market, our small business, a number of our verticals, healthcare, food and ag et cetera. So very broad-based.

our large corporate book actually came in a little bit again, in the first quarter as I did through last year. and so I think this is a reflection of the economy and our footprint doing well, and the investments that we’ve made in these verticals and other businesses continuing to mature..

Great, thanks. And just a quick cleanup on the share account, we saw the period end down, but the average slightly up.

How should we think about that going forward?.

We had the Camco acquisition in there..

Right..

And the majority of the shares that we repurchased in the first quarter or after Camco, we’re in a – we were required to stay on the market for a while, but most of the activity happened later in March..

Okay. Great, thanks..

Thank you..

Your next question is from Scott Siefers with Sandler O'Neill and Partners..

Good morning, guys..

Good morning, Scott..

Steve, I was just hoping you could touch a little more on just the notion of positive operating leverage. You guys made it last year. It looks like you’ll be able to do it again, this year.

But I guess absent any additional securities gains for example, the spread between revenue growth and expenses might start to narrow if I’m interpreting the guidance correct. So you can still do it, but it will be kind of very modest operating leverage.

When and how do you see that gap expanding more materially? Is it that 2015 is the year where it really kind of shines through and that you will have kind of a full year of no need to do investment spending on the branch build out, or how should we really think about that dynamic from your perspective?.

This is Dave. Scott, I think that we think about the future, we’re obviously having very good success in growing loans this quarter. we expect that to continue into 2014 and 2015. So that will help us. We talked about the factor we’re still expecting the net interest income line to continue to grow.

Our supermarket strategy, we expect it to break-even by the end of this year. So that will help us obviously from the positive operating leverage.

And we are sensitive to short-term interest rates, a large percentage of our book is LIBOR-based, and our projections on interest rates will help as interest rates move up on the short part of the curve, that will help us as well..

So none of our investments are mature. Scott, credit card for example was end of third quarter last year. There’s a variety of areas that we’ll continue to attribute and we come into the second quarter of the strong pipeline, much like we told you year-end, we came in to the first quarter with a strong pipeline. We would expect that to continue.

We like the activities and the focus that we have going on throughout the company. So the execution is getting better. You think about that first quarter at least in our geography, not that we want to provide weather reports, but there were clear weather impacts into some of the results.

So more to do, we’ve got frankly a lot of ambitions and – but we think we had a good quarter and a trend now with pipeline and backlog in activities to be confident as we come into the second quarter..

Okay, good. That’s helpful, and I appreciate the color. And then I guess just as a follow-up, I want to make sure, I understand the loan growth dynamic correctly. Because of the Camco transaction, there’s a little bit more of a gap than is typical between your end-of-period and average balances.

And then the accounting change that you did end of last quarter doesn’t necessarily help I guess.

So it’s just almost as simple as thinking the end-of-period, which is, I guess more of a double-digit annualized growth rate is just a much better proxy for what we should be expecting for overall loan growth than the more modest annualized growth if you just did the average numbers?.

Well. At the end-of-period, we’d pick up Camco..

Yes..

So that would – that could be misleading if you just took a spot and not an average. But we had pretty good growth throughout the quarter. it ramped a bit, but it got a little better during the quarter. but it wasn’t back-end loaded.

So the – as we come into this quarter, we get essentially the same kind of pipeline to work with and to help you that the Camco loan portfolio is about $500 million of business and consumer..

Yes, okay. So maybe, just taking that out of the end-of-period is probably a pretty good proxy then for the kind of growth rate we could see going forward, it sounds like..

Yes, we can see, you’ve got a couple of weeks in it, but that’s all..

Yes. Okay. All right, that’s perfect. I appreciate the time..

Thank you..

Your next question comes from the line of Matt O'Connor with Deutsche Bank..

Hey guys, you have Dan Delmoro [from Matt’s team] (ph). Just a quick follow-up on C&I loan growth. Your outlook points to higher customer activity and some of the benefits from investments in your verticals.

I just want to get a sense for how utilization rates trended throughout the quarter, and what you guys have been seeing in terms of pricing in terms in the space? Another regional bank pointed to some frothiness in the CRE space. So I wanted to see if you guys are seeing that as well. .

Yes. This is Dan. So, in terms of utilization it has been flat, which is actually a positive because we’ve seen a couple of year trend of decreasing utilization. So, we believe that’s leveled out and maybe pointed to an uptick, but definitely a change in direction there in the flattening.

In terms of frothiness in the market, yes nothing has changed from last quarter, the market is as competitive as ever. And CRE in particular, yes, it’s more aggressive, but given where – we have pretty modest growth targets there.

So we are able to pretty much take on the credit that fits our profile and still withholding to loan-to-value debt service coverage ratios et cetera. The stress has been more on term and recourse, but the disciplines of debt service coverage and LTVs have held up well. And so, we like what we are adding to the book..

And as we’ve talked about before, we have concentration limits in place for a variety of our loan portfolios. But, we tend to articulate it around Commercial Real Estate as a concentration limit on these calls and the analyst sessions just to point out them..

Okay, thank you..

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

Hey, good morning guys. Just want to touch a little bit more on expenses, it sounded in the intro comments as if the expectations are not materially different, but when I read the guidance, it says you expect a slight increase from this quarter’s level.

I think last quarter you had said flattish around the second half of 2013, which was the same as this quarter.

So, are you expecting a little bit higher expenses now than before or am I just getting too detailed?.

.

:.

No. That there is high and then you have highlighted several unusual items in our anyway seasonal pipe items in the second quarter.

Can you give us a sense of the magnitude of increase in the second quarter from the merit advertising in Camco acquisition all together?.

Yes. This is Dave. Unfortunately, we did not give that type of guidance..

We just stay away from line item guidance..

Okay..

But [good point] (ph) for asking, nice try..

And then last question, I'll ask you guys sort of about the expenses and the positive operating leverages. You guys map it out on Slide 20. You make adjustments for the litigation and merger expenses, which is fair, but didn't back up the security gains this quarter.

When you all think about positive operating leverage, do you think about security gains as a piece of that?.

Stephen D. Steinour:.

:.

:.

:.

Okay, great. Thank you, guys..

These investments were short in duration..

Thanks. .

The next question comes from the line of Steven Alexopoulos with JPMorgan..

Hey, everyone..

Good morning..

Steve, regarding the change in Fair Play coming in July, what drove the decision to give more customers more time to get funds into their account.

Was it any pressure from CFPB or just feedback from customers if 24 hours is not enough time?.

Well, this is has nothing to do with CFPB. We were thinking about it as we came into the New Year as a way of sort of strengthening the positioning around Fair Play and as we saw last year, again with a posting order to change service charges were actually up during the course of the year, so and good growth in customers.

So we’re still learning, we’re still testing, we still get – we seek and access customer feedback and the collective sense or judgment of the team was actually entirely consistent with the Fair Play approach, but we think also a good business in terms of – to get further strengthening Fair Play and uniqueness of 24-Hour Grace.

In 24-Hour Grace, the vast majority of our customers never overdraw, but they all show a very strong emotional appeal around it when we survey. So we’ll – so we thought it was a logical next step for us..

But do you think it's enough of a change to drive incremental share versus the 24 hours?.

Well, it could be helpful to us in terms of both growth in customers, but also a share of wallet. We continue to refine our efforts around share of wallet..

Okay. Just a question regarding compliance with liquidity coverage ratio, what’s the approximate dollar balance of higher liquid securities that you still need to add and what’s the timing to get there? Thanks..

So the overall portfolio, the securities portfolio is the absolute level today, is about the level it needs to be and as we look over the course of the year of the principal and interest of the non-qualified that roll through, we’ll reinvest that back into qualifying assets and on target to be there by the end of the year.

So we’ve said that it’s about $100 million, $125 million a month in interest and amortization. And so that will cycle now throughout the year.

We do have some legacy assets that would not be high qualified, and so that may continue to be a modest amount of substitution, but as we’ve said in the year-end call we wanted to get the portfolio positioned in aggregate during the fourth quarter for a number of reasons, including the potential scarcity of some of the product we were looking for..

Got you. So just remixing the rest of the year should be enough. Okay thank you..

I think so. Thanks..

Your next question comes from the line of Craig Siegenthaler with Credit Suisse..

Hey, thanks good morning..

Good morning, Craig..

So just a follow-up to the last question on the LCR.

On the funding side, should we expect any additional run-off of collateralized municipal deposits? And I'm wondering, did anything on the liability side related to LCR drive the consumer pricing changes that we should expect in July?.

Well, the decisions in July around our Fair Play philosophy had nothing do with LCR. In fact until you mentioned it, I hadn't thought of it in that context. So that's how remote it was.

We had been working over the last year, year and a half to adjust collateralized deposits, and certainly as we see final guidance come out we may further reduce or adjust them, but we’ve made meaningful progress during that period of time.

And we may have some other approaches to it, home loan Bank, LCD or other things for very meaningful relationships. Deeply crustal, significant treasury management and things like that that we choose to protect. Don’t see it as a huge issue for us at this point, Craig..

And then on your prior comment, you mentioned $125 million per month that you're going to reinvest from the securities portfolio into Ginnies. That nets to $1.5 billion.

Should we think about that roughly as the increase over the next 12 months? And then the delta when you think about NIM is maybe a 20 basis point difference between the average Fannie/Freddie security and Ginnie?.

We didn’t mean to imply further growth in that portfolio. This is normal and monthly interest and if you will, principal repayment or amortization of the existing portfolio that we would look to reinvest to hold the portfolio at roughly the $11 billion level that it’s at today..

So, Steve, so you hold it at $11 billion, but there's a $1.5 billion mix shift from the Fannie and Freddie portion to the Ginnie portion. And the net I think interest income delta on that is maybe 20 basis points because the Ginnies are yielding something lower. That was kind of my quick math. .

But it’s not all coming out of Fannie/Freddie to be sure, and it’s got a variety of coupons around it and the durations maybe a little different as we look at reinvest.

We do not intend to take a lot of market risk and we haven’t in the last five years, but so we’ve a number of things to work with, I wouldn’t do the 20 bps Craig, but we don’t try and provide specific guidance. So just in that context, I think you did a bit severe..

Okay. Great thanks for the color Steve..

Thank you..

Your next question comes from the line of Ryan Nash with Goldman Sachs..

Hey good morning guys..

Good morning..

Just a question on the buyback strategy. When we think about the repurchases that occurred over the past couple of quarters, you guys flowed the buybacks for two quarters. Granted I understand that there was impact from Camco, and then you obviously completed the offering this quarter when you billed back $136 million.

So can you just help, as we think about the $250 million approval that you got for this year, can you help us understand the philosophy from here? I know there was a lot of talk around sensitivity above tangible book value.

Is that still the main primary factor in determining whether or not you're going to – how aggressive you are and or is it the fact that you're continuing to generate capital at a pretty fast pace that you want to prevent the capital base from growing? So, any color you could provide on that would be helpful?.

Let me start broadly with that Ryan if we could. First of all, we think we have a strong capital position. We’re sitting with excess capital today. And our approach has been grow the course as the capital there to support growth, secondly, to support dividend and third, for other activities, buyback, M&A, et cetera.

In that context as we talked about the year-end earnings, we had a number of discussions at Board management about buyback approach and we refined or adjusted that approach which we communicated, certainly attempted to communicate at the year-end call.

And so there are a number of additional factors than just a tangible book value that we are looking at. We haven’t gone into those in great detail, but we have refined our thinking, broadened it quite a bit and that remains consistent as we go from first quarter now into second.

And Dave pointed out we had this little hiatus around the Camco acquisition that’s required, but other than that executed against that refined approach during the first quarter. So we carry that approach into the second quarter and beyond, I guess, it’s second through first quarter with the CCAR approval..

Got it. And I guess just a question on auto. I notice that you've – maybe I'm looking too far into this. I noticed in the release you are no longer stating that you won't be doing any auto securitizations. And I think the wording in the outlook around indirect auto loan growth changed slightly.

Has your thinking – has pricing changed at all for loan sales such that the economics make more sense to consider? Is there anything LCR-driven that has changed your outlook, or is it just that you're seeing improving loan growth in other areas such that you don't need as much auto loan growth to support balance sheet growth?.

When we entered the year, we tried to communicate that we did not anticipate an auto securitization this year that we had room under our concentration limit that would take us into 2015. And like the asset yield and other risk dimensions of autos versus alternative investments, and that thinking hasn’t changed and wasn’t a function of LCR..

Great. If I could sneak in one other quick one, Steve. Given that your original fee income guidance did contemplate the $6 million quarterly decline in service charges, and you highlighted the fact that, despite last year's policy changes, you were able to grow service charges 6%.

So my question is there still enough momentum in the fee income line, given the things that you're doing in Fair Play, that we could actually end up seeing core fee income growth, or are the policy changes along with the decline of mortgage still too hard to overcome?.

Well, as we’ve said in the full year outlook, net interest income will be up, will swim through whatever margin compression, fee income will be modestly down if not flat, trying to overcome mortgage, the mortgage position.

But when we gave that earning outlook, we had contemplated the decision that we’re sharing today around further adjustments to the overdrive line item and so the overall guidance doesn’t change. We’re consistent with that and so the combination of those factors and managing expenses will put us inline with what we originally said..

Great and thank you for taking my questions..

Thank you..

Your next question comes from the line of Jon Arfstrom with RBC Capital Markets..

Hey guys thanks, good morning..

Good morning, Jon..

Good morning, Mac..

Good morning, Jon..

Welcome to Huntington. .

Stephen D. Steinour:.

:.

Yes. It's not the same here without Mac in town. Just a little more granular on the commercial lending, I'm particularly interested in the customer outlook for borrowing among the manufacturers and also their appetite for CapEx borrowing. .

Yes. I would say it’s improving, I think there is – we haven’t seen huge changes yet, but I do think there’s a developing confidence out there and more potentially to look at capital investment, I think it shows up in our middle market loan growth in our equipment finance loan growth.

So I do think there are signs of that developing confidence and I think that helps form our outlook for the balance of the year..

Okay.

And then just to follow-up on that, in terms of your specialty verticals, how is the – I have to get the name right – but the foreign subsidiary business going? Are you seeing increase in activity there?.

We are seeing some activity; the thing we like about our verticals is that the growth is coming from all of them. we’re not relying on any one to kind of outperform. We’re seeing traction starting to develop in all of them, and foreign non-subs is a contributor. it is not huge, but we are starting from kind of ground zero.

So we like the developing pipeline there and what we’ve added to the book thus far. .

Jon when we talk about investments not mature, these specialty businesses or verticals, none of them are mature. And we’ve been doing this now for a number of years. we did three at the end of 2012, but there were a series of them before. they all have growth potential for us and they’re all coming on..

Okay. thank you. .

Thank you..

Your next question comes from the line of David Long with Raymond James..

Hey guys, it’s Dave Long..

Hey, Dave..

Just the one question that I still have remaining was regarding the expectations, Steve, and you talked about expectations for net interest income to grow moderately and noninterest income and expenses to be slightly higher from the current levels.

Just to confirm, does that include the impact of Camco then, or is that simply looking at it organically?.

That’s the organic, but we also have enrolled Camco into that..

Okay. so Camco is built into the – that sort of guidance if you want to call it back..

Camco is included..

Got you, okay. that’s all I have – that I have got left. Thanks guys..

Thank you, Dave..

Your next question comes from the line of Sameer Gokhale with Janney Capital..

Hi, thank you. Just I know you didn’t want to give any sort of specific guidance on the OpEx impact from Camco for full quarter in Q2, but could you – maybe, you’ve already mentioned this, sorry if I missed it.

But what was the actual impact on OpEx this quarter from Camco for roughly a month or so?.

I don’t think we’ve broken it out, it’s not material. It’s $500 million in loan, $600 million in deposits, net of 11 branches, so we’re not trying to – it’s just not material..

Okay, that’s fair. I was just thinking that might help a little bit with Q2, but it doesn’t sound like a big number, so that’s fine. And the other question was a again, relatively small number, but your litigation reserve charge of $9 million.

Can you just give a sense of what that ties into, this new litigation or existing litigation that you reserve for?.

this is Dave. as in the past, we just don’t comment on litigation matters..

Okay. Well, those are the two questions I had. Thank you..

Thank you very much..

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

Hello.

Just a quick question on the changes to the deposit service charges, what is the working you’ve done around how long you think this is expected to take for those to become earnings positive, so you recover what you lose in the service charges and other fees or other revenue?.

We haven’t taken it at an account level in terms of what we’re prepared to share this morning. we have seen a fair amount of the elasticity around customer behavior, as we made adjustments last year, for example and so that has been given us an ability to model it and perhaps in some unique ways about the consumer behavior.

Remember, our approach has been customer acquisition and share of wallet and I would increasingly, the focus for us is around revenue based share of wallet. and you’ll hear us talk about that more commonly as we go forward..

And then how much that you think there is to go on these fee initiatives and initiatives to become more customer-friendly, I mean you’ve done quite a bit already.

Do you think there is a lot more that you can do or you could think any further initiatives are going to be kind of small and incremental?.

While we test and learn, and as we said, we survey and get feedback, there is nothing large on the horizon at this point, and I wouldn’t say never, but it’s not obvious to us what or when we might do something else now.

so I think for purposes of modeling, certainly through the rest of this year, there is not another wave of activity that we’re contemplating..

Thanks very much..

Yes. Thank you..

There are no further questions at this time. I’ll turn the call back over to Steve for closing comments..

Thank you very much. So we think we had a solid start to the year. we’re grateful for your interest today, keep in your way above 1% was – is an objective and although it depressed a bit as we built the securities designed to meet the new liquidity rules. we’re pleased with results.

The customer activity in particular, that’s translated into balance sheet growth, bodes well for us as we move forward. The Camco acquisition closing integration, doing that smoothly was a nice step along with this recently announced branch acquisition in Michigan.

So each one of these, while not being significant, they add a bit to the balance sheet, 1% or so to the balance sheet, and while not being particularly significant. they do help us strengthen us over time, give us more density, and deliver modest improvements in our efficiency ratios. So we’re going to continue to execute [Technical Difficulty].