hban-20210630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

Huntington Bancshares Incorporated

(Exact name of registrant as specified in its charter)


Maryland	1-34073	31-0724920
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(I.R.S. Employer Identification No.)

Registrant’s address: 41 South High Street, Columbus, Ohio 43287

Registrant’s telephone number, including area code: (614) 480-2265

Securities registered pursuant to Section 12(b) of the Act


Title of class	Trading Symbol(s)	Name of exchange on which registered
Depositary Shares (each representing a 1/40th interest in a share of 5.875% Series C Non-Cumulative, perpetual preferred stock)	HBANN	NASDAQ

Depositary Shares (each representing a 1/40th interest in a share of 4.500% Series H Non-Cumulative, perpetual preferred stock)	HBANP	NASDAQ
Depositary Shares (each representing a 1/100th interest in a share of 5.70% Series I Non-Cumulative, perpetual preferred stock)	HBANM	NASDAQ
Common Stock—Par Value $0.01 per Share	HBAN	NASDAQ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. x Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). x Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes x No

There were 1,476,557,426 shares of the registrant’s common stock ($0.01 par value) outstanding on June 30, 2021.

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HUNTINGTON BANCSHARES INCORPORATED

INDEX


PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)			47
Condensed Consolidated Balance Sheets at June 30, 2021 and December 31, 2020			47
Condensed Consolidated Statements of Income for the three months and six months ended June 30, 2021 and 2020			48
Condensed Consolidated Statements of Comprehensive Income for the three months and six months ended June 30, 2021 and 2020			49
Condensed Consolidated Statements of Changes in Shareholders’ Equity for the three months and six months ended June 30, 2021 and 2020			50
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020			52
Notes to Unaudited Condensed Consolidated Financial Statements			54
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			5
Executive Overview			5
Discussion of Results of Operations			7
Risk Management and Capital:			20
Credit Risk			21
Market Risk			30
Liquidity Risk			33
Operational Risk			35
Compliance Risk			36
Capital			36
Business Segment Discussion			38
Additional Disclosures			43
Item 3. Quantitative and Qualitative Disclosures about Market Risk			100
Item 4. Controls and Procedures			100
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			100
Item 1A. Risk Factors			100

Item 6. Exhibits			102
Signatures			103

2 Huntington Bancshares Incorporated

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Glossary of Acronyms and Terms

The following listing provides a comprehensive reference of common acronyms and terms used throughout the document:


ACL						Allowance for Credit Losses
AFS						Available-for-Sale

ALLL						Allowance for Loan and Lease Losses
AOCI						Accumulated Other Comprehensive Income
ASC						Accounting Standards Codification

AULC						Allowance for Unfunded Lending Commitments
Basel III						Refers to the final rule issued by the FRB and OCC and published in the Federal Register on October 11, 2013
CARES Act						Coronavirus Aid, Relief, and Economic Security Act, as amended
C&I						Commercial and Industrial

CDs						Certificates of Deposit
CDI						Core Deposit Intangible
CECL						Current Expected Credit Loss

CFPB						Bureau of Consumer Financial Protection
CMO						Collateralized Mortgage Obligations
COVID-19						Coronavirus Disease 2019
CRE						Commercial Real Estate

EAD						Exposure at Default
EVE						Economic Value of Equity
FASB						Financial Accounting Standards Board
FDIC						Federal Deposit Insurance Corporation
FHLB						Federal Home Loan Bank
FICO						Fair Isaac Corporation

FRB						Federal Reserve Board
FTE						Fully-Taxable Equivalent
FTP						Funds Transfer Pricing
FVO						Fair Value Option
GAAP						Generally Accepted Accounting Principles in the United States of America
HTM						Held-to-Maturity
IRS						Internal Revenue Service
Last-of-Layer						Last-of-layer is a fair value hedge of the interest rate risk of a portfolio of similar prepayable assets whereby the last dollar amount within the portfolio of assets is identified as the hedged item

LGD						Loss Given Default
LIBOR						London Interbank Offered Rate
LIHTC						Low Income Housing Tax Credit
MBS						Mortgage-Backed Securities
MD&A						Management’s Discussion and Analysis of Financial Condition and Results of Operations
MSR						Mortgage Servicing Right
NAICS						North American Industry Classification System
NALs						Nonaccrual Loans
NCO						Net Charge-off
NII						Net Interest Income
NIM						Net Interest Margin
NPAs						Nonperforming Assets

OCC						Office of the Comptroller of the Currency
OCI						Other Comprehensive Income (Loss)

2021 2Q Form 10-Q 3

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OLEM						Other Loans Especially Mentioned

PCD						Purchased Credit Deteriorated
PD						Probability of Default
PPP						Paycheck Protection Program

RBHPCG						Regional Banking and The Huntington Private Client Group
ROC						Risk Oversight Committee



SBA						Small Business Administration
SEC						Securities and Exchange Commission
TCF						TCF Financial Corporation
TDR						Troubled Debt Restructuring
U.S. Treasury						U.S. Department of the Treasury

UPB						Unpaid principal balance
VIE						Variable Interest Entity
XBRL						eXtensible Business Reporting Language

4 Huntington Bancshares Incorporated

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PART I. FINANCIAL INFORMATION

When we refer to “we”, “our”, “us”, “Huntington”, and “the Company” in this report, we mean Huntington Bancshares Incorporated and our consolidated subsidiaries, unless the context indicates that we refer only to the parent company, Huntington Bancshares Incorporated. When we refer to the “Bank” in this report, we mean our only bank subsidiary, The Huntington National Bank, and its subsidiaries.

Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

INTRODUCTION

We are a multi-state diversified regional bank holding company organized under Maryland law in 1966 and headquartered in Columbus, Ohio. Through the Bank, we have over 150 years of servicing the financial needs of our customers. Through our subsidiaries, we provide full-service commercial and consumer banking services, mortgage banking services, automobile financing, recreational vehicle and marine financing, equipment financing, inventory finance, investment management, trust services, brokerage services, insurance products and services, and other financial products and services. Our 1,239 full-service branches and private client group offices are primarily located in Ohio, Colorado, Illinois, Indiana, Kentucky, Michigan, Minnesota, Pennsylvania, South Dakota, West Virginia and Wisconsin. Select financial services and other activities are also conducted in various other states. International banking services are available through the headquarters office in Columbus, Ohio. Our foreign banking activities, in total or with any individual country, are not significant.

This MD&A provides information we believe necessary for understanding our financial condition, changes in financial condition, results of operations, and cash flows. The MD&A included in our 2020 Annual Report on Form 10-K should be read in conjunction with this MD&A as this discussion provides only material updates to the 2020 Annual Report on Form 10-K. This MD&A should also be read in conjunction with the Unaudited Condensed Consolidated Financial Statements, Notes to Unaudited Condensed Consolidated Financial Statements, and other information contained in this report.

EXECUTIVE OVERVIEW

Acquisition of TCF Financial Corporation

On June 9, 2021, Huntington closed the acquisition of TCF Financial Corporation in an all-stock transaction valued at $7.2 billion. TCF was a financial holding company headquartered in Detroit, Michigan with operations across the Midwest. The acquisition added depth in existing markets and new markets for expansion and brings complimentary businesses together to drive synergies and growth. Historical periods prior to June 9, 2021 reflect results of legacy Huntington operations. Subsequent to closing, results reflect all post-acquisition activity. For further information, refer to Note 2 “Acquisition of TCF Financial Corporation” of the Notes to Unaudited Condensed Consolidated Financial Statements.

Summary of 2021 Second Quarter Results Compared to 2020 Second Quarter

For the quarter, we reported net loss of $15 million, compared with net income of $150 million in the year-ago quarter. Loss per common share for the 2021 second quarter was ($0.05), down $0.18 from earnings of $0.13 per common share, in the year-ago quarter. The reported net loss was impacted by TCF acquisition-related expenses totaling $269 million, or $218 million, after tax ($(0.19) per common share), in addition to the TCF acquisition initial provision for credit losses of $294 million, or $239 million after tax ($(0.21) per common share).

Net interest income was $838 million, up $46 million, or 6% from the year-ago quarter. FTE net interest income was $844 million, up $47 million, or 6%, from the year-ago quarter. The increase in FTE net interest income reflected the benefit from the $18.4 billion, or 17%, increase in average earning assets, partially offset by a 28 basis point decrease in the FTE net interest margin to 2.66%. Average earning asset growth included a $7.2 billion, or 9%, increase in average loans and leases and a $6.5 billion, or 27% increase in average securities, both of which were impacted by the late-quarter TCF acquisition.

The provision for credit losses decreased $116 million year-over-year to $211 million in the 2021 second quarter. The decrease reflected the benefit from improvement in the macro economic forecast and reduction in risk profiles, partially offset by $294 million of TCF acquisition initial provision for credit losses for the acquired non-PCD loan and

2021 2Q Form 10-Q 5

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lease portfolio and unfunded lending commitments. NCOs decreased $45 million to $62 million. Both Commercial NCOs of $59 million and Consumer NCOs of $3 million were down on a year-over-year basis. Total NCOs represented an annualized 0.28% of average loans and leases in the current quarter, down from 0.54% in the year-ago quarter.

Noninterest income was $444 million, up $53 million, or 14%, and noninterest expense increased $397 million, or 59%, from the year ago quarter. The increases in both noninterest income and noninterest expense were primarily impacted by the late-quarter acquisition of TCF.

Common Equity Tier 1 risk-based capital ratio was 9.97%, up from 9.84% a year ago. The regulatory Tier 1 risk-based capital ratio was 12.24% compared to 11.79% at June 30, 2020. The increase in regulatory capital ratios was driven by earnings, adjusted for CECL transition, offset by cash dividends. The balance sheet growth as a result of the TCF acquisition was largely offset by the common stock issued related to the acquisition, net of goodwill and intangibles, as well as the change in asset mix during 2020 related to the PPP loans and elevated deposits at the Federal Reserve Bank (both of which are 0% risk weighted). The regulatory Tier 1 risk-based capital and total risk-based capital ratios also reflect the issuance of $500 million of Series G preferred stock in the 2020 third quarter, $500 million of Series H preferred stock in the 2021 first quarter, and the issuance of $175 million of Series I preferred stock in the 2021 second quarter resulting from the conversion of TCF preferred stock.

Subsequent to quarter end, Huntington redeemed $600 million of Series D preferred stock on July 15, 2021, which represented all of the Series D preferred stock issued and outstanding.

In addition, subsequent to quarter end, the Board approved the repurchase of up to $800 million of common shares over the next four quarters. Purchases of common stock under the authorization may include open market purchases, privately negotiated transactions, and accelerated share repurchase programs.

Business Overview

General

Our general business objectives are:

•Pursue consistent organic revenue and balance sheet growth.

•Invest in our businesses, particularly technology and risk management.

•Deliver positive long-term operating leverage.

•Maintain aggregate moderate-to-low risk appetite.

•Execute disciplined capital management.

COVID-19

The COVID-19 pandemic continues to cause unprecedented disruption that affects daily living and negatively impacts the economy. As further discussed in “Discussion of Results of Operations,” the volatility in the markets and lingering economic uncertainty caused by the pandemic continue to impact our performance.

Huntington was able to react quickly to the changes required by the pandemic because of the commitment and flexibility of its workforce coupled with well-prepared business continuity plans. Our branches have reopened and we are making plans for colleagues to safely return to our offices in a phased approach. We continue to monitor the impact of the resurgence of the virus and evolving guidelines which contributes a level of uncertainty to when there will be a return to historical norms of economic and social activity.

Throughout the pandemic, we worked with our customers to originate and renew business loans as well as originate loans made available through the SBA PPP, a lending program established as part of the relief to American consumers and businesses in the CARES Act. Several subsequent congressional acts have reopened and extended the PPP loan program. During the 2021 second quarter, we continued to work with our customers who applied for and received PPP loan forgiveness. Through June 2021, $5.5 billion of the PPP loans have been forgiven by the SBA of the original $11.4 billion of PPP loans originated by both Huntington and TCF prior to acquisition.

Economy

Our second quarter results reflected solid fundamental performance. We are seeing encouraging signs of the economic recovery, and customer activity is starting to normalize. Our lending pipelines have continued to grow across the board, supporting our view of increased loan demand later this year.

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DISCUSSION OF RESULTS OF OPERATIONS

This section provides a review of financial performance from a consolidated perspective. Key Unaudited Condensed Consolidated Balance Sheet and Unaudited Condensed Statement of Income trends are discussed. All earnings per share data are reported on a diluted basis. For additional insight on financial performance, please read this section in conjunction with the “Business Segment Discussion”.

2021 2Q Form 10-Q 7

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Table 1 - Selected Quarterly Income Statement Data

	Three Months Ended
	June 30,			March 31,			June 30,
(amounts in millions, except per share data)	2021			2021			2020
Interest income	$	935		$	869		$	902
Interest expense	97			(103)			110
Net interest income	838			972			792
Provision (benefit) for credit losses	211			(60)			327
Net interest income after provision (benefit) for credit losses	627			1,032			465
Mortgage banking income	67			100			96
Service charges on deposit accounts	88			69			60
Card and payment processing income	80			65			59
Trust and investment management services	56			52			45
Leasing revenue	12			4			7
Capital markets fees	35			29			31
Insurance income	25			27			25
Bank owned life insurance income	16			16			17
Gain on sale of loans	3			3			8
Net gains (losses) on sales of securities	10			—			(1)
Other noninterest income	52			30			44
Total noninterest income	444			395			391
Personnel costs	592			468			418
Outside data processing and other services	162			115			90
Equipment	55			46			46
Net occupancy	72			42			39
Lease financing equipment depreciation	5			—			1
Professional services	48			17			11
Amortization of intangibles	11			10			10
Marketing	15			14			5
Deposit and other insurance expense	8			8			9
Other noninterest expense	104			73			46
Total noninterest expense	1,072			793			675
(Loss) income before income taxes	(1)			634			181
Provision for income taxes	14			102			31
(Loss) income after income taxes	(15)			532			150
Income attributable to non-controlling interest	—			—			—
Net (loss) income attributable to Huntington Bancshares Inc	(15)			532			150
Dividends on preferred shares	43			31			19
Net (loss) income applicable to common shares	$	(58)		$	501		$	131

Average common shares—basic	1,125			1,018			1,016
Average common shares—diluted	1,125			1,041			1,029
Net (loss) income per common share—basic	$	(0.05)		$	0.49		$	0.13
Net (loss) income per common share—diluted	(0.05)			0.48			0.13
Return on average total assets	(0.05)		%	1.76		%	0.51		%
Return on average common shareholders’ equity	(1.9)			18.7			5.0
Return on average tangible common shareholders’ equity (1)	(2.1)			23.7			6.7
Net interest margin (2)	2.66			3.48			2.94
Efficiency ratio (3)	83.1			57.0			55.9
Effective tax rate	(2,353.3)			16.1			17.2

Revenue and Net Interest Income—FTE (Non-GAAP)
Net interest income	$	838		$	972		$	792
FTE adjustment	6			6			5
Net interest income, FTE (non-GAAP) (2)	844			978			797
Noninterest income	444			395			391
Total revenue, FTE (non-GAAP) (2)	$	1,288		$	1,373		$	1,188

(1)Net (loss) income excluding expense for amortization of intangibles for the period divided by average tangible common shareholders’ equity. Average tangible common shareholders’ equity equals average total common shareholders’ equity less average intangible assets and goodwill. Expense for amortization of intangibles and average intangible assets are net of deferred tax liability, and calculated assuming a 21% tax rate.

(2)On an FTE basis assuming a 21% tax rate.

(3)Noninterest expense less amortization of intangibles and goodwill impairment divided by the sum of FTE net interest income and noninterest income excluding securities gains (losses).

8 Huntington Bancshares Incorporated

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Table 2 - Selected Year to Date Income Statements

	Six Months Ended June 30,				Change
(amounts in millions, except per share data)	2021		2020		Amount		Percent
Interest income	$	1,804	$	1,877	$	(73)	(4)	%
Interest expense	(6)		295		(301)		(102)
Net interest income	1,810		1,582		228		14
Provision for credit losses	151		768		(617)		(80)
Net interest income after provision for credit losses	1,659		814		845		104
Mortgage banking income	167		154		13		8
Service charges on deposit accounts	157		148		9		6
Card and payment processing income	145		117		28		24
Trust and investment management services	108		92		16		17
Leasing revenue	16		10		6		60
Capital markets fees	64		64		—		—
Insurance income	52		48		4		8
Bank owned life insurance income	32		32		—		—
Gain on sale of loans	6		17		(11)		(65)
Net gains (losses) on sales of securities	10		(1)		11		1,100
Other noninterest income	82		71		11		15
Total noninterest income	839		752		87		12
Personnel costs	1,060		814		246		30
Outside data processing and other services	277		175		102		58
Equipment	101		87		14		16
Net occupancy	114		79		35		44
Lease financing equipment depreciation	5		1		4		400
Professional services	65		22		43		195
Amortization of intangibles	21		21		—		—
Marketing	29		14		15		107
Deposit and other insurance expense	16		18		(2)		(11)
Other noninterest expense	177		96		81		84
Total noninterest expense	1,865		1,327		538		41
Income before income taxes	633		239		394		165
Provision for income taxes	116		41		75		183
Income after income taxes	517		198		319		161
Income attributable to non-controlling interest	—		—		—		—
Net income attributable to Huntington Bancshares Inc	517		198		319		161
Dividends declared on preferred shares	74		37		37		100
Net income applicable to common shares	$	443	$	161	$	282	175	%

Average common shares—basic	1,071		1,017		54		5	%
Average common shares—diluted	1,094		1,032		62		6
Net income per common share—basic	$	0.41	$	0.16	$	0.25	156
Net income per common share—diluted	0.40		0.16		0.24		150


Revenue and Net Interest Income—FTE (Non-GAAP)
Net interest income	$	1,810	$	1,582	$	228	14	%
FTE adjustment	12		11		1		9
Net interest income, FTE (non-GAAP) (1)	1,822		1,593		229		14
Noninterest income