hban-20210930

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 September 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 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 1,446,461,249 shares of the registrant’s common stock ($0.01 par value) outstanding on September 30, 2021.

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HUNTINGTON BANCSHARES INCORPORATED

INDEX


PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)			45
Condensed Consolidated Balance Sheets at September 30, 2021 and December 31, 2020			45
Condensed Consolidated Statements of Income for the three months and nine months ended September 30, 2021 and 2020			46
Condensed Consolidated Statements of Comprehensive Income for the three months and nine months ended September 30, 2021 and 2020			47
Condensed Consolidated Statements of Changes in Shareholders’ Equity for the three months and nine months ended September 30, 2021 and 2020			48
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020			50
Notes to Unaudited Condensed Consolidated Financial Statements			52
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:			19
Credit Risk			19
Market Risk			28
Liquidity Risk			31
Operational Risk			33
Compliance Risk			34
Capital			34
Business Segment Discussion			36
Additional Disclosures			41
Item 3. Quantitative and Qualitative Disclosures about Market Risk			97
Item 4. Controls and Procedures			97
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			97
Item 1A. Risk Factors			97

Item 6. Exhibits			99
Signatures			100

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
CET1						Common Equity Tier 1 on a Basel III basis
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 Bank
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 3Q 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

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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 1,236 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 Third Quarter Results Compared to 2020 Third Quarter

For the quarter, we reported net income of $377 million, or $0.22 per common share, compared with $303 million, or $0.27 per common share, in the year-ago quarter. The reported net income benefited from a decline in provision for credit losses of $239 million and was impacted by TCF acquisition-related expenses totaling $234 million. After tax TCF acquisition-related expenses were $192 million or $(0.13) per common share.

Net interest income was $1.2 billion, up $343 million, or 42% from the year-ago quarter. FTE net interest income was $1.2 billion, up $345 million, or 42%, from the year-ago quarter. The increase in FTE net interest income reflected the benefit from the $48.7 billion, or 44%, increase in average earning assets, partially offset by a 6 basis point decrease in the FTE net interest margin to 2.90%. Average earning asset growth included a $29.4 billion, or 36%, increase in average loans and leases and a $13.1 billion, or 57% increase in average securities, both of which were impacted by the TCF acquisition in June 2021.

2021 3Q Form 10-Q 5

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The provision for credit losses decreased $239 million from the year-ago quarter to a benefit of $62 million in the 2021 third quarter. The decrease reflected the benefit from improvement in the macroeconomic scenarios. NCOs decreased $58 million from the year-ago-quarter to $55 million. Both commercial NCOs of $47 million and consumer NCOs of $8 million were down on a year-over-year basis. Total NCOs represented an annualized 0.20% of average loans and leases in the current quarter, down from 0.56% in the year-ago quarter.

Noninterest income was $535 million, up $105 million, or 24%, and noninterest expense increased $577 million, or 81%, from the year ago quarter. The increases in both noninterest income and noninterest expense were primarily impacted by the acquisition of TCF.

Common Equity Tier 1 risk-based capital ratio was 9.57%, down from 9.89% a year ago. The regulatory Tier 1 risk-based capital ratio was 11.35% compared to 12.37% at September 30, 2020. The decrease in regulatory capital ratios was driven by the repurchase of 33.4 million common shares over the last three quarters, cash dividends, partially offset by earnings, adjusted for the CECL transition. The balance sheet growth as a result of the TCF acquisition was largely offset by the common stock issued related to the acquisition, net of goodwill and intangibles, as well as elevated deposits at 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 H preferred stock in the 2021 first quarter, the issuance of $175 million of Series I preferred stock in the 2021 second quarter resulting from the conversion of TCF preferred stock, partially offset by the redemption of $600 million of Series D preferred stock in the 2021 third quarter. Additionally, the total risk-based capital ratio reflects the issuance of $558 million of subordinated notes in the 2021 third quarter.

On July 21, 2021, the Board approved the repurchase of up to $800 million of common shares within the next four quarters. Purchases of common stock under the authorization may include open market purchases, privately negotiated transactions, and accelerated share repurchase programs. During the 2021 third quarter, Huntington repurchased a total of $500 million of common stock, representing 33.4 million common shares, at a weighted average price of $14.96.

Business Overview

General

Our general business objectives are:

•Pursue consistent organic revenue and balance sheet growth.

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

•Deliver positive long-term operating leverage.

•Maintain an aggregate moderate-to-low, through-the-cycle risk appetite.

•Execute disciplined capital management.

COVID-19

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

Huntington was able to react quickly to the changes required by the pandemic because of the commitment and flexibility of its workforce coupled with well-prepared business continuity plans. We continue to monitor the impact of the virus and evolving government guidelines.

Throughout the pandemic, we have worked with our customers to originate and renew business loans as well as originate loans made available through the SBA PPP, a lending program established as part of the relief to American consumers and businesses in the CARES Act. Several subsequent congressional acts have reopened and extended the PPP loan program. During the 2021 third quarter, we continued to work with our customers who received PPP loan forgiveness. Through September 2021, $8.5 billion of the PPP loans have been forgiven by the SBA of the original $11.4 billion of PPP loans originated by both Huntington and TCF prior to acquisition.

Uncertainty remains as to when there will be a return to historical norms of economic and social activity. Should current economic conditions deteriorate or if the pandemic worsens due to various factors, including through the spread of more easily communicable variants of COVID-19, such conditions could have an adverse effect on our business and results of operations and could adversely affect our financial condition.

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Economy

We continued to see increasing momentum in our business strategies during the quarter, delivering loan growth (excluding PPP) and fee income, including areas like wealth, capital markets, and cards and payments. Additionally, we continue to make strategic investments to drive sustained organic growth by dynamically managing expenses.

DISCUSSION OF RESULTS OF OPERATIONS

This section provides a review of financial performance on a consolidated basis. 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 3Q Form 10-Q 7

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Table 1 - Selected Quarterly Income Statement Data

	Three Months Ended
	September 30,			June 30,			September 30,
(amounts in millions, except per share data)	2021			2021			2020
Interest income	$	1,205		$	935		$	892
Interest expense	45			97			75
Net interest income	1,160			838			817
Provision for credit losses	(62)			211			177
Net interest income after provision for credit losses	1,222			627			640
Mortgage banking income	81			67			122
Service charges on deposit accounts	114			88			76
Card and payment processing income	96			80			66
Trust and investment management services	61			56			48
Leasing revenue	42			12			3
Capital markets fees	40			35			27
Insurance income	25			25			24
Bank owned life insurance income	15			16			17
Gain on sale of loans	2			3			13
Net gains (losses) on sales of securities	—			10			—
Other noninterest income	59			52			34
Total noninterest income	535			444			430
Personnel costs	643			592			453
Outside data processing and other services	304			162			98
Equipment	79			55			44
Net occupancy	95			72			40
Lease financing equipment depreciation	19			5			—
Professional services	26			48			12
Amortization of intangibles	13			11			10
Marketing	25			15			9
Deposit and other insurance expense	17			8			6
Other noninterest expense	68			104			40
Total noninterest expense	1,289			1,072			712
Income (loss) before income taxes	468			(1)			358
Provision for income taxes	90			14			55
Income (loss) after income taxes	378			(15)			303
Income attributable to non-controlling interest	1			—			—
Net income (loss) attributable to Huntington Bancshares Inc	377			(15)			303
Dividends on preferred shares	29			43			28
Impact of preferred stock redemption	15			—			—
Net income (loss) applicable to common shares	$	333		$	(58)		$	275

Average common shares—basic	1,463			1,125			1,017
Average common shares—diluted	1,487			1,125			1,031
Net income (loss) per common share—basic	$	0.23		$	(0.05)		$	0.27
Net income (loss) per common share—diluted	0.22			(0.05)			0.27
Return on average total assets	0.86		%	(0.05)		%	1.01		%
Return on average common shareholders’ equity	7.6			(1.9)			10.2
Return on average tangible common shareholders’ equity (1)	11.5			(2.1)			13.2
Net interest margin (2)	2.90			2.66			2.96
Efficiency ratio (3)	74.9			83.1			56.1
Effective tax rate	19.0			(2,353.3)			15.2

Revenue and Net Interest Income—FTE (Non-GAAP)
Net interest income	$	1,160		$	838		$	817
FTE adjustment	7			6			5
Net interest income, FTE (non-GAAP) (2)	1,167			844			822
Noninterest income	535			444			430
Total revenue, FTE (non-GAAP) (2)	$	1,702		$	1,288		$	1,252

(1)Net income (loss) 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).

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Table 2 - Selected Year to Date Income Statements

	Nine Months Ended September 30,				Change
(amounts in millions, except per share data)	2021		2020		Amount		Percent
Interest income	$	3,009	$	2,769	$	240	9	%
Interest expense	39		370		(331)		(89)
Net interest income	2,970		2,399		571		24
Provision for credit losses	89		945		(856)		(91)
Net interest income after provision for credit losses	2,881		1,454		1,427		98
Mortgage banking income	248		277		(29)		(10)
Service charges on deposit accounts	271		223		48		22
Card and payment processing income	241		183		58		32
Trust and investment management services	169		140		29		21
Leasing revenue	58		14		44		314
Capital markets fees	104		91		13		14
Insurance income	77		72		5		7
Bank owned life insurance income	47		49		(2)		(4)
Gain on sale of loans	8		30		(22)		(73)
Net gains (losses) on sales of securities	10		(1)		11		1,100
Other noninterest income	141		104		37		36
Total noninterest income	1,374		1,182		192		16
Personnel costs	1,703		1,267		436		34
Outside data processing and other services	581		273		308		113
Equipment	180		132		48		36
Net occupancy	209		119		90		76
Lease financing equipment depreciation	24		1		23		2,300
Professional services	91		34		57		168
Amortization of intangibles	34		31		3		10
Marketing	54		23		31		135
Deposit and other insurance expense	33		24		9		38
Other noninterest expense	245		135		110		81
Total noninterest expense	3,154		2,039		1,115		55
Income before income taxes	1,101		597		504		84
Provision for income taxes	206		96		110		115
Income after income taxes	895		501		394		79
Income attributable to non-controlling interest	1		—		1		100
Net income attributable to Huntington Bancshares Inc	894		501		393		78
Dividends on preferred shares	103		65		38		58
Impact of preferred stock redemption	15		—		15		100
Net income applicable to common shares	$	776	$	436	$	340	78	%

Average common shares—basic	1,202		1,017		185		18	%
Average common shares—diluted	1,225		1,032		193		19
Net income per common share—basic	$	0.65	$	0.43	$	0.22	51
Net income per common share—diluted	0.63		0.42		0.21		50