hban-20220630

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, 2022


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

For the transition period from to

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 1/1000th 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 1,442,194,344 shares of the registrant’s common stock ($0.01 par value) outstanding on June 30, 2022.

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HUNTINGTON BANCSHARES INCORPORATED

INDEX


Glossary of Acronyms and Terms			3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)			41
Condensed Consolidated Balance Sheets at June 30, 2022 and December 31, 2021			41
Condensed Consolidated Statements of Income for the three and six months ended June 30, 2022 and 2021			42
Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2022 and 2021			43
Condensed Consolidated Statements of Changes in Shareholders’ Equity for the three and six months ended June 30, 2022 and 2021			44
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021			46
Notes to Unaudited Condensed Consolidated Financial Statements			48
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:			17
Credit Risk			17
Market Risk			24
Liquidity Risk			28
Operational Risk			29
Compliance Risk			30
Capital			30
Business Segment Discussion			32
Additional Disclosures			36
Item 3. Quantitative and Qualitative Disclosures about Market Risk			89
Item 4. Controls and Procedures			89
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			89
Item 1A. Risk Factors			89
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			90
Item 6. Exhibits			91
Signatures			92

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
CCAR						Comprehensive Capital Analysis and Review
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 or the 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


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
NM						Not Meaningful
NPAs						Nonperforming Assets

OCC						Office of the Comptroller of the Currency

2022 2Q Form 10-Q 3

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OCI						Other Comprehensive Income

OLEM						Other Loans Especially Mentioned


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
SCB						Stress Capital Buffer
SEC						Securities and Exchange Commission
SOFR						Secured Overnight Financing Rate
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, investment banking, capital markets, and advisory services, equipment financing, inventory finance, investment management, trust services, brokerage services, insurance products and services, and other financial products and services. At June 30, 2022, our 1,032 full-service branches and private client group offices are primarily located in Ohio, Colorado, Illinois, Indiana, Kentucky, Michigan, Minnesota, Pennsylvania, 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 2021 Annual Report on Form 10-K should be read in conjunction with this MD&A as this discussion provides only material updates to the 2021 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

In June 2021, Huntington closed the acquisition of TCF Financial Corporation. Historical periods prior to June 9, 2021 reflect results of legacy Huntington operations. Subsequent to closing, results reflect all post-acquisition activity. See Note 3 “Acquisition of TCF Financial Corporation” of the Notes to Unaudited Condensed Consolidated Financial Statements appearing in Huntington’s 2021 Annual Report on Form 10-K for further information.

In May 2022, Huntington completed the acquisition of Torana, now known as Huntington Choice Pay, a digital payments business focused on business to consumer payments. This acquisition along with the formation of our enterprise-wide payments group reflects one of our strategic priorities to accelerate our payments capabilities and expand the services provided to our customers.

In June 2022, Huntington completed the acquisition of Capstone Partners, a top tier middle market investment bank and advisory firm. The transaction brings a national scale to serve middle market business owners throughout the corporate lifecycle, building on Huntington’s regional banking foundation. Capstone Partners related revenue, including mergers and acquisitions, capital raising and other advisory-related fees, is recognized within capital markets fees in the Consolidated Statements of Income.

Summary of 2022 Second Quarter Results Compared to 2021 Second Quarter

For the quarter, we reported net income of $539 million, or $0.35 per diluted common share, compared with a net loss of $15 million, or $0.05 per diluted common share, in the year-ago quarter. The 2022 second quarter reported net income benefited from the full-quarter impact of the TCF acquisition and organic growth, while the year-ago quarter was negatively impacted by the TCF acquisition initial provision for credit losses of $294 million, or $239 million after tax ($0.21 per diluted common share) in addition to acquisition-related expenses totaling $269 million, or $218 million after-tax ($0.19 per diluted common share).

2022 2Q Form 10-Q 5

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Net interest income was $1.3 billion, up $423 million, or 50% from the year-ago quarter. FTE net interest income, a non-GAAP financial measure, increased $423 million, or 50%, from the year-ago quarter. The increase in FTE net interest income reflected the benefit from a $33.8 billion, or 27%, increase in average earning assets and a 49 basis point increase in the FTE NIM to 3.15%. Average earning assets growth included a $26.6 billion, or 30%, increase in average loans and leases and a $11.8 billion, or 38%, increase in average securities. The year-over-year increase in NIM was primarily due to improvements in yields on earning assets largely driven by the Federal Reserve's rate increases in addition to the 2021 second quarter unfavorable impact from the $55 million mark-to-market of interest rate caps.

The provision for credit losses decreased $144 million from the year-ago quarter to $67 million in the 2022 second quarter. The decrease in provision for credit losses was primarily due to the TCF acquisition initial provision for credit losses of $294 million recognized in the year-ago quarter, partially offset by loan and lease growth. The ACL decreased $154 million from the year-ago quarter to $2.2 billion in the 2022 second quarter to 1.87% of total loans and leases, compared to $2.3 billion, or 2.09% of total loans and leases. The decrease in ACL as a percentage of total loans and leases was driven by overall improved credit quality over the last year while recognizing the near-term recessionary risks. NCOs decreased $54 million from the year-ago-quarter to $8 million. Total NCOs represented an annualized 0.03% of average loans and leases in the current quarter, down from 0.28% in the year-ago quarter.

Noninterest income was $485 million, an increase of $41 million, or 9%, and noninterest expense decreased $54 million, or 5%, from the year-ago quarter. The increase to noninterest income was primarily due to the full-quarter benefit from the TCF acquisition, completed in June 2021. The decrease to noninterest expense was primarily due to a reduction in acquisition-related expenses of $245 million and execution of cost reduction initiatives, partially offset by the full-quarter impact from the TCF acquisition.

The tangible common equity to tangible assets ratio was 5.80% at June 30, 2022, down 108 basis points from December 31, 2021, primarily due to a decrease in tangible common equity related to higher interest rates causing a decrease in accumulated other comprehensive income and the impact from the acquisitions of Capstone Partners and Torana, partially offset by earnings. CET1 risk-based capital ratio was 9.05%, down from 9.33% from December 31, 2021. The regulatory Tier 1 risk-based capital ratio was 10.63% compared to 10.99% at December 31, 2021. The decrease in regulatory capital ratios was primarily driven by risk-weighted assets growth and goodwill recognized, partially offset by earnings.

During the first six months of 2022, Huntington repurchased no shares of common stock under the current repurchase authorization which began the third quarter of 2021 and expired June 30, 2022. As of June 30, 2022, the end of the current repurchase authorization, Huntington completed $650 million of the share repurchase authorization.

Business Overview

General

Our general business objectives are:

•Build on our vision to become the country’s leading people-first, digitally powered bank

•Drive sustainable long-term revenue growth and efficiency

•Deliver a Category of One customer experience through proactive and personalized guidance, differentiated products, and expertise

•Extend our digital capabilities with focus on ease of use, access to information, and self-service across products and services

•Add scale and scope by acquiring and deepening relationships and launching of select partnerships

•Maintain positive operating leverage and execute disciplined capital management

•Execute effective risk management with an aggregate moderate-to-low, through-the-cycle risk appetite

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 economic uncertainty caused by the pandemic continue to have impact.

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Huntington reacted quickly to the changes required by the pandemic as a result of the commitment and flexibility of our colleagues coupled with well-prepared business continuity plans. We continue to make progress welcoming more of our colleagues back to the office as part of our Coming Back Together plan. We offer Workplace Flex to help employees achieve work/life harmony in support of the business. We achieve this with flexible work arrangements, parental leave, and other health, wellness and financial benefits and services that assist employees and their families. We continue to monitor the impact of the virus and current government guidelines.

Economy

Growth in economic activity and demand for goods and services, alongside labor shortages, supply chain complications and geopolitical matters, have contributed to rising inflation. In response, the FRB has raised interest rates and began reducing the size of its balance sheet. Furthermore, the FRB signaled that it would continue to implement these policy actions in order to bring inflation down. The timing and impact of inflation and rising interest rates on our business and related financial results will depend on future developments, which are highly uncertain and difficult to predict. Our businesses and financial results may be impacted by a variety of other factors as well, such as an economic slowdown or recession.

We delivered positive results this quarter, driven by continued execution of strategic initiatives in addition to loan and lease and revenue growth. Further, we added capabilities through the acquisitions of Capstone Partners and Torana during the quarter. Additionally, we saw net interest income expansion, average deposit growth and demonstrated disciplined expense management. Credit continues to perform well in keeping with our aggregate moderate-to-low risk profile through-the-cycle. Through our disciplined and proactive approach, we believe Huntington is well positioned to manage through the uncertainty in the macroeconomic environment. We remain focused on delivering profitable growth.

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”.

2022 2Q Form 10-Q 7

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Table 1 - Selected Quarterly Income Statement Data

	Three Months Ended
	June 30,			June 30,			Change
(amounts in millions, except per share data)	2022			2021			Amount		Percent
Interest income	$	1,331		$	935		$	396	42	%
Interest expense	70			97			(27)		(28)
Net interest income	1,261			838			423		50
Provision for credit losses	67			211			(144)		(68)
Net interest income after provision for credit losses	1,194			627			567		90
Service charges on deposit accounts	105			88			17		19
Card and payment processing income	96			80			16		20
Mortgage banking income	44			67			(23)		(34)
Trust and investment management services	63			56			7		13
Capital markets fees	54			35			19		54
Insurance income	27			25			2		8
Leasing revenue	27			12			15		NM
Bank owned life insurance income	11			16			(5)		(31)
Gain on sale of loans	12			3			9		NM
Net gains on sales of securities	—			10			(10)		(100)
Other noninterest income	46			52			(6)		(12)
Total noninterest income	485			444			41		9
Personnel costs	577			592			(15)		(3)
Outside data processing and other services	153			162			(9)		(6)
Net occupancy	58			72			(14)		(19)
Equipment	61			55			6		11
Professional services	19			48			(29)		(60)
Marketing	24			15			9		60
Deposit and other insurance expense	20			8			12		150
Amortization of intangibles	13			11			2		18
Lease financing equipment depreciation	11			5			6		120
Other noninterest expense	82			104			(22)		(21)
Total noninterest expense	1,018			1,072			(54)		(5)
Income (loss) before income taxes	661			(1)			662		NM
Provision for income taxes	120			14			106		NM
Income (loss) after income taxes	541			(15)			556		NM
Income attributable to non-controlling interest	2			—			2		NM
Net income (loss) attributable to Huntington Bancshares Inc	539			(15)			554		NM
Dividends on preferred shares	28			43			(15)		(35)

Net income (loss) applicable to common shares	$	511		$	(58)		$	569	NM

Average common shares—basic	1,441			1,125			316		28
Average common shares—diluted	1,463			1,125			338		30
Net income per common share—basic	$	0.35		$	(0.05)		$	0.40	NM
Net income per common share—diluted	0.35			(0.05)			0.40		NM
Return on average total assets	1.22		%	(0.05)		%
Return on average common shareholders’ equity	12.8			(1.9)
Return on average tangible common shareholders’ equity (1)	19.9			(2.1)
Net interest margin (2)	3.15			2.66
Efficiency ratio (3)	57.3			83.1
Effective tax rate	18.1			(2,353.3)

Revenue and Net Interest Income—FTE (non-GAAP)
Net interest income	$	1,261		$	838		$	423	50
FTE adjustment	6			6			—		—
Net interest income, FTE (non-GAAP) (2)	1,267			844			423		50
Noninterest income	485			444			41		9
Total revenue, FTE (non-GAAP) (2)	$	1,752		$	1,288		$	464	36

(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).

8 Huntington Bancshares Incorporated

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Table 2 - Selected Year to Date Income Statement Data

	Six Months Ended June 30,				Change
(amounts in millions, except per share data)	2022		2021		Amount		Percent
Interest income	$	2,526	$	1,804	$	722	40	%
Interest expense	119		(6)		125		NM
Net interest income	2,407		1,810		597		33
Provision for credit losses	92		151		(59)		(39)
Net interest income after provision for credit losses	2,315		1,659		656		40
Service charges on deposit accounts	202		157		45		29
Card and payment processing income	182		145		37		26
Mortgage banking income	93		167		(74)		(44)
Trust and investment management services	128		108		20		19
Capital markets fees	96		64		32		50
Insurance income	58		52		6