hban-20220930

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, 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 1,442,734,255 shares of the registrant’s common stock ($0.01 par value) outstanding on September 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)			40
Condensed Consolidated Balance Sheets at September 30, 2022 and December 31, 2021			40
Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2022 and 2021			41
Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2022 and 2021			42
Condensed Consolidated Statements of Changes in Shareholders’ Equity for the three and nine months ended September 30, 2022 and 2021			43
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021			45
Notes to Unaudited Condensed Consolidated Financial Statements			47
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			88
Item 4. Controls and Procedures			88
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			88
Item 1A. Risk Factors			88
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			89
Item 6. Exhibits			90
Signatures			91

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 (Loss)
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

C&I						Commercial and Industrial

CDs						Certificates of Deposit

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
GDP						Gross Domestic Product
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
OCI						Other Comprehensive Income

OLEM						Other Loans Especially Mentioned

2022 3Q Form 10-Q 3

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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
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, distribution finance (formerly referred to as inventory finance), investment management, trust services, brokerage services, insurance products and services, and other financial products and services. At September 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 Third Quarter Results Compared to 2021 Third Quarter

For the quarter, we reported net income of $594 million, or $0.39 per diluted common share, compared with $377 million, or $0.22 per diluted common share, in the year-ago quarter.

2022 3Q Form 10-Q 5

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Net interest income was $1.4 billion, up $244 million, or 21% from the year-ago quarter. FTE net interest income, a non-GAAP financial measure, increased $245 million, or 21%, from the year-ago quarter. The increase in FTE net interest income primarily reflects a 51 basis point increase in the FTE NIM to 3.42% and a $4.9 billion, or 3%, increase in average earning assets. The year-over-year increase in NIM was driven by the higher rate environment driving an increase in loan and lease and investment security yields, partially offset by higher cost of funds. Average earning assets growth included a $7.3 billion, or 7%, increase in average loans and leases and a $6.7 billion, or 19%, increase in average securities, partially offset by an $8.3 billion, or 72%, decrease in deposits held at the FRB.

The provision for credit losses increased $168 million from the year-ago quarter to $106 million in the 2022 third quarter. The increase in provision for credit losses was primarily due to loan and lease growth. The ACL increased $25 million from the year-ago quarter to $2.2 billion in the 2022 third quarter, or 1.89% of total loans and leases, compared to $2.2 billion, or 2.01% of total loans and leases. The decrease in ACL as a percentage of total loans and leases reflects the overall improved credit performance of the loan and lease portfolio, while also recognizing the uncertainty in the near-term macroeconomic outlook. NCOs decreased $11 million from the year-ago-quarter to $44 million. Total NCOs represented an annualized 0.15% of average loans and leases in the current quarter, down from 0.20% in the year-ago quarter.

Noninterest income was $498 million, a decrease of $37 million, or 7%, and noninterest expense decreased $236 million, or 18%, from the year-ago quarter. The decrease in noninterest income was primarily due to decreases in mortgage banking income and service charges on deposit accounts, partially offset by an increase in capital markets fees. The decrease in noninterest expense was primarily due to a reduction in acquisition-related expenses of $224 million and execution of cost reduction initiatives associated with the TCF acquisition.

The tangible common equity to tangible assets ratio was 5.32% at September 30, 2022, down 156 basis points from December 31, 2021, primarily due to a decrease in tangible common equity related to higher interest rates causing an increase in accumulated other comprehensive loss, partially offset by undistributed earnings. CET1 risk-based capital ratio was 9.27%, down from 9.33% from December 31, 2021. The decrease in regulatory capital ratios was primarily driven by dividends, risk-weighted assets growth, and goodwill recognized, partially offset by earnings.

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.

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.

6 Huntington Bancshares Incorporated

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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 has been 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 including loan and lease growth, higher deposit balances and expanded fee income while maintaining disciplined expense management. The recent addition of Capstone Partners has expanded the expertise we bring to customers, is benefiting our continued efforts to deepen relationships with commercial customers and is increasing our fee income opportunities. Credit continues to perform well in keeping with our aggregate moderate-to-low, through-the-cycle risk appetite. 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 3Q Form 10-Q 7

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Table 1 - Selected Quarterly Income Statement Data

	Three Months Ended
	September 30,			September 30,			Change
(amounts in millions, except per share data)	2022			2021			Amount		Percent
Interest income	$	1,589		$	1,205		$	384	32	%
Interest expense	185			45			140		NM
Net interest income	1,404			1,160			244		21
Provision for credit losses	106			(62)			168		NM
Net interest income after provision for credit losses	1,298			1,222			76		6
Service charges on deposit accounts	93			114			(21)		(18)
Card and payment processing income	96			96			—		—
Mortgage banking income	26			81			(55)		(68)
Trust and investment management services	60			61			(1)		(2)
Capital markets fees	73			40			33		83
Insurance income	28			25			3		12
Leasing revenue	29			42			(13)		(31)
Bank owned life insurance income	13			15			(2)		(13)
Gain on sale of loans	15			2			13		NM

Other noninterest income	65			59			6		10
Total noninterest income	498			535			(37)		(7)
Personnel costs	614			643			(29)		(5)
Outside data processing and other services	145			304			(159)		(52)
Net occupancy	63			95			(32)		(34)
Equipment	60			79			(19)		(24)
Professional services	18			26			(8)		(31)
Marketing	24			25			(1)		(4)
Deposit and other insurance expense	15			17			(2)		(12)
Amortization of intangibles	13			13			—		—
Lease financing equipment depreciation	11			19			(8)		(42)
Other noninterest expense	90			68			22		32
Total noninterest expense	1,053			1,289			(236)		(18)
Income before income taxes	743			468			275		59
Provision for income taxes	146			90			56		62
Income after income taxes	597			378			219		58
Income attributable to non-controlling interest	3			1			2		NM
Net income attributable to Huntington Bancshares Inc	594			377			217		58
Dividends on preferred shares	29			29			—		—
Impact of preferred stock redemption	—			15			(15)		NM
Net income applicable to common shares	$	565		$	333		$	232	70	%

Average common shares—basic	1,443			1,463			(20)		(1)	%
Average common shares—diluted	1,465			1,487			(22)		(1)
Net income per common share—basic	$	0.39		$	0.23		$	0.16	70
Net income per common share—diluted	0.39			0.22			0.17		77
Return on average total assets	1.31		%	0.86		%
Return on average common shareholders’ equity	13.9			7.6
Return on average tangible common shareholders’ equity (1)	21.9			11.5
Net interest margin (2)	3.42			2.91
Efficiency ratio (3)	54.4			74.9
Effective tax rate	19.7			19.0

Revenue and Net Interest Income—FTE (non-GAAP)
Net interest income	$	1,404		$	1,160		$	244	21	%
FTE adjustment	8			7			1		14
Net interest income, FTE (non-GAAP) (2)	1,412			1,167			245		21
Noninterest income	498			535			(37)		(7)
Total revenue, FTE (non-GAAP) (2)	$	1,910		$	1,702		$	208	12	%

(1)Net 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.

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Table 2 - Selected Year to Date Income Statement Data

	Nine Months Ended September 30,				Change
(amounts in millions, except per share data)	2022		2021		Amount		Percent
Interest income	$	4,115	$	3,009	$	1,106	37	%
Interest expense	304		39		265		NM
Net interest income	3,811		2,970		841		28
Provision for credit losses	198		89		109		122
Net interest income after provision for credit losses	3,613		2,881		732		25
Service charges on deposit accounts	295		271		24		9
Card and payment processing income	278		241		37		15
Mortgage banking income	119		248		(129)		(52)
Trust and investment management services	188		169		19		11
Capital markets fees	169		104		65		63
Insurance income	86		77		9		12
Leasing revenue	91		58		33		57
Bank owned life insurance income	41		47		(6)