hban-20230331

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 March 31, 2023


☐			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
Depositary Shares (each representing a 1/40th interest in a share of 6.875% Series J Non-Cumulative, perpetual preferred stock)	HBANL	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 1,443,614,966 shares of the registrant’s common stock ($0.01 par value) outstanding on March 31, 2023.

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HUNTINGTON BANCSHARES INCORPORATED

INDEX


Glossary of Acronyms and Terms			3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)			35
Consolidated Balance Sheets at March 31, 2023 and December 31, 2022			35
Consolidated Statements of Income for the three months ended March 31, 2023 and 2022			36
Consolidated Statements of Comprehensive Income for the three months ended March 31, 2023 and 2022			37
Consolidated Statements of Changes in Shareholders’ Equity for the three months ended March 31, 2023 and 2022			38
Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022			39
Notes to Unaudited Consolidated Financial Statements			41
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:			12
Credit Risk			12
Market Risk			19
Liquidity Risk			22
Operational Risk			25
Compliance Risk			26
Capital			26
Business Segment Discussion			27
Additional Disclosures			31
Item 3. Quantitative and Qualitative Disclosures about Market Risk			77
Item 4. Controls and Procedures			77
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			77
Item 1A. Risk Factors			77
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			77
Item 6. Exhibits			78
Signatures			79

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


ASU						Accounting Standards Update
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


Capstone Partners						Capstone Enterprises LLC

C&I						Commercial and Industrial



CDs						Certificates of Deposit

CECL						Current Expected Credit Losses
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


Dodd-Frank Act						Dodd-Frank Wall Street Reform and Consumer Protection Act
EAD						Exposure at Default



ESG						Environmental, Social, and Governance
EVE						Economic Value of Equity



FDIC						Federal Deposit Insurance Corporation
Federal Reserve						Board of Governors of the Federal Reserve System

FHLB						Federal Home Loan Bank
FICO						Fair Isaac Corporation





FTE						Fully-Taxable Equivalent or Full-Time 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

2023 1Q Form 10-Q 3

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


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



RPS						Retirement Plan Services
SBA						Small Business Administration
SCB						Stress Capital Buffer
SEC						Securities and Exchange Commission
SOFR						Secured Overnight Financing Rate

TDR						Troubled Debt Restructuring
Torana						Digital Payments Torana, Inc.
U.S. Treasury						U.S. Department of the Treasury


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 are committed to making people’s lives better, helping businesses thrive, and strengthening the communities we serve and have over 150 years of servicing the financial needs of our customers. Through our subsidiaries, we provide full-service commercial and consumer deposit, lending, and other banking services. This includes, but is not limited to, payments, mortgage banking, automobile, recreational vehicle and marine financing, investment banking, capital markets, advisory, equipment financing, distribution finance, investment management, trust, brokerage, insurance, and other financial products and services. At March 31, 2023, our 1,001 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.

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 2022 Annual Report on Form 10-K should be read in conjunction with this MD&A as this discussion provides only material updates to the 2022 Annual Report on Form 10-K. This MD&A should also be read in conjunction with the Unaudited Consolidated Financial Statements, Notes to Unaudited Consolidated Financial Statements, and other information contained in this report.

EXECUTIVE OVERVIEW

Acquisitions and Divestitures

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.

In March 2023, we closed the sale of our RPS business and entered into an ongoing partnership with the purchaser. The sale of our RPS business resulted in a $57 million gain including associated goodwill allocation, recorded within other noninterest income.

Summary of 2023 First Quarter Results Compared to 2022 First Quarter

For the quarter, we reported net income of $602 million, or $0.39 per diluted common share, compared with $460 million, or $0.29 per diluted common share, in the year-ago quarter.

2023 1Q Form 10-Q 5

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Net interest income was $1.4 billion, up $263 million, or 23% from the year-ago quarter. FTE net interest income, a non-GAAP financial measure, increased $264 million, or 23%, from the year-ago quarter. The increase in FTE net interest income primarily reflects a 52 basis point increase in the FTE NIM to 3.40% and a $6.7 billion, or 4%, 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 asset growth included a $9.3 billion, or 8%, increase in average loans and leases, partially offset by decreases of $1.1 billion, or 15%, in interest-bearing deposits at the Federal Reserve Bank, $793 million, or 64%, in loans held for sale, and $768 million, or 2%, in average securities.

The provision for credit losses increased $60 million from the year-ago quarter to $85 million in the 2023 first quarter. The increase in provision expense compared to the year-ago quarter is driven by an increase in realized net credit losses, along with allowance builds in the current quarter associated with loan growth and economic uncertainty. The ACL increased $190 million from the year-ago quarter to $2.3 billion in the 2023 first quarter, or 1.90% of total loans and leases, compared to $2.1 billion, or 1.87% of total loans and leases. The increase in the total ACL was primarily driven by loan and lease growth and the increase in ACL coverage ratio reflecting the increased near-term recessionary risks in 2023.

Noninterest income was $512 million, an increase of $13 million, or 3%, and noninterest expense increased $33 million, or 3%, from the year-ago quarter. The increase in noninterest income was primarily due to the sale of our RPS business which resulted in a $57 million gain including associated goodwill allocation, recorded within other noninterest income, and an increase in capital market fees, partially offset by decreases in gain on sale of loans, mortgage banking income, and service charges on deposit accounts. The increase in noninterest expense was primarily due to $36 million of voluntary retirement program expense and $6 million of organizational realignment expense, and additional increase in personnel costs, partially offset by reductions in acquisition-related expenses and equipment expense.

Total assets at March 31, 2023 were $189.1 billion, an increase of $6.2 billion, or 3%, compared to December 31, 2022. The increase in total assets was primarily driven by increases in interest-bearing deposits at Federal Reserve Bank of $3.9 billion, or 79%, and loans and leases of $1.7 billion, or 1%, driven by an increase in commercial loans and leases. Total liabilities at March 31, 2023 were $170.3 billion, an increase of $5.1 billion, or 3%, compared to December 31, 2022. The increase in total liabilities was primarily driven by an increase in total debt of $8.3 billion, or 70%, partially offset by a decrease in total deposits of $2.6 billion, or 2%, largely due to lower commercial core deposits.

The tangible common equity to tangible assets ratio was 5.77% at March 31, 2023, up 22 basis points from December 31, 2022, primarily due to an increase in tangible common equity related to current period earnings and improved AOCI. CET1 risk-based capital ratio was 9.55%, up from 9.36% from December 31, 2022. The increase in regulatory capital ratios was primarily driven by current period earnings, partially offset by dividends and the CECL transitional amount.

In January 2023, the Board authorized the repurchase of up to $1.0 billion of common shares within the eight quarter period ending December 31, 2024. Purchases of common stock under the authorization may include open market purchases, privately negotiated transactions, and accelerated share repurchase programs. Huntington repurchased no shares of common stock under the current repurchase authorization in the three months ended March 31, 2023. As part of our 2023 capital plan to grow capital and current expectation that organic capital will be used for funding loan and lease growth, we do not expect to utilize the share repurchase program during 2023. However, we may at our discretion resume share repurchases at any time while considering factors including, but not limited to, capital requirements and market conditions.

6 Huntington Bancshares Incorporated

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General

Our general business objectives are to:

•Build on our vision to be 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 our distinguished brand and culture

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

•Leverage expertise and capabilities to acquire and deepen relationships and launching of select partnerships

•Maintain positive operating leverage and execute disciplined capital management

•Stability and resilience through risk management, maintaining an aggregate moderate-to-low, through-the-cycle risk appetite

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 Federal Reserve has raised interest rates and had begun reducing the size of its balance sheet. On March 10 and March 12, 2023, Silicon Valley Bank and Signature Bank, respectively, were closed by regulators with the FDIC appointed as receiver. The closures of those banks and adverse developments affecting other banks in March 2023 resulted in heightened levels of market activity and volatility. The impact of market volatility from the adverse developments in the banking industry along with continued high 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. Our economic forecast assumes a mild recession in 2023 with growth returning in 2024. We expect inflation to moderate through 2023 as the Federal Reserve actions take effect, but that will result in lower GDP growth and higher unemployment until the economy begins to rebound into 2024.

Our results this quarter reflect continued discipline expense management, continued investments to drive sustainable revenue growth, and solid capital levels, despite the market disruption. Credit continues to perform well in keeping with our aggregate moderate-to-low, through-the-cycle risk appetite. With our disciplined and proactive approach, we believe Huntington is well positioned to manage through the uncertain economic outlook on the horizon. We remain focused on delivering profitable growth and driving value for our shareholders.

Other Recent Developments

In the aftermath of the recent bank failures, we expect that the banking agencies will propose certain actions, including reforms that will require higher capital, including increased requirements to issue long-term debt, as well as special assessments to repay losses to the FDIC’s Deposit Insurance Fund. It is not yet possible to quantify the impact of these potential actions.

DISCUSSION OF RESULTS OF OPERATIONS

This section provides a review of financial performance on a consolidated basis. Key unaudited consolidated balance sheet and unaudited income statement 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.”

2023 1Q Form 10-Q 7

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Table 1 - Selected Quarterly Income Statement Data

	Three Months Ended
	March 31,			March 31,			Change
(amounts in millions, except per share data)	2023			2022			Amount		Percent
Interest income	$	2,028		$	1,195		$	833	70	%
Interest expense	619			49			570		NM
Net interest income	1,409			1,146			263		23
Provision for credit losses	85			25			60		NM
Net interest income after provision for credit losses	1,324			1,121			203		18
Service charges on deposit accounts	83			97			(14)		(14)
Card and payment processing income	93			86			7		8
Capital markets fees	59			42			17		40
Trust and investment management services	62			65			(3)		(5)
Mortgage banking income	26			49			(23)		(47)
Leasing revenue	26			35			(9)		(26)
Insurance income	34			31			3		10
Gain on sale of loans	3			28			(25)		(89)
Bank owned life insurance income	16			17			(1)		(6)
Net gains on sales of securities	1			—			1		NM
Other noninterest income	109			49			60		122
Total noninterest income	512			499			13		3
Personnel costs	649			580			69		12
Outside data processing and other services	151			165			(14)		(8)
Equipment	64			81			(17)		(21)
Net occupancy	60			64			(4)		(6)
Marketing	25			21			4		19
Professional services	16			19			(3)		(16)
Deposit and other insurance expense	20			18			2		11
Amortization of intangibles	13			14			(1)		(7)
Lease financing equipment depreciation	8			14			(6)		(43)
Other noninterest expense	80			77			3		4
Total noninterest expense	1,086			1,053			33		3
Income before income taxes	750			567			183		32
Provision for income taxes	144			105			39		37
Income after income taxes	606			462			144		31
Income attributable to non-controlling interest	4			2			2		100
Net income attributable to Huntington	602			460			142		31
Dividends on preferred shares	29			28			1		4

Net income applicable to common shares	$	573		$	432		$	141	33	%

Average common shares—basic	1,443			1,438			5		—	%
Average common shares—diluted	1,469			1,464			5		—
Net income per common share—basic	$	0.40		$	0.30		$	0.10	33
Net income per common share—diluted	0.39			0.29			0.10		34
Return on average total assets	1.32		%	1.05		%
Return on average common shareholders’ equity	14.6			10.4
Return on average tangible common shareholders’ equity (1)	23.1			15.8
Net interest margin (2)	3.40			2.88
Efficiency ratio (3)	55.6			62.9


Revenue and Net Interest Income—FTE (non-GAAP)
Net interest income	$	1,409		$	1,146		$	263	23	%
FTE adjustment (2)	9			8			1		13
Net interest income, FTE (non-GAAP) (2)	1,418			1,154			264		23
Noninterest income	512			499			13		3
Total revenue, FTE (non-GAAP) (2)	$	1,930		$	1,653		$	277	17	%

(1)Net income applicable to common shares 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 divided by the sum of FTE net interest income and noninterest income excluding securities gains.

8 Huntington Bancshares Incorporated

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Average Balance Sheet / Net Interest Income

The following tables detail the change in our average balance sheet and the net interest margin.


Table 2 - Consolidated Quarterly Average Balance Sheet and Net Interest Margin
	Three Months Ended
	March 31, 2023						March 31, 2022						Change in
	Average		Interest		Yield/		Average		Interest		Yield/		Average Balances
(dollar amounts in millions)	Balances		Income (FTE) (1)		Rate (2)		Balances		Income (FTE) (1)		Rate (2)		Amount		Percent
Assets:
Interest-bearing deposits at Federal Reserve Bank	$	6,101	$	71	4.65	%	$	7,195	$	3	0.17	%	$	(1,094)	(15)	%
Interest-bearing deposits in banks	249		5		8.50		174		—		0.15		75		43
Securities:
Trading account securities	21		—		5.37		46		—		3.39		(25)		(54)
Available-for-sale securities:
Taxable	21,368		232		4.34		24,205		90		1.49		(2,837)		(12)
Tax-exempt	2,640		29		4.40		2,886		22		3.00		(246)		(9)
Total available-for-sale securities	24,008		261		4.35		27,091		112		1.65		(3,083)		(11)
Held-to-maturity securities—taxable	16,977		102		2.41		14,556		66		1.81		2,421		17



Other securities	886		10		4.35		967		5		1.88		(81)		(8)
Total securities	41,892		373		3.56		42,660		183		1.72		(768)		(2)
Loans held for sale	450		7		5.85		1,243		10		3.15		(793)		(64)
Loans and leases: (3)
Commercial:
Commercial and industrial	46,110		643		5.58		41,397		392		3.79		4,713		11



Commercial real estate	16,600		276		6.65		15,063		114		3.01		1,537		10
Lease financing	5,209		68		5.25		4,912		61		4.93		297		6
Total commercial	67,919		987		5.82		61,372		567		3.69		6,547		11
Consumer:
Residential mortgage	22,327		190		3.41		19,505		146		2.99		2,822		14
Automobile	13,245		129		3.94		13,463		112		3.38		(218)		(2)
Home equity	10,258		181		7.14		10,414		102		3.99		(156)		(1)
RV and marine	5,366		58		4.42		5,103		52		4.15		263		5
Other consumer	1,305		36		11.18		1,285		28		8.96		20		2
Total consumer	52,501		594		4.57		49,770		440		3.57		2,731		5
Total loans and leases	120,420		1,581		5.27		111,142		1,007		3.64		9,278		8
Total earning assets	169,112		2,037		4.89		162,414		1,203		3.00		6,698		4
Cash and due from banks	1,598						1,648						(50)		(3)
Goodwill and other intangible assets	5,759						5,584						175		3
All other assets	10,568						10,013						555		6
Allowance for loan and lease losses	(2,143)						(2,047)						(96)		(5)
Total assets	$	184,894					$	177,612					$	7,282	4	%
Liabilities and shareholders’ equity:
Interest-bearing deposits:
Demand deposits—interest-bearing	$	40,654	$	132	1.32	%	$	40,634	$	3	0.03	%	$	20	—	%
Money market deposits	37,301		172		1.87		32,672		4		0.05		4,629		14
Savings and other domestic deposits	19,877		3		0.07		21,316		1		0.02		(1,439)		(7)
Core certificates of deposit (4)	5,747		43		3.01		2,560		1		0.14		3,187		124
Other domestic deposits of $250,000 or more	252		2		2.45		316		—		0.08		(64)		(20)
Negotiable CDs, brokered and other deposits	4,815		54		4.56		3,453		2		0.17		1,362		39

Total interest-bearing deposits	108,646		406		1.52		100,951		11		0.04		7,695		8
Short-term borrowings	4,371		60		5.56		4,728		7		0.57		(357)		(8)
Long-term debt	11,047		153		5.52		6,914		31		1.83		4,133		60
Total interest-bearing liabilities	124,064		619		2.02		112,593		49		0.18		11,471		10
Demand deposits—noninterest-bearing	37,498						41,966						(4,468)		(11)
All other liabilities	5,056						3,964						1,092		28
Total liabilities	166,618						158,523						8,095		5
Total Huntington shareholders’ equity	18,231						19,064						(833)		(4)
Non-controlling interest	45						25						20		80
Total equity	18,276						19,089						(813)		(4)
Total liabilities and equity	$	184,894					$	177,612					$	7,282	4	%
Net interest rate spread					2.87						2.82
Impact of noninterest-bearing funds on margin					0.53						0.06
Net interest margin/NII (FTE)			$	1,418	3.40	%			$	1,154	2.88	%

(1)FTE yields are calculated assuming a 21% tax rate.

(2)Yield/rates include the impact of applicable derivatives. Loan and lease and deposit average yield/rates also include impact of applicable non-deferrable and amortized fees.

(3)For purposes of this analysis, NALs are reflected in the average balances of loans and leases.

(4)Includes consumer certificates of deposit of $250,000 or more.

2023 1Q Form 10-Q 9

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Net Interest Income

Net interest income for the 2023 first quarter increased $263 million, or 23%, from the 2022 first quarter. FTE net interest income, a non-GAAP financial measure, for the 2023 first quarter increased $264 million, or 23%, from the 2022 first quarter. The increase in FTE net interest income primarily reflects a 52 basis point increase in the FTE NIM to 3.40% and a $6.7 billion, or 4%, increase in average total earning assets. The NIM expansion 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.

Net interest income for the 2023 first quarter included $10 million of net interest income from purchase accounting accretion and accelerated PPP loan fees recognized upon forgiveness payments from the SBA, compared to $30 million in the 2022 first quarter.

Average Balance Sheet

Average assets for the 2023 first quarter increased $7.3 billion, or 4%, to $184.9 billion from the 2022 first quarter, primarily due to an increase in average loans and leases of $9.3 billion, or 8%, partially offset by decreases in average interest-bearing deposits at the Federal Reserve Bank of $1.1 billion, or 15%, loans held for sale of $793 million, or 64%, and total securities of $768 million, or 2%. The increase in average loans and leases was driven by organic growth in average commercial loans and leases of $6.5 billion, or 11%, and average consumer loans of $2.7 billion, or 5%.

Average liabilities increased $8.1 billion, or 5%, from the 2022 first quarter, primarily due to increases in average borrowings and deposits. Average borrowings increased $3.8 billion, or 32%, driven by new debt issuances and higher FHLB borrowings reflecting actions taken as part of normal management of funding needs. Total average deposits increased $3.2 billion, or 2%, primarily due to an increase in average interest-bearing deposits of $7.7 billion, largely due to increases in average money market and certificate of deposits, partially offset by a decrease in noninterest-bearing deposits of $4.5 billion.

Average shareholders’ equity decreased $833 million, or 4%, from the 2022 first quarter primarily due to an increase in average accumulated other comprehensive loss driven by changes in interest rates, partially offset by earnings.

Provision for Credit Losses

(This section should be read in conjunction with the “Credit Risk” section.)

The provision for credit losses is the expense necessary to maintain the ACL at levels appropriate to absorb our estimate of credit losses expected over the life of the loan and lease portfolio, securities portfolio, and unfunded lending commitments.

The provision for credit losses for the 2023 first quarter was $85 million, an increase of $60 million, compared to the 2022 first quarter. The increase in provision expense compared to the year-ago quarter was driven by an increase in realized net credit losses, along with allowance builds in the current quarter associated with loan and lease growth and economic uncertainty.

The components of the provision for credit losses were as follows:


Table 3 - Provision for Credit Losses
	Three Months Ended
	March 31,		March 31,
(dollar amounts in millions)	2023		2022
Provision for loan and lease losses	$	78	$	7
Provision for unfunded lending commitments	7		14
Provision for securities	—		4
Total provision for credit losses	$	85	$	25

10 Huntington Bancshares Incorporated

Table of Content

Noninterest Income

The following table reflects noninterest income for each of the periods presented:


Table 4 - Noninterest Income
	Three Months Ended		1Q23 vs. 1Q22
	March 31,			March 31,		Change
(dollar amounts in millions)	2023			2022		Amount		Percent
Service charges on deposit accounts	$	83		$	97	$	(14)	(14)	%
Card and payment processing income	93			86		7		8
Capital markets fees	59			42		17		40
Trust and investment management services	62			65		(3)		(5)
Mortgage banking income	26			49		(23)		(47)
Leasing revenue	26			35		(9)		(26)
Insurance income	34			31		3		10
Gain on sale of loans	3			28		(25)		(89)
Bank owned life insurance income	16			17		(1)		(6)
Net gains on sales of securities	1			—		1		100
Other noninterest income