hban-20230630

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, 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 1,447,882,434 shares of the registrant’s common stock ($0.01 par value) outstanding on June 30, 2023.

HUNTINGTON BANCSHARES INCORPORATED

INDEX


Glossary of Acronyms and Terms			5
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)			41
Consolidated Balance Sheets at June 30 , 2023 and December 31, 2022			41
Consolidated Statements of Income for the three and six months ended June 30 , 2023 and 2022			42
Consolidated Statements of Comprehensive Income for the three and six months ended June 30 , 2023 and 2022			43
Consolidated Statements of Changes in Shareholders’ Equity for the three and six months ended June 30 , 2023 and 2022			44
Consolidated Statements of Cash Flows for the six months ended June 30 , 2023 and 2022			46
Notes to Unaudited Consolidated Financial Statements			48
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			7
Executive Overview			7
Discussion of Results of Operations			9
Risk Management and Capital:			18
Credit Risk			18
Market Risk			25
Liquidity Risk			28
Operational Risk			31
Compliance Risk			32
Capital			32
Business Segment Discussion			33
Additional Disclosures			38
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			89
Item 5. Other Information			90
Item 6. Exhibits			91
Signatures			92

4 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

CFO						Chief Financial Officer
CRO						Chief Risk Officer
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
EOP						End of Period
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
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

2023 2Q Form 10-Q 5

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NIM						Net Interest Margin
NM						Not Meaningful
NPAs						Nonperforming Assets

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


REIT						Real estate investment trust
ROC						Risk Oversight Committee



RPS						Retirement Plan Services
RV						Recreational vehicle
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

6 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 June 30, 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 Second Quarter Results Compared to 2022 Second Quarter

For the quarter, we reported net income of $559 million, or $0.35 per diluted common share, compared with $539 million, or $0.35 per diluted common share, in the year-ago quarter.

Net interest income was $1.3 billion, up $85 million, or 7% from the year-ago quarter. FTE net interest income, a non-GAAP financial measure, increased $90 million, or 7%, from the year-ago quarter. The increase in FTE net interest income primarily reflects $13.7 billion, or 8%, increase in average earning assets, partially offset by a 4 basis point decrease in the FTE NIM to 3.11% and an increase in average interest-bearing liabilities.

2023 2Q Form 10-Q 7

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The provision for credit losses increased $25 million from the year-ago quarter to $92 million in the 2023 second quarter. The increase in provision expense compared to the year-ago quarter was driven by allowance builds that reflect modest deterioration in the current macro-economic environment. The ACL increased $174 million from the year-ago quarter to $2.3 billion in the 2023 second quarter, or 1.93% of total loans and leases, compared to $2.2 billion, or 1.87% of total loans and leases. The increase in the total ACL was driven by a combination of loan and lease growth and modest deterioration in the current macro-economic forecast.

Noninterest income was $495 million, an increase of $10 million, or 2%, and noninterest expense increased $32 million, or 3%, from the year-ago quarter. The increase in noninterest income was primarily due to an $18 million increase from favorable mark-to-market on pay-fixed swaptions, included within other noninterest income, and additional increases in card and payments processing, bank owned life insurance, and trust and investment management services, partially offset by decreases in service charges on deposit accounts and mortgage banking income. The increase in noninterest expense was primarily due to increases in personnel costs, marketing expense, and outside data processing and other services, partially offset by reductions in acquisition-related expenses.

Total assets at June 30, 2023 were $188.5 billion, an increase of $5.6 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 $4.5 billion, or 92%, and loans and leases of $1.7 billion, or 1%. Total liabilities at June 30, 2023 were $169.7 billion, an increase of $4.5 billion, or 3%, compared to December 31, 2022. The increase in total liabilities was primarily driven by an increase in long-term debt of $5.0 billion, or 52%.

The tangible common equity to tangible assets ratio was 5.80% at June 30, 2023, up 25 basis points from December 31, 2022, primarily due to an increase in tangible common equity related to current period earnings. CET1 risk-based capital ratio was 9.82%, 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.

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

During the second quarter of 2023, inflation has continued to trend lower while remaining at elevated levels above the Federal Reserve’s target. The Federal Reserve raised interest rates one time in May and paused in June to further evaluate the impact of their tightening and the overall health of the economy. Market volatility has subsided, and deposits have generally stabilized across the banking sector. Over the same period, loan growth across the banking sector has decreased given economic uncertainty. Further, as a result of the recent bank failures, ongoing regulatory reforms are expected, including increased capital and long-term debt requirements, as well as a special assessment to repay losses to the FDIC’s Deposit Insurance Fund.

Our economic forecast assumes a slowdown over the next 12 months with a return to modest growth in 2024. We expect inflation to moderate through 2024 as the Federal Reserve actions continue to have an effect, and will likely result in lower GDP growth and higher unemployment.

8 Huntington Bancshares Incorporated

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Our quarterly results reflect continued execution of our strategy and the strength of our balance sheet, delivered through sustained deposit growth and increased capital levels driven by earnings and capital optimization. Credit continues to perform well in keeping with our aggregate moderate-to-low, through-the-cycle risk appetite. With our disciplined and proactive approach, including balance sheet and other efficiency efforts to increase capital, 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

Following the recent failure of two financial institutions and resulting losses to the FDIC’s Deposit Insurance Fund, the FDIC approved a notice of proposed rulemaking in May 2023 that would implement a special assessment to recover the cost associated with protecting uninsured depositors as part of those financial institution failures. Under the proposed rule, the assessment base for the special assessment would be equal to an insured depository institution’s estimated uninsured deposits reported as of December 31, 2022, adjusted to exclude the first $5 billion of uninsured deposits. The $5 billion exclusion would be applied once to the aggregate amount of uninsured deposits.

The FDIC is proposing a special assessment at an annual rate of approximately 12.5 basis points to be assessed over eight quarters. The special assessment rate is subject to change prior to any final rule depending on any adjustments to the loss estimate, mergers or failures, or amendments to reported estimates of uninsured deposits. As proposed and based on The Huntington National Bank reported uninsured deposits as of December 31, 2022, the estimated impact of the special assessment is approximately $115 million. On July 24, 2023, the FDIC issued a Financial Institution Letter which clarified that inter-company subsidiary deposits should be included in reported uninsured deposits. If Huntington were to include these inter-company bank subsidiary deposits at December 31, 2022, the estimated impact of the special assessment would equal approximately $199 million. Huntington continues to assess these developments.

Any change to the terms of the final rule impacting the determination of uninsured deposits, exclusionary criteria, annual rate, or term of annual rate application would have a direct impact on the estimate of Huntington’s special assessment.

We continue to assess the impact of the special assessment to our future operating results and expect to record the impact when the final rule is enacted.

On July 27, 2023, the Federal Banking Agencies released a notice of proposed rulemaking to revise the Basel III Capital Rules applicable to the Company and the Bank. We are in the process of evaluating this proposed rulemaking and assessing its potential impact on Huntington.

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 2Q Form 10-Q 9

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Table 1 - Selected Quarterly Income Statement Data

	Three months ended June 30,			Change
(amounts in millions, except per share data)	2023				2022			Amount		Percent
Interest income	$	2,225			$	1,331		$	894	67	%
Interest expense	879				70			809		NM
Net interest income	1,346				1,261			85		7
Provision for credit losses	92				67			25		37
Net interest income after provision for credit losses	1,254				1,194			60		5
Service charges on deposit accounts	87				105			(18)		(17)
Card and payment processing income	102				96			6		6
Capital markets fees	57				54			3		6
Trust and investment management services	68				63			5		8
Mortgage banking income	33				44			(11)		(25)
Leasing revenue	25				27			(2)		(7)
Insurance income	30				27			3		11
Gain on sale of loans	8				12			(4)		(33)
Bank owned life insurance income	16				11			5		45
Net (losses) gains on sales of securities	(5)				—			(5)		NM
Other noninterest income	74				46			28		61
Total noninterest income	495				485			10		2
Personnel costs	613				577			36		6
Outside data processing and other services	148				153			(5)		(3)
Equipment	64				61			3		5
Net occupancy	54				58			(4)		(7)
Marketing	32				24			8		33
Professional services	21				19			2		11
Deposit and other insurance expense	23				20			3		15
Amortization of intangibles	13				13			—		—
Lease financing equipment depreciation	8				11			(3)		(27)
Other noninterest expense	74				82			(8)		(10)
Total noninterest expense	1,050				1,018			32		3
Income before income taxes	699				661			38		6
Provision for income taxes	134				120			14		12
Income after income taxes	565				541			24		4
Income attributable to non-controlling interest	6				2			4		NM
Net income attributable to Huntington	559				539			20		4
Dividends on preferred shares	40				28			12		43

Net income applicable to common shares	$	519			$	511		$	8	2	%

Average common shares—basic	1,446				1,441			5		—	%
Average common shares—diluted	1,466				1,463			3		—
Net income per common share—basic	$	0.36			$	0.35		$	0.01	3
Net income per common share—diluted	0.35				0.35			—		—
Return on average total assets	1.18		%		1.22		%
Return on average common shareholders’ equity	12.7				12.8
Return on average tangible common shareholders’ equity (1)	19.9				19.9
Net interest margin (2)	3.11				3.15
Efficiency ratio (3)	55.9				57.3


Revenue and Net Interest Income—FTE (non-GAAP)
Net interest income	$	1,346			$	1,261		$	85	7	%
FTE adjustment (2)	11				6			5		83
Net interest income, FTE (non-GAAP) (2)	1,357				1,267			90		7
Noninterest income	495				485			10		2
Total revenue, FTE (non-GAAP) (2)	$	1,852			$	1,752		$	100	6	%

(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.

10 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)	2023		2022		Amount		Percent
Interest income	$	4,253	$	2,526	$	1,727	68	%
Interest expense	1,498		119		1,379		NM
Net interest income	2,755		2,407		348		14
Provision for credit losses	177		92		85		92
Net interest income after provision for credit losses	2,578		2,315		263		11
Service charges on deposit accounts	170		202		(32)		(16)
Card and payment processing income	195		182		13		7
Capital markets fees	116		96		20		21
Trust and investment management services	130		128		2		2
Mortgage banking income	59		93		(34)		(37)
Leasing revenue	51		62		(11)		(18)
Insurance income	64		58		6		10
Gain on sale of loans	11		40		(29)		(73)
Bank owned life insurance income	32		28		4		14
Net (losses) gains on sales of securities	(4)		—		(4)		NM
Other noninterest income	183		95		88		93
Total noninterest income	1,007		984		23		2
Personnel costs	1,262		1,157		105		9
Outside data processing and other services	299		318		(19)		(6)
Equipment	128		142		(14)		(10)
Net occupancy	114		122		(8)		(7)
Marketing	57		45		12		27
Professional services	37		38		(1)		(3)
Deposit and other insurance expense	43		38		5		13
Amortization of intangibles	26		27		(1)		(4)
Lease financing equipment depreciation	16		25		(9)		(36)
Other noninterest expense	154		159		(5)		(3)
Total noninterest expense	2,136		2,071		65		3
Income before income taxes	1,449		1,228		221		18
Provision for income taxes	278		225		53		24
Income after income taxes	1,171		1,003		168		17
Income attributable to non-controlling interest	10		4		6		150
Net income attributable to Huntington	1,161		999		162		16
Dividends on preferred shares	69		56		13		23

Net income applicable to common shares	$	1,092	$	943	$	149	16	%

Average common shares—basic	1,445		1,440		5		—	%
Average common shares—diluted	1,468		1,464		4		—
Net income per common share—basic	$	0.76	$	0.65	$	0.11	17
Net income per common share—diluted	0.74		0.64		0.10		16


Revenue and Net Interest Income—FTE (Non-GAAP)
Net interest income	$	2,755	$	2,407	$	348	14	%
FTE adjustment	20		14		6		43
Net interest income, FTE (non-GAAP) (1)	2,775		2,421		354		15
Noninterest income	1,007		984		23		2
Total revenue, FTE (non-GAAP) (1)	$	3,782	$	3,405	$	377	11	%

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

2023 2Q Form 10-Q 11

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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 3 - Consolidated Quarterly Average Balance Sheet and Net Interest Margin (1)

Three months ended June 30, 2023

Three months ended June 30, 2022

Change in

Average

Interest

Yield/

Average

Interest

Yield/

Average Balances

(dollar amounts in millions)

Balances

Income (FTE) (2)

Rate (3)

Balances

Income (FTE) (2)

Rate (3)

Amount

Percent

Assets:

Interest-bearing deposits at Federal Reserve Bank

11,052

141

5.12

3,532

0.80

7,520