Huntington Bancshares 10-Q 2022-06-30

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

For the quarterly period ended June 30, 2022

OR

For the transition period from to

Huntington Bancshares Incorporated

(Exact name of registrant as specified in its charter)

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

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.

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

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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:

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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.

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).

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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-

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Huntington Bancshares Incorporated

Condensed Consolidated Balance Sheets

(Unaudited)

(1)Amounts represent loans for which Huntington has elected the fair value option. See Note 13 “Fair Values of Assets and Liabilities”.

See Notes to Unaudited Condensed Consolidated Financial Statements

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Quantitative and qualitative disclosures for the current period can be found in the Market Risk section of this report, which includes changes in market risk exposures from disclosures presented in Huntington’s 2021 Annual Report on Form 10-K.

Disclosure Controls and Procedures

Huntington maintains disclosure controls and procedures designed to ensure that the information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934, as amended (the Exchange Act), are recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Huntington’s management, with the participation of its Chief Executive Officer and the Chief Financial Officer, evaluated the effectiveness of Huntington’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2022. Based upon such evaluation, Huntington’s Chief Executive Officer and Chief Financial Officer have concluded that, as of June 30, 2022, Huntington’s disclosure controls and procedures were effective.

There have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended June 30, 2022, that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting.

PART II. OTHER INFORMATION

In accordance with the instructions to Part II, the other specified items in this part have been omitted because they are not applicable or the information has been previously reported.

Item 1: Legal Proceedings

Information required by this item is set forth in Note 16 “Commitments and Contingent Liabilities” of the Notes to Unaudited Condensed Consolidated Financial Statements under the caption “Litigation and Regulatory Matters” and is incorporated into this Item by reference.

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors discussed in Part I, “Item 1A. Risk Factors” in our 2021 Annual Report on Form 10-K, which could materially affect our business, financial condition, or results of operations. In the first quarter of 2022, we identified the following additional risk factor:

Liquidity Risks:

Instability in global economic conditions and geopolitical matters, as well as volatility in financial markets, could have a material adverse effect on the Company’s results of operations and financial condition.

Instability in global economic conditions and geopolitical matters, as well as volatility in financial markets, could have a material adverse effect on the Company’s results of operations and financial condition. The macroeconomic environment in the United States is susceptible to global events and volatility in financial markets. For example, trade negotiations between the U.S. and other nations remain uncertain and could adversely impact economic and market conditions for the Company and its clients and counterparties. In addition, global demand for products may exceed supply during the economic recovery from the COVID-19 pandemic, and such shortages may cause inflation, adversely impact consumer and business confidence, and adversely affect the economy as well as the Company’s financial condition and results.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a) and (b)

Not Applicable

(c)

(1)The reported shares were repurchased pursuant to Huntington’s publicly-announced share repurchase authorization.

(2)The number shown represents, as of the end of each period, the approximate dollar value of Common Stock that may yet be purchased under publicly-announced share repurchase authorizations. Authorization to repurchase common shares expired as of June 30, 2022.

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Exhibit Index

This report incorporates by reference the documents listed below that we have previously filed with the SEC. The SEC allows us to incorporate by reference information in this document. The information incorporated by reference is considered to be a part of this document, except for any information that is superseded by information that is included directly in this document.

The SEC maintains an Internet web site that contains reports, proxy statements, and other information about issuers, like us, who file electronically with the SEC. The address of the site is http://www.sec.gov. The reports and other information filed by us with the SEC are also available free of charge at our internet web site. The address of the site is http://www.huntington.com. Except as specifically incorporated by reference into this Quarterly Report on Form 10-Q, information on those web sites is not part of this report. You also should be able to inspect reports, proxy statements, and other information about us at the offices of the Nasdaq National Market at 33 Whitehall Street, New York, New York 10004.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

HUNTINGTON BANCSHARES INCORPORATED

(Registrant)

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