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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended SeptemberJune 30, 20222023
OR
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| ☐ | 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
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| 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.
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| Large Accelerated Filer | x | | Accelerated filer | ☐ |
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| Non-accelerated filer | ☐ | | Smaller reporting company | ☐ |
| | | | Emerging growth company | ☐ |
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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 1,442,734,2551,447,882,434 shares of the registrant’s common stock ($0.01 par value) outstanding on SeptemberJune 30, 2022.2023.
HUNTINGTON BANCSHARES INCORPORATED
INDEX
24 Huntington Bancshares Incorporated
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 |
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| ALLL | | Allowance for Loan and Lease Losses |
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| AOCI | | Accumulated Other Comprehensive Income (Loss) |
| ASC | | Accounting Standards Codification |
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| ASU | | Accounting Standards Update |
| AULC | | Allowance for Unfunded Lending Commitments |
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| Basel III | | Refers to the final rule issued by the FRB and OCC and published in the Federal Register on October 11, 2013 |
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| Capstone Partners | | Capstone Enterprises LLC |
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| C&I | | Commercial and Industrial |
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| CDs | | Certificates of Deposit |
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| CECL | | Current Expected Credit LossLosses |
| 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 |
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| CRE | | Commercial Real Estate |
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| Dodd-Frank Act | | Dodd-Frank Wall Street Reform and Consumer Protection Act |
| EAD | | Exposure at Default |
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| ESG | | Environmental, Social, and Governance |
| EOP | | End of Period |
| EVE | | Economic Value of Equity |
FASB | | Financial Accounting Standards Board |
| | |
| | |
| FDIC | | Federal Deposit Insurance Corporation |
| Federal Reserve | | Board of Governors of the Federal Reserve System |
| | |
| FHLB | | Federal Home Loan Bank |
| FICO | | Fair Isaac Corporation |
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FRB | | Federal Reserve Bank or the Federal Reserve Board |
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| 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 |
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| HTM | | Held-to-Maturity |
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| IRS | | Internal Revenue Service |
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| LGD | | Loss Given Default |
| LIBOR | | London Interbank Offered Rate |
| LIHTC | | Low Income Housing Tax Credit |
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| MBS | | Mortgage-Backed Securities |
| MD&A | | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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| MSR | | Mortgage Servicing Right |
| NAICS | | North American Industry Classification System |
| NALs | | Nonaccrual Loans |
| NCO | | Net Charge-off |
| NII | | Net Interest Income |
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| NIM | | Net Interest Margin |
| NM | | Not Meaningful |
| NPAs | | Nonperforming Assets |
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| OCC | | Office of the Comptroller of the Currency |
| OCI | | Other Comprehensive Income (Loss) |
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| OLEM | | Other Loans Especially Mentioned |
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PCD | | Purchased Credit Deteriorated |
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| PD | | Probability of Default |
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| PPP | | Paycheck Protection Program |
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| RBHPCG | | Regional Banking and The Huntington Private Client Group |
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| REIT | | Real estate investment trust |
| ROC | | Risk Oversight Committee |
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| 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 |
TCF | | TCF Financial Corporation |
| TDR | | Troubled Debt Restructuring |
| Torana | | Digital Payments Torana, Inc. |
| U.S. Treasury | | U.S. Department of the Treasury |
| | |
UPB | | Unpaid Principal Balance |
| VIE | | Variable Interest Entity |
| XBRL | | eXtensible Business Reporting Language |
46 Huntington Bancshares Incorporated
PART I. FINANCIAL INFORMATION
When we refer to “we”, “our”, “us”, “Huntington”,“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,services. This includes, but is not limited to, payments, 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 SeptemberJune 30, 2022,2023, our 1,0321,001 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. 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 20212022 Annual Report on Form 10-K should be read in conjunction with this MD&A as this discussion provides only material updates to the 20212022 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.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 2022 Third2023 Second Quarter Results Compared to 2021 Third2022 Second Quarter
For the quarter, we reported net income of $594$559 million, or $0.39$0.35 per diluted common share, compared with $377$539 million, or $0.22$0.35 per diluted common share, in the year-ago quarter.
Net interest income was $1.4$1.3 billion, up $244$85 million, or 21%7% from the year-ago quarter. FTE net interest income, a non-GAAP financial measure, increased $245$90 million, or 21%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 514 basis point increasedecrease in the FTE NIM to 3.42%3.11% and a $4.9 billion, or 3%,an 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 costinterest-bearing liabilities.
The provision for credit losses increased $168$25 million from the year-ago quarter to $106$92 million in the 2022 third2023 second quarter. The increase in provision for credit lossesexpense compared to the year-ago quarter was primarily due to loan and lease growth. Thedriven by allowance builds that reflect modest deterioration in the current macro-economic environment. The ACL increased $25$174 million from thethe year-ago quarter to $2.2$2.3 billion in the 2022 third2023 second quarter, or 1.89%1.93% of total loans and leases, compared to $2.2 billion, or 2.01%1.87% of total loans and leases. The decreaseincrease in the total ACL aswas driven by a percentagecombination 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 loansgrowth and leasesmodest deterioration in the current quarter, down from 0.20% in the year-ago quarter.macro-economic forecast.
Noninterest income was $498$495 million, a decreasean increase of $37$10 million, or 7%2%, and noninterest expense decreased $236increased $32 million, or 18%3%, from the year-ago quarter. The decreaseincrease 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 mortgage banking income and service charges on deposit accounts partially offset by anand mortgage banking income. The increase in capital markets fees. The decrease in noninterest expense was primarily due to a reductionincreases in personnel costs, marketing expense, and outside data processing and other services, partially offset by reductions in acquisition-related expensesexpenses.
Total assets at June 30, 2023 were $188.5 billion, an increase of $224 million$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 executionloans and leases of cost reduction initiatives associated with the TCF acquisition.$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 5.32%5.80% at SeptemberJune 30, 2022, down 1562023, up 25 basis points from December 31, 2021,2022, primarily due to a decreasean increase in tangible common equity related to higher interest rates causing an increase in accumulated other comprehensive loss, partially offset by undistributedcurrent period earnings. CET1 risk-based capital ratio was 9.27%9.82%, downup from 9.33%9.36% from December 31, 2021.2022. The decreaseincrease in regulatory capital ratios was primarily driven by dividends, risk-weighted assets growth, and goodwill recognized,current period earnings, partially offset by earnings.dividends and the CECL transitional amount.
General
Our general business objectives are:are to:
•Build on our vision to becomebe 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 proactiveour distinguished brand and personalized guidance, differentiated products, and expertiseculture
•Extend our digital capabilitiesleadership with focus on ease of use, access to information, and self-service across products and services
•Add scaleLeverage expertise and scope by acquiringcapabilities to acquire and deepeningdeepen relationships and launching of select partnerships
•Maintain positive operating leverage and execute disciplined capital management
•Execute effectiveStability and resilience through risk management, withmaintaining an aggregate moderate-to-low, through-the-cycle risk appetite
COVID-19Economy
During the second quarter of 2023, inflation has continued to trend lower while remaining at elevated levels above the Federal Reserve’s target. The COVID-19 pandemic has caused unprecedented disruption that has affected daily livingFederal Reserve raised interest rates one time in May and has negatively impactedpaused in June to further evaluate the impact of their tightening and the overall health of the economy. As further discussed in “Discussion of Results of Operations,”Market volatility has subsided, and deposits have generally stabilized across the volatility inbanking sector. Over the markets andsame period, loan growth across the banking sector has decreased given economic uncertainty caused by the pandemic continue to have impact.
Huntington reacted quickly to the changes required by the pandemicuncertainty. Further, as a result of the commitmentrecent bank failures, ongoing regulatory reforms are expected, including increased capital and flexibility of our colleagues coupledlong-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 well-prepared business continuity plans.a return to modest growth in 2024. We expect inflation to moderate through 2024 as the Federal Reserve actions 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 harmonyhave an effect, and will likely result in support of the business. We achieve this with flexible work arrangements, parental leave,lower GDP growth 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.higher unemployment.
68 Huntington Bancshares Incorporated
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 financialOur quarterly 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 byreflect continued execution of strategic initiatives including loanour strategy and leasethe strength of our balance sheet, delivered through sustained deposit 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 customersincreased capital levels driven by earnings and is increasing our fee income opportunities.capital optimization. Credit continues to perform well in keeping with our aggregate moderate-to-low, through-the-cycle risk appetite. ThroughWith 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 uncertainty inuncertain economic outlook on the macroeconomic environment.horizon. We remain focused on delivering profitable growth.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 Condensed Consolidated Balance Sheetunaudited consolidated balance sheet and Unaudited Condensed Statement of Incomeunaudited 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.”.
2022 3Q2023 2Q Form 10-Q 79
| | Table 1 - Selected Quarterly Income Statement Data | Table 1 - Selected Quarterly Income Statement Data | | Table 1 - Selected Quarterly Income Statement Data | |
| | | | Three Months Ended | | |
| | September 30, | | | September 30, | | Change | | Three months ended June 30, | | Change |
| (amounts in millions, except per share data) | (amounts in millions, except per share data) | 2022 | | | 2021 | | Amount | | Percent | (amounts in millions, except per share data) | 2023 | | | 2022 | | Amount | | Percent |
| Interest income | Interest income | $ | 1,589 | | | | $ | 1,205 | | | $ | 384 | | | 32 | % | Interest income | $ | 2,225 | | | | $ | 1,331 | | | $ | 894 | | | 67 | % |
| Interest expense | Interest expense | 185 | | | | 45 | | | 140 | | | NM | Interest expense | 879 | | | | 70 | | | 809 | | | NM |
| Net interest income | Net interest income | 1,404 | | | | 1,160 | | | 244 | | | 21 | | Net interest income | 1,346 | | | | 1,261 | | | 85 | | | 7 | |
| Provision for credit losses | Provision for credit losses | 106 | | | | (62) | | | 168 | | | NM | Provision for credit losses | 92 | | | | 67 | | | 25 | | | 37 | |
| Net interest income after provision for credit losses | Net interest income after provision for credit losses | 1,298 | | | | 1,222 | | | 76 | | | 6 | | Net interest income after provision for credit losses | 1,254 | | | | 1,194 | | | 60 | | | 5 | |
| Service charges on deposit accounts | Service charges on deposit accounts | 93 | | | | 114 | | | (21) | | | (18) | | Service charges on deposit accounts | 87 | | | | 105 | | | (18) | | | (17) | |
| Card and payment processing income | Card and payment processing income | 96 | | | | 96 | | | — | | | — | | Card and payment processing income | 102 | | | | 96 | | | 6 | | | 6 | |
| Capital markets fees | | Capital markets fees | 57 | | | | 54 | | | 3 | | | 6 | |
| Trust and investment management services | | Trust and investment management services | 68 | | | | 63 | | | 5 | | | 8 | |
| Mortgage banking income | Mortgage banking income | 26 | | | | 81 | | | (55) | | | (68) | | Mortgage banking income | 33 | | | | 44 | | | (11) | | | (25) | |
| Trust and investment management services | 60 | | | | 61 | | | (1) | | | (2) | | |
| Capital markets fees | 73 | | | | 40 | | | 33 | | | 83 | | |
| Leasing revenue | | Leasing revenue | 25 | | | | 27 | | | (2) | | | (7) | |
| Insurance income | Insurance income | 28 | | | | 25 | | | 3 | | | 12 | | Insurance income | 30 | | | | 27 | | | 3 | | | 11 | |
| Leasing revenue | 29 | | | | 42 | | | (13) | | | (31) | | |
| Gain on sale of loans | | Gain on sale of loans | 8 | | | | 12 | | | (4) | | | (33) | |
| Bank owned life insurance income | Bank owned life insurance income | 13 | | | | 15 | | | (2) | | | (13) | | Bank owned life insurance income | 16 | | | | 11 | | | 5 | | | 45 | |
| Gain on sale of loans | 15 | | | | 2 | | | 13 | | | NM | |
| | Net (losses) gains on sales of securities | | Net (losses) gains on sales of securities | (5) | | | | — | | | (5) | | | NM |
| Other noninterest income | Other noninterest income | 65 | | | | 59 | | | 6 | | | 10 | | Other noninterest income | 74 | | | | 46 | | | 28 | | | 61 | |
| Total noninterest income | Total noninterest income | 498 | | | | 535 | | | (37) | | | (7) | | Total noninterest income | 495 | | | | 485 | | | 10 | | | 2 | |
| Personnel costs | Personnel costs | 614 | | | | 643 | | | (29) | | | (5) | | Personnel costs | 613 | | | | 577 | | | 36 | | | 6 | |
| Outside data processing and other services | Outside data processing and other services | 145 | | | | 304 | | | (159) | | | (52) | | Outside data processing and other services | 148 | | | | 153 | | | (5) | | | (3) | |
| Equipment | | Equipment | 64 | | | | 61 | | | 3 | | | 5 | |
| Net occupancy | Net occupancy | 63 | | | | 95 | | | (32) | | | (34) | | Net occupancy | 54 | | | | 58 | | | (4) | | | (7) | |
| Equipment | 60 | | | | 79 | | | (19) | | | (24) | | |
| Marketing | | Marketing | 32 | | | | 24 | | | 8 | | | 33 | |
| Professional services | Professional services | 18 | | | | 26 | | | (8) | | | (31) | | Professional services | 21 | | | | 19 | | | 2 | | | 11 | |
| Marketing | 24 | | | | 25 | | | (1) | | | (4) | | |
| Deposit and other insurance expense | Deposit and other insurance expense | 15 | | | | 17 | | | (2) | | | (12) | | Deposit and other insurance expense | 23 | | | | 20 | | | 3 | | | 15 | |
| Amortization of intangibles | Amortization of intangibles | 13 | | | | 13 | | | — | | | — | | Amortization of intangibles | 13 | | | | 13 | | | — | | | — | |
| Lease financing equipment depreciation | Lease financing equipment depreciation | 11 | | | | 19 | | | (8) | | | (42) | | Lease financing equipment depreciation | 8 | | | | 11 | | | (3) | | | (27) | |
| Other noninterest expense | Other noninterest expense | 90 | | | | 68 | | | 22 | | | 32 | | Other noninterest expense | 74 | | | | 82 | | | (8) | | | (10) | |
| Total noninterest expense | Total noninterest expense | 1,053 | | | | 1,289 | | | (236) | | | (18) | | Total noninterest expense | 1,050 | | | | 1,018 | | | 32 | | | 3 | |
| Income before income taxes | Income before income taxes | 743 | | | | 468 | | | 275 | | | 59 | | Income before income taxes | 699 | | | | 661 | | | 38 | | | 6 | |
| Provision for income taxes | Provision for income taxes | 146 | | | | 90 | | | 56 | | | 62 | | Provision for income taxes | 134 | | | | 120 | | | 14 | | | 12 | |
| Income after income taxes | Income after income taxes | 597 | | | | 378 | | | 219 | | | 58 | | Income after income taxes | 565 | | | | 541 | | | 24 | | | 4 | |
| Income attributable to non-controlling interest | Income attributable to non-controlling interest | 3 | | | | 1 | | | 2 | | | NM | Income attributable to non-controlling interest | 6 | | | | 2 | | | 4 | | | NM |
| Net income attributable to Huntington Bancshares Inc | 594 | | | | 377 | | | 217 | | | 58 | | |
| Net income attributable to Huntington | | Net income attributable to Huntington | 559 | | | | 539 | | | 20 | | | 4 | |
| Dividends on preferred shares | Dividends on preferred shares | 29 | | | | 29 | | | — | | | — | | Dividends on preferred shares | 40 | | | | 28 | | | 12 | | | 43 | |
| Impact of preferred stock redemption | — | | | | 15 | | | (15) | | | NM | |
| | Net income applicable to common shares | Net income applicable to common shares | $ | 565 | | | | $ | 333 | | | $ | 232 | | | 70 | % | Net income applicable to common shares | $ | 519 | | | | $ | 511 | | | $ | 8 | | | 2 | % |
| | Average common shares—basic | Average common shares—basic | 1,443 | | | | 1,463 | | | (20) | | | (1) | % | Average common shares—basic | 1,446 | | | | 1,441 | | | 5 | | | — | % |
| Average common shares—diluted | Average common shares—diluted | 1,465 | | | | 1,487 | | | (22) | | | (1) | | Average common shares—diluted | 1,466 | | | | 1,463 | | | 3 | | | — | |
| Net income per common share—basic | Net income per common share—basic | $ | 0.39 | | | | $ | 0.23 | | | $ | 0.16 | | | 70 | | Net income per common share—basic | $ | 0.36 | | | | $ | 0.35 | | | $ | 0.01 | | | 3 | |
| Net income per common share—diluted | Net income per common share—diluted | 0.39 | | | | 0.22 | | | 0.17 | | | 77 | | Net income per common share—diluted | 0.35 | | | | 0.35 | | | — | | | — | |
| Return on average total assets | Return on average total assets | 1.31 | % | | | 0.86 | % | | Return on average total assets | 1.18 | % | | | 1.22 | % | |
| Return on average common shareholders’ equity | Return on average common shareholders’ equity | 13.9 | | | | 7.6 | | | Return on average common shareholders’ equity | 12.7 | | | | 12.8 | | |
| Return on average tangible common shareholders’ equity (1) | Return on average tangible common shareholders’ equity (1) | 21.9 | | | | 11.5 | | | Return on average tangible common shareholders’ equity (1) | 19.9 | | | | 19.9 | | |
| Net interest margin (2) | Net interest margin (2) | 3.42 | | | | 2.91 | | | Net interest margin (2) | 3.11 | | | | 3.15 | | |
| Efficiency ratio (3) | Efficiency ratio (3) | 54.4 | | | | 74.9 | | | Efficiency ratio (3) | 55.9 | | | | 57.3 | | |
| Effective tax rate | 19.7 | | | | 19.0 | | | |
| | | Revenue and Net Interest Income—FTE (non-GAAP) | Revenue and Net Interest Income—FTE (non-GAAP) | | | | Revenue and Net Interest Income—FTE (non-GAAP) | | | |
| Net interest income | Net interest income | $ | 1,404 | | | | $ | 1,160 | | | $ | 244 | | | 21 | % | Net interest income | $ | 1,346 | | | | $ | 1,261 | | | $ | 85 | | | 7 | % |
| FTE adjustment | 8 | | | | 7 | | | 1 | | | 14 | | |
| FTE adjustment (2) | | FTE adjustment (2) | 11 | | | | 6 | | | 5 | | | 83 | |
| Net interest income, FTE (non-GAAP) (2) | Net interest income, FTE (non-GAAP) (2) | 1,412 | | | | 1,167 | | | 245 | | | 21 | | Net interest income, FTE (non-GAAP) (2) | 1,357 | | | | 1,267 | | | 90 | | | 7 | |
| Noninterest income | Noninterest income | 498 | | | | 535 | | | (37) | | | (7) | | Noninterest income | 495 | | | | 485 | | | 10 | | | 2 | |
| Total revenue, FTE (non-GAAP) (2) | Total revenue, FTE (non-GAAP) (2) | $ | 1,910 | | | | $ | 1,702 | | | $ | 208 | | | 12 | % | 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 and goodwill impairment divided by the sum of FTE net interest income and noninterest income excluding securities gains.
810 Huntington Bancshares Incorporated
| | | Table 2 - Selected Year to Date Income Statement Data | Table 2 - Selected Year to Date Income Statement Data | Table 2 - Selected Year to Date Income Statement Data |
| | | | Nine Months Ended September 30, | | Change | | Six months ended June 30, | | Change |
| (amounts in millions, except per share data) | (amounts in millions, except per share data) | 2022 | | 2021 | | Amount | | Percent | (amounts in millions, except per share data) | 2023 | | 2022 | | Amount | | Percent |
| Interest income | Interest income | $ | 4,115 | | | $ | 3,009 | | | $ | 1,106 | | | 37 | % | Interest income | $ | 4,253 | | | $ | 2,526 | | | $ | 1,727 | | | 68 | % |
| Interest expense | Interest expense | 304 | | | 39 | | | 265 | | | NM | Interest expense | 1,498 | | | 119 | | | 1,379 | | | NM |
| Net interest income | Net interest income | 3,811 | | | 2,970 | | | 841 | | | 28 | | Net interest income | 2,755 | | | 2,407 | | | 348 | | | 14 | |
| Provision for credit losses | Provision for credit losses | 198 | | | 89 | | | 109 | | | 122 | | Provision for credit losses | 177 | | | 92 | | | 85 | | | 92 | |
| Net interest income after provision for credit losses | Net interest income after provision for credit losses | 3,613 | | | 2,881 | | | 732 | | | 25 | | Net interest income after provision for credit losses | 2,578 | | | 2,315 | | | 263 | | | 11 | |
| Service charges on deposit accounts | Service charges on deposit accounts | 295 | | | 271 | | | 24 | | | 9 | | Service charges on deposit accounts | 170 | | | 202 | | | (32) | | | (16) | |
| Card and payment processing income | Card and payment processing income | 278 | | | 241 | | | 37 | | | 15 | | Card and payment processing income | 195 | | | 182 | | | 13 | | | 7 | |
| Capital markets fees | | Capital markets fees | 116 | | | 96 | | | 20 | | | 21 | |
| Trust and investment management services | | Trust and investment management services | 130 | | | 128 | | | 2 | | | 2 | |
| Mortgage banking income | Mortgage banking income | 119 | | | 248 | | | (129) | | | (52) | | Mortgage banking income | 59 | | | 93 | | | (34) | | | (37) | |
| Trust and investment management services | 188 | | | 169 | | | 19 | | | 11 | | |
| Capital markets fees | 169 | | | 104 | | | 65 | | | 63 | | |
| Leasing revenue | | Leasing revenue | 51 | | | 62 | | | (11) | | | (18) | |
| Insurance income | Insurance income | 86 | | | 77 | | | 9 | | | 12 | | Insurance income | 64 | | | 58 | | | 6 | | | 10 | |
| Leasing revenue | 91 | | | 58 | | | 33 | | | 57 | | |
| Gain on sale of loans | | Gain on sale of loans | 11 | | | 40 | | | (29) | | | (73) | |
| Bank owned life insurance income | Bank owned life insurance income | 41 | | | 47 | | | (6) | | | (13) | | Bank owned life insurance income | 32 | | | 28 | | | 4 | | | 14 | |
| Gain on sale of loans | 55 | | | 8 | | | 47 | | | NM | |
| Net gains on sales of securities | — | | | 10 | | | (10) | | | NM | |
| Net (losses) gains on sales of securities | | Net (losses) gains on sales of securities | (4) | | | — | | | (4) | | | NM |
| Other noninterest income | Other noninterest income | 160 | | | 141 | | | 19 | | | 13 | | Other noninterest income | 183 | | | 95 | | | 88 | | | 93 | |
| Total noninterest income | Total noninterest income | 1,482 | | | 1,374 | | | 108 | | | 8 | | Total noninterest income | 1,007 | | | 984 | | | 23 | | | 2 | |
| Personnel costs | Personnel costs | 1,771 | | | 1,703 | | | 68 | | | 4 | | Personnel costs | 1,262 | | | 1,157 | | | 105 | | | 9 | |
| Outside data processing and other services | Outside data processing and other services | 463 | | | 581 | | | (118) | | | (20) | | Outside data processing and other services | 299 | | | 318 | | | (19) | | | (6) | |
| Equipment | | Equipment | 128 | | | 142 | | | (14) | | | (10) | |
| Net occupancy | Net occupancy | 185 | | | 209 | | | (24) | | | (11) | | Net occupancy | 114 | | | 122 | | | (8) | | | (7) | |
| Equipment | 202 | | | 180 | | | 22 | | | 12 | | |
| Marketing | | Marketing | 57 | | | 45 | | | 12 | | | 27 | |
| Professional services | Professional services | 56 | | | 91 | | | (35) | | | (38) | | Professional services | 37 | | | 38 | | | (1) | | | (3) | |
| Marketing | 69 | | | 54 | | | 15 | | | 28 | | |
| Deposit and other insurance expense | Deposit and other insurance expense | 53 | | | 33 | | | 20 | | | 61 | | Deposit and other insurance expense | 43 | | | 38 | | | 5 | | | 13 | |
| Amortization of intangibles | Amortization of intangibles | 40 | | | 34 | | | 6 | | | 18 | | Amortization of intangibles | 26 | | | 27 | | | (1) | | | (4) | |
| Lease financing equipment depreciation | Lease financing equipment depreciation | 36 | | | 24 | | | 12 | | | 50 | | Lease financing equipment depreciation | 16 | | | 25 | | | (9) | | | (36) | |
| Other noninterest expense | Other noninterest expense | 249 | | | 245 | | | 4 | | | 2 | | Other noninterest expense | 154 | | | 159 | | | (5) | | | (3) | |
| Total noninterest expense | Total noninterest expense | 3,124 | | | 3,154 | | | (30) | | | (1) | | Total noninterest expense | 2,136 | | | 2,071 | | | 65 | | | 3 | |
| Income before income taxes | Income before income taxes | 1,971 | | | 1,101 | | | 870 | | | 79 | | Income before income taxes | 1,449 | | | 1,228 | | | 221 | | | 18 | |
| Provision for income taxes | Provision for income taxes | 371 | | | 206 | | | 165 | | | 80 | | Provision for income taxes | 278 | | | 225 | | | 53 | | | 24 | |
| Income after income taxes | Income after income taxes | 1,600 | | | 895 | | | 705 | | | 79 | | Income after income taxes | 1,171 | | | 1,003 | | | 168 | | | 17 | |
| Income attributable to non-controlling interest | Income attributable to non-controlling interest | 7 | | | 1 | | | 6 | | | NM | Income attributable to non-controlling interest | 10 | | | 4 | | | 6 | | | 150 | |
| Net income attributable to Huntington Bancshares Inc | 1,593 | | | 894 | | | 699 | | | 78 | | |
| Net income attributable to Huntington | | Net income attributable to Huntington | 1,161 | | | 999 | | | 162 | | | 16 | |
| Dividends on preferred shares | Dividends on preferred shares | 85 | | | 103 | | | (18) | | | (17) | | Dividends on preferred shares | 69 | | | 56 | | | 13 | | | 23 | |
| Impact of preferred stock redemption | — | | | 15 | | | (15) | | | NM | |
| | Net income applicable to common shares | Net income applicable to common shares | $ | 1,508 | | | $ | 776 | | | $ | 732 | | | 94 | % | Net income applicable to common shares | $ | 1,092 | | | $ | 943 | | | $ | 149 | | | 16 | % |
| | Average common shares—basic | Average common shares—basic | 1,441 | | | 1,202 | | | 239 | | | 20 | % | Average common shares—basic | 1,445 | | | 1,440 | | | 5 | | | — | % |
| Average common shares—diluted | Average common shares—diluted | 1,464 | | | 1,225 | | | 239 | | | 20 | | Average common shares—diluted | 1,468 | | | 1,464 | | | 4 | | | — | |
| Net income per common share—basic | Net income per common share—basic | $ | 1.05 | | | $ | 0.65 | | | $ | 0.40 | | | 62 | | Net income per common share—basic | $ | 0.76 | | | $ | 0.65 | | | $ | 0.11 | | | 17 | |
| Net income per common share—diluted | Net income per common share—diluted | 1.03 | | | 0.63 | | | 0.40 | | | 63 | | Net income per common share—diluted | 0.74 | | | 0.64 | | | 0.10 | | | 16 | |
| | | Revenue and Net Interest Income—FTE (Non-GAAP) | Revenue and Net Interest Income—FTE (Non-GAAP) | | Revenue and Net Interest Income—FTE (Non-GAAP) | |
| Net interest income | Net interest income | $ | 3,811 | | | $ | 2,970 | | | $ | 841 | | | 28 | % | Net interest income | $ | 2,755 | | | $ | 2,407 | | | $ | 348 | | | 14 | % |
| FTE adjustment | FTE adjustment | 22 | | | 19 | | | 3 | | | 16 | | FTE adjustment | 20 | | | 14 | | | 6 | | | 43 | |
| Net interest income, FTE (non-GAAP) (1) | Net interest income, FTE (non-GAAP) (1) | 3,833 | | | 2,989 | | | 844 | | | 28 | | Net interest income, FTE (non-GAAP) (1) | 2,775 | | | 2,421 | | | 354 | | | 15 | |
| Noninterest income | Noninterest income | 1,482 | | | 1,374 | | | 108 | | | 8 | | Noninterest income | 1,007 | | | 984 | | | 23 | | | 2 | |
| Total revenue, FTE (non-GAAP) (1) | Total revenue, FTE (non-GAAP) (1) | $ | 5,315 | | | $ | 4,363 | | | $ | 952 | | | 22 | % | Total revenue, FTE (non-GAAP) (1) | $ | 3,782 | | | $ | 3,405 | | | $ | 377 | | | 11 | % |
(1)On an FTE basis assuming a 21% tax rate.
2022 3Q2023 2Q Form 10-Q 911
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 | Table 3 - Consolidated Quarterly Average Balance Sheet and Net Interest Margin | | Table 3 - Consolidated Quarterly Average Balance Sheet and Net Interest Margin | |
| | | Three Months Ended | | | |
| | September 30, 2022 | | September 30, 2021 | | Change in | | | Three months ended June 30, 2023 | | Three months ended June 30, 2022 | | Change in | |
| | Average | | Interest | | Yield/ | | Average | | Interest | | Yield/ | | Average Balances | | | Average | | Interest | | Yield/ | | Average | | Interest | | Yield/ | | Average Balances | |
| (dollar amounts in millions) | (dollar amounts in millions) | Balances | | Income (FTE) (1) | | Rate (2) | | Balances | | Income (FTE) (1) | | Rate (2) | | Amount | | Percent | | (dollar amounts in millions) | Balances | | Income (FTE) (2) | | Rate (3) | | Balances | | Income (FTE) (2) | | Rate (3) | | Amount | | Percent | |
| Assets: | Assets: | | | | | | | | | | | | | | | | | Assets: | | | | | | | | | | | | | | | | |
| Interest-bearing deposits at Federal Reserve Bank | Interest-bearing deposits at Federal Reserve Bank | $ | 3,204 | | | $ | 19 | | | 2.39 | % | | $ | 11,536 | | | $ | 4 | | | 0.17 | % | | $ | (8,332) | | | (72) | % | | Interest-bearing deposits at Federal Reserve Bank | $ | 11,052 | | | $ | 141 | | | 5.12 | % | | $ | 3,532 | | | $ | 7 | | | 0.80 | % | | $ | 7,520 | | | NM | |
| Interest-bearing deposits in banks | Interest-bearing deposits in banks | 260 | | | 2 | | | 3.31 | | | 466 | | | 1 | | | 0.04 | | | (206) | | | (44) | | | Interest-bearing deposits in banks | 229 | | | 5 | | | 7.79 | | | 161 | | | 1 | | | 1.32 | | | 68 | | | 42 | | |
| Securities: | Securities: | | | Securities: | | |
| Trading account securities | Trading account securities | 24 | | | — | | | 4.12 | | | 49 | | | — | | | 2.98 | | | (25) | | | (51) | | | Trading account securities | 34 | | | 1 | | | 4.92 | | | 30 | | | 1 | | | 3.99 | | | 4 | | | 13 | | |
| Available-for-sale securities: | Available-for-sale securities: | | | Available-for-sale securities: | | |
| Taxable | Taxable | 21,677 | | | 165 | | | 3.06 | | | 20,147 | | | 68 | | | 1.34 | | | 1,530 | | | 8 | | | Taxable | 20,920 | | | 252 | | | 4.82 | | | 21,672 | | | 123 | | | 2.25 | | | (752) | | | (3) | | |
| Tax-exempt | Tax-exempt | 2,917 | | | 25 | | | 3.39 | | | 3,116 | | | 18 | | | 2.37 | | | (199) | | | (6) | | | Tax-exempt | 2,745 | | | 33 | | | 4.87 | | | 2,859 | | | 19 | | | 2.71 | | | (114) | | | (4) | | |
| Total available-for-sale securities | Total available-for-sale securities | 24,594 | | | 190 | | | 3.09 | | | 23,263 | | | 86 | | | 1.48 | | | 1,331 | | | 6 | | | Total available-for-sale securities | 23,665 | | | 285 | | | 4.83 | | | 24,531 | | | 142 | | | 2.30 | | | (866) | | | (4) | | |
| Held-to-maturity securities—taxable | Held-to-maturity securities—taxable | 17,188 | | | 95 | | | 2.21 | | | 11,964 | | | 47 | | | 1.58 | | | 5,224 | | | 44 | | | Held-to-maturity securities—taxable | 16,762 | | | 102 | | | 2.42 | | | 17,234 | | | 90 | | | 2.10 | | | (472) | | | (3) | | |
| | Other securities | Other securities | 804 | | | 7 | | | 3.21 | | | 677 | | | 2 | | | 1.43 | | | 127 | | | 19 | | | Other securities | 1,263 | | | 11 | | | 3.47 | | | 755 | | | 6 | | | 3.62 | | | 508 | | | 67 | | |
| Total securities | Total securities | 42,610 | | | 292 | | | 2.74 | | | 35,953 | | | 135 | | | 1.52 | | | 6,657 | | | 19 | | | Total securities | 41,724 | | | 399 | | | 3.82 | | | 42,550 | | | 239 | | | 2.24 | | | (826) | | | (2) | | |
| Loans held for sale | Loans held for sale | 986 | | | 13 | | | 4.98 | | | 1,525 | | | 13 | | | 3.23 | | | (539) | | | (35) | | | Loans held for sale | 559 | | | 8 | | | 6.05 | | | 1,033 | | | 10 | | | 4.08 | | | (474) | | | (46) | | |
Loans and leases: (3)(4) | Loans and leases: (3)(4) | | | Loans and leases: (3)(4) | | |
| Commercial: | Commercial: | | | Commercial: | | |
| Commercial and industrial | Commercial and industrial | 43,598 | | | 490 | | | 4.40 | | | 40,597 | | | 419 | | | 4.04 | | | 3,001 | | | 7 | | | Commercial and industrial | 50,194 | | | 746 | | | 5.87 | | | 44,763 | | | 427 | | | 3.78 | | | 5,431 | | | 12 | | |
| | Commercial real estate | Commercial real estate | 16,102 | | | 190 | | | 4.61 | | | 14,694 | | | 122 | | | 3.23 | | | 1,408 | | | 10 | | | Commercial real estate | 13,342 | | | 243 | | | 7.22 | | | 13,202 | | | 119 | | | 3.56 | | | 140 | | | 1 | | |
| Lease financing | Lease financing | 4,981 | | | 63 | | | 4.95 | | | 4,983 | | | 61 | | | 4.84 | | | (2) | | | — | | | Lease financing | 5,155 | | | 71 | | | 5.45 | | | 4,919 | | | 61 | | | 4.98 | | | 236 | | | 5 | | |
| Total commercial | Total commercial | 64,681 | | | 743 | | | 4.50 | | | 60,274 | | | 602 | | | 3.91 | | | 4,407 | | | 7 | | | Total commercial | 68,691 | | | 1,060 | | | 6.10 | | | 62,884 | | | 607 | | | 3.83 | | | 5,807 | | | 9 | | |
| Consumer: | Consumer: | | | | | | | | | | | | | | | | | Consumer: | | |
| Residential mortgage | Residential mortgage | 21,552 | | | 174 | | | 3.23 | | | 18,886 | | | 139 | | | 2.95 | | | 2,666 | | | 14 | | | Residential mortgage | 22,765 | | | 200 | | | 3.51 | | | 20,527 | | | 158 | | | 3.09 | | | 2,238 | | | 11 | | |
| Automobile | Automobile | 13,514 | | | 120 | | | 3.53 | | | 13,209 | | | 121 | | | 3.62 | | | 305 | | | 2 | | | Automobile | 12,927 | | | 134 | | | 4.17 | | | 13,557 | | | 115 | | | 3.40 | | | (630) | | | (5) | | |
| Home equity | Home equity | 10,431 | | | 143 | | | 5.43 | | | 11,106 | | | 113 | | | 4.03 | | | (675) | | | (6) | | | Home equity | 10,154 | | | 187 | | | 7.42 | | | 10,373 | | | 115 | | | 4.44 | | | (219) | | | (2) | | |
| RV and marine | RV and marine | 5,454 | | | 59 | | | 4.29 | | | 4,998 | | | 55 | | | 4.33 | | | 456 | | | 9 | | | RV and marine | 5,478 | | | 63 | | | 4.59 | | | 5,317 | | | 55 | | | 4.12 | | | 161 | | | 3 | | |
| Other consumer | Other consumer | 1,332 | | | 32 | | | 9.55 | | | 1,195 | | | 29 | | | 9.72 | | | 137 | | | 11 | | | Other consumer | 1,330 | | | 39 | | | 11.59 | | | 1,291 | | | 30 | | | 9.08 | | | 39 | | | 3 | | |
| Total consumer | Total consumer | 52,283 | | | 528 | | | 4.02 | | | 49,394 | | | 457 | | | 3.67 | | | 2,889 | | | 6 | | | Total consumer | 52,654 | | | 623 | | | 4.74 | | | 51,065 | | | 473 | | | 3.70 | | | 1,589 | | | 3 | | |
| Total loans and leases | Total loans and leases | 116,964 | | | 1,271 | | | 4.28 | | | 109,668 | | | 1,059 | | | 3.80 | | | 7,296 | | | 7 | | | Total loans and leases | 121,345 | | | 1,683 | | | 5.51 | | | 113,949 | | | 1,080 | | | 3.77 | | | 7,396 | | | 6 | | |
| Allowance for loan and lease losses | (2,099) | | | | | | | (2,219) | | | | | | | 120 | | | 5 | | | |
| Net loans and leases | 114,865 | | | 107,449 | | | 7,416 | | | 7 | | | |
| Total earning assets | Total earning assets | 164,024 | | | 1,597 | | | 3.86 | | | 159,148 | | | 1,212 | | | 3.02 | | | 4,876 | | | 3 | | | Total earning assets | 174,909 | | | 2,236 | | | 5.13 | | | 161,225 | | | 1,337 | | | 3.33 | | | 13,684 | | | 8 | | |
| Cash and due from banks | Cash and due from banks | 1,697 | | | | | | | 1,535 | | | | | | | 162 | | | 11 | | | Cash and due from banks | 1,639 | | | 1,669 | | | (30) | | | (2) | | |
| Goodwill and other intangible assets | Goodwill and other intangible assets | 5,781 | | | 5,578 | | | 203 | | | 4 | | | Goodwill and other intangible assets | 5,734 | | | 5,613 | | | 121 | | | 2 | | |
| All other assets | All other assets | 10,154 | | | 9,791 | | | 363 | | | 4 | | | All other assets | 10,638 | | | 10,107 | | | 531 | | | 5 | | |
| Allowance for loan and lease losses | | Allowance for loan and lease losses | (2,174) | | | (2,053) | | | (121) | | | (6) | | |
| Total assets | Total assets | $ | 179,557 | | | $ | 173,833 | | | $ | 5,724 | | | 3 | % | | Total assets | $ | 190,746 | | | $ | 176,561 | | | $ | 14,185 | | | 8 | % | |
| Liabilities and Shareholders’ Equity: | | | | | | | | | |
| Liabilities and shareholders’ equity: | | Liabilities and shareholders’ equity: | | | | | | | | |
| Interest-bearing deposits: | Interest-bearing deposits: | | | Interest-bearing deposits: | | |
| Demand deposits—interest-bearing | Demand deposits—interest-bearing | $ | 42,038 | | | $ | 42 | | | 0.40 | % | | $ | 35,690 | | | $ | 3 | | | 0.04 | % | | $ | 6,348 | | | 18 | % | | Demand deposits—interest-bearing | $ | 39,772 | | | $ | 167 | | | 1.68 | % | | $ | 41,712 | | | $ | 11 | | | 0.10 | % | | $ | (1,940) | | | (5) | % | |
| Money market deposits | Money market deposits | 34,058 | | | 25 | | | 0.29 | | | 33,281 | | | 7 | | | 0.08 | | | 777 | | | 2 | | | Money market deposits | 38,753 | | | 255 | | | 2.64 | | | 33,791 | | | 8 | | | 0.09 | | | 4,962 | | | 15 | | |
| Savings and other domestic deposits | Savings and other domestic deposits | 21,439 | | | 1 | | | 0.02 | | | 20,931 | | | 1 | | | 0.03 | | | 508 | | | 2 | | | Savings and other domestic deposits | 18,826 | | | 6 | | | 0.11 | | | 21,683 | | | 1 | | | 0.02 | | | (2,857) | | | (13) | | |
| Core certificates of deposit (4) | 2,040 | | | 1 | | | 0.10 | | | 3,319 | | | (2) | | | (0.23) | | | (1,279) | | | (39) | | | |
| Core certificates of deposit (5) | | Core certificates of deposit (5) | 8,820 | | | 83 | | | 3.78 | | | 2,228 | | | — | | | 0.07 | | | 6,592 | | | NM | |
| Other domestic deposits of $250,000 or more | Other domestic deposits of $250,000 or more | 193 | | | — | | | 0.35 | | | 582 | | | 1 | | | 0.21 | | | (389) | | | (67) | | | Other domestic deposits of $250,000 or more | 320 | | | 2 | | | 3.27 | | | 225 | | | — | | | 0.23 | | | 95 | | | 42 | | |
| Negotiable CDs, brokered and other deposits | Negotiable CDs, brokered and other deposits | 4,124 | | | 23 | | | 2.25 | | | 3,905 | | | 1 | | | 0.15 | | | 219 | | | 6 | | | Negotiable CDs, brokered and other deposits | 4,502 | | | 57 | | | 5.07 | | | 2,981 | | | 5 | | | 0.72 | | | 1,521 | | | 51 | | |
| | Total interest-bearing deposits | Total interest-bearing deposits | 103,892 | | | 92 | | | 0.35 | | | 97,708 | | | 11 | | | 0.05 | | | 6,184 | | | 6 | | | Total interest-bearing deposits | 110,993 | | | 570 | | | 2.06 | | | 102,620 | | | 25 | | | 0.10 | | | 8,373 | | | 8 | | |
| Short-term borrowings | Short-term borrowings | 2,609 | | | 22 | | | 3.31 | | | 317 | | | — | | | 0.14 | | | 2,292 | | | NM | | Short-term borrowings | 5,242 | | | 74 | | | 5.70 | | | 2,103 | | | 7 | | | 1.40 | | | 3,139 | | | 149 | | |
| Long-term debt | Long-term debt | 8,251 | | | 71 | | | 3.40 | | | 7,587 | | | 34 | | | 1.81 | | | 664 | | | 9 | | | Long-term debt | 16,252 | | | 235 | | | 5.79 | | | 7,024 | | | 38 | | | 2.16 | | | 9,228 | | | 131 | | |
| Total interest-bearing liabilities | Total interest-bearing liabilities | 114,752 | | | 185 | | | 0.64 | | | 105,612 | | | 45 | | | 0.17 | | | 9,140 | | | 9 | | | Total interest-bearing liabilities | 132,487 | | | 879 | | | 2.66 | | | 111,747 | | | 70 | | | 0.25 | | | 20,740 | | | 19 | | |
| Demand deposits—noninterest-bearing | Demand deposits—noninterest-bearing | 42,116 | | | | | | | 44,595 | | | | | | | (2,479) | | | (6) | | | Demand deposits—noninterest-bearing | 34,566 | | | | | | | 42,388 | | | | | | | (7,822) | | | (18) | | |
| All other liabilities | All other liabilities | 4,340 | | | 3,823 | | | 517 | | | 14 | | | All other liabilities | 4,796 | | | 4,168 | | | 628 | | | 15 | | |
| Total Huntington Bancshares Inc shareholders’ equity | 18,317 | | | 19,783 | | | (1,466) | | | (7) | | | |
| Total liabilities | | Total liabilities | 171,849 | | | 158,303 | | | 13,546 | | | 9 | | |
| Total Huntington shareholders’ equity | | Total Huntington shareholders’ equity | 18,844 | | | 18,228 | | | 616 | | | 3 | | |
| Non-controlling interest | Non-controlling interest | 32 | | | 20 | | | 12 | | | 60 | | | Non-controlling interest | 53 | | | 30 | | | 23 | | | 77 | | |
| Total equity | Total equity | 18,349 | | | 19,803 | | | (1,454) | | | (7) | | | Total equity | 18,897 | | | 18,258 | | | 639 | | | 3 | | |
| Total liabilities and shareholders’ equity | $ | 179,557 | | | $ | 173,833 | | | $ | 5,724 | | | 3 | % | | |
| Total liabilities and equity | | Total liabilities and equity | $ | 190,746 | | | $ | 176,561 | | | $ | 14,185 | | | 8 | % | |
| Net interest rate spread | Net interest rate spread | | | 3.22 | | | | | 2.85 | | | | | | | Net interest rate spread | | | 2.47 | | | | | 3.08 | | | | | | |
| Impact of noninterest-bearing funds on margin | Impact of noninterest-bearing funds on margin | | 0.20 | | | 0.06 | | | | Impact of noninterest-bearing funds on margin | | 0.64 | | | 0.07 | | | |
| Net interest margin/NII (FTE) | Net interest margin/NII (FTE) | | $ | 1,412 | | | 3.42 | % | | $ | 1,167 | | | 2.91 | % | | | Net interest margin/NII (FTE) | | $ | 1,357 | | | 3.11 | % | | $ | 1,267 | | | 3.15 | % | | |
(1)During the 2023 second quarter, the process for assessing and monitoring the risk and performance of non-real estate secured commercial loans was revised, primarily loans to REITs. These loans were reclassified from CRE to the C&I loan category to align reporting with this process revision. All prior period results have been adjusted to conform to the current presentation.
(2)FTE yields are calculated assuming a 21% tax rate.
(3)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.
(4)For purposes of this analysis, NALs are reflected in the average balances of loans and leases.
(5)Includes consumer certificates of deposit of $250,000 or more.
12 Huntington Bancshares Incorporated
Quarterly Net Interest Income
Net interest income for the 2023 second quarter increased $85 million, or 7%, from the 2022 second quarter. FTE net interest income, a non-GAAP financial measure, for the 2023 second quarter increased $90 million, or 7%, from the 2022 second 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. The NIM compression was driven by higher cost of funds and the impact from higher cash balances, partially offset by the higher rate environment driving an increase in loan and lease and investment security yields.
Average Balance Sheet
Average assets for the 2023 second quarter increased $14.2 billion, or 8%, to $190.7 billion from the 2022 second quarter, primarily due to an increase in average interest-bearing deposits at the Federal Reserve Bank of $7.5 billion, and average loans and leases of $7.4 billion, or 6%, partially offset by a decrease in average total securities of $826 million, or 2%. The increase in average loans and leases was driven by growth in average commercial loans and leases of $5.8 billion, or 9%, and average consumer loans of $1.6 billion, or 3%.
Average liabilities for the 2023 second quarter increased $13.5 billion, or 9%, from the 2022 second quarter, primarily due to increases in average borrowings and deposits. Average borrowings increased $12.4 billion, or 135%, driven by long and short-term FHLB borrowings and new debt issuances reflecting actions taken as part of normal management of funding needs. Average deposits increased $551 million, primarily due to an increase in average interest-bearing deposits of $8.4 billion, or 8%, largely due to increases in average certificate of deposits and money market deposits, partially offset by a decrease in noninterest-bearing deposits of $7.8 billion, or 18%.
Average shareholders’ equity for the 2023 second quarter increased $616 million, or 3%, from the 2022 second quarter primarily due to earnings, partially offset by an increase in average accumulated other comprehensive loss driven by changes in interest rates.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Table 4 - Consolidated YTD Average Balance Sheets and Net Interest Margin (1) | | | | |
| | Six months ended | | | | | | | | |
| June 30, 2023 | | June 30, 2022 | | Change in | | |
| Average | | Interest | | Yield/ | | Average | | Interest | | Yield/ | | Average Balances | | |
| (dollar amounts in millions) | Balances | | Income (FTE) (2) | | Rate (2) | | Balances | | Income (FTE) (2) | | Rate (3) | | Amount | | Percent | | | | |
| Assets: | | | | | | | | | | | | | | | | | | | |
| Interest-bearing deposits at Federal Reserve Bank | $ | 8,590 | | | $ | 212 | | | 4.95 | % | | $ | 5,354 | | | $ | 10 | | | 0.38 | % | | $ | 3,236 | | | 60 | % | | | | |
| Interest-bearing deposits in banks | 239 | | | 10 | | | 8.16 | | | 168 | | | 1 | | | 0.71 | | | 71 | | | 42 | | | | | |
| Securities: | | | | | | | | | | | | | | | | | | | |
| Trading account securities | 27 | | | 1 | | | 5.09 | | | 38 | | | 1 | | | 3.63 | | | (11) | | | (29) | | | | | |
| Available-for-sale securities: | | | | | | | | | | | | | | | | | | | |
| Taxable | 21,143 | | | 484 | | | 4.58 | | | 22,931 | | | 213 | | | 1.85 | | | (1,788) | | | (8) | | | | | |
| Tax-exempt | 2,693 | | | 62 | | | 4.64 | | | 2,873 | | | 41 | | | 2.86 | | | (180) | | | (6) | | | | | |
| Total available-for-sale securities | 23,836 | | | 546 | | | 4.59 | | | 25,804 | | | 254 | | | 1.96 | | | (1,968) | | | (8) | | | | | |
| Held-to-maturity securities—taxable | 16,869 | | | 204 | | | 2.42 | | | 15,902 | | | 156 | | | 1.97 | | | 967 | | | 6 | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Other securities | 1,075 | | | 21 | | | 3.83 | | | 860 | | | 11 | | | 2.64 | | | 215 | | | 25 | | | | | |
| Total securities | 41,807 | | | 772 | | | 3.69 | | | 42,604 | | | 422 | | | 1.98 | | | (797) | | | (2) | | | | | |
| Loans held for sale | 505 | | | 15 | | | 5.96 | | | 1,137 | | | 20 | | | 3.58 | | | (632) | | | (56) | | | | | |
| Loans and leases: (4) | | | | | | | | | | | | | | | | | | | |
| Commercial: | | | | | | | | | | | | | | | | | | | |
| Commercial and industrial | 49,615 | | | 1,432 | | | 5.74 | | | 43,937 | | | 828 | | | 3.75 | | | 5,678 | | | 13 | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Commercial real estate | 13,511 | | | 476 | | | 7.01 | | | 13,280 | | | 224 | | | 3.35 | | | 231 | | | 2 | | | | | |
| Lease financing | 5,181 | | | 139 | | | 5.35 | | | 4,915 | | | 122 | | | 4.95 | | | 266 | | | 5 | | | | | |
| Total commercial | 68,307 | | | 2,047 | | | 5.96 | | | 62,132 | | | 1,174 | | | 3.76 | | | 6,175 | | | 10 | | | | | |
| Consumer: | | | | | | | | | | | | | | | | | | | |
| Residential mortgage | 22,547 | | | 390 | | | 3.46 | | | 20,019 | | | 304 | | | 3.04 | | | 2,528 | | | 13 | | | | | |
| Automobile | 13,085 | | | 263 | | | 4.05 | | | 13,510 | | | 227 | | | 3.39 | | | (425) | | | (3) | | | | | |
| Home equity | 10,206 | | | 368 | | | 7.28 | | | 10,394 | | | 217 | | | 4.21 | | | (188) | | | (2) | | | | | |
| RV and marine | 5,422 | | | 121 | | | 4.51 | | | 5,210 | | | 107 | | | 4.14 | | | 212 | | | 4 | | | | | |
| Other consumer | 1,318 | | | 75 | | | 11.39 | | | 1,288 | | | 58 | | | 9.02 | | | 30 | | | 2 | | | | | |
| Total consumer | 52,578 | | | 1,217 | | | 4.66 | | | 50,421 | | | 913 | | | 3.64 | | | 2,157 | | | 4 | | | | | |
| Total loans and leases | 120,885 | | | 3,264 | | | 5.39 | | | 112,553 | | | 2,087 | | | 3.71 | | | 8,332 | | | 7 | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Total earning assets | 172,026 | | | 4,273 | | | 5.01 | | | 161,816 | | | 2,540 | | | 3.17 | | | 10,210 | | | 6 | | | | | |
| Cash and due from banks | 1,619 | | | | | | | 1,659 | | | | | | | (40) | | | (2) | | | | | |
| Goodwill and other intangible assets | 5,747 | | | | | | | 5,598 | | | | | | | 149 | | | 3 | | | | | |
| All other assets | 10,602 | | | | | | | 10,061 | | | | | | | 541 | | | 5 | | | | | |
| Allowance for loan and lease losses | (2,158) | | | | | | | (2,050) | | | | | | | (108) | | | (5) | | | | | |
| Total assets | $ | 187,836 | | | | | | | $ | 177,084 | | | | | | | $ | 10,752 | | | 6 | % | | | | |
| Liabilities and Shareholders’ Equity: | | | | | | | | | | | | | | | | | | | |
| Interest-bearing deposits: | | | | | | | | | | | | | | | | | | | |
| Demand deposits—interest-bearing | $ | 40,211 | | | $ | 299 | | | 1.50 | % | | $ | 41,176 | | | $ | 14 | | | 0.07 | % | | $ | (965) | | | (2) | % | | | | |
| Money market deposits | 38,031 | | | 427 | | | 2.27 | | | 33,235 | | | 12 | | | 0.07 | | | 4,796 | | | 14 | | | | | |
| Savings and other domestic deposits | 19,348 | | | 9 | | | 0.09 | | | 21,501 | | | 2 | | | 0.02 | | | (2,153) | | | (10) | | | | | |
| Core certificates of deposit (5) | 7,292 | | | 126 | | | 3.48 | | | 2,393 | | | 1 | | | 0.10 | | | 4,899 | | | NM | | | | |
| Other domestic deposits of $250,000 or more | 286 | | | 4 | | | 2.91 | | | 270 | | | — | | | 0.19 | | | 16 | | | 6 | | | | | |
| Negotiable CDs, brokered and other deposits | 4,659 | | | 111 | | | 4.81 | | | 3,216 | | | 7 | | | 0.42 | | | 1,443 | | | 45 | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Total interest-bearing deposits | 109,827 | | | 976 | | | 1.79 | | | 101,791 | | | 36 | | | 0.07 | | | 8,036 | | | 8 | | | | | |
| Short-term borrowings | 4,809 | | | 134 | | | 5.64 | | | 3,408 | | | 14 | | | 0.83 | | | 1,401 | | | 41 | | | | | |
| Long-term debt | 13,664 | | | 388 | | | 5.67 | | | 6,969 | | | 69 | | | 1.99 | | | 6,695 | | | 96 | | | | | |
| Total interest-bearing liabilities | 128,300 | | | 1,498 | | | 2.35 | | | 112,168 | | | 119 | | | 0.21 | | | 16,132 | | | 14 | | | | | |
| Demand deposits—noninterest-bearing | 36,023 | | | | | | | 42,177 | | | | | | | (6,154) | | | (15) | | | | | |
| All other liabilities | 4,925 | | | | | | | 4,068 | | | | | | | 857 | | | 21 | | | | | |
| Total liabilities | 169,248 | | | | | | | 158,413 | | | | | | | 10,835 | | | 7 | | | | | |
| Total Huntington shareholders’ equity | 18,539 | | | | | | | 18,644 | | | | | | | (105) | | | (1) | | | | | |
| Non-controlling interest | 49 | | | | | | | 27 | | | | | | | 22 | | | 81 | | | | | |
| Total equity | 18,588 | | | | | | | 18,671 | | | | | | | (83) | | | — | | | | | |
| Total liabilities and shareholders’ equity | $ | 187,836 | | | | | | | $ | 177,084 | | | | | | | $ | 10,752 | | | 6 | % | | | | |
| Net interest rate spread | | | | | 2.66 | | | | | | | 2.96 | | | | | | | | | |
| Impact of noninterest-bearing funds on margin | | | | | 0.59 | | | | | | | 0.06 | | | | | | | | | |
| Net interest margin/NII | | | $ | 2,775 | | | 3.25 | % | | | | $ | 2,421 | | | 3.02 | % | | | | | | | | |
(1)During the 2023 second quarter, the process for assessing and monitoring the risk and performance of non-real estate secured commercial loans was revised, primarily loans to REITs. These loans were reclassified from CRE to the C&I loan category to align reporting with this process revision. All prior period results have been adjusted to conform to the current presentation.
(2)FTE yields are calculated assuming a 21% tax rate.
(3)Average 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)(4)For purposes of this analysis, NALs are reflected in the average balances of loans and leases.
(4)(5)Includes consumer certificates of deposit of $250,000 or more.
10 Huntington Bancshares Incorporated
2022 Third Quarter versus 2021 Third Quarter
Net interest income for the 2022 third quarter increased $244 million, or 21%, from the 2021 third quarter. FTE net interest income, a non-GAAP financial measure, for the 2022 third quarter increased $245 million, or 21%, from the 2021 third quarter. The increase in FTE net interest income reflects a 51 basis point increase in the FTE NIM to 3.42% and a $4.9 billion, or 3%, increase in average total earning assets. The increase to FTE 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. The increase in average total earning assets 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. Average loan and lease balance increases were driven by organic growth in commercial and consumer loans and leases, partially offset by a $3.1 billion decrease in average PPP loans. The increase in average securities was driven by the redeployment of excess liquidity into securities in the second half of 2021.
Net interest income for the 2022 third quarter included $15 million of net interest income from purchase accounting accretion and $4 million in accelerated PPP loan fees recognized upon forgiveness payments from the SBA, compared to $36 million and $30 million, respectively, in the 2021 third quarter.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Table 4 - Consolidated YTD Average Balance Sheets and Net Interest Margin | | | | |
| | Nine months ended | | | | | | | | |
| September 30, 2022 | | September 30, 2021 | | 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 | $ | 4,629 | | | $ | 29 | | | 0.84 | % | | $ | 8,432 | | | $ | 8 | | | 0.13 | % | | $ | (3,803) | | | (45) | % | | | | |
| Interest-bearing deposits in banks | 200 | | | 3 | | | 1.85 | | | 322 | | | 1 | | | 0.04 | | | (122) | | | (38) | | | | | |
| Securities: | | | | | | | | | | | | | | | | | | | |
| Trading account securities | 33 | | | 1 | | | 3.75 | | | 50 | | | 1 | | | 3.21 | | | (17) | | | (34) | | | | | |
| Available-for-sale securities: | | | | | | | | | | | | | | | | | | | |
| Taxable | 22,509 | | | 378 | | | 2.24 | | | 18,376 | | | 184 | | | 1.33 | | | 4,133 | | | 22 | | | | | |
| Tax-exempt | 2,887 | | | 66 | | | 3.04 | | | 2,868 | | | 52 | | | 2.43 | | | 19 | | | 1 | | | | | |
| Total available-for-sale securities | 25,396 | | | 444 | | | 2.33 | | | 21,244 | | | 236 | | | 1.48 | | | 4,152 | | | 20 | | | | | |
| Held-to-maturity securities—taxable | 16,336 | | | 251 | | | 2.05 | | | 9,185 | | | 124 | | | 1.81 | | | 7,151 | | | 78 | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Other securities | 841 | | | 18 | | | 2.83 | | | 524 | | | 6 | | | 1.57 | | | 317 | | | 60 | | | | | |
| Total securities | 42,606 | | | 714 | | | 2.23 | | | 31,003 | | | 367 | | | 1.58 | | | 11,603 | | | 37 | | | | | |
| Loans held for sale | 1,086 | | | 33 | | | 4.00 | | | 1,404 | | | 31 | | | 2.90 | | | (318) | | | (23) | | | | | |
| Loans and leases: (3) | | | | | | | | | | | | | | | | | | | |
| Commercial: | | | | | | | | | | | | | | | | | | | |
| Commercial and industrial | 42,569 | | | 1,297 | | | 4.02 | | | 35,657 | | | 1,053 | | | 3.90 | | | 6,912 | | | 19 | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Commercial real estate | 15,484 | | | 435 | | | 3.70 | | | 10,345 | | | 243 | | | 3.09 | | | 5,139 | | | 50 | | | | | |
| Lease financing | 4,938 | | | 185 | | | 4.95 | | | 3,336 | | | 125 | | | 4.96 | | | 1,602 | | | 48 | | | | | |
| Total commercial | 62,991 | | | 1,917 | | | 4.01 | | | 49,338 | | | 1,421 | | | 3.80 | | | 13,653 | | | 28 | | | | | |
| Consumer: | | | | | | | | | | | | | | | | | | | |
| Residential mortgage | 20,536 | | | 478 | | | 3.10 | | | 14,941 | | | 338 | | | 3.02 | | | 5,595 | | | 37 | | | | | |
| Automobile | 13,512 | | | 347 | | | 3.44 | | | 12,891 | | | 352 | | | 3.65 | | | 621 | | | 5 | | | | | |
| Home equity | 10,406 | | | 360 | | | 4.62 | | | 9,771 | | | 282 | | | 3.86 | | | 635 | | | 6 | | | | | |
| RV and marine | 5,293 | | | 166 | | | 4.19 | | | 4,549 | | | 145 | | | 4.26 | | | 744 | | | 16 | | | | | |
| Other consumer | 1,301 | | | 90 | | | 9.21 | | | 1,058 | | | 83 | | | 10.44 | | | 243 | | | 23 | | | | | |
| Total consumer | 51,048 | | | 1,441 | | | 3.77 | | | 43,210 | | | 1,200 | | | 3.71 | | | 7,838 | | | 18 | | | | | |
| Total loans and leases | 114,039 | | | 3,358 | | | 3.91 | | | 92,548 | | | 2,621 | | | 3.76 | | | 21,491 | | | 23 | | | | | |
| Allowance for loan and lease losses | (2,067) | | | | | | | (1,953) | | | | | | | (114) | | | (6) | | | | | |
| Net loans and leases | 111,972 | | | | | | | 90,595 | | | | | | | 21,377 | | | 24 | | | | | |
| Total earning assets | 162,560 | | | 4,137 | | | 3.40 | | | 133,709 | | | 3,028 | | | 3.03 | | | 28,851 | | | 22 | | | | | |
| Cash and due from banks | 1,672 | | | | | | | 1,242 | | | | | | | 430 | | | 35 | | | | | |
| Goodwill and other intangible assets | 5,660 | | | | | | | 3,615 | | | | | | | 2,045 | | | 57 | | | | | |
| All other assets | 10,092 | | | | | | | 8,459 | | | | | | | 1,633 | | | 19 | | | | | |
| Total assets | $ | 177,917 | | | | | | | $ | 145,072 | | | | | | | $ | 32,845 | | | 23 | % | | | | |
| Liabilities and Shareholders’ Equity: | | | | | | | | | | | | | | | | | | | |
| Interest-bearing deposits: | | | | | | | | | | | | | | | | | | | |
| Demand deposits—interest-bearing | $ | 41,467 | | | $ | 56 | | | 0.18 | % | | $ | 30,776 | | | $ | 9 | | | 0.04 | % | | $ | 10,691 | | | 35 | % | | | | |
| Money market deposits | 33,512 | | | 37 | | | 0.15 | | | 29,243 | | | 15 | | | 0.07 | | | 4,269 | | | 15 | | | | | |
| Savings and other domestic deposits | 21,480 | | | 3 | | | 0.02 | | | 16,165 | | | 4 | | | 0.03 | | | 5,315 | | | 33 | | | | | |
| Core certificates of deposit (4) | 2,274 | | | 2 | | | 0.10 | | | 2,186 | | | 1 | | | 0.05 | | | 88 | | | 4 | | | | | |
| Other domestic deposits of $250,000 or more | 244 | | | — | | | 0.24 | | | 320 | | | 1 | | | 0.23 | | | (76) | | | (24) | | | | | |
| Negotiable CDs, brokered and other deposits | 3,522 | | | 30 | | | 1.14 | | | 3,417 | | | 4 | | | 0.16 | | | 105 | | | 3 | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Total interest-bearing deposits | 102,499 | | | 128 | | | 0.17 | | | 82,107 | | | 34 | | | 0.05 | | | 20,392 | | | 25 | | | | | |
| Short-term borrowings | 3,139 | | | 36 | | | 1.52 | | | 256 | | | — | | | 0.26 | | | 2,883 | | | NM | | | | |
| Long-term debt (5) | 7,401 | | | 140 | | | 2.51 | | | 7,413 | | | 5 | | | 0.10 | | | (12) | | | — | | | | | |
| Total interest-bearing liabilities | 113,039 | | | 304 | | | 0.36 | | | 89,776 | | | 39 | | | 0.06 | | | 23,263 | | | 26 | | | | | |
| Demand deposits—noninterest-bearing | 42,157 | | | | | | | 36,139 | | | | | | | 6,018 | | | 17 | | | | | |
| All other liabilities | 4,158 | | | | | | | 2,952 | | | | | | | 1,206 | | | 41 | | | | | |
| Total Huntington Bancshares Inc shareholders’ equity | 18,534 | | | | | | | 16,196 | | | | | | | 2,338 | | | 14 | | | | | |
| Non-controlling interest | 29 | | | | | | | 9 | | | | | | | 20 | | | NM | | | | |
| Total equity | 18,563 | | | | | | | 16,205 | | | | | | | 2,358 | | | 15 | | | | | |
| Total liabilities and shareholders’ equity | $ | 177,917 | | | | | | | $ | 145,072 | | | | | | | $ | 32,845 | | | 23 | % | | | | |
| Net interest rate spread | | | | | 3.04 | | | | | | | 2.97 | | | | | | | | | |
| Impact of noninterest-bearing funds on margin | | | | | 0.11 | | | | | | | 0.02 | | | | | | | | | |
| Net interest margin/NII | | | $ | 3,833 | | | 3.15 | % | | | | $ | 2,989 | | | 2.99 | % | | | | | | | | |
(1)FTE yields are calculated assuming a 21% tax rate.
(2)Average 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.
(5) Reflects the net mark-to-market impact of interest rate caps, a benefit of $89 million, or 161 bps, for the first nine-month period of 2021. There was no impact for the first nine-month period of 2022.
1214 Huntington Bancshares Incorporated
2022 First Nine Months versus 2021 First Nine MonthsYear to Date Net Interest Income
Net interest income for the first nine-monthsix-month period of 20222023 increased $841$348 million, or 28%14%, from the year-ago period. FTE net interest income, a non-GAAP financial measure, for the first nine-monthsix-month period of 20222023 increased $844$354 million, or 28%15%, from the year-ago period. The increase in FTE net interest income reflected the benefit of a $28.9 billion, or 22%, increase in average total earning assets in addition to a 1623 basis point increase in the FTE NIM to 3.15%. The3.25% and a $10.2 billion, or 6%, increase in average total earning assets, includedpartially offset by a $21.5$16.1 billion, or 23%14%, increase in average loansinterest-bearing liabilities and leaseslower accelerated PPP loan fees recognized upon forgiveness payments from the SBA and a $11.6 billion, or 37%, increase in average securities. Average balances across earning assets categories reflect the late second-quarter 2021 TCF acquisition in addition to organic growth. The increase in average securities was additionally driven by the redeployment of excess liquidity into securities in the second half of 2021.purchase accounting accretion.
The NIM expansion was driven by the higher rate environment driving an increase in loans and lease and investment security yields, partially offset by higher cost of funds and higher cash balances.
Net interest income for the prior year benefitfirst six-month period of 2023 included $18 million of net interest income from the $89purchase accounting accretion, compared to $35 million net mark-to-market impact of interest rate caps, and the impact of lower$16 million from purchase accounting accretion and accelerated PPP loan fees recognized upon forgiveness payments from the SBA, in 2022.
Net interest income for the first nine-month period of 2022 included $50 million of net interest income from purchase accounting accretion and $20 million in accelerated PPP loan fees recognized upon forgiveness payments from the SBA, compared to $46 million and $105 million, respectively, in the year-ago period.
Average Balance Sheet
Average assets for the first six-month period of 2023 increased $10.8 billion, or 6%, to $187.8 billion from the year-ago period, primarily due to increases in average loans and leases of $8.3 billion, or 7%, and interest-bearing deposits at the Federal Reserve Bank of $3.2 billion, or 60%, partially offset by a decrease in total securities of $797 million, or 2%. The increase in average loans and leases was driven by growth in average commercial loans and leases of $6.2 billion, or 10%, and average consumer loans of $2.2 billion, or 4%.
Average liabilities for the first six-month period of 2023 increased $10.8 billion, or 7%, from the year-ago period, primarily due to increases in average borrowings and deposits. Average borrowings increased $8.1 billion, or 78%, driven by higher long and short-term FHLB borrowings and new debt issuances reflecting actions taken as part of normal management of funding needs. Total average deposits increased $1.9 billion, or 1%, primarily due to an increase in average interest-bearing deposits of $8.0 billion, or 8%, largely due to increases in average certificates of deposits and money market deposits, partially offset by a decrease in noninterest-bearing deposits of $6.2 billion, or 15%.
Average shareholders’ equity for the first six-month of 2023 decreased $105 million, or 1%, from the year-ago period 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 credit allowanceACL 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 2022 third2023 second quarter of $106was $92 million, an increase of $168$25 million, compared to the 2021 third quarter, primarily due to a combination of current period loan and lease growth and a reserve release in the prior year period.2022 second quarter. On a year-to-date basis, provision for credit losses for the first nine-monthsix-month period of 20222023 was $198$177 million, an increase of $109$85 million, or 122%92%, compared to year-ago period. The increase in provision expense over the year-agoprior year quarter was driven by allowance builds that reflect modest deterioration in the current macro-economic forecast. The increase over the prior year-to-date period primarily due towas driven by allowance builds associated with a combination of loan and lease growth. The prior year-to-date provision for credit losses primarily reflectedgrowth and modest deterioration in the TCF acquisition initial provision for credit lossescurrent macro-economic forecast.
The components of the provision for credit losses were as follows:
| | Table 5 - Provision for Credit Losses | Table 5 - Provision for Credit Losses | Table 5 - Provision for Credit Losses |
| | Three Months Ended | | Nine months ended | | Three months ended | | Six months ended |
| | September 30, | | | September 30, | | September 30, | | September 30, | | | June 30, | | | June 30, | | June 30, | | June 30, | |
| (dollar amounts in millions) | (dollar amounts in millions) | 2022 | | | 2021 | | 2022 | | 2021 | | (dollar amounts in millions) | 2023 | | | 2022 | | 2023 | | 2022 | |
| Provision for loan and lease losses | Provision for loan and lease losses | $ | 80 | | | | $ | (56) | | | $ | 151 | | | $ | 42 | | | Provision for loan and lease losses | $ | 84 | | | | $ | 64 | | | $ | 162 | | | $ | 71 | | |
| Provision for unfunded lending commitments | Provision for unfunded lending commitments | 26 | | | | (6) | | | 43 | | | 47 | | | Provision for unfunded lending commitments | 8 | | | | 3 | | | 15 | | | 17 | | |
| Provision for securities | Provision for securities | — | | | | — | | | 4 | | | — | | | Provision for securities | — | | | | — | | | — | | | 4 | | |
| Total provision for credit losses | Total provision for credit losses | $ | 106 | | | | $ | (62) | | | $ | 198 | | | $ | 89 | | | Total provision for credit losses | $ | 92 | | | | $ | 67 | | | $ | 177 | | | $ | 92 | | |
The ACL increased $25 million from the year-ago quarter to $2.2 billion, 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 a gradual improvement in the economic outlook, while also recognizing the near-term recessionary risks.
Noninterest Income
The following table reflects noninterest income for each of the periods presented:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Table 6 - Noninterest Income |
| Three Months Ended | | 3Q22 vs. 3Q21 | | |
| September 30, | | | | | | | | September 30, | | Change | | |
| (dollar amounts in millions) | 2022 | | | | | | | | 2021 | | Amount | | Percent | | | | |
| 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) | % | | | | |
2022 Third Quarter versus 2021 Third Quarter | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Table 6 - Noninterest Income |
| Three months ended | | Six months ended | | | |
| June 30, | | | | | | | | June 30, | | Change | | June 30, | | June 30, | | Change | | | |
| (dollar amounts in millions) | 2023 | | | | | | | | 2022 | | Percent | | 2023 | | 2022 | | Percent | | | | | | | |
| Service charges on deposit accounts | $ | 87 | | | | | | | | | $ | 105 | | | (17) | % | | $ | 170 | | | $ | 202 | | | (16) | % | | | | | | | |
| Card and payment processing income | 102 | | | | | | | | | 96 | | | 6 | | | 195 | | | 182 | | | 7 | | | | | | | | |
| Capital markets fees | 57 | | | | | | | | | 54 | | | 6 | | | 116 | | | 96 | | | 21 | | | | | | | | |
| Trust and investment management services | 68 | | | | | | | | | 63 | | | 8 | | | 130 | | | 128 | | | 2 | | | | | | | | |
| Mortgage banking income | 33 | | | | | | | | | 44 | | | (25) | | | 59 | | | 93 | | | (37) | | | | | | | | |
| Leasing revenue | 25 | | | | | | | | | 27 | | | (7) | | | 51 | | | 62 | | | (18) | | | | | | | | |
| Insurance income | 30 | | | | | | | | | 27 | | | 11 | | | 64 | | | 58 | | | 10 | | | | | | | | |
| Gain on sale of loans | 8 | | | | | | | | | 12 | | | (33) | | | 11 | | | 40 | | | (73) | | | | | | | | |
| Bank owned life insurance income | 16 | | | | | | | | | 11 | | | 45 | | | 32 | | | 28 | | | 14 | | | | | | | | |
| Net (losses) gains on sales of securities | (5) | | | | | | | | | — | | | (100) | | | (4) | | | — | | | (100) | | | | | | | | |
| Other noninterest income | 74 | | | | | | | | | 46 | | | 61 | | | 183 | | | 95 | | | 93 | | | | | | | | |
| Total noninterest income | $ | 495 | | | | | | | | | $ | 485 | | | 2 | % | | $ | 1,007 | | | $ | 984 | | | 2 | % | | | | | | | |
Noninterest income for the 2023 second quarter was $495 million, an increase of $10 million, or 2%, from the year-ago quarter. Other noninterest income increased $28 million, or 61%, primarily due to an $18 million increase from favorable mark-to-market on pay-fixed swaptions. Additional increases included card and payment processing income of $6 million, or 6%, bank owned life insurance income of $5 million, or 45%, and trust and investment management fees of $5 million, or 8%. Partially offsetting these increases, service charges on deposit accounts decreased $18 million, or 17%, primarily reflecting the impact from program changes, and mortgage banking income decreased $11 million, or 25%, primarily reflecting lower net MSR risk management.
Noninterest income for the 2022 third quarter was $498first six-month period of 2023 increased $23 million, or 2%, from the year-ago period. Other noninterest income increased $88 million, or 93%, primarily due to a $57 million gain on the sale of our RPS business, including associated goodwill allocation, and a $17 million increase from favorable mark-to-market on pay-fixed swaptions. Additional increases included capital markets fees of $20 million, or 21%, primarily reflecting Capstone Partners related advisory fees, partially offset by a decrease in interest rate derivative fees, and card and payments processing income of $37$13 million, or 7%, from the year-ago quarter. Mortgagelargely due to an increase in debit card usage. Partially offsetting these increases, mortgage banking income decreased $55$34 million, or 68%37%, primarily reflecting lower secondary marketing spreadssalable volume and lower salable volume.net MSR risk management. Service charges on depositdeposits accounts decreased $21$32 million, or 16%, primarily reflecting impact from program changes. Gain on sale of loans decreased $29 million, or 73%, primarily resulting from the strategic decision to retain the guaranteed portion of SBA loans at origination. Leasing revenue decreased $11 million, or 18%, primarily reflecting impact from Fair Play enhancements implemented in July 2022 and conversion of TCF customers to Huntington’s Fair Play product and service set in October 2021. Leasing revenue decreased $13 million, or 31%, primarily reflectingdriven by a decrease in operating leases. Partially offsetting these decreases, capital markets fees increased $33 million, or 83%, primarily reflecting higher advisory fees supported by a full quarter impact of Capstone Partners, and gain on sale of loans increased $13 million, primarily due to resuming the sale of SBA loans in 2022.
| | | | | | | | | | | | | | | | | | | | | | | |
| Table 7 - Noninterest Income—2022 First Nine Months Ended vs. 2021 First Nine Months Ended |
| | Nine Months Ended September 30, | | Change |
| (dollar amounts in millions) | 2022 | | 2021 | | Amount | | Percent |
| 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) | | | (13) | |
| Gain on sale of loans | 55 | | | 8 | | | 47 | | | NM |
| Net gains on sales of securities | — | | | 10 | | | (10) | | | NM |
| Other noninterest income | 160 | | | 141 | | | 19 | | | 13 | |
| Total noninterest income | $ | 1,482 | | | $ | 1,374 | | | $ | 108 | | | 8 | % |
1416 Huntington Bancshares Incorporated
Noninterest income for the first nine-month period of 2022 increased $108 million, or 8%, from the year-ago period. The first nine-month period of 2022 noninterest income across categories was driven by the full-period impact of the TCF acquisition, completed in June 2021. Capital markets fees increased $65 million, or 63%, primarily reflecting higher advisory fees supported by the impact of Capstone Partners, interest rate derivative fees, loan syndication fees, and foreign exchange fees. Gain on sale of loans increased $47 million, primarily due to resuming the sale of SBA loans in 2022. Trust and investment management services increased $19 million, or 11%, primarily reflecting continued strong sales and the impact of the TCF acquisition. All other increases were primarily a result of the impact of the TCF acquisition. These increases were partially offset by decreases in mortgage banking of $129 million, or 52%, primarily reflecting lower secondary marketing spreads and lower salable volume, and net gains on sales of securities of $10 million, as the prior year included sales reflecting securities optimization following the acquisition of TCF.
Noninterest Expense
The following table reflects noninterest expense for each of the periods presented:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Table 8 - Noninterest Expense |
| Three Months Ended | | 3Q22 vs. 3Q21 | | |
| September 30, | | | | | | | | September 30, | | Change | | |
| (dollar amounts in millions) | 2022 | | | | | | | | 2021 | | Amount | | Percent | | | | |
| 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) | % | | | | |
| Number of employees (average full-time equivalent) | 19,997 | | | | | | | | | 20,908 | | | (911) | | | (4) | % | | | | |
Impacts of acquisition-related expenses:
| | | | | | | | | | | | | |
| Three Months Ended |
| September 30, | | | | September 30, |
| (dollar amounts in millions) | 2022 | | | | 2021 |
| Personnel costs | $ | 1 | | | | | $ | 36 | |
| Outside data processing and other services | 2 | | | | | 140 | |
| Net occupancy | 6 | | | | | 36 | |
| Equipment | 1 | | | | | 5 | |
| Professional services | — | | | | | 9 | |
| Marketing | — | | | | | 3 | |
| | | | | |
| Other noninterest expense | — | | | | | 5 | |
| Total noninterest expense adjustments | $ | 10 | | | | | $ | 234 | |
2022 Third Quarter versus 2021 Third Quarter | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Table 7 - Noninterest Expense |
| Three months ended | | | Six months ended | | |
| June 30, | | | | | | | | June 30, | | Change | | | June 30, | | June 30, | | Change | | |
| (dollar amounts in millions) | 2023 | | | | | | | | 2022 | | Percent | | | | | 2023 | | 2022 | | Percent | | | | |
| Personnel costs | $ | 613 | | | | | | | | | $ | 577 | | | 6 | % | | | | | $ | 1,262 | | | $ | 1,157 | | | 9 | % | | | | |
| Outside data processing and other services | 148 | | | | | | | | | 153 | | | (3) | | | | | | 299 | | | 318 | | | (6) | | | | | |
| Equipment | 64 | | | | | | | | | 61 | | | 5 | | | | | | 128 | | | 142 | | | (10) | | | | | |
| Net occupancy | 54 | | | | | | | | | 58 | | | (7) | | | | | | 114 | | | 122 | | | (7) | | | | | |
| Marketing | 32 | | | | | | | | | 24 | | | 33 | | | | | | 57 | | | 45 | | | 27 | | | | | |
| Professional services | 21 | | | | | | | | | 19 | | | 11 | | | | | | 37 | | | 38 | | | (3) | | | | | |
| Deposit and other insurance expense | 23 | | | | | | | | | 20 | | | 15 | | | | | | 43 | | | 38 | | | 13 | | | | | |
| Amortization of intangibles | 13 | | | | | | | | | 13 | | | — | | | | | | 26 | | | 27 | | | (4) | | | | | |
| Lease financing equipment depreciation | 8 | | | | | | | | | 11 | | | (27) | | | | | | 16 | | | 25 | | | (36) | | | | | |
| Other noninterest expense | 74 | | | | | | | | | 82 | | | (10) | | | | | | 154 | | | 159 | | | (3) | | | | | |
| Total noninterest expense | $ | 1,050 | | | | | | | | | $ | 1,018 | | | 3 | % | | | | | $ | 2,136 | | | $ | 2,071 | | | 3 | % | | | | |
| Number of employees (average full-time equivalent) | 20,200 | | | | | | | | | 19,866 | | | 2 | % | | | | | 20,198 | | | 19,821 | | | 2 | % | | | | |
Noninterest expense for the 2022 third2023 second quarter was $1.1 billion, a decreasean increase of $236$32 million, or 18%3%, from the year-ago quarter. There were no acquisition-related expenses for the 2023 second quarter, compared to $24 million in the year-ago quarter. Personnel costs increased $36 million, or 6%, primarily reflecting a $224 million decrease in acquisition-related expenses and execution of cost reduction initiatives associated withhigher expense due to the TCF acquisition.
| | | | | | | | | | | | | | | | | | | | | | | |
| Table 9 - Noninterest Expense—2022 First Nine Months Ended vs. 2021 First Nine Months Ended |
| | | | | | | |
| | Nine Months Ended September 30, | | Change |
| (dollar amounts in millions) | 2022 | | 2021 | | Amount | | Percent |
| Personnel costs | $ | 1,771 | | | $ | 1,703 | | | $ | 68 | | | 4 | % |
| Outside data processing and other services | 463 | | | 581 | | | (118) | | | (20) | |
| Net occupancy | 185 | | | 209 | | | (24) | | | (11) | |
| Equipment | 202 | | | 180 | | | 22 | | | 12 | |
| Professional services | 56 | | | 91 | | | (35) | | | (38) | |
| Marketing | 69 | | | 54 | | | 15 | | | 28 | |
| Deposit and other insurance expense | 53 | | | 33 | | | 20 | | | 61 | |
| Amortization of intangibles | 40 | | | 34 | | | 6 | | | 18 | |
| Lease financing equipment depreciation | 36 | | | 24 | | | 12 | | | 50 | |
| Other noninterest expense | 249 | | | 245 | | | 4 | | | 2 | |
| Total noninterest expense | $ | 3,124 | | | $ | 3,154 | | | $ | (30) | | | (1) | % |
Impacts of acquisition-related expenses:
| | | | | | | | | | | |
| | Nine Months Ended September 30, |
| (dollar amounts in millions) | 2022 | | 2021 |
| Personnel costs | $ | 8 | | | $ | 146 | |
| Outside data processing and other services | 39 | | | 181 | |
| Net occupancy | 22 | | | 74 | |
| Equipment | 3 | | | 9 | |
| Professional services | 3 | | | 53 | |
| Marketing | — | | | 3 | |
| Deposit and other insurance expense | 1 | | | — | |
| Other noninterest expense | 4 | | | 58 | |
| Total noninterest expense adjustments | $ | 80 | | | $ | 524 | |
Noninterest expense decreased $30 million, or 1%, from the year-ago period, primarily reflecting a $444 million decrease in acquisition-related expenses and execution of cost reduction initiatives, partially offset by the full-period impact of the TCF acquisition. OutsideCapstone Partners acquisition and merit increases. Marketing expense increased $8 million, or 33%, primarily reflecting actions taken to deepen and acquire new customer relationships. Partially offsetting these increases, outside data processing and other services decreased $118$5 million, or 20%3%, professional services expense decreased $35 million, or 38%, and net occupancy expense decreased $24 million, or 11%, all primarily reflecting decreasesa decrease in acquisition-related expense,expenses of $12 million, partially offset by higher technology investments.
Noninterest expense for the full-period impactfirst six-month period of 2023 increased $65 million, or 3%, from the TCF acquisition. Partially offsetting these decreases, personnelyear-ago period. There were no acquisition-related expenses for the first six-month period of 2023, compared to $70 million in the year-ago period. Personnel costs increased $68$105 million, or 4%9%, primarily due to $36 million of voluntary retirement program expense and $6 million of organizational realignment expense, the impact of the full-period impact of the TCFCapstone Partners acquisition in addition to impacts ofand merit increases, partially offset by a $7 million decrease in acquisition-related expenses. Marketing expense increased $12 million, or 27%, primarily reflecting actions taken to deepen and acquire new customer relationships. Partially offsetting these increases, outside data processing decreased $19 million, or 6%, primarily due to a decrease of $37 million in acquisition-related expenses, partially offset by higher technology investments. Equipment expense increased $22decreased $14 million, or 12%10%, primarily reflecting the impact of the TCF acquisition and timing of technology equipment purchases and amortization. Marketing expense increased $15 million, or 28%, primarily reflecting investment in new product launches and expanding brand marketing. All other increases were primarily a result of the impact of the TCF acquisition.
Provision for Income Taxes
The provision for income taxes in the 2022 third2023 second quarter was $146$134 million, compared to $90$120 million in the 2021 third2022 second quarter. The provision for income taxes for the nine-monthsix-month periods ended SeptemberJune 30, 2023 and June 30, 2022 and September 30, 2021 was $371$278 million and $206$225 million, respectively. All periods included the benefits from general business credits, capital losses, tax-exempt income, tax-exempt bank owned life insurance income, and investments in qualified affordable housing projects. The effective tax rates for the 2022 third2023 second quarter and 2021 third2022 second quarter were 19.7%19.3% and 19.0%18.1%, respectively. The effective tax rates for the nine-monthsix-month periods ended SeptemberJune 30, 2023 and June 30, 2022 were 19.2% and September 30, 2021 were 18.8% and 18.7%18.3%, respectively. The variance between the 2023 second quarter compared to the 2022 second quarter, and the six month period ended June 30, 2023 compared to the six month period ended June 30, 2022 provision for income taxes and effective tax rates relates primarily to a reduction in capital losses, partially offset by an increase in tax credits and the impact of stock-based compensation.
The net federal deferred tax asset was $658$383 million, and the net state deferred tax asset was $84$87 million at SeptemberJune 30, 2022.2023.
162023 2Q Form 10-Q Huntington Bancshares Incorporated17
We file income tax returns with the IRS and various state, city, and foreign jurisdictions. Federal income tax audits have been completed for tax years through 2009. The 2010 and 2011 tax years remain under exam by the IRS. While the statute of limitations remains open for tax years 2012 through 2020, the IRS has advised that tax years 2012 through 2014 will not be audited and is currently examining the 2015 and 2016 federal income tax returns.2016. Also, with few exceptions, we arethe Company is no longer subject to state and local income tax examinations for tax years before 2017.2018.
RISK MANAGEMENT AND CAPITAL
We use a multi-faceted approach to risk governance. It begins with our Board of Directors defining our risk appetite as aggregate moderate-to-low, through-the-cycle. Risk awareness, identification and assessment, reporting, and active management are key elements in overall risk management. Controls include, among others, effective segregation of duties, access management, and authorization and reconciliation procedures, as well as staff education and a disciplined assessment process. We use a multi-faceted approach to risk governance. It begins with the Board of Directors defining our risk appetite as aggregate moderate-to-low, through-the-cycle.
We believe that our primaryclassify/aggregate risk exposures areinto seven risk pillars; credit, market, liquidity, operational, compliance, strategic, and compliance.reputation. More information on risk can be found in Item 1A Risk Factors below, the Risk Factors section included in Item 1A of our 20212022 Annual Report on Form 10-K and subsequent filings with the SEC. The MD&A included in our 20212022 Annual Report on Form 10-K should be read in conjunction with this MD&A, as this discussion provides only material updates to the 20212022 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. Our definition, philosophy, and approach to risk management have not materially changed from the discussion presented in the 20212022 Annual Report on Form 10-K. Credit Risk
Credit risk is the risk of financial loss if a counterparty is not able to meet the agreed upon terms of the financial obligation. The majority of our credit risk is associated with lending activities, as the acceptance and management of credit risk is central to profitable lending. We also have credit risk associated with our investment securities portfolios (see Note 43 “Investment Securities and Other Securities” of the Notes to the Unaudited Condensed Consolidated Financial Statements). We engage with other financial counterparties for a variety of purposes including investing, asset and liability management, mortgage banking, and trading activities. A variety of derivative financial instruments, principally interest rate swaps, caps,swaptions, swaption collars, and floors are used in asset and liability management activities to protect against the risk of adverse price or interest rate movements. We also use derivatives, principally loan sale commitments, in hedging our mortgage loan interest rate lock commitments and mortgage loans held for sale. While there is credit risk associated with derivative activity, we believe this exposure is minimal. We focus on the early identification, monitoring, and management of all aspects of our credit risk. In addition to the traditional credit risk mitigation strategies of credit policies and processes, market risk management activities, and portfolio diversification, we use quantitative measurement capabilities utilizing external data sources, enhanced modeling technology, and internal stress testing processes. Our ongoing expansion ofdisciplined portfolio management resources isprocesses are central to our commitment to maintaining an aggregate moderate-to-low, through-the-cycle risk appetite. In our efforts to identify risk mitigation techniques, we have focused on product design features, origination policies, and solutions for delinquent or stressed borrowers.
Loan and Lease Credit Exposure Mix
Refer to the “Loan and Lease Credit Exposure Mix” section of our 20212022 Annual Report on Form 10-K for a brief description of each portfolio segment. During the 2023 second quarter, Huntington revised its process for assessing and monitoring the risk and performance of non-real estate secured commercial loans, primarily loans to REITs. These loans were reclassified from CRE to the C&I loan category to align reporting with this process revision. All prior period results have been adjusted to conform to the current presentation.
18 Huntington Bancshares Incorporated
The table below provides the composition of our total loan and lease portfolio:
| | Table 10 - Loan and Lease Portfolio Composition | |
| Table 8 - Loan and Lease Portfolio Composition | | Table 8 - Loan and Lease Portfolio Composition |
| | (dollar amounts in millions) | (dollar amounts in millions) | September 30,
2022 | | | December 31,
2021 | | (dollar amounts in millions) | At June 30, 2023 | | At December 31, 2022 | |
| Commercial: | Commercial: | | | | | | Commercial: | | | | |
| Commercial and industrial | Commercial and industrial | $ | 44,144 | | | 38 | % | | | $ | 41,688 | | | 37 | % | | Commercial and industrial | $ | 49,834 | | | 41 | % | | $ | 48,121 | | | 41 | % | |
| | Commercial real estate | Commercial real estate | 16,456 | | | 14 | | | | 14,961 | | | 14 | | | Commercial real estate | 13,166 | | | 11 | | | 13,640 | | | 11 | | |
| Lease financing | Lease financing | 5,093 | | | 4 | | | | 5,000 | | | 4 | | | Lease financing | 5,143 | | | 4 | | | 5,252 | | | 4 | | |
| Total commercial | Total commercial | 65,693 | | | 56 | | | | 61,649 | | | 55 | | | Total commercial | 68,143 | | | 56 | | | 67,013 | | | 56 | | |
| Consumer: | Consumer: | | | | | | | | | | Consumer: | | | | | | | | |
| Residential mortgage | Residential mortgage | 21,816 | | | 18 | | | | 19,256 | | | 17 | | | Residential mortgage | 23,138 | | | 19 | | | 22,226 | | | 19 | | |
| Automobile | Automobile | 13,430 | | | 11 | | | | 13,434 | | | 12 | | | Automobile | 12,819 | | | 11 | | | 13,154 | | | 11 | | |
| Home equity | Home equity | 10,440 | | | 9 | | | | 10,550 | | | 9 | | | Home equity | 10,135 | | | 8 | | | 10,375 | | | 9 | | |
| RV and marine | RV and marine | 5,436 | | | 5 | | | | 5,058 | | | 5 | | | RV and marine | 5,640 | | | 5 | | | 5,376 | | | 4 | | |
| Other consumer | Other consumer | 1,332 | | | 1 | | | | 1,320 | | | 2 | | | Other consumer | 1,350 | | | 1 | | | 1,379 | | | 1 | | |
| Total consumer | Total consumer | 52,454 | | | 44 | | | | 49,618 | | | 45 | | | Total consumer | 53,082 | | | 44 | | | 52,510 | | | 44 | | |
| Total loans and leases | Total loans and leases | $ | 118,147 | | | 100 | % | | | $ | 111,267 | | | 100 | % | | Total loans and leases | $ | 121,225 | | | 100 | % | | $ | 119,523 | | | 100 | % | |
Our loan and lease portfolio is a managed mix of consumer and commercial credits. We manage the overall credit exposure and portfolio composition via a credit concentration policy. The policy designates specific loan types, collateral types, and loan structures to be formally tracked and assigned maximum exposure limits as a percentage of capital. Commercial lending by NAICS categories, specific limits for CRE project types, loans secured by residential real estate, large dollar exposures, and designated high risk loan categories represent examples of specifically tracked components of our concentration management process. There are no identified concentrations that exceed the assigned exposure limit. Our concentration management policy is approved by the ROC and is used to ensure a high quality, well diversified portfolio that is consistent with our overall objective of maintaining an aggregate moderate-to-low, through-the-cycle risk appetite. Changes to existing concentration limits, incorporating specific information relating to the potential impact on the overall portfolio composition and performance metrics, require the approval of the ROC prior to implementation.
Commercial Credit
Refer to the “Commercial Credit” section of our 20212022 Annual Report on Form 10-K for our commercial credit underwriting and on-going credit management processes.
Consumer Credit
Refer to the “Consumer Credit” section of our 20212022 Annual Report on Form 10-K for our consumer credit underwriting and on-going credit management processes.
182023 2Q Form 10-Q Huntington Bancshares Incorporated19
The table below provides our total loan and lease portfolio by industry type:
| | Table 11 - Loan and Lease Portfolio by Industry Type | | |
| Table 9 - Loan and Lease Portfolio by Industry Type | | Table 9 - Loan and Lease Portfolio by Industry Type | |
| | (dollar amounts in millions) | (dollar amounts in millions) | September 30,
2022 | | December 31,
2021 | | (dollar amounts in millions) | At June 30, 2023 | | At December 31, 2022 | |
| Commercial loans and leases: | Commercial loans and leases: | | | | | Commercial loans and leases: | | | | |
Real estate and rental and leasing | Real estate and rental and leasing | $ | 15,984 | | | 14 | % | | $ | 14,287 | | | 13 | % | | Real estate and rental and leasing | $ | 16,372 | | | 14 | % | | $ | 16,310 | | | 14 | % | |
Retail trade (1)(2) | Retail trade (1)(2) | 8,760 | | | 7 | | | 6,709 | | | 6 | | | Retail trade (1)(2) | 10,843 | | | 9 | | | 9,894 | | | 8 | | |
| Manufacturing | Manufacturing | 7,992 | | | 7 | | | 7,401 | | | 7 | | | Manufacturing | 7,754 | | | 6 | | | 7,809 | | | 7 | | |
Finance and insurance | Finance and insurance | 5,241 | | | 4 | | | 4,595 | | | 4 | | | Finance and insurance | 5,079 | | | 4 | | | 5,005 | | | 4 | | |
Health care and social assistance | Health care and social assistance | 4,278 | | | 4 | | | 4,733 | | | 4 | | | Health care and social assistance | 4,321 | | | 4 | | | 4,293 | | | 4 | | |
| Wholesale Trade | Wholesale Trade | 4,330 | | | 4 | | | 4,067 | | | 4 | | | Wholesale Trade | 3,777 | | | 3 | | | 3,922 | | | 3 | | |
| Accommodation and food services | Accommodation and food services | 3,368 | | | 3 | | | 3,778 | | | 3 | | | Accommodation and food services | 3,197 | | | 3 | | | 3,335 | | | 3 | | |
| Transportation and warehousing | Transportation and warehousing | 3,073 | | | 3 | | | 3,096 | | | 3 | | | Transportation and warehousing | 3,196 | | | 3 | | | 3,246 | | | 3 | | |
| Other services | 2,057 | | | 2 | | | 2,119 | | | 2 | | | |
| Professional, scientific, and technical services | Professional, scientific, and technical services | 1,910 | | | 2 | | | 1,975 | | | 2 | | | Professional, scientific, and technical services | 2,102 | | | 2 | | | 1,899 | | | 2 | | |
| Other Services | | Other Services | 1,910 | | | 2 | | | 2,097 | | | 2 | | |
| Utilities | | Utilities | 1,809 | | | 1 | | | 1,298 | | | 1 | | |
| Construction | Construction | 1,691 | | | 1 | | | 1,980 | | | 2 | | | Construction | 1,707 | | | 1 | | | 1,757 | | | 1 | | |
| Admin./Support/Waste Mgmt. and Remediation Services | | Admin./Support/Waste Mgmt. and Remediation Services | 1,431 | | | 1 | | | 1,370 | | | 1 | | |
| Arts, entertainment, and recreation | Arts, entertainment, and recreation | 1,400 | | | 1 | | | 1,495 | | | 1 | | | Arts, entertainment, and recreation | 1,302 | | | 1 | | | 1,424 | | | 1 | | |
| Admin./Support/Waste Mgmt. and Remediation Services | 1,309 | | | 1 | | | 1,285 | | | 1 | | | |
| Utilities | 1,085 | | | 1 | | | 932 | | | 1 | | | |
| Information | Information | 1,000 | | | 1 | | | 870 | | | 1 | | | Information | 1,253 | | | 1 | | | 1,167 | | | 1 | | |
| Public administration | Public administration | 678 | | | 1 | | | 713 | | | 1 | | | Public administration | 667 | | | 1 | | | 667 | | | 1 | | |
| Educational services | Educational services | 528 | | | — | | | 657 | | | — | | | Educational services | 473 | | | — | | | 513 | | | — | | |
| Agriculture, forestry, fishing and hunting | 438 | | | — | | | 453 | | | — | | | |
| Agriculture, forestry, fishing, and hunting | | Agriculture, forestry, fishing, and hunting | 418 | | | — | | | 455 | | | — | | |
| Mining, quarrying, and oil and gas extraction | Mining, quarrying, and oil and gas extraction | 212 | | | — | | | 358 | | | — | | | Mining, quarrying, and oil and gas extraction | 145 | | | — | | | 196 | | | — | | |
| Management of companies and enterprises | Management of companies and enterprises | 113 | | | — | | | 130 | | | — | | | Management of companies and enterprises | 126 | | | — | | | 127 | | | — | | |
| Unclassified/other | Unclassified/other | 246 | | | — | | | 16 | | | — | | | Unclassified/other | 261 | | | — | | | 229 | | | — | | |
| Total commercial loans and leases by industry category | Total commercial loans and leases by industry category | 65,693 | | | 56 | | | 61,649 | | | 55 | | | Total commercial loans and leases by industry category | 68,143 | | | 56 | | | 67,013 | | | 56 | | |
| Residential mortgage | Residential mortgage | 21,816 | | | 18 | | | 19,256 | | | 17 | | | Residential mortgage | 23,138 | | | 19 | | | 22,226 | | | 19 | | |
| Automobile | Automobile | 13,430 | | | 11 | | | 13,434 | | | 12 | | | Automobile | 12,819 | | | 11 | | | 13,154 | | | 11 | | |
| Home equity | Home equity | 10,440 | | | 9 | | | 10,550 | | | 9 | | | Home equity | 10,135 | | | 8 | | | 10,375 | | | 9 | | |
| RV and marine | RV and marine | 5,436 | | | 5 | | | 5,058 | | | 5 | | | RV and marine | 5,640 | | | 5 | | | 5,376 | | | 4 | | |
| Other consumer loans | Other consumer loans | 1,332 | | | 1 | | | 1,320 | | | 2 | | | Other consumer loans | 1,350 | | | 1 | | | 1,379 | | | 1 | | |
| Total loans and leases | Total loans and leases | $ | 118,147 | | | 100 | % | | $ | 111,267 | | | 100 | % | | Total loans and leases | $ | 121,225 | | | 100 | % | | $ | 119,523 | | | 100 | % | |
(1) Non-real estate secured commercial loans to REITs, which are classified in the C&I loan category, are included in the real estate, finance and insurance, and health care industry types.
(2) Amounts include $1.9$2.6 billion and $1.5$2.3 billion of auto dealer services loans at SeptemberJune 30, 20222023 and December 31, 2021,2022, respectively.
Credit Quality
We believe the most meaningful way to assess overall credit quality performance is through an analysis of specific performance ratios. This approach forms the basis of the discussion in the sections immediately following: NPAs, NALs, ACL, and NCOs. In addition, we utilize delinquency rates, risk distribution and migration patterns, product segmentation, and origination trends in the analysis of our credit quality performance.
Credit quality performance in the 2022 third2023 second quarter reflected NCOs of $44$49 million, or 0.15%0.16% of average total loans and leases, annualized, a decreasean increase of $11$41 million, compared to $55$8 million, or 0.20%0.03%, in the year-ago quarter. The decreaseincrease was driven by a $32$38 million reductionincrease in Commercialcommercial NCOs to $15$27 million in the 2022 third2023 second quarter, partially offset by a $21 million increasecompared to net credit recoveries in Consumer NCOs.the prior year period. NPAs decreased from December 31, 20212022 by $123$37 million, or 16%6%, largely driven by a decrease in commercial and industrial NALs.
2022 3Q Form 10-Q 2019 Huntington Bancshares Incorporated
NPAs and NALs
(This section should be read in conjunction with Note 54 “Loans /and Leases” and Note 65 “Allowance for Credit Losses” of the Notes to Unaudited Condensed Consolidated Financial Statements and “Credit Quality” section appearing in Huntington’s 20212022 Annual Report on Form 10-K.) NPAs and NALs
Commercial loans and leases are placed on nonaccrual status at 90-days past due, or earlier if repayment of principal and interest is in doubt. Of the $428$357 million of commercial related NALs at SeptemberJune 30, 2022, $2712023, $207 million, or 63%58%, representedrepresent loans and leases that were less than 30-days past due, demonstrating our continued commitment to proactive credit risk management.
The following table reflects period-end NALs and NPAs detail:
| | Table 12 - Nonaccrual Loans and Leases and Nonperforming Assets | |
| Table 10 - Nonaccrual Loans and Leases and Nonperforming Assets | | Table 10 - Nonaccrual Loans and Leases and Nonperforming Assets |
| | (dollar amounts in millions) | (dollar amounts in millions) | September 30,
2022 | | | December 31,
2021 | | (dollar amounts in millions) | At June 30, 2023 | | At December 31, 2022 | |
| Nonaccrual loans and leases (NALs): | Nonaccrual loans and leases (NALs): | | | | | | Nonaccrual loans and leases (NALs): | | | | |
| Commercial and industrial | Commercial and industrial | $ | 288 | | | | $ | 370 | | | Commercial and industrial | $ | 267 | | | $ | 288 | | |
| Commercial real estate | Commercial real estate | 110 | | | | 104 | | | Commercial real estate | 75 | | | 92 | | |
| Lease financing | Lease financing | 30 | | | | 48 | | | Lease financing | 15 | | | 18 | | |
| Residential mortgage | Residential mortgage | 94 | | | | 111 | | | Residential mortgage | 73 | | | 90 | | |
| Automobile | Automobile | 4 | | | | 3 | | | Automobile | 4 | | | 4 | | |
| Home equity | Home equity | 75 | | | | 79 | | | Home equity | 75 | | | 76 | | |
| RV and marine | RV and marine | 1 | | | | 1 | | | RV and marine | 1 | | | 1 | | |
| | Total nonaccrual loans and leases | Total nonaccrual loans and leases | 602 | | | | 716 | | | Total nonaccrual loans and leases | 510 | | | 569 | | |
| Other real estate, net: | | | | | |
| Residential | 11 | | | | 8 | | | |
| Commercial | — | | | | 1 | | | |
| Total other real estate, net | 11 | | | | 9 | | | |
| | Other real estate, net | | Other real estate, net | 18 | | | 11 | | |
| Other NPAs (1) | Other NPAs (1) | 14 | | | | 25 | | | Other NPAs (1) | 29 | | | 14 | | |
| Total nonperforming assets | Total nonperforming assets | $ | 627 | | | | $ | 750 | | | Total nonperforming assets | $ | 557 | | | $ | 594 | | |
| | Nonaccrual loans and leases as a % of total loans and leases | Nonaccrual loans and leases as a % of total loans and leases | 0.51 | % | | | 0.64 | % | | Nonaccrual loans and leases as a % of total loans and leases | 0.42 | % | | 0.48 | % | |
| NPA ratio (2) | NPA ratio (2) | 0.53 | | | | 0.67 | | | NPA ratio (2) | 0.46 | | | 0.50 | | |
|
(1) Other nonperforming assets include certain impaired investment securities and/or nonaccrual loans held-for-sale.
(2) Nonperforming assets divided by the sum of loans and leases, other real estate owned, and other NPAs.
ACL
(This section should be read in conjunction with Note 65 “Allowance for Credit Losses” of the Notes to Unaudited Condensed Consolidated Financial Statements.) Our ACL is comprised of two different components, both of which in our judgment are appropriate to absorb lifetime expected credit losses in our loan and lease portfolio: the ALLL and the AULC.
We use statistically-based models that employ assumptions about current and future economic conditions throughout the contractual life of the loan. The process of estimating expected credit losses is based on three key parameters: PD, EAD, and LGD. Beyond the reasonable and supportable period (two to three years), the economic variables revert to a historical equilibrium at a pace dependent on the state of the economy reflected within the economic scenario.
20 Huntington Bancshares Incorporated
Future economic conditions consider multiple macroeconomic scenarios provided to us by an independent third party and are reviewed through the appropriate committee governance channels described below. These macroeconomic scenarios contain certain variables that are influential to our modeling process, the most significant being unemployment rates and GDP. The probability weights assigned to each scenario are generally expected to be consistent from period to period and determined through our ACL process. Any changes in probability weights must be supported by appropriate documentation and approval of senior management. Additionally, we consider whether to adjust the modeled estimates to address possible limitations within the models or factors not captured within the macroeconomic scenarios. Lifetime losses for most of our loans and leases are evaluated collectively based on similar risk characteristics, risk ratings, origination credit bureau scores, delinquency status, and remaining months within loan agreements, among other factors.
The baseline scenario used for the 2022 third2023 second quarter assumes thatweakening of the Russian oil supply losseslabor market is underway and will be largely offset resulting incontinue through the global oil market remaining balanced into 2023, allowing oil pricesend of 2024 causing the unemployment rate to gradually drop.increase, peaking at 4.2% by the end of 2024. The overnight federal funds rate is forecasted to continue to increase, hittinghave peaked at a terminal rate of 3.5% in Q1approximately 5.1% during the second quarter of 2023, remaining at this terminal level until the end of 2023 as the Federal Reserve continues to address the elevated inflation levels. The expectation is that the Federal Reserve would then start to cut rates early in 2024, although monetary policy remains restrictive until the end of 2025. The federal funds rate would stay at 3.5% throughreturns to its neutral rate in early 2026. Inflation is forecasted to drop from an average of 8.0% in 2022, to 3.9% in 2023 before startingand to cut2.5% in 2024 as a result of the Federal Reserve’s actions, and as inflation pressures stemming from U.S labor market conditions, the housing market and global energy prices continue to soften. The GDP forecast for the second half of 2023 into 2024 has fallen somewhat from year end, a result of elevated interest rates overand tightening credit conditions. GDP is now forecasted to be 2.3% by the coursefourth quarter of 2024.
Management uses a probability-weighted approach that incorporates a baseline, an adverse and a more favorable economic scenario when formulating that quantitative estimate for the allowance The table below is intended to show how the forecasted path of unemployment rate and GDP in the baseline scenario has changed since the end of 2021:2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Table 13 - Forecasted Key Macroeconomic Variables |
| Baseline scenario forecast | 2021 | | 2022 | | 2023 |
| Q4 | | Q2 | | Q4 | | Q2 | | Q4 |
| | | | | | | | | |
| | | | | | | | | |
| Unemployment rate (1) | | | | | | | | | |
| 4Q 2021 | 4.5 | % | | 3.7 | % | | 3.5 | % | | 3.5 | % | | 3.5 | % |
| | | | | | | | | |
| | | | | | | | | |
| 3Q 2022 | N/A | | N/A | | 3.7 | | | 3.9 | | | 4.0 | |
| | | | | | | | | |
| Gross Domestic Product (1) | | | | | | | | | |
| 4Q 2021 | 6.6 | % | | 3.6 | % | | 2.5 | % | | 2.9 | % | | 2.8 | % |
| | | | | | | | | |
| | | | | | | | | |
| 3Q 2022 | N/A | | N/A | | 1.0 | | | 1.8 | | | 2.7 | |
| | | | | | | | | |
| (1) Values reflect the baseline scenario forecast inputs for each period presented, not updated for subsequent actual amounts. |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Table 11 - Forecasted Key Macroeconomic Variables |
| Baseline scenario forecast | 2022 | | 2023 | | 2024 |
| Q4 | | Q2 | | Q4 | | Q2 | | Q4 |
| | | | | | | | | |
| | | | | | | | | |
| Unemployment rate (1) | | | | | | | | | |
| 4Q 2022 | 3.7 | % | | 3.9 | % | | 4.1 | % | | 4.1 | % | | 3.9 | % |
| | | | | | | | | |
| 2Q 2023 | N/A | | 3.4 | | | 3.8 | | | 4.0 | | | 4.2 | |
| | | | | | | | | |
| | | | | | | | | |
| Gross Domestic Product (1) | | | | | | | | | |
| 4Q 2022 | (0.1) | % | | 0.4 | % | | 2.0 | % | | 2.3 | % | | 2.7 | % |
| | | | | | | | | |
| 2Q 2023 | N/A | | 1.6 | | | 1.1 | | | 2.1 | | | 2.3 | |
| | | | | | | | | |
| | | | | | | | | |
| (1) Values reflect the baseline scenario forecast inputs for each period presented, not updated for subsequent actual amounts. |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
Management continues to assess the uncertainty in the macroeconomic environment, including those related to geopolitical instability and current inflation levels, considering multiple macroeconomic forecasts that reflected a range of possible outcomes in order to address such uncertainty.outcomes. While we have incorporated estimates of economic uncertainty into our ACL, the ultimate impact of the currentrecent inflation levels and attempts to lower inflation through Federal Reserve rate actions will have on the economy remains uncertain.unknown.
Management develops additional analytics to support adjustments to our modeled results. Our governance committees reviewed model results of variouseach economic scenariosscenario for appropriate usage, concluding that the quantitative transactional reserve will continue to utilize scenario weighting. Given the uncertainty associated with key economic scenario assumptions, the SeptemberJune 30, 20222023 ACL included a general reserve that consists of various risk profile components, including profiles to capture uncertainty not addressed within the quantitative transaction reserve.
Our ACL methodology committee is responsible for developing the methodology, assumptions and estimates used in the calculation, as well as determining the appropriateness of the ACL. The ALLL represents the estimate of lifetime expected losses in the loan and lease portfolio at the reported date. The loss modeling process uses an EAD concept to calculate total expected losses on both funded balances and unfunded lending commitments, where appropriate. Losses related to the unfunded lending commitments are then recorded as AULC within other liabilities in the Unaudited Condensed Consolidated Balance Sheet. A liability for expected credit losses for off-balance sheet credit exposures is recognized if Huntington has a present contractual obligation to extend the credit and the obligation is not unconditionally cancelable.
The AULC is determined by applying the same quantitative reserve determination process to the unfunded portion of the loan exposures adjusted by an applicable funding expectation. (See Note 1 “Significant Accounting Policies” of the Notes to Unaudited Condensed Consolidated Financial Statements appearing in Huntington’s 2021 Annual Report on Form 10-K.)
Our ACL evaluation process includes the on-going assessment of credit quality metrics, and a comparison of certain ACL benchmarks to current performance. For morefurther information, including the ALLL and AULC activity by portfolio segment, refer to Note 65 “Allowance for Credit Losses” of the Notes to the Unaudited Condensed Consolidated Financial Statements. 22 Huntington Bancshares Incorporated
The table below reflects the allocation of our ALLL among our various loan and lease categories and the reported ACL:
| | Table 14 - Allocation of Allowance for Credit Losses (1) | |
| Table 12 - Allocation of Allowance for Credit Losses | | Table 12 - Allocation of Allowance for Credit Losses |
| | (dollar amounts in millions) | (dollar amounts in millions) | September 30,
2022 | | | December 31,
2021 | | (dollar amounts in millions) | At June 30, 2023 | | At December 31, 2022 | |
| ALLL | | | | | | |
| | | Allocation of Allowance | | % of Total ALLL | | % of Total Loans and Leases (1) | | Allocation of Allowance | | % of Total ALLL | | % of Total Loans and Leases (1) | |
| Commercial | Commercial | | | | | Commercial | | | | | | | | | | | | |
| Commercial and industrial | Commercial and industrial | $ | 860 | | | 38 | % | | | $ | 832 | | | 37 | % | | Commercial and industrial | $ | 994 | | | 46 | % | | 41 | % | | $ | 939 | | | 45 | % | | 41 | % | |
| Commercial real estate | Commercial real estate | 504 | | | 14 | | | | 586 | | | 14 | | | Commercial real estate | 442 | | | 20 | | | 11 | | | 433 | | | 20 | | | 11 | | |
| Lease financing | Lease financing | 50 | | | 4 | | | | 44 | | | 4 | | | Lease financing | 47 | | | 2 | | | 4 | | | 52 | | | 2 | | | 4 | | |
| Total commercial | Total commercial | 1,414 | | | 56 | | | | 1,462 | | | 55 | | | Total commercial | 1,483 | | | 68 | | | 56 | | | 1,424 | | | 67 | | | 56 | | |
| Consumer | Consumer | | | | | Consumer | | |
| Residential mortgage | Residential mortgage | 178 | | | 18 | | | | 145 | | | 17 | | | Residential mortgage | 194 | | | 9 | | | 19 | | | 187 | | | 8 | | | 19 | | |
| Automobile | Automobile | 118 | | | 11 | | | | 108 | | | 12 | | | Automobile | 144 | | | 7 | | | 11 | | | 141 | | | 7 | | | 11 | | |
| Home equity | Home equity | 126 | | | 9 | | | | 88 | | | 9 | | | Home equity | 119 | | | 5 | | | 8 | | | 105 | | | 5 | | | 9 | | |
| RV and marine | RV and marine | 127 | | | 5 | | | | 105 | | | 5 | | | RV and marine | 145 | | | 7 | | | 5 | | | 143 | | | 7 | | | 4 | | |
| Other consumer | Other consumer | 147 | | | 1 | | | | 122 | | | 2 | | | Other consumer | 92 | | | 4 | | | 1 | | | 121 | | | 6 | | | 1 | | |
| Total consumer | Total consumer | 696 | | | 44 | | | | 568 | | | 45 | | | Total consumer | 694 | | | 32 | % | | 44 | % | | 697 | | | 33 | % | | 44 | % | |
| Total ALLL | Total ALLL | 2,110 | | | 100 | % | | | 2,030 | | | 100 | % | | Total ALLL | 2,177 | | | 2,121 | | | |
| AULC | AULC | 120 | | | | | | 77 | | | | | AULC | 165 | | | 150 | | | |
| Total ACL | Total ACL | $ | 2,230 | | | | $ | 2,107 | | | | Total ACL | $ | 2,342 | | | $ | 2,271 | | | |
| Total ALLL as a % of | Total ALLL as a % of | Total ALLL as a % of |
| Total loans and leases | Total loans and leases | | 1.79% | | | | 1.82% | | Total loans and leases | 1.80% | | 1.77% | | |
| Nonaccrual loans and leases | Nonaccrual loans and leases | | 351 | | | | 284 | | Nonaccrual loans and leases | 427 | | 373 | | |
| NPAs | NPAs | | 336 | | | | 271 | | NPAs | 391 | | 357 | | |
| Total ACL as % of | Total ACL as % of | Total ACL as % of |
| Total loans and leases | Total loans and leases | | 1.89% | | | | 1.89% | | Total loans and leases | 1.93% | | 1.90% | | |
| Nonaccrual loans and leases | Nonaccrual loans and leases | | 371 | | | | 294 | | Nonaccrual loans and leases | 459 | | 400 | | |
| NPAs | NPAs | | 355 | | | | 281 | | NPAs | 420 | | 382 | | |
|
(1)Percentages represent the percentage of each loan and lease category to total loans and leases.
At SeptemberJune 30, 2022,2023, the ACL was $2.2$2.3 billion, or 1.89%1.93% of total loans and leases, compared to $2.1$2.3 billion, or 1.89%1.90%, at December 31, 2021.2022. The consistent ACL as a percentage of total loans and leases reflects positive credit quality trends while recognizing the uncertainty in the near-term macroeconomic outlook. The increase in the total ACL was primarily driven by a combination of loan and lease growth.growth and modest deterioration in the current macro-economic forecast. The ACL coverage ratio at June 30, 2023 is reflective of the current macro-economic environment including recognition of the near-term recessionary risks.
222023 2Q Form 10-Q Huntington Bancshares Incorporated23
NCOs
The table below reflects NCO detail for each of the three-month periods ended September 30, 2022 and 2021:presented:
| | | | | | | | | | | | | | | | | |
| Table 15 - Quarterly Net Charge-off Analysis |
| Three Months Ended |
| September 30, | | | | | | | | September 30, |
| (dollar amounts in millions) | 2022 | | | | | | | | 2021 |
| Net charge-offs (recoveries) by loan and lease type: |
| Commercial: | | | | | | | | | |
| Commercial and industrial | $ | 16 | | | | | | | | | $ | 28 | |
| Commercial real estate | (3) | | | | | | | | | 7 | |
| Lease financing | 2 | | | | | | | | | 12 | |
| Total commercial | 15 | | | | | | | | | 47 | |
| Consumer: | | | | | | | | | |
| Residential mortgage | (1) | | | | | | | | | — | |
| Automobile | 3 | | | | | | | | | (4) | |
| Home equity | (2) | | | | | | | | | (3) | |
| RV and marine | 2 | | | | | | | | | — | |
| Other consumer | 27 | | | | | | | | | 15 | |
| Total consumer | 29 | | | | | | | | | 8 | |
| Total net charge-offs | $ | 44 | | | | | | | | | $ | 55 | |
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| Net charge-offs (recoveries) - annualized percentages: |
| Commercial: | | | | | | | | | |
| Commercial and industrial | 0.15 | % | | | | | | | | 0.28 | % |
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| Commercial real estate | (0.06) | | | | | | | | | 0.21 | |
| Lease financing | 0.17 | | | | | | | | | 0.87 | |
| Total commercial | 0.10 | | | | | | | | | 0.31 | |
| Consumer: | | | | | | | | | |
| Residential mortgage | (0.02) | | | | | | | | | — | |
| Automobile | 0.07 | | | | | | | | | (0.10) | |
| Home equity | (0.07) | | | | | | | | | (0.08) | |
| RV and marine | 0.17 | | | | | | | | | (0.01) | |
| Other consumer | 8.09 | | | | | | | | | 4.84 | |
| Total consumer | 0.22 | | | | | | | | | 0.07 | |
| Net charge-offs as a % of average loans and leases | 0.15 | % | | | | | | | | 0.20 | % |
2022 Third Quarter versus 2021 Third Quarter | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Table 13 - Net Charge-off Analysis | | | | |
| Three months ended | | Six months ended |
| June 30, | | | | | | | | June 30, | | June 30, | | June 30, |
| (dollar amounts in millions) | 2023 | | | | | | | | 2022 | | 2023 | | 2022 |
| Net charge-offs (recoveries) by loan and lease type: | | | | |
| Commercial: | | | | | | | | | | | | | |
| Commercial and industrial | $ | 20 | | | | | | | | | $ | (4) | | | $ | 36 | | | $ | (27) | |
| Commercial real estate | 7 | | | | | | | | | (4) | | | 25 | | | 4 | |
| Lease financing | — | | | | | | | | | (3) | | | (5) | | | 2 | |
| Total commercial | 27 | | | | | | | | | (11) | | | 56 | | | (21) | |
| Consumer: | | | | | | | | | | | | | |
| Residential mortgage | 1 | | | | | | | | | (1) | | | 1 | | | (1) | |
| Automobile | 3 | | | | | | | | | — | | | 8 | | | — | |
| Home equity | — | | | | | | | | | (2) | | | (1) | | | (3) | |
| RV and marine | 2 | | | | | | | | | 1 | | | 4 | | | 4 | |
| Other consumer | 16 | | | | | | | | | 21 | | | 38 | | | 48 | |
| Total consumer | 22 | | | | | | | | | 19 | | | 50 | | | 48 | |
| Total net charge-offs | $ | 49 | | | | | | | | | $ | 8 | | | $ | 106 | | | $ | 27 | |
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| Net charge-offs (recoveries) - annualized percentages: | | | | |
| Commercial: | | | | | | | | | | | | | |
| Commercial and industrial | 0.15 | % | | | | | | | | (0.04) | % | | 0.14 | % | | (0.12) | % |
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| Commercial real estate | 0.23 | | | | | | | | | (0.13) | | | 0.37 | | | 0.06 | |
| Lease financing | — | | | | | | | | | (0.24) | | | (0.19) | | | 0.08 | |
| Total commercial | 0.16 | | | | | | | | | (0.07) | | | 0.16 | | | (0.07) | |
| Consumer: | | | | | | | | | | | | | |
| Residential mortgage | 0.01 | | | | | | | | | (0.02) | | | 0.01 | | | (0.01) | |
| Automobile | 0.10 | | | | | | | | | — | | | 0.12 | | | — | |
| Home equity | (0.02) | | | | | | | | | (0.08) | | | (0.02) | | | (0.05) | |
| RV and marine | 0.13 | | | | | | | | | 0.10 | | | 0.16 | | | 0.15 | |
| Other consumer | 5.17 | | | | | | | | | 6.60 | | | 5.76 | | | 7.53 | |
| Total consumer | 0.17 | | | | | | | | | 0.15 | | | 0.19 | | | 0.19 | |
| Net charge-offs as a % of average loans and leases | 0.16 | % | | | | | | | | 0.03 | % | | 0.17 | % | | 0.05 | % |
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NCOs were an annualized 0.15%0.16% of average loans and leases in the current quarter, downup from 0.20%0.03% in the 2021 third2022 second quarter. NCOs for the commercial portfolios showed improvement,were higher, with annualized net charge-offs of 0.10%0.16% in the current quarter, compared to 0.31%net recoveries of 0.07% in the year-ago quarter.quarter, reflecting the continued normalization of net charge-offs. Consumer charge-offs were modestly higher in the quarter, compared to the year-ago quarter.
NCOs were an annualized 0.17% of average loans and leases for the first six-month period of 2023, up from 0.05% in the year ago period. NCOs for the commercial portfolios were higher with annualized net charge-offs of 0.16% in the current period compared to net recoveries of 0.07% in the year-ago period. Consumer charge-offs remained consistent in the period, compared to the year-ago period.
2022 3Q Form 10-Q 2423 Huntington Bancshares Incorporated
The table below reflects NCO detail for the nine-month periods ended September 30, 2022 and 2021:
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| Table 16 - Year to Date Net Charge-off Analysis |
| (dollar amounts in millions) | | | |
| Nine months ended September 30, |
| 2022 | | 2021 |
| Net charge-offs (recoveries) by loan and lease type: | | | |
| Commercial: | | | |
| Commercial and industrial | $ | (11) | | | $ | 93 | |
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| Commercial real estate | 1 | | | 21 | |
| Lease financing | 4 | | | 41 | |
| Total commercial | (6) | | | 155 | |
| Consumer: | | | |
| Residential mortgage | (2) | | | — | |
| Automobile | 3 | | | (6) | |
| Home equity | (5) | | | (4) | |
| RV and marine | 6 | | | 3 | |
| Other consumer | 75 | | | 33 | |
| Total consumer | 77 | | | 26 | |
| Total net charge-offs | $ | 71 | | | $ | 181 | |
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| Net charge-offs (recoveries) - annualized percentages: | | | |
| Commercial: | | | |
| Commercial and industrial | (0.04) | % | | 0.35 | % |
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| Commercial real estate | 0.01 | | | 0.27 | |
| Lease financing | 0.11 | | | 1.64 | |
| Total commercial | (0.01) | | | 0.42 | |
| Consumer: | | | |
| Residential mortgage | (0.01) | | | — | |
| Automobile | 0.03 | | | (0.06) | |
| Home equity | (0.06) | | | (0.05) | |
| RV and marine | 0.16 | | | 0.09 | |
| Other consumer | 7.72 | | | 4.07 | |
| Total consumer | 0.20 | | | 0.08 | |
| Net charge-offs as a % of average loans | 0.08 | % | | 0.26 | % |
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2022 First Nine Months versus 2021 First Nine Months
NCOs decreased $110 million in the first nine-month period of 2022 to $71 million. NCOs for the commercial portfolios showed improvement, with annualized net recoveries of 0.01% in the current period compared to annualized net charge-offs of 0.42% in the year-ago period. Consumer charge-offs were higher in the period, compared to the year-ago period.
Market Risk
(This section should be read in conjunction with the “Market Risk” section appearing in Huntington’s 20212022 Annual Report on Form 10-K for our on-going market risk management processes.)
Market risk refers to potential losses arising from changes in interest rates, foreign exchange rates, equity prices and commodity prices, including the correlation among these factors and their volatility. When the value of an instrument is tied to such external factors, the holder faces market risk. We are primarily exposed to interest rate risk as a result of offering a wide array of financial products to our customers and secondarily to price risk from trading securities, securities owned by our broker-dealer subsidiaries, foreign exchange positions, equity investments, and investments in securities backed by mortgage loans.
24 Huntington Bancshares Incorporated
We measure market risk exposure via financial simulation models, which provide management with insights on the potential impact to net interest income and other key metrics as a result of changes in market interest rates. Models are used to simulate cash flows and accrual characteristics of the balance sheet based on assumptions regarding the slope or shape of the yield curve, the direction and volatility of interest rates, and the changing composition and characteristics of the balance sheet resulting from strategic objectives and customer behavior. AssumptionsOur models incorporate market-based assumptions that include the impact of changing interest rates on prepayment rates of assets and runoff rates of deposits. The models provide insight on forecasted balance sheet growthalso include our projections of the future volume and composition, and the pricing and maturity characteristics of current and future business.various business lines.
In measuring the financial risks associated with interest rate sensitivity in our balance sheet, we compare a set of alternative interest rate scenarios to the results of a base case scenario derived using market forward rates. The market forward reflects the market consensus regarding the future level and slope of the yield curve across a range of tenor points. The standard set of interest rate scenarios includes two types: “shock” scenarios which are immediate parallel rate shifts, and “ramp” scenarios where the parallel shift is applied gradually over the first 12 months of the forecast on a pro rata basis. In both shock and ramp scenarios with falling rates, we presume that market rates will not go below 0%. The scenarios are inclusive of all executed interest rate risk hedging activities. Forward starting hedges are included to the extent that they have been transacted and that they start within the measurement horizon.
We use two approaches to model interest rate risk: Net interest income at risk (NII at risk) and economic value of equity at risk modeling sensitivity analysis (EVE at Risk).
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| Table 17 - Net Interest Income at Risk |
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| | Net Interest Income at Risk (%) |
| Basis point change scenario | -100 | | | | +100 | | +200 |
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| September 30, 2022 | -2.1 | | | | | 2.2 | | | 4.3 | |
| December 31, 2021 | -4.2 | | | | | 4.6 | | | 8.9 | |
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| Table 14 - Net Interest Income at Risk |
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| | Net Interest Income at Risk (%) |
| Basis point change scenario | -200 | | -100 | | | | +100 | | +200 |
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| At June 30, 2023 | -5.4 | | | -2.6 | | | | | 2.8 | | | 6.4 | |
| At December 31, 2022 | -4.1 | | | -2.0 | | | | | 2.0 | | | 4.0 | |
NII at Risk is used by management to measure the risk and impact to earnings over the next 12 months, using a variety of interest rate scenarios. The NII at Risk results included in the table above reflect the analysis used monthly by management. It models gradual “ramp” -200, -100, +100 and +200 basis point parallel shift scenarios, implied by the forward yield curve over the next twelve12 months.
The NII at Risk shows that the balance sheet is asset sensitive at both SeptemberJune 30, 2022,2023, and December 31, 2021. The2022. A key driver of the change in sensitivity is primarily driven bycan be attributed to hedging activity, which has supported an increase to asset sensitivity in rising rate scenarios, while minimizing the impact to falling rate scenarios. Other drivers to the change in sensitivity include changes in the funding mix, deposit modeling assumptions, and market rates.
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| Table 15 - Economic Value of Equity at Risk |
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| | Economic Value of Equity at Risk (%) |
| Basis point change scenario | -200 | | -100 | | | | +100 | | +200 |
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| At June 30, 2023 | 0.3 | | | 1.4 | | | | | -3.3 | | | -7.4 | |
| At December 31, 2022 | 9.0 | | | 5.9 | | | | | -8.0 | | | -17.3 | |
EVE at Risk provides a sensitivity analysis on shareholder’s equity for longer-term interest rate expectations, andrisk in the size and mix of the balance sheet.
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| Table 18 - Economic Value of Equity at Risk |
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| | Economic Value of Equity at Risk (%) |
| Basis point change scenario | -100 | | | | +100 | | +200 |
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| September 30, 2022 | 6.4 | | | | | -8.5 | | | -17.9 | |
| December 31, 2021 | -4.6 | | | | | -1.5 | | | -5.6 | |
banking book. The EVE results included in the table above reflect the analysis used monthly by management. It models immediate -200, -100, +100 and +200 basis point parallel “shock” scenarios.
The change in sensitivity from December 31, 20212022 was driven primarily by updated deposit modeling assumptions, market rates and continued yield curve inversion, as well as changes in the spot market rate curve extending the duration of the securities portfoliofunding mix and shortening the duration of liabilities.hedging activity.
We have LIBOR-based exposure in the form of variable rate loans, derivatives, Series B preferred stock, long term debt and other securities and financial arrangements. To address the discontinuance of LIBOR, in its current form, we established a LIBOR transition team and project plan under the oversight of the CRO and CFO, providing periodic updates to the ROC. Huntington has outstanding LIBOR-based instruments that mature after June 30, 2023, including, loans and leases and notional derivatives. Contract remediation efforts coordinated by the LIBOR transition team are scheduled for completion bycomplete as of June 2023. Upon the discontinuation of LIBOR, all loans and leases that reference LIBOR have transitioned to a SOFR-based replacement rate as set forth in the related contract. For further details on the transition of notional derivatives, refer to the Use of Derivatives to Manage Interest Rate Risk section below. Source systems have been updated to support alternative reference rates. At this time alternative reference rates are predominantly SOFR based. As such, we have developed a SOFR-enabled interest rate risk monitoring framework and a strategy for managing interest rate risk during the transition from LIBOR to SOFR. We continue to monitor market developments and legislative and regulatory updates.
Use of Derivatives to Manage Interest Rate Risk
An integral component of our interest rate risk management strategy is the use of derivative instruments to minimize significant fluctuations in earnings caused by changes in market interest rates. Examples of derivative instruments that we may use as part of our interest rate risk management strategy include interest rate swaps, caps and floors, collars, forward contracts, and forward starting interest rate swaps.
Table 1916 shows all swap, swaption, swaption collar and floor positions that are utilized for purposes of managing our exposures to the variability of interest rates. The interest rates variability may impact either the fair value of the assets and liabilities or impact the cash flows attributable to net interest margin. These positions are used to protect the fair value of asset and liabilities by converting the contractual interest rate on a specified amount of assets and liabilities (i.e., notional amounts) to another interest rate index. The positions are also used to hedge the variability in cash flows attributable to the contractually specified interest rate by converting the variable rate index into a fixed rate. The volume, maturity and mix of derivative positions change frequently as we adjust our broader interest rate risk management objectives and the balance sheet positions to be hedged. For further information, including the notional amount and fair values of these derivatives, refer to Note 1413 “Derivative Financial Instruments” of the Notes to Unaudited Condensed Consolidated Financial Statements. During the second quarter of 2023, all cleared derivatives that referenced LIBOR have transitioned from LIBOR to a SOFR-based replacement rate in accordance with the conventions established by the applicable clearinghouse. Upon the discontinuation of LIBOR, all over-the-counter derivatives that reference LIBOR will transition to a SOFR-based replacement rate as set forth in the related contract. Those derivatives that do not have a clearly defined or practicable replacement benchmark rate set forth in the related contract will use the LIBOR Act to replace LIBOR with a SOFR-based rate established by FRB rulemaking. For every LIBOR referenced instrument with a reset date after the LIBOR cessation date, counterparties would receive a LIBOR referenced instrument maturing on the first reset date after the LIBOR cessation date, and a forward starting SOFR instrument. The following tables present additional information aboutinstruments received through the interest rate swapstransition are economically similar to the instruments held prior to the transition. The LIBOR referenced instruments seen in the table below are those instruments that were received in the transition and floors usedhave a corresponding forward starting SOFR referenced instrument. Both instruments are included in Huntington’s asset and liability management activities at September 30, 2022 and December 31, 2021.
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| Table 19 - Weighted-Average Maturity, Receive Rate and SOFR/LIBOR Reset Rate on Asset Liability Management Instruments |
| September 30, 2022 |
| | | Average Maturity (years) | | | | Weighted-Average Fixed Rate | | Weighted-Average Reset Rate |
| (dollar amounts in millions) | Notional Value | | | Fair Value | | |
| Asset conversion swaps | | | | | | | | | |
| Receive Fixed - Pay 1 month LIBOR | $ | 7,875 | | | 1.66 | | | $ | (399) | | | 1.21 | % | | 2.70 | % |
| Receive Fixed - Pay SOFR | 6,400 | | | 3.55 | | | (303) | | | 2.38 | | | 2.35 | |
| Pay Fixed - Receive 1 month LIBOR (1) | 7,585 | | | 4.04 | | | 829 | | | 0.90 | | | 3.04 | |
| Pay Fixed - Receive SOFR | 366 | | | 7.27 | | | 52 | | | 1.46 | | | 2.29 | |
| Receive Fixed - Pay SOFR - forward starting (2) | 4,050 | | | 4.96 | | | (177) | | | 2.63 | | | — | |
| Pay Fixed - Receive 1 month LIBOR - forward starting (3) | 530 | | | 6.29 | | | 67 | | | 1.44 | | | — | |
| Pay Fixed - Receive SOFR - forward starting (1) (4) | 1,816 | | | 6.21 | | | 85 | | | 2.10 | | | — | |
| Liability conversion swaps | | | | | | | | | |
| Receive Fixed - Pay 1 month LIBOR | 1,430 | | | 2.10 | | | (59) | | | 2.01 | | | 2.75 | |
| Receive Fixed - Pay SOFR | 4,299 | | | 5.52 | | | (199) | | | 2.73 | | | 2.70 | |
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| Purchased swaption collars | | | | | | | | | |
| Purchased Interest Rate Swaption Collars (5) | 4,000 | | | 0.31 | | | (65) | | | 2.37 / 3.67 | | — | |
| Basis Swaps | | | | | | | | | |
| Pay SOFR- Receive Fed Fund (economic hedges) (6) | 230 | | | 2.91 | | | — | | | 3.08 | | | 2.97 | |
| Pay Fed Fund - Receive SOFR (economic hedges) (6) | 41 | | | 0.23 | | | — | | | 2.96 | | | 3.08 | |
| Total swap portfolio (7) | $ | 38,622 | | | | | $ | (169) | | | | | |
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26 Huntington Bancshares Incorporated
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| December 31, 2021 |
| | | Average Maturity (years) | | | | Weighted-Average
Fixed Rate | | Weighted-Average
Reset Rate |
| (dollar amounts in millions) | Notional Value | | | Fair Value | | |
| Asset conversion swaps | | | | | | | | | |
| Receive Fixed - Pay 1 month LIBOR | $ | 10,775 | | | 1.88 | | | $ | 58 | | | 1.38 | % | | 0.11 | % |
| Pay Fixed - Receive 1 month LIBOR (1) | 1,625 | | | 8.83 | | | 34 | | | 1.08 | | | 0.10 | |
| Pay Fixed - Receive SOFR | 67 | | | 7.98 | | | — | | | 1.32 | | | — | |
| Pay Fixed - Pay 1 month LIBOR - forward starting (8) | 6,500 | | | 3.97 | | | 78 | | | 0.90 | | | — | |
| Pay Fixed - Receive SOFR - forward starting (8) | 36 | | | 7.32 | | | — | | | 1.29 | | | — | |
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| Liability conversion swaps | | | | | | | | | |
| Receive Fixed - Pay 1 month LIBOR | 1,928 | | | 2.16 | | | 54 | | | 2.13 | | | 0.10 | |
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| Basis Swaps | | | | | | | | | |
| Pay SOFR- Receive Fed Fund (economic hedges) (5) | 230 | | | 3.66 | | | — | | | 0.08 | | | 0.06 | |
| Pay Fed Fund - Receive SOFR (economic hedges) (5) | 41 | | | 0.98 | | | — | | | 0.05 | | | 0.08 | |
| Total swap portfolio | $ | 21,202 | | | | | $ | 224 | | | | | |
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| December 31, 2021 |
| | | Average Maturity (years) | | | | Weighted-Average
Floor Strike | | Weighted-Average
Reset Rate |
| (dollar amounts in millions) | Notional Value | | | Fair Value | | |
| Interest rate floors | | | | | | | | | |
| Purchased Interest Rate Floors - 1 month LIBOR | $ | 375 | | | 0.06 | | | $ | 2 | | | 1.93 | % | | 0.10 | % |
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| Total floors portfolio | $ | 375 | | | | | $ | 2 | | | | | |
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| Table 16 - Weighted-Average Maturity, Receive Rate and SOFR/LIBOR Reset Rate on Asset Liability Management Instruments |
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| | | Average Maturity (years) | | | | Weighted-Average Fixed Rate | | Weighted-Average Reset Rate |
| (dollar amounts in millions) | Notional Value | | | Fair Value | | |
| At June 30, 2023 | | | | | | | | | |
| Asset conversion swaps | | | | | | | | | |
| Securities (1): | | | | | | | | | |
| Pay Fixed - Receive 1 month LIBOR (2) | $ | 7,908 | | | 0.06 | | | $ | 17 | | | 0.94 | % | | 5.16 | % |
| Pay Fixed - Receive SOFR | 2,883 | | | 4.21 | | | 154 | | | 2.54 | | | 5.07 | |
| Pay Fixed - Receive SOFR - forward starting (3) | 8,836 | | | 3.95 | | | 768 | | | 1.14 | | | — | |
| Loans: | | | | | | | | | |
| Receive Fixed - Pay SOFR - forward starting (4) | 2,950 | | | 2.77 | | | (92) | | | 1.97 | | | — | |
| Receive Fixed - Pay 1 month LIBOR (2) | 1,550 | | | 0.04 | | | (5) | | | 1.13 | | | 5.18 | |
| Receive Fixed - Pay SOFR | 10,350 | | | 3.43 | | | (462) | | | 2.74 | | | 5.07 | |
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| Liability conversion swaps | | | | | | | | | |
| Receive Fixed - Pay 1 month LIBOR (2) | 1,331 | | | 0.03 | | | 2 | | | 2.01 | | | 5.19 | |
| Receive Fixed - Pay SOFR | 6,240 | | | 4.44 | | | (256) | | | 3.16 | | | 3.49 | |
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| Receive Fixed - Pay SOFR - forward starting (5) | 1,331 | | | 1.35 | | | (53) | | | 2.01 | | | — | |
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| Purchased floors | | | | | | | | | |
| Purchased Floor Spread - SOFR (6) | 5,000 | | | 2.79 | | | 37 | | | 3.97 / 2.97 | | — | |
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| Pay SOFR- Receive Fed Fund (economic hedges) (7) | 174 | | | 3.08 | | | — | | | 5.07 | | | 5.07 | |
| Pay Fed Fund - Receive SOFR (economic hedges) (7) | 1 | | | 12.31 | | | — | | | 5.11 | | | 5.07 | |
| Purchased swaptions | | | | | | | | | |
| Pay Fixed - Receive SOFR Swaptions (economic hedges) | 9,550 | | | 0.59 | | | 48 | | | 4.59 | | | — | |
| Total swap portfolio | $ | 58,104 | | | | | $ | 158 | | | | | |
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| At December 31, 2022 | | | | | | | | | |
| Asset conversion swaps | | | | | | | | | |
| Securities (1): | | | | | | | | | |
| Pay Fixed - Receive 1 month LIBOR | $ | 8,024 | | | 3.89 | | | $ | 834 | | | 0.93 | % | | 4.37 | % |
| Pay Fixed - Receive SOFR | 366 | | | 7.02 | | | 49 | | | 1.46 | | | 3.82 | |
| Pay Fixed - Receive 1 month LIBOR - forward starting (8) | 91 | | | 7.31 | | | 12 | | | 1.62 | | | — | |
| Pay Fixed - Receive SOFR - forward starting (9) | 1,926 | | | 6.17 | | | 85 | | | 2.17 | | | — | |
| Loans: | | | | | | | | | |
| Receive Fixed - Pay SOFR - forward starting (10) | 2,950 | | | 4.91 | | | (109) | | | 2.64 | | | — | |
| Receive Fixed - Pay 1 month LIBOR | 7,875 | | | 1.41 | | | (390) | | | 1.21 | | | 4.20 | |
| Receive Fixed - Pay SOFR | 8,700 | | | 3.55 | | | (351) | | | 2.57 | | | 3.90 | |
| Liability conversion swaps | | | | | | | | | |
| Receive Fixed - Pay 1 month LIBOR | 1,430 | | | 1.85 | | | (60) | | | 2.01 | | | 4.25 | |
| Receive Fixed - Pay SOFR | 6,299 | | | 4.91 | | | (201) | | | 3.16 | | | 3.36 | |
| Purchased swaption collars | | | | | | | | | |
| Purchased Interest Rate Swaption Collars (6) | 4,800 | | | 0.27 | | | (6) | | | 2.87 / 4.05 | | — | |
| Basis swaps | | | | | | | | | |
| Pay SOFR- Receive Fed Fund (economic hedges) (7) | 174 | | | 3.58 | | | — | | | 4.33 | | | 4.31 | |
| Pay Fed Fund - Receive SOFR (economic hedges) (7) | 1 | | | 12.81 | | | — | | | 4.35 | | | 4.33 | |
| Total swap portfolio | $ | 42,636 | | | | | $ | (137) | | | | | |
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(1)Amounts include interest rate swaps as fair value hedges of fixed-rate investment securities using the portfolio layer method.
(2)Forward starting swaps effective startingLIBOR swap instruments are instruments received from October 2022 toLIBOR transition of clearinghouses and mature in July 2024.2023.
(3)Forward starting swaps effective starting from July 2023 to October 2022 to February 2023.2027.
(4)Forward starting swaps effective starting from JanuaryJuly 2023 to October 2027.January 2025.
(5)Forward starting swaps effective July 2023.
(6)The weighted average fixed rates for thefloor spread and swaption collars are the weighted average strike rates for the upper and lower bounds of the collars.instruments.
(6)(7)Swaps have variable pay and variable receive resets. Weighted Average Fixed Rateaverage fixed fate column represents pay rate reset.
(7)LIBOR swap instruments that remain outstanding in July 2023 will transition to a SOFR-based rate.
(8)Forward starting swaps effective starting from January 20222023 to February 2023.
(9)Forward starting swaps effective starting from January 2023 to October 2027.
(10)Forward starting swaps effective starting from January 2023 to July 2024.
During the six months ended June 30, 2023, we entered into $9.6 billion of interest rate swaptions with an average strike price of 4.59% to reduce the impact on capital from rising rates. These swaptions are economic hedges of interest rate risk attributable to our investment securities with the change in value of these instruments recorded in other noninterest income.
MSRs
At SeptemberJune 30, 2022,2023, we had a total of $486$505 million of capitalized MSRs representing the right to service $32.0$32.7 billion in mortgage loans.
MSR fair values are sensitive to movements in interest rates as expected future net servicing income depends on the projected outstanding principal balances of the underlying loans, which can be reduced by prepayments and declines in credit quality. Prepayments usually increase when mortgage interest rates decline and decrease when mortgage interest rates rise. We also employ hedging strategies to reduce the risk of MSR fair value changes or impairment. However, volatile changes in interest rates can diminish the effectiveness of these economic hedges. We report changes in the MSR value net of hedge-related trading activity in the mortgage banking income category of noninterest income.
MSR assets are included in servicing rights and other intangible assets in the Unaudited Condensed Consolidated Financial Statements.
Price Risk
Price risk represents the risk of loss arising from adverse movements in the prices of financial instruments that are carried at fair value and are subject to fair value accounting. We have price risk from trading securities, securities owned by our broker-dealer subsidiaries, foreign exchange positions, derivative instruments, and equity investments. We have established loss limits on the trading portfolio, on the amount of foreign exchange exposure that can be maintained, and on the amount of marketable equity securities that can be held.
Liquidity Risk
(This section should be read in conjunction with the “Liquidity Risk” section appearing in Huntington’s 20212022 Annual Report on Form 10-K for our on-going liquidity risk management processes.)
Our primary sourceLiquidity risk is the possibility of us being unable to meet current and future financial obligations in a timely manner. The goal of liquidity management is ourto ensure adequate, stable, reliable, and cost-effective sources of funds to satisfy changes in loan and lease demand, unexpected levels of deposit withdrawals, investment opportunities, and other contractual obligations. We consider core earnings, strong capital ratios, and credit quality essential for maintaining high credit ratings, which allows us cost-effective access to market-based liquidity. We mitigate liquidity risk by maintaining liquid assets in the form of cash and cash equivalents and securities. In addition, we maintain a large, stable core deposit base. Core deposits comprised approximately 97%base and a diversified base of total deposits at September 30, 2022. We also havereadily available unused wholesale funding sources, of liquidity, including advances from the FHLB through pledged borrowing capacity, issuance through dealers in the capital markets, and access to certificates of deposit issued through brokers. Liquidity risk is further provided by unencumbered, or unpledged, investment securities that totaled $12.2 billion as of September 30, 2022.
Bank Liquidityreviewed and Sources of Funding
Our primary sources of fundingmanaged continuously for the Bank are consumer and commercial core deposits.the parent company, as well as its subsidiaries. At SeptemberJune 30, 2022, these core deposits funded 79% of total assets (120% of total loans). Other2023, management believes current sources of liquidity are sufficient to meet Huntington’s on and off-balance sheet obligations.
28 Huntington Bancshares Incorporated
We maintain a contingency funding plan that provides for liquidity stress testing, which assesses the potential erosion of funds in the event of an institution-specific event or systemic financial market crisis. Examples of institution specific events could include non-corea downgrade in our public credit rating by a rating agency, a large charge to earnings, declines in profitability or other financial measures, declines in liquidity sources including reductions in deposit balances or access to contingent funding sources, or a significant merger or acquisition. Examples of systemic events unrelated to us that could have an effect on our access to liquidity would be terrorism or war, natural disasters, political events, seizure of a major financial institution, or the default or bankruptcy of a major, corporation, mutual fund, or hedge fund. Similarly, market speculation or rumors about us, or the banking industry in general, may adversely affect the cost and availability of normal funding sources. The contingency funding plan outlines the process for addressing a liquidity crisis and provides for an evaluation of funding sources under various market conditions. It also assigns specific roles and responsibilities and communication protocols for effectively managing liquidity through a problem period.
Our largest source of liquidity on a consolidated basis is core deposits, FHLB advances, wholesale debt instruments,which provide stable and securitizations. Demand deposit overdrafts that have been reclassified as loan balanceslower-cost funding. Core deposits were $21 million$142.9 billion at June 30, 2023 which comprised 97% of total deposits, compared to $142.1 billion, and $29 million96% of total deposits, at September 30, 2022 and December 31, 2021, respectively.2022. The $728 million increase in core deposits, compared to December 31, 2022, was primarily driven by an increase in consumer core deposits, partially offset by a decrease in commercial core deposits driven by shifts to off-balance sheet liquidity solutions we provide for our customers. Our core deposits come from a base of primary bank customer relationships and we continue to focus on acquiring and deepening those relationships resulting in our granular and diversified deposit base.
The following table reflects deposit composition detail.
| | Table 20 - Deposit Composition | | |
| | Table 17 - Deposit Composition | | Table 17 - Deposit Composition | |
| | September 30, | | December 31, | | | |
| (dollar amounts in millions) | (dollar amounts in millions) | 2022 | | 2021 | | (dollar amounts in millions) | At June 30, 2023 | | At December 31, 2022 | |
| By Type: | | | | | |
| Total deposits by type: | | Total deposits by type: | | | | |
| Demand deposits—noninterest-bearing | Demand deposits—noninterest-bearing | $ | 40,762 | | | 28 | % | | $ | 43,236 | | | 30 | % | | Demand deposits—noninterest-bearing | $ | 33,340 | | | 23 | % | | $ | 38,242 | | | 26 | % | |
| Demand deposits—interest-bearing | Demand deposits—interest-bearing | 43,673 | | | 30 | | | 39,837 | | | 28 | | | Demand deposits—interest-bearing | 40,387 | | | 27 | | | 43,136 | | | 29 | | |
| Money market deposits | Money market deposits | 33,811 | | | 23 | | | 32,522 | | | 23 | | | Money market deposits | 40,534 | | | 28 | | | 36,082 | | | 24 | | |
| Savings and other domestic deposits | Savings and other domestic deposits | 21,274 | | | 15 | | | 21,088 | | | 15 | | | Savings and other domestic deposits | 18,294 | | | 12 | | | 20,357 | | | 14 | | |
| Core certificates of deposit (1) | Core certificates of deposit (1) | 2,115 | | | 1 | | | 2,740 | | | 2 | | | Core certificates of deposit (1) | 10,314 | | | 7 | | | 4,324 | | | 3 | | |
| Total core deposits: | Total core deposits: | 141,635 | | | 97 | | | 139,423 | | | 98 | | | Total core deposits: | 142,869 | | | 97 | | | 142,141 | | | 96 | | |
| Other domestic deposits of $250,000 or more | Other domestic deposits of $250,000 or more | 186 | | | — | | | 359 | | | — | | | Other domestic deposits of $250,000 or more | 381 | | | — | | | 220 | | | — | | |
| Negotiable CDs, brokered and other deposits | Negotiable CDs, brokered and other deposits | 4,492 | | | 3 | | | 3,481 | | | 2 | | | Negotiable CDs, brokered and other deposits | 4,778 | | | 3 | | | 5,553 | | | 4 | | |
| | Total deposits | Total deposits | $ | 146,313 | | | 100 | % | | $ | 143,263 | | | 100 | % | | Total deposits | $ | 148,028 | | | 100 | % | | $ | 147,914 | | | 100 | % | |
| | | Total core deposits: | Total core deposits: | | | | | | | | | Total core deposits: | | |
| Commercial | Commercial | $ | 65,151 | | | 46 | % | | $ | 61,521 | | | 44 | % | | Commercial | $ | 61,450 | | | 43 | % | | $ | 64,107 | | | 45 | % | |
| Consumer | Consumer | 76,484 | | | 54 | | | 77,902 | | | 56 | | | Consumer | 81,419 | | | 57 | | | 78,034 | | | 55 | | |
| Total core deposits | Total core deposits | $ | 141,635 | | | 100 | % | | $ | 139,423 | | | 100 | % | | Total core deposits | $ | 142,869 | | | 100 | % | | $ | 142,141 | | | 100 | % | |
| | Total deposits (insured/uninsured): | | Total deposits (insured/uninsured): | | |
| Insured deposits | | Insured deposits | $ | 104,912 | | | 71 | % | | $ | 100,631 | | | 68 | % | |
| | Uninsured deposits (2) | | Uninsured deposits (2) | 43,116 | | | 29 | | | 47,283 | | | 32 | | |
| | Total deposits | | Total deposits | $ | 148,028 | | | 100 | % | | $ | 147,914 | | | 100 | % | |
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(1)Includes consumer certificates of deposit of $250,000 or more.
(2)Represents consolidated Huntington uninsured deposits, determined by adjusting the amounts reported in the Bank Call Report (FFIEC 031) by inter-company deposits, which are not customer deposits and are therefore eliminated through consolidation. As of June 30, 2023, the Bank Call Report uninsured deposit balance was reported gross at $58.0 billion, which includes $3.8 billion of inter-company parent affiliate deposits and $11.1 billion of inter-company bank subsidiary deposits. As of December 31, 2022, the Bank Call Report uninsured deposit balance was $50.9 billion, which includes $3.6 billion of inter-company parent affiliate deposits and excludes $33.7 billion of inter-company bank subsidiary deposits.
Cash and cash equivalents were $11.1 billion and $6.7 billion at June 30, 2023 and December 31, 2022, respectively. The $4.4 billion increase in cash and cash equivalents is primarily due to an increase in interest-bearing deposits at the Federal Reserve Bank maintainsto support short-term liquidity.
Total securities were $40.9 billion at June 30, 2023, compared to $41.3 billion at December 31, 2022. The $434 million decrease in securities compared to December 31, 2022, was primarily due to runoff and sales, partially offset by an increase in FHLB stock during the period. At June 30, 2023, the duration of the securities portfolio was 4.7 years, or 3.7 years net of hedging. Securities are pledged to secure borrowing capacity atwith the FHLB and the Federal Reserve, discussed further in the Bank Discount Window. The Bank does not consider borrowing capacity from the Federal Reserve Bank Discount Window as a primary sourceLiquidity and Sources of liquidity. Total loans andFunding section below. At June 30, 2023, securities pledged to the Federal Reserve Bank Discount Window and the FHLB are $89.6 billion at September 30, 2022.
At September 30, 2022, the carryingwith market value of investment securities pledged: (i) to secure public and trust deposits, trading account liabilities, U.S. Treasury demand notes, and security repurchase agreements, and (ii) to support borrowing capacity, totaled $28.0 billion. There$6.5 billion were no securities of a single issuer, which are not governmental or government-sponsored, that exceeded 10% of shareholders’ equity at September 30, 2022.unpledged.
To the extent we are unable to obtain sufficient liquidity through core deposits, we may meet our liquidity needs through sources of wholesale funding, asset securitization or sale. Sources of wholesale funding include other domestic deposits of $250,000 or more, negotiable CDs, brokered and other deposits, short-term borrowings, and long-term debt. Our wholesale funding for both the Bank and parent company totaled $15.3$21.6 billion at SeptemberJune 30, 2022,2023, compared to $11.3$17.5 billion at December 31, 2021.2022. The increase from year-end is primarily due to increasesan increase in long-term FHLB borrowings. As of June 30, 2023, long-term FHLB borrowings brokered funds,have a weighted average life of 2.2 years.
Bank Liquidity and senior debt.Sources of Funding
Our primary sources of funding for the Bank are consumer and commercial core deposits. At June 30, 2023, these core deposits funded 76% of total assets (118% of total loans and leases). To the extent we are unable to obtain sufficient liquidity through core deposits and cash and cash equivalents, we may meet our liquidity needs through sources of wholesale funding and asset securitization or sale.
The Bank maintains borrowing capacity at both the FHLB and the Federal Reserve secured by pledged loans and securities. The Bank does not consider borrowing capacity at the Federal Reserve a primary source of funding, however, it could be used as a potential source of liquidity in a stressed environment or during a market disruption. At June 30, 2023, the Bank’s available contingent borrowing capacity at the FHLB and Federal Reserve totaled $77.2 billion, compared to $53.5 billion at December 31, 2022. The increase reflects our optimization of contingent borrowing capacity through the pledge of incremental assets. The amount of available contingent borrowing capacity may fluctuate based on the level of borrowings outstanding and level of assets pledged.
Following the first quarter 2023 bank failures, the Federal Reserve Bank established the Bank Term Funding Program as an additional source of available liquidity to support depository institutions through pledging qualifying assets as collateral. The Bank has taken steps to support readiness but has not participated through June 30, 2023.
At SeptemberJune 30, 2022,2023, we believe the Bank has sufficient liquidity and capital resources to meet its cash flow obligations over the next 12 months and for the foreseeable future.
28 Huntington Bancshares Incorporated
Parent Company Liquidity
The parent company’s funding requirements consist primarily of dividends to shareholders, debt service, income taxes, operating expenses, funding of nonbank subsidiaries, repurchases of our stock, and acquisitions. The parent company obtains funding to meet obligations from dividends and interest received from the Bank, interest and dividends received from direct subsidiaries, net taxes collected from subsidiaries included in the federal consolidated tax return, fees for services provided to subsidiaries, and the issuance of debt securities.
The parent company had $3.9$3.7 billion and $2.8$3.5 billion at SeptemberJune 30, 20222023 and December 31, 20212022 in cash and cash equivalents, respectively.
On October 20, 2022,July 19, 2023, our Board of Directors declared a quarterly common stock cash dividend of $0.155 per common share. The dividend is payable on January 3,October 2, 2023, to shareholders of record on December 19, 2022.September 18, 2023. Based on the current quarterly dividend of $0.155 per common share, cash demands required for common stock dividends are estimated to be approximately $224 million per quarter. Additionally, on October 20, 2022,July 19, 2023, our Board of Directors declared a quarterly Series B, Series E, Series F, Series G, Series H, and Series HJ Preferred Stock dividend payable on January 17,October 16, 2023 to shareholders of record on JanuaryOctober 1, 2023. On September 19, 2022,June 15, 2023, our Board of Directors declared a quarterly dividend for the Series I Preferred Stock payable on DecemberSeptember 1, 20222023 to shareholders of record on NovemberAugust 15, 2022.2023. Total cash demands required for Series B, Series E, Series F, Series G, Series H and Series Ipreferred stock dividends are expected to be approximately $29$38 million per quarter.
During the first ninesix months of 2022,2023, the Bank paid preferred and common dividends to the parent company of $34$22 million and $907$753 million, respectively. To meet any additional liquidity needs, the parent company may issue debt or equity securities.
30 Huntington Bancshares Incorporated
At SeptemberJune 30, 2022,2023, we believe the Company has sufficient liquidity and capital resources to meet its cash flow obligations over the next 12 months and for the foreseeable future.
Off-Balance Sheet Arrangements
In the normal course of business, we enter into various off-balance sheet arrangements. These arrangements include commitments to extend credit, interest rate swaps, caps and floors, swaption collars, financial guarantees contained in standby letters-of-credit issued by the Bank, and commitments by the Bank to sell mortgage loans.
Operational Risk
Operational risk is the risk of loss due to human error, third-party performance failures, inadequate or failed internal systems and controls, including the use of financial or other quantitative methodologies that may not adequately predict future results; violations of, or noncompliance with, laws, rules, regulations, prescribed practices, or ethical standards; and external influences such as market conditions, fraudulent activities, disasters, failed business contingency plans and security risks. We continuously strive to strengthen our system of internal controls to ensure compliance with significant contracts, agreements, laws, rules, and regulations, and to improve the oversight of our operational risk.
We actively monitor cyber threatscyberattacks such as attempts related to online deception and loss of sensitive customer data. We evaluate internal systems, processes, and controls to mitigate loss from cyber-attackscyberattacks and, to date, have not experienced any material losses. Cybersecurity threats have increased, primarily through phishing campaigns. We are actively monitoring our email gateways for malicious phishing email campaigns. We have also increased our cybersecurity and fraud monitoring activities through the implementation of specific monitoring of remote connections by geography and volume of connections to detect anomalous remote logins, since a significant portion of our workforce has the option to work remotely.
Our objective for managing cyber security risk is to avoid or minimize the impacts of external threat events or other efforts to penetrate our systems. We work to achieve this objective by hardening networks and systems against attack, and by diligently managing visibility and monitoring controls within our data and communications environment to recognize events and respond before the attacker has the opportunity to plan and execute on its own goals. To this end we employ a set of defense in-depth strategies, which include efforts to make us less attractive as a target and less vulnerable to threats, while investing in threat analytic capabilities for rapid detection and response. Potential concerns related to cyber security may be escalated to our board-level Technology Committee, as appropriate. As a complement to the overall cyber security risk management, we use a number of internal training methods, both formally through mandatory courses and informally through written communications and other updates. Internal policies and procedures have been implemented to encourage the reporting of potential phishing attacks or other security risks. We also use third-party services to test the effectiveness of our cyber security risk management framework, and any such third parties are required to comply with our policies regarding information security and confidentiality.
To govern operational risks, we have an Operational Risk Committee, a Legal, Regulatory, and Compliance Committee, a Funds Movement Committee, and a Third Party Risk Management Committee. The responsibilities of these committees, among other duties, include establishing and maintaining management information systems to monitor material risks and to identify potential concerns, risks, or trends that may have a significant impact and ensuring that recommendations are developed to address the identified issues. In addition, we have a Model Risk Oversight Committee that is responsible for policies and procedures describing how model risk is evaluated and managed and the application of the governance process to implement these practices throughout the enterprise. These committees report any significant findings and remediation recommendations to the Risk Management Committee. Potential concerns may be escalated to our ROC and our Audit Committee, as appropriate. Significant findings or issues are escalated by the Third Party Risk Management Committee to the Technology Committee of the Board of Directors, as appropriate.
The goal of this framework is to implement effective operational risk-monitoring; minimize operational, fraud, and legal losses; minimize the impact of inadequately designed models and enhance our overall performance.
Compliance Risk
Financial institutions are subject to many laws, rules, and regulations at both the federal and state levels. These broad-based laws, rules, and regulations include, but are not limited to, expectations relating to anti-money laundering, lending limits, client privacy, fair lending, prohibitions against unfair, deceptive, or abusive acts or practices, protections for military members as they enter active duty, and community reinvestment. The volume and complexity of recent regulatory changes have increased our overall compliance risk. As such, we utilize various resources to help ensure expectations are met, including a team of compliance experts dedicated to ensuring our conformance with all applicable laws, rules, and regulations. Our colleagues receive training for several broad-based laws and regulations including, but not limited to, anti-money laundering and customer privacy. Additionally, colleagues engaged in lending activities receive training for laws and regulations related to flood disaster protection, equal credit opportunity, fair lending, and/or other courses related to the extension of credit. We hold ourselves to a high standard for adherence to compliance management and seek to continuously enhance our performance.
Capital
We consider disciplined capital management as a key objective. Both regulatory capital and shareholders’ equity are managed at the Bank and on a consolidated basis. We have an active program for managing capital and maintain a comprehensive process for assessing our overall capital adequacy. We believe our current levels of both regulatory capital and shareholders’ equity are adequate.
30 Huntington Bancshares Incorporated
The following table presents certain regulatory capital data at both the consolidated and Bank levels for each of the periods presented:
| | Table 21 - Regulatory Capital Data (1) | | | | | |
| Table 18 - Regulatory Capital Data (1) | | Table 18 - Regulatory Capital Data (1) | | |
| | (dollar amounts in millions) | (dollar amounts in millions) | | | September 30, 2022 | | | December 31,
2021 | | (dollar amounts in millions) | | | At June 30, 2023 | | At December 31, 2022 | |
| Total risk-weighted assets | Total risk-weighted assets | Consolidated | | $ | 138,759 | | | | $ | 131,266 | | | Total risk-weighted assets | Consolidated | | $ | 141,432 | | | $ | 141,940 | | |
| | Bank | | 138,790 | | | | 130,597 | | | | Bank | | 141,320 | | | 141,571 | | |
| CET 1 risk-based capital | Consolidated | | 12,859 | | | | 12,249 | | | |
| CET1 risk-based capital | | CET1 risk-based capital | Consolidated | | 13,885 | | | 13,290 | | |
| | Bank | | 14,019 | | | | 13,261 | | | | Bank | | 14,617 | | | 14,133 | | |
| Tier 1 risk-based capital | Tier 1 risk-based capital | Consolidated | | 15,036 | | | | 14,426 | | | Tier 1 risk-based capital | Consolidated | | 16,379 | | | 15,467 | | |
| | Bank | | 15,217 | | | | 14,445 | | | | Bank | | 15,830 | | | 15,334 | | |
| Tier 2 risk-based capital | Tier 2 risk-based capital | Consolidated | | 3,078 | | | | 2,821 | | | Tier 2 risk-based capital | Consolidated | | 3,161 | | | 3,106 | | |
| | Bank | | 2,284 | | | | 1,982 | | | | Bank | | 2,368 | | | 2,313 | | |
| Total risk-based capital | Total risk-based capital | Consolidated | | 18,114 | | | | 17,246 | | | Total risk-based capital | Consolidated | | 19,540 | | | 18,573 | | |
| | Bank | | 17,501 | | | | 16,427 | | | | Bank | | 18,198 | | | 17,647 | | |
| CET 1 risk-based capital ratio | Consolidated | | 9.27 | % | | | 9.33 | % | | |
| CET1 risk-based capital ratio | | CET1 risk-based capital ratio | Consolidated | | 9.82 | % | | 9.36 | % | |
| | Bank | | 10.10 | | | | 10.15 | | | | Bank | | 10.34 | | | 9.98 | | |
| Tier 1 risk-based capital ratio | Tier 1 risk-based capital ratio | Consolidated | | 10.84 | | | | 10.99 | | | Tier 1 risk-based capital ratio | Consolidated | | 11.58 | | | 10.90 | | |
| | Bank | | 10.96 | | | | 11.06 | | | | Bank | | 11.20 | | | 10.83 | | |
| Total risk-based capital ratio | Total risk-based capital ratio | Consolidated | | 13.05 | | | | 13.14 | | | Total risk-based capital ratio | Consolidated | | 13.82 | | | 13.09 | | |
| | Bank | | 12.61 | | | | 12.58 | | | | Bank | | 12.88 | | | 12.47 | | |
| Tier 1 leverage ratio | Tier 1 leverage ratio | Consolidated | | 8.51 | | | | 8.56 | | | Tier 1 leverage ratio | Consolidated | | 9.01 | | | 8.60 | | |
| | Bank | | 8.63 | | | | 8.60 | | | | Bank | | 8.40 | | | 8.54 | | |
(1) Huntington elected to temporarily delay certain effects of CECL on regulatory capital for two years, followed by a three-year transition period which began January 1, 2022 pursuant to a rule that allows bank holding companies and banks to delay for two years 100% of the day-one impact of adopting CECL and 25% of the cumulative change in the reported allowance for credit losses since adopting CECL. As of SeptemberJune 30, 2023 and December 31, 2022, we have phased in 50% and 25%, respectively, of the cumulative CECL deferral with the remaining impact to be recognized over the remainder of the three-year transition period.
At SeptemberJune 30, 2022,2023, at both the consolidated and Bank level, we maintained Basel III capital ratios in excess of the well-capitalized standards established by the FRB.Federal Reserve. The decreaseincrease in regulatorythe consolidated CET1 risk-based capital ratiosratio, compared to the prior year end, was primarily driven by dividends, risk-weighted asset growth and goodwill recognized,current period earnings, partially offset by earnings.dividends and the CECL transitional amount.
32 Huntington Bancshares Incorporated
Shareholders’ Equity
We generate shareholders’ equity primarily through the retention of earnings, net of dividends and share repurchases. Other potential sources of shareholders’ equity include issuances of common and preferred stock. Our objective is to maintain capital at an amount commensurate with our risk appetite and risk tolerance objectives, to meet both regulatory and market expectations, and to provide the flexibility needed for future growth and business opportunities.
Shareholders’ equity totaled $17.1$18.8 billion at SeptemberJune 30, 2022, a decrease2023, an increase of $2.2$1.1 billion, or 11%6%, when compared with December 31, 2021.2022. The decreaseincrease was primarily driven by the higher rate environment causing an increase in accumulated other comprehensive loss, partially offset by earnings, net of dividends.dividends, and the issuance of perpetual preferred stock.
Huntington is authorized to make capital distributions that are consistent with the requirements in the FRB’sFederal Reserve’s capital rule, inclusive of the SCB requirement. As of September 30, 2022, Huntington’s SCB requirement was 2.5%associated with its 2022 Capital Plan is 3.3%, whichand is effective for the minimum under the SCB framework.period of October 1, 2022 through September 30, 2023. On April 5, 2022,2023, Huntington submitted its 20222023 Capital Plan to the Federal Reserve for supervisory review. By notice dated August 4, 2022,June 28, 2023, the Federal Reserve informed Huntington that its finalindicative SCB requirement associated with its 20222023 Capital Plan is 3.3%3.2%, and is effective for the period of October 1, 20222023 through September 30, 2023.
Share Repurchases
From time to time our Board of Directors authorizes the Company to repurchase shares of our common stock. Although we announce when the Board of Directors authorizes share repurchases, we typically do not give any public notice before we repurchase our shares. Future stock repurchases may be private or open-market repurchases, including block transactions, accelerated or delayed block transactions, forward transactions, and similar transactions. Various factors determine the amount and timing of our share repurchases, including our capital requirements, the number of shares we expect to issue for employee benefit plans and acquisitions, market conditions (including the trading price of our stock), and regulatory and legal considerations.
On January 18, 2023, our Board authorized the repurchase of up to $1.0 billion of common shares within the eight quarter period ending December 31, 2024, subject to the Federal Reserve’s capital regulations. Purchases of common stock under the authorization may include open market purchases, privately negotiated transactions, and accelerated share repurchase programs. During the six months ended June 30, 2023, Huntington repurchased no shares of common stock under the current repurchase authorization. As part of the 2023 capital plan and our 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.
BUSINESS SEGMENT DISCUSSION
Overview
Our business segments are basedTo align with our strategic priorities, during the second quarter 2023, we completed an organizational realignment and now report on our internally-aligned segment leadership structure, which is how we monitor results and assess performance. We have four majortwo business segments: Commercial Banking, Consumer and Business Banking, Vehicle Finance, and& Regional Banking and The Huntington Private Client Group (RBHPCG).Commercial Banking. The Treasury / Other function includes technology and operations, other unallocated assets, liabilities, revenue, and expense. Huntington’s business segments are based on our internally-aligned segment leadership structure, which is how management monitors results and assesses performance. The organizational realignment primarily involved consolidating our previously reported Consumer and Business Banking, Vehicle Finance and RBHPCG, into one new business segment called Consumer & Regional Banking. Prior period results have been adjusted to conform to the new segment presentation.
Following is a description of our business segments and the Treasury/Other function:
Consumer & Regional Banking - The Consumer & Regional Banking segment provides a wide array of financial products and services to consumer and business customers including, but not limited to, deposits, lending, payments, mortgage banking, dealer financing, investment management, trust, brokerage, insurance, and other financial products and services. We serve our customers through our network of channels, including branches, online banking, mobile banking, telephone banking, and ATMs.
We have a “Fair Play” banking philosophy: providing differentiated products and services, built on a strong foundation of customer friendly products and advocacy. Our brand resonates with consumers and businesses, helping us acquire new customers and deepen relationships with current customers. Our Fair Play banking suite of products includes 24-Hour Grace®, Perks and Asterisk-Free Checking®, Money Scout℠, $50 Safety Zone℠, Standby Cash®, Early Pay, Instant Access, The Hub, and Huntington Heads Up®.
Consumer & Regional Banking offers a comprehensive set of digitally powered consumer and business financial solutions to Consumer Lending, Regional Banking, Branch Banking, and Wealth Management customers.
Consumer Lending provides direct and indirect consumer loans, as well as dealer finance loans and deposits. The direct consumer loan products, including mortgage and home equity, are originated through branch, online, and third-party channels. Indirect consumer loans are originated through deep relationships with dealerships to finance consumer purchases of automobiles, recreational vehicles, marine craft, and powersports. We also provide dealer finance loans (including floorplan loans), deposits, and other financial products to these dealerships and their owners.
Regional Banking, along with our business and specialty banking offerings, is a dynamic part of our business and we are committed to being the bank of choice for businesses in our markets. Regional Banking is defined as serving small to mid-sized businesses. Beyond conventional lending solutions, Huntington offers access to capital markets, practice finance and SBA lending capabilities. We are the #1 SBA lender in the nation in units as of federal fiscal year end September 30, 2022. In addition, our payments business provides credit and debit cards and treasury management services to our customers. Huntington continues to develop products and services that are designed specifically to meet the needs of business customers and looks for ways to help companies find solutions to their financing needs.
Branch Banking provides a full range of financial products and services to consumer and business customers through our extensive branch and ATM network. The branch network offers full-service branches that are primarily located in Ohio, Colorado, Illinois, Indiana, Kentucky, Michigan, Minnesota, Pennsylvania, West Virginia, and Wisconsin.
Wealth Management has a comprehensive product offering, including private banking, wealth management and legacy planning through investment and portfolio management, fiduciary administration and trust services, institutional custody services, and full-service retail brokerage investments.
Commercial Banking - The Commercial Banking segment provides expertise through bankers, capabilities, and digital channels, and includes a comprehensive set of product offerings. Our target clients span from mid-market to large corporates across a national footprint. The Commercial Banking segment leverages internal partnerships for wealth management, trust, insurance, payments, and treasury management capabilities. In particular, our payments capabilities continue to expand as we develop unique solutions for our diverse client segments, including Huntington ChoicePay. This segment includes customers in Middle Market Banking, Corporate, Specialty, and Government Banking, Asset Finance, Commercial Real Estate Banking, and Capital Markets.
Middle Market Banking serves the banking needs of mid-sized clients who reside in our geographic footprint. We leverage our local presence to serve our clients, extending our full suite of banking products including lending, liquidity, treasury management and other payment services, and capital markets.
Corporate, Specialty, and Government Banking serves medium to large enterprises. We focus on specific industry verticals such as government and non-profits, healthcare, technology and telecommunications, franchises, financial sponsors, and global services. Our expertise in these markets allows us to uniquely serve our clients’ sophisticated banking, capital markets, and payments requirements.
Asset Finance serves our clients’ capital expenditure and working capital needs through equipment financing, asset-based lending, distribution finance, structured lending, and municipal financing solutions. Our relationship with large manufacturers is bolstered by a strong commitment to their dealers and financing needs.
Commercial Real Estate Banking provides banking solutions to commercial real estate developers and institutional sponsors across the nation. Within this group, Huntington Community Development improves the quality of life for our communities and the residents of low-to-moderate income neighborhoods by developing and delivering innovative products and services to support affordable housing and neighborhood stabilization, including tax credit investments.
34 Huntington Bancshares Incorporated
Capital Markets delivers corporate risk management, institutional sales and trading, capital and equity raising, and advisory services.
Treasury / Other - The Treasury / Other function includes technology and operations, other unallocated assets, liabilities, revenue, and expense.
Business segment results are determined based upon our management practices, which assigns balance sheet and income statement items to each of the business segments. The process is designed around our organizational and management structure and, accordingly, the results derived are not necessarily comparable with similar information published by other financial institutions.
Revenue Sharing
Revenue is recorded in the business segment responsible for the related product or service. Fee sharing is recorded to allocate portions of such revenue to other business segments involved in selling to or providing service to customers. Results of operations for the business segments reflect these fee sharing allocations.
Expense Allocation
The management process that develops the business segment reporting utilizes various estimates and allocation methodologies to measure the performance of the business segments. Expenses are allocated to business segments using a two-phase approach. The first phase consists of measuring and assigning unit costs (activity-based costs) to activities related to product origination and servicing. These activity-based costs are then extended, based on volumes, with the resulting amount allocated to business segments that own the related products. The second phase consists of the allocation of overhead costs to all fourthe business segments from Treasury / Other. We utilize a full-allocation methodology, where all Treasury / Other expenses, except reported acquisition-related expenses, if any, and a small amount of other residual unallocated expenses, are allocated to the four business segments.
Funds Transfer Pricing (FTP)
We use an active and centralized FTP methodology to attribute appropriate net interest income to the business segments. The intent of the FTP methodology is to transfer interest rate risk from the business segments by providing modeled duration funding of assets and liabilities. The result is to centralize the financial impact, management, and reporting of interest rate risk in the Treasury / Other function where it can be centrally monitored and managed. The Treasury / Other function charges (credits) an internal cost of funds for assets held in (or pays for funding provided by) each business segment. The FTP rate is based on prevailing market interest rates for comparable duration assets (or liabilities).
Net Income by Business Segment
Net income by business segment for the six-month periods ending June 30, 2023 and June 30, 2022 is presented in the following table:
| | | | | | | | | | | |
| Table 19 - Net Income by Business Segment |
| | Six months ended June 30, |
| (dollar amounts in millions) | 2023 | | 2022 |
| Consumer & Regional Banking | $ | 1,086 | | | $ | 313 | |
| Commercial Banking | 657 | | | 555 | |
| | | |
| | | |
| | | |
| Treasury / Other | (582) | | | 131 | |
| Net income attributable to Huntington | $ | 1,161 | | | $ | 999 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Consumer & Regional Banking | | | | | | |
| | | | | | | | | | | | | |
| Table 20 - Key Performance Indicators for Consumer & Regional Banking | | | | | | |
| | Six months ended June 30, | | Change | | | | | | |
| (dollar amounts in millions) | 2023 | | 2022 | | Amount | | Percent | | | | | | |
| Net interest income | $ | 2,358 | | | $ | 1,341 | | | $ | 1,017 | | | 76 | % | | | | | | |
| Provision for credit losses | 110 | | | 167 | | | (57) | | | (34) | | | | | | | |
| Noninterest income | 646 | | | 674 | | | (28) | | | (4) | | | | | | | |
| Noninterest expense | 1,519 | | | 1,452 | | | 67 | | | 5 | | | | | | | |
| Provision for income taxes | 289 | | | 83 | | | 206 | | | NM | | | | | | |
| Net income attributable to Huntington | $ | 1,086 | | | $ | 313 | | | $ | 773 | | | NM | | | | | | |
| Number of employees (average full-time equivalent) | 11,868 | | | 12,038 | | | (170) | | | (1) | % | | | | | | |
| Total average assets | $ | 70,361 | | | $ | 68,627 | | | $ | 1,734 | | | 3 | | | | | | | |
| Total average loans/leases | 64,497 | | | 62,085 | | | 2,412 | | | 4 | | | | | | | |
| Total average deposits | 104,373 | | | 106,457 | | | (2,084) | | | (2) | | | | | | | |
| Net interest margin | 4.48 | % | | 2.49 | % | | 1.99 | % | | 80 | | | | | | | |
| NCOs | $ | 69 | | | $ | 56 | | | $ | 13 | | | 23 | | | | | | | |
| NCOs as a % of average loans and leases | 0.21 | % | | 0.18 | % | | 0.03 | % | | 17 | | | | | | | |
| Total assets under management (in billions)—eop | $ | 22.8 | | | $ | 21.0 | | | $ | 1.8 | | | 9 | | | | | | | |
| Total trust assets (in billions)—eop | 156.7 | | | 129.3 | | | 27.4 | | | 21 | | | | | | | |
Consumer & Regional Banking reported net income of $1.1 billion in the six-month period of 2023, an increase of $773 million compared to the year-ago period. Segment net interest income increased $1.0 billion, or 76%, primarily due to a 199 basis point increase in NIM driven by the higher rate environment. The provision for credit losses decreased $57 million, or 34%, primarily due to consumer recessionary risk profiles added in second quarter 2022. Average loans and leases increased $2.4 billion, or 4%. Average deposits decreased $2.1 billion, or 2%. Noninterest income decreased $28 million, or 4%, primarily due to decreases in service charges primarily reflecting impact from program changes, lower mortgage banking income primarily reflecting lower salable volume, and in gain on sale of loans resulting from the strategic decision to retain the guaranteed portion of SBA loans at origination, partially offset by a $57 million gain on the sale of our RPS business and an increase in card and payment processing income. Noninterest expense increased $67 million, or 5%, primarily due to gains from branch sales in the six-month period of 2022, higher personnel expense, and increased overhead allocations.
36 Huntington Bancshares Incorporated
Net Income by Business Segment
Net income (loss) by business segment for the nine-month periods ending September 30, 2022 and September 30, 2021 is presented in the following table:
| | | | | | | | | | | |
| Table 22 - Net Income by Business Segment |
| | Nine Months Ended September 30, |
| (dollar amounts in millions) | 2022 | | 2021 |
| Commercial Banking | $ | 812 | | | $ | 446 | |
| Consumer and Business Banking | 427 | | | 231 | |
| Vehicle Finance | 161 | | | 243 | |
| RBHPCG | 73 | | | 47 | |
| Treasury / Other | 120 | | | (73) | |
| Net income | $ | 1,593 | | | $ | 894 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Commercial Banking | | | | | |
| | | | | | | | | | | | |
| Table 23 - Key Performance Indicators for Commercial Banking | | | | | |
| | Nine Months Ended September 30, | | Change | | | | | |
| (dollar amounts in millions) | 2022 | | 2021 | | Amount | | Percent | | | | | |
| Net interest income | $ | 1,339 | | | $ | 873 | | | $ | 466 | | | 53 | % | | | | | |
| Provision for credit losses | 9 | | | 107 | | | (98) | | | (92) | | | | | | |
| Noninterest income | 473 | | | 353 | | | 120 | | | 34 | | | | | | |
| Noninterest expense | 767 | | | 553 | | | 214 | | | 39 | | | | | | |
| Provision for income taxes | 217 | | | 119 | | | 98 | | | 82 | | | | | | |
| Income attributable to non-controlling interest | 7 | | | 1 | | | 6 | | | NM | | | | | |
| Net income | $ | 812 | | | $ | 446 | | | $ | 366 | | | 82 | % | | | | | |
| Number of employees (average full-time equivalent) | 2,109 | | | 1,652 | | | 457 | | | 28 | % | | | | | |
| Total average assets | $ | 58,886 | | | $ | 40,941 | | | $ | 17,945 | | | 44 | | | | | | |
| Total average loans/leases | 51,364 | | | 34,995 | | | 16,369 | | | 47 | | | | | | |
| Total average deposits | 35,061 | | | 28,475 | | | 6,586 | | | 23 | | | | | | |
| Net interest margin | 3.31 | % | | 3.11 | % | | 0.20 | % | | 6 | | | | | | |
| NCOs | $ | (13) | | | $ | 116 | | | $ | (129) | | | (111) | | | | | | |
| NCOs as a % of average loans and leases | (0.03) | % | | 0.44 | % | | (0.47) | % | | (107) | | | | | | |
2022 First Nine Months versus 2021 First Nine Months | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Commercial Banking | | | | | |
| | | | | | | | | | | | |
| Table 21 - Key Performance Indicators for Commercial Banking | | | | | |
| | Six months ended June 30, | | Change | | | | | |
| (dollar amounts in millions) | 2023 | | 2022 | | Amount | | Percent | | | | | |
| Net interest income | $ | 1,140 | | | $ | 837 | | | $ | 303 | | | 36 | % | | | | | |
| Provision for credit losses | 67 | | | (75) | | | 142 | | | NM | | | | | |
| Noninterest income | 323 | | | 290 | | | 33 | | | 11 | | | | | | |
| Noninterest expense | 552 | | | 494 | | | 58 | | | 12 | | | | | | |
| Provision for income taxes | 177 | | | 149 | | | 28 | | | 19 | | | | | | |
| Income attributable to non-controlling interest | 10 | | | 4 | | | 6 | | | NM | | | | | |
| Net income attributable to Huntington | $ | 657 | | | $ | 555 | | | $ | 102 | | | 18 | % | | | | | |
| Number of employees (average full-time equivalent) | 2,240 | | | 2,026 | | | 214 | | | 11 | % | | | | | |
| Total average assets | $ | 64,477 | | | $ | 57,532 | | | $ | 6,945 | | | 12 | | | | | | |
| Total average loans/leases | 56,148 | | | 50,229 | | | 5,919 | | | 12 | | | | | | |
| Total average deposits | 36,019 | | | 33,451 | | | 2,568 | | | 8 | | | | | | |
| Net interest margin | 3.92 | % | | 3.19 | % | | 0.73 | % | | 23 | | | | | | |
| NCOs | $ | 36 | | | $ | (28) | | | $ | 64 | | | NM | | | | | |
| NCOs as a % of average loans and leases | 0.13 | % | | (0.11) | % | | 0.24 | % | | NM | | | | | |
Commercial Banking reported net income of $812$657 million in the nine-monthsix-month period of 2022,2023, compared to $446$555 million in the year-ago period. Segment net interest income increased $466$303 million, or 53%36%, primarily due to an increase in average loans and leases, reflecting the impact of the June 2021 acquisition of TCF and organic loan growth, in addition to a 20-basis73 basis point increase in NIM. The increase in NIM, was driven by the higher rate environment resulting in an increase in spreads and an increase in net interest income from purchase accounting accretion.average loans and leases, partially offset by an increase in average deposits. The provision for credit losses decreased $98increased $142 million, primarily due to the initial provision for credit losses recognizedreserve releases in second quarter of 2022 along with modest deterioration in the second quarter 2021 related tomacroeconomic environment in the TCF acquisition.current period. Noninterest income increased $120$33 million, or 34%11%, reflecting the impact of the TCF acquisition in additionprimarily due to an increase in capital markets fees, primarily reflectingdue to higher advisory fees interest rate derivative fees, loan syndication fees, and foreign exchange fees. Noninterest expense increased $214 million, or 39%, primarily reflectingsupported by the impact of the TCF and Capstone Partners acquisitions, which led to higher personnel costsacquisition, partially offset by lower service charges on deposit accounts and allocated overhead.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Consumer and Business Banking | | | | | | |
| | | | | | | | | | | | | |
| Table 24 - Key Performance Indicators for Consumer and Business Banking | | | | | | |
| | Nine Months Ended September 30, | | Change | | | | | | |
| (dollar amounts in millions) | 2022 | | 2021 | | Amount | | Percent | | | | | | |
| Net interest income | $ | 1,701 | | | $ | 1,187 | | | $ | 514 | | | 43 | % | | | | | | |
| Provision for credit losses | 138 | | | 57 | | | 81 | | | 142 | | | | | | | |
| Noninterest income | 785 | | | 780 | | | 5 | | | 1 | | | | | | | |
| Noninterest expense | 1,807 | | | 1,617 | | | 190 | | | 12 | | | | | | | |
| Provision for income taxes | 114 | | | 62 | | | 52 | | | 84 | | | | | | | |
| Net income | $ | 427 | | | $ | 231 | | | $ | 196 | | | 85 | % | | | | | | |
| Number of employees (average full-time equivalent) | 9,510 | | | 8,905 | | | 605 | | | 7 | % | | | | | | |
| Total average assets | $ | 38,416 | | | $ | 35,470 | | | $ | 2,946 | | | 8 | | | | | | | |
| Total average loans/leases | 32,059 | | | 30,640 | | | 1,419 | | | 5 | | | | | | | |
| Total average deposits | 94,548 | | | 76,806 | | | 17,742 | | | 23 | | | | | | | |
| Net interest margin | 2.38 | % | | 2.03 | % | | 0.35 | % | | 17 | | | | | | | |
| NCOs | $ | 79 | | | $ | 68 | | | $ | 11 | | | 16 | | | | | | | |
| NCOs as a % of average loans and leases | 0.33 | % | | 0.30 | % | | 0.03 | % | | 10 | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
2022 First Nine Months versus 2021 First Nine Months
Consumer and Business Banking, including Home Lending, reported net income of $427 milliona decrease in the nine-month period of 2022, an increase of $196leasing revenue. Noninterest expense increased $58 million, or 85%, compared to the year-ago period. Segment net interest income increased $514 million, or 43%12%, primarily due to an increase in average earnings assetspersonnel costs reflecting the impact of the June 2021Capstone Partners acquisition of TCF and a 35 basis point increase in NIM driven by the higher rate environment, partially offset by a decrease in accelerated PPP loan fees recognized upon forgiveness payments from the SBA. The provision for credit losses increased $81 million to $138 million, primarily due to an increase in loan growth. Noninterest income increased $5 million, or 1%, reflecting the impact of the TCF acquisition and gains from SBA sales in 2022, partially offset by decreased mortgage banking income primarily reflecting lower secondary marketing spreads and lower salable volume. Noninterest expense increased $190 million, or 12%, primarily reflecting the impact of the TCF acquisition largely driven by higher personnel expense reflecting an increase in the number of FTE employees and allocated overhead.
Home Lending, an operating unit of Consumer and Business Banking, reflects the result of the origination, sale, and servicing of mortgage loans less referral fees and net interest income for mortgage banking products distributed by the retail branch network and other business segments. Home Lending reported net income of $112 million in the nine-month period of 2022, compared with net income of $80 million in the year-ago period. Net interest income increased $73 million, primarily due to the impact of the TCF acquisition, reduction in prepayment activity and increased retention. The provision for credit losses decreased $44 million, primarily due to general economic improvements whilst still recognizing near-term recessionary risks. Noninterest income decreased $98 million, driven primarily by lower secondary marketing spreads and lower salable volume.
34 Huntington Bancshares Incorporated
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Vehicle Finance | | | | | |
| | | | | | | | | | | | |
| Table 25 - Key Performance Indicators for Vehicle Finance | | | | | |
| | Nine Months Ended September 30, | | Change | | | | | |
| (dollar amounts in millions) | 2022 | | 2021 | | Amount | | Percent | | | | | |
| Net interest income | $ | 357 | | | $ | 340 | | | $ | 17 | | | 5 | % | | | | | |
| Provision (benefit) for credit losses | 36 | | | (77) | | | 113 | | | 147 | | | | | | |
| Noninterest income | 10 | | | 9 | | | 1 | | | 11 | | | | | | |
| Noninterest expense | 127 | | | 119 | | | 8 | | | 7 | | | | | | |
| Provision for income taxes | 43 | | | 64 | | | (21) | | | (33) | | | | | | |
| Net income | $ | 161 | | | $ | 243 | | | $ | (82) | | | (34) | % | | | | | |
| Number of employees (average full-time equivalent) | 271 | | | 259 | | | 12 | | | 5 | % | | | | | |
| Total average assets | $ | 21,255 | | | $ | 19,593 | | | $ | 1,662 | | | 8 | | | | | | |
| Total average loans/leases | 21,503 | | | 19,836 | | | 1,667 | | | 8 | | | | | | |
| Total average deposits | 1,266 | | | 1,046 | | | 220 | | | 21 | | | | | | |
| Net interest margin | 2.22 | % | | 2.29 | % | | (0.07) | % | | (3) | | | | | | |
| NCOs | $ | 7 | | | $ | (3) | | | $ | 10 | | | 333 | | | | | | |
| NCOs as a % of average loans and leases | 0.04 | % | | (0.02) | % | | 0.06 | % | | 300 | | | | | | |
2022 First Nine Months versus 2021 First Nine Months
Vehicle Finance reported net income of $161 million in the nine-month period of 2022, a decrease of $82 million, compared to the year-ago period. Segment net interest income increased $17 million, or 5%, primarily due to an increase in average earning assets,full-time equivalent employees, partially offset by a 7 basis point decrease in the net interest margin. The provision for credit losses increased $113 million, primarily due to reserve releases in 2021 as the economic environment was improving, in addition to the risk of a near-term recession as the Federal Reserve raises rates attempting to lower inflation. Noninterest income was relatively unchanged from the year-ago period. Noninterestlease financing equipment depreciation, equipment expense, increased $8 million, or 7%, largely attributable to higher production related costs and geographic expansion.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Regional Banking and The Huntington Private Client Group | | | | | |
| | | | | | | | | | | | |
| Table 26 - Key Performance Indicators for Regional Banking and The Huntington Private Client Group | | | | | |
| | Nine Months Ended September 30, | | Change | | | | | |
| (dollar amounts in millions) | 2022 | | 2021 | | Amount | | Percent | | | | | |
| Net interest income | $ | 167 | | | $ | 113 | | | $ | 54 | | | 48 | % | | | | | |
| Provision for credit losses | 15 | | | 2 | | | 13 | | | 650 | | | | | | |
| Noninterest income | 181 | | | 165 | | | 16 | | | 10 | | | | | | |
| Noninterest expense | 241 | | | 217 | | | 24 | | | 11 | | | | | | |
| Provision for income taxes | 19 | | | 12 | | | 7 | | | 58 | | | | | | |
| Net income | $ | 73 | | | $ | 47 | | | $ | 26 | | | 55 | % | | | | | |
| Number of employees (average full-time equivalent) | 1,107 | | | 1,051 | | | 56 | | | 5 | % | | | | | |
| Total average assets | $ | 9,088 | | | $ | 7,278 | | | $ | 1,810 | | | 25 | | | | | | |
| Total average loans/leases | 8,798 | | | 6,982 | | | 1,816 | | | 26 | | | | | | |
| Total average deposits | 9,417 | | | 7,742 | | | 1,675 | | | 22 | | | | | | |
| Net interest margin | 2.30 | % | | 1.90 | % | | 0.40 | % | | 21 | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Total assets under management (in billions)—eop | $ | 20.2 | | | $ | 23.9 | | | $ | (3.7) | | | (16) | | | | | | |
| Total trust assets (in billions)—eop | 138.2 | | | 133.6 | | | 4.6 | | | 3 | | | | | | |
eop - End of Period
2022 First Nine Months versus 2021 First Nine Months
RBHPCG reported net income of $73 million for the first nine-month period of 2022, an increase of $26 million, or 55%, compared to the year-ago period. Segment net interest income increased $54 million, or 48%, primarily due to an increase in average earnings assetsoutside data and a 40 basis point increase in net interest margin, largely driven by higher benefit in deposit spreads. Average loans and leases increased $1.8 billion, or 26%, due to growth in both commercial and residential real estate mortgages, and the impact of the June 2021 acquisition of TCF. Average deposits increased $1.7 billion, or 22%, primarily related to the acquired TCF deposit portfolio and higher customer liquidity levels. The provision for credit losses increased $13 million, largely due to loan growth. Noninterest income increased $16 million, or 10%, reflecting higher sales production and the impact of the TCF acquisition. Total assets under management decreased 16% due to equity and bond market declines, partially offset by positive net asset flows. Noninterest expense increased $24 million primarily due to an increase in personnel expense impacted by the TCF acquisition and impacts of strategic initiative investments.other processing services.
Treasury / Other
The Treasury / Other function includes revenue and expense related to assets, liabilities, derivatives, (including the mark-to-market of interest rate caps in the first nine-month period of 2021), and equity not directly assigned or allocated to one of the fourtwo business segments. Assets include investment securities and bank owned life insurance.
Net interest income includes the impact of administering our investment securities portfolios, the net impact of derivatives used to hedge interest rate sensitivity as well as the financial impact associated with our FTP methodology, as described above. Noninterest income includes miscellaneous fee income not allocated to other business segments, such as bank owned life insurance income and securities and trading asset gains or losses. Noninterest expense includes certain corporate administrative, acquisition-related expenses, if any, and other miscellaneous expenses not allocated to other business segments. The provision for income taxes for the business segments is calculated at a statutory 21% tax rate, although our overall effective tax rate is lower.
Treasury / Other reported a net loss of $582 million in the six-month period of 2023, a decrease of $713 million, compared to the year-ago period, driven by a decrease in net interest income, partially offset by a decrease in provision for income tax. Treasury / Other net interest income decreased $972 million, primarily due to an increase in FTP credit rates on deposits allocated to the business segments.
ADDITIONAL DISCLOSURES
Forward-Looking Statements
This report, including MD&A, contains certain forward-looking statements, including, but not limited to, certain plans, expectations, goals, projections, and statements, which are not historical facts and are subject to numerous assumptions, risks, and uncertainties. Statements that do not describe historical or current facts, including statements about beliefs and expectations, are forward-looking statements. Forward-looking statements may be identified by words such as expect, anticipate, believe, intend, estimate, plan, target, goal, or similar expressions, or future or conditional verbs such as will, may, might, should, would, could, or similar variations. The forward-looking statements are intended to be subject to the safe harbor provided by Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, and the Private Securities Litigation Reform Act of 1995.
While there is no assurance that any list of risks and uncertainties or risk factors is complete, below are certain factors which could cause actual results to differ materially from those contained or implied in the forward-looking statements: changes in general economic, political, or industry conditions; deterioration in business and economic conditions, including persistent inflation, supply chain issues or labor shortages, instability in global economic conditions and geopolitical matters, as well as volatility in financial markets; the magnitude and durationimpact of pandemics, including the COVID-19 pandemic and related variants and mutations, and their impact on the global economy and financial market conditions and our business, results of operations, and financial condition; the impacts related to or resulting from recent bank failures and other volatility, including potential increased regulatory requirements and costs, such as FDIC special assessments, long-term debt requirements and heightened capital requirements, and potential impacts to macroeconomic conditions, which could affect the ability of depository institutions, including us, to attract and retain depositors and to borrow or raise capital; unexpected outflows of uninsured deposits which may require us to sell investment securities at a loss; rising interest rates which could negatively impact the value of our portfolio of investment securities; the loss of value of our investment portfolio which could negatively impact market perceptions of us and could lead to deposit withdrawals; the effects of social media on market perceptions of us and banks generally; cybersecurity risks; uncertainty in U.S. fiscal and monetary policy, including the interest rate policies of the Federal Reserve Board;Reserve; volatility and disruptions in global capital and credit markets; movements in interest rates; reform oftransition away from LIBOR; competitive pressures on product pricing and services; success, impact, and timing of our business strategies, including market acceptance of any new products or services including those implementing our “Fair Play” banking philosophy; the nature, extent, timing, and results of governmental actions, examinations, reviews, reforms, regulations, and interpretations, including those related to the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Basel III regulatory capital reforms, as well as those involving the OCC, Federal Reserve, FDIC, and CFPB; the possibility that the anticipated benefits of the transaction with TCF are not realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of the two companies or as a result of the strength of the economy and competitive factors in the areas where Huntington does business; and other factors that may affect the future results of Huntington.
36 Huntington Bancshares Incorporated
All forward-looking statements speak only as of the date they are made and are based on information available at that time. Huntington does not assume any obligation to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements were made or to reflect the occurrence of unanticipated events except as required by federal securities laws. As forward-looking statements involve significant risks and uncertainties, caution should be exercised against placing undue reliance on such statements.
Non-GAAP Financial Measures
This document contains GAAP financial measures and non-GAAP financial measures where management believes it to be helpful in understanding our results of operations or financial position. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found herein.
Fully-Taxable Equivalent Basis
Interest income, yields, and ratios on aan FTE basis are considered non-GAAP financial measures. Management believes net interest income on aan FTE basis provides an insightful picture of the interest margin for comparison purposes. The FTE basis also allows management to assess the comparability of revenue arising from both taxable and tax-exempt sources. The FTE basis assumes a federal statutory tax rate of 21 percent. We encourage readers to consider the Unaudited Condensed Consolidated Financial Statements and other financial information contained in this Form 10-Q in their entirety, and not to rely on any single financial measure.
38 Huntington Bancshares Incorporated
Non-Regulatory Capital Ratios
In addition to capital ratios defined by banking regulators, the Company considers various other measures when evaluating capital utilization and adequacy, including:
•Tangible common equity to tangible assets,
•Tangible equity to tangible assets, and
•Tangible common equity to risk-weighted assets using Basel III definitions.
These non-regulatory capital ratios are viewed by management as useful additional methods of reflecting the level of capital available to withstand unexpected market conditions. Additionally, presentation of these ratios allows readers to compare our capitalization to other financial services companies. These ratios differ from capital ratios defined by banking regulators principally in that the numerator excludes goodwill and other intangible assets, the nature and extent of which varies among different financial services companies. These ratios are not defined in GAAP or federal banking regulations. As a result, these non-regulatory capital ratios disclosed by the Company are considered non-GAAP financial measures.
Because there are no standardized definitions for these non-regulatory capital ratios, the Company’s calculation methods may differ from those used by other financial services companies. Also, there may be limits in the usefulness of these measures to investors. As a result, we encourage readers to consider the Unaudited Condensed Consolidated Financial Statements and other financial information contained in this Form 10-Q in their entirety, and not to rely on any single financial measure.
Critical Accounting Policies and Use of Significant Estimates
Our Consolidated Financial Statements are prepared in accordance with GAAP. The preparation of financial statements in conformity with GAAP requires us to establish accounting policies and make estimates that affect amounts reported in our Consolidated Financial Statements. Note 1 of the Notes to Consolidated Financial Statements included in our 20212022 Annual Report on Form 10-K, as supplemented by this report including this MD&A, describes the significant accounting policies we used in our Consolidated Financial Statements.
An accounting estimate requires assumptions and judgments about uncertain matters that could have a material effect on the Consolidated Financial Statements. Estimates are made under facts and circumstances at a point in time, and changes in those facts and circumstances could produce results substantially different from those estimates. Our most significantcritical accounting policies include the allowance for credit losses, fair value measurement, and estimatesgoodwill. The policies, assumptions, and theirjudgments related applicationto fair value measurement and goodwill are discusseddescribed in our 2021the Critical Accounting Policies and Use of Significant Estimates section within the MD&A of Huntington’s 2022 Annual Report on Form 10-K, as supplemented by this report including this MD&A.
10-K. The following details the policies, assumption, and judgments related to the allowance for credit losses. Allowance for Credit Losses
Our ACL at SeptemberJune 30, 20222023 represents our current estimate of the lifetime credit losses expected from our loan and lease portfolio and our unfunded lending commitments. Management estimates the ACL by projecting probability of default, loss given default and exposure at default conditional on economic parameters, for the remaining contractual term. Internal factors that impact the quarterly allowance estimate include the level of outstanding balances, the portfolio performance and assigned risk ratings.
One of the most significant judgments influencing the ACL estimate is the macroeconomic forecasts. Key external economic parameters that directly impact our loss modeling framework include forecasted footprint unemployment rates and Gross Domestic Product.GDP. Changes in the economic forecasts could significantly affect the estimated credit losses, which could potentially lead to materially different allowance levels from one reporting period to the next.
Given the dynamic relationship between macroeconomic variables within our modeling framework, it is difficult to estimate the impact of a change in any one individual variable on the allowance. As a result, management uses a probability-weighted approach that incorporates a baseline, an adverse and a more favorable economic scenario when formulating the quantitative estimate.
However, to illustrate a hypothetical sensitivity analysis, management calculated a quantitative allowance using a 100% weighting applied to an adverse scenario. This scenario includes assumptions aroundcontemplates persisting inflation concerns at the Federal Reserve causing the federal funds rate to remain elevated through third quarter of 2023, ongoing banking industry uncertainty and the tightening of lending standards. Increased geopolitical tensions between China and Taiwan impact the supply chain for semiconductors. The threat of a wider conflict causes consumer confidence to fall. Additionally, the Russian invasion of Ukraine worsening and lastinglasts longer than in the baseline scenario. Import bans on Russian oil lead to additional price increases, causing substantially higherscenario further impacting the supply chain. The combination of elevated inflation, rates that are also exacerbated by the continuingbanking industry uncertainty, increasing supply chain disruption. The Federal Reserve responds by raising interest rates fastershortages, political tensions and the federal funds rate remaining elevated cause the stock market to fall. The economy falls into a recession in the fourththird quarter of 2022.2023. Under this scenario, as an example, the unemployment rate increases from baseline levels and remains elevated for a prolonged period, the rate is estimated at 5.8%7.1% and 7.8%7.3% at the end of 20222023 and 2023,2024, respectively. This forecast reflects unemployment rates that are approximately 2.1%3.3% and 3.8%3.1% higher than baseline scenario projections of 3.7%3.8% and 4.0%4.2%, respectively, for the same time periods.
To demonstrate the sensitivity to key economic parameters used in the calculation of our ACL at SeptemberJune 30, 2022,2023, management calculated the difference between our quantitative ACL and this 100% adverse scenario. Excluding consideration of qualitative adjustments, this sensitivity analysis would result in a hypothetical increase in our ACL of approximately $900 million$1.2 billion at SeptemberJune 30, 2022.2023. This hypothetical increase is reflective of the sensitivity of the rate of change in the unemployment variable on our models.
The resulting difference is not intended to represent an expected increase in allowance levels for a number of reasons including the following:
•Management uses a weighted approach applied to multiple economic scenarios for its allowance estimation process;
•The highly uncertain economic environment;
•The difficulty in predicting the inter-relationships between the economic parameters used in the various economic scenarios; and
•The sensitivity estimate does not account for any general reserve components and associated risk profile adjustments incorporated by management as part of its overall allowance framework.
38 Huntington Bancshares Incorporated
We regularly review our ACL for appropriateness by performing on-going evaluations of the loan and lease portfolio. In doing so, we consider factors such as the differing economic risks associated with each loan category, the financial condition of specific borrowers, the level of delinquent loans, the value of any collateral and, where applicable, the existence of any guarantees or other documented support. We also evaluate the impact of changes in key economic parameters and overall economic conditions on the ability of borrowers to meet their financial obligations when quantifying our exposure to credit losses and assessing the appropriateness of our ACL at each reporting date. There is no certainty that our ACL will be appropriate over time to cover losses in our portfolio as economic and market conditions may ultimately differ from our reasonable and supportable forecast. Additionally, events adversely affecting specific customers, industries, or our markets such as geopolitical instability or risks of inflation including a near-term recession, or the emergence of a more contagious and severe COVID-19 variant, could severely impact our current expectations. If the credit quality of our customer base materially deteriorates or the risk profile of a market, industry, or group of customers changes materially, our net income and capital could be materially adversely affected which, in turn could have a material adverse effect on our financial condition and results of operations. The extent to which the geopolitical instability and risks of inflation and the COVID-19 pandemic will continue to negatively impact our businesses, financial condition, liquidity, and results will depend on future developments, which are highly uncertain and cannot be forecasted with precision at this time. For more information, see Note 54 “Loans and LeasesLeases” and Note 65 “Allowance for Credit Losses” of the Notes to Unaudited Condensed Consolidated Financial Statements. Fair Value Measurement
Certain assets and liabilities are measured at fair value on a recurring basis, including securities, and derivative instruments. Assets and liabilities carried at fair value inherently include subjectivity and may require the use of significant assumptions, adjustments and judgment including, among others, discount rates, rates of return on assets, cash flows, default rates, loss rates, terminal values, and liquidation values. A significant change in assumptions may result in a significant change in fair value, which in turn, may result in a higher degree of financial statement volatility and could result in significant impact on our results of operations, financial condition, or disclosures of fair value information.
The fair value hierarchy requires use of observable inputs first and subsequently unobservable inputs when observable inputs are not available. Our fair value measurements involve various valuation techniques and models, which involve inputs that are observable (Level 1 or Level 2 in fair value hierarchy), when available. The level of judgment required to determine fair value is dependent on the methods or techniques used in the process. Assets and liabilities that are measured at fair value using quoted prices in active markets (Level 1) do not require significant judgment while the valuation of assets and liabilities when quoted market prices are not available (Levels 2 and 3) may require significant judgment to assess whether observable or unobservable inputs for those assets and liabilities provide reasonable determination of fair value. The fair values measured at each level of the fair value hierarchy, additional discussion regarding fair value measurements, and a brief description of how fair value is determined for categories that have unobservable inputs, can be found in Note 13 “Fair Values of Assets and Liabilities” of the Notes to Unaudited Condensed Consolidated Financial Statements.Goodwill and Other Intangible Assets
The acquisition method of accounting requires that assets and liabilities acquired in a business combination are recorded at fair value as of the acquisition date. The valuation of assets and liabilities often involves estimates based on third party valuations or internal valuations based on discounted cash flow analyses or other valuation techniques, all of which are inherently subjective. This typically results in goodwill, the amount by which the cost of net assets acquired in a business combination exceeds their fair value, which is subject to impairment testing at least annually. The amortization of identified intangible assets recognized in a business combination is based upon the estimated economic benefits to be received over their economic life, which is also subjective. Customer attrition rates that are based on historical experience are used to determine the estimated economic life of certain intangibles assets, including but not limited to, customer deposit intangibles.
Item 1: Financial Statements
Huntington Bancshares Incorporated
Condensed Consolidated Balance Sheets
(Unaudited)
| | | | | | | | | | | |
| September 30, | | December 31, |
| (dollar amounts in millions) | 2022 | | 2021 |
| Assets | | | |
| Cash and due from banks | $ | 1,685 | | | $ | 1,811 | |
| Interest-bearing deposits at Federal Reserve Bank | 2,691 | | | 3,711 | |
| Interest-bearing deposits in banks | 216 | | | 392 | |
| Trading account securities | 32 | | | 46 | |
| Available-for-sale securities | 23,306 | | | 28,460 | |
| Held-to-maturity securities | 17,173 | | | 12,447 | |
| | | |
| | | |
| Other securities | 818 | | | 648 | |
| Loans held for sale (includes $758 and $1,270 respectively, measured at fair value)(1) | 893 | | | 1,676 | |
| Loans and leases (includes $182 and $171 respectively, measured at fair value)(1) | 118,147 | | | 111,267 | |
| Allowance for loan and lease losses | (2,110) | | | (2,030) | |
| Net loans and leases | 116,037 | | | 109,237 | |
| Bank owned life insurance | 2,768 | | | 2,765 | |
| Accrued income and other receivables | 1,352 | | | 1,319 | |
| Premises and equipment | 1,171 | | | 1,164 | |
| Goodwill | 5,571 | | | 5,349 | |
| Servicing rights and other intangible assets | 715 | | | 611 | |
| Other assets | 4,974 | | | 4,428 | |
| Total assets | $ | 179,402 | | | $ | 174,064 | |
| Liabilities and shareholders’ equity | | | |
| Liabilities | | | |
| Deposits: | | | |
| Demand deposits—noninterest-bearing | $ | 40,762 | | | $ | 43,236 | |
| Interest-bearing | 105,551 | | | 100,027 | |
| Total deposits | 146,313 | | | 143,263 | |
| Short-term borrowings | 426 | | | 334 | |
| Long-term debt | 10,168 | | | 7,108 | |
| Other liabilities | 5,324 | | | 4,041 | |
| Total liabilities | 162,231 | | | 154,746 | |
| Commitments and Contingent Liabilities (Note 16) | | | |
| Shareholders’ equity | | | |
| Preferred stock | 2,167 | | | 2,167 | |
| Common stock | 14 | | | 14 | |
| Capital surplus | 15,282 | | | 15,222 | |
| Less treasury shares, at cost | (80) | | | (79) | |
| Accumulated other comprehensive income (loss) | (3,276) | | | (229) | |
| Retained earnings | 3,029 | | | 2,202 | |
| Total Huntington Bancshares Inc shareholders’ equity | 17,136 | | | 19,297 | |
| Non-controlling interest | 35 | | | 21 | |
| Total equity | 17,171 | | | 19,318 | |
| Total liabilities and shareholders’ equity | $ | 179,402 | | | $ | 174,064 | |
| Common shares authorized (par value of $0.01) | 2,250,000,000 | | | 2,250,000,000 | |
| | | |
| Common shares outstanding | 1,442,734,255 | | | 1,437,742,172 | |
| Treasury shares outstanding | 6,341,958 | | | 6,298,288 | |
| Preferred stock, authorized shares | 6,617,808 | | | 6,617,808 | |
| | | |
| Preferred shares outstanding | 557,500 | | | 557,500 | |
See Notes to Unaudited Condensed Consolidated Financial Statements
40 Huntington Bancshares Incorporated
| | | | | | | | | | | | | | | | | | | | | | | |
| Huntington Bancshares Incorporated | | | | | | | |
| Condensed Consolidated Statements of Income | | | | | | | |
| (Unaudited) | | | | | | | |
| Three months ended September 30, | | Nine months ended September 30, |
| (dollar amounts in millions, except per share data, share count in thousands) | 2022 | | 2021 | | 2022 | | 2021 |
| Interest and fee income: | | | | | | | |
| Loans and leases | $ | 1,268 | | | $ | 1,056 | | | $ | 3,350 | | | $ | 2,614 | |
| Available-for-sale securities | | | | | | | |
| Taxable | 165 | | | 68 | | | 378 | | | 184 | |
| Tax-exempt | 20 | | | 15 | | | 52 | | | 41 | |
| Held-to-maturity securities—taxable | 95 | | | 47 | | | 251 | | | 124 | |
| Other securities—taxable | 7 | | | 2 | | | 18 | | | 6 | |
| | | | | | | |
| Other | 34 | | | 17 | | | 66 | | | 40 | |
| Total interest income | 1,589 | | | 1,205 | | | 4,115 | | | 3,009 | |
| Interest expense: | | | | | | | |
| Deposits | 92 | | | 11 | | | 128 | | | 34 | |
| Short-term borrowings | 22 | | | — | | | 36 | | | — | |
| | | | | | | |
| Long-term debt | 71 | | | 34 | | | 140 | | | 5 | |
| | | | | | | |
| Total interest expense | 185 | | | 45 | | | 304 | | | 39 | |
| Net interest income | 1,404 | | | 1,160 | | | 3,811 | | | 2,970 | |
| Provision for credit losses | 106 | | | (62) | | | 198 | | | 89 | |
| Net interest income after provision for credit losses | 1,298 | | | 1,222 | | | 3,613 | | | 2,881 | |
| Service charges on deposit accounts | 93 | | | 114 | | | 295 | | | 271 | |
| Card and payment processing income | 96 | | | 96 | | | 278 | | | 241 | |
| Mortgage banking income | 26 | | | 81 | | | 119 | | | 248 | |
| Trust and investment management services | 60 | | | 61 | | | 188 | | | 169 | |
| Capital markets fees | 73 | | | 40 | | | 169 | | | 104 | |
| Insurance income | 28 | | | 25 | | | 86 | | | 77 | |
| Leasing revenue | 29 | | | 42 | | | 91 | | | 58 | |
| Bank owned life insurance income | 13 | | | 15 | | | 41 | | | 47 | |
| Gain on sale of loans | 15 | | | 2 | | | 55 | | | 8 | |
| Net gains on sales of securities | — | | | — | | | — | | | 10 | |
| | | | | | | |
| Other noninterest income | 65 | | | 59 | | | 160 | | | 141 | |
| Total noninterest income | 498 | | | 535 | | | 1,482 | | | 1,374 | |
| Personnel costs | 614 | | | 643 | | | 1,771 | | | 1,703 | |
| Outside data processing and other services | 145 | | | 304 | | | 463 | | | 581 | |
| Net occupancy | 63 | | | 95 | | | 185 | | | 209 | |
| Equipment | 60 | | | 79 | | | 202 | | | 180 | |
| Professional services | 18 | | | 26 | | | 56 | | | 91 | |
| Marketing | 24 | | | 25 | | | 69 | | | 54 | |
| Deposit and other insurance expense | 15 | | | 17 | | | 53 | | | 33 | |
| Amortization of intangibles | 13 | | | 13 | | | 40 | | | 34 | |
| Lease financing equipment depreciation | 11 | | | 19 | | | 36 | | | 24 | |
| | | | | | | |
| Other noninterest expense | 90 | | | 68 | | | 249 | | | 245 | |
| Total noninterest expense | 1,053 | | | 1,289 | | | 3,124 | | | 3,154 | |
| Income before income taxes | 743 | | | 468 | | | 1,971 | | | 1,101 | |
| Provision for income taxes | 146 | | | 90 | | | 371 | | | 206 | |
| Income after income taxes | 597 | | | 378 | | | 1,600 | | | 895 | |
| Income attributable to non-controlling interest | 3 | | | 1 | | | 7 | | | 1 | |
| Net income attributable to Huntington Bancshares Inc | 594 | | | 377 | | | 1,593 | | | 894 | |
| Dividends on preferred shares | 29 | | | 29 | | | 85 | | | 103 | |
| Impact of preferred stock redemption | — | | | 15 | | | — | | | 15 | |
| Net income applicable to common shares | $ | 565 | | | $ | 333 | | | $ | 1,508 | | | $ | 776 | |
| Average common shares—basic | 1,442,591 | | | 1,462,736 | | | 1,440,740 | | | 1,201,763 | |
| Average common shares—diluted | 1,465,083 | | | 1,487,335 | | | 1,464,234 | | | 1,225,428 | |
| Per common share: | | | | | | | |
| Net income—basic | $ | 0.39 | | | $ | 0.23 | | | $ | 1.05 | | | $ | 0.65 | |
| Net income—diluted | 0.39 | | | 0.22 | | | 1.03 | | | 0.63 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| See Notes to Unaudited Condensed Consolidated Financial Statements |
Huntington Bancshares Incorporated
Consolidated Balance Sheets
(Unaudited)
| | | | | | | | | | | |
| At June 30, | | At December 31, |
| (dollar amounts in millions) | 2023 | | 2022 |
| Assets | | | |
| Cash and due from banks | $ | 1,636 | | | $ | 1,796 | |
| Interest-bearing deposits at Federal Reserve Bank | 9,443 | | | 4,908 | |
| Interest-bearing deposits in banks | 210 | | | 214 | |
| Trading account securities | 128 | | | 19 | |
| Available-for-sale securities | 23,233 | | | 23,423 | |
| Held-to-maturity securities | 16,578 | | | 17,052 | |
| | | |
| | | |
| Other securities | 975 | | | 854 | |
| Loans held for sale (includes $543 and $520 respectively, measured at fair value)(1) | 545 | | | 529 | |
| Loans and leases (includes $175 and $185 respectively, measured at fair value)(1) | 121,225 | | | 119,523 | |
| Allowance for loan and lease losses | (2,177) | | | (2,121) | |
| Net loans and leases | 119,048 | | | 117,402 | |
| Bank owned life insurance | 2,757 | | | 2,753 | |
| Accrued income and other receivables | 1,471 | | | 1,573 | |
| Premises and equipment | 1,128 | | | 1,156 | |
| Goodwill | 5,561 | | | 5,571 | |
| Servicing rights and other intangible assets | 690 | | | 712 | |
| Other assets | 5,102 | | | 4,944 | |
| Total assets | $ | 188,505 | | | $ | 182,906 | |
| Liabilities and shareholders’ equity | | | |
| Liabilities | | | |
| Deposits: | | | |
| Demand deposits—noninterest-bearing | $ | 33,340 | | | $ | 38,242 | |
| Interest-bearing | 114,688 | | | 109,672 | |
| Total deposits | 148,028 | | | 147,914 | |
| Short-term borrowings | 1,680 | | | 2,027 | |
| Long-term debt | 14,711 | | | 9,686 | |
| Other liabilities | 5,248 | | | 5,510 | |
| Total liabilities | 169,667 | | | 165,137 | |
| Commitments and Contingent Liabilities (Note 15) | | | |
| Shareholders’ Equity | | | |
| Preferred stock | 2,484 | | | 2,167 | |
| Common stock | 15 | | | 14 | |
| Capital surplus | 15,335 | | | 15,309 | |
| Less treasury shares, at cost | (92) | | | (80) | |
| Accumulated other comprehensive income (loss) | (3,006) | | | (3,098) | |
| Retained earnings | 4,052 | | | 3,419 | |
| Total Huntington shareholders’ equity | 18,788 | | | 17,731 | |
| Non-controlling interest | 50 | | | 38 | |
| Total equity | 18,838 | | | 17,769 | |
| Total liabilities and equity | $ | 188,505 | | | $ | 182,906 | |
| Common shares authorized (par value of $0.01) | 2,250,000,000 | | | 2,250,000,000 | |
| | | |
| Common shares outstanding | 1,447,882,434 | | | 1,443,068,036 | |
| Treasury shares outstanding | 7,429,675 | | | 6,322,052 | |
| Preferred stock, authorized shares | 6,617,808 | | | 6,617,808 | |
| | | |
| Preferred shares outstanding | 882,500 | | | 557,500 | |
See Notes to Unaudited Consolidated Financial Statements
2022 3Q2023 2Q Form 10-Q 41
Huntington Bancshares Incorporated
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended
September 30, | | Nine Months Ended
September 30, |
| (dollar amounts in millions) | 2022 | | 2021 | | 2022 | | 2021 |
| Net income attributable to Huntington Bancshares Inc | $ | 594 | | | $ | 377 | | | $ | 1,593 | | | $ | 894 | |
| Other comprehensive (loss) income, net of tax: | | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Net unrealized losses on available-for-sale securities | (971) | | | (82) | | | (2,970) | | | (220) | |
| Net impact of fair value hedges on available-for-sale securities | 250 | | | — | | | 705 | | | 29 | |
| Change in fair value related to cash flow hedges | (456) | | | (29) | | | (782) | | | (131) | |
| | | | | | | |
| | | | | | | |
| Translation adjustments, net of hedges | (4) | | | 2 | | | (6) | | | (4) | |
| Change in accumulated unrealized gains for pension and other post-retirement obligations | 3 | | | 3 | | | 6 | | | 9 | |
| Other comprehensive (loss) income, net of tax | (1,178) | | | (106) | | | (3,047) | | | (317) | |
| Comprehensive (loss) income attributable to Huntington Bancshares | (584) | | | 271 | | | (1,454) | | | 577 | |
| Comprehensive income attributed to non-controlling interest | 3 | | | 1 | | | 7 | | | 1 | |
| Comprehensive (loss) income | $ | (581) | | | $ | 272 | | | $ | (1,447) | | | $ | 578 | |
See Notes to Unaudited Condensed Consolidated Financial Statements | | | | | | | | | | | | | | | | | | | | | | | |
| Huntington Bancshares Incorporated | | | | | | | |
| Consolidated Statements of Income | | | | | | | |
| (Unaudited) | | | | | | | |
| Three months ended June 30, | | Six months ended June 30, |
| (dollar amounts in millions, except per share data, share count in thousands) | 2023 | | 2022 | | 2023 | | 2022 |
| Interest and fee income: | | | | | | | |
| Loans and leases | $ | 1,679 | | | $ | 1,078 | | | $ | 3,258 | | | $ | 2,082 | |
| Available-for-sale securities | | | | | | | |
| Taxable | 252 | | | 123 | | | 484 | | | 213 | |
| Tax-exempt | 26 | | | 15 | | | 49 | | | 32 | |
| Held-to-maturity securities—taxable | 102 | | | 90 | | | 204 | | | 156 | |
| Other securities—taxable | 11 | | | 6 | | | 21 | | | 11 | |
| | | | | | | |
| Other | 155 | | | 19 | | | 237 | | | 32 | |
| Total interest income | 2,225 | | | 1,331 | | | 4,253 | | | 2,526 | |
| Interest expense: | | | | | | | |
| Deposits | 570 | | | 25 | | | 976 | | | 36 | |
| Short-term borrowings | 74 | | | 7 | | | 134 | | | 14 | |
| | | | | | | |
| Long-term debt | 235 | | | 38 | | | 388 | | | 69 | |
| | | | | | | |
| Total interest expense | 879 | | | 70 | | | 1,498 | | | 119 | |
| Net interest income | 1,346 | | | 1,261 | | | 2,755 | | | 2,407 | |
| Provision for credit losses | 92 | | | 67 | | | 177 | | | 92 | |
| Net interest income after provision for credit losses | 1,254 | | | 1,194 | | | 2,578 | | | 2,315 | |
| Service charges on deposit accounts | 87 | | | 105 | | | 170 | | | 202 | |
| Card and payment processing income | 102 | | | 96 | | | 195 | | | 182 | |
| Capital markets fees | 57 | | | 54 | | | 116 | | | 96 | |
| Trust and investment management services | 68 | | | 63 | | | 130 | | | 128 | |
| Mortgage banking income | 33 | | | 44 | | | 59 | | | 93 | |
| Leasing revenue | 25 | | | 27 | | | 51 | | | 62 | |
| Insurance income | 30 | | | 27 | | | 64 | | | 58 | |
| Gain on sale of loans | 8 | | | 12 | | | 11 | | | 40 | |
| Bank owned life insurance income | 16 | | | 11 | | | 32 | | | 28 | |
| Net (losses) gains on sales of securities | (5) | | | — | | | (4) | | | — | |
| | | | | | | |
| Other noninterest income | 74 | | | 46 | | | 183 | | | 95 | |
| Total noninterest income | 495 | | | 485 | | | 1,007 | | | 984 | |
| Personnel costs | 613 | | | 577 | | | 1,262 | | | 1,157 | |
| Outside data processing and other services | 148 | | | 153 | | | 299 | | | 318 | |
| Equipment | 64 | | | 61 | | | 128 | | | 142 | |
| Net occupancy | 54 | | | 58 | | | 114 | | | 122 | |
| Marketing | 32 | | | 24 | | | 57 | | | 45 | |
| Professional services | 21 | | | 19 | | | 37 | | | 38 | |
| Deposit and other insurance expense | 23 | | | 20 | | | 43 | | | 38 | |
| Amortization of intangibles | 13 | | | 13 | | | 26 | | | 27 | |
| Lease financing equipment depreciation | 8 | | | 11 | | | 16 | | | 25 | |
| | | | | | | |
| Other noninterest expense | 74 | | | 82 | | | 154 | | | 159 | |
| Total noninterest expense | 1,050 | | | 1,018 | | | 2,136 | | | 2,071 | |
| Income before income taxes | 699 | | | 661 | | | 1,449 | | | 1,228 | |
| Provision for income taxes | 134 | | | 120 | | | 278 | | | 225 | |
| Income after income taxes | 565 | | | 541 | | | 1,171 | | | 1,003 | |
| Income attributable to non-controlling interest | 6 | | | 2 | | | 10 | | | 4 | |
| Net income attributable to Huntington | 559 | | | 539 | | | 1,161 | | | 999 | |
| Dividends on preferred shares | 40 | | | 28 | | | 69 | | | 56 | |
| | | | | | | |
| Net income applicable to common shares | $ | 519 | | | $ | 511 | | | $ | 1,092 | | | $ | 943 | |
| Average common shares—basic | 1,446,372 | | | 1,441,200 | | | 1,444,820 | | | 1,439,814 | |
| Average common shares—diluted | 1,465,720 | | | 1,463,293 | | | 1,467,500 | | | 1,463,810 | |
| Per common share: | | | | | | | |
| Net income—basic | $ | 0.36 | | | $ | 0.35 | | | $ | 0.76 | | | $ | 0.65 | |
| Net income—diluted | 0.35 | | | 0.35 | | | 0.74 | | | 0.64 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| See Notes to Unaudited Consolidated Financial Statements |
42 Huntington Bancshares Incorporated
Huntington Bancshares Incorporated
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended June 30, | | Six months ended June 30, |
| (dollar amounts in millions) | 2023 | | 2022 | | 2023 | | 2022 |
| Net income attributable to Huntington | $ | 559 | | | $ | 539 | | | $ | 1,161 | | | $ | 999 | |
| Other comprehensive income (loss), net of tax: | | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Net unrealized gains (losses) on available-for-sale securities | (190) | | | (820) | | | 104 | | | (1,999) | |
| Net impact of fair value hedges on available-for-sale securities | 107 | | | 123 | | | (33) | | | 455 | |
| Net change related to cash flow hedges on loans | (169) | | | (86) | | | 20 | | | (326) | |
| | | | | | | |
| | | | | | | |
| Translation adjustments, net of hedges | 1 | | | (2) | | | 1 | | | (2) | |
| Change in accumulated unrealized gains for pension and other post-retirement obligations | — | | | 1 | | | — | | | 3 | |
| Other comprehensive income (loss), net of tax | (251) | | | (784) | | | 92 | | | (1,869) | |
| Comprehensive income (loss) attributable to Huntington | 308 | | | (245) | | | 1,253 | | | (870) | |
| Comprehensive income attributed to non-controlling interest | 6 | | | 2 | | | 10 | | | 4 | |
| Comprehensive income (loss) | $ | 314 | | | $ | (243) | | | $ | 1,263 | | | $ | (866) | |
See Notes to Unaudited Consolidated Financial Statements
Huntington Bancshares Incorporated
Consolidated Statements of Changes in Shareholders’ Equity
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (dollar amounts in millions, share amounts in thousands) | Preferred Stock | | Common Stock | | Capital Surplus | | Treasury Stock | | Accumulated Other Comprehensive Income (Loss) | | Retained Earnings | | | | Non-controlling Interest | | Total Equity |
| Amount | | Shares | | Amount | | | Shares | | Amount | | | | Total | | |
| Three Months Ended September 30, 2022 | | | | | | | | | | | | | | | | | | | | | |
| Balance, beginning of period | $ | 2,167 | | | 1,448,885 | | | $ | 14 | | | $ | 15,261 | | | (6,691) | | | $ | (85) | | | $ | (2,098) | | | $ | 2,691 | | | $ | 17,950 | | | $ | 29 | | | $ | 17,979 | |
| Net income | | | | | | | | | | | | | | | 594 | | | 594 | | | 3 | | | 597 | |
| Other comprehensive income (loss), net of tax | | | | | | | | | | | | | (1,178) | | | | | (1,178) | | | | | (1,178) | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Cash dividends declared: | | | | | | | | | | | | | | | | | | | | | |
| Common ($0.155 per share) | | | | | | | | | | | | | | | (227) | | | (227) | | | | | (227) | |
| Preferred | | | | | | | | | | | | | | | (29) | | | (29) | | | | | (29) | |
| Recognition of the fair value of share-based compensation | | | | | | | 19 | | | | | | | | | | | 19 | | | | | 19 | |
| | | | | | | | | | | | | | | | | | | | | |
| Other share-based compensation activity | | | 191 | | | — | | | 2 | | | | | | | | | — | | | 2 | | | | | 2 | |
| | | | | | | | | | | | | | | | | | | | | |
| Other | | | | | | | — | | | 349 | | | 5 | | | | | — | | | 5 | | | 3 | | | 8 | |
| Balance, end of period | $ | 2,167 | | | 1,449,076 | | | $ | 14 | | | $ | 15,282 | | | (6,342) | | | $ | (80) | | | $ | (3,276) | | | $ | 3,029 | | | $ | 17,136 | | | $ | 35 | | | $ | 17,171 | |
| | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, 2021 | | | | | | | | | | | | | | | | | | | | | |
| Balance, beginning of period | $ | 2,851 | | | 1,484,614 | | | $ | 15 | | | $ | 15,830 | | | (8,056) | | | $ | (105) | | | $ | (19) | | | $ | 1,939 | | | $ | 20,511 | | | $ | 20 | | | $ | 20,531 | |
| | | | | | | | | | | | | | | | | | | | | |
| Net income | | | | | | | | | | | | | | | 377 | | | 377 | | | 1 | | | 378 | |
| Other comprehensive income (loss), net of tax | | | | | | | | | | | | | (106) | | | | | (106) | | | | | (106) | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Redemption of Preferred Series D Stock | (585) | | | | | | | | | | | | | | | (15) | | | (600) | | | | | (600) | |
| Repurchases of common stock | | | (33,409) | | | — | | | (500) | | | | | | | | | | | (500) | | | | | (500) | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Cash dividends declared: | | | | | | | | | | | | | | | | | | | | | |
| Common ($0.15 per share) | | | | | | | | | | | | | | | (221) | | | (221) | | | | | (221) | |
| Preferred | | | | | | | | | | | | | | | (29) | | | (29) | | | | | (29) | |
| | | | | | | | | | | | | | | | | | | | | |
| Recognition of the fair value of share-based compensation | | | | | | | 32 | | | | | | | | | | | 32 | | | | | 32 | |
| | | | | | | | | | | | | | | | | | | | | |
| Other share-based compensation activity | | | 1,562 | | | — | | | (12) | | | | | | | | | — | | | (12) | | | | | (12) | |
| Other | 1 | | | | | | — | | | 1,750 | | | 26 | | | | | — | | | 27 | | | (1) | | | 26 | |
| Balance, end of period | $ | 2,267 | | | 1,452,767 | | | $ | 15 | | | $ | 15,350 | | | (6,306) | | | $ | (79) | | | $ | (125) | | | $ | 2,051 | | | $ | 19,479 | | | $ | 20 | | | $ | 19,499 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (dollar amounts in millions, share amounts in thousands) | Preferred Stock | | Common Stock | | Capital Surplus | | Treasury Stock | | AOCI | | Retained Earnings | | Huntington Shareholders’ Equity | | Non-controlling | | Total |
| Amount | | Shares | | Amount | | | Shares | | Amount | | | | | Interest | | Equity |
| Three months ended June 30, 2023 | | | | | | | | | | | | | | | | | | | | | |
| Balance, beginning of period | $ | 2,484 | | | 1,450,080 | | | $ | 15 | | | $ | 15,332 | | | (6,465) | | | $ | (82) | | | $ | (2,755) | | | $ | 3,764 | | | $ | 18,758 | | | $ | 53 | | | $ | 18,811 | |
| Net income | | | | | | | | | | | | | | | 559 | | | 559 | | | 6 | | | 565 | |
| Other comprehensive income (loss), net of tax | | | | | | | | | | | | | (251) | | | | | (251) | | | | | (251) | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Cash dividends declared: | | | | | | | | | | | | | | | | | | | | | |
| Common ($0.155 per share) | | | | | | | | | | | | | | | (228) | | | (228) | | | | | (228) | |
| Preferred | | | | | | | | | | | | | | | (40) | | | (40) | | | | | (40) | |
| Recognition of the fair value of share-based compensation | | | | | | | 23 | | | | | | | | | | | 23 | | | | | 23 | |
| | | | | | | | | | | | | | | | | | | | | |
| Other share-based compensation activity | | | 5,232 | | | — | | | (20) | | | | | | | | | (3) | | | (23) | | | | | (23) | |
| | | | | | | | | | | | | | | | | | | | | |
| Other | | | | | | | — | | | (965) | | | (10) | | | | | — | | | (10) | | | (9) | | | (19) | |
| Balance, end of period | $ | 2,484 | | | 1,455,312 | | | $ | 15 | | | $ | 15,335 | | | (7,430) | | | $ | (92) | | | $ | (3,006) | | | $ | 4,052 | | | $ | 18,788 | | | $ | 50 | | | $ | 18,838 | |
| | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, 2022 | | | | | | | | | | | | | | | | | | | | | |
| Balance, beginning of period | $ | 2,167 | | | 1,445,386 | | | $ | 14 | | | $ | 15,255 | | | (6,211) | | | $ | (78) | | | $ | (1,314) | | | $ | 2,408 | | | $ | 18,452 | | | $ | 29 | | | $ | 18,481 | |
| | | | | | | | | | | | | | | | | | | | | |
| Net income | | | | | | | | | | | | | | | 539 | | | 539 | | | 2 | | | 541 | |
| Other comprehensive (loss) income, net of tax | | | | | | | | | | | | | (784) | | | | | (784) | | | | | (784) | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Cash dividends declared: | | | | | | | | | | | | | | | | | | | | | |
| Common ($0.155 per share) | | | | | | | | | | | | | | | (228) | | | (228) | | | | | (228) | |
| Preferred | | | | | | | | | | | | | | | (28) | | | (28) | | | | | (28) | |
| | | | | | | | | | | | | | | | | | | | | |
| Recognition of the fair value of share-based compensation | | | | | | | 23 | | | | | | | | | | | 23 | | | | | 23 | |
| | | | | | | | | | | | | | | | | | | | | |
| Other share-based compensation activity | | | 3,499 | | | — | | | (17) | | | | | | | | | — | | | (17) | | | | | (17) | |
| Other | | | | | | | — | | | (480) | | | (7) | | | | | — | | | (7) | | | (2) | | | (9) | |
| Balance, end of period | $ | 2,167 | | | 1,448,885 | | | $ | 14 | | | $ | 15,261 | | | (6,691) | | | $ | (85) | | | $ | (2,098) | | | $ | 2,691 | | | $ | 17,950 | | | $ | 29 | | | $ | 17,979 | |
See Notes to Unaudited Condensed Consolidated Financial Statements
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| (dollar amounts in millions, share amounts in thousands) | Preferred Stock | | Common Stock | | Capital Surplus | | Treasury Stock | | Accumulated Other Comprehensive Gain (Loss) | | Retained Earnings | | | | Non-controlling Interest | | Total Equity |
| Amount | | Shares | | Amount | | | Shares | | Amount | | | | Total | | |
| Nine Months Ended September 30, 2022 | | | | | | | | | | | | | | | | | | | | | |
| Balance, beginning of period | $ | 2,167 | | | 1,444,040 | | | $ | 14 | | | $ | 15,222 | | | (6,298) | | | $ | (79) | | | $ | (229) | | | $ | 2,202 | | | $ | 19,297 | | | $ | 21 | | | $ | 19,318 | |
| | | | | | | | | | | | | | | | | | | | | |
| Net income | | | | | | | | | | | | | | | 1,593 | | | 1,593 | | | 7 | | | 1,600 | |
| Other comprehensive income (loss), net of tax | | | | | | | | | | | | | (3,047) | | | | | (3,047) | | | | | (3,047) | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Cash dividends declared: | | | | | | | | | | | | | | | | | | | | | |
| Common ($0.465 per share) | | | | | | | | | | | | | | | (681) | | | (681) | | | | | (681) | |
| Preferred | | | | | | | | | | | | | | | (85) | | | (85) | | | | | (85) | |
| | | | | | | | | | | | | | | | | | | | | |
| Recognition of the fair value of share-based compensation | | | | | | | 82 | | | | | | | | | | | 82 | | | | | 82 | |
| Other share-based compensation activity | | | 5,036 | | | — | | | (22) | | | | | | | | | — | | | (22) | | | | | (22) | |
| | | | | | | | | | | | | | | | | | | | | |
| Other | | | | | | | — | | | (44) | | | (1) | | | — | | | — | | | (1) | | | 7 | | | 6 | |
| Balance, end of period | $ | 2,167 | | | 1,449,076 | | | $ | 14 | | | $ | 15,282 | | | (6,342) | | | $ | (80) | | | $ | (3,276) | | | $ | 3,029 | | | $ | 17,136 | | | $ | 35 | | | $ | 17,171 | |
| | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2021 | | | | | | | | | | | | | | | | | | | | | |
| Balance, beginning of period | $ | 2,191 | | | 1,022,258 | | | $ | 10 | | | $ | 8,781 | | | (5,062) | | | $ | (59) | | | $ | 192 | | | $ | 1,878 | | | $ | 12,993 | | | $ | — | | | $ | 12,993 | |
| | | | | | | | | | | | | | | | | | | | | |
| Net income | | | | | | | | | | | | | | | 894 | | | 894 | | | 1 | | | 895 | |
| Other comprehensive income (loss), net of tax | | | | | | | | | | | | | (317) | | | | | (317) | | | | | (317) | |
| TCF Financial Corp acquisition: | | | | | | | | | | | | | | | | | | | | | |
| Issuance of common stock | | | 458,171 | | | 5 | | | 6,993 | | | | | (37) | | | | | | | 6,961 | | | | | 6,961 | |
| Issuance of Series I preferred stock | 175 | | | | | | | 10 | | | | | | | | | | | 185 | | | | | 185 | |
| Non-controlling interest acquired | | | | | | | | | | | | | | | | | — | | | 22 | | | 22 | |
| Net proceeds from issuance of preferred stock | 486 | | | | | | | | | | | | | | | | | 486 | | | | | 486 | |
| | | | | | | | | | | | | | | | | | | | | |
| Redemption of Preferred Series D stock | (585) | | | | | | | | | | | | | | | (15) | | | (600) | | | | | (600) | |
| Repurchases of common stock | | | (33,409) | | | — | | | (500) | | | | | | | | | | | (500) | | | | | (500) | |
| Cash dividends declared: | | | | | | | | | | | | | | | | | | | | | |
| Common ($0.45 per share) | | | | | | | | | | | | | | | (601) | | | (601) | | | | | (601) | |
| Preferred | | | | | | | | | | | | | | | (103) | | | (103) | | | | | (103) | |
| | | | | | | | | | | | | | | | | | | | | |
| Recognition of the fair value of share-based compensation | | | | | | | 97 | | | | | | | | | | | 97 | | | | | 97 | |
| Other share-based compensation activity | | | 5,747 | | | — | | | (31) | | | | | | | | | — | | | (31) | | | | | (31) | |
| | | | | | | | | | | | | | | | | | | | | |
| Other | | | | | | | — | | | (1,244) | | | 17 | | | | | (2) | | | 15 | | | (3) | | | 12 | |
| Balance, end of period | $ | 2,267 | | | 1,452,767 | | | $ | 15 | | | $ | 15,350 | | | (6,306) | | | $ | (79) | | | $ | (125) | | | $ | 2,051 | | | $ | 19,479 | | | $ | 20 | | | $ | 19,499 | |
| | | | | | | | | | | | | | | | | | | | | |
See Notes to Unaudited Condensed Consolidated Financial Statements
44 Huntington Bancshares Incorporated
Huntington Bancshares Incorporated | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| (dollar amounts in millions, share amounts in thousands) | Preferred Stock | | Common Stock | | Capital Surplus | | Treasury Stock | | AOCI | | Retained Earnings | | Huntington Shareholders’ Equity | | Non-controlling Interest | | Total Equity |
| Amount | | Shares | | Amount | | | Shares | | Amount | | | | | |
| Six months ended June 30, 2023 | | | | | | | | | | | | | | | | | | | | | |
| Balance, beginning of period | $ | 2,167 | | | 1,449,390 | | | $ | 14 | | | $ | 15,309 | | | (6,322) | | | $ | (80) | | | $ | (3,098) | | | $ | 3,419 | | | $ | 17,731 | | | $ | 38 | | | $ | 17,769 | |
| | | | | | | | | | | | | | | | | | | | | |
| Net income | | | | | | | | | | | | | | | 1,161 | | | 1,161 | | | 10 | | | 1,171 | |
| Other comprehensive income (loss), net of tax | | | | | | | | | | | | | 92 | | | | | 92 | | | | | 92 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Net proceeds from issuance of Series J Preferred Stock | 317 | | | | | | | | | | | | | | | | | 317 | | | | | 317 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Cash dividends declared: | | | | | | | | | | | | | | | | | | | | | |
| Common ($0.31 per share) | | | | | | | | | | | | | | | (456) | | | (456) | | | | | (456) | |
| Preferred | | | | | | | | | | | | | | | (69) | | | (69) | | | | | (69) | |
| | | | | | | | | | | | | | | | | | | | | |
| Recognition of the fair value of share-based compensation | | | | | | | 48 | | | | | | | | | | | 48 | | | | | 48 | |
| Other share-based compensation activity | | | 5,922 | | | 1 | | | (22) | | | | | | | | | (3) | | | (24) | | | | | (24) | |
| | | | | | | | | | | | | | | | | | | | | |
| Other | | | | | | | — | | | (1,108) | | | (12) | | | — | | | — | | | (12) | | | 2 | | | (10) | |
| Balance, end of period | $ | 2,484 | | | 1,455,312 | | | $ | 15 | | | $ | 15,335 | | | (7,430) | | | $ | (92) | | | $ | (3,006) | | | $ | 4,052 | | | $ | 18,788 | | | $ | 50 | | | $ | 18,838 | |
| | | | | | | | | | | | | | | | | | | | | |
| Six months ended June 30, 2022 | | | | | | | | | | | | | | | | | | | | | |
| Balance, beginning of period | $ | 2,167 | | | 1,444,040 | | | $ | 14 | | | $ | 15,222 | | | (6,298) | | | $ | (79) | | | $ | (229) | | | $ | 2,202 | | | $ | 19,297 | | | $ | 21 | | | $ | 19,318 | |
| | | | | | | | | | | | | | | | | | | | | |
| Net income | | | | | | | | | | | | | | | 999 | | | 999 | | | 4 | | | 1,003 | |
| Other comprehensive income (loss), net of tax | | | | | | | | | | | | | (1,869) | | | | | (1,869) | | | | | (1,869) | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Cash dividends declared: | | | | | | | | | | | | | | | | | | | | | |
| Common ($0.31 per share) | | | | | | | | | | | | | | | (454) | | | (454) | | | | | (454) | |
| Preferred | | | | | | | | | | | | | | | (56) | | | (56) | | | | | (56) | |
| | | | | | | | | | | | | | | | | | | | | |
| Recognition of the fair value of share-based compensation | | | | | | | 63 | | | | | | | | | | | 63 | | | | | 63 | |
| Other share-based compensation activity | | | 4,845 | | | — | | | (24) | | | | | | | | | — | | | (24) | | | | | (24) | |
| | | | | | | | | | | | | | | | | | | | | |
| Other | | | | | | | — | | | (393) | | | (6) | | | | | — | | | (6) | | | 4 | | | (2) | |
| Balance, end of period | $ | 2,167 | | | 1,448,885 | | | $ | 14 | | | $ | 15,261 | | | (6,691) | | | $ | (85) | | | $ | (2,098) | | | $ | 2,691 | | | $ | 17,950 | | | $ | 29 | | | $ | 17,979 | |
| | | | | | | | | | | | | | | | | | | | | |
CondensedSee Notes to Unaudited Consolidated Financial Statements of Cash Flows
(Unaudited)
| | | | | | | | | | | |
| | Nine Months Ended September 30, |
| (dollar amounts in millions) | 2022 | | 2021 |
| Operating activities | |
| Net income | $ | 1,600 | | | $ | 895 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | |
| | | |
| Provision for credit losses | 198 | | | 89 | |
| Depreciation and amortization | 355 | | | 299 | |
| Share-based compensation expense | 82 | | | 97 | |
| Deferred income tax expense | 164 | | | 40 | |
| | | |
| | | |
| Net change in: | | | |
| Trading account securities | 15 | | | (15) | |
| Loans held for sale | 464 | | | (115) | |
| | | |
| Other assets | (1,109) | | | (247) | |
| Other liabilities | 893 | | | 455 | |
| | | |
| | | |
| Other, net | 8 | | | 67 | |
| Net cash provided by operating activities | 2,670 | | | 1,565 | |
| Investing activities | |
| Change in interest bearing deposits in banks | 287 | | | 611 | |
| Net cash (paid) received from business combinations | (223) | | | 466 | |
| Proceeds from: | | | |
| Maturities and calls of available-for-sale securities | 3,298 | | | 5,408 | |
| Maturities and calls of held-to-maturity securities | 2,306 | | | 3,073 | |
| Maturities and calls of other securities | 829 | | | — | |
| Sales of available-for-sale securities | — | | | 5,860 | |
| | | |
| Purchases of available-for-sale securities | (6,365) | | | (14,995) | |
| Purchases of held-to-maturity securities | (2,845) | | | (3,685) | |
| Purchases of other securities | (1,009) | | | — | |
| | | |
| Net proceeds from sales of portfolio loans and leases | 937 | | | 479 | |
| Principal payments received under direct finance and sales-type leases | 1,389 | | | 899 | |
| Net loan and lease activity, excluding sales and purchases | (8,375) | | | 5,130 | |
| | | |
| Purchases of premises and equipment | (165) | | | (157) | |
| | | |
| Purchases of loans and leases | (569) | | | (771) | |
| Net accrued income and other receivables activity | 96 | | | (1,009) | |
| | | |
| Net cash paid for branch disposition | — | | | (618) | |
| Other, net | 63 | | | 98 | |
| Net cash provided by (used in) investing activities | (10,346) | | | 789 | |
| Financing activities | | | |
| Increase in deposits | 3,050 | | | 5,136 | |
| Increase (decrease) in short-term borrowings | 783 | | | (1,062) | |
| | | |
| Net proceeds from issuance of long-term debt | 5,379 | | | 646 | |
| Maturity/redemption of long-term debt | (1,902) | | | (2,649) | |
| Dividends paid on preferred stock | (84) | | | (109) | |
| Dividends paid on common stock | (673) | | | (531) | |
| Repurchases of common stock | — | | | (500) | |
| | | |
| Payment to repurchase preferred stock | — | | | (600) | |
| Net proceeds from issuance of preferred stock | — | | | 486 | |
| | | |
| | | |
| Other, net | (23) | | | (21) | |
| Net cash provided by financing activities | 6,530 | | | 796 | |
| Increase (decrease) in cash and cash equivalents | (1,146) | | | 3,150 | |
| Cash and cash equivalents at beginning of period | 5,522 | | | 6,595 | |
| Cash and cash equivalents at end of period | $ | 4,376 | | | $ | 9,745 | |
2022 3Q2023 2Q Form 10-Q 45
| | | | | | | | | | | |
| | Nine Months Ended September 30, |
| (dollar amounts in millions) | 2022 | | 2021 |
| Supplemental disclosures: | |
| Interest paid | $ | 269 | | | $ | 135 | |
| Income taxes (received) paid | (113) | | | 262 | |
| | | |
| Non-cash activities | |
| Loans transferred to held-for-sale from portfolio | 764 | | | 385 |
| Loans transferred to portfolio from held-for-sale | 65 | | | 83 |
| | | |
| | | |
| Transfer of securities from available-for-sale to held-to-maturity | 4,225 | | | 3,007 | |
| | | |
| | | |
| Business Combination (1) | | | |
| | | |
| | | |
| | | |
| | | |
| | | |
(1) In the nine months ended September 30, 2021, the TCF acquisition included fair valueConsolidated Statements of tangible assets acquired of $46.3 billion, goodwill and other intangible assets of $3.5 billion, liabilities assumed $42.6 billion, preferred stock of $185 million, and common stock of $7.0 billion.Cash Flows
See Notes to Unaudited Condensed Consolidated Financial Statements
| | | | | | | | | | | |
| | Six months ended June 30, |
| (dollar amounts in millions) | 2023 | | 2022 |
| Operating activities | | | |
| Net income | $ | 1,171 | | | $ | 1,003 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | |
| | | |
| Provision for credit losses | 177 | | | 92 | |
| Depreciation and amortization | 344 | | | 207 | |
| Share-based compensation expense | 48 | | | 63 | |
| Deferred income tax expense | 38 | | | 108 | |
| | | |
| | | |
| Net change in: | | | |
| Trading account securities | (109) | | | 12 | |
| Loans held for sale | (79) | | | 485 | |
| | | |
| Other assets | (617) | | | (206) | |
| Other liabilities | (213) | | | 67 | |
| | | |
| | | |
| Other, net | — | | | (7) | |
| Net cash provided by operating activities | 760 | | | 1,824 | |
| Investing activities | | | |
| Change in interest bearing deposits in banks | 5 | | | 321 | |
| Net cash (paid) received from business combinations | — | | | (223) | |
| Proceeds from: | | | |
| Maturities and calls of available-for-sale securities | 1,060 | | | 2,401 | |
| Maturities and calls of held-to-maturity securities | 710 | | | 1,699 | |
| Maturities and calls of other securities | 337 | | | 812 | |
| Sales of available-for-sale securities | 736 | | | — | |
| Sales of other securities | 142 | | | 9 | |
| Purchases of available-for-sale securities | (1,549) | | | (5,246) | |
| Purchases of held-to-maturity securities | (254) | | | (2,409) | |
| Purchases of other securities | (600) | | | (936) | |
| | | |
| Net proceeds from sales of portfolio loans and leases | 266 | | | 704 | |
| Principal payments received under direct finance and sales-type leases | 950 | | | 902 | |
| Net loan and lease activity, excluding sales and purchases | (3,012) | | | (5,858) | |
| | | |
| Purchases of premises and equipment | (57) | | | (123) | |
| | | |
| Purchases of loans and leases | (25) | | | (493) | |
| Net accrued income and other receivables activity | 116 | | | (818) | |
| | | |
| | | |
| Other, net | 43 | | | 53 | |
| Net cash (used in) provided by investing activities | (1,132) | | | (9,205) | |
| Financing activities | | | |
| (Decrease) increase in deposits | 114 | | | 2,172 | |
| Increase in short-term borrowings | (207) | | | 3,209 | |
| | | |
| Net proceeds from issuance of long-term debt | 13,594 | | | 2,075 | |
| Maturity/redemption of long-term debt | (8,536) | | | (1,158) | |
| Dividends paid on preferred stock | (57) | | | (56) | |
| Dividends paid on common stock | (449) | | | (449) | |
| | | |
| | | |
| | | |
| Net proceeds from issuance of preferred stock | 317 | | | — | |
| | | |
| | | |
| Other, net | (29) | | | (26) | |
| Net cash provided by financing activities | 4,747 | | | 5,767 | |
| Increase (decrease) in cash and cash equivalents | 4,375 | | | (1,614) | |
| Cash and cash equivalents at beginning of period | 6,704 | | | 5,522 | |
| Cash and cash equivalents at end of period | $ | 11,079 | | | $ | 3,908 | |
46 Huntington Bancshares Incorporated
| | | | | | | | | | | |
| | Six months ended June 30, |
| (dollar amounts in millions) | 2023 | | 2022 |
| Supplemental disclosures: | | | |
| Interest paid | $ | 1,433 | | | $ | 113 | |
| Income taxes (received) paid | 93 | | | (110) | |
| | | |
| Non-cash activities | |
| Loans transferred to held-for-sale from portfolio | 246 | | | 569 | |
| Loans transferred to portfolio from held-for-sale | 12 | | | 31 | |
| | | |
| | | |
| Transfer of securities from available-for-sale to held-to-maturity | — | | | 4,225 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
See Notes to Unaudited Consolidated Financial Statements
Huntington Bancshares Incorporated
Notes to Unaudited Condensed Consolidated Financial Statements
1. BASIS OF PRESENTATION
The accompanying Unaudited Condensed Consolidated Financial Statements of Huntington reflect all adjustments consisting of normal recurring accruals which are, in the opinion of management, necessary for a fair statement of the consolidated financial position, the results of operations, and cash flows for the periods presented. These Unaudited Condensed Consolidated Financial Statements have been prepared according to the rules and regulations of the SEC and, therefore, certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been omitted. The Notes to Consolidated Financial Statements appearing in Huntington’s 20212022 Annual Report on Form 10-K, which include descriptions of significant accounting policies, as updated by the information contained in this report, should be read in conjunction with these interim financial statements.
For statementDuring the 2023 second quarter, Huntington revised its process for assessing and monitoring the risk and performance of cash flow purposes, cashnon-real estate secured commercial loans, primarily loans to REITs. These loans were reclassified from commercial real estate to the commercial and cash equivalents are defined as the sum of cash and due from banks and interest-bearing deposits at Federal Reserve Bank.
Certain prior period amounts have been reclassifiedindustrial loan category to conform to current year’s presentation.
Effective in the 2022 first quarter, a new classification within the Unaudited Condensed Consolidated Balance Sheet of accrued income and other receivables was established comprised of activity that was previously classified as loans and leases (other consumer loans and leases) and other assets.align reporting with this process revision. All prior period amounts and all related metricsresults have been revisedadjusted to conform to the current presentation.
During the 2023 second quarter, Huntington completed an organizational realignment and now reports on two business segments: Consumer & Regional Banking and Commercial Banking. The Treasury / Other function includes technology and operations, other unallocated assets, liabilities, revenue, and expense. Huntington’s business segments are based on our internally-aligned segment leadership structure, which is how management monitors results and assesses performance. The organizational realignment primarily involved consolidating our previously reported Consumer and Business Banking, Vehicle Finance and RBHPCG, into one new business segment called Consumer & Regional Banking. Prior period results have been adjusted to conform to the new segment presentation. See Note 16 “Segment Reporting” for a description of our business segments.
Effective January 1, 2023, Huntington adopted ASU 2022-02 Financial Instruments - Credit Losses (Topic 326) Troubled Debt Restructurings (TDR) and Vintage Disclosures, which removed the existing measurement and disclosure requirements for TDR loans and added additional disclosure requirements related to modifications provided to borrowers experiencing financial difficulty. Prior to adoption a change in contractual terms of a loan where a borrower was experiencing financial difficulty and received a concession not available through other sources the loans was required to be disclosed as a TDR, whereas now a borrower that is experiencing financial difficulty and receives a modification in the form of principal forgiveness, interest rate reduction, an other-than-insignificant payment delay or a term extension in the current period needs to be disclosed. Huntington may modify loans to borrowers experiencing financial difficulty as a way of managing risk and mitigating credit loss from the borrower. Huntington may make various types of modifications and may in certain circumstances use a combination of modification types in order to mitigate future loss. The amount of defined modifications given to borrowers experiencing financial difficulty is disclosed in the Notes to the Consolidated Financial Statements, along with the financial impact of those modifications.
In conjunction with applicable accounting standards, all material subsequent events have been either recognized in the Unaudited Condensed Consolidated Financial Statements or disclosed in the Notes to Unaudited Condensed Consolidated Financial Statements. There were no material subsequent events to disclose for the current period.
48 Huntington Bancshares Incorporated
2. ACCOUNTING STANDARDS UPDATE
| | | | | | | | | | | | | | |
| Accounting standards adopted in the current period |
| | | | | | | | | | | | | | |
| Standard | | Summary of guidance | | Effects on financial Statements |
ASU 2021-08-Business Combinations2022-02- Financial Instruments - Credit Losses (Topic 805)326): Troubled Debt Restructurings and Vintage Disclosures Issued October 2021March 2022 | | •The amendments in this update require that an acquirer apply topic 606 to the recognitioneliminate TDR accounting while enhancing disclosure requirements for certain loan modifications when a borrower is experiencing financial difficulty. The ASU also requires disclosure of current period gross charge-offs by year of origination for financing receivables and measurement of revenue contract assets and liabilities acquirednet investments in a business combination.leases. | | •Management adopted the guidance during the secondfirst quarter 2022.2023. •The ASU has been applied prospectively, except the portion of the standard related to all business combinations occurring during 2022the recognition and will be applied prospectivelymeasurement of TDRs where we elected to all future business combinations.use a modified retrospective transition method. •The adoption did not result in a material impact on Huntington’s Unaudited Condensed Consolidated Financial Statements. |
ASU 2022-01-Derivatives and Hedging (Topic 815): Fair Value Hedging - Portfolio Layer Method Issued March 2022 | •The amendments in this update expand the current last-of-layer method to allow for multiple hedge layers in a single closed portfolio. To reflect the expansion, the last-of-layer method has been renamed the portfolio layer method. The standard also expands the scope of the portfolio layer method to nonprepayable financial assets.
| •Management early adopted the guidance during the second quarter of 2022 using the modified retrospective basis. There was no impact to Huntington’s Unaudited Condensed Consolidated Financial Statements as a result of the adoption. Amendments related to disclosures were applied prospectively from the initial adoption date.
•The ASU also gives entities the option to reclassify debt securities classified in the held-to-maturity category at the date of adoption to the available-for-sale category if the entity applies the portfolio layer method hedging to one or more closed portfolios that include those debt securities, Huntington did not apply this option to any held-to-maturity securities.
|
| | | | | | | | |
| Accounting standards yet to be adopted |
| | | | | | | | | | | | | | | | | | | | |
| Standard | | Summary of guidance | | Effects on financial statements | | | | | | |
ASU 2022-02- Financial Instruments2023-02 Investments - Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures IssuedStructures Using the Proportional Amortization Method Issued: March 20222023 | | •The amendments in this update eliminate TDR accountingPermits the election of the proportional amortization method for entitiesany tax equity investment that have adopted Update 2016-13, while enhancingmeets specific criteria. •Requires that the election be made on a tax-credit-program-by-tax-credit-program basis. •Receipt of tax credits must be accounted for using the flow through method. •Required that a liability be recorded for delayed equity contributions. •Expands disclosure requirements for certain loan modifications when a borrower is experiencingthe nature of investments and financial difficulty. The ASU also requires disclosure of current period gross write-offs by year of origination for financing receivables and net investment in leases.statement effect. | | •Effective for fiscal years beginning after December 15, 2022,2023, including interim periods within those fiscal years. •AdoptionEarly adoption is permitted in any interim period. •If adopted in an interim period, it shall be adopted as if adopted at the beginning of the ASU willfiscal year. •The amendments can be applied prospectively, except for the portion of the standard related to the recognition and measurement of TDRs an entity may elect to use ain retrospective or modified retrospective transition methodbasis, with a cumulative effect adjustment toreflected in retained earnings at the beginning of the period of adoption. The ASU does allow for early adoption.earnings. •Huntington is currently evaluating the impactdoes not expect adoption of the ASUstandard to have a material impact on its Unaudited Consolidated Financial Statements, as well as which adoption method to apply. Huntington does not currently intend to adopt the ASU prior to the effective date.Statements. | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
3. BUSINESS COMBINATIONS
On June 15, 2022, Huntington acquired Capstone Partners, a leading middle market investment bank and advisory firm dedicated to servicing middle market companies throughout their full business lifecycle. The acquisition resulted in $192 million of goodwill, allocated to the Commercial segment, which approximates total consideration. Fair value estimates related to the acquired assets and liabilities are subject to adjustment during the one-year measurement period following the closing of the acquisition. The goodwill recognized is deductible for tax purposes.
482023 2Q Form 10-Q Huntington Bancshares Incorporated49
4.3. INVESTMENT SECURITIES AND OTHER SECURITIES
Debt securities purchased in which Huntington has the intent and ability to hold to their maturity are classified as held-to-maturity securities. All other debt and equity securities are classified as either available-for-sale or other securities.
The following tables provide amortized cost, fair value, and gross unrealized gains and losses by investment category at SeptemberJune 30, 20222023 and December 31, 2021:2022:
| | | Unrealized | | | Unrealized | |
| (dollar amounts in millions) | (dollar amounts in millions) | Amortized Cost (1)(2) | | Gross
Gains | | Gross
Losses | | Fair Value | (dollar amounts in millions) | Amortized Cost (1)(2) | | Gross
Gains | | Gross
Losses | | Fair Value |
| September 30, 2022 | | | | | | | | |
| At June 30, 2023 | | At June 30, 2023 | | | | | | | |
| Available-for-sale securities: | Available-for-sale securities: | | Available-for-sale securities: | |
| U.S. Treasury | U.S. Treasury | $ | 5 | | | $ | — | | | $ | — | | | $ | 5 | | U.S. Treasury | $ | 5 | | | $ | — | | | $ | — | | | $ | 5 | |
| Federal agencies: | Federal agencies: | | Federal agencies: | |
| Residential CMO | Residential CMO | 3,417 | | | — | | | (382) | | | 3,035 | | Residential CMO | 3,742 | | | — | | | (434) | | | 3,308 | |
| Residential MBS | Residential MBS | 14,269 | | | — | | | (2,286) | | | 11,983 | | Residential MBS | 13,789 | | | 1 | | | (1,979) | | | 11,811 | |
| Commercial MBS | Commercial MBS | 2,581 | | | — | | | (543) | | | 2,038 | | Commercial MBS | 2,551 | | | — | | | (653) | | | 1,898 | |
| Other agencies | Other agencies | 199 | | | — | | | (9) | | | 190 | | Other agencies | 176 | | | — | | | (8) | | | 168 | |
| Total U.S. Treasury, federal agency, and other agency securities | Total U.S. Treasury, federal agency, and other agency securities | 20,471 | | | — | | | (3,220) | | | 17,251 | | Total U.S. Treasury, federal agency, and other agency securities | 20,263 | | | 1 | | | (3,074) | | | 17,190 | |
| Municipal securities | Municipal securities | 3,626 | | | 1 | | | (251) | | | 3,376 | | Municipal securities | 3,778 | | | 2 | | | (244) | | | 3,536 | |
| Private-label CMO | Private-label CMO | 151 | | | 1 | | | (10) | | | 142 | | Private-label CMO | 138 | | | — | | | (15) | | | 123 | |
| Asset-backed securities | Asset-backed securities | 414 | | | 1 | | | (44) | | | 371 | | Asset-backed securities | 410 | | | — | | | (41) | | | 369 | |
| Corporate debt | Corporate debt | 2,464 | | | 140 | | | (442) | | | 2,162 | | Corporate debt | 2,230 | | | 94 | | | (313) | | | 2,011 | |
| Other securities/Sovereign debt | Other securities/Sovereign debt | 4 | | | — | | | — | | | 4 | | Other securities/Sovereign debt | 4 | | | — | | | — | | | 4 | |
| Total available-for-sale securities | Total available-for-sale securities | $ | 27,130 | | | $ | 143 | | | $ | (3,967) | | | $ | 23,306 | | Total available-for-sale securities | $ | 26,823 | | | $ | 97 | | | $ | (3,687) | | | $ | 23,233 | |
| | Held-to-maturity securities: | Held-to-maturity securities: | | Held-to-maturity securities: | |
| Federal agencies: | Federal agencies: | | Federal agencies: | |
| Residential CMO | Residential CMO | $ | 4,757 | | | $ | — | | | $ | (667) | | | $ | 4,090 | | Residential CMO | $ | 5,012 | | | $ | — | | | $ | (722) | | | $ | 4,290 | |
| Residential MBS | Residential MBS | 10,517 | | | — | | | (1,474) | | | 9,043 | | Residential MBS | 9,835 | | | — | | | (1,294) | | | 8,541 | |
| Commercial MBS | Commercial MBS | 1,756 | | | — | | | (188) | | | 1,568 | | Commercial MBS | 1,613 | | | — | | | (245) | | | 1,368 | |
| Other agencies | Other agencies | 141 | | | — | | | (9) | | | 132 | | Other agencies | 116 | | | — | | | (9) | | | 107 | |
| Total federal agency and other agency securities | Total federal agency and other agency securities | 17,171 | | | — | | | (2,338) | | | 14,833 | | Total federal agency and other agency securities | 16,576 | | | — | | | (2,270) | | | 14,306 | |
| Municipal securities | Municipal securities | 2 | | | — | | | — | | | 2 | | Municipal securities | 2 | | | — | | | — | | | 2 | |
| Total held-to-maturity securities | Total held-to-maturity securities | $ | 17,173 | | | $ | — | | | $ | (2,338) | | | $ | 14,835 | | Total held-to-maturity securities | $ | 16,578 | | | $ | — | | | $ | (2,270) | | | $ | 14,308 | |
| | Other securities, at cost: | Other securities, at cost: | | Other securities, at cost: | |
| Non-marketable equity securities: | Non-marketable equity securities: | | Non-marketable equity securities: | |
| Federal Home Loan Bank stock | Federal Home Loan Bank stock | $ | 245 | | | $ | — | | | $ | — | | | $ | 245 | | Federal Home Loan Bank stock | $ | 412 | | | $ | — | | | $ | — | | | $ | 412 | |
| Federal Reserve Bank stock | Federal Reserve Bank stock | 515 | | | — | | | — | | | 515 | | Federal Reserve Bank stock | 516 | | | — | | | — | | | 516 | |
| Equity securities | Equity securities | 8 | | | — | | | — | | | 8 | | Equity securities | 14 | | | — | | | — | | | 14 | |
| Other securities, at fair value: | Other securities, at fair value: | | Other securities, at fair value: | |
| Mutual funds | Mutual funds | 47 | | | — | | | — | | | 47 | | Mutual funds | 32 | | | — | | | — | | | 32 | |
| Equity securities | Equity securities | 2 | | | 1 | | | — | | | 3 | | Equity securities | 1 | | | — | | | — | | | 1 | |
| Total other securities | Total other securities | $ | 817 | | | $ | 1 | | | $ | — | | | $ | 818 | | Total other securities | $ | 975 | | | $ | — | | | $ | — | | | $ | 975 | |
|
(1)Amortized cost amounts exclude accrued interest receivable, which is recorded within accrued income and other receivables on the Consolidated Balance Sheets. At SeptemberJune 30, 2022,2023, accrued interest receivable on available-for-sale securities and held-to-maturity securities totaled $71$62 million and $38 million, respectively.
(2)Excluded from the amortized cost are portfolio level basis adjustments for securities designated in fair value hedges under the portfolio layer method. The basis adjustments totaled $892$843 million and represent a reduction to the amortized cost of the securities being hedged. The securities being hedged under the portfolio layer method are primarily Residential CMO and Residential MBS securities.
2022 3Q Form 10-Q 5049 Huntington Bancshares Incorporated
| | | Unrealized | | | Unrealized | |
| (dollar amounts in millions) | (dollar amounts in millions) | Amortized
Cost (1) | | Gross
Gains | | Gross
Losses | | Fair Value | (dollar amounts in millions) | Amortized
Cost (1)(2) | | Gross
Gains | | Gross
Losses | | Fair Value |
| December 31, 2021 | | | | | | | | |
| At December 31, 2022 | | At December 31, 2022 | | | | | | | |
| Available-for-sale securities: | Available-for-sale securities: | | Available-for-sale securities: | |
| U.S. Treasury | U.S. Treasury | $ | 5 | | | $ | — | | | $ | — | | | $ | 5 | | U.S. Treasury | $ | 103 | | | $ | — | | | $ | — | | | $ | 103 | |
| Federal agencies: | Federal agencies: | | Federal agencies: | |
| Residential CMO | Residential CMO | 4,649 | | | 40 | | | (40) | | | 4,649 | | Residential CMO | 3,336 | | | — | | | (422) | | | 2,914 | |
| Residential MBS | Residential MBS | 15,533 | | | 135 | | | (160) | | | 15,508 | | Residential MBS | 14,349 | | | 4 | | | (2,090) | | | 12,263 | |
| Commercial MBS | Commercial MBS | 1,896 | | | 7 | | | (38) | | | 1,865 | | Commercial MBS | 2,565 | | | — | | | (612) | | | 1,953 | |
| Other agencies | Other agencies | 248 | | | 1 | | | (1) | | | 248 | | Other agencies | 190 | | | 1 | | | (9) | | | 182 | |
| Total U.S. Treasury, federal agency, and other agency securities | Total U.S. Treasury, federal agency, and other agency securities | 22,331 | | | 183 | | | (239) | | | 22,275 | | Total U.S. Treasury, federal agency, and other agency securities | 20,543 | | | 5 | | | (3,133) | | | 17,415 | |
| Municipal securities | Municipal securities | 3,497 | | | 62 | | | (33) | | | 3,526 | | Municipal securities | 3,527 | | | 1 | | | (238) | | | 3,290 | |
| Private-label CMO | Private-label CMO | 106 | | | 1 | | | (1) | | | 106 | | Private-label CMO | 146 | | | — | | | (18) | | | 128 | |
| Asset-backed securities | Asset-backed securities | 385 | | | 1 | | | (4) | | | 382 | | Asset-backed securities | 416 | | | — | | | (44) | | | 372 | |
| Corporate debt | Corporate debt | 2,183 | | | 22 | | | (38) | | | 2,167 | | Corporate debt | 2,467 | | | 132 | | | (385) | | | 2,214 | |
| Other securities/Sovereign debt | Other securities/Sovereign debt | 4 | | | — | | | — | | | 4 | | Other securities/Sovereign debt | 4 | | | — | | | — | | | 4 | |
| Total available-for-sale securities | Total available-for-sale securities | $ | 28,506 | | | $ | 269 | | | $ | (315) | | | $ | 28,460 | | Total available-for-sale securities | $ | 27,103 | | | $ | 138 | | | $ | (3,818) | | | $ | 23,423 | |
| | Held-to-maturity securities: | Held-to-maturity securities: | | Held-to-maturity securities: | |
| Federal agencies: | Federal agencies: | | Federal agencies: | |
| Residential CMO | Residential CMO | $ | 2,602 | | | $ | 35 | | | $ | (20) | | | $ | 2,617 | | Residential CMO | $ | 4,970 | | | $ | 4 | | | $ | (714) | | | $ | 4,260 | |
| Residential MBS | Residential MBS | 7,475 | | | 41 | | | (59) | | | 7,457 | | Residential MBS | 10,295 | | | — | | | (1,375) | | | 8,920 | |
| Commercial MBS | Commercial MBS | 2,175 | | | 45 | | | (5) | | | 2,215 | | Commercial MBS | 1,652 | | | — | | | (204) | | | 1,448 | |
| Other agencies | Other agencies | 193 | | | 5 | | | — | | | 198 | | Other agencies | 133 | | | — | | | (9) | | | 124 | |
| Total federal agency and other agency securities | Total federal agency and other agency securities | 12,445 | | | 126 | | | (84) | | | 12,487 | | Total federal agency and other agency securities | 17,050 | | | 4 | | | (2,302) | | | 14,752 | |
| Municipal securities | Municipal securities | 2 | | | — | | | — | | | 2 | | Municipal securities | 2 | | | — | | | — | | | 2 | |
| Total held-to-maturity securities | Total held-to-maturity securities | $ | 12,447 | | | $ | 126 | | | $ | (84) | | | $ | 12,489 | | Total held-to-maturity securities | $ | 17,052 | | | $ | 4 | | | $ | (2,302) | | | $ | 14,754 | |
| | Other securities, at cost: | Other securities, at cost: | | Other securities, at cost: | |
| Non-marketable equity securities: | Non-marketable equity securities: | | Non-marketable equity securities: | |
| Federal Home Loan Bank stock | Federal Home Loan Bank stock | $ | 52 | | | $ | — | | | $ | — | | | $ | 52 | | Federal Home Loan Bank stock | $ | 312 | | | $ | — | | | $ | — | | | $ | 312 | |
| Federal Reserve Bank stock | Federal Reserve Bank stock | 512 | | | — | | | — | | | 512 | | Federal Reserve Bank stock | 500 | | | — | | | — | | | 500 | |
| Equity securities | Equity securities | 12 | | | — | | | — | | | 12 | | Equity securities | 10 | | | — | | | — | | | 10 | |
| Other securities, at fair value: | Other securities, at fair value: | | Other securities, at fair value: | |
| Mutual funds | Mutual funds | 65 | | | — | | | — | | | 65 | | Mutual funds | 31 | | | — | | | — | | | 31 | |
| Equity securities | Equity securities | 6 | | | 1 | | | — | | | 7 | | Equity securities | 1 | | | — | | | — | | | 1 | |
| Total other securities | Total other securities | $ | 647 | | | $ | 1 | | | $ | — | | | $ | 648 | | Total other securities | $ | 854 | | | $ | — | | | $ | — | | | $ | 854 | |
|
(1)Amortized cost amounts exclude accrued interest receivable, which is recorded within accrued income and other receivables on the Consolidated Balance Sheets. At December 31, 2021,2022, accrued interest receivable on available-for-sale securities and held-to-maturity securities totaled $62$64 million and $26$39 million, respectively.
(2)Excluded from the amortized cost are portfolio level basis adjustments for securities designated in fair value hedges under the portfolio layer method. The basis adjustments totaled $849 million and represent a reduction to the amortized cost of the securities being hedged. The securities being hedged under the portfolio layer method are primarily Residential CMO and Residential MBS securities.
502023 2Q Form 10-Q Huntington Bancshares Incorporated51
The following table provides the amortized cost and fair value of securities by contractual maturity at SeptemberJune 30, 20222023 and December 31, 2021.2022. Expected maturities may differ from contractual maturities as issuers may have the right to call or prepay obligations with or without incurring penalties.
| | | September 30, 2022 | | December 31, 2021 | | At June 30, 2023 | | At December 31, 2022 |
| (dollar amounts in millions) | (dollar amounts in millions) | Amortized Cost | | Fair Value | | Amortized Cost | | Fair Value | (dollar amounts in millions) | Amortized Cost | | Fair Value | | Amortized Cost | | Fair Value |
| Available-for-sale securities: | Available-for-sale securities: | | | | | | | | Available-for-sale securities: | | | | | | | |
| Under 1 year | Under 1 year | $ | 462 | | | $ | 448 | | | $ | 377 | | | $ | 374 | | Under 1 year | $ | 524 | | | $ | 514 | | | $ | 518 | | | $ | 511 | |
| After 1 year through 5 years | After 1 year through 5 years | 2,566 | | | 2,367 | | | 1,888 | | | 1,880 | | After 1 year through 5 years | 2,456 | | | 2,273 | | | 2,182 | | | 2,033 | |
| After 5 years through 10 years | After 5 years through 10 years | 3,059 | | | 2,735 | | | 3,166 | | | 3,180 | | After 5 years through 10 years | 2,734 | | | 2,507 | | | 3,106 | | | 2,814 | |
| After 10 years | After 10 years | 21,043 | | | 17,756 | | | 23,075 | | | 23,026 | | After 10 years | 21,109 | | | 17,939 | | | 21,297 | | | 18,065 | |
| Total available-for-sale securities | Total available-for-sale securities | $ | 27,130 | | | $ | 23,306 | | | $ | 28,506 | | | $ | 28,460 | | Total available-for-sale securities | $ | 26,823 | | | $ | 23,233 | | | $ | 27,103 | | | $ | 23,423 | |
| | Held-to-maturity securities: | Held-to-maturity securities: | | Held-to-maturity securities: | |
| Under 1 year | Under 1 year | $ | 1�� | | | $ | 1 | | | $ | 2 | | | $ | 2 | | Under 1 year | $ | 2 | | | $ | 2 | | | $ | — | | | $ | — | |
| After 1 year through 5 years | After 1 year through 5 years | 98 | | | 94 | | | 162 | | | 164 | | After 1 year through 5 years | 58 | | | 55 | | | 72 | | | 68 | |
| After 5 years through 10 years | After 5 years through 10 years | 57 | | | 53 | | | 44 | | | 45 | | After 5 years through 10 years | 75 | | | 70 | | | 71 | | | 66 | |
| After 10 years | After 10 years | 17,017 | | | 14,687 | | | 12,239 | | | 12,278 | | After 10 years | 16,443 | | | 14,181 | | | 16,909 | | | 14,620 | |
| Total held-to-maturity securities | Total held-to-maturity securities | $ | 17,173 | | | $ | 14,835 | | | $ | 12,447 | | | $ | 12,489 | | Total held-to-maturity securities | $ | 16,578 | | | $ | 14,308 | | | $ | 17,052 | | | $ | 14,754 | |
|
The following tables provide detail on investment securities with unrealized losses aggregated by investment category and the length of time the individual securities have been in a continuous loss position at SeptemberJune 30, 20222023 and December 31, 2021:2022:
| | | Less than 12 Months | | Over 12 Months | | Total | | Less than 12 Months | | Over 12 Months | | Total |
| (dollar amounts in millions) | (dollar amounts in millions) | Fair
Value | | Gross Unrealized
Losses | | Fair
Value | | Gross Unrealized
Losses | | Fair
Value | | Gross Unrealized
Losses | (dollar amounts in millions) | Fair
Value | | Gross Unrealized
Losses | | Fair
Value | | Gross Unrealized
Losses | | Fair
Value | | Gross Unrealized
Losses |
| September 30, 2022 | | | | | | | | | | | | |
| At June 30, 2023 | | At June 30, 2023 | | | | | | | | | | | |
| Available-for-sale securities: | Available-for-sale securities: | | Available-for-sale securities: | |
| Federal agencies: | Federal agencies: | | Federal agencies: | |
| Residential CMO | Residential CMO | $ | 2,330 | | | $ | (220) | | | $ | 705 | | | $ | (162) | | | $ | 3,035 | | | $ | (382) | | Residential CMO | $ | 1,249 | | | $ | (56) | | | $ | 2,059 | | | $ | (378) | | | $ | 3,308 | | | $ | (434) | |
| Residential MBS | Residential MBS | 5,580 | | | (921) | | | 6,402 | | | (1,365) | | | 11,982 | | | (2,286) | | Residential MBS | 778 | | | (38) | | | 10,883 | | | (1,941) | | | 11,661 | | | (1,979) | |
| Commercial MBS | Commercial MBS | 1,462 | | | (324) | | | 576 | | | (219) | | | 2,038 | | | (543) | | Commercial MBS | 387 | | | (64) | | | 1,512 | | | (589) | | | 1,899 | | | (653) | |
| Other agencies | Other agencies | 28 | | | (1) | | | 52 | | | (8) | | | 80 | | | (9) | | Other agencies | 22 | | | — | | | 70 | | | (8) | | | 92 | | | (8) | |
| Total federal agency and other agency securities | Total federal agency and other agency securities | 9,400 | | | (1,466) | | | 7,735 | | | (1,754) | | | 17,135 | | | (3,220) | | Total federal agency and other agency securities | 2,436 | | | (158) | | | 14,524 | | | (2,916) | | | 16,960 | | | (3,074) | |
| Municipal securities | Municipal securities | 2,863 | | | (226) | | | 401 | | | (25) | | | 3,264 | | | (251) | | Municipal securities | 789 | | | (49) | | | 2,566 | | | (195) | | | 3,355 | | | (244) | |
| Private-label CMO | Private-label CMO | 94 | | (8) | | | 20 | | | (2) | | | 114 | | (10) | | Private-label CMO | 6 | | | — | | | 97 | | | (15) | | | 103 | | | (15) | |
| Asset-backed securities | Asset-backed securities | 240 | | | (20) | | | 131 | | | (24) | | | 371 | | | (44) | | Asset-backed securities | — | | | — | | | 369 | | | (41) | | | 369 | | | (41) | |
| Corporate debt | Corporate debt | 1,240 | | | (229) | | | 920 | | | (213) | | | 2,160 | | | (442) | | Corporate debt | — | | | — | | | 2,011 | | | (313) | | | 2,011 | | | (313) | |
| | Total temporarily impaired available-for-sale securities | Total temporarily impaired available-for-sale securities | $ | 13,837 | | | $ | (1,949) | | | $ | 9,207 | | | $ | (2,018) | | | $ | 23,044 | | | $ | (3,967) | | Total temporarily impaired available-for-sale securities | $ | 3,231 | | | $ | (207) | | | $ | 19,567 | | | $ | (3,480) | | | $ | 22,798 | | | $ | (3,687) | |
| | Held-to-maturity securities: | Held-to-maturity securities: | | Held-to-maturity securities: | |
| Federal agencies: | Federal agencies: | | Federal agencies: | |
| Residential CMO | Residential CMO | $ | 3,279 | | | $ | (510) | | | $ | 811 | | | $ | (157) | | | $ | 4,090 | | | $ | (667) | | Residential CMO | $ | 612 | | | $ | (12) | | | $ | 3,678 | | | $ | (710) | | | $ | 4,290 | | | $ | (722) | |
| Residential MBS | Residential MBS | 5,851 | | | (811) | | | 3,174 | | | (663) | | | 9,025 | | | (1,474) | | Residential MBS | 1,118 | | | (60) | | | 7,407 | | | (1,234) | | | 8,525 | | | (1,294) | |
| Commercial MBS | Commercial MBS | 1,360 | | | (151) | | | 207 | | | (37) | | | 1,567 | | | (188) | | Commercial MBS | 43 | | | (3) | | | 1,324 | | | (242) | | | 1,367 | | | (245) | |
| Other agencies | Other agencies | 132 | | | (9) | | | — | | | — | | | 132 | | | (9) | | Other agencies | — | | | — | | | 108 | | | (9) | | | 108 | | | (9) | |
| Total federal agency and other agency securities | Total federal agency and other agency securities | 10,622 | | | (1,481) | | | 4,192 | | | (857) | | | 14,814 | | | (2,338) | | Total federal agency and other agency securities | 1,773 | | | (75) | | | 12,517 | | | (2,195) | | | 14,290 | | | (2,270) | |
| | Total temporarily impaired held-to-maturity securities | Total temporarily impaired held-to-maturity securities | $ | 10,622 | | | $ | (1,481) | | | $ | 4,192 | | | $ | (857) | | | $ | 14,814 | | | $ | (2,338) | | Total temporarily impaired held-to-maturity securities | $ | 1,773 | | | $ | (75) | | | $ | 12,517 | | | $ | (2,195) | | | $ | 14,290 | | | $ | (2,270) | |
2022 3Q Form 10-Q 5251 Huntington Bancshares Incorporated
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Less than 12 Months | | Over 12 Months | | Total | | |
| (dollar amounts in millions) | Fair
Value | | Gross Unrealized
Losses | | Fair
Value | | Gross Unrealized
Losses | | Fair
Value | | Gross Unrealized
Losses | | |
| December 31, 2021 | | | | | | | | | | | | | |
| Available-for-sale securities: | | | | | | | | | | | | | |
| Federal agencies: | | | | | | | | | | | | | |
| Residential CMO | $ | 2,925 | | | $ | (40) | | | $ | — | | | $ | — | | | $ | 2,925 | | | $ | (40) | | | |
| Residential MBS | 13,491 | | | (160) | | | — | | | — | | | 13,491 | | | (160) | | | |
| Commercial MBS | 1,251 | | | (38) | | | — | | | — | | | 1,251 | | | (38) | | | |
| Other agencies | 140 | | | (1) | | | — | | | — | | | 140 | | | (1) | | | |
| Total federal agency and other agency securities | 17,807 | | | (239) | | | — | | | — | | | 17,807 | | | (239) | | | |
| Municipal securities | 859 | | | (22) | | | 319 | | | (11) | | | 1,178 | | | (33) | | | |
| Private-label CMO | 78 | | | (1) | | | — | | | — | | | 78 | | | (1) | | | |
| Asset-backed securities | 237 | | | (4) | | | — | | | — | | | 237 | | | (4) | | | |
| Corporate debt | 1,766 | | | (38) | | | — | | | — | | | 1,766 | | | (38) | | | |
| | | | | | | | | | | | | |
| Total temporarily impaired available-for-sale securities | $ | 20,747 | | | $ | (304) | | | $ | 319 | | | $ | (11) | | | $ | 21,066 | | | $ | (315) | | | |
| | | | | | | | | | | | | |
| Held-to-maturity securities: | | | | | | | | | | | | | |
| Federal agencies: | | | | | | | | | | | | | |
| Residential CMO | $ | 1,453 | | | $ | (20) | | | $ | — | | | $ | — | | | $ | 1,453 | | | $ | (20) | | | |
| Residential MBS | 5,837 | | | (59) | | | — | | | — | | | 5,837 | | | (59) | | | |
| Commercial MBS | 318 | | | (5) | | | — | | | — | | | 318 | | | (5) | | | |
| | | | | | | | | | | | | |
| Total federal agency and other agency securities | 7,608 | | | (84) | | | — | | | — | | | 7,608 | | | (84) | | | |
| | | | | | | | | | | | | |
| Total temporarily impaired held-to-maturity securities | $ | 7,608 | | | $ | (84) | | | $ | — | | | $ | — | | | $ | 7,608 | | | $ | (84) | | | |
During the 2022 first quarter, Huntington transferred $4.2 billion of securities from the AFS portfolio to the HTM portfolio. At the time of the transfer, AOCI included $58 million of net unrealized losses (after-tax) attributed to these securities. This loss will be amortized into interest income over the remaining life of the securities. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Less than 12 Months | | Over 12 Months | | Total | | |
| (dollar amounts in millions) | Fair
Value | | Gross Unrealized
Losses | | Fair
Value | | Gross Unrealized
Losses | | Fair
Value | | Gross Unrealized
Losses | | |
| At December 31, 2022 | | | | | | | | | | | | | |
| Available-for-sale securities: | | | | | | | | | | | | | |
| Federal agencies: | | | | | | | | | | | | | |
| Residential CMO | $ | 2,096 | | | $ | (224) | | | $ | 818 | | | $ | (198) | | | $ | 2,914 | | | $ | (422) | | | |
| Residential MBS | 2,455 | | | (286) | | | 9,490 | | | (1,804) | | | 11,945 | | | (2,090) | | | |
| Commercial MBS | 1,090 | | | (249) | | | 863 | | | (363) | | | 1,953 | | | (612) | | | |
| Other agencies | 40 | | | (1) | | | 56 | | | (8) | | | 96 | | | (9) | | | |
| Total federal agency and other agency securities | 5,681 | | | (760) | | | 11,227 | | | (2,373) | | | 16,908 | | | (3,133) | | | |
| Municipal securities | 2,298 | | | (174) | | | 807 | | | (64) | | | 3,105 | | | (238) | | | |
| Private-label CMO | 64 | | | (13) | | | 43 | | | (5) | | | 107 | | | (18) | | | |
| Asset-backed securities | 174 | | | (10) | | | 199 | | | (34) | | | 373 | | | (44) | | | |
| Corporate debt | 727 | | | (105) | | | 1,487 | | | (280) | | | 2,214 | | | (385) | | | |
| | | | | | | | | | | | | |
| Total temporarily impaired available-for-sale securities | $ | 8,944 | | | $ | (1,062) | | | $ | 13,763 | | | $ | (2,756) | | | $ | 22,707 | | | $ | (3,818) | | | |
| | | | | | | | | | | | | |
| Held-to-maturity securities: | | | | | | | | | | | | | |
| Federal agencies: | | | | | | | | | | | | | |
| Residential CMO | $ | 1,702 | | | $ | (238) | | | $ | 2,283 | | | $ | (476) | | | $ | 3,985 | | | $ | (714) | | | |
| Residential MBS | 4,151 | | | (462) | | | 4,711 | | | (913) | | | 8,862 | | | (1,375) | | | |
| Commercial MBS | 1,201 | | | (154) | | | 247 | | | (50) | | | 1,448 | | | (204) | | | |
| Other agencies | 124 | | | (9) | | | — | | | — | | | 124 | | | (9) | | | |
| Total federal agency and other agency securities | 7,178 | | | (863) | | | 7,241 | | | (1,439) | | | 14,419 | | | (2,302) | | | |
| | | | | | | | | | | | | |
| Total temporarily impaired held-to-maturity securities | $ | 7,178 | | | $ | (863) | | | $ | 7,241 | | | $ | (1,439) | | | $ | 14,419 | | | $ | (2,302) | | | |
At SeptemberJune 30, 20222023 and December 31, 2021,2022, the carrying value of investment securities pledged: (i) to secure public and trustcertain uninsured deposits, trading account liabilities, U.S. Treasury demand notes, and security repurchase agreements, and (ii) to support borrowing capacity, totaled $28.0$33.1 billion and $21.7$26.9 billion, respectively. There were no securities of a single issuer, which were not governmental or government-sponsored, that exceeded 10% of shareholders’ equity at either SeptemberJune 30, 20222023 or December 31, 2021.2022. At SeptemberJune 30, 2022,2023, all HTM debt securities are considered AAA rated.investment grade. In addition, there were no HTM debt securities considered past due at SeptemberJune 30, 2022.2023.
Based on an evaluation of available information including security type, counterparty credit quality, past events, current conditions, and reasonable and supportable forecasts that are relevant to collectability of cash flows, as of SeptemberJune 30, 2022,2023, Huntington has concluded that except for one municipal bond classified as an AFS debt security for which a charge-off of $4 million was recognized during the 2022 first quarter, it expects to receive all contractual cash flows from each security held in its AFS and HTM debt securities portfolio. There was no allowance related to investment securities as of SeptemberJune 30, 20222023 or December 31, 2021.2022. A $4 million charge-off was recognized during the 2022 first quarter for one municipal bond classified as an AFS debt security.
522023 2Q Form 10-Q Huntington Bancshares Incorporated53
5.4. LOANS AND LEASES
The following table provides a detailed listing of Huntington’s loan and lease portfolio at SeptemberJune 30, 20222023 and December 31, 2021.2022.
| | (dollar amounts in millions) | (dollar amounts in millions) | September 30, 2022 | | December 31, 2021 | (dollar amounts in millions) | At June 30, 2023 | | At December 31, 2022 |
| | Commercial loan and lease portfolio: | Commercial loan and lease portfolio: | | | | Commercial loan and lease portfolio: | | | |
| Commercial and industrial | Commercial and industrial | $ | 44,144 | | | $ | 41,688 | | Commercial and industrial | $ | 49,834 | | | $ | 48,121 | |
| Commercial real estate | Commercial real estate | 16,456 | | | 14,961 | | Commercial real estate | 13,166 | | | 13,640 | |
| Lease financing | Lease financing | 5,093 | | | 5,000 | | Lease financing | 5,143 | | | 5,252 | |
| Total commercial loan and lease portfolio | Total commercial loan and lease portfolio | 65,693 | | | 61,649 | | Total commercial loan and lease portfolio | 68,143 | | | 67,013 | |
| Consumer loan portfolio: | Consumer loan portfolio: | | | | Consumer loan portfolio: | |
| Residential mortgage | Residential mortgage | 21,816 | | | 19,256 | | Residential mortgage | 23,138 | | | 22,226 | |
| Automobile | Automobile | 13,430 | | | 13,434 | | Automobile | 12,819 | | | 13,154 | |
| Home equity | Home equity | 10,440 | | | 10,550 | | Home equity | 10,135 | | | 10,375 | |
| RV and marine | RV and marine | 5,436 | | | 5,058 | | RV and marine | 5,640 | | | 5,376 | |
| Other consumer | Other consumer | 1,332 | | | 1,320 | | Other consumer | 1,350 | | | 1,379 | |
| Total consumer loan portfolio | Total consumer loan portfolio | 52,454 | | | 49,618 | | Total consumer loan portfolio | 53,082 | | | 52,510 | |
| Total loans and leases (1)(2) | Total loans and leases (1)(2) | 118,147 | | | 111,267 | | Total loans and leases (1)(2) | 121,225 | | | 119,523 | |
| Allowance for loan and lease losses | Allowance for loan and lease losses | (2,110) | | | (2,030) | | Allowance for loan and lease losses | (2,177) | | | (2,121) | |
| Net loans and leases | Net loans and leases | $ | 116,037 | | | $ | 109,237 | | Net loans and leases | $ | 119,048 | | | $ | 117,402 | |
(1)Loans and leases are reported at principal amount outstanding including unamortized purchase premiums and discounts, unearned income, and net direct fees and costs associated with originating and acquiring loans and leases. The aggregate amount of these loan and lease adjustments was a net discount(discount) premium of $42$(86) million and $111$3 million at SeptemberJune 30, 20222023 and December 31, 2021,2022, respectively.
(2)The total amount of accrued interest recorded for these loans and leases at SeptemberJune 30, 2022,2023, was $190$306 million and $167$195 million of commercial and consumer loan and lease portfolios, respectively, and at December 31, 2021,2022, was $148$274 million and $150$186 million of commercial and consumer loan and lease portfolios, respectively. Accrued interest is presented in accrued income and other receivables within the Condensed Consolidated Balance Sheets.
Lease Financing
Huntington leases equipment to customers, and substantially all such arrangements are classified as either sales-type or direct financing leases, which are included in commercial loans and leases. These leases are reported at the aggregate of lease payments receivable and estimated residual values, net of unearned and deferred income, and any initial direct costs incurred to originate these leases.
Huntington assesses net investments in leases (including residual values) for impairment and recognizes any impairment losses in accordance with the impairment guidance for financial instruments. As such, net investments in leases may be reduced by an ACL, with changes recognized as provision expense.
The following table presents net investments in lease financing receivables by category at SeptemberJune 30, 20222023 and December 31, 2021.2022.
| | (dollar amounts in millions) | (dollar amounts in millions) | September 30,
2022 | | December 31,
2021 | (dollar amounts in millions) | At June 30, 2023 | | At December 31, 2022 |
| | Lease payments receivable | Lease payments receivable | $ | 4,740 | | | $ | 4,620 | | Lease payments receivable | $ | 4,830 | | | $ | 4,916 | |
| Estimated residual value of leased assets | Estimated residual value of leased assets | 769 | | | 774 | | Estimated residual value of leased assets | 797 | | | 788 | |
| Gross investment in lease financing receivables | Gross investment in lease financing receivables | 5,509 | | | 5,394 | | Gross investment in lease financing receivables | 5,627 | | | 5,704 | |
| Deferred origination costs | Deferred origination costs | 42 | | | 36 | | Deferred origination costs | 52 | | | 46 | |
| Deferred fees, unearned income and other | Deferred fees, unearned income and other | (458) | | | (430) | | Deferred fees, unearned income and other | (536) | | | (498) | |
| Total lease financing receivables | Total lease financing receivables | $ | 5,093 | | | $ | 5,000 | | Total lease financing receivables | $ | 5,143 | | | $ | 5,252 | |
The carrying value of residual values guaranteed was $454$483 million and $473$466 million as of SeptemberJune 30, 20222023 and December 31, 2021,2022, respectively. The future lease rental payments due from customers on sales-type and direct financing leases at SeptemberJune 30, 2022,2023, totaled $4.7$4.8 billion and were due as follows: $838 million in 2022, $820$856 million in 2023, $815$853 million in 2024, $733$764 million in 2025, $688$784 million in 2026, $747 million in 2027, and $846$826 million thereafter. Interest income recognized for these types of leases was $41$70 million and $73$39 million for the three-month periods ended SeptemberJune 30, 20222023 and 2021,2022, respectively. For the nine-monthsix-month periods ended SeptemberJune 30, 20222023 and 2021,2022, interest income recognized for these types of leases was $117$138 million and $154 million.$77 million, respectively.
2022 3Q Form 10-Q 5453 Huntington Bancshares Incorporated
Nonaccrual and Past Due Loans and Leases
The following table presents NALs by class at SeptemberJune 30, 20222023 and December 31, 2021:2022:
| | | September 30, 2022 | | December 31, 2021 | | At June 30, 2023 | | At December 31, 2022 |
| (dollar amounts in millions) | (dollar amounts in millions) | Nonaccrual loans and leases with no ACL | Total nonaccrual loans and leases | | Nonaccrual loans and leases with no ACL | Total nonaccrual loans and leases | (dollar amounts in millions) | Nonaccrual loans and leases with no ACL | | Total nonaccrual loans and leases | | Nonaccrual loans and leases with no ACL | | Total nonaccrual loans and leases |
| Commercial and industrial | Commercial and industrial | $ | 73 | | $ | 288 | | | $ | 81 | | $ | 370 | | Commercial and industrial | $ | 49 | | | $ | 267 | | | $ | 49 | | | $ | 288 | |
| Commercial real estate | Commercial real estate | 85 | | 110 | | | 80 | | 104 | | Commercial real estate | 32 | | | 75 | | | 63 | | | 92 | |
| Lease financing | Lease financing | 7 | | 30 | | | 3 | | 48 | | Lease financing | — | | | 15 | | | — | | | 18 | |
| Residential mortgage | Residential mortgage | — | | 94 | | | — | | 111 | | Residential mortgage | — | | | 73 | | | — | | | 90 | |
| Automobile | Automobile | — | | 4 | | | — | | 3 | | Automobile | — | | | 4 | | | — | | | 4 | |
| Home equity | Home equity | — | | 75 | | | — | | 79 | | Home equity | — | | | 75 | | | — | | | 76 | |
| RV and marine | RV and marine | — | | 1 | | | — | | 1 | | RV and marine | — | | | 1 | | | — | | | 1 | |
| | Total nonaccrual loans and leases | Total nonaccrual loans and leases | $ | 165 | | $ | 602 | | | $ | 164 | | $ | 716 | | Total nonaccrual loans and leases | $ | 81 | | | $ | 510 | | | $ | 112 | | | $ | 569 | |
|
The following table presentstables present an aging analysis of loans and leases, by class at SeptemberJune 30, 20222023 and December 31, 2021:2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2022 | |
| Past Due (1) | | | | | | Loans Accounted for Under FVO | | Total Loans
and Leases | | 90 or
more days
past due
and accruing | |
| (dollar amounts in millions) | 30-59
Days | | 60-89
Days | | 90 or
more days | | Total | | Current | | | | | | |
| Commercial and industrial | $ | 92 | | | $ | 49 | | | $ | 117 | | | $ | 258 | | | $ | 43,886 | | | | | $ | — | | | $ | 44,144 | | | $ | 29 | | (2) |
| Commercial real estate | 24 | | | 4 | | | 32 | | | 60 | | | 16,396 | | | | | — | | | 16,456 | | | — | | |
| Lease financing | 57 | | | 45 | | | 21 | | | 123 | | | 4,970 | | | | | — | | | 5,093 | | | 18 | | (3) |
| Residential mortgage | 196 | | | 65 | | | 203 | | | 464 | | | 21,171 | | | | | 181 | | | 21,816 | | | 153 | | (4) |
| Automobile | 72 | | | 18 | | | 9 | | | 99 | | | 13,331 | | | | | — | | | 13,430 | | | 6 | | |
| Home equity | 47 | | | 21 | | | 61 | | | 129 | | | 10,310 | | | | | 1 | | | 10,440 | | | 12 | | |
| RV and marine | 12 | | | 4 | | | 2 | | | 18 | | | 5,418 | | | | | — | | | 5,436 | | | 2 | | |
| Other consumer | 13 | | | 3 | | | 3 | | | 19 | | | 1,313 | | | | | — | | | 1,332 | | | 3 | | |
| Total loans and leases | $ | 513 | | | $ | 209 | | | $ | 448 | | | $ | 1,170 | | | $ | 116,795 | | | | | $ | 182 | | | $ | 118,147 | | | $ | 223 | | |
| | | December 31, 2021 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Past Due (1) | | | Loans Accounted for Under FVO | | Total Loans
and Leases | | 90 or
more days
past due
and accruing | | | Past Due (1) | | | | Loans Accounted for Under FVO | | Total Loans
and Leases | | 90 or
more days
past due
and accruing | |
| (dollar amounts in millions) | (dollar amounts in millions) | 30-59
Days | | 60-89
Days | | 90 or more days | | Total | | Current | | | | (dollar amounts in millions) | 30-59
Days | | 60-89
Days | | 90 or
more days | | Total | | Current | | | Loans Accounted for Under FVO | Total Loans
and Leases | 90 or
more days
past due
and accruing |
| At June 30, 2023 | | At June 30, 2023 | | | | | | | | | | | | |
| Commercial and industrial | Commercial and industrial | $ | 72 | | | $ | 69 | | | $ | 107 | | | $ | 248 | | | $ | 41,440 | | | | $ | — | | | $ | 41,688 | | | $ | 13 | | (2) | Commercial and industrial | $ | 42 | | | $ | 21 | | | $ | 86 | | | $ | 149 | | | $ | 49,685 | | | | $ | — | | | $ | 49,834 | | | $ | 7 | | (2) |
| Commercial real estate | Commercial real estate | 9 | | | 1 | | | 9 | | | 19 | | | 14,942 | | | | — | | | 14,961 | | | — | | | Commercial real estate | 1 | | | — | | | 35 | | | 36 | | | 13,130 | | | | — | | | 13,166 | | | — | | |
| Lease financing | Lease financing | 39 | | | 13 | | | 17 | | | 69 | | | 4,931 | | | | — | | | 5,000 | | | 11 | | (3) | Lease financing | 28 | | | 17 | | | 18 | | | 63 | | | 5,080 | | | | — | | | 5,143 | | | 12 | | (3) |
| Residential mortgage | Residential mortgage | 151 | | | 49 | | | 233 | | | 433 | | | 18,653 | | | | 170 | | | 19,256 | | | 157 | | (4) | Residential mortgage | 229 | | | 71 | | | 167 | | | 467 | | | 22,497 | | | | 174 | | | 23,138 | | | 121 | | (4) |
| Automobile | Automobile | 79 | | | 18 | | | 8 | | | 105 | | | 13,329 | | | | — | | | 13,434 | | | 6 | | | Automobile | 75 | | | 19 | | | 9 | | | 103 | | | 12,716 | | | | — | | | 12,819 | | | 6 | | |
| Home equity | Home equity | 48 | | | 35 | | | 76 | | | 159 | | | 10,390 | | | | 1 | | | 10,550 | | | 17 | | | Home equity | 54 | | | 23 | | | 73 | | | 150 | | | 9,984 | | | | 1 | | | 10,135 | | | 18 | | |
| RV and marine | RV and marine | 14 | | | 4 | | | 3 | | | 21 | | | 5,037 | | | | — | | | 5,058 | | | 3 | | | RV and marine | 13 | | | 4 | | | 2 | | | 19 | | | 5,621 | | | | — | | | 5,640 | | | 2 | | |
| Other consumer | Other consumer | 13 | | | 2 | | | 3 | | | 18 | | | 1,302 | | | | — | | | 1,320 | | | 3 | | | Other consumer | 10 | | | 3 | | | 3 | | | 16 | | | 1,334 | | | | — | | | 1,350 | | | 3 | | |
| Total loans and leases | Total loans and leases | $ | 425 | | | $ | 191 | | | $ | 456 | | | $ | 1,072 | | | $ | 110,024 | | | | $ | 171 | | | $ | 111,267 | | | $ | 210 | | | Total loans and leases | $ | 452 | | | $ | 158 | | | $ | 393 | | | $ | 1,003 | | | $ | 120,047 | | | | $ | 175 | | | $ | 121,225 | | | $ | 169 | | |
| At December 31, 2022 | | At December 31, 2022 | | | | | | | | | | | | | | | | | |
| Commercial and industrial | | Commercial and industrial | $ | 53 | | | $ | 19 | | | $ | 108 | | | $ | 180 | | | $ | 47,941 | | | | $ | — | | | $ | 48,121 | | | $ | 23 | | (2) |
| Commercial real estate | | Commercial real estate | 2 | | | 1 | | | 9 | | | 12 | | | 13,628 | | | | — | | | 13,640 | | | — | | |
| Lease financing | | Lease financing | 36 | | | 18 | | | 10 | | | 64 | | | 5,188 | | | | — | | | 5,252 | | | 9 | | (3) |
| Residential mortgage | | Residential mortgage | 246 | | | 69 | | | 199 | | | 514 | | | 21,528 | | | | 184 | | | 22,226 | | | 146 | | (4) |
| Automobile | | Automobile | 88 | | | 20 | | | 11 | | | 119 | | | 13,035 | | | | — | | | 13,154 | | | 9 | | |
| Home equity | | Home equity | 56 | | | 30 | | | 66 | | | 152 | | | 10,222 | | | | 1 | | | 10,375 | | | 15 | | |
| RV and marine | | RV and marine | 15 | | | 5 | | | 3 | | | 23 | | | 5,353 | | | | — | | | 5,376 | | | 3 | | |
| Other consumer | | Other consumer | 13 | | | 3 | | | 3 | | | 19 | | | 1,360 | | | | — | | | 1,379 | | | 2 | | |
| Total loans and leases | | Total loans and leases | $ | 509 | | | $ | 165 | | | $ | 409 | | | $ | 1,083 | | | $ | 118,255 | | | | $ | 185 | | | $ | 119,523 | | | $ | 207 | | |
(1)NALs are included in this aging analysis based on the loan’s past due status.
(2)Amounts include PPP (SBA guaranteed) and other SBA loans and leases.
(3)Amounts include Huntington Technology Finance administrative lease delinquencies.
(4)Amounts include mortgage loans insured by U.S. government agencies.
542023 2Q Form 10-Q Huntington Bancshares Incorporated55
Credit Quality Indicators
See Note 5 “Loans/“Loans and Leases” to the Consolidated Financial Statements appearing in Huntington’s 20212022 Annual Report on Form 10-K for a description of the credit quality indicators Huntington utilizes for monitoring credit quality and for determining an appropriate ACL level.
To facilitate the monitoring of credit quality for commercial loans, and for purposes of determining an appropriate ACL level for these loans, Huntington utilizes the following internally defined categories of credit grades:
•Pass - Higher quality loans that do not fit any of the other categories described below.
•OLEM - The credit risk may be relatively minor yet represents a risk given certain specific circumstances. If the potential weaknesses are not monitored or mitigated, the loan may weaken or the collateral may be inadequate to protect Huntington’s position in the future. For these reasons, Huntington considers the loans to be potential problem loans.
•Substandard - Inadequately protected loans resulting from the borrower’s ability to repay, equity, and/or the collateral pledged to secure the loan. These loans have identified weaknesses that could hinder normal repayment or collection of the debt. It is likely Huntington will sustain some loss if any identified weaknesses are not mitigated.
•Doubtful - Loans that have all of the weaknesses inherent in those loans classified as Substandard, with the added elements of the full collection of the loan is improbable and that the possibility of loss is high.
Loans are generally assigned a category of “Pass” rating upon initial approval and subsequently updated as appropriate based on the borrower���s financial performance.
Commercial loans categorized as OLEM, Substandard, or Doubtful are considered Criticized loans. Commercial loans categorized as Substandard or Doubtful are both considered Classified loans.
For all classes within the consumer loan portfolios, loans are assigned pool level PD factors based on the FICO range within which the borrower’sborrower credit bureau score falls.scores are monitored as an indicator of credit quality. A credit bureau score is a credit score developed by FICO based on data provided by the credit bureaus. The credit bureau score is widely accepted as the standard measure of consumer credit risk used by lenders, regulators, rating agencies, and consumers. The higher the credit bureau score, the higher likelihood of repayment and therefore, an indicator of higher credit quality.
Huntington assesses the risk in the loan portfolio by utilizing numerous risk characteristics. The classifications described above, and also presented in the table below, represent one of those characteristics that are closely monitored in the overall credit risk management processes.
2022 3Q Form 10-Q 5655 Huntington Bancshares Incorporated
The following tables present the amortized cost basis of loans and leases by vintage and credit quality indicator at SeptemberJune 30, 20222023 and December 31, 20212022 respectively:
| | | As of September 30, 2022 | | At June 30, 2023 |
| | Term Loans Amortized Cost Basis by Origination Year | | Revolver Total at Amortized Cost Basis | | Revolver Total Converted to Term Loans | | | Term Loans Amortized Cost Basis by Origination Year | | Revolver Total at Amortized Cost Basis | | Revolver Total Converted to Term Loans | |
| (dollar amounts in millions) | (dollar amounts in millions) | | 2022 | | 2021 | | 2020 | | 2019 | | 2018 | | Prior | | Total | (dollar amounts in millions) | | 2023 | | 2022 | | 2021 | | 2020 | | 2019 | | Prior | | Total |
| Commercial and industrial | Commercial and industrial | | | | | | | | | | | | | | | | | | | Commercial and industrial | | | | | | | | | | | | | | | | | | |
| Credit Quality Indicator (1): | Credit Quality Indicator (1): | | Credit Quality Indicator (1): | |
| Pass | Pass | | $ | 13,212 | | | $ | 7,720 | | | $ | 3,808 | | | $ | 2,328 | | | $ | 1,228 | | | $ | 1,314 | | | $ | 11,998 | | | $ | 4 | | | $ | 41,612 | | Pass | | $ | 9,983 | | | $ | 12,540 | | | $ | 4,863 | | | $ | 2,602 | | | $ | 1,552 | | | $ | 1,701 | | | $ | 14,156 | | | $ | 4 | | | $ | 47,401 | |
| OLEM | OLEM | | 128 | | | 204 | | | 130 | | | 43 | | | 61 | | | 39 | | | 139 | | | — | | | 744 | | OLEM | | 107 | | | 214 | | | 79 | | | 16 | | | 7 | | | 25 | | | 159 | | | — | | | 607 | |
| Substandard | Substandard | | 227 | | | 199 | | | 194 | | | 244 | | | 155 | | | 277 | | | 491 | | | — | | | 1,787 | | Substandard | | 219 | | | 318 | | | 144 | | | 179 | | | 130 | | | 288 | | | 547 | | | — | | | 1,825 | |
| Doubtful | Doubtful | | — | | | — | | | — | | | — | | | — | | | 1 | | | — | | | — | | | 1 | | Doubtful | | — | | | — | | | — | | | — | | | — | | | 1 | | | — | | | — | | | 1 | |
| Total Commercial and industrial | Total Commercial and industrial | | $ | 13,567 | | | $ | 8,123 | | | $ | 4,132 | | | $ | 2,615 | | | $ | 1,444 | | | $ | 1,631 | | | $ | 12,628 | | | $ | 4 | | | $ | 44,144 | | Total Commercial and industrial | | $ | 10,309 | | | $ | 13,072 | | | $ | 5,086 | | | $ | 2,797 | | | $ | 1,689 | | | $ | 2,015 | | | $ | 14,862 | | | $ | 4 | | | $ | 49,834 | |
| Commercial real estate | Commercial real estate | | Commercial real estate | |
| Credit Quality Indicator (1): | Credit Quality Indicator (1): | | Credit Quality Indicator (1): | |
| Pass | Pass | | $ | 4,638 | | | $ | 3,544 | | | $ | 1,821 | | | $ | 1,892 | | | $ | 1,075 | | | $ | 1,186 | | | $ | 1,325 | | | $ | — | | | $ | 15,481 | | Pass | | $ | 972 | | | $ | 3,794 | | | $ | 2,451 | | | $ | 1,247 | | | $ | 1,330 | | | $ | 1,556 | | | $ | 638 | | | $ | — | | | $ | 11,988 | |
| OLEM | OLEM | | 44 | | | 26 | | | 4 | | | 11 | | | 12 | | | 39 | | | — | | | — | | | 136 | | OLEM | | 35 | | | 243 | | | 71 | | | 17 | | | 47 | | | 24 | | | — | | | — | | | 437 | |
| Substandard | Substandard | | 195 | | | 126 | | | 121 | | | 128 | | | 129 | | | 137 | | | 3 | | | — | | | 839 | | Substandard | | 164 | | | 128 | | | 90 | | | 23 | | | 151 | | | 183 | | | 2 | | | — | | | 741 | |
| | Total Commercial real estate | Total Commercial real estate | | $ | 4,877 | | | $ | 3,696 | | | $ | 1,946 | | | $ | 2,031 | | | $ | 1,216 | | | $ | 1,362 | | | $ | 1,328 | | | $ | — | | | $ | 16,456 | | Total Commercial real estate | | $ | 1,171 | | | $ | 4,165 | | | $ | 2,612 | | | $ | 1,287 | | | $ | 1,528 | | | $ | 1,763 | | | $ | 640 | | | $ | — | | | $ | 13,166 | |
| Lease financing | Lease financing | | Lease financing | |
| Credit Quality Indicator (1): | Credit Quality Indicator (1): | | Credit Quality Indicator (1): | |
| Pass | Pass | | $ | 1,391 | | | $ | 1,424 | | | $ | 1,069 | | | $ | 546 | | | $ | 229 | | | $ | 177 | | | $ | — | | | $ | — | | | $ | 4,836 | | Pass | | $ | 948 | | | $ | 1,631 | | | $ | 1,057 | | | $ | 757 | | | $ | 341 | | | $ | 197 | | | $ | — | | | $ | — | | | $ | 4,931 | |
| OLEM | OLEM | | 25 | | | 14 | | | 32 | | | 6 | | | 7 | | | 4 | | | — | | | — | | | 88 | | OLEM | | 13 | | | 20 | | | 11 | | | 20 | | | 10 | | | 7 | | | — | | | — | | | 81 | |
| Substandard | Substandard | | 37 | | | 25 | | | 56 | | | 28 | | | 9 | | | 14 | | | — | | | — | | | 169 | | Substandard | | 8 | | | 46 | | | 32 | | | 14 | | | 20 | | | 10 | | | — | | | — | | | 130 | |
| | Doubtful | | Doubtful | | — | | | — | | | 1 | | | — | | | — | | | — | | | — | | | — | | | 1 | |
| Total Lease financing | Total Lease financing | | $ | 1,453 | | | $ | 1,463 | | | $ | 1,157 | | | $ | 580 | | | $ | 245 | | | $ | 195 | | | $ | — | | | $ | — | | | $ | 5,093 | | Total Lease financing | | $ | 969 | | | $ | 1,697 | | | $ | 1,101 | | | $ | 791 | | | $ | 371 | | | $ | 214 | | | $ | — | | | $ | — | | | $ | 5,143 | |
| Residential mortgage | Residential mortgage | | Residential mortgage | |
| Credit Quality Indicator (2): | Credit Quality Indicator (2): | | Credit Quality Indicator (2): | |
| 750+ | 750+ | | $ | 2,993 | | | $ | 6,251 | | | $ | 3,611 | | | $ | 864 | | | $ | 485 | | | $ | 2,165 | | | $ | — | | | $ | — | | | $ | 16,369 | | 750+ | | $ | 1,127 | | | $ | 3,953 | | | $ | 6,215 | | | $ | 3,442 | | | $ | 791 | | | $ | 2,375 | | | $ | — | | | $ | — | | | $ | 17,903 | |
| 650-749 | 650-749 | | 1,260 | | | 1,308 | | | 670 | | | 235 | | | 146 | | | 814 | | | — | | | — | | | 4,433 | | 650-749 | | 459 | | | 1,137 | | | 1,054 | | | 547 | | | 208 | | | 837 | | | — | | | — | | | 4,242 | |
| <650 | <650 | | 29 | | | 60 | | | 60 | | | 90 | | | 94 | | | 500 | | | — | | | — | | | 833 | | <650 | | 7 | | | 61 | | | 65 | | | 65 | | | 87 | | | 534 | | | — | | | — | | | 819 | |
| | Total Residential mortgage | Total Residential mortgage | | $ | 4,282 | | | $ | 7,619 | | | $ | 4,341 | | | $ | 1,189 | | | $ | 725 | | | $ | 3,479 | | | $ | — | | | $ | — | | | $ | 21,635 | | Total Residential mortgage | | $ | 1,593 | | | $ | 5,151 | | | $ | 7,334 | | | $ | 4,054 | | | $ | 1,086 | | | $ | 3,746 | | | $ | — | | | $ | — | | | $ | 22,964 | |
| Automobile | Automobile | | Automobile | |
| Credit Quality Indicator (2): | Credit Quality Indicator (2): | | Credit Quality Indicator (2): | |
| 750+ | 750+ | | $ | 2,358 | | | $ | 2,366 | | | $ | 1,381 | | | $ | 898 | | | $ | 362 | | | $ | 154 | | | $ | — | | | $ | — | | | $ | 7,519 | | 750+ | | $ | 1,417 | | | $ | 2,330 | | | $ | 1,885 | | | $ | 988 | | | $ | 558 | | | $ | 198 | | | $ | — | | | $ | — | | | $ | 7,376 | |
| 650-749 | 650-749 | | 1,641 | | | 1,733 | | | 785 | | | 436 | | | 205 | | | 77 | | | — | | | — | | | 4,877 | | 650-749 | | 819 | | | 1,616 | | | 1,153 | | | 498 | | | 250 | | | 112 | | | — | | | — | | | 4,448 | |
| <650 | <650 | | 231 | | | 364 | | | 186 | | | 128 | | | 79 | | | 46 | | | — | | | — | | | 1,034 | | <650 | | 89 | | | 311 | | | 304 | | | 143 | | | 86 | | | 62 | | | — | | | — | | | 995 | |
| | Total Automobile | Total Automobile | | $ | 4,230 | | | $ | 4,463 | | | $ | 2,352 | | | $ | 1,462 | | | $ | 646 | | | $ | 277 | | | $ | — | | | $ | — | | | $ | 13,430 | | Total Automobile | | $ | 2,325 | | | $ | 4,257 | | | $ | 3,342 | | | $ | 1,629 | | | $ | 894 | | | $ | 372 | | | $ | — | | | $ | — | | | $ | 12,819 | |
| Home equity | Home equity | | Home equity | |
| Credit Quality Indicator (2): | Credit Quality Indicator (2): | | Credit Quality Indicator (2): | |
| 750+ | 750+ | | $ | 359 | | | $ | 588 | | | $ | 633 | | | $ | 25 | | | $ | 23 | | | $ | 323 | | | $ | 4,891 | | | $ | 265 | | | $ | 7,107 | | 750+ | | $ | 223 | | | $ | 458 | | | $ | 547 | | | $ | 574 | | | $ | 19 | | | $ | 282 | | | $ | 4,541 | | | $ | 233 | | | $ | 6,877 | |
| 650-749 | 650-749 | | 104 | | | 95 | | | 69 | | | 10 | | | 8 | | | 130 | | | 2,124 | | | 269 | | | 2,809 | | 650-749 | | 74 | | | 108 | | | 71 | | | 60 | | | 8 | | | 111 | | | 2,051 | | | 238 | | | 2,721 | |
| <650 | <650 | | 2 | | | 3 | | | 3 | | | 2 | | | 2 | | | 55 | | | 324 | | | 132 | | | 523 | | <650 | | — | | | 3 | | | 3 | | | 4 | | | 2 | | | 49 | | | 347 | | | 128 | | | 536 | |
| | Total Home equity | Total Home equity | | $ | 465 | | | $ | 686 | | | $ | 705 | | | $ | 37 | | | $ | 33 | | | $ | 508 | | | $ | 7,339 | | | $ | 666 | | | $ | 10,439 | | Total Home equity | | $ | 297 | | | $ | 569 | | | $ | 621 | | | $ | 638 | | | $ | 29 | | | $ | 442 | | | $ | 6,939 | | | $ | 599 | | | $ | 10,134 | |
| RV and marine | RV and marine | | RV and marine | |
| Credit Quality Indicator (2): | Credit Quality Indicator (2): | | Credit Quality Indicator (2): | |
| 750+ | 750+ | | $ | 1,059 | | | $ | 1,070 | | | $ | 764 | | | $ | 379 | | | $ | 373 | | | $ | 465 | | | $ | — | | | $ | — | | | $ | 4,110 | | 750+ | | $ | 683 | | | $ | 1,052 | | | $ | 945 | | | $ | 651 | | | $ | 326 | | | $ | 693 | | | $ | — | | | $ | — | | | $ | 4,350 | |
| 650-749 | 650-749 | | 247 | | | 335 | | | 213 | | | 126 | | | 122 | | | 180 | | | — | | | — | | | 1,223 | | 650-749 | | 126 | | | 270 | | | 271 | | | 173 | | | 101 | | | 237 | | | — | | | — | | | 1,178 | |
| <650 | <650 | | 3 | | | 16 | | | 14 | | | 16 | | | 16 | | | 38 | | | — | | | — | | | 103 | | <650 | | 1 | | | 9 | | | 21 | | | 18 | | | 15 | | | 48 | | | — | | | — | | | 112 | |
| | Total RV and marine | Total RV and marine | | $ | 1,309 | | | $ | 1,421 | | | $ | 991 | | | $ | 521 | | | $ | 511 | | | $ | 683 | | | $ | — | | | $ | — | | | $ | 5,436 | | Total RV and marine | | $ | 810 | | | $ | 1,331 | | | $ | 1,237 | | | $ | 842 | | | $ | 442 | | | $ | 978 | | | $ | — | | | $ | — | | | $ | 5,640 | |
| Other consumer | Other consumer | | Other consumer | |
| Credit Quality Indicator (2): | Credit Quality Indicator (2): | | Credit Quality Indicator (2): | |
| 750+ | 750+ | | $ | 202 | | | $ | 71 | | | $ | 39 | | | $ | 40 | | | $ | 15 | | | $ | 55 | | | $ | 360 | | | $ | 3 | | | $ | 785 | | 750+ | | $ | 118 | | | $ | 99 | | | $ | 51 | | | $ | 25 | | | $ | 24 | | | $ | 56 | | | $ | 388 | | | $ | 3 | | | $ | 764 | |
| 650-749 | 650-749 | | 57 | | | 34 | | | 14 | | | 18 | | | 4 | | | 16 | | | 330 | | | 18 | | | 491 | | 650-749 | | 50 | | | 55 | | | 21 | | | 8 | | | 8 | | | 16 | | | 354 | | | 14 | | | 526 | |
| <650 | <650 | | 2 | | | 3 | | | 2 | | | 3 | | | 1 | | | 2 | | | 30 | | | 13 | | | 56 | | <650 | | 2 | | | 5 | | | 4 | | | 1 | | | 2 | | | 1 | | | 33 | | | 12 | | | 60 | |
| | Total Other consumer | Total Other consumer | | $ | 261 | | | $ | 108 | | | $ | 55 | | | $ | 61 | | | $ | 20 | | | $ | 73 | | | $ | 720 | | | $ | 34 | | | $ | 1,332 | | Total Other consumer | | $ | 170 | | | $ | 159 | | | $ | 76 | | | $ | 34 | | | $ | 34 | | | $ | 73 | | | $ | 775 | | | $ | 29 | | | $ | 1,350 | |
(1)Consistent with the credit quality disclosures, indicators for the Commercial portfolio are based on internally defined categories of credit grades which are generally refreshed at least semi-annually.grades.
(2)Consistent with the credit quality disclosures, indicators for the Consumer portfolio are based on updated customer credit scores refreshed at least quarterly.
562023 2Q Form 10-Q Huntington Bancshares Incorporated57
| | | As of December 31, 2021 | | At December 31, 2022 |
| | Term Loans Amortized Cost Basis by Origination Year | | Revolver Total at Amortized Cost Basis | | Revolver Total Converted to Term Loans | | | Term Loans Amortized Cost Basis by Origination Year | | Revolver Total at Amortized Cost Basis | | Revolver Total Converted to Term Loans | |
| (dollar amounts in millions) | (dollar amounts in millions) | | 2021 | | 2020 | | 2019 | | 2018 | | 2017 | | Prior | | Total | (dollar amounts in millions) | | 2022 | | 2021 | | 2020 | | 2019 | | 2018 | | Prior | | Total |
| Commercial and industrial | Commercial and industrial | | | | | | | | | | | | | | | | | | | Commercial and industrial | | | | | | | | | | | | | | | | | | |
| Credit Quality Indicator (1): | Credit Quality Indicator (1): | | Credit Quality Indicator (1): | |
| Pass | Pass | | $ | 15,435 | | | $ | 5,677 | | | $ | 3,682 | | | $ | 1,983 | | | $ | 1,080 | | | $ | 1,134 | | | $ | 9,945 | | | $ | 3 | | | $ | 38,939 | | Pass | | $ | 18,092 | | | $ | 6,742 | | | $ | 3,332 | | | $ | 2,107 | | | $ | 1,156 | | | $ | 1,186 | | | $ | 13,060 | | | $ | 3 | | | $ | 45,678 | |
| OLEM | OLEM | | 183 | | | 178 | | | 87 | | | 83 | | | 38 | | | 73 | | | 166 | | | — | | | 808 | | OLEM | | 108 | | | 139 | | | 72 | | | 21 | | | 49 | | | 26 | | | 113 | | | — | | | 528 | |
| Substandard | Substandard | | 336 | | | 203 | | | 344 | | | 206 | | | 125 | | | 167 | | | 552 | | | — | | | 1,933 | | Substandard | | 368 | | | 183 | | | 203 | | | 212 | | | 142 | | | 256 | | | 550 | | | — | | | 1,914 | |
| Doubtful | Doubtful | | 5 | | | 1 | | | 1 | | | 1 | | | — | | | — | | | — | | | — | | | 8 | | Doubtful | | — | | | — | | | — | | | — | | | — | | | 1 | | | — | | | — | | | 1 | |
| Total Commercial and industrial | Total Commercial and industrial | | $ | 15,959 | | | $ | 6,059 | | | $ | 4,114 | | | $ | 2,273 | | | $ | 1,243 | | | $ | 1,374 | | | $ | 10,663 | | | $ | 3 | | | $ | 41,688 | | Total Commercial and industrial | | $ | 18,568 | | | $ | 7,064 | | | $ | 3,607 | | | $ | 2,340 | | | $ | 1,347 | | | $ | 1,469 | | | $ | 13,723 | | | $ | 3 | | | $ | 48,121 | |
| Commercial real estate | Commercial real estate | | Commercial real estate | |
| Credit Quality Indicator (1): | Credit Quality Indicator (1): | | Credit Quality Indicator (1): | |
| Pass | Pass | | $ | 4,144 | | | $ | 2,367 | | | $ | 2,593 | | | $ | 1,456 | | | $ | 761 | | | $ | 1,124 | | | $ | 798 | | | $ | — | | | $ | 13,243 | | Pass | | $ | 4,022 | | | $ | 3,115 | | | $ | 1,562 | | | $ | 1,662 | | | $ | 829 | | | $ | 1,020 | | | $ | 519 | | | $ | — | | | $ | 12,729 | |
| OLEM | OLEM | | 76 | | | 48 | | | 42 | | | 83 | | | 73 | | | 19 | | | — | | | — | | | 341 | | OLEM | | 61 | | | 53 | | | 1 | | | 43 | | | 6 | | | 9 | | | — | | | — | | | 173 | |
| Substandard | Substandard | | 224 | | | 362 | | | 448 | | | 115 | | | 151 | | | 46 | | | 30 | | | — | | | 1,376 | | Substandard | | 231 | | | 116 | | | 92 | | | 74 | | | 84 | | | 140 | | | 1 | | | — | | | 738 | |
| Doubtful | | — | | | — | | | — | | | 1 | | | — | | | — | | | — | | | — | | | 1 | | |
| | Total Commercial real estate | Total Commercial real estate | | $ | 4,444 | | | $ | 2,777 | | | $ | 3,083 | | | $ | 1,655 | | | $ | 985 | | | $ | 1,189 | | | $ | 828 | | | $ | — | | | $ | 14,961 | | Total Commercial real estate | | $ | 4,314 | | | $ | 3,284 | | | $ | 1,655 | | | $ | 1,779 | | | $ | 919 | | | $ | 1,169 | | | $ | 520 | | | $ | — | | | $ | 13,640 | |
| Lease financing | Lease financing | | Lease financing | |
| Credit Quality Indicator (1): | Credit Quality Indicator (1): | | Credit Quality Indicator (1): | |
| Pass | Pass | | $ | 1,851 | | | $ | 1,441 | | | $ | 809 | | | $ | 417 | | | $ | 226 | | | $ | 131 | | | $ | — | | | $ | — | | | $ | 4,875 | | Pass | | $ | 1,930 | | | $ | 1,291 | | | $ | 952 | | | $ | 447 | | | $ | 186 | | | $ | 143 | | | $ | — | | | $ | — | | | $ | 4,949 | |
| OLEM | OLEM | | 8 | | | 32 | | | 12 | | | 4 | | | 2 | | | — | | | — | | | — | | | 58 | | OLEM | | 32 | | | 9 | | | 15 | | | 18 | | | 6 | | | 3 | | | — | | | — | | | 83 | |
| Substandard | Substandard | | 6 | | | 23 | | | 19 | | | 2 | | | 9 | | | 8 | | | — | | | — | | | 67 | | Substandard | | 65 | | | 37 | | | 74 | | | 24 | | | 9 | | | 11 | | | — | | | — | | | 220 | |
| | Total Lease financing | Total Lease financing | | $ | 1,865 | | | $ | 1,496 | | | $ | 840 | | | $ | 423 | | | $ | 237 | | | $ | 139 | | | $ | — | | | $ | — | | | $ | 5,000 | | Total Lease financing | | $ | 2,027 | | | $ | 1,337 | | | $ | 1,041 | | | $ | 489 | | | $ | 201 | | | $ | 157 | | | $ | — | | | $ | — | | | $ | 5,252 | |
| Residential mortgage | Residential mortgage | | Residential mortgage | |
| Credit Quality Indicator (2): | Credit Quality Indicator (2): | | Credit Quality Indicator (2): | |
| 750+ | 750+ | | $ | 5,532 | | | $ | 3,857 | | | $ | 978 | | | $ | 554 | | | $ | 687 | | | $ | 1,704 | | | $ | — | | | $ | — | | | $ | 13,312 | | 750+ | | $ | 3,666 | | | $ | 6,274 | | | $ | 3,566 | | | $ | 846 | | | $ | 469 | | | $ | 2,070 | | | $ | — | | | $ | — | | | $ | 16,891 | |
| 650-749 | 650-749 | | 1,862 | | | 993 | | | 409 | | | 269 | | | 254 | | | 1,028 | | | — | | | — | | | 4,815 | | 650-749 | | 1,394 | | | 1,172 | | | 617 | | | 211 | | | 137 | | | 777 | | | — | | | — | | | 4,308 | |
| <650 | <650 | | 48 | | | 56 | | | 104 | | | 120 | | | 99 | | | 532 | | | — | | | — | | | 959 | | <650 | | 49 | | | 68 | | | 61 | | | 95 | | | 90 | | | 480 | | | — | | | — | | | 843 | |
| | Total Residential mortgage | Total Residential mortgage | | $ | 7,442 | | | $ | 4,906 | | | $ | 1,491 | | | $ | 943 | | | $ | 1,040 | | | $ | 3,264 | | | $ | — | | | $ | — | | | $ | 19,086 | | Total Residential mortgage | | $ | 5,109 | | | $ | 7,514 | | | $ | 4,244 | | | $ | 1,152 | | | $ | 696 | | | $ | 3,327 | | | $ | — | | | $ | — | | | $ | 22,042 | |
| Automobile | Automobile | | Automobile | |
| Credit Quality Indicator (2): | Credit Quality Indicator (2): | | Credit Quality Indicator (2): | |
| 750+ | 750+ | | $ | 2,993 | | | $ | 1,927 | | | $ | 1,381 | | | $ | 666 | | | $ | 345 | | | $ | 129 | | | $ | — | | | $ | — | | | $ | 7,441 | | 750+ | | $ | 2,770 | | | $ | 2,212 | | | $ | 1,243 | | | $ | 777 | | | $ | 289 | | | $ | 98 | | | $ | — | | | $ | — | | | $ | 7,389 | |
| 650-749 | 650-749 | | 2,393 | | | 1,237 | | | 736 | | | 380 | | | 168 | | | 55 | | | — | | | — | | | 4,969 | | 650-749 | | 1,944 | | | 1,508 | | | 683 | | | 367 | | | 162 | | | 52 | | | — | | | — | | | 4,716 | |
| <650 | <650 | | 380 | | | 234 | | | 178 | | | 128 | | | 70 | | | 34 | | | — | | | — | | | 1,024 | | <650 | | 307 | | | 352 | | | 173 | | | 115 | | | 67 | | | 35 | | | — | | | — | | | 1,049 | |
| | Total Automobile | Total Automobile | | $ | 5,766 | | | $ | 3,398 | | | $ | 2,295 | | | $ | 1,174 | | | $ | 583 | | | $ | 218 | | | $ | — | | | $ | — | | | $ | 13,434 | | Total Automobile | | $ | 5,021 | | | $ | 4,072 | | | $ | 2,099 | | | $ | 1,259 | | | $ | 518 | | | $ | 185 | | | $ | — | | | $ | — | | | $ | 13,154 | |
| Home equity | Home equity | | Home equity | |
| Credit Quality Indicator (2): | Credit Quality Indicator (2): | | Credit Quality Indicator (2): | |
| 750+ | 750+ | | $ | 645 | | | $ | 701 | | | $ | 32 | | | $ | 31 | | | $ | 34 | | | $ | 387 | | | $ | 4,772 | | | $ | 272 | | | $ | 6,874 | | 750+ | | $ | 463 | | | $ | 573 | | | $ | 611 | | | $ | 23 | | | $ | 20 | | | $ | 301 | | | $ | 4,787 | | | $ | 252 | | | $ | 7,030 | |
| 650-749 | 650-749 | | 129 | | | 94 | | | 15 | | | 13 | | | 13 | | | 161 | | | 2,324 | | | 324 | | | 3,073 | | 650-749 | | 131 | | | 88 | | | 68 | | | 9 | | | 8 | | | 122 | | | 2,129 | | | 261 | | | 2,816 | |
| <650 | <650 | | 3 | | | 2 | | | 2 | | | 1 | | | 1 | | | 67 | | | 361 | | | 165 | | | 602 | | <650 | | 3 | | | 3 | | | 3 | | | 2 | | | 2 | | | 51 | | | 335 | | | 129 | | | 528 | |
| | Total Home equity | Total Home equity | | $ | 777 | | | $ | 797 | | | $ | 49 | | | $ | 45 | | | $ | 48 | | | $ | 615 | | | $ | 7,457 | | | $ | 761 | | | $ | 10,549 | | Total Home equity | | $ | 597 | | | $ | 664 | | | $ | 682 | | | $ | 34 | | | $ | 30 | | | $ | 474 | | | $ | 7,251 | | | $ | 642 | | | $ | 10,374 | |
| RV and marine | RV and marine | | RV and marine | |
| Credit Quality Indicator (2): | Credit Quality Indicator (2): | | Credit Quality Indicator (2): | |
| 750+ | 750+ | | $ | 1,257 | | | $ | 933 | | | $ | 470 | | | $ | 468 | | | $ | 268 | | | $ | 319 | | | $ | — | | | $ | — | | | $ | 3,715 | | 750+ | | $ | 1,148 | | | $ | 1,031 | | | $ | 731 | | | $ | 361 | | | $ | 354 | | | $ | 438 | | | $ | — | | | $ | — | | | $ | 4,063 | |
| 650-749 | 650-749 | | 393 | | | 273 | | | 171 | | | 157 | | | 106 | | | 150 | | | — | | | — | | | 1,250 | | 650-749 | | 290 | | | 315 | | | 200 | | | 118 | | | 113 | | | 169 | | | — | | | — | | | 1,205 | |
| <650 | <650 | | 6 | | | 11 | | | 13 | | | 18 | | | 18 | | | 27 | | | — | | | — | | | 93 | | <650 | | 5 | | | 18 | | | 15 | | | 17 | | | 17 | | | 36 | | | — | | | — | | | 108 | |
| | Total RV and marine | Total RV and marine | | $ | 1,656 | | | $ | 1,217 | | | $ | 654 | | | $ | 643 | | | $ | 392 | | | $ | 496 | | | $ | — | | | $ | — | | | $ | 5,058 | | Total RV and marine | | $ | 1,443 | | | $ | 1,364 | | | $ | 946 | | | $ | 496 | | | $ | 484 | | | $ | 643 | | | $ | — | | | $ | — | | | $ | 5,376 | |
| Other consumer | Other consumer | | Other consumer | |
| Credit Quality Indicator (2): | Credit Quality Indicator (2): | | Credit Quality Indicator (2): | |
| 750+ | 750+ | | $ | 211 | | | $ | 34 | | | $ | 50 | | | $ | 13 | | | $ | 10 | | | $ | 27 | | | $ | 326 | | | $ | 3 | | | $ | 674 | | 750+ | | $ | 207 | | | $ | 64 | | | $ | 35 | | | $ | 34 | | | $ | 13 | | | $ | 52 | | | $ | 393 | | | $ | 3 | | | $ | 801 | |
| 650-749 | 650-749 | | 88 | | | 52 | | | 50 | | | 23 | | | 17 | | | 41 | | | 295 | | | 24 | | | 590 | | 650-749 | | 71 | | | 30 | | | 12 | | | 15 | | | 4 | | | 14 | | | 355 | | | 16 | | | 517 | |
| <650 | <650 | | 2 | | | 2 | | | 5 | | | 2 | | | — | | | 1 | | | 27 | | | 17 | | | 56 | | <650 | | 3 | | | 3 | | | 2 | | | 3 | | | 1 | | | 2 | | | 33 | | | 14 | | | 61 | |
| | Total Other consumer | Total Other consumer | | $ | 301 | | | $ | 88 | | | $ | 105 | | | $ | 38 | | | $ | 27 | | | $ | 69 | | | $ | 648 | | | $ | 44 | | | $ | 1,320 | | Total Other consumer | | $ | 281 | | | $ | 97 | | | $ | 49 | | | $ | 52 | | | $ | 18 | | | $ | 68 | | | $ | 781 | | | $ | 33 | | | $ | 1,379 | |
|
(1)Consistent with the credit quality disclosures, indicators for the Commercial portfolio are based on internally defined categories of credit grades which are generally refreshed at least semi-annually.grades.
(2)Consistent with the credit quality disclosures, indicators for the Consumer portfolio are based on updated customer credit scores refreshed at least quarterly.
2022 3Q58 Huntington Bancshares Incorporated
The following tables present the gross charge-offs of loans and leases by vintage.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Term Loans Gross Charge-offs by Origination Year | | Revolver Gross Charge-offs | | Revolver Converted to Term Loans Gross Charge-offs | | |
| (dollar amounts in millions) | | 2023 | | 2022 | | 2021 | | 2020 | | 2019 | | Prior | | | | Total |
| Three months ended June 30, 2023 | | | | | | | | | | | | | | | | | | |
| Commercial and industrial | | $ | 1 | | | $ | 4 | | | $ | 14 | | | $ | — | | | $ | 8 | | | $ | 10 | | | $ | — | | | $ | 1 | | | $ | 38 | |
| Commercial real estate | | — | | | 3 | | | — | | | — | | | 5 | | | 5 | | | — | | | — | | | 13 | |
| Lease Financing | | — | | | 1 | | | 1 | | | — | | | — | | | — | | | — | | | — | | | 2 | |
| Residential mortgage | | — | | | — | | | — | | | — | | | — | | | 1 | | | — | | | — | | | 1 | |
| Automobile | | — | | | 3 | | | 4 | | | 2 | | | 2 | | | — | | | — | | | — | | | 11 | |
| Home equity | | — | | | — | | | — | | | — | | | — | | | 1 | | | — | | | 1 | | | 2 | |
| RV and marine | | — | | | 1 | | | — | | | — | | | — | | | 3 | | | — | | | — | | | 4 | |
| Other consumer | | 2 | | | 5 | | | 3 | | | 2 | | | 2 | | | 1 | | | — | | | 6 | | | 21 | |
| Total | | $ | 3 | | | $ | 17 | | | $ | 22 | | | $ | 4 | | | $ | 17 | | | $ | 21 | | | $ | — | | | $ | 8 | | | $ | 92 | |
| Six months ended June 30, 2023 | | | | | | | | | | | | | | | | | | |
| Commercial and industrial | | $ | 2 | | | $ | 18 | | | $ | 17 | | | $ | 6 | | | $ | 12 | | | $ | 10 | | | $ | 4 | | | $ | 1 | | | $ | 70 | |
| Commercial real estate | | — | | | 3 | | | 19 | | | — | | | 5 | | | 5 | | | — | | | — | | | 32 | |
| Lease Financing | | — | | | 1 | | | 1 | | | — | | | — | | | 1 | | | — | | | — | | | 3 | |
| Residential mortgage | | — | | | — | | | 1 | | | — | | | — | | | 2 | | | — | | | — | | | 3 | |
| Automobile | | — | | | 6 | | | 8 | | | 4 | | | 3 | | | 2 | | | — | | | — | | | 23 | |
| Home equity | | — | | | — | | | — | | | — | | | — | | | 1 | | | 1 | | | 2 | | | 4 | |
| RV and marine | | — | | | 1 | | | 1 | | | 1 | | | 1 | | | 4 | | | — | | | — | | | 8 | |
| Other consumer | | 3 | | | 13 | | | 8 | | | 3 | | | 3 | | | 5 | | | — | | | 13 | | | 48 | |
| Total | | $ | 5 | | | $ | 42 | | | $ | 55 | | | $ | 14 | | | $ | 24 | | | $ | 30 | | | $ | 5 | | | $ | 16 | | | $ | 191 | |
| | | | | | | | | | | | | | | | | | |
Modifications to Debtors Experiencing Financial Difficulty
Effective January 1, 2023, Huntington adopted ASU 2022-02- Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. For additional information on the adoption, refer to both Note 1 “Basis of Presentation” and Note 2 “Accounting Standards Update.” Huntington will modify the contractual terms of loans to a borrower experiencing financial difficulties as a way to mitigate loss, proactively work with borrowers in financial difficulty, or to comply with regulations regarding the treatment of certain bankruptcy filing and discharge situations.
A debtor is considered to be experiencing financial difficulty when there is significant doubt about the debtor’s ability to make required payments on the debt or to get equivalent financing from another creditor at a market rate for similar debt. A loan placed on nonaccrual because the borrower is experiencing financial difficulty may be returned to accrual status when all contractually due interest and principal has been paid and the borrower demonstrates the financial capacity to continue to pay as agreed, with the risk of loss diminished.
Reported Modification Types
Modifications in the form of principal forgiveness, an interest rate reduction, an other than insignificant payment delay or a term extension that have occurred in the current reporting period to a borrower experiencing financial difficulty are disclosed along with the financial impact of the modifications.
Huntington will generally try other forms of relief before principal forgiveness but would define any contractual reduction in the amount of principal due without receiving payment or assets as forgiveness. For the purpose of the disclosure Huntington considers any contractual change in interest rate that results in the borrower receiving a below market rate to be an interest rate reduction. Many factors can go into what is considered an other than insignificant payment delay such as the significance of the restructured payment amount relative to the normal loan payment or the relative significance of the delay to the original loan terms. Generally, Huntington would consider any delay in payment of greater than 90 days in the last 12 months to be significant. For the purpose of the disclosure modification of contingent payment features or covenants that would have accelerated payment are not considered term extensions.
Following is a description of what is considered a borrower experiencing financial difficulty by the different loan types:
Commercial loan modifications – Our strategy involving commercial borrowers generally includes working with these borrowers to allow them time to improve their financial position and remain a Huntington customer through restructuring their notes or to restructure elsewhere if necessary. Borrowers that are rated substandard or worse in accordance with the regulatory definition, or that cannot otherwise restructure at market terms and conditions, are considered to be experiencing financial difficulty. A subsequent restructuring or modification of a loan may occur when either the loan matures according to the terms of the modified agreement, or the borrower requests a change to the loan agreements. It is subjected to the normal underwriting standards and processes for other similar credit extensions, both new and existing. The restructured note is evaluated to determine if it is considered a new loan or a continuation of the prior loan.
Consumer loan modifications – Consumer loans in which a borrower requires a modification as a result of negative changes to their financial condition or to avoid default, generally indicate the borrower is experiencing financial difficulty. The primary modifications made to consumer loans are amortization, maturity date and interest rate changes. Consumer borrowers identified as experiencing financial difficulty are unable to refinance their loans through the Company’s normal origination channels or through other independent sources. Most, but not all, of the loans may be delinquent. The Company’s primary loan categories that receive modifications are residential mortgage, automobile, home equity, RV and marine, and other consumer loans.
Impact on Credit Quality of Borrowers Experiencing Financial Difficulty
Huntington’s ALLL is influenced by loan level characteristics that inform the assessed propensity to default. As such, the provision for credit losses is impacted primarily by changes in such loan level characteristics, such as payment performance. Commercial borrowers experiencing financial difficulty are risk rated to reflect the increase in default characteristics so that that the ALLL reflects the future risk of loss. Borrowers experiencing financial difficulty can be classified as either accrual or nonaccrual loans.
60 Huntington Bancshares Incorporated
The following table summarizes the amortized cost basis of loans modified during the reporting period to borrowers experiencing financial difficulty, disaggregated by class of financing receivable and type of modification.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Amortized Cost | | |
| (dollar amounts in millions) | Interest rate reduction | | Term extension | | Payment deferral | | | | Combo - interest rate reduction and term extension | | | | | | Total | | % of total loan class (1) |
| Three months ended June 30, 2023 | | | | | | | | | | | | | | | | | |
| Commercial and industrial | $ | — | | | $ | 138 | | | $ | — | | | | | $ | — | | | | | | | $ | 138 | | | 0.28 | % |
| Commercial real estate | — | | | 134 | | | — | | | | | — | | | | | | | 134 | | | 1.02 | |
| Residential mortgage | — | | | 12 | | | 2 | | | | | 1 | | | | | | | 15 | | | 0.06 | |
| Automobile | — | | | 4 | | | — | | | | | 1 | | | | | | | 5 | | | 0.04 | |
| Home equity | — | | | 1 | | | — | | | | | 3 | | | | | | | 4 | | | 0.04 | |
| | | | | | | | | | | | | | | | | |
| Other consumer | 1 | | | — | | | — | | | | | — | | | | | | | 1 | | | 0.07 | |
| Total loans to borrowers experiencing financial difficulty in which modifications were made | $ | 1 | | | $ | 289 | | | $ | 2 | | | | | $ | 5 | | | | | | | $ | 297 | | | 0.24 | % |
| Six months ended June 30, 2023 | | | | | | | | | | | | | | | | | |
| Commercial and industrial | $ | 35 | | | $ | 198 | | | $ | — | | | | | $ | 3 | | | | | | | $ | 236 | | | 0.47 | % |
| Commercial real estate | — | | | 148 | | | — | | | | | — | | | | | | | 148 | | | 1.12 | |
| Residential mortgage | — | | | 35 | | | 2 | | | | | 2 | | | | | | | 39 | | | 0.17 | |
| Automobile | — | | | 7 | | | — | | | | | 1 | | | | | | | 8 | | | 0.06 | |
| Home equity | — | | | 1 | | | — | | | | | 5 | | | | | | | 6 | | | 0.06 | |
| RV and marine | — | | | 1 | | | — | | | | | — | | | | | | | 1 | | | 0.02 | |
| Other consumer | 1 | | | — | | | — | | | | | — | | | | | | | 1 | | | 0.07 | |
| Total loans to borrowers experiencing financial difficulty in which modifications were made | $ | 36 | | | $ | 390 | | | $ | 2 | | | | | $ | 11 | | | | | | | $ | 439 | | | 0.36 | % |
| | | | | | | | | | | | | | | | | |
(1)Represents the amortized cost of loans modified during the reporting period as a percentage of the period-end loan balance by class.
The following table describes the financial effect of the modification made to borrowers experiencing financial difficulty.
| | | | | | | | | | | | | | | | | | | | | | |
| Interest Rate Reduction | | Term Extension | | | |
| Weighted-average contractual interest rate | | Weighted-average years added to the life | | | | | |
| From | | To | | | | | |
| Three months ended June 30, 2023 | | | | | | | | | | |
| Commercial and industrial | | | | | | | 0.7 | | | | | |
| Commercial real estate | | | | | | | 0.5 | | | | | |
| Residential mortgage | 5.55 | % | | 4.42 | % | | 8.8 | | | | | |
| Automobile | 6.58 | | | 6.22 | | | 2.0 | | | | | |
| Home equity | 8.55 | | | 6.05 | | | 14.6 | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| Six months ended June 30, 2023 | | | | | | | | | | |
| Commercial and industrial | 7.68 | % | | 6.94 | % | | 0.9 | | | | | |
| Commercial real estate | | | | | 0.5 | | | | | |
| Residential mortgage | 5.54 | | | 4.29 | | | 7.2 | | | | | |
| Automobile | 6.59 | | | 6.24 | | | 2.0 | | | | | |
| Home equity | 8.37 | | | 5.86 | | | 15.5 | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
The performance of loans made to borrowers experiencing financial difficulty in which modifications were made is closely monitored to understand the effectiveness of modification efforts. Loans are considered to be in payment default at 90 or more days past due. The following table depicts the performance of loans that have been modified during the reporting period.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| At June 30, 2023 |
| Past Due | | | | | | |
| (dollar amounts in millions) | 30-59
Days | | 60-89
Days | | 90 or
more days | | Total | | Current | | Total | | |
| Commercial and industrial | $ | 1 | | | $ | 1 | | | $ | — | | | $ | 2 | | | $ | 234 | | | $ | 236 | | | |
| Commercial real estate | — | | | — | | | — | | | — | | | 148 | | | 148 | | | |
| Residential mortgage | 7 | | | 3 | | | 4 | | | 14 | | | 25 | | | 39 | | | |
| Automobile | 1 | | | — | | | — | | | 1 | | | 7 | | | 8 | | | |
| Home equity | 1 | | | — | | | — | | | 1 | | | 5 | | | 6 | | | |
| RV and marine | — | | | — | | | — | | | — | | | 1 | | | 1 | | | |
| Other consumer | — | | | — | | | — | | | — | | | 1 | | | 1 | | | |
| Total loans to borrowers experiencing financial difficulty in which modifications were made in the six months ended June 30, 2023 | $ | 10 | | | $ | 4 | | | $ | 4 | | | $ | 18 | | | $ | 421 | | | $ | 439 | | | |
TDR Loans
The following provides additional disclosures previously required by ASC Subtopic 310-40, Receivables—Troubled Debt Restructurings by Creditors, related to the three-month and six-month period ended June 30, 2022.
TDRs are modified loans where a concession was provided to a borrower experiencing financial difficulties. Loan modifications are considered TDRs when the concessions provided would not otherwise be considered. However, not all loan modifications are TDRs. See Note 1 “Significant Accounting Policies” and Note 5 “Loans /and Leases” to the Consolidated Financial Statements appearing in Huntington’s 20212022 Annual Report on Form 10-K for an additional discussion of TDRs.
62 Huntington Bancshares Incorporated
The following table presents, by class and modification type, the number of contracts, post-modification outstanding balance, and the financial effects of the modification for the three-month and nine-month periodssix-month period ended SeptemberJune 30, 2022 and 2021.2022.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| New Troubled Debt Restructurings (1) |
| Three Months Ended September 30, 2022 |
| Number of
Contracts | | Post-modification Outstanding Recorded Investment (2) | | |
| (dollar amounts in millions) | | Interest rate reduction | | Amortization or maturity date change | | Chapter 7 bankruptcy | | Other | | Total | |
| Commercial and industrial | 81 | | | $ | 39 | | | $ | 22 | | | $ | — | | | $ | 13 | | | $ | 74 | | | |
| Commercial real estate | 7 | | | 5 | | | 10 | | | — | | | — | | | 15 | | | |
| | | | | | | | | | | | | |
| Residential mortgage | 184 | | | — | | | 25 | | | 1 | | | — | | | 26 | | | |
| Automobile | 697 | | | — | | | 6 | | | 1 | | | — | | | 7 | | | |
| Home equity | 54 | | | — | | | 1 | | | — | | | — | | | 1 | | | |
| RV and marine | 31 | | | — | | | 1 | | | 1 | | | — | | | 2 | | | |
| Other consumer | 38 | | | — | | | — | | | — | | | — | | | — | | | |
| Total new TDRs | 1,092 | | | $ | 44 | | | $ | 65 | | | $ | 3 | | | $ | 13 | | | $ | 125 | | | |
| | | | | | | | | | | | | |
| Three Months Ended September 30, 2021 |
| Number of
Contracts | | Post-modification Outstanding Recorded Investment (2) | | |
| (dollar amounts in millions) | | Interest rate reduction | | Amortization or maturity date change | | Chapter 7 bankruptcy | | Other | | Total | |
| | | | | | | | | | | | | |
| Commercial and industrial | 16 | | | $ | — | | | $ | 3 | | | $ | — | | | $ | — | | | $ | 3 | | | |
| Commercial real estate | 4 | | | — | | | — | | | — | | | — | | | — | | | |
| | | | | | | | | | | | | |
| Residential mortgage | 74 | | | — | | | 7 | | | 2 | | | — | | | 9 | | | |
| Automobile | 498 | | | — | | | 3 | | | 1 | | | — | | | 4 | | | |
| Home equity | 42 | | | — | | | 1 | | | 1 | | | — | | | 2 | | | |
| RV and marine | 19 | | | — | | | — | | | — | | | — | | | — | | | |
| Other consumer | 49 | | | — | | | — | | | — | | | — | | | — | | | |
| Total new TDRs | 702 | | | $ | — | | | $ | 14 | | | $ | 4 | | | $ | — | | | $ | 18 | | | |
| | | | | | | | | | | | | |
58 Huntington Bancshares Incorporated
| | | | New Troubled Debt Restructurings (1) | | New Troubled Debt Restructurings (1) |
| | Nine Months Ended September 30, 2022 | |
| | Number of
Contracts | | Post-modification Outstanding Recorded Investment (2) | | | Number of
Contracts | | Post-modification Outstanding Recorded Investment (2) | |
| (dollar amounts in millions) | (dollar amounts in millions) | | Interest rate reduction | | Amortization or maturity date change | | Chapter 7 bankruptcy | | Other | | Total | | (dollar amounts in millions) | Number of
Contracts | Interest rate reduction | | Amortization or maturity date change | | Chapter 7 bankruptcy | | Other | | Total | |
| Three months ended June 30, 2022 | | | | | | | | | | | | | |
| Commercial and industrial | Commercial and industrial | 222 | | | $ | 69 | | | $ | 37 | | | $ | — | | | $ | 14 | | | $ | 120 | | | Commercial and industrial | 88 | | | $ | 19 | | | $ | 12 | | | $ | — | | | $ | 1 | | | $ | 32 | | |
| Commercial real estate | Commercial real estate | 12 | | | 42 | | | 10 | | | — | | | — | | | 52 | | | Commercial real estate | 4 | | | 37 | | | — | | | — | | | — | | | 37 | | |
| | Residential mortgage | Residential mortgage | 629 | | | — | | | 85 | | | 5 | | | — | | | 90 | | | Residential mortgage | 238 | | | — | | | 32 | | | 3 | | | — | | | 35 | | |
| Automobile | Automobile | 1,791 | | | — | | | 13 | | | 2 | | | — | | | 15 | | | Automobile | 469 | | | — | | | 3 | | | — | | | — | | | 3 | | |
| Home equity | Home equity | 166 | | | — | | | 5 | | | 3 | | | — | | | 8 | | | Home equity | 70 | | | — | | | 3 | | | 2 | | | — | | | 5 | | |
| RV and marine finance | 105 | | | — | | | 2 | | | 1 | | | — | | | 3 | | | |
| RV and marine | | RV and marine | 35 | | | — | | | — | | | — | | | — | | | — | | |
| Other consumer | Other consumer | 91 | | | — | | | — | | | — | | | — | | | — | | | Other consumer | 23 | | | — | | | — | | | — | | | — | | | — | | |
| Total new TDRs | Total new TDRs | 3,016 | | | $ | 111 | | | $ | 152 | | | $ | 11 | | | $ | 14 | | | $ | 288 | | | Total new TDRs | 927 | | | $ | 56 | | | $ | 50 | | | $ | 5 | | | $ | 1 | | | $ | 112 | | |
| | | Nine Months Ended September 30, 2021 | |
| | Number of
Contracts | | Post-modification Outstanding Recorded Investment (2) | | |
| (dollar amounts in millions) | | Interest rate reduction | | Amortization or maturity date change | | Chapter 7 bankruptcy | | Other | | Total | | |
| | | Six months ended June 30, 2022 | | Six months ended June 30, 2022 | | | | | | | | | | | | |
| Commercial and industrial | Commercial and industrial | 53 | | | $ | 15 | | | $ | 23 | | | $ | — | | | $ | — | | | $ | 38 | | | Commercial and industrial | 46 | | | $ | 30 | | | $ | 15 | | | $ | — | | | $ | 1 | | | $ | 46 | | |
| Commercial real estate | Commercial real estate | 4 | | | — | | | — | | | — | | | — | | | — | | | Commercial real estate | 5 | | | 37 | | | — | | | — | | | — | | | 37 | | |
| | Residential mortgage | Residential mortgage | 232 | | | — | | | 31 | | | 4 | | | — | | | 35 | | | Residential mortgage | 445 | | | — | | | 60 | | | 4 | | | — | | | 64 | | |
| Automobile | Automobile | 1,914 | | | — | | | 13 | | | 3 | | | — | | | 16 | | | Automobile | 1,094 | | | — | | | 7 | | | 1 | | | — | | | 8 | | |
| Home equity | Home equity | 155 | | | — | | | 3 | | | 5 | | | — | | | 8 | | | Home equity | 112 | | | — | | | 4 | | | 3 | | | — | | | 7 | | |
| RV and marine finance | 103 | | | 1 | | | 1 | | | 1 | | | — | | | 3 | | | |
| RV and marine | | RV and marine | 74 | | | — | | | 1 | | | — | | | — | | | 1 | | |
| Other consumer | Other consumer | 214 | | | — | | | — | | | — | | | 1 | | | 1 | | | Other consumer | 53 | | | — | | | — | | | — | | | — | | | — | | |
| Total new TDRs | Total new TDRs | 2,675 | | | $ | 16 | | | $ | 71 | | | $ | 13 | | | $ | 1 | | | $ | 101 | | | Total new TDRs | 1,829 | | | $ | 67 | | | $ | 87 | | | $ | 8 | | | $ | 1 | | | $ | 163 | | |
|
(1)TDRs may include multiple concessions and the disclosure classifications are based on the primary concession provided to the borrower.
(2)Post-modification balances approximate pre-modification balances.
Pledged Loans
The Bank has access to the Federal Reserve’s discount window and advances from the FHLB. As of SeptemberJune 30, 20222023 and December 31, 2021,2022, these borrowings and advances are secured by $70.1$99.2 billion and $61.1$70.9 billion, respectively, of loans.
2022 3Q2023 2Q Form 10-Q 5963
6.5. ALLOWANCE FOR CREDIT LOSSES
Allowance for Credit Losses - Roll-forward
The following tables present ACL activity by portfolio segment for the three-month and nine-monthsix-month periods ended SeptemberJune 30, 20222023 and 2021.2022.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (dollar amounts in millions) | | | | | | | | | | | | | | | Commercial | | Consumer | | Total |
| Three months ended June 30, 2023 | | | | | | | | | | | | | | | | | | | |
| ALLL balance, beginning of period | | | | | | | | | | | | | | | $ | 1,457 | | | $ | 685 | | | $ | 2,142 | |
| | | | | | | | | | | | | | | | | | | |
| Loan and lease charge-offs | | | | | | | | | | | | | | | (53) | | | (39) | | | (92) | |
| Recoveries of loans and leases previously charged-off | | | | | | | | | | | | | | | 26 | | | 17 | | | 43 | |
| Provision for loan and lease losses | | | | | | | | | | | | | | | 53 | | | 31 | | | 84 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| ALLL balance, end of period | | | | | | | | | | | | | | | $ | 1,483 | | | $ | 694 | | | $ | 2,177 | |
| AULC balance, beginning of period | | | | | | | | | | | | | | | $ | 75 | | | $ | 82 | | | $ | 157 | |
| | | | | | | | | | | | | | | | | | | |
| Provision for unfunded lending commitments | | | | | | | | | | | | | | | 3 | | | 5 | | | 8 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| AULC balance, end of period | | | | | | | | | | | | | | | $ | 78 | | | $ | 87 | | | $ | 165 | |
| ACL balance, end of period | | | | | | | | | | | | | | | $ | 1,561 | | | $ | 781 | | | $ | 2,342 | |
| Six months ended June 30, 2023 | | | | | | | | | | | | | | | | | | | |
| ALLL balance, beginning of period | | | | | | | | | | | | | | | $ | 1,424 | | | $ | 697 | | | $ | 2,121 | |
| | | | | | | | | | | | | | | | | | | |
| Loan and lease charge-offs | | | | | | | | | | | | | | | (105) | | | (86) | | | (191) | |
| Recoveries of loans and leases previously charged-off | | | | | | | | | | | | | | | 49 | | | 36 | | | 85 | |
| Provision for loan and lease losses | | | | | | | | | | | | | | | 115 | | | 47 | | | 162 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| ALLL balance, end of period | | | | | | | | | | | | | | | $ | 1,483 | | | $ | 694 | | | $ | 2,177 | |
| AULC balance, beginning of period | | | | | | | | | | | | | | | $ | 71 | | | $ | 79 | | | $ | 150 | |
| | | | | | | | | | | | | | | | | | | |
| Provision for unfunded lending commitments | | | | | | | | | | | | | | | 7 | | | 8 | | | 15 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| AULC balance, end of period | | | | | | | | | | | | | | | $ | 78 | | | $ | 87 | | | $ | 165 | |
| ACL balance, end of period | | | | | | | | | | | | | | | $ | 1,561 | | | $ | 781 | | | $ | 2,342 | |
| | | (dollar amounts in millions) | (dollar amounts in millions) | | Commercial | | Consumer | | Total | (dollar amounts in millions) | | Commercial | | Consumer | | Total |
| Three-month period ended September 30, 2022: | | | | | | | |
| Three months ended June 30, 2022 | | Three months ended June 30, 2022 | | | | | | |
| ALLL balance, beginning of period | ALLL balance, beginning of period | | $ | 1,342 | | | $ | 732 | | | $ | 2,074 | | ALLL balance, beginning of period | | $ | 1,514 | | | $ | 504 | | | $ | 2,018 | |
| | Loan and lease charge-offs | Loan and lease charge-offs | | (35) | | | (48) | | | (83) | | Loan and lease charge-offs | | (12) | | | (40) | | | (52) | |
| Recoveries of loans and leases previously charged-off | Recoveries of loans and leases previously charged-off | | 20 | | | 19 | | | 39 | | Recoveries of loans and leases previously charged-off | | 24 | | | 20 | | | 44 | |
| Provision (benefit) for loan and lease losses | Provision (benefit) for loan and lease losses | | 87 | | | (7) | | | 80 | | Provision (benefit) for loan and lease losses | | (184) | | | 248 | | | 64 | |
| | ALLL balance, end of period | ALLL balance, end of period | | $ | 1,414 | | | $ | 696 | | | $ | 2,110 | | ALLL balance, end of period | | $ | 1,342 | | | $ | 732 | | | $ | 2,074 | |
| AULC balance, beginning of period | AULC balance, beginning of period | | $ | 53 | | | $ | 41 | | | $ | 94 | | AULC balance, beginning of period | | $ | 57 | | | $ | 34 | | | $ | 91 | |
| | Provision (benefit) for unfunded lending commitments | Provision (benefit) for unfunded lending commitments | | 8 | | | 18 | | | 26 | | Provision (benefit) for unfunded lending commitments | | (4) | | | 7 | | | 3 | |
| | AULC balance, end of period | AULC balance, end of period | | $ | 61 | | | $ | 59 | | | $ | 120 | | AULC balance, end of period | | $ | 53 | | | $ | 41 | | | $ | 94 | |
| ACL balance, end of period | ACL balance, end of period | | $ | 1,475 | | | $ | 755 | | | $ | 2,230 | | ACL balance, end of period | | $ | 1,395 | | | $ | 773 | | | $ | 2,168 | |
| Nine-month period ended September 30, 2022: | | | | | | | |
| Six months ended June 30, 2022 | | Six months ended June 30, 2022 |
| ALLL balance, beginning of period | ALLL balance, beginning of period | | $ | 1,462 | | | $ | 568 | | | $ | 2,030 | | ALLL balance, beginning of period | | $ | 1,462 | | | $ | 568 | | | $ | 2,030 | |
| | Loan and lease charge-offs | Loan and lease charge-offs | | (77) | | | (139) | | | (216) | | Loan and lease charge-offs | | (44) | | | (89) | | | (133) | |
| Recoveries of loans and leases previously charged-off | Recoveries of loans and leases previously charged-off | | 83 | | | 62 | | | 145 | | Recoveries of loans and leases previously charged-off | | 65 | | | 41 | | | 106 | |
| Provision for loan and lease losses | | (54) | | | 205 | | | 151 | | |
| Provision (benefit) for loan and lease losses | | Provision (benefit) for loan and lease losses | | (141) | | | 212 | | | 71 | |
| | ALLL balance, end of period | ALLL balance, end of period | | $ | 1,414 | | | $ | 696 | | | $ | 2,110 | | ALLL balance, end of period | | $ | 1,342 | | | $ | 732 | | | $ | 2,074 | |
| AULC balance, beginning of period | AULC balance, beginning of period | | $ | 41 | | | $ | 36 | | | $ | 77 | | AULC balance, beginning of period | | $ | 41 | | | $ | 36 | | | $ | 77 | |
| | Provision for unfunded lending commitments | Provision for unfunded lending commitments | | 20 | | | 23 | | | 43 | | Provision for unfunded lending commitments | | 12 | | | 5 | | | 17 | |
| | AULC balance, end of period | AULC balance, end of period | | $ | 61 | | | $ | 59 | | | $ | 120 | | AULC balance, end of period | | $ | 53 | | | $ | 41 | | | $ | 94 | |
| ACL balance, end of period | ACL balance, end of period | | $ | 1,475 | | | $ | 755 | | | $ | 2,230 | | ACL balance, end of period | | $ | 1,395 | | | $ | 773 | | | $ | 2,168 | |
|
At June 30, 2023, the ACL was $2.3 billion, an increase of $71 million compared to December 31, 2022.
6064 Huntington Bancshares Incorporated
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| (dollar amounts in millions) | | | | | | | | | | | | | | | Commercial | | Consumer | | Total |
| Three-month period ended September 30, 2021: | | | | | | | | | | | | | | | | | | | |
| ALLL balance, beginning of period | | | | | | | | | | | | | | | $ | 1,618 | | | $ | 600 | | | $ | 2,218 | |
| | | | | | | | | | | | | | | | | | | |
| Loan and lease charge-offs | | | | | | | | | | | | | | | (74) | | | (32) | | | (106) | |
| Recoveries of loans and leases previously charged-off | | | | | | | | | | | | | | | 27 | | | 24 | | | 51 | |
| Provision (benefit) for loan and lease losses | | | | | | | | | | | | | | | (22) | | | (34) | | | (56) | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| ALLL balance, end of period | | | | | | | | | | | | | | | $ | 1,549 | | | $ | 558 | | | $ | 2,107 | |
| AULC balance, beginning of period | | | | | | | | | | | | | | | $ | 76 | | | $ | 28 | | | $ | 104 | |
| | | | | | | | | | | | | | | | | | | |
| Provision (benefit) for unfunded lending commitments | | | | | | | | | | | | | | | 2 | | | (8) | | | (6) | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| AULC balance, end of period | | | | | | | | | | | | | | | $ | 78 | | | $ | 20 | | | $ | 98 | |
| ACL balance, end of period | | | | | | | | | | | | | | | $ | 1,627 | | | $ | 578 | | | $ | 2,205 | |
| Nine-month period ended September 30, 2021: |
| ALLL balance, beginning of period | | | | | | | | | | | | | | | $ | 1,236 | | | $ | 578 | | | $ | 1,814 | |
| | | | | | | | | | | | | | | | | | | |
| Loan and lease charge-offs | | | | | | | | | | | | | | | (213) | | | (90) | | | (303) | |
| Recoveries of loans and leases previously charged-off | | | | | | | | | | | | | | | 58 | | | 64 | | | 122 | |
| Provision (benefit) for loan and lease losses (1) | | | | | | | | | | | | | | | 94 | | | (52) | | | 42 | |
| | | | | | | | | | | | | | | | | | | |
| Allowance on PCD loans and leases at acquisition | | | | | | | | | | | | | | | 374 | | | 58 | | | 432 | |
| ALLL balance, end of period | | | | | | | | | | | | | | | $ | 1,549 | | | $ | 558 | | | $ | 2,107 | |
| AULC balance, beginning of period | | | | | | | | | | | | | | | $ | 34 | | | $ | 18 | | | $ | 52 | |
| | | | | | | | | | | | | | | | | | | |
| Provision for unfunded lending commitments (2) | | | | | | | | | | | | | | | 45 | | | 2 | | | 47 | |
| | | | | | | | | | | | | | | | | | | |
| Unfunded lending commitment losses | | | | | | | | | | | | | | | (1) | | | — | | | (1) | |
| AULC balance, end of period | | | | | | | | | | | | | | | $ | 78 | | | $ | 20 | | | $ | 98 | |
| ACL balance, end of period | | | | | | | | | | | | | | | $ | 1,627 | | | $ | 578 | | | $ | 2,205 | |
| | | | | | | | | | | | | | | | | | | |
(1)Includes $234 million of TCF acquisition initial provision for credit losses related to non-PCD loans and leases.
(2)Includes $60 million from acquired unfunded lending commitments.
At September 30, 2022, theThe commercial ACL was $2.2$1.6 billion anat June 30, 2023 and $1.5 billion at December 31, 2022. The increase of $123$66 million fromsince year end was driven by a combination of loan and lease growth and modest deterioration in the macro-economic forecast.
The consumer ACL was $781 million, relatively flat compared to the December 31, 20212022 balance of $2.1 billion.$776 million.
The baseline economic scenario used in the June 30, 2023 ACL determination included the federal funds rate projected to peak at approximately 5.1% in the third quarter of 2023 as the Federal Reserve continues to address elevated inflation levels. As a result, inflation is forecast to drop from an estimated 8.0% in 2022 to 2.5% by 2024. However, unemployment is expected to gradually increase to a projected level of 4.2% by Q4 2024.
The economic scenarios used in the September 30, 2022 ACL determination contained judgmental assumptions due toincluded elevated levels of economic uncertainty associated with geopolitical instability, high inflation readings, and the expected path of interest rate increases by the Fed.Federal Reserve. Given the uncertainty associated with key economic scenario assumptions, the SeptemberJune 30, 20222023 ACL included a general reserve that consists of various risk profile components to capture uncertainty not addressed within the quantitative transaction reserve.
7.6. MORTGAGE LOAN SALES AND SERVICING RIGHTS
Residential Mortgage Portfolio
The following table summarizes activity relating to residential mortgage loans sold with servicing retained for the three-month and nine-monthsix-month periods ended SeptemberJune 30, 20222023 and 2021:2022:
| | | Three Months Ended
September 30, | | Nine Months Ended
September 30, | | Three months ended June 30, 2023 | | Six months ended June 30, 2023 |
| (dollar amounts in millions) | (dollar amounts in millions) | | 2022 | | 2021 | | 2022 | | 2021 | (dollar amounts in millions) | | 2023 | | 2022 | | 2023 | | 2022 |
| Residential mortgage loans sold with servicing retained | Residential mortgage loans sold with servicing retained | | $ | 1,310 | | | $ | 2,298 | | | $ | 4,557 | | | $ | 7,302 | | Residential mortgage loans sold with servicing retained | | $ | 1,117 | | | $ | 1,313 | | | $ | 1,979 | | | $ | 3,247 | |
| Pretax gains resulting from above loan sales (1) | Pretax gains resulting from above loan sales (1) | | 11 | | | 80 | | | 110 | | | 274 | | Pretax gains resulting from above loan sales (1) | | 15 | | | 40 | | | 22 | | | 99 | |
(1)Recorded in mortgage banking income.
The following table summarizes the changes in MSRs recorded using the fair value method for the three-month and nine-monthsix-month periods ended SeptemberJune 30, 20222023 and 2021:2022:
| | | Three Months Ended
September 30, | | Nine Months Ended
September 30, | | Three months ended June 30, 2023 | | Six months ended June 30, 2023 |
| (dollar amounts in millions) | (dollar amounts in millions) | | 2022 | | 2021 | | 2022 | | 2021 | (dollar amounts in millions) | | 2023 | | 2022 | | 2023 | | 2022 |
| Fair value, beginning of period | Fair value, beginning of period | | $ | 463 | | | $ | 327 | | | $ | 351 | | | $ | 210 | | Fair value, beginning of period | | $ | 485 | | | $ | 416 | | | $ | 494 | | | $ | 351 | |
| | Servicing assets obtained in acquisition | | — | | `` | — | | | — | | | 59 | | |
| | New servicing assets created | New servicing assets created | | 20 | | | 31 | | | 68 | | | 103 | | New servicing assets created | | 18 | | | 18 | | | 31 | | | 47 | |
| Change in fair value during the period due to: | Change in fair value during the period due to: | | Change in fair value during the period due to: | |
| Time decay (1) | Time decay (1) | | (6) | | | (4) | | | (16) | | | (11) | | Time decay (1) | | (6) | | | (5) | | | (12) | | | (10) | |
| Payoffs (2) | Payoffs (2) | | (8) | | | (17) | | | (29) | | | (50) | | Payoffs (2) | | (7) | | | (10) | | | (11) | | | (20) | |
| Changes in valuation inputs or assumptions (3) | Changes in valuation inputs or assumptions (3) | | 17 | | | 1 | | | 112 | | | 27 | | Changes in valuation inputs or assumptions (3) | | 15 | | | 44 | | | 3 | | | 95 | |
| Fair value, end of period | Fair value, end of period | | $ | 486 | | | $ | 338 | | | $ | 486 | | | $ | 338 | | Fair value, end of period | | $ | 505 | | | $ | 463 | | | $ | 505 | | | $ | 463 | |
|
(1)Represents decrease in value due to passage of time, including the impact from both regularly scheduled principal payments and partial loan paydowns.
(2)Represents decrease in value associated with loans that paid off during the period.
(3)Represents change in value resulting primarily from market-driven changes in interest rates.
MSRs do not trade in an active, open market with readily observable prices. Therefore, the fair value of MSRs is estimated using a discounted future cash flow model. Changes in the assumptions used may have a significant impact on the valuation of MSRs. MSR values are sensitive to movement in interest rates as expected future net servicing income depends on the projected outstanding principal balances of the underlying loans, which are impacted by the level of prepayments.
A summary of key assumptions and the sensitivity of the MSR value to changes in these assumptions at SeptemberJune 30, 2022,2023, and December 31, 20212022 follows:
| | | September 30, 2022 | | December 31, 2021 | | At June 30, 2023 | | At December 31, 2022 |
| | | Decline in fair value due to | | | Decline in fair value due to | | | Decline in fair value due to | | | Decline in fair value due to |
| (dollar amounts in millions) | (dollar amounts in millions) | Actual | | 10%
adverse
change | | 20%
adverse
change | | Actual | | 10%
adverse
change | | 20%
adverse
change | (dollar amounts in millions) | Actual | | 10%
adverse
change | | 20%
adverse
change | | Actual | | 10%
adverse
change | | 20%
adverse
change |
Constant prepayment rate (annualized) | Constant prepayment rate (annualized) | 7.04 | % | | | $ | (12) | | | $ | (24) | | | 12.28 | % | | | $ | (17) | | | $ | (32) | | Constant prepayment rate (annualized) | 7.60 | % | | | $ | (13) | | | $ | (25) | | | 7.05 | % | | | $ | (13) | | | $ | (25) | |
| Spread over forward interest rate swap rates | Spread over forward interest rate swap rates | 579 | | bps | | (11) | | | (22) | | | 466 | | bps | | (7) | | | (13) | | Spread over forward interest rate swap rates | 571 | | bps | | (11) | | | (22) | | | 578 | | bps | | (12) | | | (22) | |
Total servicing, late and other ancillary fees included in mortgage banking income was $23$24 million and $22$23 million for the three-month periods ended SeptemberJune 30, 20222023 and 2021,2022, respectively. Total servicing, late fees and other ancillary fees included in mortgage banking income was $68$48 million and $57$45 million for the nine-monthsix-month periods ended SeptemberJune 30, 20222023 and 2021,2022, respectively. The unpaid principal balance of residential mortgage loans serviced for third parties was $32$32.7 billion and $31$32.4 billion at SeptemberJune 30, 20222023 and December 31, 2021,2022, respectively.
8.7. BORROWINGS
Borrowings with original maturities of one year or less are classified as short-term and were comprised of the following at SeptemberJune 30, 20222023 and December 31, 2021,2022, respectively:
| | | | | | | | | | | |
| (dollar amounts in millions) | September 30,
2022 | | December 31,
2021 |
| Federal funds purchased and securities sold under agreements to repurchase | $ | 300 | | | $ | 320 | |
| | | |
| | | |
| Other borrowings | 126 | | | 14 | |
| Total short-term borrowings | $ | 426 | | | $ | 334 | |
62 Huntington Bancshares Incorporated
| | | | | | | | | | | |
| (dollar amounts in millions) | At June 30, 2023 | | At December 31, 2022 |
| Federal funds purchased and securities sold under agreements to repurchase | $ | 646 | | | $ | 253 | |
| FHLB advances | 1,000 | | | 1,700 | |
| | | |
| Other borrowings | 34 | | | 74 | |
| Total short-term borrowings | $ | 1,680 | | | $ | 2,027 | |
Huntington’s long-term debt consisted of the following at SeptemberJune 30, 20222023 and December 31, 2021,2022, respectively:
| | | | | | | | | | | |
| (dollar amounts in millions) | September 30,
2022 | | December 31,
2021 |
| The Parent Company: | | | |
| Senior Notes | $ | 2,990 | | | $ | 2,083 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| Subordinated Notes | 973 | | | 1,028 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| Total notes issued by the parent | 3,963 | | | 3,111 | |
| The Bank: | | | |
| Senior Notes | 2,287 | | | 2,434 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| Subordinated Notes | 650 | | | 811 | |
| | | |
| | | |
| Total notes issued by the bank | 2,937 | | | 3,245 | |
| FHLB Advances | 2,712 | | | 215 | |
| | | |
| Other | 556 | | | 537 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| Total long-term debt | $ | 10,168 | | | $ | 7,108 | |
In May 2022, the Bank issued $500 million of senior notes at 99.8% of face value. The senior notes mature on May 16, 2025 and have a fixed coupon rate of 4.01%.
In May 2022, the Bank issued $800 million of senior notes at 99.7% of face value. The senior notes mature on May 17, 2028 and have a fixed coupon rate of 4.55%.
In May 2022, the Bank issued $300 million of senior notes at 99.8% of face value. The senior notes mature on May 16, 2025 and have a floating rate equal to SOFR plus 119 basis points resetting quarterly.
In May 2022, Huntington issued $400 million of senior notes at 100% of face value. The senior notes mature on May 17, 2033 and have a fixed coupon rate of 5.02%.
In August 2022, Huntington issued $750 million of senior notes at 99.7% of face value. The senior notes mature on August 4, 2028 and have a fixed coupon rate of 4.44%. | | | | | | | | | | | |
| (dollar amounts in millions) | At June 30, 2023 | | At December 31, 2022 |
| The Parent Company: | | | |
| Senior Notes | $ | 2,908 | | | $ | 3,005 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| Subordinated Notes | 751 | | | 975 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| Total notes issued by the parent | 3,659 | | | 3,980 | |
| The Bank: | | | |
| Senior Notes | 4,146 | | | 4,272 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| Subordinated Notes | 651 | | | 651 | |
| | | |
| | | |
| Total notes issued by the bank | 4,797 | | | 4,923 | |
| FHLB Advances | 5,708 | | | 211 | |
| | | |
| Other | 547 | | | 572 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| Total long-term debt | $ | 14,711 | | | $ | 9,686 | |
2022 3Q Form 10-Q 6663 Huntington Bancshares Incorporated
9.8. OTHER COMPREHENSIVE INCOME
The components of Huntington’s OCI for the three-month and nine-monthsix-month periods ended SeptemberJune 30, 20222023 and 2021,2022, were as follows:
| | | | | | | | | | | | | | | | | |
| (dollar amounts in millions) | Pretax | | Tax (Expense) benefit | | After-tax |
| Three Months Ended September 30, 2022 | | | | | |
| | | | | |
| Unrealized losses on available-for-sale securities arising during the period | $ | (1,265) | | | $ | 291 | | | $ | (974) | |
| Reclassification adjustment for realized net losses included in net income | 4 | | | (1) | | | 3 | |
| Total unrealized losses on available-for-sale securities | (1,261) | | | 290 | | | (971) | |
| | | | | |
| Net impact of fair value hedges on available-for-sale securities | 325 | | | (75) | | | 250 | |
| | | | | |
| | | | | |
| Change in fair value related to cash flow hedges | (591) | | | 135 | | | (456) | |
| Foreign currency translation adjustment (1) | (15) | | | — | | | (15) | |
| Net unrealized gains (losses) on net investment hedges | 11 | | | — | | | 11 | |
| Translation adjustments, net of hedges (1) | (4) | | | — | | | (4) | |
| Change in accumulated unrealized gains for pension and other post retirement obligations | 3 | | | — | | | 3 | |
| Other comprehensive loss | $ | (1,528) | | | $ | 350 | | | $ | (1,178) | |
| Three Months Ended September 30, 2021 | | | | | |
| | | | | |
| Unrealized gains on available-for-sale securities arising during the period | $ | (112) | | | $ | 26 | | | $ | (86) | |
| Reclassification adjustment for realized net losses included in net income | 5 | | | (1) | | | 4 | |
| Total unrealized losses on available-for-sale securities | (107) | | | 25 | | | (82) | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| Change in fair value related to cash flow hedges | (43) | | | 14 | | | (29) | |
| Foreign currency translation adjustment (1) | (7) | | | — | | | (7) | |
| Net unrealized gains (losses) on net investment hedges | 9 | | | — | | | 9 | |
| Translation adjustments, net of hedges (1) | 2 | | | — | | | 2 | |
| Change in accumulated unrealized gains for pension and other post retirement obligations | 3 | | | — | | | 3 | |
| Other comprehensive income | $ | (145) | | | $ | 39 | | | $ | (106) | |
| | | | | |
| Nine Months Ended September 30, 2022 | | | | | |
| | | | | |
| Unrealized losses on available-for-sale securities arising during the period | $ | (3,952) | | | $ | 909 | | | $ | (3,043) | |
| Reclassification adjustment for realized net losses (gains) included in net income | 95 | | | (22) | | | 73 | |
| Total unrealized gains (losses) on available-for-sale securities | (3,857) | | | 887 | | | (2,970) | |
| | | | | |
| Net impact of fair value hedges on available-for-sale securities | 917 | | | (212) | | | 705 | |
| | | | | |
| | | | | |
| Change in fair value related to cash flow hedges | (1,012) | | | 230 | | | (782) | |
| Foreign currency translation adjustment (1) | (21) | | | — | | | (21) | |
| Net unrealized gains (losses) on net investment hedges | 15 | | | — | | | 15 | |
| Translation adjustments, net of hedges (1) | (6) | | | — | | | (6) | |
| Change in accumulated unrealized gains for pension and other post retirement obligations | 8 | | | (2) | | | 6 | |
| Other comprehensive loss | $ | (3,950) | | | $ | 903 | | | $ | (3,047) | |
| Nine Months Ended September 30, 2021 | | | | | |
| | | | | |
| Unrealized losses on available-for-sale securities arising during the period | $ | (311) | | | $ | 70 | | | $ | (241) | |
| Reclassification adjustment for realized net losses (gains) included in net income | 27 | | | (6) | | | 21 | |
| Total unrealized losses on available-for-sale securities | (284) | | | 64 | | | (220) | |
| | | | | |
| Net impact of fair value hedges on available-for-sale securities | 38 | | | (9) | | | 29 | |
| | | | | |
| | | | | |
| Change in fair value related to cash flow hedges | (173) | | | 42 | | | (131) | |
| Foreign currency translation adjustment (1) | (13) | | | — | | | (13) | |
| Net unrealized gains (losses) on net investment hedges | 9 | | | — | | | 9 | |
| Translation adjustments, net of hedges (1) | (4) | | | — | | | (4) | |
| Change in accumulated unrealized gains for pension and other post retirement obligations | 12 | | | (3) | | | 9 | |
| Other comprehensive loss | $ | (411) | | | $ | 94 | | | $ | (317) | |
| | | | | | | | | | | | | | | | | |
| (dollar amounts in millions) | Pretax | | Tax (expense) benefit | | After-tax |
| Three months ended June 30, 2023 | | | | | |
| | | | | |
| Unrealized gains (losses) on available-for-sale securities arising during the period | $ | (282) | | | $ | 65 | | | $ | (217) | |
| Reclassification adjustment for realized net losses included in net income | 35 | | | (8) | | | 27 | |
| Total unrealized gains (losses) on available-for-sale securities | (247) | | | 57 | | | (190) | |
| | | | | |
| Net impact of fair value hedges on available-for-sale securities | 139 | | | (32) | | | 107 | |
| Unrealized gains (losses) on cash flow hedges during the period | (266) | | | 65 | | | (201) | |
| Reclassification adjustment for cash flow hedges included in net income | 34 | | | (2) | | | 32 | |
| Net change related to cash flow hedges on loans | (232) | | | 63 | | | (169) | |
| | | | | |
| | | | | |
| Translation adjustments, net of hedges (1) | 1 | | | — | | | 1 | |
| | | | | |
| Other comprehensive income (loss) | $ | (339) | | | $ | 88 | | | $ | (251) | |
| Three months ended June 30, 2022 | | | | | |
| | | | | |
| Unrealized gains (losses) on available-for-sale securities arising during the period | $ | (1,147) | | | $ | 264 | | | $ | (883) | |
| Reclassification adjustment for realized net losses included in net income | 82 | | | (19) | | | 63 | |
| Total unrealized gains (losses) on available-for-sale securities | (1,065) | | | 245 | | | (820) | |
| | | | | |
| | | | | |
| | | | | |
| Net impact of fair value hedges on available-for-sale securities | 161 | | | (38) | | | 123 | |
| Net change related to cash flow hedges on loans | (111) | | | 25 | | | (86) | |
| | | | | |
| | | | | |
| Translation adjustments, net of hedges (1) | (2) | | | — | | | (2) | |
| Change in accumulated unrealized gains for pension and other post-retirement obligations | 2 | | | (1) | | | 1 | |
| Other comprehensive income (loss) | $ | (1,015) | | | $ | 231 | | | $ | (784) | |
| Six months ended June 30, 2023 | | | | | |
| | | | | |
| Unrealized gains (losses) on available-for-sale securities arising during the period | $ | 97 | | | $ | (22) | | | $ | 75 | |
| Reclassification adjustment for realized net losses included in net income | 38 | | | (9) | | | 29 | |
| Total unrealized gains (losses) on available-for-sale securities | 135 | | | (31) | | | 104 | |
| | | | | |
| Net impact of fair value hedges on available-for-sale securities | (43) | | | 10 | | | (33) | |
| Unrealized gains (losses) on cash flow hedging relationships arising during the period | (35) | | | 12 | | | (23) | |
| Reclassification adjustment for cash flow hedges included in net income | 46 | | | (3) | | | 43 | |
| Net change related to cash flow hedges | 11 | | | 9 | | | 20 | |
| | | | | |
| | | | | |
| Translation adjustments, net of hedges (1) | 1 | | | — | | | 1 | |
| | | | | |
| Other comprehensive income (loss) | $ | 104 | | | $ | (12) | | | $ | 92 | |
| Six months ended June 30, 2022 | | | | | |
| | | | | |
| Unrealized gains (losses) on available-for-sale securities arising during the period | $ | (2,687) | | | $ | 618 | | | $ | (2,069) | |
| Reclassification adjustment for realized net losses included in net income | 91 | | | (21) | | | 70 | |
| Total unrealized gains (losses) on available-for-sale securities | (2,596) | | | 597 | | | (1,999) | |
| | | | | |
| Net impact of fair value hedges on available-for-sale securities | 592 | | | (137) | | | 455 | |
| | | | | |
| | | | | |
| Net change related to cash flow hedges | (421) | | | 95 | | | (326) | |
| | | | | |
| | | | | |
| Translation adjustments, net of hedges (1) | (2) | | | — | | | (2) | |
| Change in accumulated unrealized gains for pension and other post-retirement obligations | 5 | | | (2) | | | 3 | |
| Other comprehensive income (loss) | $ | (2,422) | | | $ | 553 | | | $ | (1,869) | |
(1)Foreign investments are deemed to be permanent in nature and, therefore, Huntington does not provide for taxes on foreign currency translation adjustments.
642023 2Q Form 10-Q Huntington Bancshares Incorporated67
Activity in accumulated OCI for the three-month and nine-monthsix-month periods ended SeptemberJune 30, 20222023 and 2021,2022, were as follows:
| | (dollar amounts in millions) | (dollar amounts in millions) | Unrealized gains (losses) on available-for-sale securities (1) | | Net impact of fair value hedges on available-for-sale securities | | Change in fair value related to cash flow hedges | | | Translation adjustments, net of hedges | | Unrealized gains (losses) for pension and other post- retirement obligations | | Total | (dollar amounts in millions) | Unrealized gains (losses) on available-for-sale securities (1) | | Net impact of fair value hedges on available-for-sale securities | | Net change related to cash flow hedges on loans | | | Translation adjustments, net of hedges | | Unrealized gains (losses) for pension and other post- retirement obligations | | Total |
| Three Months Ended September 30, 2022 | | | | | | | | | | | | | |
| Three months ended June 30, 2023 | | Three months ended June 30, 2023 | | | | | | | | | | | | |
| Balance, beginning of period | Balance, beginning of period | $ | (2,152) | | | $ | 544 | | | $ | (263) | | | | $ | (5) | | | $ | (222) | | | $ | (2,098) | | Balance, beginning of period | $ | (2,708) | | | $ | 614 | | | $ | (443) | | | | $ | (8) | | | $ | (210) | | | $ | (2,755) | |
| | Other comprehensive income (loss) before reclassifications | Other comprehensive income (loss) before reclassifications | (974) | | | 250 | | | (456) | | | | (4) | | | — | | | (1,184) | | Other comprehensive income (loss) before reclassifications | (217) | | | 107 | | | (201) | | | | 1 | | | — | | | (310) | |
| Amounts reclassified from accumulated OCI to earnings | Amounts reclassified from accumulated OCI to earnings | 3 | | | — | | | — | | | | — | | | 3 | | | 6 | | Amounts reclassified from accumulated OCI to earnings | 27 | | | — | | | 32 | | | | — | | | — | | | 59 | |
| Period change | Period change | (971) | | | 250 | | | (456) | | | | (4) | | | 3 | | | (1,178) | | Period change | (190) | | | 107 | | | (169) | | | | 1 | | | — | | | (251) | |
| Balance, end of period | Balance, end of period | $ | (3,123) | | | $ | 794 | | | $ | (719) | | | | $ | (9) | | | $ | (219) | | | $ | (3,276) | | Balance, end of period | $ | (2,898) | | | $ | 721 | | | $ | (612) | | | | $ | (7) | | | $ | (210) | | | $ | (3,006) | |
| | Three Months Ended September 30, 2021 | | | | |
| Three months ended June 30, 2022 | | Three months ended June 30, 2022 | | | | | | | | | | | | |
| Balance, beginning of period | Balance, beginning of period | $ | 50 | | | $ | 31 | | | $ | 153 | | | | $ | (6) | | | $ | (247) | | | $ | (19) | | Balance, beginning of period | $ | (1,332) | | | $ | 421 | | | $ | (177) | | | | $ | (3) | | | $ | (223) | | | $ | (1,314) | |
| | Other comprehensive income (loss) before reclassifications | Other comprehensive income (loss) before reclassifications | (86) | | | — | | | (29) | | | | 2 | | | — | | | (113) | | Other comprehensive income (loss) before reclassifications | (883) | | | 123 | | | (86) | | | | (2) | | | — | | | (848) | |
| Amounts reclassified from accumulated OCI to earnings | Amounts reclassified from accumulated OCI to earnings | 4 | | | — | | | — | | | | — | | | 3 | | | 7 | | Amounts reclassified from accumulated OCI to earnings | 63 | | | — | | | — | | | | — | | | 1 | | | 64 | |
| Period change | Period change | (82) | | | — | | | (29) | | | | 2 | | | 3 | | | (106) | | Period change | (820) | | | 123 | | | (86) | | | | (2) | | | 1 | | | (784) | |
| | Balance, end of period | Balance, end of period | $ | (32) | | | $ | 31 | | | $ | 124 | | | | $ | (4) | | | $ | (244) | | | $ | (125) | | Balance, end of period | $ | (2,152) | | | $ | 544 | | | $ | (263) | | | | $ | (5) | | | $ | (222) | | | $ | (2,098) | |
| | Nine Months Ended September 30, 2022 | | | | |
| Six months ended June 30, 2023 | | Six months ended June 30, 2023 | | | | | | | | | | | | |
| Balance, beginning of period | Balance, beginning of period | $ | (153) | | | $ | 89 | | | $ | 63 | | | | $ | (3) | | | $ | (225) | | | $ | (229) | | Balance, beginning of period | $ | (3,002) | | | $ | 754 | | | $ | (632) | | | | $ | (8) | | | $ | (210) | | | $ | (3,098) | |
| Other comprehensive loss before reclassifications | (3,043) | | | 705 | | | (782) | | | | (6) | | | — | | | (3,126) | | |
| Other comprehensive income (loss) before reclassifications | | Other comprehensive income (loss) before reclassifications | 75 | | | (33) | | | (23) | | | | 1 | | | — | | | 20 | |
| Amounts reclassified from accumulated OCI to earnings | Amounts reclassified from accumulated OCI to earnings | 73 | | | — | | | — | | | | — | | | 6 | | | 79 | | Amounts reclassified from accumulated OCI to earnings | 29 | | | 43 | | | | — | | | — | | | 72 | |
| Period change | Period change | (2,970) | | | 705 | | | (782) | | | | (6) | | | 6 | | | (3,047) | | Period change | 104 | | | (33) | | | 20 | | | | 1 | | | — | | | 92 | |
| Balance, end of period | Balance, end of period | $ | (3,123) | | | $ | 794 | | | $ | (719) | | | | $ | (9) | | | $ | (219) | | | $ | (3,276) | | Balance, end of period | $ | (2,898) | | | $ | 721 | | | $ | (612) | | | | $ | (7) | | | $ | (210) | | | $ | (3,006) | |
| | Nine Months Ended September 30, 2021 | | | | |
| Six months ended June 30, 2022 | | Six months ended June 30, 2022 | | | | | | | | | | | | |
| Balance, beginning of period | Balance, beginning of period | $ | 188 | | | $ | 2 | | | $ | 255 | | | | $ | — | | | $ | (253) | | | $ | 192 | | Balance, beginning of period | $ | (153) | | | $ | 89 | | | $ | 63 | | | | $ | (3) | | | $ | (225) | | | $ | (229) | |
| Other comprehensive income before reclassifications | (241) | | | 29 | | | (131) | | | | (4) | | | — | | | (347) | | |
| Other comprehensive income (loss) before reclassifications | | Other comprehensive income (loss) before reclassifications | (2,069) | | | 455 | | | (326) | | | | (2) | | | — | | | (1,942) | |
| Amounts reclassified from accumulated OCI to earnings | Amounts reclassified from accumulated OCI to earnings | 21 | | | — | | | — | | | | — | | | 9 | | | 30 | | Amounts reclassified from accumulated OCI to earnings | 70 | | | — | | | — | | | | — | | | 3 | | | 73 | |
| Period change | Period change | (220) | | | 29 | | | (131) | | | | (4) | | | 9 | | | (317) | | Period change | (1,999) | | | 455 | | | (326) | | | | (2) | | | 3 | | | (1,869) | |
| Balance, end of period | Balance, end of period | $ | (32) | | | $ | 31 | | | $ | 124 | | | | $ | (4) | | | $ | (244) | | | $ | (125) | | Balance, end of period | $ | (2,152) | | | $ | 544 | | | $ | (263) | | | | $ | (5) | | | $ | (222) | | | $ | (2,098) | |
(1)AOCI amounts at SeptemberJune 30, 2023 and June 30, 2022 and September 30, 2021 include $69$62 million and $41$73 million, respectively, of net unrealized losses (after-tax) on securities transferred from the available-for-sale securities portfolio to the held-to-maturity securities portfolio. The net unrealized losses will be recognized in earnings over the remaining life of the security using the effective interest method.
2022 3Q Form 10-Q 6865 Huntington Bancshares Incorporated
10. SHAREHOLDERS’9. SHAREHOLDERS' EQUITY
Preferred Stock
The following is a summary of Huntington’s non-cumulative, non-voting, perpetual preferred stock outstanding.
| | | (dollar amounts in millions) | (dollar amounts in millions) | | Carrying Amount | (dollar amounts in millions) | | Carrying Amount |
| Series | Series | | | Issuance Date | | Shares Outstanding | | Dividend Rate | | Earliest Redemption Date (1) | | September 30,
2022 | | December 31, 2021 | Series | | | Issuance Date | | Shares Outstanding | | Dividend Rate | | Earliest Redemption Date (1) | | At June 30, 2023 | | At December 31, 2022 |
| | Series B (2) | Series B (2) | | | 12/28/2011 | | 35,500 | | | 3-mo. LIBOR + 270 bps | | 1/15/2017 | | $ | 23 | | | $ | 23 | | Series B (2) | | | 12/28/2011 | | 35,500 | | | 3-mo. LIBOR + 270 bps (3) | | 1/15/2017 | | $ | 23 | | | $ | 23 | |
| | Series E (3) | | | 2/27/2018 | | 5,000 | | | 5.70 | | | 4/15/2023 | | 495 | | | 495 | | |
| Series F (3) | | | 5/27/2020 | | 5,000 | | | 5.625 | | | 7/15/2030 | | 494 | | | 494 | | |
| Series G (3) | | | 8/3/2020 | | 5,000 | | | 4.45 | | | 10/15/2027 | | 494 | | | 494 | | |
| Series E (4) | | Series E (4) | | | 2/27/2018 | | 5,000 | | | 3-mo. LIBOR + 288 bps (5) | | 4/15/2023 | | 495 | | | 495 | |
| Series F (4) | | Series F (4) | | | 5/27/2020 | | 5,000 | | | 5.625 | | | 7/15/2030 | | 494 | | | 494 | |
| Series G (4) | | Series G (4) | | | 8/3/2020 | | 5,000 | | | 4.45 | | | 10/15/2027 | | 494 | | | 494 | |
| Series H (2) | Series H (2) | | | 2/2/2021 | | 500,000 | | | 4.50 | | | 4/15/2026 | | 486 | | | 486 | | Series H (2) | | | 2/2/2021 | | 500,000 | | | 4.50 | | | 4/15/2026 | | 486 | | | 486 | |
| Series I (4) | | | 6/9/2021 | | 7,000 | | | 5.70 | | | 12/01/2022 | | 175 | | | 175 | | |
| Series I (6) | | Series I (6) | | | 6/9/2021 | | 7,000 | | | 5.70 | | | 12/01/2022 | | 175 | | | 175 | |
| Series J (2) | | Series J (2) | | | 3/6/2023 | | 325,000 | | | 6.875 | | | 4/15/2028 | | 317 | | | — | |
| Total | Total | | | | 557,500 | | | $ | 2,167 | | | $ | 2,167 | | Total | | | | 882,500 | | | $ | 2,484 | | | $ | 2,167 | |
(1) Denotes earliest option redemption date. Earlier redemption is solelyRedeemable at Huntington’s option subject to prior approval of FRB.on the date stated or on a quarterly basis thereafter.
(2) Series B, H, and HJ preferred stock have a liquidation value and redemption price per share of $1,000, plus any declared and unpaid dividends.
(3) Series B converts to 3-month CME Term SOFR + 26 bps LIBOR spread adjustment + 270 bps effective July 15, 2023.
(4) Series E, F, and G preferred stock have a liquidation value and redemption price per share of $100,000, plus any declared and unpaid dividends.
(4)(5) Series E converts to 3-month CME Term SOFR + 26 bps LIBOR spread adjustment + 288 bps effective July 15, 2023.
(6) Series I preferred stock has a liquidation value and redemption price per share of $25,000, plus any declared and unpaid dividends.
The following table presents the dividends declared for each series of Preferred shares for the three-month and nine-monthsix-month periods ended SeptemberJune 30, 20222023 and 2021:2022:
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| | Three Months Ended September 30, | | Nine months ended September 30, |
| (amounts in millions, except per share data) | | 2022 | | 2021 | | 2022 | | 2021 |
| Cash Dividend Declared Per Share | | | | Cash Dividend Declared Per Share | | | | Cash Dividend Declared Per Share | | | | Cash Dividend Declared Per Share | | |
| Preferred Series | | | Amount ($) | | | Amount ($) | | | Amount ($) | | | Amount ($) |
| Series B | | $ | 16.95 | | | $ | — | | | $ | 7.07 | | | $ | — | | | $ | 39.34 | | | $ | — | | | $ | 21.63 | | | $ | — | |
| Series C | | — | | | — | | | 14.69 | | | (1) | | | — | | | — | | | 44.07 | | | (4) | |
| Series D | | — | | | — | | | — | | | — | | | — | | | — | | | 31.25 | | | (18) | |
| Series E | | 1,425.00 | | | (7) | | | 1,425.00 | | | (7) | | | 4,275.00 | | | (21) | | | 4,275.00 | | | (21) | |
| Series F | | 1,406.25 | | | (7) | | | 1,406.25 | | | (7) | | | 4,218.75 | | | (21) | | | 4,218.75 | | | (21) | |
| Series G | | 1,112.50 | | | (6) | | | 1,112.50 | | | (6) | | | 3,337.50 | | | (18) | | | 3,337.50 | | | (18) | |
| Series H | | 11.25 | | | (6) | | | 11.25 | | | (6) | | | 33.75 | | | (18) | | | 30.75 | | | (16) | |
| Series I | | 356.25 | | | (3) | | | 356.25 | | | (2) | | | 1,068.75 | | | (7) | | | 712.50 | | | (5) | |
| Total | | | | $ | (29) | | | | | $ | (29) | | | | | $ | (85) | | | | | $ | (103) | |
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Treasury shares
Treasury shares includes shares held for deferred compensation plans, at cost, of $80 million at September 30, 2022 and $79 million at December 31, 2021.
Non-controlling Interest in Subsidiaries
Through the acquisition of TCF, Huntington acquired a joint venture in which Huntington maintains a 55% ownership interest. As Huntington has a controlling financial interest, its financial results are consolidated in Huntington's financial statements and the other party’s 45% ownership interest is reported as a non-controlling interest within equity.
66 Huntington Bancshares Incorporated
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| | Three months ended June 30, | | Six months ended June 30, |
| (amounts in millions, except per share data) | | 2023 | | 2022 | | 2023 | | 2022 |
| Cash Dividend Declared Per Share | | | | Cash Dividend Declared Per Share | | | | Cash Dividend Declared Per Share | | | | Cash Dividend Declared Per Share | | |
| Preferred Series | | | Amount ($) | | | Amount ($) | | | Amount ($) | | | Amount ($) |
| Series B | | $ | 19.90 | | | $ | — | | | $ | 13.03 | | | $ | — | | | $ | 38.72 | | | $ | (1) | | | $ | 22.39 | | | $ | — | |
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| Series E | | 2,035.07 | | | (10) | | | 1,425.00 | | | (7) | | | 3,460.07 | | | (17) | | | 2,850.00 | | | (14) | |
| Series F | | 1,406.25 | | | (7) | | | 1,406.25 | | | (7) | | | 2,812.50 | | | (14) | | | 2,812.50 | | | (14) | |
| Series G | | 1,112.50 | | | (6) | | | 1,112.50 | | | (6) | | | 2,225.00 | | | (12) | | | 2,225.00 | | | (12) | |
| Series H | | 11.25 | | | (6) | | | 11.25 | | | (6) | | | 22.50 | | | (12) | | | 22.50 | | | (12) | |
| Series I | | 356.25 | | | (3) | | | 356.25 | | | (2) | | | 712.50 | | | (5) | | | 712.50 | | | (4) | |
| Series J | | 24.64 | | | (8) | | | — | | | — | | | 24.64 | | | (8) | | | — | | | — | |
| Total | | | | $ | (40) | | | | | $ | (28) | | | | | $ | (69) | | | | | $ | (56) | |
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11.10. EARNINGS PER SHARE
Basic earnings per share is the amount of earnings (adjusted for dividends declared on preferred stock and impact of preferred stock redemption)stock) available to each share of common stock outstanding during the reporting period. Diluted earnings per share is the amount of earnings available to each share of common stock outstanding during the reporting period adjusted to include the effect of potentially dilutive common shares. Potentially dilutive common shares include incremental shares issued for stock options, restricted stock units and awards, and distributions from deferred compensation plans. Potentially dilutive common shares are excluded from the computation of diluted earnings per share in periods in which the effect would be antidilutive.
The calculation of basic and diluted earnings per share for the three-month and nine-monthsix-month periods ended SeptemberJune 30, 20222023 and 20212022 was as follows:
| | | Three Months Ended
September 30, | | Nine Months Ended
September 30, | | Three months ended June 30, | | Six months ended June 30, |
| (dollar amounts in millions, except per share data, share count in thousands) | (dollar amounts in millions, except per share data, share count in thousands) | 2022 | | 2021 | | 2022 | | 2021 | (dollar amounts in millions, except per share data, share count in thousands) | 2023 | | 2022 | | 2023 | | 2022 |
| Basic earnings per common share: | Basic earnings per common share: | | | | | | | | Basic earnings per common share: | | | | | | | |
| Net income attributable to Huntington Bancshares Inc | $ | 594 | | | $ | 377 | | | $ | 1,593 | | | $ | 894 | | |
| Net income attributable to Huntington | | Net income attributable to Huntington | $ | 559 | | | $ | 539 | | | $ | 1,161 | | | $ | 999 | |
| Preferred stock dividends | Preferred stock dividends | 29 | | | 29 | | | 85 | | | 103 | | Preferred stock dividends | 40 | | | 28 | | | 69 | | | 56 | |
| Impact of preferred stock redemption | — | | | 15 | | | — | | | 15 | | |
| | Net income available to common shareholders | Net income available to common shareholders | $ | 565 | | | $ | 333 | | | $ | 1,508 | | | $ | 776 | | Net income available to common shareholders | $ | 519 | | | $ | 511 | | | $ | 1,092 | | | $ | 943 | |
| Average common shares issued and outstanding | Average common shares issued and outstanding | 1,442,591 | | | 1,462,736 | | | 1,440,740 | | | 1,201,763 | | Average common shares issued and outstanding | 1,446,372 | | | 1,441,200 | | | 1,444,820 | | | 1,439,814 | |
| Basic earnings per common share | Basic earnings per common share | $ | 0.39 | | | $ | 0.23 | | | $ | 1.05 | | | $ | 0.65 | | Basic earnings per common share | $ | 0.36 | | | $ | 0.35 | | | $ | 0.76 | | | $ | 0.65 | |
| Diluted earnings per common share: | Diluted earnings per common share: | | Diluted earnings per common share: | |
| | Dilutive potential common shares: | | |
| Average dilutive potential common shares: | | Average dilutive potential common shares: | |
| Stock options and restricted stock units and awards | Stock options and restricted stock units and awards | 16,064 | | | 17,536 | | | 17,078 | | | 17,623 | | Stock options and restricted stock units and awards | 12,213 | | | 15,545 | | | 15,913 | | | 17,587 | |
| Shares held in deferred compensation plans | Shares held in deferred compensation plans | 6,428 | | | 7,063 | | | 6,416 | | | 6,042 | | Shares held in deferred compensation plans | 7,136 | | | 6,548 | | | 6,767 | | | 6,409 | |
| | Dilutive potential common shares | 22,492 | | | 24,599 | | | 23,494 | | | 23,665 | | |
| Average dilutive potential common shares | | Average dilutive potential common shares | 19,349 | | | 22,093 | | | 22,680 | | | 23,996 | |
| Total diluted average common shares issued and outstanding | Total diluted average common shares issued and outstanding | 1,465,083 | | | 1,487,335 | | | 1,464,234 | | | 1,225,428 | | Total diluted average common shares issued and outstanding | 1,465,720 | | | 1,463,293 | | | 1,467,500 | | | 1,463,810 | |
| Diluted earnings per common share | Diluted earnings per common share | $ | 0.39 | | | $ | 0.22 | | | $ | 1.03 | | | $ | 0.63 | | Diluted earnings per common share | $ | 0.35 | | | $ | 0.35 | | | $ | 0.74 | | | $ | 0.64 | |
| Anti-dilutive awards (1) | Anti-dilutive awards (1) | 7,121 | | | 4,609 | | | 5,565 | | | 4,410 | | Anti-dilutive awards (1) | 15,413 | | | 11,550 | | | 12,226 | | | 6,333 | |
(1)Reflects the total number of shares related to outstanding options and awards that have been excluded from the computation of diluted earnings per share because the impact would have been anti-dilutive.
12.11. NONINTEREST INCOME
Huntington earns a variety of revenue including interest and fees from customers as well as revenues from non-customers. Certain sources of revenue are recognized within interest or fee income and are outside of the scope of ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). Other sources of revenue fall within the scope of ASC 606 and are generally recognized within noninterest income. These revenues are included within various sections of the Unaudited Condensed Consolidated Financial Statements. The following table shows Huntington’s total noninterest income segregated between contracts with customers within the scope of ASC 606 and those within the scope of other GAAP Topics.
| | (dollar amounts in millions) | (dollar amounts in millions) | | Three Months Ended September 30, | | Nine Months Ended September 30, | (dollar amounts in millions) | | Three months ended June 30, | | Six months ended June 30, |
| Noninterest income | Noninterest income | | 2022 | | 2021 | | 2022 | | 2021 | Noninterest income | | 2023 | | 2022 | | 2023 | | 2022 |
| Noninterest income from contracts with customers | Noninterest income from contracts with customers | | $ | 345 | | | $ | 315 | | | $ | 975 | | | $ | 794 | | Noninterest income from contracts with customers | | $ | 332 | | | $ | 322 | | | $ | 709 | | | $ | 630 | |
| Noninterest income within the scope of other GAAP topics | Noninterest income within the scope of other GAAP topics | | 153 | | | 220 | | | 507 | | | 580 | | Noninterest income within the scope of other GAAP topics | | 163 | | | 163 | | | 298 | | | 354 | |
| Total noninterest income | Total noninterest income | | $ | 498 | | | $ | 535 | | | $ | 1,482 | | | $ | 1,374 | | Total noninterest income | | $ | 495 | | | $ | 485 | | | $ | 1,007 | | | $ | 984 | |
70 Huntington Bancshares Incorporated
The following table illustrates the disaggregation by operating segment and major revenue stream and reconciles disaggregated revenue to segment revenue presented in Note 1716 “Segment Reporting”. | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (dollar amounts in millions) | Consumer & Regional Banking | | Commercial Banking | | | | | | Treasury / Other | | Huntington Consolidated |
| Major Revenue Streams | | | | | |
| Three months ended June 30, 2023 | | | | | | | | | | | |
| Service charges on deposit accounts | $ | 69 | | | $ | 18 | | | | | | | $ | — | | | $ | 87 | |
| Card and payment processing income | 89 | | | 7 | | | | | | | — | | | 96 | |
| Trust and investment management services | 61 | | | 7 | | | | | | | — | | | 68 | |
| Insurance income | 27 | | | 3 | | | | | | | — | | | 30 | |
| Capital markets fees | 4 | | | 20 | | | | | | | — | | | 24 | |
| Other noninterest income | 7 | | | 21 | | | | | | | (1) | | | 27 | |
| Net revenue from contracts with customers | 257 | | | 76 | | | | | | | (1) | | | 332 | |
Noninterest income within the scope of other GAAP topics | 45 | | | 91 | | | | | | | 27 | | | 163 | |
| Total noninterest income | $ | 302 | | | $ | 167 | | | | | | | $ | 26 | | | $ | 495 | |
| Three months ended June 30, 2022 | | | | | | | | | | | |
| Service charges on deposit accounts | $ | 83 | | | $ | 22 | | | | | | | $ | — | | | $ | 105 | |
| Card and payment processing income | 84 | | | 5 | | | | | | | — | | | 89 | |
| Trust and investment management services | 61 | | | 2 | | | | | | | — | | | 63 | |
| Insurance income | 26 | | | 2 | | | | | | | (1) | | | 27 | |
| Capital markets fees | 4 | | | 7 | | | | | | | — | | | 11 | |
| Other noninterest income | 6 | | | 21 | | | | | | | — | | | 27 | |
| Net revenue from contracts with customers | 264 | | | 59 | | | | | | | (1) | | | 322 | |
Noninterest income within the scope of other GAAP topics | 68 | | | 91 | | | | | | | 4 | | | 163 | |
| Total noninterest income | $ | 332 | | | $ | 150 | | | | | | | $ | 3 | | | $ | 485 | |
| Six months ended June 30, 2023 | | | | | | | | | | | |
| Service charges on deposit accounts | $ | 133 | | | $ | 37 | | | | | | | $ | — | | | $ | 170 | |
| Card and payment processing income | 169 | | | 13 | | | | | | | — | | | 182 | |
| Trust and investment management services | 123 | | | 7 | | | | | | | — | | | 130 | |
| Insurance income | 59 | | | 5 | | | | | | | — | | | 64 | |
| Capital markets fees | 7 | | | 46 | | | | | | | — | | | 53 | |
| Other noninterest income | 70 | | | 41 | | | | | | | (1) | | | 110 | |
| Net revenue from contracts with customers | 561 | | | 149 | | | | | | | (1) | | | 709 | |
Noninterest income within the scope of other GAAP topics | 85 | | | 174 | | | | | | | 39 | | | 298 | |
| Total noninterest income | $ | 646 | | | $ | 323 | | | | | | | $ | 38 | | | $ | 1,007 | |
| Six months ended June 30, 2022 | | | | | | | | | | | |
| Service charges on deposit accounts | $ | 157 | | | $ | 45 | | | | | | | $ | — | | | $ | 202 | |
| Card and payment processing income | 158 | | | 11 | | | | | | | — | | | 169 | |
| Trust and investment management services | 126 | | | 2 | | | | | | | — | | | 128 | |
| Insurance income | 54 | | | 4 | | | | | | | — | | | 58 | |
| Capital markets fees | 6 | | | 11 | | | | | | | — | | | 17 | |
| Other noninterest income | 13 | | | 43 | | | | | | | — | | | 56 | |
| Net revenue from contracts with customers | 514 | | | 116 | | | | | | | — | | | 630 | |
Noninterest income within the scope of other GAAP topics | 160 | | | 174 | | | | | | | 20 | | | 354 | |
| Total noninterest income | $ | 674 | | | $ | 290 | | | | | | | $ | 20 | | | $ | 984 | |
2022 3Q2023 2Q Form 10-Q 6771
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| Three Months Ended September 30, 2022 |
| (dollar amounts in millions) | Commercial Banking | | Consumer & Business Banking | | Vehicle Finance | | RBHPCG | | Treasury / Other | | Huntington Consolidated |
| Major Revenue Streams | | | | | |
| Service charges on deposit accounts | $ | 20 | | | $ | 70 | | | $ | 2 | | | $ | 1 | | | $ | — | | | $ | 93 | |
| Card and payment processing income | 6 | | | 84 | | | — | | | — | | | — | | | 90 | |
| Trust and investment management services | 1 | | | 16 | | | — | | | 43 | | | — | | | 60 | |
| Insurance income | 2 | | | 14 | | | — | | | 11 | | | 1 | | | 28 | |
| Capital markets fees | 37 | | | 2 | | | 1 | | | — | | | (2) | | | 38 | |
| Other noninterest income | 29 | | | 6 | | | 1 | | | 1 | | | (1) | | | 36 | |
| Net revenue from contracts with customers | $ | 95 | | | $ | 192 | | | $ | 4 | | | $ | 56 | | | $ | (2) | | | $ | 345 | |
Noninterest income within the scope of other GAAP topics | 86 | | | 51 | | | — | | | 1 | | | 15 | | | 153 | |
| Total noninterest income | $ | 181 | | | $ | 243 | | | $ | 4 | | | $ | 57 | | | $ | 13 | | | $ | 498 | |
| | | | | | | | | | | |
| | | Three Months Ended September 30, 2021 |
| (dollar amounts in millions) | Commercial Banking | | Consumer & Business Banking | | Vehicle Finance | | RBHPCG | | Treasury / Other | | Huntington Consolidated |
| Major Revenue Streams | | | | | |
| Service charges on deposit accounts | $ | 23 | | | $ | 89 | | | $ | 1 | | | $ | 1 | | | $ | — | | | $ | 114 | |
| Card and payment processing income | 6 | | | 85 | | | — | | | — | | | — | | | 91 | |
| Trust and investment management services | — | | | 17 | | | — | | | 44 | | | — | | | 61 | |
| Insurance income | 2 | | | 12 | | | — | | | 11 | | | — | | | 25 | |
| Capital markets fees | 4 | | | 1 | | | — | | | 1 | | | — | | | 6 | |
| Other noninterest income | 1 | | | 7 | | | 1 | | | 1 | | | 8 | | | 18 | |
| Net revenue from contracts with customers | $ | 36 | | | $ | 211 | | | $ | 2 | | | $ | 58 | | | $ | 8 | | | $ | 315 | |
Noninterest income within the scope of other GAAP topics | 114 | | | 91 | | | 2 | | | — | | | 13 | | | 220 | |
| Total noninterest income | $ | 150 | | | $ | 302 | | | $ | 4 | | | $ | 58 | | | $ | 21 | | | $ | 535 | |
68 Huntington Bancshares Incorporated
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | |
| Nine Months Ended September 30, 2022 |
| (dollar amounts in millions) | Commercial Banking | | Consumer & Business Banking | | Vehicle Finance | | RBHPCG | | Treasury / Other | | Huntington Consolidated |
| Major Revenue Streams | | | | | |
| Service charges on deposit accounts | $ | 65 | | | $ | 222 | | | $ | 5 | | | $ | 3 | | | $ | — | | | $ | 295 | |
| Card and payment processing income | 17 | | | 242 | | | — | | | — | | | — | | | 259 | |
| Trust and investment management services | 3 | | | 51 | | | — | | | 134 | | | — | | | 188 | |
| Insurance income | 6 | | | 40 | | | — | | | 39 | | | 1 | | | 86 | |
| Capital markets fees | 48 | | | 6 | | | 2 | | | 1 | | | (2) | | | 55 | |
| Other noninterest income | 72 | | | 18 | | | 1 | | | 2 | | | (1) | | | 92 | |
| Net revenue from contracts with customers | $ | 211 | | | $ | 579 | | | $ | 8 | | | $ | 179 | | | $ | (2) | | | $ | 975 | |
Noninterest income within the scope of other GAAP topics | 262 | | | 206 | | | 2 | | | 2 | | | 35 | | | 507 | |
| Total noninterest income | $ | 473 | | | $ | 785 | | | $ | 10 | | | $ | 181 | | | $ | 33 | | | $ | 1,482 | |
| | | | | | | | | | | |
| Nine Months Ended September 30, 2021 |
| (dollar amounts in millions) | Commercial Banking | | Consumer & Business Banking | | Vehicle Finance | | RBHPCG | | Treasury / Other | | Huntington Consolidated |
| Major Revenue Streams | | | | | |
| Service charges on deposit accounts | $ | 64 | | | $ | 201 | | | $ | 4 | | | $ | 2 | | | $ | — | | | $ | 271 | |
| Card and payment processing income | 14 | | | 211 | | | — | | | — | | | — | | | 225 | |
| Trust and investment management services | 1 | | | 45 | | | — | | | 122 | | | — | | | 168 | |
| Insurance income | 5 | | | 38 | | | — | | | 33 | | | 1 | | | 77 | |
| Capital markets fees | 11 | | | 4 | | | 1 | | | 1 | | | — | | | 17 | |
| Other noninterest income | 3 | | | 15 | | | 1 | | | 6 | | | 11 | | | 36 | |
| Net revenue from contracts with customers | $ | 98 | | | $ | 514 | | | $ | 6 | | | $ | 164 | | | $ | 12 | | | $ | 794 | |
Noninterest income within the scope of other GAAP topics | 255 | | | 266 | | | 3 | | | 1 | | | 55 | | | 580 | |
| Total noninterest income | $ | 353 | | | $ | 780 | | | $ | 9 | | | $ | 165 | | | $ | 67 | | | $ | 1,374 | |
Huntington generally provides services for customers in which it acts as principal. Payment terms and conditions vary amongst services and customers, and thus impact the timing and amount of revenue recognition. Some fees may be paid before any service is rendered and accordingly, such fees are deferred until the obligations pertaining to those fees are satisfied. Most Huntington contracts with customers are cancelable by either party without penalty or they are short-term in nature, with a contract duration of less than one year. Accordingly, most revenue deferred for the reporting period ended SeptemberJune 30, 20222023 is expected to be earned within one year. Huntington does not have significant balances of contract assets or contract liabilities and any change in those balances during the reporting period ended SeptemberJune 30, 20222023 was determined to be immaterial.
13.12. FAIR VALUES OF ASSETS AND LIABILITIES
See Note 19 “Fair Value of Assets and Liabilities” to the Consolidated Financial Statements appearing in Huntington’s 20212022 Annual Report on Form 10-K for a description of the valuation methodologies used for instruments measured at fair value. Assets and liabilities measured at fair value rarely transfer between Level 1 and Level 2 measurements. There were no such transfers during the three-month and nine-monthsix-month periods ended SeptemberJune 30, 20222023 and 2021.
Assets and Liabilities measured at fair value on a recurring basis
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Fair Value Measurements at Reporting Date Using | | Netting Adjustments (1) | | September 30, 2022 |
| (dollar amounts in millions) | Level 1 | | Level 2 | | Level 3 | | |
| Assets | | | | | | | | | |
| Trading account securities: | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Municipal securities | $ | — | | | $ | 32 | | | $ | — | | | $ | — | | | $ | 32 | |
| | | | | | | | | |
| | | | | | | | | |
| Available-for-sale securities: | | | | | | | | | |
| U.S. Treasury securities | 5 | | | — | | | — | | | — | | | 5 | |
| Residential CMOs | — | | | 3,035 | | | — | | | — | | | 3,035 | |
| Residential MBS | — | | | 11,983 | | | — | | | — | | | 11,983 | |
| Commercial MBS | — | | | 2,038 | | | — | | | — | | | 2,038 | |
| Other agencies | — | | | 190 | | | — | | | — | | | 190 | |
| Municipal securities | — | | | 44 | | | 3,332 | | | — | | | 3,376 | |
| Private-label CMO | — | | | 121 | | | 21 | | | — | | | 142 | |
| Asset-backed securities | — | | | 301 | | | 70 | | | — | | | 371 | |
| Corporate debt | — | | | 2,162 | | | — | | | — | | | 2,162 | |
| Other securities/sovereign debt | — | | | 4 | | | — | | | — | | | 4 | |
| Total available-for-sale securities | 5 | | | 19,878 | | | 3,423 | | | — | | | 23,306 | |
| Other securities | 47 | | | 3 | | | — | | | — | | | 50 | |
| Loans held for sale | — | | | 758 | | | — | | | — | | | 758 | |
| Loans held for investment | — | | | 166 | | | 16 | | | — | | | 182 | |
| MSRs | — | | | — | | | 486 | | | — | | | 486 | |
| Other assets: | | | | | | | | | |
| Derivative assets | — | | | 2,521 | | | 2 | | | (2,104) | | | 419 | |
| Assets held in trust for deferred compensation plans | 111 | | | — | | | — | | | — | | | 111 | |
| Liabilities | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Derivative liabilities | — | | | 2,652 | | | 11 | | | (1,460) | | | 1,203 | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Fair Value Measurements at Reporting Date Using | | Netting Adjustments (1) | | At June 30, 2023 |
| (dollar amounts in millions) | Level 1 | | Level 2 | | Level 3 | | |
| Assets | | | | | | | | | |
| Trading account securities: | | | | | | | | | |
| U.S. Treasury securities | $ | 90 | | | $ | — | | | $ | — | | | $ | — | | | $ | 90 | |
| | | | | | | | | |
| | | | | | | | | |
| Municipal securities | — | | | 33 | | | — | | | — | | | 33 | |
| Corporate debt | — | | | 5 | | | — | | | — | | | 5 | |
| Total trading account securities | 90 | | | 38 | | | — | | | — | | | 128 | |
| Available-for-sale securities: | | | | | | | | | |
| U.S. Treasury securities | 5 | | | — | | | — | | | — | | | 5 | |
| Residential CMO | — | | | 3,308 | | | — | | | — | | | 3,308 | |
| Residential MBS | — | | | 11,811 | | | — | | | — | | | 11,811 | |
| Commercial MBS | — | | | 1,898 | | | — | | | — | | | 1,898 | |
| Other agencies | — | | | 168 | | | — | | | — | | | 168 | |
| Municipal securities | — | | | 40 | | | 3,496 | | | — | | | 3,536 | |
| Private-label CMO | — | | | 103 | | | 20 | | | — | | | 123 | |
| Asset-backed securities | — | | | 294 | | | 75 | | | — | | | 369 | |
| Corporate debt | — | | | 2,011 | | | — | | | — | | | 2,011 | |
| Other securities/sovereign debt | — | | | 4 | | | — | | | — | | | 4 | |
| Total available-for-sale securities | 5 | | | 19,637 | | | 3,591 | | | — | | | 23,233 | |
| Other securities | 32 | | | 1 | | | — | | | — | | | 33 | |
| Loans held for sale | — | | | 543 | | | — | | | — | | | 543 | |
| Loans held for investment | — | | | 142 | | | 33 | | | — | | | 175 | |
| MSRs | — | | | — | | | 505 | | | — | | | 505 | |
| Other assets: | | | | | | | | | |
| Derivative assets | — | | | 2,159 | | | 5 | | | (1,715) | | | 449 | |
| Assets held in trust for deferred compensation plans | 168 | | | — | | | — | | | — | | | 168 | |
| Liabilities | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Derivative liabilities | — | | | 2,039 | | | 7 | | | (1,111) | | | 935 | |
| | | | | | | | | |
7072 Huntington Bancshares Incorporated
| | | Fair Value Measurements at Reporting Date Using | | Netting Adjustments (1) | | December 31, 2021 | | Fair Value Measurements at Reporting Date Using | | Netting Adjustments (1) | | At December 31, 2022 |
| (dollar amounts in millions) | (dollar amounts in millions) | Level 1 | | Level 2 | | Level 3 | | (dollar amounts in millions) | Level 1 | | Level 2 | | Level 3 | |
| Assets | Assets | | | | | | | | | | Assets | | | | | | | | | |
| Trading account securities: | Trading account securities: | | Trading account securities: | |
| | Municipal securities | Municipal securities | $ | — | | | $ | 46 | | | $ | — | | | $ | — | | | $ | 46 | | Municipal securities | $ | — | | | $ | 19 | | | $ | — | | | $ | — | | | $ | 19 | |
| | Available-for-sale securities: | Available-for-sale securities: | | Available-for-sale securities: | |
| U.S. Treasury securities | U.S. Treasury securities | 5 | | | — | | | — | | | — | | | 5 | | U.S. Treasury securities | 103 | | | — | | | — | | | — | | | 103 | |
| Residential CMOs | Residential CMOs | — | | | 4,649 | | | — | | | — | | | 4,649 | | Residential CMOs | — | | | 2,914 | | | — | | | — | | | 2,914 | |
| Residential MBS | Residential MBS | — | | | 15,508 | | | — | | | — | | | 15,508 | | Residential MBS | — | | | 12,263 | | | — | | | — | | | 12,263 | |
| Commercial MBS | Commercial MBS | — | | | 1,865 | | | — | | | — | | | 1,865 | | Commercial MBS | — | | | 1,953 | | | — | | | — | | | 1,953 | |
| Other agencies | Other agencies | — | | | 248 | | | — | | | — | | | 248 | | Other agencies | — | | | 182 | | | — | | | — | | | 182 | |
| Municipal securities | Municipal securities | — | | | 49 | | | 3,477 | | | — | | | 3,526 | | Municipal securities | — | | | 42 | | | 3,248 | | | — | | | 3,290 | |
| Private-label CMO | Private-label CMO | — | | | 86 | | | 20 | | | — | | | 106 | | Private-label CMO | — | | | 108 | | | 20 | | | — | | | 128 | |
| Asset-backed securities | Asset-backed securities | — | | | 312 | | | 70 | | | — | | | 382 | | Asset-backed securities | — | | | 298 | | | 74 | | | — | | | 372 | |
| Corporate debt | Corporate debt | — | | | 2,167 | | | — | | | — | | | 2,167 | | Corporate debt | — | | | 2,214 | | | — | | | — | | | 2,214 | |
| Other securities/sovereign debt | Other securities/sovereign debt | — | | | 4 | | | — | | | — | | | 4 | | Other securities/sovereign debt | — | | | 4 | | | — | | | — | | | 4 | |
| Total available-for-sale securities | Total available-for-sale securities | 5 | | | 24,888 | | | 3,567 | | | — | | | 28,460 | | Total available-for-sale securities | 103 | | | 19,978 | | | 3,342 | | | — | | | 23,423 | |
| Other securities | Other securities | 65 | | | 7 | | | — | | | — | | | 72 | | Other securities | 31 | | | 1 | | | — | | | — | | | 32 | |
| Loans held for sale | Loans held for sale | — | | | 1,270 | | | — | | | — | | | 1,270 | | Loans held for sale | — | | | 520 | | | — | | | — | | | 520 | |
| Loans held for investment | Loans held for investment | — | | | 152 | | | 19 | | | — | | | 171 | | Loans held for investment | — | | | 169 | | | 16 | | | — | | | 185 | |
| MSRs | MSRs | — | | | — | | | 351 | | | — | | | 351 | | MSRs | — | | | — | | | 494 | | | — | | | 494 | |
| Other assets: | Other assets: | | Other assets: | |
| Derivative assets | Derivative assets | — | | | 1,055 | | | 10 | | | (465) | | | 600 | | Derivative assets | — | | | 2,161 | | | 3 | | | (1,808) | | | 356 | |
| Assets held in trust for deferred compensation plans | Assets held in trust for deferred compensation plans | 156 | | | — | | | — | | | — | | | 156 | | Assets held in trust for deferred compensation plans | 155 | | | — | | | — | | | — | | | 155 | |
| Liabilities | Liabilities | | Liabilities | |
| Derivative liabilities | Derivative liabilities | — | | | 737 | | | 6 | | | (624) | | | 119 | | Derivative liabilities | — | | | 2,332 | | | 5 | | | (1,345) | | | 992 | |
|
(1)Amounts represent the impact of legally enforceable master netting agreements that allow the Company to settle positive and negative positions and cash collateral held or placed with the same counterparties.
The following tables present a rollforward of the balance sheet amounts measured at fair value on a recurring basis and classified as Level 3. The classification of an item as Level 3 is based on the significance of the unobservable inputs to the overall fair value measurement. However, Level 3 measurements may also include observable components of value that can be validated externally. Accordingly, the gains and losses in the table below include changes in fair value due in part to observable factors that are part of the valuation methodology.
2022 3Q2023 2Q Form 10-Q 7173
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Level 3 Fair Value Measurements | |
| | | | | Available-for-sale securities | | Loans held for investment | |
| (dollar amounts in millions) | MSRs | | Derivative instruments | | Municipal securities | | Private-
label CMO | | Asset-backed securities | | | | |
| Three Months Ended September 30, 2022 | | | | | | | | | | | | | | |
| Opening balance | $ | 463 | | | $ | (5) | | | $ | 3,377 | | | $ | 22 | | | $ | 44 | | | | | $ | 17 | | |
| | | | | | | | | | | | | | |
| Transfers out of Level 3 (1) | — | | | (6) | | | — | | | — | | | — | | | | | — | | |
| Total gains/losses for the period: | | | | | | | | | | | | | | |
| Included in earnings: | | | | | | | | | | | | | | |
| Mortgage banking income | 17 | | | 2 | | | — | | | — | | | — | | | | | — | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| Included in OCI | — | | | — | | | (66) | | | — | | | — | | | | | — | | |
| Purchases/originations | 20 | | | — | | | 309 | | | — | | | 26 | | | | | — | | |
| | | | | | | | | | | | | | |
| Repayments | — | | | — | | | — | | | — | | | — | | | | | (1) | | |
| | | | | | | | | | | | | | |
| Settlements | (14) | | | — | | | (288) | | | (1) | | | — | | | | | — | | |
| Closing balance | $ | 486 | | | $ | (9) | | | $ | 3,332 | | | $ | 21 | | | $ | 70 | | | | | $ | 16 | | |
| Change in unrealized gains or losses for the period included in earnings for assets held at end of the reporting date | $ | 17 | | | $ | (8) | | | $ | — | | | $ | — | | | $ | — | | | | | $ | — | | |
| Change in unrealized gains or losses for the period included in other comprehensive income for assets held at the end of the reporting period | — | | | — | | | (69) | | | — | | | (1) | | | | | — | | |
| Three Months Ended September 30, 2021 | | | | | | | | | | | | | | |
| Opening balance | $ | 327 | | | $ | 23 | | | $ | 3,609 | | | $ | 18 | | | $ | 46 | | | | | $ | 21 | | |
| | | | | | | | | | | | | | |
| Transfers out of Level 3 (1) | — | | | (39) | | | — | | | — | | | — | | | | | — | | |
| Total gains/losses for the period: | | | | | | | | | | | | | | |
| Included in earnings: | | | | | | | | | | | | | | |
| Mortgage banking income | 1 | | | 28 | | | — | | | — | | | — | | | | | — | | |
| Interest and fee income | — | | | — | | | (1) | | | — | | | — | | | | | — | | |
| Included in OCI | — | | | — | | | (8) | | | — | | | — | | | | | — | | |
| Purchases/originations | 31 | | | — | | | 260 | | | — | | | — | | | | | — | | |
| Sales | — | | | — | | | (17) | | | — | | | — | | | | | — | | |
| Repayments | — | | | — | | | — | | | — | | | — | | | | | (1) | | |
| | | | | | | | | | | | | | |
| Settlements | (21) | | | — | | | (261) | | | — | | | (11) | | | | | — | | |
| Closing balance | $ | 338 | | | $ | 12 | | | $ | 3,582 | | | $ | 18 | | | $ | 35 | | | | | $ | 20 | | |
| Change in unrealized gains or losses for the period included in earnings for assets held at end of the reporting date | $ | 1 | | | $ | (12) | | | $ | — | | | $ | — | | | $ | — | | | | | $ | — | | |
| Change in unrealized gains or losses for the period included in other comprehensive income for assets held at the end of the reporting period | — | | | — | | | (10) | | | — | | | — | | | | | — | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Level 3 Fair Value Measurements | |
| | | | | Available-for-sale securities | | Loans held for investment | |
| (dollar amounts in millions) | MSRs | | Derivative instruments | | Municipal securities | | Private-
label CMO | | Asset-backed securities | | | | |
| Three months ended June 30, 2023 | | | | | | | | | | | | | | |
| Opening balance | $ | 485 | | | $ | 3 | | | $ | 3,339 | | | $ | 20 | | | $ | 74 | | | | | $ | 15 | | |
| Transfers into Level 3 | — | | | — | | | — | | | — | | | — | | | | | 19 | | |
| Transfers out of Level 3 (1) | — | | | (8) | | | — | | | — | | | — | | | | | — | | |
| Total gains/losses for the period: | | | | | | | | | | | | | | |
| Included in earnings: | | | | | | | | | | | | | | |
| Mortgage banking income | 15 | | | 3 | | | — | | | — | | | — | | | | | — | | |
| | | | | | | | | | | | | | |
| Interest and fee income | — | | | — | | | — | | | — | | | — | | | | | — | | |
| Included in OCI | — | | | — | | | (7) | | | — | | | 1 | | | | | — | | |
| Purchases/originations | 18 | | | — | | | 378 | | | — | | | — | | | | | — | | |
| | | | | | | | | | | | | | |
| Repayments | — | | | — | | | — | | | — | | | — | | | | | (1) | | |
| | | | | | | | | | | | | | |
| Settlements | (13) | | | — | | | (214) | | | — | | | — | | | | | — | | |
| Closing balance | $ | 505 | | | $ | (2) | | | $ | 3,496 | | | $ | 20 | | | $ | 75 | | | | | $ | 33 | | |
| Change in unrealized gains or losses for the period included in earnings for assets held at end of the reporting date | $ | 15 | | | $ | (1) | | | $ | — | | | $ | — | | | $ | — | | | | | $ | — | | |
| Change in unrealized gains or losses for the period included in other comprehensive income for assets held at the end of the reporting period | — | | | — | | | (13) | | | — | | | — | | | | | — | | |
| Three months ended June 30, 2022 | | | | | | | | | | | | | | |
| Opening balance | $ | 416 | | | $ | (10) | | | $ | 3,282 | | | $ | 19 | | | $ | 62 | | | | | $ | 18 | | |
| | | | | | | | | | | | | | |
| Transfers out of Level 3 (1) | — | | | 7 | | | — | | | — | | | — | | | | | — | | |
| Total gains/losses for the period: | | | | | | | | | | | | | | |
| Included in earnings: | | | | | | | | | | | | | | |
| Mortgage banking income | 44 | | | (2) | | | — | | | — | | | — | | | | | — | | |
| Interest and fee income | — | | | — | | | — | | | (1) | | | — | | | | | — | | |
| | | | | | | | | | | | | | |
| Included in OCI | — | | | — | | | (88) | | | — | | | — | | | | | — | | |
| Purchases/originations | 18 | | | — | | | 386 | | | 4 | | | — | | | | | — | | |
| | | | | | | | | | | | | | |
| Repayments | — | | | — | | | — | | | — | | | — | | | | | (1) | | |
| | | | | | | | | | | | | | |
| Settlements | (15) | | | — | | | (203) | | | — | | | (18) | | | | | — | | |
| Closing balance | $ | 463 | | | $ | (5) | | | $ | 3,377 | | | $ | 22 | | | $ | 44 | | | | | $ | 17 | | |
| Change in unrealized gains or losses for the period included in earnings for assets held at end of the reporting date | $ | 44 | | | $ | 7 | | | $ | — | | | $ | — | | | $ | — | | | | | $ | — | | |
| Change in unrealized gains or losses for the period included in other comprehensive income for assets held at the end of the reporting period | — | | | — | | | (90) | | | — | | | — | | | | | — | | |
(1)Transfers out of Level 3 represent the settlement value of the derivative instruments (i.e., interest rate lock agreements) that are transferred to loans held for sale, which is classified as Level 2. | |
7274 Huntington Bancshares Incorporated
| | | | Level 3 Fair Value Measurements | | Level 3 Fair Value Measurements |
| | | Available-for-sale securities | | Loans held for investment | | | Available-for-sale securities | | Loans held for investment |
| (dollar amounts in millions) | (dollar amounts in millions) | MSRs | | Derivative instruments | | Municipal securities | | Private- label CMO | | Asset-backed securities | | (dollar amounts in millions) | MSRs | | Derivative instruments | | Municipal securities | | Private- label CMO | | Asset-backed securities | |
| Nine Months Ended September 30, 2022 | | | | | | | | | | | | |
| Six months ended June 30, 2023 | | Six months ended June 30, 2023 | | | | | | | | | | | |
| Opening balance | Opening balance | $ | 351 | | | $ | 4 | | | $ | 3,477 | | | $ | 20 | | | $ | 71 | | | $ | 19 | | Opening balance | $ | 494 | | | $ | (2) | | | $ | 3,248 | | | $ | 20 | | | $ | 74 | | | $ | 16 | |
| | Transfers into Level 3 | | Transfers into Level 3 | — | | | — | | | — | | | — | | | — | | | 19 | |
| Transfers out of Level 3 (1) | Transfers out of Level 3 (1) | — | | | (6) | | | — | | | — | | | — | | | — | | Transfers out of Level 3 (1) | — | | | (10) | | | — | | | — | | | — | | | — | |
| Total gains/losses for the period: | Total gains/losses for the period: | | Total gains/losses for the period: | |
| Included in earnings: | Included in earnings: | | Included in earnings: | |
| Mortgage banking income | | Mortgage banking income | 3 | | | 10 | | | — | | | — | | | — | | | — | |
| Interest and fee income | | Interest and fee income | — | | | — | | | — | | | (1) | | | — | | | — | |
| | Included in OCI | | Included in OCI | — | | | — | | | (4) | | | — | | | 1 | | | — | |
| Purchases/originations | | Purchases/originations | 31 | | | — | | | 555 | | | 1 | | | — | | | — | |
| | Repayments | | Repayments | — | | | — | | | — | | | — | | | — | | | (2) | |
| | Settlements | | Settlements | (23) | | | — | | | (303) | | | — | | | — | | | — | |
| Closing balance | | Closing balance | $ | 505 | | | $ | (2) | | | $ | 3,496 | | | $ | 20 | | | $ | 75 | | | $ | 33 | |
| Change in unrealized gains or losses for the period included in earnings for assets held at end of the reporting date | | Change in unrealized gains or losses for the period included in earnings for assets held at end of the reporting date | $ | 3 | | | $ | 4 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| Change in unrealized gains or losses for the period included in other comprehensive income for assets held at the end of the reporting period | | Change in unrealized gains or losses for the period included in other comprehensive income for assets held at the end of the reporting period | — | | | — | | | (10) | | | — | | | — | | | — | |
| Six months ended June 30, 2022 | | Six months ended June 30, 2022 | |
| Opening balance | | Opening balance | $ | 351 | | | $ | 4 | | | $ | 3,477 | | | $ | 20 | | | $ | 70 | | | $ | 19 | |
| | Total gains/losses for the period: | | Total gains/losses for the period: | |
| Included in earnings | | Included in earnings | |
| Mortgage banking income | Mortgage banking income | 112 | | | (7) | | | — | | | — | | | — | | | — | | Mortgage banking income | 95 | | | (9) | | | — | | | — | | | — | | | — | |
| Interest and fee income | Interest and fee income | — | | | — | | | (2) | | | (2) | | | — | | | — | | Interest and fee income | — | | | — | | | (2) | | | (2) | | | — | | | — | |
| Provision for credit losses | Provision for credit losses | — | | | — | | | (4) | | | — | | | — | | | — | | Provision for credit losses | — | | | — | | | (4) | | | — | | | — | | | — | |
| Included in OCI | Included in OCI | — | | | — | | | (274) | | | — | | | (1) | | | — | | Included in OCI | — | | | — | | | (208) | | | — | | | (1) | | | — | |
| Purchases/originations | Purchases/originations | 68 | | | — | | | 867 | | | 4 | | | 26 | | | — | | Purchases/originations | 48 | | | — | | | 558 | | | 4 | | | — | | | — | |
| | Repayments | Repayments | — | | | — | | | — | | | — | | | — | | | (3) | | Repayments | — | | | — | | | — | | | — | | | — | | | (2) | |
| | Settlements | Settlements | (45) | | | — | | | (732) | | | (1) | | | (26) | | | — | | Settlements | (31) | | | — | | | (444) | | | — | | | (25) | | | — | |
| Closing balance | Closing balance | $ | 486 | | | $ | (9) | | | $ | 3,332 | | | $ | 21 | | | $ | 70 | | | $ | 16 | | Closing balance | $ | 463 | | | $ | (5) | | | $ | 3,377 | | | $ | 22 | | | $ | 44 | | | $ | 17 | |
| Change in unrealized gains or losses for the period included in earnings for assets held at end of the reporting date | Change in unrealized gains or losses for the period included in earnings for assets held at end of the reporting date | $ | 112 | | | $ | (17) | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | Change in unrealized gains or losses for the period included in earnings for assets held at end of the reporting date | $ | 95 | | | $ | (9) | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| Change in unrealized gains or losses for the period included in other comprehensive income for assets held at the end of the reporting period | Change in unrealized gains or losses for the period included in other comprehensive income for assets held at the end of the reporting period | — | | | — | | | (274) | | | — | | | (1) | | | — | | Change in unrealized gains or losses for the period included in other comprehensive income for assets held at the end of the reporting period | — | | | — | | | (205) | | | — | | | — | | | — | |
| Nine Months Ended September 30, 2021 | | |
| Opening balance | $ | 210 | | | $ | 41 | | | $ | 2,951 | | | $ | 9 | | | $ | 10 | | | $ | 23 | | |
| | Transfers out of Level 3 (1) | — | | | (109) | | | — | | | — | | | — | | | — | | |
| Total gains/losses for the period: | | |
| Included in earnings | | |
| Mortgage banking income | 27 | | | 73 | | | — | | | — | | | — | | | — | | |
| Interest and fee income | — | | | — | | | (1) | | | — | | | — | | | — | | |
| Included in OCI | — | | | — | | | (13) | | | — | | | — | | | — | | |
| Purchases/originations/acquisitions | 162 | | | 7 | | | 1,613 | | | 8 | | | 75 | | | — | | |
| Sales | — | | | — | | | (369) | | | — | | | — | | | — | | |
| Repayments | — | | | — | | | — | | | — | | | — | | | (3) | | |
| | Settlements | (61) | | | — | | | (599) | | | 1 | | | (50) | | | — | | |
| Closing balance | $ | 338 | | | $ | 12 | | | $ | 3,582 | | | $ | 18 | | | $ | 35 | | | $ | 20 | | |
| Change in unrealized gains or losses for the period included in earnings for assets held at end of the reporting date | $ | 27 | | | $ | (33) | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | |
| Change in unrealized gains or losses for the period included in other comprehensive income for assets held at the end of the reporting period | — | | | — | | | (14) | | | — | | | — | | | — | | |
(1)Transfers out of Level 3 represent the settlement value of the derivative instruments (i.e., interest rate lock agreements) that are transferred to loans held for sale, which is classified as Level 2. | | (1)Transfers out of Level 3 represent the settlement value of the derivative instruments (i.e., interest rate lock agreements) that are transferred to loans held for sale, which is classified as Level 2. |
(1)Transfers out of Level 3 represent the settlement value of the derivative instruments (i.e., interest rate lock agreements) that are transferred to loans held for sale, which is classified as Level 2.
2022 3Q2023 2Q Form 10-Q 7375
Assets and liabilities under the fair value option
The following tables presenttable presents the fair value and aggregate principal balance of certain assets and liabilities under the fair value option:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total Loans | | Loans that are 90 or more days past due |
| (dollar amounts in millions) | (dollar amounts in millions) | Total Loans | | Loans that are 90 or more days past due | (dollar amounts in millions) | Fair value
carrying
amount | | Aggregate
unpaid
principal | | Difference | | Fair value
carrying
amount | | Aggregate
unpaid
principal | | Difference |
| At June 30, 2023 | | At June 30, 2023 | | | | | | | | | | | |
| | Fair value carrying amount | | Aggregate unpaid principal | | Difference | | Fair value carrying amount | | Aggregate unpaid principal | | Difference | |
| September 30, 2022 | | | | | | | | | | | | |
| Assets | | |
| Loans held for sale | Loans held for sale | $ | 758 | | | $ | 781 | | | $ | (23) | | | $ | — | | | $ | — | | | $ | — | | Loans held for sale | $ | 543 | | | $ | 536 | | | $ | 7 | | | $ | — | | | $ | — | | | $ | — | |
| Loans held for investment | Loans held for investment | 182 | | | 187 | | | (5) | | | 3 | | | 3 | | | — | | Loans held for investment | 175 | | | 183 | | | (8) | | | 2 | | | 2 | | | — | |
| December 31, 2021 | | |
| Assets | | |
| At December 31, 2022 | | At December 31, 2022 | |
| | Loans held for sale | Loans held for sale | $ | 1,270 | | | $ | 1,237 | | | $ | 33 | | | $ | — | | | $ | — | | | $ | — | | Loans held for sale | $ | 520 | | | $ | 513 | | | $ | 7 | | | $ | — | | | $ | — | | | $ | — | |
| Loans held for investment | Loans held for investment | 171 | | | 177 | | | (6) | | | 4 | | | 4 | | | — | | Loans held for investment | 185 | | | 190 | | | (5) | | | 11 | | | 11 | | | — | |
The following table presents the net gains (losses) from fair value changes.
| | | | | Three months ended June 30, | | Six months ended June 30, |
| (dollar amounts in millions) | (dollar amounts in millions) | | Three Months Ended September 30, | | Nine Months Ended September 30, | (dollar amounts in millions) | | 2023 | | 2022 | | 2023 | | 2022 |
| Assets | | 2022 | | 2021 | | 2022 | | 2021 | |
| Loans held for sale (1) | Loans held for sale (1) | | $ | (22) | | | $ | (4) | | | $ | (56) | | | $ | (30) | | Loans held for sale (1) | | $ | — | | | $ | 10 | | | $ | — | | | $ | (34) | |
| Loans held for investment | Loans held for investment | | — | | | — | | | 1 | | | — | | Loans held for investment | | (3) | | | — | | | (3) | | | 1 | |
(1)The net gains (losses) from fair value changes are included in Mortgage banking income on the Unaudited Condensed Consolidated Statements of Income.
Assets and Liabilities measured at fair value on a nonrecurring basis
Certain assets and liabilities may be required to be measured at fair value on a nonrecurring basis in periods subsequent to their initial recognition. These assets and liabilities are not measured at fair value on an ongoing basis; however, they are subject to fair value adjustments in certain circumstances, such as when there is evidence of impairment. The amounts presented represent the fair value on the various measurement dates throughout the period. The gains (losses) represent the amounts recorded during the period regardless of whether the asset is still held at period end.
The amounts measured at fair value on a nonrecurring basis were as follows:
| | | | Fair Value Measurements Using Significant Other Unobservable Inputs (Level 3) | | | Total Gains (Losses) | | | Fair Value Measurements Using Significant Other Unobservable Inputs (Level 3) | | | Total Losses |
| | | | | Three Months Ended September 30, | | Nine Months Ended September 30, | | | | | Three months ended June 30, | | Six months ended June 30, |
| (dollar amounts in millions) | (dollar amounts in millions) | | September 30, 2022 | | December 31, 2021 | | | 2022 | | 2021 | | 2022 | | 2021 | (dollar amounts in millions) | | At June 30, 2023 | | At December 31, 2022 | | | 2023 | | 2022 | | 2023 | | 2022 |
| | Collateral-dependent loans | Collateral-dependent loans | | $ | 47 | | | $ | 39 | | | | $ | — | | | $ | — | | | $ | (1) | | | $ | (2) | | Collateral-dependent loans | | $ | 35 | | | $ | 16 | | | | $ | (1) | | | $ | — | | | $ | (7) | | | $ | (1) | |
| | Loans held for sale | | 61 | | | — | | | | 1 | | | (1) | | | 1 | | | 1 | | |
|
Huntington records nonrecurring adjustments of collateral-dependent loans held for investment. Such amounts are generally based on the fair value of the underlying collateral supporting the loan. Appraisals are generally obtained to support the fair value of the collateral and incorporate measures such as recent sales prices for comparable properties and cost of construction. Periodically, in cases where the carrying value exceeds the fair value of the collateral less cost to sell, an impairment charge is recognized in the form of a charge-off.
7476 Huntington Bancshares Incorporated
Significant unobservable inputs for assets and liabilities measured at fair value on a recurring and nonrecurring basis
The table below presents quantitative information about the significant unobservable inputs for assets and liabilities measured at fair value on a recurring and nonrecurring basis:
| | | | Quantitative Information about Level 3 Fair Value Measurements | | | Quantitative Information about Level 3 Fair Value Measurements |
| | | | At September 30, 2022 (1) | | At December 31, 2021 (1) | | | | At June 30, 2023 (1) | | At December 31, 2022 (1) |
| (dollar amounts in millions) | (dollar amounts in millions) | | Valuation Technique | | Significant Unobservable Input | | Range | | Weighted Average | | Range | | Weighted Average | (dollar amounts in millions) | | Valuation Technique | | Significant Unobservable Input | | Range | | Weighted Average | | Range | | Weighted Average |
| Measured at fair value on a recurring basis: | Measured at fair value on a recurring basis: | | | | | Measured at fair value on a recurring basis: | | | | |
| MSRs | MSRs | | Discounted cash flow | | Constant prepayment rate | | 5 | % | - | 22% | | 7 | % | | 8 | % | —% | 23 | % | | 12 | % | MSRs | | Discounted cash flow | | Constant prepayment rate | | 5 | % | - | 28 | % | | 8 | % | | 5 | % | - | 40 | % | | 7 | % |
| | | | Spread over forward interest rate swap rates | | 5 | % | - | 13% | | 6 | % | | 3 | % | —% | 11 | % | | 5 | % | | | | Spread over forward interest rate swap rates | | 5 | % | - | 13 | % | | 6 | % | | 5 | % | - | 13 | % | | 6 | % |
| Derivative instruments | | Consensus Pricing | | Net market price | | (20) | % | - | 6% | | (3) | % | | (4) | % | —% | 8 | % | | 1 | % | |
| | | | | Estimated pull through % | | 5 | % | - | 100% | | 94 | % | | 6 | % | —% | 100 | % | | 92 | % | |
| | Municipal securities and asset-backed securities | Municipal securities and asset-backed securities | | Discounted cash flow | | Discount rate | | 4 | % | - | 5% | | 5 | % | | — | % | —% | 2 | % | | 1 | % | Municipal securities and asset-backed securities | | Discounted cash flow | | Discount rate | | 5 | % | - | 6 | % | | 6 | % | | 5 | % | - | 5 | % | | 5 | % |
| | | | Cumulative default | | — | % | - | 64% | | 7 | % | | — | % | —% | 64 | % | | 5 | % | | | | Cumulative default | | — | % | - | 64 | % | | 7 | % | | — | % | - | 64 | % | | 7 | % |
| | | | Loss given default | | 5 | % | - | 80% | | 25 | % | | 5 | % | —% | 80 | % | | 23 | % | | | | Loss given default | | 20 | % | - | 20 | % | | 20 | % | | 20 | % | - | 20 | % | | 20 | % |
| | |
(1) Certain disclosures related to quantitative level 3 fair value measurements do not include those deemed to be immaterial.
The following provides a general description of the impact of a change in an unobservable input on the fair value measurement and the interrelationship between unobservable inputs, where relevant/significant. Interrelationships may also exist between observable and unobservable inputs.
Credit loss estimates, such as probability of default, constant default, cumulative default, loss given default, cure given deferral, and loss severity, are driven by the ability of the borrowers to pay their loans and the value of the underlying collateral and are impacted by changes in macroeconomic conditions, typically increasing when economic conditions worsen and decreasing when conditions improve. An increase in the estimated prepayment rate typically results in a decrease in estimated credit losses and vice versa. Higher credit loss estimates generally result in lower fair values. Credit spreads generally increase when liquidity risks and market volatility increase and decrease when liquidity conditions and market volatility improve.
Discount rates and spread over forward interest rate swap rates typically increase when market interest rates increase and/or credit and liquidity risks increase and decrease when market interest rates decline and/or credit and liquidity conditions improve. Higher discount rates and credit spreads generally result in lower fair market values.
Net market price and pull through percentages generally increase when market interest rates increase and decline when market interest rates decline. Higher net market price and pull through percentages generally result in higher fair values.
Fair values of financial instruments
The following table providesMany of the carrying amountsassets and estimatedliabilities subject to the disclosure requirements are not actively traded, requiring fair values to be estimated by management. These estimations necessarily involve the use of Huntington’s financial instruments:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (dollar amounts in millions) | Amortized Cost | | Lower of Cost or Market | | Fair Value or Fair Value Option | | Total Carrying Amount | | Estimated Fair Value |
| September 30, 2022 | | | | | | | | | |
| Financial Assets | | | | | | | | | |
| Cash and short-term assets | $ | 4,592 | | | $ | — | | | $ | — | | | $ | 4,592 | | | $ | 4,592 | |
| Trading account securities | — | | | — | | | 32 | | | 32 | | | 32 | |
| Available-for-sale securities | — | | | — | | | 23,306 | | | 23,306 | | | 23,306 | |
| Held-to-maturity securities | 17,173 | | | — | | | — | | | 17,173 | | | 14,835 | |
| Other securities | 768 | | | — | | | 50 | | | 818 | | | 818 | |
| Loans held for sale | — | | | 135 | | | 758 | | | 893 | | | 900 | |
| Net loans and leases (1) | 115,855 | | | — | | | 182 | | | 116,037 | | | 110,944 | |
| Derivative assets | — | | | — | | | 419 | | | 419 | | | 419 | |
| Assets held in trust for deferred compensation plans | — | | | — | | | 111 | | | 111 | | | 111 | |
| Financial Liabilities | | | | | | | | | |
| Deposits | 146,313 | | | — | | | — | | | 146,313 | | | 146,211 | |
| Short-term borrowings | 426 | | | — | | | — | | | 426 | | | 426 | |
| Long-term debt | 10,168 | | | — | | | — | | | 10,168 | | | 9,995 | |
| Derivative liabilities | — | | | — | | | 1,203 | | | 1,203 | | | 1,203 | |
| December 31, 2021 | | | | | | | | | |
| Financial Assets | | | | | | | | | |
| Cash and short-term assets | $ | 5,914 | | | $ | — | | | $ | — | | | $ | 5,914 | | | $ | 5,914 | |
| Trading account securities | — | | | — | | | 46 | | | 46 | | | 46 | |
| Available-for-sale securities | — | | | — | | | 28,460 | | | 28,460 | | | 28,460 | |
| Held-to-maturity securities | 12,447 | | | — | | | — | | | 12,447 | | | 12,489 | |
| Other securities | 576 | | | — | | | 72 | | | 648 | | | 648 | |
| Loans held for sale | — | | | 406 | | | 1,270 | | | 1,676 | | | 1,621 | |
| Net loans and leases (1) | 109,066 | | | — | | | 171 | | | 109,237 | | | 109,695 | |
| Derivative assets | — | | | — | | | 600 | | | 600 | | | 600 | |
| Assets held in trust for deferred compensation plans | — | | | — | | | 156 | | | 156 | | | 156 | |
| Financial Liabilities | | | | | | | | | |
| Deposits | 143,263 | | | — | | | — | | | 143,263 | | | 143,574 | |
| Short-term borrowings | 334 | | | — | | | — | | | 334 | | | 334 | |
| Long-term debt | 7,108 | | | — | | | — | | | 7,108 | | | 7,319 | |
| Derivative liabilities | — | | | — | | | 119 | | | 119 | | | 119 | |
(1)Includes collateral-dependent loans.
76 Huntington Bancshares Incorporated
The following table presents the level in the fair value hierarchy for the estimated fair values at September 30, 2022factors, including but not limited to, relevancy of market prices of comparable instruments, expected future cash flows, and December 31, 2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Estimated Fair Value Measurements at Reporting Date Using | | Netting Adjustments (1) | Presented Balance |
| (dollar amounts in millions) | Level 1 | | Level 2 | | Level 3 | |
| September 30, 2022 | | | | | | | | |
| Financial Assets | | | | | | | | |
| Trading account securities | $ | — | | | $ | 32 | | | $ | — | | | | $ | 32 | |
| Available-for-sale securities | 5 | | | 19,878 | | | 3,423 | | | | 23,306 | |
| Held-to-maturity securities | — | | | 14,835 | | | — | | | | 14,835 | |
| Other securities (2) | 47 | | | 3 | | | — | | | | 50 | |
| Loans held for sale | — | | | 758 | | | 142 | | | | 900 | |
| Net loans and leases | — | | | 166 | | | 110,778 | | | | 110,944 | |
| Derivative assets | — | | | 2,521 | | | 2 | | | $ | (2,104) | | 419 | |
| Financial Liabilities | | | | | | | | |
| Deposits | — | | | 142,710 | | | 3,501 | | | | 146,211 | |
| Short-term borrowings | — | | | 426 | | | — | | | | 426 | |
| Long-term debt | — | | | 6,631 | | | 3,364 | | | | 9,995 | |
| Derivative liabilities | — | | | 2,652 | | | 11 | | | (1,460) | | 1,203 | |
| December 31, 2021 | | | | | | | | |
| Financial Assets | | | | | | | | |
| Trading account securities | $ | — | | | $ | 46 | | | $ | — | | | | $ | 46 | |
| Available-for-sale securities | 5 | | | 24,888 | | | 3,567 | | | | 28,460 | |
| Held-to-maturity securities | — | | | 12,489 | | | — | | | | 12,489 | |
| Other securities (2) | 65 | | | 7 | | | — | | | | 72 | |
| Loans held for sale | — | | | 1,270 | | | 351 | | | | 1,621 | |
| Net loans and leases | — | | | 152 | | | 109,543 | | | | 109,695 | |
| Derivative assets | — | | | 1,055 | | | 10 | | | $ | (465) | | 600 | |
| Financial Liabilities | | | | | | | | |
| Deposits | — | | | 139,047 | | | 4,527 | | | | 143,574 | |
| Short-term borrowings | — | | | 334 | | | — | | | | 334 | |
| Long-term debt | — | | | 6,441 | | | 878 | | | | 7,319 | |
| Derivative liabilities | — | | | 737 | | | 6 | | | (624) | | 119 | |
(1)Amounts represent the impact of legally enforceable master netting agreements that allow the Company to settle positive and negative positions and cash collateral held or placed with the same counterparties.
(2)Excludes securities without readily determinable fair values.appropriate discount rates.
The short-term nature of certain assets and liabilities result in their carrying value approximating fair value. These include trading account securities, customers’ acceptance liabilities, short-term borrowings, bank acceptances outstanding, FHLB advances, and cash and short-term assets, which include cash and due from banks, interest-bearing deposits in banks, interest-bearing deposits at FRB,Federal Reserve Bank, and federal funds sold, and securities purchased under resale agreements.sold. Loan commitments and letters-of-credit generally have short-term, variable-rate features and contain clauses that limit Huntington’s exposure to changes in customer credit quality. Accordingly, their carrying values, which are immaterial at the respective balance sheet dates, are reasonable estimates of fair value.
Certain assets, the most significant being operating lease assets, bank owned life insurance, and premises and equipment, do not meet the definition of a financial instrument and are excluded from this disclosure. Similarly, mortgage servicing rights and relationship intangibles are not considered financial instruments and are not included above.in following tables. Accordingly, this fair value information is not intended to, and does not, represent Huntington’s underlying value. Many of the assets and liabilities subject to the disclosure requirements are not actively traded, requiring fair values to be estimated by management. These estimations necessarily involve the use of judgment about a wide variety of factors, including but not limited to, relevancy of market prices of comparable instruments, expected future cash flows, and appropriate discount rates.
2022 3Q2023 2Q Form 10-Q 77
The following table provides the carrying amounts and estimated fair values of Huntington’s financial instruments:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (dollar amounts in millions) | Amortized Cost | | Lower of Cost or Market | | Fair Value or Fair Value Option | | Total Carrying Amount | | Estimated Fair Value |
| At June 30, 2023 | | | | | | | | | |
| Financial Assets | | | | | | | | | |
| Cash and short-term assets | $ | 11,289 | | | $ | — | | | $ | — | | | $ | 11,289 | | | $ | 11,289 | |
| Trading account securities | — | | | — | | | 128 | | | 128 | | | 128 | |
| Available-for-sale securities | — | | | — | | | 23,233 | | | 23,233 | | | 23,233 | |
| Held-to-maturity securities | 16,578 | | | — | | | — | | | 16,578 | | | 14,308 | |
| Other securities | 942 | | | — | | | 33 | | | 975 | | | 975 | |
| Loans held for sale | — | | | 2 | | | 543 | | | 545 | | | 545 | |
| Net loans and leases (1) | 118,873 | | | — | | | 175 | | | 119,048 | | | 114,587 | |
| Derivative assets | — | | | — | | | 449 | | | 449 | | | 449 | |
| Assets held in trust for deferred compensation plans | — | | | — | | | 168 | | | 168 | | | 168 | |
| Financial Liabilities | | | | | | | | | |
| Deposits | 148,028 | | | — | | | — | | | 148,028 | | | 147,911 | |
| Short-term borrowings | 1,680 | | | — | | | — | | | 1,680 | | | 1,680 | |
| Long-term debt | 14,711 | | | — | | | — | | | 14,711 | | | 14,407 | |
| Derivative liabilities | — | | | — | | | 935 | | | 935 | | | 935 | |
| At December 31, 2022 | | | | | | | | | |
| Financial Assets | | | | | | | | | |
| Cash and short-term assets | $ | 6,918 | | | $ | — | | | $ | — | | | $ | 6,918 | | | $ | 6,918 | |
| Trading account securities | — | | | — | | | 19 | | | 19 | | | 19 | |
| Available-for-sale securities | — | | | — | | | 23,423 | | | 23,423 | | | 23,423 | |
| Held-to-maturity securities | 17,052 | | | — | | | — | | | 17,052 | | | 14,754 | |
| Other securities | 822 | | | — | | | 32 | | | 854 | | | 854 | |
| Loans held for sale | — | | | 9 | | | 520 | | | 529 | | | 529 | |
| Net loans and leases (1) | 117,217 | | | — | | | 185 | | | 117,402 | | | 112,591 | |
| Derivative assets | — | | | — | | | 356 | | | 356 | | | 356 | |
| Assets held in trust for deferred compensation plans | — | | | — | | | 155 | | | 155 | | | 155 | |
| Financial Liabilities | | | | | | | | | |
| Deposits | 147,914 | | | — | | | — | | | 147,914 | | | 147,796 | |
| Short-term borrowings | 2,027 | | | — | | | — | | | 2,027 | | | 2,027 | |
| Long-term debt | 9,686 | | | — | | | — | | | 9,686 | | | 9,564 | |
| Derivative liabilities | — | | | — | | | 992 | | | 992 | | | 992 | |
(1)Includes collateral-dependent loans.
78 Huntington Bancshares Incorporated
14.The following table presents the level in the fair value hierarchy for the estimated fair values at June 30, 2023 and December 31, 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Estimated Fair Value Measurements at Reporting Date Using | | Netting Adjustments (1) | | Presented Balance |
| (dollar amounts in millions) | Level 1 | | Level 2 | | Level 3 | | |
| At June 30, 2023 | | | | | | | | | |
| Financial Assets | | | | | | | | | |
| Trading account securities | $ | 90 | | | $ | 38 | | | $ | — | | | | | $ | 128 | |
| Available-for-sale securities | 5 | | | 19,637 | | | 3,591 | | | | | 23,233 | |
| Held-to-maturity securities | — | | | 14,308 | | | — | | | | | 14,308 | |
| Other securities (2) | 32 | | | 1 | | | — | | | | | 33 | |
| Loans held for sale | — | | | 545 | | | — | | | | | 545 | |
| Net loans and leases | — | | | 142 | | | 114,445 | | | | | 114,587 | |
| Derivative assets | — | | | 2,159 | | | 5 | | | $ | (1,715) | | | 449 | |
| Financial Liabilities | | | | | | | | | |
| Deposits | — | | | 135,562 | | | 12,349 | | | | | 147,911 | |
| Short-term borrowings | — | | | 1,680 | | | — | | | | | 1,680 | |
| Long-term debt | — | | | 8,048 | | | 6,359 | | | | | 14,407 | |
| Derivative liabilities | — | | | 2,039 | | | 7 | | | (1,111) | | | 935 | |
| At December 31, 2022 | | | | | | | | | |
| Financial Assets | | | | | | | | | |
| Trading account securities | $ | — | | | $ | 19 | | | $ | — | | | | | $ | 19 | |
| Available-for-sale securities | 103 | | | 19,978 | | | 3,342 | | | | | 23,423 | |
| Held-to-maturity securities | — | | | 14,754 | | | — | | | | | 14,754 | |
| Other securities (2) | 31 | | | 1 | | | — | | | | | 32 | |
| Loans held for sale | — | | | 520 | | | 9 | | | | | 529 | |
| Net loans and leases | — | | | 169 | | | 112,422 | | | | | 112,591 | |
| Derivative assets | — | | | 2,161 | | | 3 | | | $ | (1,808) | | | 356 | |
| Financial Liabilities | | | | | | | | | |
| Deposits | — | | | 142,081 | | | 5,715 | | | | | 147,796 | |
| Short-term borrowings | — | | | 2,027 | | | — | | | | | 2,027 | |
| Long-term debt | — | | | 8,680 | | | 884 | | | | | 9,564 | |
| Derivative liabilities | — | | | 2,332 | | | 5 | | | (1,345) | | | 992 | |
(1)Amounts represent the impact of legally enforceable master netting agreements that allow the Company to settle positive and negative positions and cash collateral held or placed with the same counterparties.
(2)Excludes securities without readily determinable fair values.
13. DERIVATIVE FINANCIAL INSTRUMENTS
Derivative financial instruments are recorded in the Unaudited Condensed Consolidated Balance Sheets as either an asset or a liability (in other assets or other liabilities, respectively) and measured at fair value.
Derivative financial instruments can be designated as accounting hedges under GAAP. Designating a derivative as an accounting hedge allows Huntington to recognize gains and losses on the hedging instruments in the income statement line item where the gains and losses on the hedged item are recognized. Gains and losses on derivatives that are not designated in an effective hedge relationship under GAAP immediately impact earnings within the period they occur.
The following table presents the fair values and notional values of all derivative instruments included in the Unaudited Condensed Consolidated Balance Sheets at SeptemberJune 30, 20222023 and December 31, 2021.2022. Amounts in the table below are presented gross without the impact of any net collateral arrangements.
| | | September 30, 2022 | | December 31, 2021 | | At June 30, 2023 | | At December 31, 2022 |
| (dollar amounts in millions) | (dollar amounts in millions) | Notional Value | | Asset | | Liability | | Notional Value | | Asset | | Liability | (dollar amounts in millions) | Notional Value | | Asset | | Liability | | Notional Value | | Asset | | Liability |
| Derivatives designated as Hedging Instruments | Derivatives designated as Hedging Instruments | | | | | | | | | | | | Derivatives designated as Hedging Instruments | | | | | | | | | | | |
| Interest rate contracts | Interest rate contracts | $ | 38,351 | | | $ | 1,036 | | | $ | 1,205 | | | $ | 21,306 | | | $ | 258 | | | $ | 32 | | Interest rate contracts | $ | 48,379 | | | $ | 1,020 | | | $ | 910 | | | $ | 42,461 | | | $ | 1,008 | | | $ | 1,145 | |
| Foreign exchange contracts | Foreign exchange contracts | 206 | | | — | | | 13 | | | 210 | | | 1 | | | — | | Foreign exchange contracts | 215 | | | 2 | | | — | | | 202 | | | 2 | | | — | |
| Derivatives not designated as Hedging Instruments | Derivatives not designated as Hedging Instruments | | Derivatives not designated as Hedging Instruments | |
| Interest rate contracts | Interest rate contracts | 39,835 | | | 1,188 | | | 1,181 | | | 45,286 | | | 587 | | | 498 | | Interest rate contracts | 58,048 | | | 992 | | | 973 | | | 37,562 | | | 968 | | | 1,008 | |
| Foreign exchange contracts | Foreign exchange contracts | 4,483 | | | 98 | | | 64 | | | 3,524 | | | 29 | | | 31 | | Foreign exchange contracts | 4,343 | | | 69 | | | 62 | | | 4,889 | | | 68 | | | 68 | |
| Commodities contracts | Commodities contracts | 1,045 | | | 201 | | | 198 | | | 1,077 | | | 178 | | | 177 | | Commodities contracts | 828 | | | 81 | | | 78 | | | 762 | | | 114 | | | 113 | |
| Equity contracts | Equity contracts | 559 | | | — | | | 2 | | | 685 | | | 12 | | | 5 | | Equity contracts | 709 | | | — | | | 23 | | | 636 | | | 4 | | | 3 | |
| Total Contracts | $ | 84,479 | | | $ | 2,523 | | | $ | 2,663 | | | $ | 72,088 | | | $ | 1,065 | | | $ | 743 | | |
| Total contracts | | Total contracts | $ | 112,522 | | | $ | 2,164 | | | $ | 2,046 | | | $ | 86,512 | | | $ | 2,164 | | | $ | 2,337 | |
The following table presents the amount of gain or loss recognized in income for derivatives not designated as hedging instruments under ASC Subtopic 815-10 in the Unaudited Condensed Consolidated Income Statement for the three-month and nine-monthsix-month periods ended SeptemberJune 30, 20222023 and 2021,2022, respectively.
| | | Location of Gain or (Loss) Recognized in Income on Derivative | | Amount of Gain or (Loss) Recognized in Income on Derivative | | Location of Gain or (Loss) Recognized in Income on Derivative | | Amount of Gain or (Loss) Recognized in Income on Derivative |
| | Three Months Ended
September 30, | | Nine Months Ended
September 30, | | Three months ended June 30, | | Six months ended June 30, |
| (dollar amounts in millions) | (dollar amounts in millions) | | 2022 | | 2021 | | 2022 | | 2021 | (dollar amounts in millions) | | 2023 | | 2022 | | 2023 | | 2022 |
| Interest rate contracts: | Interest rate contracts: | | | | | | | | | | | Interest rate contracts: | | | | | | | | | | |
| Customer | Customer | | Capital markets fees | | $ | 12 | | | $ | 13 | | | $ | 37 | | | $ | 37 | | Customer | | Capital markets fees | | $ | 10 | | | $ | 15 | | | $ | 17 | | | $ | 25 | |
| Mortgage banking | Mortgage banking | | Mortgage banking income | | — | | | 5 | | | (80) | | | (24) | | Mortgage banking | | Mortgage banking income | | — | | | (33) | | | 9 | | | (80) | |
| Interest rate floors | | Interest and fee income on loans and leases | | — | | | (4) | | | — | | | (8) | | |
| Interest rate caps | | Interest expense on long-term debt | | — | | | — | | | — | | | 89 | | |
| | Interest rate swaptions | | Interest rate swaptions | | Other noninterest income | | 18 | | | — | | | 17 | | | — | |
| Foreign exchange contracts | Foreign exchange contracts | | Capital markets fees | | 12 | | | 9 | | | 32 | | | 22 | | Foreign exchange contracts | | Capital markets fees | | 13 | | | 10 | | | 25 | | | 20 | |
| Commodities contracts | Commodities contracts | | Capital markets fees | | 1 | | | (1) | | | 4 | | | (1) | | Commodities contracts | | Capital markets fees | | 1 | | | 2 | | | 3 | | | 3 | |
| | Equity contracts | Equity contracts | | Other noninterest expense | | (1) | | | (2) | | | (4) | | | (6) | | Equity contracts | | Other noninterest expense | | (4) | | | (4) | | | (5) | | | (3) | |
| Total | Total | | $ | 24 | | | $ | 20 | | | $ | (11) | | | $ | 109 | | Total | | $ | 38 | | | $ | (10) | | | $ | 66 | | | $ | (35) | |
Derivatives used in asset and liability management activities
Huntington engages in balance sheet hedging activity, principally for asset and liability management purposes. Balance sheet hedging activity is generally arranged to receive hedge accounting treatment that can be classified as either fair value or cash flow hedges. Fair value hedges are executed to hedge changes in fair value of outstanding fixed-rate debt and investment securities caused by fluctuations in market interest rates. Cash flow hedges are executed to modify interest rate characteristics of designated commercial loans in order to reduce the impact of changes in future cash flows due to market interest rate changes.
7880 Huntington Bancshares Incorporated
The following table presents the gross notional values of derivatives used in Huntington’s asset and liability management activities at SeptemberJune 30, 20222023 and December 31, 2021,2022, identified by the underlying interest rate-sensitive instruments.
| | | September 30, 2022 | |
| (dollar amounts in millions) | (dollar amounts in millions) | Fair Value Hedges | | Cash Flow Hedges | | Economic Hedges | | Total | (dollar amounts in millions) | Fair Value Hedges | | Cash Flow Hedges | | Economic Hedges | | Total |
| At June 30, 2023 | | At June 30, 2023 | | | | | | | |
| Instruments associated with: | Instruments associated with: | | | | | | | | Instruments associated with: | |
| Investment securities | Investment securities | $ | 10,297 | | | $ | — | | | $ | — | | | $ | 10,297 | | Investment securities | $ | 19,627 | | | $ | — | | | $ | 9,550 | | | $ | 29,177 | |
| Loans | Loans | — | | | 22,325 | | | 271 | | | 22,596 | | Loans | — | | | 19,850 | | | 175 | | | 20,025 | |
| | Long-term debt | Long-term debt | 5,729 | | | — | | | — | | | 5,729 | | Long-term debt | 8,902 | | | — | | | — | | | 8,902 | |
| | Total notional value at September 30, 2022 | $ | 16,026 | | | $ | 22,325 | | | $ | 271 | | | $ | 38,622 | | |
| Total notional value | | Total notional value | $ | 28,529 | | | $ | 19,850 | | | $ | 9,725 | | | $ | 58,104 | |
| | | December 31, 2021 | |
| (dollar amounts in millions) | Fair Value Hedges | | Cash Flow Hedges | | Economic Hedges | | Total | |
| | At December 31, 2022 | | At December 31, 2022 | | | | | | | |
| Instruments associated with: | Instruments associated with: | | | | | | | | Instruments associated with: | |
| Investment securities | Investment securities | $ | 8,228 | | | $ | — | | | $ | — | | | $ | 8,228 | | Investment securities | $ | 10,407 | | | $ | — | | | $ | — | | | $ | 10,407 | |
| Loans | Loans | — | | | 11,150 | | | 271 | | | 11,421 | | Loans | — | | | 24,325 | | | 175 | | | 24,500 | |
| | Long-term debt | Long-term debt | 1,928 | | | — | | | — | | | 1,928 | | Long-term debt | 7,729 | | | — | | | — | | | 7,729 | |
| Total notional value at December 31, 2021 | $ | 10,156 | | | $ | 11,150 | | | $ | 271 | | | $ | 21,577 | | |
| Total notional value | | Total notional value | $ | 18,136 | | | $ | 24,325 | | | $ | 175 | | | $ | 42,636 | |
These derivative financial instruments were entered into for the purpose of managing the interest rate risk of assets and liabilities. Net amounts receivable or payable on contracts hedging either interest earning assets or interest bearing liabilities were accrued as an adjustment to either interest income or interest expense. Adjustments to interest income were also recorded for the amounts related to the amortization of premiums for collars floors, and forward-starting floors that were excluded from the hedge effectiveness, changesnot included in the fair valuemeasurement of economic hedges,hedge effectiveness, as well as the amounts related to terminated hedges reclassified from AOCI. The net amounts resulted in an increasea decrease to net interest income of $21$64 million and $61an increase of $48 million for the three-month periods ended SeptemberJune 30, 2022,2023, and 2021,2022, respectively. For the nine-monthsix-month periods ended SeptemberJune 30, 2022,2023, and 2021,2022, the net amounts resulted in an increasea decrease to net interest income of $108$116 million and $291an increase of $87 million, respectively.
Fair Value Hedges
The changes in fair value of the fair value hedges are recorded through earnings and offset against changes in the fair value of the hedged item.
Huntington has designated $9.4$18.3 billion of interest rate swaps as fair value hedges of fixed-rate investment securities using the portfolio layer method. This approach allows the Company to designate as the hedged item a stated amount of the assets that are not expected to be affected by prepayments, defaults and other factors affecting the timing and amount of cash flows. The fair value portfolio level basis adjustment on our hedged mortgage-backed securities portfolio has not been attributed to the individual available-for-sale securities in our Unaudited Condensed Consolidated Statements of Financial Condition. Huntington has also designated $869 million$1.3 billion of interest rate swaps as fair value hedges of fixed-rate corporate bonds.
The following table presents the change in fair value for derivatives designated as fair value hedges as well as the offsetting change in fair value on the hedged item for the three-month and nine-monthsix-month periods ended SeptemberJune 30, 20222023 and 2021.2022.
| | | | Three Months Ended
September 30, | | Nine Months Ended
September 30, | | | Three months ended June 30, | | Six months ended June 30, |
| (dollar amounts in millions) | (dollar amounts in millions) | | 2022 | | 2021 | | 2022 | | 2021 | (dollar amounts in millions) | | 2023 | | 2022 | | 2023 | | 2022 |
| Interest rate contracts | Interest rate contracts | | | | | | | | | Interest rate contracts | | | | | | | | |
| Change in fair value of interest rate swaps hedging investment securities (1) | Change in fair value of interest rate swaps hedging investment securities (1) | | $ | 340 | | | $ | 2 | | | $ | 926 | | | $ | 39 | | Change in fair value of interest rate swaps hedging investment securities (1) | | $ | 138 | | | $ | 168 | | | $ | (44) | | | $ | 586 | |
| Change in fair value of hedged investment securities (1) | Change in fair value of hedged investment securities (1) | | (324) | | | — | | | (914) | | | (40) | | Change in fair value of hedged investment securities (1) | | (139) | | | (160) | | | 42 | | | (590) | |
| | Change in fair value of interest rate swaps hedging long-term debt (2) | Change in fair value of interest rate swaps hedging long-term debt (2) | | (178) | | | (22) | | | (314) | | | (95) | | Change in fair value of interest rate swaps hedging long-term debt (2) | | (138) | | | (38) | | | (22) | | | (136) | |
| Change in fair value of hedged long term debt (2) | Change in fair value of hedged long term debt (2) | | 178 | | | 22 | | | 315 | | | 96 | | Change in fair value of hedged long term debt (2) | | 138 | | | 39 | | | 22 | | | 137 | |
As of SeptemberJune 30, 2022,2023 and December 31, 2021,2022, the following amounts were recorded on the balance sheet related to cumulative basis adjustments for fair value hedges.
| | | Amortized Cost | | Cumulative Amount of Fair Value Hedging Adjustment To Hedged Items | | Amortized Cost | | Cumulative Amount of Fair Value Hedging Adjustment To Hedged Items |
| (dollar amounts in millions) | (dollar amounts in millions) | September 30, 2022 | | December 31, 2021 | | September 30, 2022 | | December 31, 2021 | (dollar amounts in millions) | At June 30, 2023 | | At December 31, 2022 | | At June 30, 2023 | | At December 31, 2022 |
| Assets | Assets | | | | | | | | Assets | | | | | | | |
| Investment securities (1) | Investment securities (1) | $ | 18,026 | | | $ | 17,150 | | | $ | (1,032) | | | $ | (117) | | Investment securities (1) | $ | 18,976 | | | $ | 18,029 | | | $ | (937) | | | $ | (979) | |
| | Liabilities | Liabilities | | Liabilities | |
| Long-term debt (2) | Long-term debt (2) | 4,095 | | | 1,981 | | | (271) | | | 45 | | Long-term debt (2) | 6,998 | | | 7,175 | | | (278) | | | (256) | |
|
(1)Amounts include the amortized cost basis of closed portfolios used to designate hedging relationships under the portfolio layer method. The hedged item is a layer of the closed portfolio which is expected to be remaining at the end of the hedging relationship. As of SeptemberJune 30, 2022,2023, the amortized cost basis of the closed portfolios used in these hedging relationships was $17.2$18.3 billion, the cumulative basis adjustments associated with these hedging relationships was $892$843 million, and the amounts of the designated hedging instruments were $9.4$18.3 billion.
(2)Excluded from the above table are the cumulative amount of fair value hedge adjustments remaining for long-term debt for which hedge accounting has been discontinued in the amounts of $(69)$(71) million at SeptemberJune 30, 20222023 and $17$(70) million at December 31, 2021.2022.
Cash Flow Hedges
At SeptemberJune 30, 2022,2023, Huntington has $22.3$19.9 billion of interest rate swaps, swaption collars, and collars.floors. These are designated as cash flow hedges for variable rate commercial loans. The change in the fair value of a derivative instrument designated as a cash flow hedge is initially recognized in OCI and is reclassified into income when the hedged item impacts earnings. The initial premium paid for the interest rate collar and floor contracts represents the time value of the contracts and is not included in the measurement of hedge effectiveness. Any change in fair value related to time value is recognized in OCI. The initial premium paid is amortized on a straight line basis as a reduction to interest income over the contractual life of these contracts.
Gains and (losses) onAt June 30, 2023, the net losses recognized in AOCI that are expected to be reclassified into earnings within the next 12 months were $176 million.
Economic Hedges
During the six-month period ended June 30, 2023, Huntington entered into $9.6 billion of interest rate floors, floor spreads, and swaps recognizedswaptions to reduce the impact on capital from rising rates. These swaptions are economic hedges of interest rate risk attributable to our investment securities with the change in value of these instruments recorded in other comprehensive income (loss) after-tax were $(456) million and $(29) million for the three-month periods ended September 30, 2022 and 2021, respectively. For the nine-month periods ended September 30, 2022 and 2021, gains and (losses) on interest rate floors and swaps recognized in other comprehensive income were $(782) million and $(131) million, respectively.noninterest income.
Derivatives used in mortgage banking activities
Mortgage loan origination hedging activity
Huntington’s mortgage origination hedging activity is related to economically hedging Huntington’s mortgage pricing commitments to customers and the secondary sale to third parties. The value of a newly originated mortgage is not firm until the interest rate is committed or locked. Forward commitments to sell economically hedge the possible loss on interest rate lock commitments due to interest rate change. The net asset position of these derivatives at SeptemberJune 30, 20222023 and December 31, 20212022 were $41a net asset of $12 million and $15a net liability of $3 million, respectively. At SeptemberJune 30, 20222023 and December 31, 2021,2022, Huntington had commitments to sell residential real estate loans of $1.2 billion and $2.1 billion,$766 million, respectively. These contracts mature in less than one year.
80 Huntington Bancshares Incorporated
MSR hedging activity
Huntington’s MSR economic hedging activity uses securities and derivatives to manage the value of the MSR asset and to mitigate the various types of risk inherent in the MSR asset, including risks related to duration, basis, convexity, volatility, and yield curve. The hedging instruments include forward commitments, TBA securities, Treasury futures contracts, interest rate swaps, and options on interest rate swaps.
82 Huntington Bancshares Incorporated
MSR hedging trading assets and liabilities are included in other assets and other liabilities, respectively, in the Unaudited Condensed Balance Sheets. Trading gains (losses) are included in mortgage banking income in the Unaudited Condensed Consolidated Statement of Income. The notional value of the derivative financial instruments, the corresponding trading assets and liabilities positions, and net trading gains (losses) related to MSR hedging activity is summarized in the following table:tables:
| | | (dollar amounts in millions) | (dollar amounts in millions) | September 30,
2022 | December 31,
2021 | (dollar amounts in millions) | At June 30, 2023 | At December 31, 2022 |
| Notional value | Notional value | $ | 1,095 | | | $ | 1,330 | | Notional value | $ | 1,610 | | | $ | 1,120 | |
| Trading assets | Trading assets | 4 | | | 19 | | Trading assets | 3 | | | 4 | |
| Trading liabilities | Trading liabilities | (80) | | | — | | Trading liabilities | (78) | | | (78) | |
|
| | | Three Months Ended
September 30, 2022 | | Nine Months Ended
September 30, 2022 | | Three months ended June 30, | | Six months ended June 30, |
| (dollar amounts in millions) | (dollar amounts in millions) | 2022 | | 2021 | | 2022 | | 2021 | (dollar amounts in millions) | 2023 | | 2022 | | 2023 | | 2022 |
| Trading gains (losses) | $ | (25) | | | $ | (4) | | | $ | (105) | | | $ | (28) | | |
| Trading losses | | Trading losses | $ | (15) | | | $ | (33) | | | $ | (6) | | | $ | (80) | |
|
Derivatives used in customer related activities
Various derivative financial instruments are offered to enable customers to meet their financing and investing objectives and for their risk management purposes. Derivative financial instruments used in trading activities consist of commodity, interest rate, and foreign exchange contracts. Huntington enters into offsetting third-party contracts with approved, reputable counterparties with substantially matching terms and currencies in order to economically hedge significant exposure related to derivatives used in trading activities.
The interest rate or price risk of customer derivatives is mitigated by entering into similar derivatives having offsetting terms with other counterparties. The credit risk to these customers is evaluated and included in the calculation of fair value. Foreign currency derivatives help the customer hedge risk and reduce exposure to fluctuations in exchange rates. Transactions are primarily in liquid currencies with Canadian dollars and Euros comprising a majority of all transactions. Commodity derivatives help the customer hedge risk and reduce exposure to fluctuations in the price of various commodities. Hedging of energy-related products and base metals comprise the majority of these transactions.
The net fair values of these derivative financial instruments, for which the gross amounts are included in other assets or other liabilities at both SeptemberJune 30, 20222023 and December 31, 2021,2022, were $76$58 million and $51$59 million, respectively. The total notional values of derivative financial instruments used by Huntington on behalf of customers, including offsetting derivatives, were $42.1$50.0 billion and $45.1$40.7 billion at SeptemberJune 30, 20222023 and December 31, 2021,2022, respectively. Huntington’s credit risk from customer derivatives was $146$94 million and $551$118 million at the same dates, respectively.
Financial assets and liabilities that are offset in the Unaudited Condensed Consolidated Balance Sheets
Derivative balances are presented on a net basis taking into consideration the effects of legally enforceable master netting agreements. Additionally, collateral exchanged with counterparties is also netted against the applicable derivative fair values. Huntington enters into derivative transactions with two primary groups: broker-dealers and banks, and Huntington’s customers. Different methods are utilized for managing counterparty credit exposure and credit risk for each of these groups.
Huntington enters into transactions with broker-dealers and banks for various risk management purposes. These types of transactions generally are high dollar volume. Huntington enters into collateral and master netting agreements with these counterparties, and routinely exchanges cash and high quality securities collateral. Huntington enters into transactions with customers to meet their financing, investing, payment and risk management needs. These types of transactions generally are low dollar volume. Huntington enters into master netting agreements with customer counterparties; however, collateral is generally not exchanged with customer counterparties.
In addition to the customer derivative credit exposure, aggregate credit risk associated with broker-dealer and bank derivative transactions was net excess collateral of $280 million and net credit risk of $44$337 million and $227 million at SeptemberJune 30, 20222023 and December 31, 2021,2022, respectively. The net credit risk associated with derivatives is calculated after considering master netting agreements and is reduced by collateral that has been pledged by the counterparty.
At SeptemberJune 30, 2022,2023, Huntington pledged $298$226 million of investment securities and cash collateral to counterparties, while other counterparties pledged $861$858 million of investment securities and cash collateral to Huntington to satisfy collateral netting agreements. In the event of credit downgrades, Huntington would not be required to provide additional collateral.
The following tables present the gross amounts of these assets and liabilities with any offsets to arrive at the net amounts recognized in the Unaudited Condensed Consolidated Balance Sheets at SeptemberJune 30, 20222023 and December 31, 2021.2022.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Offsetting of Financial Assets and Derivative Assets |
| | | | Gross amounts
offset in the unaudited
consolidated
balance sheets | | Net amounts of
assets
presented in
the unaudited
consolidated
balance sheets | | Gross amounts not offset in the
unaudited consolidated
balance sheets | | |
| (dollar amounts in millions) | | Gross amounts of recognized assets | | | | Financial instruments | | Cash collateral received | | Net amount |
| At June 30, 2023 | | $ | 2,164 | | | $ | (1,715) | | | $ | 449 | | | $ | (108) | | | $ | (24) | | | $ | 317 | |
| At December 31, 2022 | | 2,164 | | | (1,808) | | | 356 | | | (7) | | | (56) | | | 293 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Offsetting of Financial Assets and Derivative Assets |
| | | | Gross amounts
offset in the unaudited
condensed
consolidated
balance sheets | | Net amounts of
assets
presented in
the unaudited condensed
consolidated
balance sheets | | Gross amounts not offset in the
unaudited condensed consolidated
balance sheets | | |
| (dollar amounts in millions) | | Gross amounts of recognized assets | | | | Financial instruments | | Cash collateral received | | Net amount |
| September 30, 2022 | | $ | 2,523 | | | $ | (2,104) | | | $ | 419 | | | $ | (6) | | | $ | (121) | | | $ | 292 | |
| December 31, 2021 | | 1,065 | | | (465) | | | 600 | | | (65) | | | (31) | | | 504 | |
| Offsetting of Financial Liabilities and Derivative Liabilities | | | | | Gross amounts offset in the unaudited condensed consolidated balance sheets | | Net amounts of liabilities presented in the unaudited condensed consolidated balance sheets | | Gross amounts not offset in the unaudited condensed consolidated balance sheets | | | | | Gross amounts offset in the unaudited consolidated balance sheets | | Net amounts of liabilities presented in the unaudited consolidated balance sheets | | Gross amounts not offset in the
unaudited consolidated
balance sheets | |
| (dollar amounts in millions) | (dollar amounts in millions) | | Gross amounts of recognized liabilities | | Financial instruments | | Cash collateral delivered | | Net amount | (dollar amounts in millions) | | Gross amounts of recognized liabilities | | Financial instruments | | Cash collateral delivered | | Net amount |
| September 30, 2022 | | $ | 2,663 | | | $ | (1,460) | | | $ | 1,203 | | | $ | (79) | | | $ | (148) | | | $ | 976 | | |
| December 31, 2021 | | 743 | | | (624) | | | 119 | | | (3) | | | (116) | | | — | | |
| At June 30, 2023 | | At June 30, 2023 | | $ | 2,046 | | | $ | (1,111) | | | $ | 935 | | | $ | — | | | $ | (113) | | | $ | 822 | |
| At December 31, 2022 | | At December 31, 2022 | | 2,337 | | | (1,345) | | | 992 | | | (79) | | | (118) | | | 795 | |
15. VIEs14. Variable Interest Entities
Unconsolidated VIEs
The following tables provide a summary of the assets and liabilities included in Huntington’s Unaudited Condensed Consolidated Financial Statements, as well as the maximum exposure to losses, associated with its interests related to unconsolidated VIEs for which Huntington holds an interest in, but is not the primary beneficiary, of the VIE at SeptemberJune 30, 2022,2023, and December 31, 2021:2022:
| | | September 30, 2022 | | At June 30, 2023 |
| (dollar amounts in millions) | (dollar amounts in millions) | Total Assets | | Total Liabilities | | Maximum Exposure to Loss | (dollar amounts in millions) | Total Assets | | Total Liabilities | | Maximum Exposure to Loss |
| Affordable Housing Tax Credit Partnerships | Affordable Housing Tax Credit Partnerships | $ | 1,910 | | | $ | 1,169 | | | $ | 1,910 | | Affordable Housing Tax Credit Partnerships | $ | 2,186 | | | $ | 1,304 | | | $ | 2,186 | |
| Trust Preferred Securities | Trust Preferred Securities | 8 | | | 179 | | | — | | Trust Preferred Securities | 14 | | | 248 | | | — | |
| Other Investments | Other Investments | 522 | | | 148 | | | 522 | | Other Investments | 675 | | | 146 | | | 675 | |
| Total | Total | $ | 2,440 | | | $ | 1,496 | | | $ | 2,432 | | Total | $ | 2,875 | | | $ | 1,698 | | | $ | 2,861 | |
| | | | | | | | | | | | | | | | | |
| At December 31, 2022 |
| (dollar amounts in millions) | Total Assets | | Total Liabilities | | Maximum Exposure to Loss |
| Affordable Housing Tax Credit Partnerships | $ | 2,036 | | | $ | 1,260 | | | $ | 2,036 | |
| Trust Preferred Securities | 14 | | | 248 | | | — | |
| Other Investments | 522 | | | 141 | | | 522 | |
| Total | $ | 2,572 | | | $ | 1,649 | | | $ | 2,558 | |
8284 Huntington Bancshares Incorporated
| | | | | | | | | | | | | | | | | |
| December 31, 2021 |
| (dollar amounts in millions) | Total Assets | | Total Liabilities | | Maximum Exposure to Loss |
| Affordable Housing Tax Credit Partnerships | $ | 1,652 | | | $ | 949 | | | $ | 1,652 | |
| Trust Preferred Securities | 14 | | | 248 | | | — | |
| Other Investments | 484 | | | 146 | | | 484 | |
| Total | $ | 2,150 | | | $ | 1,343 | | | $ | 2,136 | |
Trust-Preferred Securities
Huntington has certain wholly-owned trusts whose assets, liabilities, equity, income, and expenses are not included within Huntington’s Unaudited Condensed Consolidated Financial Statements. These trusts have been formed for the sole purpose of issuing trust-preferred securities, from which the proceeds are then invested in Huntington junior subordinated debentures, which are reflected in Huntington’s Unaudited Condensed Consolidated Balance Sheet as long-term debt. The trust securities are the obligations of the trusts, and as such, are not consolidated within Huntington’s Unaudited Condensed Consolidated Financial Statements.
A list of trust preferred securities outstanding at September 30, 2022 follows:
| | | | | | | | | | | | | | | | | |
| (dollar amounts in millions) | Rate | | Principal amount of subordinated note/ debenture issued to trust (1) | | Investment in unconsolidated subsidiary |
| | | | | |
| Huntington Capital II | 4.38 | | (2) | $ | 32 | | | $ | 3 | |
| Sky Financial Capital Trust III | 5.15 | | (3) | 72 | | | 2 | |
| Sky Financial Capital Trust IV | 5.15 | | (3) | 75 | | | 3 | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| Total | | | $ | 179 | | | $ | 8 | |
(1)Represents the principal amount of debentures issued to each trust, including unamortized original issue discount.
(2)Variable effective rate at September 30, 2022, based on three-month LIBOR +0.625%.
(3)Variable effective rate at September 30, 2022, based on three-month LIBOR +1.40%.
Each issue of the junior subordinated debentures has an interest rate equal to the corresponding trust securities distribution rate. Huntington has the right to defer payment of interest on the debentures at any time, or from time-to-time for a period not exceeding five years provided that no extension period may extend beyond the stated maturity of the related debentures. During any such extension period, distributions to the trust securities will also be deferred and Huntington’s ability to pay dividends on its common stock will be restricted. Periodic cash payments and payments upon liquidation or redemption with respect to trust securities are guaranteed by Huntington to the extent of funds held by the trusts. The guarantee ranks subordinate and junior in right of payment to all indebtedness of the Company to the same extent as the junior subordinated debt. The guarantee does not place a limitation on the amount of additional indebtedness that may be incurred by Huntington.
Affordable Housing Tax Credit Partnerships
Huntington makes certain equity investments in various limited partnerships that sponsor affordable housing projects utilizing the LIHTC pursuant to Section 42 of the Internal Revenue Code. The purpose of these investments is to achieve a satisfactory return on capital, to facilitate the sale of additional affordable housing product offerings, and to assist in achieving goals associated with the Community Reinvestment Act. The primary activities of the limited partnerships include the identification, development, and operation of multi-family housing that is leased to qualifying residential tenants. Generally, these types of investments are funded through a combination of debt and equity.
Huntington uses the proportional amortization method to account for a majority of its investments in these entities. These investments are included in other assets. Investments that do not meet the requirements of the proportional amortization method are accounted for using the equity method. Investment losses are included in Other noninterest income in the Unaudited Condensed Consolidated Statements of Income.
The following table presents the balances of Huntington’s affordable housing tax credit investments and related unfunded commitments at SeptemberJune 30, 20222023 and December 31, 2021.2022.
| | (dollar amounts in millions) | (dollar amounts in millions) | September 30,
2022 | | December 31,
2021 | (dollar amounts in millions) | At June 30, 2023 | | At December 31, 2022 |
| Affordable housing tax credit investments | Affordable housing tax credit investments | $ | 2,743 | | | $ | 2,376 | | Affordable housing tax credit investments | $ | 3,142 | | | $ | 2,891 | |
| Less: amortization | Less: amortization | (833) | | | (724) | | Less: amortization | (956) | | | (855) | |
| Net affordable housing tax credit investments | Net affordable housing tax credit investments | $ | 1,910 | | | $ | 1,652 | | Net affordable housing tax credit investments | $ | 2,186 | | | $ | 2,036 | |
| Unfunded commitments | Unfunded commitments | $ | 1,169 | | | $ | 949 | | Unfunded commitments | $ | 1,304 | | | $ | 1,260 | |
The following table presents other information relating to Huntington’s affordable housing tax credit investments for the three-month and nine-monthsix-month periods ended SeptemberJune 30, 20222023 and 2021.2022.
| | | Three Months Ended
September 30, | | Nine Months Ended
September 30, | | Three months ended June 30, | | Six months ended June 30, |
| (dollar amounts in millions) | (dollar amounts in millions) | | 2022 | | 2021 | | 2022 | | 2021 | (dollar amounts in millions) | | 2023 | | 2022 | | 2023 | | 2022 |
| Tax credits and other tax benefits recognized | Tax credits and other tax benefits recognized | | $ | 52 | | | $ | 36 | | | $ | 159 | | | $ | 113 | | Tax credits and other tax benefits recognized | | $ | 65 | | | $ | 53 | | | $ | 131 | | | $ | 107 | |
| | Proportional amortization expense included in provision for income taxes | Proportional amortization expense included in provision for income taxes | | 45 | | | 34 | | | 131 | | | 92 | | Proportional amortization expense included in provision for income taxes | | 54 | | | 44 | | | 109 | | | 86 | |
| |
There were no sales of affordable housing tax credit investments during the three-month and nine-monthsix-month periods ended SeptemberJune 30, 20222023 and 2021.2022. There was no impairment recognized for the three-month and nine-monthsix-month periods ended SeptemberJune 30, 20222023 and 2021.2022.
Trust-Preferred Securities
Huntington has certain wholly-owned trusts whose assets, liabilities, equity, income, and expenses are not included within Huntington’s Unaudited Consolidated Financial Statements. These trusts have been formed for the sole purpose of issuing trust-preferred securities, from which the proceeds are then invested in Huntington junior subordinated debentures, which are reflected in Huntington’s Unaudited Consolidated Balance Sheet as long-term debt. The trust securities are the obligations of the trusts, and as such, are not consolidated within Huntington’s Unaudited Consolidated Financial Statements.
Other investments
Other investments determined to be VIE’s include investments in Small Business Investment Companies, Historic Tax Credit Investments, certain equity method investments, renewable energy financings, and other miscellaneous investments.
15. COMMITMENTS AND CONTINGENT LIABILITIES
Commitments to extend credit
In the ordinary course of business, Huntington makes various commitments to extend credit that are not reflected in the Unaudited Condensed Consolidated Financial Statements. The contract amounts of these financial agreements at SeptemberJune 30, 20222023 and December 31, 2021,2022, were as follows:
| | (dollar amounts in millions) | (dollar amounts in millions) | September 30,
2022 | | December 31,
2021 | (dollar amounts in millions) | At June 30, 2023 | | At December 31, 2022 |
| Contract amount representing credit risk | Contract amount representing credit risk | | | | Contract amount representing credit risk | | | |
| Commitments to extend credit: | Commitments to extend credit: | | Commitments to extend credit: | |
| Commercial | Commercial | $ | 30,478 | | | $ | 27,933 | | Commercial | $ | 32,589 | | | $ | 32,500 | |
| Consumer | Consumer | 19,283 | | | 18,513 | | Consumer | 19,496 | | | 19,064 | |
| Commercial real estate | Commercial real estate | 3,491 | | | 3,042 | | Commercial real estate | 2,929 | | | 3,393 | |
| Standby letters of credit and guarantees on industrial revenue bonds | Standby letters of credit and guarantees on industrial revenue bonds | 733 | | | 694 | | Standby letters of credit and guarantees on industrial revenue bonds | 749 | | | 714 | |
| Commercial letters of credit | Commercial letters of credit | 14 | | | 36 | | Commercial letters of credit | 10 | | | 15 | |
Commitments to extend credit generally have fixed expiration dates, are variable-rate, and contain clauses that permit Huntington to terminate or otherwise renegotiate the contracts in the event of a significant deterioration in the customer’s credit quality. These arrangements normally require the payment of a fee by the customer, the pricing of which is based on prevailing market conditions, credit quality, probability of funding, and other relevant factors. Since many of these commitments are expected to expire without being drawn upon, the contract amounts are not necessarily indicative of future cash requirements. The interest rate risk arising from these financial instruments is insignificant as a result of their predominantly short-term, variable-rate nature. Collateral to secure any funding of these commitments predominately consists of residential and commercial real estate mortgage loans.
84 Huntington Bancshares Incorporated
Standby letters-of-credit and guarantees on industrial revenue bonds are conditional commitments issued to guarantee the performance of a customer to a third-party. These guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing, and similar transactions. Most of these arrangements mature within two years. Since the conditions under which Huntington is required to fund these commitments may not materialize, the cash requirements are expected to be less than the total outstanding commitments. The carrying amount of deferred revenue associated with these guarantees was $20$22 million and $7$27 million at SeptemberJune 30, 20222023 and December 31, 2021,2022, respectively.
Commercial letters-of-credit represent short-term, self-liquidating instruments that facilitate customer trade transactions and generally have maturities of no longer than 90 days. The goods or cargo being traded normally secure these instruments.
Litigation and Regulatory Matters
In the ordinary course of business, Huntington is routinely a defendant in or party to pending and threatened legal and regulatory actions and proceedings.
In view of the inherent difficulty of predicting the outcome of such matters, particularly where the claimants seek very large or indeterminate damages or where the matters present novel legal theories or involve a large number of parties, Huntington generally cannot predict what the eventual outcome of the pending matters will be, what the timing of the ultimate resolution of these matters will be, or what the eventual loss, fines or penalties related to each matter may be.
Huntington establishes an accrued liability when those matters present loss contingencies that are both probable and estimable. In such cases, there may be an exposure to loss in excess of any amounts accrued. Huntington thereafter continues to monitor the matter for further developments that could affect the amount of the accrued liability that has been previously established.
86 Huntington Bancshares Incorporated
For certain matters, Huntington is able to estimate a range of possible loss. In cases in which Huntington possesses information to estimate a range of possible loss, that estimate is aggregated and disclosed below. There may be other matters for which a loss is probable or reasonably possible but such an estimate of the range of possible loss may not be possible. For those matters where an estimate of the range of possible loss is possible, management currently estimates the aggregate range of reasonably possible loss is $0 to $15$20 million at SeptemberJune 30, 20222023 in excess of the accrued liability (if any) related to those matters. This estimated range of possible loss is based upon currently available information and is subject to significant judgment, a variety of assumptions, and known and unknown uncertainties. The matters underlying the estimated range will change from time to time, and actual results may vary significantly from the current estimate. The estimated range of possible loss does not represent Huntington’s maximum loss exposure.
Based on current knowledge, management does not believe that loss contingencies arising from pending matters will have a material adverse effect on the consolidated financial position of Huntington. Further, management believes that amounts accrued are adequate to address Huntington’s contingent liabilities. However, in light of the inherent uncertainties involved in these matters, some of which are beyond Huntington’s control, and the large or indeterminate damages sought in some of these matters, an adverse outcome in one or more of these matters could be material to Huntington’s results of operations for any particular reporting period.
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. 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.
17.
16. SEGMENT REPORTING
Huntington’s business segments are based on our internally-aligned segment leadership structure, which is how management monitors results and assesses performance. The Company has four majortwo business segments: Commercial Banking, Consumer and Business Banking, Vehicle Finance, and& Regional Banking and The Huntington Private Client Group (RBHPCG).Commercial Banking. The Treasury / Other function includes technology and operations, other unallocated assets, liabilities, revenue, and expense. ForSee Note 1 “Basis of Presentation” for a description of our business segments, see Note 25 - Segment Reportingthe changes made during the second quarter 2023. Prior period results have been adjusted to conform to the Consolidated Financial Statements appearingnew segment presentation.
Consumer & Regional Banking - Consumer & Regional Banking offers a comprehensive set of digitally powered consumer and business financial solutions to Consumer Lending, Regional Banking, Branch Banking, and Wealth Management customers. The Consumer & Regional Banking segment provides a wide array of financial products and services to consumer and business customers including, but not limited to, deposits, lending, payments, mortgage banking, dealer financing, investment management, trust, brokerage, insurance, and other financial products and services. We serve our customers through our network of channels, including branches, online banking, mobile banking, telephone banking, and ATMs.
Commercial Banking - The Commercial Banking segment provides expertise through bankers, capabilities, and digital channels, and includes a comprehensive set of product offerings. Our target clients span from mid-market to large corporates across a national footprint. The Commercial Banking segment leverages internal partnerships for wealth management, trust, insurance, payments, and treasury management capabilities. In particular, our payments capabilities continue to expand as we develop unique solutions for our diverse client segments, including Huntington ChoicePay. This segment includes customers in Huntington’s 2021 Annual Report onMiddle Market Banking, Corporate, Specialty, and Government Banking, Asset Finance, Commercial Real Estate Banking, and Capital Markets.
2023 2Q Form 10-K.10-Q 87
Listed in the following tables is certain operating basis financial information reconciled to Huntington’s SeptemberJune 30, 2022,2023, December 31, 2021,2022, and SeptemberJune 30, 2021,2022, reported results by business segment.
2022 3Q Form 10-Q 85 | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | |
| Income Statements | Consumer & Regional Banking | | Commercial Banking | | | | | | Treasury / Other | | Huntington Consolidated |
| (dollar amounts in millions) | | | | | |
| Three months ended June 30, 2023 | | | | | | | | | | | |
| Net interest income | $ | 1,192 | | | $ | 577 | | | | | | | $ | (423) | | | $ | 1,346 | |
| Provision for credit losses | 64 | | | 28 | | | | | | | — | | | 92 | |
| Noninterest income | 302 | | | 167 | | | | | | | 26 | | | 495 | |
| Noninterest expense | 765 | | | 274 | | | | | | | 11 | | | 1,050 | |
| Provision (benefit) for income taxes | 140 | | | 93 | | | | | | | (99) | | | 134 | |
| Income attributable to non-controlling interest | — | | | 6 | | | | | | | — | | | 6 | |
| Net income (loss) attributable to Huntington | $ | 525 | | | $ | 343 | | | | | | | $ | (309) | | | $ | 559 | |
| Three months ended June 30, 2022 | | | | | | | | | | | |
| Net interest income | $ | 710 | | | $ | 422 | | | | | | | $ | 129 | | | $ | 1,261 | |
| Provision (benefit) for credit losses | 272 | | | (205) | | | | | | | — | | | 67 | |
| Noninterest income | 332 | | | 150 | | | | | | | 3 | | | 485 | |
| Noninterest expense | 714 | | | 246 | | | | | | | 58 | | | 1,018 | |
| Provision (benefit) for income taxes | 13 | | | 111 | | | | | | | (4) | | | 120 | |
| Income attributable to non-controlling interest | — | | | 2 | | | | | | | — | | | 2 | |
| Net income attributable to Huntington | $ | 43 | | | $ | 418 | | | | | | | $ | 78 | | | $ | 539 | |
| Six months ended June 30, 2023 | | | | | | | | | | | |
| Net interest income | $ | 2,358 | | | $ | 1,140 | | | | | | | $ | (743) | | | $ | 2,755 | |
| Provision for credit losses | 110 | | | 67 | | | | | | | — | | | 177 | |
| Noninterest income | 646 | | | 323 | | | | | | | 38 | | | 1,007 | |
| Noninterest expense | 1,519 | | | 552 | | | | | | | 65 | | | 2,136 | |
| Provision (benefit) for income taxes | 289 | | | 177 | | | | | | | (188) | | | 278 | |
| Income attributable to non-controlling interest | — | | | 10 | | | | | | | — | | | 10 | |
| Net income (loss) attributable to Huntington | $ | 1,086 | | | $ | 657 | | | | | | | $ | (582) | | | $ | 1,161 | |
| Six months ended June 30, 2022 | | | | | | | | | | | |
| Net interest income | $ | 1,341 | | | $ | 837 | | | | | | | $ | 229 | | | $ | 2,407 | |
| Provision (benefit) for credit losses | 167 | | | (75) | | | | | | | — | | | 92 | |
| Noninterest income | 674 | | | 290 | | | | | | | 20 | | | 984 | |
| Noninterest expense | 1,452 | | | 494 | | | | | | | 125 | | | 2,071 | |
| Provision (benefit) for income taxes | 83 | | | 149 | | | | | | | (7) | | | 225 | |
| Income attributable to non-controlling interest | — | | | 4 | | | | | | | — | | | 4 | |
| Net income attributable to Huntington | $ | 313 | | | $ | 555 | | | | | | | $ | 131 | | | $ | 999 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | |
| Three Months Ended September 30, |
| Income Statements | Commercial Banking | | Consumer & Business Banking | | Vehicle Finance | | RBHPCG | | Treasury / Other | | Huntington Consolidated |
| (dollar amounts in millions) | | | | | |
| 2022 | | | | | | | | | | | |
| Net interest income | $ | 495 | | | $ | 708 | | | $ | 120 | | | $ | 63 | | | $ | 18 | | | $ | 1,404 | |
| Provision (benefit) for credit losses | 84 | | | 64 | | | (43) | | | 1 | | | — | | | 106 | |
| Noninterest income | 181 | | | 243 | | | 4 | | | 57 | | | 13 | | | 498 | |
| Noninterest expense | 271 | | | 605 | | | 41 | | | 79 | | | 57 | | | 1,053 | |
| Provision (benefit) for income taxes | 66 | | | 60 | | | 27 | | | 8 | | | (15) | | | 146 | |
| Income attributable to non-controlling interest | 3 | | | — | | | — | | | — | | | — | | | 3 | |
| Net income (loss) attributable to Huntington Bancshares Inc | $ | 252 | | | $ | 222 | | | $ | 99 | | | $ | 32 | | | $ | (11) | | | $ | 594 | |
| 2021 | | | | | | | | | | | |
| Net interest income | $ | 416 | | | $ | 483 | | | $ | 123 | | | $ | 42 | | | $ | 96 | | | $ | 1,160 | |
| Provision (benefit) for credit losses | (34) | | | (7) | | | (25) | | | 4 | | | — | | | (62) | |
| Noninterest income | 150 | | | 302 | | | 4 | | | 58 | | | 21 | | | 535 | |
| Noninterest expense | 247 | | | 637 | | | 48 | | | 84 | | | 273 | | | 1,289 | |
| Provision (benefit) for income taxes | 73 | | | 33 | | | 22 | | | 3 | | | (41) | | | 90 | |
| Income attributable to non-controlling interest | 1 | | | — | | | — | | | — | | | — | | | 1 | |
| Net income (loss) attributable to Huntington Bancshares Inc | $ | 279 | | | $ | 122 | | | $ | 82 | | | $ | 9 | | | $ | (115) | | | $ | 377 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | |
| Nine Months Ended September 30, |
| Income Statements | Commercial Banking | | Consumer & Business Banking | | Vehicle Finance | | RBHPCG | | Treasury / Other | | Huntington Consolidated |
| (dollar amounts in millions) | | | | | |
| 2022 | | | | | | | | | | | |
| Net interest income | $ | 1,339 | | | $ | 1,701 | | | $ | 357 | | | $ | 167 | | | $ | 247 | | | $ | 3,811 | |
| Provision for credit losses | 9 | | | 138 | | | 36 | | | 15 | | | — | | | 198 | |
| Noninterest income | 473 | | | 785 | | | 10 | | | 181 | | | 33 | | | 1,482 | |
| Noninterest expense | 767 | | | 1,807 | | | 127 | | | 241 | | | 182 | | | 3,124 | |
| Provision (benefit) for income taxes | 217 | | | 114 | | | 43 | | | 19 | | | (22) | | | 371 | |
| Income attributable to non-controlling interest | 7 | | | — | | | — | | | — | | | — | | | 7 | |
| Net income attributable to Huntington Bancshares Inc | $ | 812 | | | $ | 427 | | | $ | 161 | | | $ | 73 | | | $ | 120 | | | $ | 1,593 | |
| 2021 | | | | | | | | | | | |
| Net interest income | $ | 873 | | | $ | 1,187 | | | $ | 340 | | | $ | 113 | | | $ | 457 | | | $ | 2,970 | |
| Provision (benefit) for credit losses | 107 | | | 57 | | | (77) | | | 2 | | | — | | | 89 | |
| Noninterest income | 353 | | | 780 | | | 9 | | | 165 | | | 67 | | | 1,374 | |
| Noninterest expense | 553 | | | 1,617 | | | 119 | | | 217 | | | 648 | | | 3,154 | |
| Provision (benefit) for income taxes | 119 | | | 62 | | | 64 | | | 12 | | | (51) | | | 206 | |
| Income attributable to non-controlling interest | 1 | | | — | | | — | | | — | | | — | | | 1 | |
| Net income (loss) attributable to Huntington Bancshares Inc | $ | 446 | | | $ | 231 | | | $ | 243 | | | $ | 47 | | | $ | (73) | | | $ | 894 | |
86 Huntington Bancshares Incorporated
| | | Assets at | | Deposits at | | Assets at | | Deposits at |
| (dollar amounts in millions) | (dollar amounts in millions) | September 30,
2022 | | December 31,
2021 | | September 30,
2022 | | December 31,
2021 | (dollar amounts in millions) | June 30,
2023 | | December 31,
2022 | | June 30,
2023 | | December 31,
2022 |
| Consumer & Regional Banking | | Consumer & Regional Banking | $ | 71,423 | | | $ | 70,268 | | | $ | 106,502 | | | $ | 105,064 | |
| Commercial Banking | Commercial Banking | $ | 62,924 | | | $ | 57,071 | | | $ | 37,194 | | | $ | 31,845 | | Commercial Banking | 64,505 | | | 63,611 | | | 36,459 | | | 36,807 | |
| Consumer & Business Banking | 38,424 | | | 39,929 | | | 93,854 | | | 95,352 | | |
| Vehicle Finance | 21,461 | | | 20,752 | | | 1,173 | | | 1,401 | | |
| RBHPCG | 9,876 | | | 8,325 | | | 8,982 | | | 10,162 | | |
| | Treasury / Other | Treasury / Other | 46,717 | | | 47,987 | | | 5,110 | | | 4,503 | | Treasury / Other | 52,577 | | | 49,027 | | | 5,067 | | | 6,043 | |
| Total | Total | $ | 179,402 | | | $ | 174,064 | | | $ | 146,313 | | | $ | 143,263 | | Total | $ | 188,505 | | | $ | 182,906 | | | $ | 148,028 | | | $ | 147,914 | |
2022 3Q Form 10-Q 8887 Huntington Bancshares Incorporated
Item 3: Quantitative and Qualitative Disclosures about Market Risk
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 20212022 Annual Report on Form 10-K.
Item 4: Controls and Procedures
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 SeptemberJune 30, 2022.2023. Based upon such evaluation, Huntington’s Chief Executive Officer and Chief Financial Officer have concluded that, as of SeptemberJune 30, 2022,2023, 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 SeptemberJune 30, 2022,2023, 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
Item 1A: Risk Factors
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 20212022 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.
88 Huntington Bancshares Incorporated
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(a) and (b)
Not Applicable
(c)
Not Applicable | | | | | | | | | | | | | | | | | | |
| Period | Total Number of Shares Purchased | | Average
Price Paid
Per Share | | Maximum Number of Shares (or Approximate Dollar Value) that May Yet Be Purchased Under the Plans or Programs (1) | |
| April 1, 2023 to April 30, 2023 | — | | | $ | — | | | $ | 1,000,000,000 | | |
| May 1, 2023 to May 31, 2023 | — | | | — | | | 1,000,000,000 | | |
| June 1, 2023 to June 30, 2023 | — | | | — | | | 1,000,000,000 | | |
| Total | — | | | $ | — | | | | |
(1)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. The shares may be purchased, from time-to-time, depending on market conditions.
2022 3Q2023 2Q Form 10-Q 89
Item 5. Other Information
On April 28, 2023, Richard A. Pohle, our Chief Credit Officer, adopted a trading plan intended to satisfy the conditions under Rule 10b5-1(c) of the Exchange Act. Mr. Pohle’s plan is for the sale of up to 93,290.0445 shares of our common stock in amounts and prices determined in accordance with formulae set forth in the plan and terminates on the earlier of the date all the shares under the plan are sold and August 1, 2024.
Item 6. Exhibits
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.
| Exhibit
Number | Exhibit
Number | Document Description | Report or Registration Statement | SEC File or
Registration
Number | Exhibit
Reference | Exhibit
Number | Document Description | Report or Registration Statement | SEC File or
Registration
Number | Exhibit
Reference |
| 3.1 | 3.1 | | | | | 3.1 | | | | |
| 3.2 | 3.2 | | | | | 3.2 | | | | |
| 3.3 | 3.3 | | | | | 3.3 | | | | |
| 3.4 | 3.4 | | | | | 3.4 | | | | |
| 3.5 | 3.5 | | | | | 3.5 | | | | |
| 3.6 | 3.6 | | | | | 3.6 | | | | |
| 3.7 | 3.7 | | | | | 3.7 | | | | |
| 3.8 | 3.8 | | | | | 3.8 | | | | |
| | | | | | |
| 3.10 | | 3.10 | | | | |
| 4.1(P) | 4.1(P) | Instruments defining the Rights of Security Holders—reference is made to Articles Fifth, Eighth, and Tenth of Articles of Restatement of Charter, as amended and supplemented. Instruments defining the rights of holders of long-term debt will be furnished to the Securities and Exchange Commission upon request. | | 4.1(P) | Instruments defining the Rights of Security Holders—reference is made to Articles Fifth, Eighth, and Tenth of Articles of Restatement of Charter, as amended and supplemented. Instruments defining the rights of holders of long-term debt will be furnished to the Securities and Exchange Commission upon request. | |
| | | | |
| 31.1 | 31.1 | | | 31.1 | | |
| 31.2 | 31.2 | | | 31.2 | | |
| 32.1 | 32.1 | | | 32.1 | | |
| 32.2 | 32.2 | | | 32.2 | | |
| 101.INS | 101.INS | ***The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document | | 101.INS | ***The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document | |
| 101.SCH | 101.SCH | *Inline XBRL Taxonomy Extension Schema Document | | 101.SCH | *Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL | 101.CAL | *Inline XBRL Taxonomy Extension Calculation Linkbase Document | | 101.CAL | *Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF | 101.DEF | *Inline XBRL Taxonomy Extension Definition Linkbase Document | | 101.DEF | *Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB | 101.LAB | *Inline XBRL Taxonomy Extension Label Linkbase Document | | 101.LAB | *Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | 101.PRE | *Inline XBRL Taxonomy Extension Presentation Linkbase Document | | 101.PRE | *Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | 104 | *Cover Page Interactive Data File (formatted as Inline XBRL and contained within Exhibit 101 attachments) | | 104 | *Cover Page Interactive Data File (formatted as Inline XBRL and contained within Exhibit 101 attachments) | |
| | | | | |
| |
* | Filed herewith |
** | Furnished herewith |
*** | The following material from Huntington’s Form 10-Q Report for the quarterly period ended September 30, 2022** Furnished herewith
|
90 Huntington Bancshares Incorporated
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)
| | | | | | | | | | | |
| | | |
| Date: | OctoberJuly 28, 20222023 | | /s/ Stephen D. Steinour |
| | | Stephen D. Steinour |
| | | Chairman, President, and Chief Executive Officer (Principal Executive Officer) |
| | |
| Date: | OctoberJuly 28, 20222023 | | /s/ Zachary Wasserman |
| | | Zachary Wasserman |
| | | Chief Financial Officer (Principal Financial Officer) |
