Business context and reporting period
Huntington Bancshares Incorporated is a regional bank holding company headquartered in Columbus, Ohio. This unaudited Form 10-Q covers the quarter and nine months ended September 30, 2022; comparisons are with the corresponding 2021 periods unless noted. The 2021 comparisons include TCF only after its June 2021 acquisition, limiting comparability. Huntington acquired payments business Torana (Huntington Choice Pay) in May 2022 and middle-market advisory firm Capstone Partners in June 2022.
Financial performance and position
| Metric | Third quarter 2022 | Comparison |
|---|---|---|
| Net income attributable to Huntington | $594 million | Up 58% from $377 million |
| Diluted earnings per share | $0.39 | Versus $0.22 |
| Net interest income | $1.404 billion | Up 21% |
| Net interest margin | 3.42% | Up 51 basis points |
| Noninterest income | $498 million | Down 7% |
| Noninterest expense | $1.053 billion | Down 18%; included $10 million of acquisition-related expenses, versus $234 million |
| Provision for credit losses | $106 million | Versus a $62 million benefit |
| Efficiency ratio | 54.4% | Versus 74.9% |
For the first nine months, net income was $1.593 billion, up 78%; diluted EPS was $1.03, versus $0.63. Net interest income rose 28% to $3.811 billion, noninterest income rose 8% to $1.482 billion, and noninterest expense declined 1% to $3.124 billion. Provision for credit losses was $198 million, versus $89 million.
At September 30, total assets were $179.4 billion, loans and leases were $118.1 billion, and deposits were $146.3 billion. Loans grew about 6% from year-end 2021; deposits grew about 2%. Core deposits were 97% of deposits. Total long-term debt was $10.2 billion, up from $7.1 billion at year-end; short-term borrowings were $426 million. The company reported $3.9 billion in parent-company cash and cash equivalents and said it had sufficient liquidity and capital for the next 12 months and foreseeable future. It reported $12.2 billion of unpledged securities and $15.3 billion of wholesale funding.
For the first nine months, operating cash flow was $2.670 billion, investing cash flow was negative $10.346 billion, and financing cash flow was $6.530 billion. Cash and cash equivalents ended at $4.376 billion, down from $5.522 billion at the start of the period.
Credit indicators were generally favorable: the allowance for credit losses was $2.230 billion, or 1.89% of loans and leases; quarterly net charge-offs were $44 million, or an annualized 0.15% of average loans, versus 0.20% a year earlier. Nonperforming assets were $627 million, down from $750 million at year-end 2021. Consolidated CET1 capital was 9.27%, versus 9.33% at year-end; tangible common equity to tangible assets was 5.32%. Shareholders’ equity declined 11% from year-end to $17.1 billion.
Material changes and management commentary
- Higher market rates lifted loan and securities yields and net interest margin, while funding costs also increased. Average loans and leases rose 7% year over year; average securities rose 19%.
- Quarterly noninterest income was pressured by lower mortgage banking income and deposit service charges, partly offset by higher capital markets fees, including Capstone-related advisory activity. Nine-month mortgage banking income fell 52% year over year.
- Lower acquisition-related costs and TCF integration savings drove much of the quarterly expense decline. Management said it remained focused on profitable growth, loan growth, fee income, cost discipline, and its moderate-to-low through-the-cycle risk appetite.
- Higher rates contributed to a $3.047 billion nine-month after-tax other comprehensive loss, largely reflecting securities and cash-flow-hedge valuation changes. Accumulated other comprehensive loss reached $3.276 billion, contributing to lower equity and tangible capital measures.
- The Federal Reserve set Huntington’s stress capital buffer at 3.3% for October 1, 2022 through September 30, 2023, up from the 2.5% minimum that applied through September 2022.
Outlook, risks, contingencies, and unusual items
The filing gives no specific earnings or revenue guidance. Management emphasized uncertainty from inflation, Federal Reserve rate actions, possible recession, geopolitical instability, supply-chain disruption, and COVID-19 developments. Its baseline credit forecast assumed unemployment rising to 4.0% by fourth-quarter 2023 and GDP growth of 2.7% for that quarter. A hypothetical 100%-weighted adverse economic scenario would increase the modeled allowance by approximately $900 million before qualitative adjustments; management stressed this is a sensitivity illustration, not an expected reserve increase.
The balance sheet was asset-sensitive under management’s interest-rate scenarios: modeled net interest income changed by +2.2% for a gradual +100-basis-point move and +4.3% for +200 basis points, versus -2.1% for -100 basis points. These are scenario estimates, not forecasts. The filing also reports substantial unrealized securities losses and notes that interest-rate volatility can affect capital, earnings, mortgage servicing rights, and hedge effectiveness. LIBOR contract remediation was scheduled for completion by June 2023.
Legal and regulatory matters are routine but uncertain; management estimated aggregate reasonably possible losses of $0–$15 million above accrued liabilities for matters where a range could be estimated, while noting actual outcomes could differ and the range is not maximum exposure. The filing identifies heightened liquidity risk from economic and geopolitical instability and market volatility. It also discusses increased cybersecurity threats, particularly phishing, and ongoing monitoring and controls.
Most important facts for investors to verify
- Whether net interest margin and earnings remain resilient as deposit and wholesale funding costs rise, and how actual results compare with the rate-sensitivity scenarios.
- Whether loan growth, delinquencies, charge-offs, nonperforming assets, and the $2.230 billion credit allowance evolve consistently with the uncertain macroeconomic outlook; assess the adverse-scenario sensitivity in context.
- How securities valuation losses and accumulated other comprehensive loss affect tangible equity, regulatory capital, and future capital distributions.
- Whether deposit balances and mix, wholesale funding, debt issuance, and available liquidity support funding needs under stress.
- Whether fee income and expense performance are sustainable after acquisition-related savings, including mortgage banking and Capstone-related capital markets activity.
- Developments in legal and regulatory matters, LIBOR transition, cybersecurity risks, and the effective 3.3% stress capital buffer.