Huntington Bancshares Incorporated — Q2 2022 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2022. Financial statements are unaudited. Comparisons are primarily with Q2 or first-half 2021; the prior-year period is affected by the June 2021 TCF acquisition, so growth comparisons are not wholly organic.
Business context
Huntington is a regional bank holding company headquartered in Columbus, Ohio, offering commercial and consumer banking, mortgage, vehicle finance, capital markets, investment management, and related services. In May 2022 it acquired digital payments business Torana, now Huntington Choice Pay, and in June acquired middle-market investment bank Capstone Partners.
Key financial results
| Metric | Q2 2022 | Comparable period / change |
|---|---|---|
| Net interest income | $1.261 billion | Up 50% from Q2 2021 |
| Net interest margin | 3.15% FTE | Up 49 basis points year over year |
| Noninterest income | $485 million | Up 9% |
| Noninterest expense | $1.018 billion | Down 5%; lower acquisition costs and cost reductions partly offset TCF’s full-quarter impact |
| Provision for credit losses | $67 million | Down $144 million, primarily because Q2 2021 included TCF acquisition-related initial provision |
| Net income attributable to Huntington | $539 million | Versus a $15 million loss |
| Diluted EPS | $0.35 | Versus $(0.05) |
| Efficiency ratio | 57.3% | Versus 83.1%; prior period included substantial acquisition expenses |
For the first half of 2022, net income was $999 million versus $517 million, diluted EPS was $0.64 versus $0.40, and FTE revenue was $3.405 billion, up 28%. First-half net interest income increased 33%; FTE margin was 3.02%, down 2 basis points.
Balance sheet, liquidity and capital
- At June 30, total assets were $178.8 billion, loans and leases $116.2 billion, deposits $145.4 billion, and shareholders’ equity $18.0 billion. Loans increased about $5.0 billion and deposits about $2.2 billion from year-end 2021.
- Short-term borrowings were $3.0 billion and long-term debt $7.9 billion, compared with $0.3 billion and $7.1 billion, respectively, at year-end. The bank issued $2.0 billion of senior notes in May.
- Core deposits represented approximately 97% of deposits; unpledged securities available as a liquidity source totaled $12.9 billion. Management stated the bank and parent had sufficient liquidity and capital for obligations over the next 12 months and foreseeable future.
- Six-month cash flows: operating activities provided $1.824 billion; investing activities used $9.205 billion; financing activities provided $5.767 billion. Cash and cash equivalents ended at $3.908 billion, down from $5.522 billion at year-end.
- Consolidated CET1 ratio was 9.05%, down from 9.33% at year-end; total risk-based capital ratio was 12.81%. Tangible common equity to tangible assets was 5.80%. Equity declined $1.3 billion, principally as higher rates reduced AOCI.
Credit, changes and management outlook
- Loans and leases grew 4.5% from year-end. Q2 net charge-offs were $8 million, or 0.03% annualized, versus $62 million and 0.28% a year earlier. Nonperforming assets were $682 million, down from $750 million at year-end.
- The allowance for credit losses was $2.168 billion, or 1.87% of loans and leases, versus $2.107 billion and 1.89% at year-end. Management cited improved credit quality but retained general reserves for potential recession and commercial real estate risks.
- Management described results as supported by loan and revenue growth, rate-driven net interest income expansion, deposit growth, and expense discipline. It highlighted inflation, Federal Reserve tightening, geopolitical uncertainty, supply constraints, and the possibility of economic slowdown or recession. No specific earnings or financial guidance is provided in the supplied filing text.
- Interest-rate exposure: the bank reported asset sensitivity; a gradual +100-basis-point scenario implied a 3.0% increase in net interest income at risk. A +200-basis-point scenario implied a 6.0% increase. Economic value of equity sensitivity worsened versus year-end.
- Available-for-sale securities had $2.702 billion of gross unrealized losses at June 30; the company reported a $1.869 billion six-month after-tax OCI loss. These valuation movements materially affected reported equity.
- The allowance sensitivity analysis estimated that applying a 100% adverse economic scenario would hypothetically increase quantitative ACL by approximately $900 million, excluding qualitative adjustments; management cautioned this was not an expected allowance increase.
Investor facts to verify
- How much of revenue and expense growth reflects TCF consolidation and the Torana and Capstone acquisitions versus underlying organic growth.
- Whether higher rates continue to expand net interest income, and how deposit pricing and deposit mix evolve.
- Credit trends, especially consumer charge-offs, commercial real estate exposure, and allowance adequacy if recession risks rise.
- The impact of securities unrealized losses and AOCI on equity and capital, and the Federal Reserve’s final stress capital buffer. Huntington had requested reconsideration of the indicative 3.3% requirement.
- The outcome of pending legal and regulatory matters: the company estimated a reasonably possible loss range of $0–$15 million above accrued liabilities where estimable, while noting actual outcomes could differ.
- Capital returns: no shares were repurchased in the first half; the $800 million authorization expired June 30, 2022, with $650 million completed. The board declared a $0.155 quarterly common dividend in July.