Business context and reporting period
Huntington Bancshares Incorporated is a diversified regional bank holding company headquartered in Columbus, Ohio. It provides consumer and commercial banking, lending, payments, wealth management, mortgage, and other financial services. This unaudited Form 10-Q covers the quarter and nine months ended September 30, 2023; comparisons are with the corresponding 2022 periods, except balance-sheet comparisons, which are primarily with December 31, 2022. The company reorganized its reporting into Consumer & Regional Banking and Commercial Banking during 2023, with prior-period segment figures recast.
Financial results and condition
| Metric | Q3 2023 | Comparison / context |
|---|---|---|
| Net income attributable to Huntington | $547 million; diluted EPS $0.35 | Down 8% and from $594 million / $0.39 in Q3 2022 |
| Net interest income | $1.368 billion; FTE NII $1.379 billion | GAAP NII down 3%; FTE NII down 2% year over year |
| Net interest margin | 3.20% FTE | Down 22 basis points year over year; nine-month FTE NIM was 3.24%, up 9 basis points |
| Provision for credit losses | $99 million | Down $7 million year over year; nine-month provision was $276 million, up $78 million |
| Noninterest income / expense | $509 million / $1.090 billion | Income up 2%; expense up 4%. Efficiency ratio was 57.0%, versus 54.4% |
| Assets / loans / deposits | Total assets $186.7 billion; loans and leases $120.9 billion; deposits $148.9 billion | Since year-end 2022, assets rose 2%, loans 1%, and deposits 1% |
| Capital | Consolidated CET1 ratio 10.10%; tangible common equity to tangible assets 5.70% | CET1 was 9.36% and tangible ratio 5.55% at year-end 2022 |
For the first nine months, net income attributable to Huntington was $1.708 billion, up 7%, and diluted EPS was $1.09, up from $1.03. Total FTE revenue was $5.670 billion, up 7%. Nine-month operating cash flow was $1.759 billion, versus $2.670 billion in 2022; investing activities provided $312 million and financing activities provided $2.660 billion.
At September 30, cash and cash equivalents were $11.4 billion. Core deposits were $144.2 billion, or 97% of deposits; uninsured deposits were $44.7 billion, or 30%. Available contingent FHLB and Federal Reserve borrowing capacity was $79.9 billion. Long-term debt was $12.8 billion, up from $9.7 billion at year-end, while short-term borrowings declined to $681 million from $2.0 billion.
Material changes, outlook, and risks
- Earnings and funding: Q3 NII fell as the cost of funds rose and average interest-bearing liabilities increased 13%, partly offset by 4% growth in average earning assets. Average noninterest-bearing deposits declined 22% year over year. Higher loan and securities yields supported nine-month NIM expansion, but the quarterly margin compressed.
- Credit: The allowance for credit losses was $2.368 billion, or 1.96% of loans and leases, compared with $2.271 billion and 1.90% at year-end. Q3 annualized net charge-offs rose to 0.24% from 0.15%; nonperforming assets were $634 million, up from $594 million at year-end. Management cites loan growth, commercial charge-offs, and near-term recession risk in its allowance assessment. An adverse-scenario sensitivity would add approximately $1.1 billion to modeled ACL before qualitative adjustments; management says this is illustrative, not an expected reserve increase.
- Unusual income and costs: Q3 other noninterest income benefited from a $33 million favorable mark-to-market on pay-fixed swaptions. Nine-month income included a $57 million gain on the March sale of Retirement Plan Services. Q3 expenses included $8 million of severance and $7 million of corporate real-estate consolidation costs. The company also reported substantial unrealized securities losses: $4.510 billion gross on available-for-sale securities and $2.839 billion on held-to-maturity securities at quarter-end; accumulated other comprehensive loss was $3.622 billion.
- Regulatory and contingent exposures: The proposed FDIC special assessment was estimated to cost Huntington approximately $199 million; the company expects to record the impact when the rule is final. Proposed Basel capital changes could require recognition of most AOCI in regulatory capital, among other changes; proposed long-term debt requirements could also increase funding needs. A proposed debit interchange cap may adversely affect fee income. These proposals were under evaluation, not final requirements. Litigation and regulatory matters had an estimated aggregate reasonably possible loss range of $0–$20 million above accrued liabilities, where estimable; the filing says actual outcomes may differ and other matters may not be estimable.
- Management outlook: The filing provides no specific company earnings or revenue guidance. Management said it believed liquidity and capital resources were sufficient for obligations over the next 12 months and foreseeable future, and described its risk appetite as moderate-to-low through the cycle. Its economic discussion anticipated slower growth over the next three quarters and modest growth in the second half of 2024, while noting uncertainty around inflation, rates, and credit conditions. Risks include deposit outflows, rate-driven securities losses, economic deterioration, regulation, cybersecurity, and market volatility.
Most important facts for investors to verify
- Whether deposit pricing, deposit mix, and funding costs stabilize enough to support NIM and net interest income.
- Subsequent trends in commercial credit quality, charge-offs, nonaccruals, and ACL coverage, particularly under weaker economic conditions.
- The realized or unrealized effects of securities losses, AOCI, interest rates, and hedging on capital and liquidity.
- The final FDIC assessment and outcomes of proposed capital, long-term debt, and debit interchange rules.
- Whether recurring earnings excluding the swaption mark-to-market benefit and the RPS sale gain support reported profitability and expenses.