Huntington Bancshares Incorporated — 2021 Form 10-K
Business context and reporting period. This annual report covers the fiscal year ended December 31, 2021, not only the fourth quarter. Huntington is a regional bank holding company headquartered in Columbus, Ohio. On June 9, 2021, it completed its all-stock acquisition of TCF Financial Corporation, valued at $7.2 billion; 2021 results include TCF only after closing, limiting direct comparability with 2020.
Financial performance and condition
| Metric | 2021 | 2020 |
|---|---|---|
| Total revenue, FTE | $6.016 billion | $4.836 billion |
| Net interest income | $4.102 billion | $3.224 billion |
| Net interest margin, FTE | 2.94% | 2.99% |
| Provision for credit losses | $25 million | $1.048 billion |
| Noninterest income | $1.889 billion | $1.591 billion |
| Noninterest expense | $4.375 billion | $2.795 billion |
| Net income attributable to Huntington | $1.295 billion | $817 million |
| Net income applicable to common shares | $1.153 billion | $717 million |
| Diluted EPS | $0.90 | $0.69 |
| Operating cash flow | $2.062 billion | $1.323 billion |
| Net cash from investing activities | $(3.962) billion | $(8.639) billion |
| Net cash from financing activities | $827 million | $12.741 billion |
At year-end, total assets were $174.1 billion, loans and leases $111.9 billion, deposits $143.3 billion, and long-term debt $7.1 billion; short-term borrowings were $334 million. Core deposits were 98% of deposits, and unpledged investment securities totaled $19.1 billion. Management said liquidity and capital resources were sufficient for obligations over the next 12 months and foreseeable future.
Credit measures: allowance for credit losses (ACL) was $2.107 billion, or 1.88% of loans, versus $1.866 billion and 2.29% in 2020. Net charge-offs were $215 million, or 0.22% of average loans, down from $449 million and 0.57%. Nonperforming assets were $750 million, up from $563 million, largely due to TCF; the NPA ratio was 0.67% versus 0.69%.
Capital: consolidated CET1 was 9.33%, Tier 1 risk-based capital 10.99%, total risk-based capital 13.14%, and Tier 1 leverage 8.56%. Tangible common equity to tangible assets was 6.88%, down from 7.16%.
Material changes versus prior year
- Revenue rose 24% and net income 59%; diluted EPS increased 30%. Growth primarily reflects the TCF acquisition and organic growth, while the acquired business is included for only part of 2021.
- Net interest income increased 27%, mainly from 29% growth in average earning assets. The FTE margin declined 5 basis points to 2.94% as asset yields fell, partly offset by lower funding costs.
- Credit-loss provision fell 98%, reflecting an improved macroeconomic forecast, compared with 2020’s pandemic-related reserve build. The 2021 provision also included TCF’s $294 million initial provision for acquired loans and unfunded commitments.
- Noninterest expense increased 57%, primarily due to TCF and $701 million in acquisition-related costs ($566 million after tax, or $0.44 per common share). Noninterest income increased 19%, also primarily reflecting TCF.
- Loans and leases increased 37% to $111.9 billion; deposits increased to $143.3 billion from $98.9 billion. The acquisition contributed substantially to balance-sheet growth.
Outlook, commentary, risks and unusual items
- Management reported improving regional economic indicators, stronger commercial lending and loan pipelines, and described the company as entering 2022 with strong momentum. It planned continued investment in technology, digital innovation, marketing and people. The filing does not provide specific numerical earnings or revenue guidance.
- TCF integration remained a central execution risk. Management expected further integration costs and warned that synergies, cost savings and growth benefits might be delayed or not achieved.
- COVID-19 effects, inflation, labor shortages and supply-chain disruptions remained uncertain. The filing identified potential effects on borrower credit quality, loan demand, operating costs and financial results.
- Interest-rate changes may affect net interest income, securities values, mortgage servicing rights and capital. Huntington reported asset-sensitive net interest income exposure: modeled NII sensitivity was +4.6% for a gradual +100-basis-point shift and +8.9% for +200 basis points. These are scenario estimates, not forecasts.
- Management’s adverse-scenario ACL sensitivity analysis indicated a hypothetical increase of approximately $1.2 billion, excluding general-reserve adjustments; it was not presented as an expected allowance increase. The year-end reserve included a general reserve for economic uncertainty.
- The company was transitioning LIBOR-linked contracts to alternative rates, predominantly SOFR, with remaining acquired TCF contract remediation targeted for completion by June 2023.
- For pending litigation and regulatory matters, management estimated aggregate reasonably possible losses of $0–$15 million in excess of any accrued liability, where estimable; it cautioned this was not the maximum exposure. Management did not expect pending matters to materially affect consolidated financial position, but an adverse outcome could materially affect a particular period’s results.
- Auditor PwC gave unqualified opinions on the financial statements and internal control over financial reporting. Critical audit matters included valuation of the ACL general reserve and certain acquired TCF loans.
Important facts for investors to verify
- Separate TCF-driven growth from organic growth and assess integration costs, realized synergies and remaining conversion or integration work.
- Review the basis for the sharp decline in provision expense and monitor ACL adequacy, criticized and nonperforming loans, and the disclosed adverse-scenario sensitivity.
- Assess the sustainability of net interest income and margin as rates change, alongside deposit pricing and the company’s interest-rate sensitivity assumptions.
- Confirm capital and liquidity remain adequate after dividends, repurchases and acquisition integration; 2021 included $650 million of common-stock repurchases.
- Track LIBOR remediation, litigation and regulatory contingencies, and any material changes in COVID-19, inflation, labor-market or supply-chain conditions.