Huntington Bancshares Incorporated — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023; comparisons are primarily with the year ended December 31, 2022. Huntington is a regional bank holding company headquartered in Columbus, Ohio, operating through The Huntington National Bank and offering consumer, commercial and other financial services. It reorganized its reporting into Consumer & Regional Banking and Commercial Banking during 2023.
Financial performance
| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| Net interest income | $5.439 billion | $5.273 billion | Up 3% |
| Net interest margin, FTE | 3.19% | 3.25% | Down 6 basis points |
| Total revenue, FTE | $7.402 billion | $7.285 billion | Up 2% |
| Provision for credit losses | $402 million | $289 million | Up 39% |
| Noninterest income | $1.921 billion | $1.981 billion | Down 3% |
| Noninterest expense | $4.574 billion | $4.201 billion | Up 9% |
| Net income attributable to Huntington | $1.951 billion | $2.238 billion | Down 13% |
| Diluted earnings per common share | $1.24 | $1.45 | Down 14% |
Net interest income increased as loan and securities yields and average earning assets rose, offset by substantially higher deposit and borrowing costs. Average interest-bearing liability costs rose to 2.68% from 0.61%. FTE is a non-GAAP measure; the filing presents GAAP net interest income separately.
Revenue pressures included lower loan-sale gains, deposit and loan fees, and mortgage banking income. Payments and cash management and wealth and asset management revenues increased. The reported effective tax rate was 17.3%, compared with 18.6% in 2022.
Balance sheet, cash flow and capital
- Assets and loans: Total assets were $189.4 billion, up 4% year over year. Loans and leases were $122.0 billion, up 2%.
- Deposits and funding: Deposits were $151.2 billion, up 2%. Core deposits were $145.5 billion, or 96% of deposits; insured deposits were approximately 70%. Noninterest-bearing demand deposits fell to $31.0 billion from $38.2 billion.
- Liquidity: Cash and cash equivalents were $10.1 billion, compared with $6.7 billion. The Bank reported $83.0 billion of available contingent FHLB and Federal Reserve borrowing capacity. Management said liquidity was sufficient for obligations over the next 12 months and foreseeable future; the Bank had not used the BTFP as of year-end.
- Debt: Short-term borrowings were $620 million, down from $2.027 billion; long-term debt was $12.394 billion, up from $9.686 billion. Wholesale funding totaled $18.8 billion, versus $17.5 billion.
- Cash flow: Operating activities provided $2.657 billion, investing activities used $2.997 billion, and financing activities provided $3.765 billion. Cash and cash equivalents increased $3.425 billion during the year.
- Capital: Consolidated CET1 was 10.25%, versus 9.36%; total risk-based capital was 14.17%, versus 13.09%. Tangible common equity to tangible assets was 6.14%, versus 5.55%. Huntington and the Bank exceeded applicable well-capitalized standards and capital buffers.
Credit quality and material changes
- Allowance for credit losses was $2.4 billion, or 1.97% of loans and leases, compared with $2.3 billion, or 1.90%, at year-end 2022. The increase reflected loan growth and modest coverage builds.
- Net charge-offs rose to $273 million, or 0.23% of average loans, from $121 million, or 0.11%. Nonperforming assets increased 20% to $711 million; nonaccrual loans were 0.55% of total loans, versus 0.48%.
- Commercial real estate loans declined to $12.4 billion from $13.6 billion. The office portfolio was $1.8 billion; management reported reserves of approximately 10% for that portfolio and $25 million of office loans at least 30 days past due.
- Consumer & Regional Banking net income increased 28% to $1.315 billion; Commercial Banking net income increased 8% to $1.179 billion. Treasury / Other reported a $543 million loss, compared with $124 million of income, largely reflecting higher allocated funding costs.
Outlook, commentary, risks and unusual items
- Outlook: The filing provides no formal company earnings or revenue guidance. Management described a consensus economic outlook of a soft landing, modest growth in the second half of 2024, and inflation moving toward 2%; these are economic assumptions, not company guidance. Its year-end ACL baseline assumed unemployment peaking at 4.1% in early 2025 and Federal Reserve rate cuts beginning in the third quarter of 2024.
- Management commentary: Huntington cited deposit growth, expansion of payments and fee capabilities, stronger CET1, and disciplined credit management. Its stated priorities include profitable growth, positive operating leverage, capital discipline, and maintaining a moderate-to-low through-the-cycle risk appetite.
- Unusual expense and gain: 2023 included a $214 million FDIC special assessment ($169 million after tax, or $0.11 per share) and $69 million of staffing and corporate-location consolidation costs ($55 million after tax, or $0.04 per share). The RPS business sale generated a $57 million gain. The pay-fixed swaptions program produced $24 million of unfavorable mark-to-market.
- Capital returns: Common dividends declared were $0.62 per share in 2023. No common shares were repurchased under the existing $1.0 billion authorization; management did not expect to use the program through 2024, citing organic capital needs and proposed regulatory changes. The board declared a $0.155 quarterly common dividend in January 2024.
- Interest-rate exposure: Year-end modeling showed estimated 12-month net interest income sensitivity of +5.5% under a gradual +200-basis-point scenario and -5.6% under a -200-basis-point scenario. Management noted that results depend on deposit behavior, balance-sheet composition and model assumptions.
- Key risks: Credit deterioration, particularly commercial real estate; inflation and a weaker economy; deposit competition and funding costs; interest-rate and securities valuation exposure; cybersecurity, third-party and operational risks; and evolving capital, liquidity and consumer-protection regulation. A hypothetical 100%-adverse-scenario ACL sensitivity was approximately $1.1 billion above the reported quantitative estimate, excluding qualitative adjustments; management said this was not an expected reserve increase.
- Contingencies: Management estimated aggregate reasonably possible litigation losses of $0–$20 million above accrued amounts for matters where a range could be estimated. It cautioned that this is not maximum exposure and outcomes could materially affect a particular reporting period.
- Assurance: The auditor issued unqualified opinions on the financial statements and internal control over financial reporting. Valuation of the ACL general reserve was identified as a critical audit matter.
Important facts for investors to verify
- Whether deposit pricing and mix stabilize enough to support net interest margin after the sharp rise in funding costs.
- Whether commercial credit deterioration continues, particularly in office and other CRE exposures, and how charge-offs and the allowance develop.
- The scale and timing of any effects from proposed capital, long-term debt and other banking regulations on capital returns and funding costs.
- How much of earnings was affected by the FDIC assessment, restructuring costs, RPS sale gain and swaption mark-to-market, and whether these items recur.
- Whether liquidity, uninsured-deposit levels and contingent borrowing availability remain consistent with management’s stated outlook.
- How segment results are affected by the 2023 organizational realignment and revised funds-transfer-pricing methodology when comparing periods.