Huntington(HBAN) - 2024 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) The company presents its unaudited consolidated financial statements, including balance sheets, income statements, and cash flows Consolidated Financial Statements Unaudited statements show total assets grew to $196.3 billion, while net income for the first half of 2024 declined Consolidated Balance Sheet Highlights (June 30, 2024 vs. Dec 31, 2023) | Metric | June 30, 2024 (in millions) | Dec 31, 2023 (in millions) | | :--- | :--- | :--- | | Total Assets | $196,310 | $189,368 | | Net Loans and Leases | $122,118 | $119,727 | | Total Deposits | $154,367 | $151,230 | | Total Liabilities | $176,747 | $169,970 | | Total Shareholders' Equity | $19,515 | $19,353 | Consolidated Income Statement Highlights (Six Months Ended June 30) | Metric | 2024 (in millions) | 2023 (in millions) | | :--- | :--- | :--- | | Net Interest Income | $2,599 | $2,755 | | Provision for Credit Losses | $207 | $177 | | Total Noninterest Income | $958 | $1,007 | | Total Noninterest Expense | $2,254 | $2,136 | | Net Income Attributable to Huntington | $893 | $1,161 | - For the six months ended June 30, 2024, net cash provided by operating activities was $769 million, net cash used in investing activities was $4.45 billion, and net cash provided by financing activities was $6.10 billion, resulting in a net increase in cash and cash equivalents of $2.42 billion[237] Notes to Unaudited Consolidated Financial Statements Detailed notes explain accounting policies, financial instrument valuations, credit loss allowances, and segment performance - The financial statements are prepared in accordance with GAAP and SEC regulations and should be read in conjunction with the 2023 Annual Report on Form 10-K[239] - Effective January 1, 2024, Huntington adopted ASU 2023-02 regarding investments in tax credit structures, which did not have a material impact on its financial statements[240] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses Q2 2024 performance, noting lower net income due to margin compression amid stable credit quality Executive Overview Q2 2024 net income fell 15% to $474 million due to net interest margin compression, while total assets grew 4% Q2 2024 vs. Q2 2023 Performance Summary | Metric | Q2 2024 | Q2 2023 | Change (%) | | :--- | :--- | :--- | :--- | | Net Income | $474M | $559M | (15)% | | Diluted EPS | $0.30 | $0.35 | (14)% | | Net Interest Income | $1,312M | $1,346M | (3)% | | Provision for Credit Losses | $100M | $92M | 9% | - Total assets reached $196.3 billion at June 30, 2024, a 4% increase from year-end 2023, driven by growth in loans, investment securities, and interest-earning deposits[103] - The CET1 risk-based capital ratio improved to 10.4% from 10.2% at year-end 2023, supported by earnings and a CLN transaction that optimized risk-weighted assets[103] - Management observes signs of a cooling economy, including waning consumer spending and a slowing service sector, and anticipates a soft landing or a short, shallow recession[105] Discussion of Results of Operations Q2 2024 net interest income fell 3% from margin compression, while noninterest expense rose 6% on higher costs - Q2 2024 FTE net interest income decreased by 2% YoY, reflecting a 12 basis point decline in FTE NIM to 2.99% and a 6% increase in average interest-bearing liabilities[81] - The provision for credit losses for Q2 2024 was $100 million, an increase of $8 million (9%) from Q2 2023, reflecting increased charge-off activity in the Commercial portfolio[87] - Q2 2024 noninterest income decreased 1% YoY to $491 million, mainly due to a favorable mark-to-market on swaptions in the prior year[88] - Q2 2024 noninterest expense rose 6% YoY to $1.1 billion, driven by a $50 million (8%) increase in personnel costs and a $17 million (11%) increase in outside data processing services[118] Risk Management and Capital The company maintains stable credit quality, strong liquidity, and a CET1 capital ratio of 10.4% - The company manages risk across seven pillars with a Board-defined risk appetite of aggregate moderate-to-low, through-the-cycle[120] - The Allowance for Credit Losses (ACL) was $2.4 billion, or 1.95% of total loans and leases, at June 30, 2024, broadly consistent with year-end 2023[129] - The balance sheet is asset sensitive, with a +100 basis point gradual rate ramp projected to increase Net Interest Income (NII) by 2.2% over 12 months[134][135] - The CET1 risk-based capital ratio was 10.4% at June 30, 2024, and the indicative Stress Capital Buffer (SCB) requirement will decrease to 2.5% effective October 1, 2024[183][210] Business Segment Discussion Consumer & Regional Banking net income grew 10%, while Commercial Banking net income fell 15% in H1 2024 Net Income by Business Segment (Six Months Ended June 30) | Segment | 2024 (in millions) | 2023 (in millions) | Change (%) | | :--- | :--- | :--- | :--- | | Consumer & Regional Banking | $716 | $648 | 10% | | Commercial Banking | $526 | $616 | (15)% | | Treasury / Other | $(349) | $(103) | (239)% | | Total Net Income | $893 | $1,161 | (23)% | - Consumer & Regional Banking performance was boosted by a 9% increase in net interest income, reflecting a 5% growth in average loans and a 10 basis point expansion in NIM[245] - Commercial Banking's net income decline was driven by a 3% decrease in net interest income, a 27% increase in provision for credit losses, and an 8% rise in noninterest expense[192] Quantitative and Qualitative Disclosures about Market Risk Market risk disclosures are included in the MD&A section, noting any changes from the 2023 Annual Report - Quantitative and qualitative disclosures regarding market risk for the current period are located in the Market Risk section of the MD&A in this report[36] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2024 - The CEO and CFO concluded that as of June 30, 2024, Huntington's disclosure controls and procedures were effective in ensuring that required information is recorded and reported in a timely manner[28] - There were no material changes in internal control over financial reporting during the quarter ended June 30, 2024[458] PART II. OTHER INFORMATION Legal Proceedings Information regarding legal proceedings is incorporated by reference from Note 15 of the financial statements - Information regarding legal proceedings is detailed in Note 15 of the Notes to Unaudited Consolidated Financial Statements[29] Risk Factors This section refers to the risk factors detailed in the company's 2023 Annual Report on Form 10-K - Readers are advised to consider the risk factors discussed in the 2023 Annual Report on Form 10-K, as they could materially affect the company's business and financial results[38] Unregistered Sales of Equity Securities and Use of Proceeds The company did not repurchase any common stock in Q2 2024, with a $1 billion repurchase authorization remaining Issuer Purchases of Equity Securities (Q2 2024) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Approx. Dollar Value of Shares that May Yet Be Purchased | | :--- | :--- | :--- | :--- | | April 2024 | — | — | $1,000,000,000 | | May 2024 | — | — | $1,000,000,000 | | June 2024 | — | — | $1,000,000,000 | Other Information Two senior executive officers adopted Rule 10b5-1 trading plans for the sale of company stock - On January 31, 2024, Scott D. Kleinman, President of Commercial Banking, adopted a Rule 10b5-1 trading plan for the sale of up to 56,684 shares of common stock[460] - On January 24, 2024, Rajeev Syal, Chief Human Resources Officer, adopted a Rule 10b5-1 trading plan covering the exercise and sale of stock options and various stock units[460] Exhibits An index lists all exhibits filed with the Form 10-Q, including required CEO/CFO certifications - The Exhibit Index lists all documents filed as part of this quarterly report, including Articles of Incorporation, Bylaws, and required CEO/CFO certifications[41]