HUNTINGTON BANCSHARES DEP(HBANM) - 2024 Q4 - Annual Report

Part I Business Huntington is a multi-state regional bank with Consumer & Regional and Commercial Banking segments, emphasizing customer value and subject to extensive regulation - Huntington is a diversified regional bank holding company with 978 full-service branches and private client group offices in 12 states as of December 31, 2024[19] - The company's business is organized into two main segments: Consumer & Regional Banking and Commercial Banking, along with a Treasury / Other function[21][28][32] - A key strategic initiative is the "Fair Play" banking philosophy, which includes customer-friendly products like 24-Hour Grace®, Standby Cash®, and Early Pay to attract and retain customers[21][35] - In June 2021, Huntington launched a five-year, $40 billion Community Plan focused on affordable housing, small business lending, and community development, of which significant progress has been made[126][127] Business Segments Huntington operates through Consumer & Regional Banking and Commercial Banking segments, supported by Treasury/Other, focusing on diverse client needs and relationship building - Consumer & Regional Banking provides a wide array of financial products to consumer and business customers, including deposits, lending, payments, mortgage banking, and wealth management[21] - Commercial Banking serves mid-market to large corporate clients with offerings in Middle Market Banking, Corporate/Specialty Banking, Asset Finance, Commercial Real Estate, and Capital Markets[28] - The Treasury / Other function includes technology, operations, and other unallocated assets, liabilities, revenue, and expenses not assigned to the main business segments[32] Competition Huntington faces intense competition from diverse financial entities, maintaining strong deposit market shares in key MSAs by emphasizing value and service - The company competes with a wide range of financial services companies, including banks, savings and loans, credit unions, and non-bank entities like FinTechs[33] Deposit Market Share in Top MSAs (as of June 30, 2024) | MSA | Rank | Deposits (in millions) | Market Share | | :--- | :--- | :--- | :--- | | Columbus, OH | 1 | $ 44,814 | 43 % | | Detroit, MI | 5 | $ 17,398 | 9 % | | Cleveland, OH | 2 | $ 15,595 | 12 % | | Chicago, IL | 11 | $ 9,667 | 2 % | | Minneapolis-St. Paul, MN | 4 | $ 6,604 | 3 % | | Grand Rapids, MI | 1 | $ 5,756 | 19 % | | Indianapolis, IN | 5 | $ 5,493 | 6 % | | Akron, OH | 1 | $ 5,191 | 28 % | | Cincinnati, OH | 5 | $ 4,735 | 3 % | | Pittsburgh, PA | 7 | $ 4,682 | 2 % | - Huntington actively monitors and invests in technology to compete with FinTechs and larger technology platforms entering the banking space, including seeking partnership and investment opportunities[39] Regulatory Matters Huntington operates under extensive regulation as a Category IV banking organization, adhering to enhanced capital, liquidity, and stress testing standards, consistently exceeding minimum requirements - Huntington is a Category IV banking organization, subjecting it to enhanced prudential standards for firms with $100 billion or more in assets, though it is in the least restrictive tier[42][60] Regulatory Capital Ratios (as of December 31, 2024) | Ratio | Level | Minimum + Buffer | Actual | | :--- | :--- | :--- | :--- | | CET1 risk-based capital | Consolidated | 7.0% | 10.5% | | Tier 1 risk-based capital | Consolidated | 8.5% | 11.9% | | Total risk-based capital | Consolidated | 10.5% | 14.3% | | Tier 1 leverage ratio | Consolidated | 4.0% | 8.6% | - The company is subject to an annual capital plan review under the Federal Reserve's CCAR process, which determines its Stress Capital Buffer (SCB) Effective October 1, 2024, Huntington's SCB is the minimum 2.5%[77][80] - The Bank received the highest possible CRA rating of "Outstanding" in its most recent examination, a key factor for regulatory approval of mergers and branch expansions[112] - In 2023, the Bank incurred a $214 million expense for the FDIC's special assessment related to the first half 2023 bank failures, with an additional $28 million expensed in 2024[108] Corporate Responsibility Huntington integrates corporate responsibility into its operations, focusing on governance, a $40 billion Community Plan, environmental stewardship, and human capital development - The Board of Directors and Executive Leadership Team (ELT) were both 50% diverse by race and gender as of December 31, 2024[122] - Launched a five-year, $40 billion Community Plan in 2021 to support affordable housing, small businesses, and community development As of October 31, 2024, significant progress includes reaching $18.2 billion in affordable housing/consumer lending and $8.2 billion in small business lending[126][127] - In 2024, the company published its third standalone Climate Report, aligned with the TCFD framework, and disclosed Scope 3 emissions for its consumer auto portfolio[129] - Employee engagement remains high, with 2024 survey results showing 82% favorable on engagement and 85% on trust Colleagues completed nearly 800,000 training hours during the year[131][136] Risk Factors Huntington faces diverse risks including credit, market, liquidity, operational, compliance, strategic, and reputational, with particular emphasis on cybersecurity, interest rate volatility, and regulatory compliance - Credit Risk: The ACL of $2.4 billion at year-end may not be adequate to cover lifetime losses if economic conditions worsen, potentially affecting net income and capital[146] - Market Risk: Changes in interest rates can significantly reduce net interest income and negatively impact the value of loans and securities Intense competition from banks and FinTechs also poses a threat[151][159] - Liquidity Risk: The company is dependent on subsidiary dividends for its liquidity needs and faces risks from loss of depositor confidence or diminished access to capital markets[160][163][164] - Operational & Cybersecurity Risk: The company faces significant risks from system failures, cyber-attacks (e.g., phishing, malware, ransomware), and reliance on third-party vendors The use of AI introduces new and heightened risks[169][173][191] - Compliance Risk: Operating in a highly regulated industry means that changes in laws or failure to comply can lead to fines, penalties, and business restrictions[193][194] Cybersecurity Huntington's cybersecurity program, integrated into its ERM framework and aligned with NIST standards, employs a defense-in-depth strategy with Board oversight - The cybersecurity program is integrated into the company's ERM approach and follows the NIST framework[217] - Governance includes oversight from the Board's Technology Committee, which receives regular updates from the Chief Information Security Officer and participates in cyber-related tabletop exercises[219][220] - The company employs a defense-in-depth strategy, including technical safeguards, third-party risk management, employee training, and collaboration with public and private entities to manage cyber threats[219][432] Properties Huntington's headquarters are in Columbus, Ohio, and Detroit, Michigan, with numerous owned or leased facilities considered adequate for operations - Headquarters are located in the Huntington Center in Columbus, Ohio, and the commercial headquarters is in the Detroit Tower, Detroit, Michigan[224] - The company owns or leases numerous other premises for its operations, which are considered adequate for business purposes[225] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Huntington's common stock (HBAN) trades on Nasdaq, with a five-year return of $138 on a $100 investment, outperforming the KBW Bank Index but trailing the S&P 500 - Huntington's common stock is traded on the Nasdaq Global Stock Market under the symbol "HBAN"[229] Five-Year Cumulative Total Return Comparison | | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | HBAN | $100 | $89 | $113 | $108 | $103 | $138 | | S&P 500 | $100 | $118 | $152 | $125 | $157 | $197 | | KBW Bank Index | $100 | $90 | $124 | $98 | $97 | $133 | Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) In 2024, Huntington's net income slightly decreased to $1.9 billion due to lower net interest income, despite growth in assets and loans, while maintaining strong capital 2024 vs. 2023 Financial Performance | Metric | 2024 | 2023 | Change | | :--- | :--- | :--- | :--- | | Net Income | $1.9 B | $2.0 B | -1% | | Diluted EPS | $1.22 | $1.24 | -2% | | Net Interest Income | $5.3 B | $5.4 B | -2% | | Noninterest Income | $2.0 B | $1.9 B | +6% | | Total Assets (EOP) | $204.2 B | $189.4 B | +8% | | Total Loans (EOP) | $130.0 B | $122.0 B | +7% | | CET1 Ratio (EOP) | 10.5% | 10.2% | +30 bps | Discussion of Results of Operations In 2024, net interest income declined due to higher funding costs, while noninterest income grew, and noninterest expense remained stable despite personnel cost increases - FTE net interest income decreased by $83 million (2%) in 2024, driven by a 19 basis point decline in NIM to 3.00% as higher funding costs outpaced the increase in earning asset yields[266] - The provision for credit losses increased by $18 million (4%) to $420 million in 2024, reflecting loan growth and higher net charge-offs, partially offset by a reduction in coverage ratios[271] - Noninterest income grew by $119 million (6%), primarily due to a $79 million increase in capital markets and advisory fees and a $36 million increase in wealth and asset management revenue[275] - Noninterest expense decreased by $12 million, as a $186 million reduction in the FDIC special assessment was largely offset by a $172 million increase in personnel costs[278] Risk Management Huntington manages its moderate-to-low risk appetite through a three-lines-of-defense structure, actively overseeing credit, market, liquidity, and capital risks to maintain financial stability - The company's risk appetite is defined as aggregate moderate-to-low on a through-the-cycle basis, managed across seven key risk categories: credit, market, liquidity, operational, compliance, strategic, and reputation[284][286] - Credit Risk: Total loans and leases grew 7% to $130.0 billion The Allowance for Credit Losses (ACL) was $2.4 billion, or 1.88% of total loans and leases, at year-end 2024[299][368] - Market Risk: The balance sheet is asset sensitive A gradual +100 basis point rate change is projected to increase Net Interest Income by 0.8% over 12 months[380][382] - Liquidity Risk: Customer deposits, the primary funding source, increased 7% to $162.4 billion The company has $85.5 billion in available contingent borrowing capacity from the FHLB and Federal Reserve[402][416] - Capital: The CET1 risk-based capital ratio was 10.5% at December 31, 2024, exceeding the minimum requirement plus buffer of 7.0%[437][441] Business Segment Discussion In 2024, Consumer & Regional Banking net income grew 15%, while Commercial Banking net income slightly declined 2%, and Treasury/Other reported an increased net loss Net Income by Business Segment (in millions) | Segment | 2024 | 2023 | Change | | :--- | :--- | :--- | :--- | | Consumer & Regional Banking | $1,512 | $1,315 | +15% | | Commercial Banking | $1,153 | $1,179 | -2% | | Treasury / Other | $(725) | $(543) | +34% (loss) | | Total Net Income | $1,940 | $1,951 | -1% | - Consumer & Regional Banking performance was strong, with net income up $197 million, benefiting from a $3.8 billion increase in average loans and a 18 basis point expansion in net interest margin[454] - Commercial Banking saw a slight decline in net income While noninterest income grew $70 million (11%) on higher advisory fees, this was offset by a $39 million (2%) decrease in net interest income and an $84 million (7%) increase in noninterest expense[456] Financial Statements and Supplementary Data The 2024 consolidated financial statements, audited by PwC, report $204.2 billion in assets, $1.9 billion net income, and effective internal controls, with detailed disclosures in accompanying notes Consolidated Balance Sheet Highlights (as of Dec 31, 2024) | Account | Amount (in millions) | | :--- | :--- | | Total Assets | $204,230 | | Net Loans and Leases | $127,798 | | Total Deposits | $162,448 | | Total Liabilities | $184,448 | | Total Shareholders' Equity | $19,740 | Consolidated Income Statement Highlights (Year Ended Dec 31, 2024) | Account | Amount (in millions) | | :--- | :--- | | Net Interest Income | $5,345 | | Provision for Credit Losses | $420 | | Noninterest Income | $2,040 | | Noninterest Expense | $4,562 | | Net Income Attributable to Huntington | $1,940 | Note 4 - Loans and Leases Total loans and leases grew 7% to $130.0 billion in 2024, with commercial loans comprising 56% and nonaccrual loans increasing to $783 million Loan and Lease Portfolio Composition (in millions) | Category | Dec 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Commercial | $73,341 | $68,307 | | Consumer | $56,701 | $53,675 | | Total Loans and Leases | $130,042 | $121,982 | - Nonaccrual loans and leases totaled $783 million, or 0.60% of total loans, at year-end 2024, compared to $667 million, or 0.55%, at year-end 2023[352][587] - During 2024, the company modified loans with an amortized cost basis of $734 million for borrowers experiencing financial difficulty, primarily through term extensions and interest rate reductions[611] Note 5 - Allowance for Credit Losses (ACL) The total Allowance for Credit Losses (ACL) increased slightly to $2.446 billion in 2024, driven by loan growth, with commercial loans accounting for the majority ACL Activity for Year Ended Dec 31, 2024 (in millions) | Component | Beginning Balance | Provision | Charge-offs (Net) | Ending Balance | | :--- | :--- | :--- | :--- | :--- | | ALLL | $2,255 | $361 | $(372) | $2,244 | | AULC | $145 | $57 | N/A | $202 | | Total ACL | $2,400 | $418 | $(372) | $2,446 | - The ACL of $2.446 billion at year-end 2024 represents 1.88% of total loans and leases[367][620] - The baseline economic scenario used for the ACL calculation assumes the unemployment rate peaking at 4.2% in Q4 2024 before improving, and the Federal Reserve continuing its rate-cutting cycle through 2025 and 2026[623] Note 10 - Borrowings Total long-term debt significantly increased to $16.4 billion in 2024, driven by higher FHLB advances and new funding sources like auto loan securitizations and Credit Linked Notes Long-Term Debt Composition (in millions) | Category | Dec 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Parent Company Notes | $7,177 | $4,993 | | The Bank Notes | $2,169 | $4,142 | | FHLB Advances | $4,696 | $2,731 | | Auto Loan Securitization Trust | $1,023 | $— | | Credit Linked Notes | $821 | $— | | Total Long-Term Debt | $16,374 | $12,394 | - In 2024, Huntington entered into two Credit Linked Note (CLN) transactions related to an aggregate reference pool of approximately $6.8 billion of auto loans to manage credit risk and optimize capital[653][654][655] Note 22 - Other Regulatory Matters Huntington consistently exceeds U.S. Basel III capital requirements, with a consolidated CET1 ratio of 10.5% and a Stress Capital Buffer (SCB) of 2.5% at year-end 2024 Regulatory Capital Ratios vs. Requirements (as of Dec 31, 2024) | Ratio | Level | Actual Ratio | Minimum + Buffer | | :--- | :--- | :--- | :--- | | CET1 risk-based capital | Consolidated | 10.5% | 7.0% | | CET1 risk-based capital | Bank | 11.6% | 7.0% | | Total risk-based capital | Consolidated | 14.3% | 10.5% | | Total risk-based capital | Bank | 14.1% | 10.5% | - The Stress Capital Buffer (SCB) applicable to Huntington was 2.5% at December 31, 2024, while the Capital Conservation Buffer (CCB) for the Bank was 2.5%[819] Note 24 - Segment Reporting Segment reporting details 2024 performance, with Consumer & Regional Banking generating $1.51 billion net income and Commercial Banking $1.15 billion, while Treasury/Other reported a $725 million net loss Segment Financial Highlights (Year Ended Dec 31, 2024, in millions) | Segment | Net Interest Income | Noninterest Income | Total Noninterest Expense | Net Income (Loss) | | :--- | :--- | :--- | :--- | :--- | | Consumer & Regional Banking | $4,070 | $1,301 | $3,173 | $1,512 | | Commercial Banking | $2,123 | $716 | $1,218 | $1,153 | | Treasury / Other | $(848) | $23 | $171 | $(725) | - The company uses a funds transfer pricing (FTP) methodology to transfer interest rate risk from the business segments to the central Treasury / Other function[836] Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2024, with no material changes during Q4 2024 - Management concluded that as of December 31, 2024, Huntington's disclosure controls and procedures were effective[841] - No changes in internal control over financial reporting occurred during the quarter ended December 31, 2024, that have materially affected, or are reasonably likely to materially affect, these controls[843] Part III Directors, Executive Officers, and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the 2025 Proxy Statement - This section incorporates by reference information from the registrant's definitive Proxy Statement for the 2025 Annual Shareholders' Meeting[9][848] Executive Compensation Information on executive and director compensation is incorporated by reference from the 2025 Proxy Statement - This section incorporates by reference information from the registrant's definitive Proxy Statement for the 2025 Annual Shareholders' Meeting[9][849] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters As of December 31, 2024, 35.6 million securities were issuable under equity plans, with 37.9 million available for future issuance, and ownership details are in the 2025 Proxy Statement Equity Compensation Plan Information (as of Dec 31, 2024) | Plan Category | Securities to be Issued (a) | Weighted-Avg Exercise Price (b) | Securities Available for Future Issuance (c) | | :--- | :--- | :--- | :--- | | Approved by security holders | 35,649,066 | $12.77 | 37,914,765 | | Not approved by security holders | — | — | — | | Total | 35,649,066 | $12.77 | 37,914,765 | - Information regarding security ownership of certain beneficial owners and management is incorporated by reference from the 2025 Proxy Statement[852] Part IV Exhibits and Financial Statement Schedules This section lists financial statements, schedules, and exhibits, including governing documents and certifications, many incorporated by reference from Item 8 and prior filings - The consolidated financial statements are incorporated by reference from Item 8 of the report[856] - A detailed index of exhibits filed with the report or incorporated by reference is provided, including governing documents, material contracts, and required certifications[857][863]