HUNTINGTON BANCSHARES DEP(HBANM) - 2023 Q1 - Quarterly Report

Financial Performance - Net income for Q1 2023 was $602 million, or $0.39 per diluted share, compared to $460 million, or $0.29 per diluted share in Q1 2022, representing a 31% increase [18]. - Net interest income for Q1 2023 was $1,409 million, an increase of 22.9% compared to $1,146 million in Q1 2022 [179]. - Noninterest income for Q1 2023 was $512 million, a slight increase from $499 million in Q1 2022 [179]. - Comprehensive income attributable to Huntington for Q1 2023 was $945 million, compared to a loss of $625 million in Q1 2022 [181]. - Net income attributable to Huntington for Q1 2023 was $602 million, up 30.9% from $460 million in Q1 2022 [181]. Credit Quality - The provision for credit losses rose to $85 million, an increase of $60 million from the year-ago quarter, reflecting higher realized net credit losses and allowance builds due to loan growth and economic uncertainty [21]. - The total provision for loan and lease losses was $78 million in Q1 2023, compared to $7 million in Q1 2022, indicating a significant increase in expected credit losses [43]. - Credit quality performance reflected net charge-offs (NCOs) of $57 million, or 0.19% of average total loans and leases, an increase from $19 million, or 0.07%, in the prior year [59]. - The total nonperforming assets (NPAs) decreased to $578 million at March 31, 2023, from $594 million at December 31, 2022 [61]. - The Allowance for Credit Losses (ACL) as of March 31, 2023, is $2.3 billion, representing 1.90% of total loans and leases, unchanged from December 31, 2022 [78]. Asset and Deposit Growth - Total assets as of March 31, 2023, were $189.1 billion, a 3% increase from December 31, 2022, primarily due to a $3.9 billion increase in interest-bearing deposits at the Federal Reserve Bank [23]. - Average total assets for Q1 2023 rose to $184.9 billion, an increase of $7.3 billion, or 4%, from Q1 2022, primarily due to an increase in average loans and leases of $9.3 billion, or 8% [39]. - Total deposits decreased to $145.3 billion at March 31, 2023, from $147.9 billion at December 31, 2022, representing a decline of 1.1% [109]. - Core deposits were $140.4 billion at March 31, 2023, comprising 97% of total deposits, a decrease from $142.1 billion and 96% at December 31, 2022 [107]. - Cash and cash equivalents increased by $3.7 billion to $10.4 billion at March 31, 2023, primarily due to higher interest-bearing deposits at the Federal Reserve [111]. Interest Income and Margin - Net interest income increased to $1.4 billion, up $263 million, or 23% from the previous year, driven by a 52 basis point increase in the net interest margin (NIM) to 3.40% [20]. - The net interest margin (NIM) expansion was primarily driven by higher loan and lease yields, partially offset by increased funding costs [37]. - The net interest margin for Commercial Banking improved to 3.94%, a 22% increase from 3.24% in the previous year [146]. Economic Outlook - The company anticipates a mild recession in 2023, with growth expected to return in 2024, while inflation is expected to moderate [27]. - The baseline economic scenario forecasts an unemployment rate increase to 4.0% by the end of 2024 and a GDP growth of 2.6% by the same period [67]. - The Federal Reserve's overnight federal funds rate is projected to peak at approximately 4.8% in Q2 2023, with expectations of rate cuts starting early in 2024 [67]. Operational Efficiency - The efficiency ratio improved to 55.6% in Q1 2023, down from 62.9% in Q1 2022, indicating better cost management [31]. - Noninterest expense for Q1 2023 was $1.1 billion, an increase of $33 million, or 3%, from Q1 2022 [46]. - Personnel costs rose by $69 million, or 12%, primarily due to a $36 million voluntary retirement program expense and $6 million organizational realignment expense [46]. Segment Performance - Commercial Banking segment net income increased to $318 million, up 127% from $140 million year-over-year, driven by a 36% increase in net interest income [147]. - Consumer and Business Banking segment net income rose to $430 million, a 138% increase from $181 million in the prior year, primarily due to a 113% increase in net interest income [150]. - Vehicle Finance segment net income decreased to $44 million, down 34% from $67 million year-over-year, attributed to a 5% decline in net interest income [152]. - Regional Banking and The Huntington Private Client Group reported net income of $83 million, significantly up from $19 million in the previous year, with a 39% increase in net interest income [153]. Shareholder Returns - The company authorized a share repurchase program of up to $1.0 billion, but does not expect to utilize it in 2023 due to capital requirements [138]. - The company declared cash dividends of $228 million on common stock and $29 million on preferred stock during Q1 2023 [183]. Securities and Investments - As of March 31, 2023, total available-for-sale securities amounted to $27,410 million, with gross unrealized losses of $3,445 million, resulting in a fair value of $24,086 million [190]. - Held-to-maturity securities totaled $16,977 million, with gross unrealized losses of $2,046 million, leading to a fair value of $14,939 million [190]. - The company reported accrued interest receivable on available-for-sale securities totaling $73 million as of March 31, 2023 [190]. Risk Management - The company maintains a contingency funding plan to address liquidity crises, assessing potential erosion of funds during specific events [106]. - The company uses a probability-weighted approach to estimate the allowance, incorporating baseline, adverse, and favorable economic scenarios [68]. - The company emphasizes the uncertainty of economic conditions and their potential impact on credit quality and financial performance [175].