HUNTINGTON BANCSHARES DEP(HBANM) - 2024 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements (Unaudited) This section presents Huntington Bancshares Incorporated's unaudited consolidated financial statements for Q1 2024 and 2023, along with accompanying notes Consolidated Balance Sheets Total assets increased to $193.5 billion as of March 31, 2024, driven by loan and securities growth, while total shareholders' equity slightly decreased Consolidated Balance Sheet Highlights (in millions) | Account | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Assets | $193,519 | $189,368 | | Net Loans and Leases | $120,487 | $119,727 | | Total Investment Securities (AFS & HTM) | $42,217 | $41,055 | | Goodwill | $5,561 | $5,561 | | Total Liabilities | $174,146 | $169,970 | | Total Deposits | $153,225 | $151,230 | | Long-term Debt | $14,894 | $12,394 | | Total Shareholders' Equity | $19,322 | $19,353 | Consolidated Statements of Income Net income attributable to Huntington for Q1 2024 decreased to $419 million, primarily due to declines in net interest and noninterest income, coupled with increased noninterest expense Consolidated Income Statement Highlights (in millions) | Account | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net Interest Income | $1,287 | $1,409 | | Provision for Credit Losses | $107 | $85 | | Total Noninterest Income | $467 | $512 | | Total Noninterest Expense | $1,137 | $1,086 | | Net Income Attributable to Huntington | $419 | $602 | | Net Income Per Common Share - Diluted | $0.26 | $0.39 | Notes to Unaudited Consolidated Financial Statements The notes provide detailed disclosures on accounting policies, loan portfolio composition, allowance for credit losses, and fair value measurements - In Q1 2024, the company adopted ASU 2023-02 regarding accounting for investments in tax credit structures, which did not have a material impact[188] - Total loans and leases increased to $122.8 billion at March 31, 2024, from $122.0 billion at year-end 2023, with growth in both commercial and consumer portfolios[203] - The Allowance for Credit Losses (ACL) was $2.415 billion at March 31, 2024, a slight increase from $2.400 billion at year-end 2023, primarily driven by loan growth[232] - During Q1 2024, Huntington entered into an auto securitization involving a VIE, transferring $1.6 billion in auto loans, and consolidated the VIE as the primary beneficiary[325][327] Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations for Q1 2024, covering performance, risk management, and segment analysis Executive Overview For Q1 2024, Huntington reported net income of $419 million, or $0.26 per diluted share, a decrease primarily due to lower net interest and noninterest income, impacted by a $32 million FDIC special assessment Q1 2024 Selected Financial Data (in millions, except per share data) | Metric | Q1 2024 | Q1 2023 | Change (%) | | :--- | :--- | :--- | :--- | | Net Interest Income | $1,287 | $1,409 | (9)% | | Provision for Credit Losses | $107 | $85 | 26% | | Noninterest Income | $467 | $512 | (9)% | | Noninterest Expense | $1,137 | $1,086 | 5% | | Net Income Attributable to Huntington | $419 | $602 | (30)% | | Net Income Per Share (Diluted) | $0.26 | $0.39 | (33)% | | Net Interest Margin (FTE) | 3.01% | 3.40% | -39 bps | - Q1 2024 net income was negatively impacted by a $32 million FDIC special assessment expense, while the prior-year quarter included a $57 million gain from the sale of the Retirement Plan Services (RPS) business[22] - The economic outlook assumes a soft landing, with the Federal Reserve expected to begin cutting rates in late 2024 or early 2025[29][30] Discussion of Results of Operations Huntington's Q1 2024 operating results show a 9% decrease in net interest income due to margin compression, a 26% rise in provision for credit losses, and a 9% decline in noninterest income, while noninterest expense increased 5% - FTE net interest income decreased 8% year-over-year to $1.3 billion, driven by a 39 basis point decline in FTE NIM to 3.01% as the cost of funds increased[38] - The provision for credit losses increased by $22 million year-over-year to $107 million, reflecting higher charge-off activity, primarily in the Commercial portfolio[42] - Noninterest income decreased by $45 million year-over-year, mainly due to a $57 million gain on the sale of the RPS business in Q1 2023[44] - Noninterest expense increased by $51 million year-over-year, primarily due to a $32 million FDIC special assessment and a $15 million increase in outside data processing services[46] Risk Management and Capital Huntington maintains an aggregate moderate-to-low, through-the-cycle risk appetite, managing credit, market, liquidity, operational, and compliance risks, with capital ratios remaining above well-capitalized standards - The company's risk appetite is defined by the Board of Directors as aggregate moderate-to-low, through-the-cycle[49] - Risk is classified and managed across seven pillars: credit, market, liquidity, operational, compliance, strategic, and reputation[50] Business Segment Discussion In Q1 2024, Consumer & Regional Banking net income grew 6% to $348 million, while Commercial Banking net income fell 18% to $242 million, and the Treasury/Other function reported a net loss of $171 million Net Income by Business Segment (in millions) | Segment | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Consumer & Regional Banking | $348 | $328 | | Commercial Banking | $242 | $296 | | Treasury / Other | $(171) | $(22) | | Net Income Attributable to Huntington | $419 | $602 | - Consumer & Regional Banking's net income increased 6% year-over-year, driven by a 10% rise in net interest income from margin expansion and loan growth[151] - Commercial Banking's net income decreased 18% year-over-year, impacted by a 3% decline in net interest income and a $22 million increase in the provision for credit losses[154] Additional Disclosures This section includes forward-looking statements, discusses the use of non-GAAP financial measures, and identifies the allowance for credit losses (ACL) and goodwill as critical accounting policies, detailing the judgments involved in ACL estimation - The report contains forward-looking statements regarding plans and expectations, which are subject to risks such as economic conditions, interest rate changes, and regulatory actions[159][160] - The Allowance for Credit Losses (ACL) is identified as a critical accounting policy, with its estimation involving significant judgment and high sensitivity to macroeconomic forecasts, particularly unemployment rates and GDP[168][169][171] - A hypothetical sensitivity analysis shows that using a 100% adverse economic scenario would increase the ACL by approximately $1.1 billion, excluding qualitative adjustments[173][174] Quantitative and Qualitative Disclosures about Market Risk This section refers to the 'Market Risk' section within Management's Discussion and Analysis (MD&A) for quantitative and qualitative disclosures about market risk - Disclosures regarding market risk for the current period are located in the Market Risk section of the MD&A in this report[354] Controls and Procedures Management, including the CEO and CFO, concluded that Huntington's disclosure controls and procedures were effective as of March 31, 2024, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that as of March 31, 2024, the company's disclosure controls and procedures were effective[355] - No changes in internal control over financial reporting occurred during Q1 2024 that have materially affected, or are reasonably likely to materially affect, these controls[356] PART II. OTHER INFORMATION Legal Proceedings Huntington is routinely involved in legal and regulatory matters, with an estimated aggregate range of reasonably possible loss of $0 to $20 million in excess of accrued amounts, which management does not believe will have a material adverse effect - For certain legal matters where a range of possible loss can be estimated, management estimates the aggregate range of reasonably possible loss is between $0 and $20 million as of March 31, 2024, in excess of any accrued liability[348] - Management does not currently believe that pending legal matters will have a material adverse effect on Huntington's consolidated financial position[349] Risk Factors This section directs readers to the risk factors discussed in Part I, Item 1A of the company's 2023 Annual Report on Form 10-K - For a detailed discussion of risk factors, readers are referred to the company's 2023 Annual Report on Form 10-K[359] Unregistered Sales of Equity Securities and Use of Proceeds During Q1 2024, Huntington did not repurchase any common shares and does not expect to utilize its $1.0 billion share repurchase authorization through 2024, planning instead to fund loan growth and address regulatory capital changes organically - No shares of common stock were repurchased during the three months ended March 31, 2024[141][360] - The company has a $1.0 billion share repurchase authorization valid through December 31, 2024, but does not expect to use it during 2024[141] Exhibits This section provides an index of the exhibits filed with or furnished as part of this Quarterly Report on Form 10-Q - The exhibit list includes CEO and CFO certifications under Rule 13a-14(a) and Section 1350, as well as Inline XBRL data files[365]