HUNTINGTON BANCSHARES DEP(HBANM) - 2024 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements (Unaudited) Presents Huntington Bancshares' unaudited consolidated financial statements for Q2 2024 and 2023, covering balance sheets, income, and notes Consolidated Balance Sheets Total assets increased to $196.3 billion at June 30, 2024, driven by loan growth, with liabilities and equity also rising Consolidated Balance Sheet Summary (Unaudited) | (in millions) | At June 30, 2024 | At December 31, 2023 | | :--- | :--- | :--- | | Total Assets | $196,310 | $189,368 | | Net loans and leases | $122,118 | $119,727 | | Total investment securities (AFS & HTM) | $42,490 | $41,055 | | Goodwill | $5,561 | $5,561 | | Total Liabilities | $176,747 | $169,970 | | Total deposits | $154,367 | $151,230 | | Long-term debt | $16,461 | $12,394 | | Total Shareholders' Equity | $19,515 | $19,353 | Consolidated Statements of Income Net income attributable to Huntington decreased to $474 million in Q2 2024 and $893 million for H1 2024, due to lower net interest income and higher expenses Consolidated Income Statement Summary (Unaudited) | (in millions, except per share data) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $1,312 | $1,346 | $2,599 | $2,755 | | Provision for credit losses | $100 | $92 | $207 | $177 | | Total Noninterest Income | $491 | $495 | $958 | $1,007 | | Total Noninterest Expense | $1,117 | $1,050 | $2,254 | $2,136 | | Net Income Attributable to Huntington | $474 | $559 | $893 | $1,161 | | Net Income Per Common Share—Diluted | $0.30 | $0.35 | $0.56 | $0.74 | Notes to Unaudited Consolidated Financial Statements Detailed notes explain financial statements, covering investment securities, loan portfolio, ACL, derivatives, and segment reporting Management's Discussion and Analysis (MD&A) MD&A provides an executive overview of Q2 and H1 2024 financial performance, detailing operational results, risk management, capital, and segment performance Executive Overview Q2 2024 net income decreased to $474 million due to lower net interest income and higher expenses, while total assets grew and CET1 capital improved Q2 2024 vs. Q2 2023 Performance | Metric | Q2 2024 | Q2 2023 | Change | | :--- | :--- | :--- | :--- | | Net Income | $474M | $559M | -15% | | Diluted EPS | $0.30 | $0.35 | -14% | | Net Interest Income | $1.31B | $1.35B | -3% | | FTE NIM | 2.99% | 3.11% | -12 bps | | Noninterest Expense | $1.12B | $1.05B | +6% | - Total assets increased by $6.9 billion (4%) to $196.3 billion at June 30, 2024, compared to year-end 2023, driven by growth in loans, investment securities, and interest-earning deposits[25] - The CET1 risk-based capital ratio increased to 10.4% at June 30, 2024, from 10.2% at December 31, 2023, primarily due to earnings retention, partially offset by the CECL transition and loan growth[26] - The economic outlook suggests a cooling economy, with waning consumer spending and slowing in the service sector, and the market anticipates the first Federal Reserve rate cut in September 2024[28][29] Discussion of Results of Operations Operational results for Q2 and H1 2024 show decreased net interest income due to NIM compression, increased credit loss provisions, and higher noninterest expenses Net Interest Income and Margin Analysis | Metric | Q2 2024 | Q2 2023 | YTD 2024 | YTD 2023 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income (FTE, non-GAAP) | $1,325M | $1,357M | $2,625M | $2,775M | | Change (YoY) | -2% | | -5% | | | Net Interest Margin (FTE) | 2.99% | 3.11% | 3.00% | 3.25% | - The provision for credit losses was $100 million in Q2 2024, up 9% from Q2 2023, reflecting increased charge-off activity, primarily in the Commercial portfolio[49] - Q2 2024 noninterest income decreased 1% YoY to $491 million, mainly due to a prior-year $18 million favorable mark-to-market on swaptions, partially offset by an 18% increase in capital markets and advisory fees[52] - Q2 2024 noninterest expense increased 6% YoY to $1.1 billion, driven by a $50 million (8%) rise in personnel costs and a $17 million (11%) increase in outside data processing and other services[55] Risk Management and Capital Huntington manages risk across seven pillars, with increased nonperforming assets and net charge-offs, while maintaining strong liquidity and improving CET1 capital to 10.4% Business Segment Discussion H1 2024 saw Consumer & Regional Banking net income rise 10% to $716 million, while Commercial Banking net income fell 15% to $526 million, and Treasury / Other reported a larger net loss Net Income by Business Segment (Six Months Ended) | (in millions) | June 30, 2024 | June 30, 2023 | Change | | :--- | :--- | :--- | :--- | | Consumer & Regional Banking | $716 | $648 | +10% | | Commercial Banking | $526 | $616 | -15% | | Treasury / Other | ($349) | ($103) | -239% | | Net Income Attributable to Huntington | $893 | $1,161 | -23% | - Consumer & Regional Banking's net income increase was primarily due to a $159 million (9%) rise in net interest income, reflecting loan growth and a 10 basis point NIM expansion[168] - Commercial Banking's net income decrease was driven by a $38 million (3%) drop in net interest income, an $18 million (27%) increase in the provision for credit losses, and a $42 million (8%) rise in noninterest expense[170] Additional Disclosures This section details forward-looking statements, non-GAAP financial measures, and the critical accounting policy for ACL, including sensitivity analysis to adverse economic scenarios - The report contains forward-looking statements subject to risks including economic changes, interest rate volatility, and regulatory actions[175][176] - The Allowance for Credit Losses (ACL) is a critical accounting estimate highly sensitive to macroeconomic forecasts, particularly unemployment rates and GDP[184][186] - A sensitivity analysis using a 100% adverse economic scenario (e.g., unemployment at 7.6% in 2025) would hypothetically increase the quantitative ACL by approximately $1 billion as of June 30, 2024[189][190] Quantitative and Qualitative Disclosures about Market Risk This section refers to the MD&A's Market Risk section for quantitative and qualitative disclosures on market risk, including interest rate exposure and management strategies - Disclosures regarding market risk for the current period are located in the Market Risk section of the MD&A in this report[380] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2024, with no material changes to internal control over financial reporting during Q2 2024 - The CEO and CFO concluded that as of June 30, 2024, Huntington's disclosure controls and procedures were effective[381] - No changes in internal control over financial reporting occurred during the quarter ended June 30, 2024, that have materially affected, or are reasonably likely to materially affect, these controls[382] PART II. OTHER INFORMATION Legal Proceedings Huntington is involved in routine legal matters, with an estimated aggregate reasonably possible loss range of $0 to $20 million, not expected to materially affect financial position - For certain legal matters where a range of possible loss can be estimated, management estimates the aggregate range of reasonably possible loss is $0 to $20 million at June 30, 2024, in excess of any accrued liability[374] - Management does not currently believe that pending legal matters will have a material adverse effect on Huntington's consolidated financial position[375] Risk Factors This section refers to the 2023 Annual Report on Form 10-K for a comprehensive understanding of risk factors that could materially affect the business - Readers are advised to consider the risk factors discussed in the 2023 Annual Report on Form 10-K[385] Unregistered Sales of Equity Securities and Use of Proceeds Huntington did not repurchase common shares in Q2 2024, and despite a $1.0 billion authorization, does not expect to utilize the program through 2024 due to capital priorities Issuer Purchases of Equity Securities (Q2 2024) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Approx. Dollar Value Remaining Under Program | | :--- | :--- | :--- | :--- | | April 2024 | 0 | $— | $1,000,000,000 | | May 2024 | 0 | $— | $1,000,000,000 | | June 2024 | 0 | $— | $1,000,000,000 | - The company does not expect to utilize its share repurchase program through 2024, prioritizing organic capital for funding loan growth and adapting to proposed regulatory capital changes[159] Other Information Two senior executive officers adopted Rule 10b5-1 trading plans in January 2024 for the future sale of company stock, including performance units, restricted stock, and options - 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 underlying performance stock units, terminating by January 17, 2025[387] - On January 24, 2024, Rajeev Syal, Chief Human Resources Officer, adopted a Rule 10b5-1 trading plan covering the sale of shares from stock options (up to 315,126), restricted stock units (up to 21,425), performance stock units (up to 49,458), and direct ownership (up to 32,647), terminating by January 31, 2025[388][389] Exhibits This section provides an index of all exhibits filed with the Quarterly Report on Form 10-Q, including corporate governance documents, CEO/CFO certifications, and XBRL data - The report includes various exhibits, such as amendments to bylaws, certifications from the CEO and CFO under Sarbanes-Oxley rules, and XBRL data files[393][394]