Huntington(HBAN) - 2025 Q1 - Quarterly Report

PART I Management's Discussion and Analysis of Financial Condition and Results of Operations Analysis of Huntington's Q1 2025 financial performance, detailing strong net income, asset growth, and robust capital Executive Overview Huntington reported strong Q1 2025 results with $527 million net income, driven by net interest income and asset growth Q1 2025 vs Q1 2024 Financial Highlights | Metric | Q1 2025 | Q1 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Net Income | $527 million | $419 million | 26% | | Diluted EPS | $0.34 | $0.26 | 31% | | Net Interest Income | $1,426 million | $1,287 million | 11% | | Noninterest Income | $494 million | $467 million | 6% | | Noninterest Expense | $1,152 million | $1,137 million | 1% | | Provision for Credit Losses | $115 million | $107 million | 7% | - The increase in FTE net interest income was primarily due to an 8% ($14.5 billion) increase in average earning assets and a 9 basis point increase in the FTE Net Interest Margin (NIM) to 3.10%[21] - Total assets reached $209.6 billion at March 31, 2025, a 3% increase from December 31, 2024, driven by growth in loans and interest-earning deposits[24] - The CET1 risk-based capital ratio improved to 10.6% at March 31, 2025, up from 10.5% at the end of 2024, primarily due to earnings retention[25] Discussion of Results of Operations Detailed Q1 2025 results show 11% net interest income growth and 6% noninterest income increase Average Balance Sheet YoY Change (Q1 2025 vs Q1 2024) | Balance Sheet Item | Q1 2025 Avg. Balance | YoY Change ($) | YoY Change (%) | | :--- | :--- | :--- | :--- | | Total Assets | $205.1 billion | +$14.8 billion | +8% | | Total Loans and Leases | $130.9 billion | +$8.9 billion | +7% | | Total Deposits | $162.6 billion | +$10.9 billion | +7% | | Total Liabilities | $185.0 billion | +$14.0 billion | +8% | Noninterest Income Breakdown (Q1 2025 vs Q1 2024) | Category | Q1 2025 | Q1 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Payments and cash management | $155 M | $146 M | +6% | | Wealth and asset management | $101 M | $88 M | +15% | | Capital markets and advisory | $67 M | $56 M | +20% | | Total Noninterest Income | $494 M | $467 M | +6% | - Noninterest expense increased 1% YoY, primarily due to a $32 million (5%) rise in personnel costs, partially offset by a $17 million (31%) decrease in deposit and other insurance expense[44] - The provision for income taxes was $122 million with an effective tax rate of 18.6%, compared to $86 million and 16.8% in Q1 2024, mainly due to higher pretax income[46] Risk Management Huntington manages risk through a comprehensive framework, maintaining a moderate-to-low appetite across key risk categories - The company's risk management is structured around a Board-approved Risk Appetite Statement, focusing on seven key risk categories: credit, market, liquidity, operational, compliance, strategic, and reputation[48] Key Risk Metrics (as of March 31, 2025) | Metric | Value | Source Chunk | | :--- | :--- | :--- | | Total Loans & Leases | $132.5 billion | 52 | | Nonperforming Assets (NPAs) | $804 million | 66 | | NPA Ratio | 0.61% | 66, 67 | | Allowance for Credit Losses (ACL) | $2.5 billion (1.87% of loans) | 81 | | Net Charge-offs (annualized) | 0.26% | 83 | | Primary Contingent Liquidity | $107.4 billion | 125 | Capital Huntington maintains robust capital, with a 10.6% CET1 ratio and a new $1.0 billion share repurchase authorization Regulatory Capital Ratios (Consolidated) | Ratio | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | CET1 risk-based capital | 10.6% | 10.5% | | Tier 1 risk-based capital | 11.9% | 11.9% | | Total risk-based capital | 14.3% | 14.3% | | Tier 1 leverage | 8.5% | 8.6% | - The increase in the CET1 ratio was driven by current period earnings, net of dividends, which was partially offset by an increase in risk-weighted assets from loan growth and the CECL transition adjustment[149] - On April 16, 2025, the Board of Directors approved a new share repurchase authorization of up to $1.0 billion of common shares[154] Business Segment Discussion Consumer & Regional Banking net income decreased 8% YoY, Commercial Banking declined 2%, with Treasury/Other improving Net Income by Business Segment (Q1 2025 vs Q1 2024) | Segment | Q1 2025 Net Income | Q1 2024 Net Income | YoY Change | | :--- | :--- | :--- | :--- | | Consumer & Regional Banking | $319 million | $348 million | -8% | | Commercial Banking | $236 million | $242 million | -2% | | Treasury / Other | ($28 million) | ($171 million) | +84% | | Total Net Income | $527 million | $419 million | +26% | - Consumer & Regional Banking's net income decline was driven by a 5% increase in noninterest expense and a 7 basis point compression in net interest margin[163] - Commercial Banking's performance was supported by a 12% increase in noninterest income, primarily from capital markets and advisory fees, which helped offset a 2% decline in net interest income[165] Additional Disclosures This section covers forward-looking statements, non-GAAP measures, and critical accounting policies, including ACL sensitivity - The report contains forward-looking statements subject to risks including economic changes, interest rate volatility, and regulatory actions[170][172] - The company's critical accounting policies are the allowance for credit losses (ACL) and goodwill, with ACL estimates highly dependent on macroeconomic forecasts[181][182][183] - A hypothetical 100% adverse economic scenario would increase the quantitative ACL by approximately $0.8 billion, excluding qualitative adjustments[186][187] Financial Statements (Unaudited) This section presents Huntington's unaudited consolidated financial statements, including balance sheets, income, and cash flows Consolidated Balance Sheets Total assets increased to $209.6 billion at March 31, 2025, driven by loan and deposit growth, with equity at $20.4 billion Consolidated Balance Sheet Highlights | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $209,596 M | $204,230 M | | Net Loans and Leases | $130,242 M | $127,798 M | | Total Deposits | $165,337 M | $162,448 M | | Total Liabilities | $189,110 M | $184,448 M | | Total Shareholders' Equity | $20,434 M | $19,740 M | Consolidated Statements of Income Net income attributable to Huntington increased to $527 million in Q1 2025, driven by higher interest and noninterest income Consolidated Income Statement Summary (Three Months Ended) | Account | March 31, 2025 | March 31, 2024 | | :--- | :--- | :--- | | Net Interest Income | $1,426 M | $1,287 M | | Provision for Credit Losses | $115 M | $107 M | | Total Noninterest Income | $494 M | $467 M | | Total Noninterest Expense | $1,152 M | $1,137 M | | Net Income Attributable to Huntington | $527 M | $419 M | | Net Income Per Diluted Share | $0.34 | $0.26 | Consolidated Statements of Cash Flows Cash and cash equivalents increased by $2.46 billion in Q1 2025, driven by $4.10 billion from financing activities Cash Flow Summary (Three Months Ended March 31, 2025) | Activity | Net Cash Flow | | :--- | :--- | | Net Cash Provided by Operating Activities | $513 million | | Net Cash Used in Investing Activities | ($2,150 million) | | Net Cash Provided by Financing Activities | $4,100 million | | Increase in Cash and Cash Equivalents | $2,463 million | Notes to Unaudited Consolidated Financial Statements Detailed notes provide disclosures on investment securities, loan portfolio, ACL, debt, derivatives, and commitments - Note 3: Total investment securities were $44.6 billion, with available-for-sale securities at $27.8 billion and held-to-maturity at $16.3 billion, resulting in net unrealized losses of $5.0 billion[205][206] - Note 4: Total loans and leases were $132.5 billion, with Commercial loans comprising 57% ($75.4 billion) and Consumer loans 43% ($57.1 billion)[220] - Note 5: The Allowance for Credit Losses (ACL) stood at $2.478 billion, consisting of $2.263 billion for loan and lease losses (ALLL) and $215 million for unfunded commitments (AULC)[247] - Note 7: Total long-term debt increased to $18.1 billion from $16.4 billion at year-end, primarily due to the issuance of $1.5 billion in senior notes and a $415 million CLN transaction[261][263][264] - Note 13: The total notional value of derivative contracts was $101.8 billion, used for hedging interest rate risk, mortgage banking activities, and customer-related services[317] - Note 15: Commitments to extend credit totaled $62.5 billion, primarily in commercial and industrial ($39.1 billion) and consumer ($20.5 billion) loans[367] Quantitative and Qualitative Disclosures about Market Risk This section refers to the MD&A's Market Risk section for detailed quantitative and qualitative disclosures - Disclosures regarding market risk for the current period are located in the Market Risk section of the MD&A in this report[381] Controls and Procedures Management concluded disclosure controls were effective as of March 31, 2025, with no material changes to internal controls - The Chief Executive Officer and Chief Financial Officer concluded that as of March 31, 2025, Huntington's disclosure controls and procedures were effective[382] - There were no changes in internal control over financial reporting during the quarter ended March 31, 2025, that have materially affected, or are reasonably likely to materially affect, these controls[383] PART II. OTHER INFORMATION Legal Proceedings Huntington is involved in routine legal and regulatory actions, with an estimated aggregate possible loss of $0 to $15 million - The company is routinely a defendant in legal and regulatory actions, with an estimated aggregate range of reasonably possible loss of $0 to $15 million at March 31, 2025, in excess of any amounts already accrued[374][385] Risk Factors This section refers to the 2024 Annual Report on Form 10-K for a comprehensive discussion of risk factors - The report refers to the risk factors discussed in the 2024 Annual Report on Form 10-K for a comprehensive understanding of potential risks[386] Unregistered Sales of Equity Securities and Use of Proceeds This item is not applicable for the reporting period - This item is not applicable for the reporting period[387] Other Information General Counsel Marcy Hingst adopted a Rule 10b5-1 trading plan for the sale of up to 54,800 common shares - On March 13, 2025, General Counsel Marcy Hingst adopted a Rule 10b5-1 trading plan for the sale of up to 54,800 shares of common stock from vested restricted share units[388] Exhibits This section lists all exhibits filed with the Form 10-Q, including corporate governance documents and certifications - The exhibit index lists documents filed with the report, including CEO and CFO certifications (Exhibits 31.1, 31.2, 32.1, 32.2) and Inline XBRL data files (Exhibit 101)[393]