hban-20240331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Huntington Bancshares Incorporated

(Exact name of registrant as specified in its charter)


Maryland	1-34073	31-0724920
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(I.R.S. Employer Identification No.)

Registrant’s address: 41 South High Street, Columbus, Ohio 43287

Registrant’s telephone number, including area code: (614) 480-2265

Securities registered pursuant to Section 12(b) of the Act


Title of class	Trading Symbol(s)	Name of exchange on which registered


Depositary Shares (each representing a 1/40th interest in a share of 4.500% Series H Non-Cumulative, perpetual preferred stock)	HBANP	NASDAQ
Depositary Shares (each representing a 1/1000th interest in a share of 5.70% Series I Non-Cumulative, perpetual preferred stock)	HBANM	NASDAQ
Depositary Shares (each representing a 1/40th interest in a share of 6.875% Series J Non-Cumulative, perpetual preferred stock)	HBANL	NASDAQ
Common Stock—Par Value $0.01 per Share	HBAN	NASDAQ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. x Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). x Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes x No

There were 1,449,254,147 shares of the registrant’s common stock ($0.01 par value) outstanding on March 31, 2024.

HUNTINGTON BANCSHARES INCORPORATED

INDEX


Glossary of Acronyms and Terms			3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)			34
Consolidated Balance Sheets at March 31, 2024 and December 31, 2023			34
Consolidated Statements of Income for the three months ended March 31, 2024 and 2023			35
Consolidated Statements of Comprehensive Income for the three months ended March 31, 2024 and 2023			36
Consolidated Statements of Changes in Shareholders’ Equity for the three months ended March 31, 2024 and 2023			37
Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023			38
Notes to Unaudited Consolidated Financial Statements			40
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			5
Executive Overview			5
Discussion of Results of Operations			8
Risk Management and Capital:			12
Credit Risk			12
Market Risk			18
Liquidity Risk			22
Operational Risk			25
Compliance Risk			26
Capital			26
Business Segment Discussion			27
Additional Disclosures			30
Item 3. Quantitative and Qualitative Disclosures about Market Risk			74
Item 4. Controls and Procedures			74
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			74
Item 1A. Risk Factors			74
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			74

Item 6. Exhibits			75
Signatures			76

2 Huntington Bancshares Incorporated

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Glossary of Acronyms and Terms

The following listing provides a comprehensive reference of common acronyms and terms used throughout the document:


ACL						Allowance for Credit Losses
AFS						Available-for-Sale
ALCO						Asset-Liability Management Committee
ALLL						Allowance for Loan and Lease Losses

AOCI						Accumulated Other Comprehensive Income (Loss)
ASC						Accounting Standards Codification


ASU						Accounting Standards Update

AULC						Allowance for Unfunded Lending Commitments

Basel III						Refers to the final rule issued by the FRB and OCC and published in the Federal Register on October 11, 2013




C&I						Commercial and Industrial



CDs						Certificates of Deposit
CDS						Credit Default Swap

CECL						Current Expected Credit Losses
CET1						Common Equity Tier 1 on a Basel III basis



CFPB						Bureau of Consumer Financial Protection

CME						Chicago Mercantile Exchange
CMO						Collateralized Mortgage Obligations
CODM						Chief Operating Decision Maker




CRE						Commercial Real Estate




DIF						Deposit Insurance Fund
Dodd-Frank Act						Dodd-Frank Wall Street Reform and Consumer Protection Act





EOP						End of Period
EVE						Economic Value of Equity



FDIC						Federal Deposit Insurance Corporation

Federal Reserve						Board of Governors of the Federal Reserve System
FFIEC						Federal Financial Institutions Examination Council

FHLB						Federal Home Loan Bank
FICO						Fair Isaac Corporation




FRB						Federal Reserve Bank
FTE						Fully-Taxable Equivalent
FTP						Funds Transfer Pricing
FVO						Fair Value Option
GAAP						Generally Accepted Accounting Principles in the United States of America
GDP						Gross Domestic Product




HTM						Held-to-Maturity

IRS						Internal Revenue Service




LIBOR						London Interbank Offered Rate
LIHTC						Low Income Housing Tax Credit

MBS						Mortgage-Backed Securities
MD&A						Management’s Discussion and Analysis of Financial Condition and Results of Operations

MSR						Mortgage Servicing Right
NAICS						North American Industry Classification System
NALs						Nonaccrual Loans
NCO						Net Charge-off
NII						Net Interest Income

2024 1Q Form 10-Q 3

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NIM						Net Interest Margin
NM						Not Meaningful
NPAs						Nonperforming Assets

OCC						Office of the Comptroller of the Currency
OCI						Other Comprehensive Income (Loss)


OLEM						Other Loans Especially Mentioned













RBHPCG						Regional Banking and The Huntington Private Client Group
REIT						Real Estate Investment Trust


ROC						Risk Oversight Committee



RPS						Retirement Plan Services
RV						Recreational vehicle

SBA						Small Business Administration

SEC						Securities and Exchange Commission
SOFR						Secured Overnight Financing Rate

SPE						Special Purpose Entity
TBA						To Be Announced


U.S. Treasury						U.S. Department of the Treasury


VIE						Variable Interest Entity
XBRL						eXtensible Business Reporting Language

4 Huntington Bancshares Incorporated

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PART I. FINANCIAL INFORMATION

When we refer to “we,” “our,” “us,” “Huntington,” and “the Company” in this report, we mean Huntington Bancshares Incorporated and our consolidated subsidiaries, unless the context indicates that we refer only to the parent company, Huntington Bancshares Incorporated. When we refer to the “Bank” in this report, we mean our only bank subsidiary, The Huntington National Bank, and its subsidiaries.

Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

INTRODUCTION

We are a multi-state diversified regional bank holding company organized under Maryland law in 1966 and headquartered in Columbus, Ohio. Through the Bank, we are committed to making people’s lives better, helping businesses thrive, and strengthening the communities we serve, and we have been servicing the financial needs of our customers since 1866. Through our subsidiaries, we provide full-service commercial and consumer deposit, lending, and other banking services. These include, but are not limited to, payments, mortgage banking, automobile, recreational vehicle and marine financing, investment banking, capital markets, advisory, equipment financing, distribution finance, investment management, trust, brokerage, insurance, and other financial products and services. As of March 31, 2024, we have approximately 970 full-service branches and private client group offices which are primarily located in Ohio, Colorado, Illinois, Indiana, Kentucky, Michigan, Minnesota, Pennsylvania, West Virginia, and Wisconsin. Select financial services and other activities are also conducted in various other states.

This MD&A provides information we believe necessary for understanding our financial condition, changes in financial condition, results of operations, and cash flows. The MD&A included in our 2023 Annual Report on Form 10-K should be read in conjunction with this MD&A as this discussion provides only material updates to the 2023 Annual Report on Form 10-K. This MD&A should also be read in conjunction with the Unaudited Consolidated Financial Statements, Notes to Unaudited Consolidated Financial Statements, and other information contained in this report.

EXECUTIVE OVERVIEW

Reporting Updates

During the fourth quarter of 2023, we updated the presentation of our noninterest income categories to align product and service types more closely with how we strategically manage our business. For a description of each updated noninterest income revenue stream, refer to Note 15 - “Revenue from Contracts with Customers” of the Notes to Consolidated Financial Statements appearing in Huntington’s 2023 Annual Report on Form 10-K.

During the fourth quarter of 2023, we revised our FTP methodology for non-maturity deposits, which has been enhanced to consider the internally modeled weighted average life by non-maturity deposit type. In general, the impact of the FTP methodology revision resulted in a net higher cost of funds allocation as compared with the previous method.

To align with our strategic priorities, during the second quarter of 2023, we completed an organizational realignment and now report on two business segments: Consumer & Regional Banking and Commercial Banking. The Treasury / Other function includes technology and operations, and other unallocated assets, liabilities, revenue, and expense. Huntington’s business segments are based on our internally-aligned segment leadership structure, which is how management monitors results and assesses performance. The organizational realignment primarily involved consolidating our previously reported Consumer and Business Banking, Vehicle Finance and RBHPCG, into one new business segment called Consumer & Regional Banking.

For the reporting updates discussed above, prior period results have been adjusted to conform to the current presentation.

2024 1Q Form 10-Q 5

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Financial Performance Review

Selected Financial Data


Table 1 - Selected Quarterly Income Statement Data

	Three months ended March 31,			Change
(amounts in millions, except per share data)	2024				2023			Amount		Percent
Interest income	$	2,380			$	2,028		$	352	17	%
Interest expense	1,093				619			474		77
Net interest income	1,287				1,409			(122)		(9)
Provision for credit losses	107				85			22		26
Net interest income after provision for credit losses	1,180				1,324			(144)		(11)











Noninterest income	467				512			(45)		(9)










Noninterest expense	1,137				1,086			51		5
Income before income taxes	510				750			(240)		(32)
Provision for income taxes	86				144			(58)		(40)
Income after income taxes	424				606			(182)		(30)
Income attributable to non-controlling interest	5				4			1		25
Net income attributable to Huntington	419				602			(183)		(30)
Dividends on preferred shares	36				29			7		24

Net income applicable to common shares	$	383			$	573		$	(190)	(33)	%

Average common shares—basic	1,448				1,443			5		—	%
Average common shares—diluted	1,473				1,469			4		—
Net income per common share—basic	$	0.26			$	0.40		$	(0.14)	(35)
Net income per common share—diluted	0.26				0.39			(0.13)		(33)
Return on average total assets	0.89		%		1.32		%
Return on average common shareholders’ equity	9.2				14.6
Return on average tangible common shareholders’ equity (1)	14.2				23.1
Net interest margin (2)	3.01				3.40
Efficiency ratio (3)	63.7				55.6


Revenue and Net Interest Income—FTE (non-GAAP)
Net interest income	$	1,287			$	1,409		$	(122)	(9)	%
FTE adjustment (2)	13				9			4		44
Net interest income, FTE (non-GAAP) (2)	1,300				1,418			(118)		(8)
Noninterest income	467				512			(45)		(9)
Total revenue, FTE (non-GAAP) (2)	$	1,767			$	1,930		$	(163)	(8)	%

(1)Net income applicable to common shares excluding expense for amortization of intangibles for the period divided by average tangible common shareholders’ equity. Average tangible common shareholders’ equity equals average total common shareholders’ equity less average intangible assets and goodwill. Expense for amortization of intangibles and average intangible assets are net of deferred tax liability and calculated assuming a 21% tax rate.

(2)On an FTE basis assuming a 21% tax rate.

(3)Noninterest expense less amortization of intangibles divided by the sum of FTE net interest income and noninterest income excluding securities gains.

For the first quarter of 2024, we reported net income of $419 million, or $0.26 per diluted common share, compared with $602 million, or $0.39 per diluted common share, in the year-ago quarter. The first quarter of 2024 reported net income was negatively impacted by the recognition of additional FDIC DIF special assessment expense totaling $32 million, or $25 million after tax ($0.02 per common share), based on updated FDIC estimates to recover the costs associated with the 2023 bank failures, and staffing efficiency related expense of $7 million, or $5 million after tax. The year-ago quarter reported net income was positively impacted by the sale of our RPS business resulting in a $57 million gain, or $44 million after tax ($0.03 per common share), and negatively impacted by voluntary retirement program and organization realignment expense of $42 million, or $34 million after tax ($0.02 per common share).

6 Huntington Bancshares Incorporated

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Net interest income was $1.3 billion for the first quarter of 2024, a decrease of $122 million, or 9%, from the year-ago quarter. FTE net interest income, a non-GAAP financial measure, decreased $118 million, or 8%, from the year-ago quarter. The decrease in FTE net interest income primarily reflected a 39 basis point decrease in the FTE NIM to 3.01% and a $11.8 billion, or 10%, increase in average interest-bearing liabilities, partially offset by a $4.7 billion, or 3%, increase in average earning assets.

The provision for credit losses increased $22 million, or 26%, from the year-ago quarter to $107 million in the first quarter of 2024. The ACL increased $116 million from the year-ago quarter to $2.4 billion in the first quarter of 2024, or 1.97% of total loans and leases, compared to $2.3 billion, or 1.90% of total loans and leases. The increase in the total ACL was driven by a combination of loan and lease growth and modest builds in overall coverage ratios that are reflective of the current macroeconomic environment and changes in various risk profiles intended to capture uncertainty not addressed within the quantitative reserve.

Noninterest income of $467 million, decreased $45 million, or 9%, from the year-ago quarter, primarily due to the $57 million gain associated with the sale of the RPS business recognized in the year-ago quarter included within other noninterest income, and a decrease in capital markets and advisory fees, partially offset by increases in payments and cash management revenue and wealth and asset management revenue. Noninterest expense of $1.1 billion, increased $51 million, or 5%, from the year-ago quarter, primarily due to the aforementioned $32 million of FDIC DIF special assessment expense and an increase in outside data processing and other services.

Total assets at March 31, 2024 were $193.5 billion, an increase of $4.2 billion, or 2%, compared to December 31, 2023. The increase in total assets was primarily driven by increases in interest-earning deposits with banks of $2.5 billion, or 28%, total investment securities of $1.2 billion, or 3%, and loans and leases of $785 million, or 1%. Total liabilities at March 31, 2024 were $174.1 billion, an increase of $4.2 billion, or 2%, compared to December 31, 2023. The increase in total liabilities was primarily driven by increases in long-term debt of $2.5 billion, or 20%, and total deposits of $2.0 billion, or 1%, partially offset by a decrease in short-term borrowings of $438 million, or 71%.

The tangible common equity to tangible assets ratio decreased slightly to 6.0% at March 31, 2024, compared to 6.1% at December 31, 2023, primarily due to higher tangible assets and a change in AOCI driven by changes in interest rates, partially offset by current period earnings, net of dividends. CET1 risk-based capital ratio was 10.2% at both March 31, 2024 and December 31, 2023, as an increase in risk-weighted assets, driven by loan growth, and the CECL transitional amount, was offset by current period earnings, net of dividends.

General

Our general business objectives are to:

•Build on our vision to be the country’s leading people-first, digitally powered bank;

•Drive sustainable long-term revenue growth and efficiency;

•Deliver a Category of One customer experience through our distinguished brand and culture;

•Extend our digital leadership with focus on ease of use, access to information, and self-service across products and services;

•Leverage expertise and capabilities to acquire and deepen relationships and launch of select partnerships;

•Maintain positive operating leverage and execute disciplined capital management; and

•Provide stability and resilience through risk management, maintaining an aggregate moderate-to-low, through-the-cycle risk appetite.

Economy

Inflation remained high in the first quarter of 2024 while the labor market showed some signs of slowing, but remained strong overall. The Federal Reserve reiterates that data drives its interest rate policy. Until the data demonstrates that inflation will near the Federal Reserve’s 2% target, the Federal Reserve indicated that it is unlikely to take action to lower interest rates. The economy as a whole is doing well and consumer spending continues to surprise to the upside. Equity markets rallied in the first quarter of 2024 as the soft landing scenario looks more likely. Further banking regulation has been delayed with clarity on proposed amendment to the regulatory capital rule and long-term debt requirements for banks anticipated later in 2024.

The consensus economic outlook assumes a soft landing in the second half of 2024 to early 2025. Inflation expectations have risen, which has pushed expectations for the first Federal Reserve rate cuts to late 2024 or early 2025. The delay in rate cuts could eventually lead to lower GDP growth and higher unemployment.

2024 1Q Form 10-Q 7

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Our quarterly results reflect continued execution of our growth strategy and leveraging the strength of our balance sheet, delivered through sustained organic deposit and loan growth. We have continued our disciplined approach to managing credit quality consistent with our aggregate moderate-to-low, through-the-cycle risk appetite. With our disciplined and proactive approach, we believe Huntington is well positioned to perform well through the dynamic environment. We remain focused on delivering profitable growth and driving value for our shareholders.

DISCUSSION OF RESULTS OF OPERATIONS

This section provides a review of financial performance on a consolidated basis. Key unaudited consolidated balance sheet and unaudited income statement trends are discussed. All earnings per share data are reported on a diluted basis. For additional insight on financial performance, please read this section in conjunction with the “Business Segment Discussion.”

8 Huntington Bancshares Incorporated

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Average Balance Sheet / Net Interest Income

The following tables detail the change in our average balance sheet and the net interest margin.


Table 2 - Consolidated Quarterly Average Balance Sheet and Net Interest Margin Analysis

	Three Months Ended March 31, 2024						Three Months Ended March 31, 2023
	Average		Interest Income		Yield/		Average		Interest Income		Yield/		Change in Average Balances
(dollar amounts in millions)	Balances		(FTE) (1)		Rate (2)		Balances		(FTE) (1)		Rate (2)		Amount		Percent
Assets:


Interest-earning deposits with banks	$	9,761	$	134	5.50	%	$	6,350	$	76	4.81	%	$	3,411	54	%
Securities:
Trading account securities	133		2		5.15		21		—		5.37		112		NM
Available-for-sale securities:
Taxable	22,515		296		5.26		21,368		232		4.34		1,147		5
Tax-exempt	2,676		34		5.05		2,640		29		4.40		36		1
Total available-for-sale securities	25,191		330		5.24		24,008		261		4.35		1,183		5
Held-to-maturity securities—taxable	15,567		95		2.44		16,977		102		2.41		(1,410)		(8)



Other securities	724		9		5.23		886		10		4.35		(162)		(18)
Total securities	41,615		436		4.19		41,892		373		3.56		(277)		(1)
Loans held for sale	458		7		6.51		450		7		5.85		8		2
Loans and leases: (3)
Commercial:
Commercial and industrial	50,625		801		6.26		49,028		686		5.60		1,597		3



Commercial real estate	12,563		240		7.56		13,682		233		6.80		(1,119)		(8)
Lease financing	5,081		79		6.13		5,209		68		5.25		(128)		(2)
Total commercial	68,269		1,120		6.49		67,919		987		5.82		350		1
Consumer:
Residential mortgage	23,710		227		3.83		22,327		190		3.41		1,383		6
Automobile	12,553		158		5.05		13,245		129		3.94		(692)		(5)
Home equity	10,072		195		7.77		10,258		181		7.14		(186)		(2)
RV and marine	5,892		74		5.04		5,366		58		4.42		526		10
Other consumer	1,434		42		11.91		1,305		36		11.18		129		10
Total consumer	53,661		696		5.20		52,501		594		4.57		1,160		2
Total loans and leases	121,930		1,816		5.92		120,420		1,581		5.27		1,510		1
Total earning assets	173,764		2,393		5.54		169,112		2,037		4.89		4,652		3
Cash and due from banks	1,493						1,598						(105)		(7)
Goodwill and other intangible assets	5,697						5,759						(62)		(1)
All other assets	11,619						10,568						1,051		10
Allowance for loan and lease losses	(2,267)						(2,143)						(124)		(6)
Total assets	$	190,306					$	184,894					$	5,412	3	%
Liabilities and shareholders’ equity:
Interest-bearing deposits:
Demand deposits—interest-bearing	$	38,488	$	200	2.09	%	$	40,654	$	132	1.32	%	$	(2,166)	(5)	%
Money market deposits	46,100		413		3.61		37,301		172		1.87		8,799		24
Savings and other domestic deposits	16,595		10		0.24		19,877		3		0.07		(3,282)		(17)
Core certificates of deposit (4)	13,867		160		4.64		5,747		43		3.01		8,120		141
Other domestic deposits of $250,000 or more	461		5		4.18		252		2		2.45		209		83
Negotiable CDs, brokered and other deposits	5,307		69		5.19		4,815		54		4.56		492		10

Total interest-bearing deposits	120,818		857		2.85		108,646		406		1.52		12,172		11
Short-term borrowings	1,300		19		5.95		4,371		60		5.56		(3,071)		(70)
Long-term debt	13,777		217		6.30		11,047		153		5.52		2,730		25
Total interest-bearing liabilities	135,895		1,093		3.23		124,064		619		2.02		11,831		10
Demand deposits—noninterest-bearing	29,910						37,498						(7,588)		(20)
All other liabilities	5,239						5,056						183		4
Total liabilities	171,044						166,618						4,426		3
Total Huntington shareholders’ equity	19,213						18,231						982		5
Non-controlling interest	49						45						4		9
Total equity	19,262						18,276						986		5
Total liabilities and equity	$	190,306					$	184,894					$	5,412	3	%
Net interest rate spread					2.31						2.87
Impact of noninterest-bearing funds on margin					0.70						0.53
Net interest margin/NII (FTE)			$	1,300	3.01	%			$	1,418	3.40	%

(1)FTE yields are calculated assuming a 21% tax rate.

(2)Yield/rates include the impact of applicable derivatives. Loan and lease and deposit average yield/rates also include impact of applicable non-deferrable and amortized fees.

(3)For purposes of this analysis, NALs are reflected in the average balances of loans and leases.

(4)Includes consumer certificates of deposit of $250,000 or more.

2024 1Q Form 10-Q 9

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Quarterly Net Interest Income

Net interest income for the first quarter of 2024 decreased $122 million, or 9%, from the first quarter of 2023. FTE net interest income, a non-GAAP financial measure, for the first quarter of 2024 decreased $118 million, or 8%, from the first quarter of 2023. The decrease in FTE net interest income primarily reflected a 39 basis point decrease in the FTE NIM to 3.01% and a $11.8 billion, or 10%, increase in average interest-bearing liabilities, partially offset by a $4.7 billion, or 3%, increase in average earning assets. The lower NIM was primarily driven by higher cost of funds with the higher interest rate environment and an increase in deposits held at the Federal Reserve Bank, partially offset by higher loan and lease and investment security yields.

Quarterly Average Balance Sheet

Average assets for the first quarter of 2024 increased $5.4 billion, or 3%, to $190.3 billion from the first quarter of 2023, primarily due to increases in average interest-earning deposits with banks of $3.4 billion, or 54%, and average loans and leases of $1.5 billion, or 1%. The increase in average loans and leases was driven by growth in average consumer loans of $1.2 billion, or 2%, and average commercial loans and leases of $350 million, or 1%.

Average liabilities for the first quarter of 2024 increased $4.4 billion, or 3%, from the first quarter of 2023, primarily due to an increase in average deposits. Average deposits increased $4.6 billion, or 3%, primarily due to an increase in average interest-bearing deposits of $12.2 billion, or 11%, partially offset by a decrease in noninterest-bearing deposits of $7.6 billion, or 20%. The increase in average interest-bearing deposits was primarily due to increases in average money market deposits and certificates of deposits, partially offset by decreases in savings and other domestic deposits and interest-bearing demand deposits.

Average shareholders’ equity for the first quarter of 2024 increased $982 million, or 5%, from the first quarter of 2023 primarily due to earnings.

Provision for Credit Losses

(This section should be read in conjunction with the “Credit Risk” section.)

The provision for credit losses for the first quarter of 2024 was $107 million, an increase of $22 million, or 26%, compared to the first quarter of 2023. The increase in provision expense over the prior year quarter reflects increased charge-off activity in the current quarter, primarily in the Commercial portfolio compared to the year ago quarter.

The components of the provision for credit losses were as follows:


Table 3 - Provision for Credit Losses
	Three Months Ended
(dollar amounts in millions)	March 31, 2024		March 31, 2023
Provision for loan and lease losses	$	117	$	78
Provision (benefit) for unfunded lending commitments	(10)		7

Total provision for credit losses	$	107	$	85

10 Huntington Bancshares Incorporated

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Noninterest Income

The following table reflects noninterest income for each of the periods presented:


Table 4 - Noninterest Income
	Three Months Ended
	March 31,		March 31,		Change
(dollar amounts in millions)	2024		2023		Percent
Payments and cash management revenue	$	146	$	137	7	%
Wealth and asset management revenue	88		80		10
Customer deposit and loan fees	77		76		1
Capital markets and advisory fees	56		65		(14)
Leasing revenue	22		26		(15)
Mortgage banking income	31		26		19
Insurance income	19		19		—
Bank owned life insurance income	16		16		—
Gain on sale of loans	5		3		67
Net gains on sales of securities	—		1		—
Other noninterest income	7		63		(89)
Total noninterest income	$	467	$	512	(9)	%

Noninterest income for the first quarter of 2024 was $467 million, a decrease of $45 million, or 9%, from the year-ago quarter. Other noninterest income decreased $56 million, or 89%, primarily due to a $57 million gain on the sale of our RPS business recognized in the first quarter of 2023. Capital markets and advisory fees decreased $9 million, or 14%, primarily due to lower advisory fees. Partially offsetting these decreases, payments and cash management revenue increased $9 million, or 7%, reflecting higher debit card transaction revenue and commercial treasury management revenue, and wealth and asset management revenue increased $8 million, or 10%, reflecting higher assets under management and fixed annuity commissions.

Noninterest Expense

The following table reflects noninterest expense for each of the periods presented:


Table 5 - Noninterest Expense
	Three Months Ended
	March 31,		March 31,		Change
(dollar amounts in millions)	2024		2023		Percent
Personnel costs	$	639	$	649	(2)	%
Outside data processing and other services	166		151		10
Deposit and other insurance expense	54		20		170
Equipment	70		64		9
Net occupancy	57		60		(5)
Marketing	28		25		12
Professional services	25		16		56
Amortization of intangibles	12		13		(8)
Lease financing equipment depreciation	4		8		(50)
Other noninterest expense	82		80		3
Total noninterest expense	$	1,137	$	1,086	5	%
Number of employees (average full-time equivalent)	19,719		20,198		(2)	%

2024 1Q Form 10-Q 11

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Noninterest expense for the first quarter of 2024 was $1.1 billion, an increase of $51 million, or 5%, from the year-ago quarter. Deposit and other insurance expense increased $34 million primarily due to the recognition of additional FDIC DIF special assessment expense totaling $32 million based on updated FDIC estimates to recover the costs associated with the 2023 bank failures. Outside data processing and other services increased $15 million, or 10%, reflecting higher technology and data expense. Professional services increased $9 million, or 56%, largely due to an increase in consulting fees. Partially offsetting these increases, personnel costs decreased $10 million, or 2%, primarily reflecting a $35 million reduction in severance expense related to staffing efficiencies, partially offset by higher salary and benefit expense.

Provision for Income Taxes

The provision for income taxes in the first quarter of 2024 was $86 million, compared to $144 million in the first quarter of 2023. Both periods included the benefits from general business credits, tax-exempt income, tax-exempt bank owned life insurance income, and investments in qualified affordable housing projects. The effective tax rate for the first quarter of 2024 and first quarter of 2023 were 16.8% and 19.2%, respectively. The variance between the first quarter of 2024 compared to the first quarter of 2023 provision for income taxes and effective tax rates related primarily to lower pretax income and discrete tax benefits, while the 2023 first quarter reflected the benefit of capital losses recognized.

The net federal deferred tax asset was $686 million, and the net state deferred tax asset was $114 million at March 31, 2024.

We file income tax returns with the IRS and various state, city, and foreign jurisdictions. Federal income tax audits have been completed for tax years through 2016. Also, with few exceptions, the Company is no longer subject to state and local income tax examinations for tax years before 2019.

RISK MANAGEMENT AND CAPITAL

Risk awareness, identification and assessment, reporting, and active management are key elements in overall risk management. Controls include, among others, effective segregation of duties, access management, and authorization and reconciliation procedures, as well as staff education and a disciplined assessment process. We use a multi-faceted approach to risk governance. It begins with the Board of Directors, which has defined our risk appetite as aggregate moderate-to-low, through-the-cycle.

We classify/aggregate risk into seven risk pillars: credit, market; liquidity, operational, compliance, strategic, and reputation. More information on risk can be found in Item 1A Risk Factors below, the Risk Factors section included in Item 1A of our 2023 Annual Report on Form 10-K and subsequent filings with the SEC. The MD&A included in our 2023 Annual Report on Form 10-K should be read in conjunction with this MD&A, as this discussion provides only material updates to the 2023 Annual Report on Form 10-K. This MD&A should also be read in conjunction with the Unaudited Consolidated Financial Statements, Notes to Unaudited Consolidated Financial Statements, and other information contained in this report. Our definition, philosophy, and approach to risk management have not materially changed from the discussion presented in the 2023 Annual Report on Form 10-K.

Credit Risk

Credit risk is the risk of financial loss if a counterparty is not able to meet the agreed upon terms of the financial obligation. The majority of our credit risk is associated with lending activities, as the acceptance and management of credit risk is central to profitable lending. We also have credit risk associated with our investment securities portfolios (see Note 3 - “Investment Securities and Other Securities” of the Notes to the Unaudited Consolidated Financial Statements). We engage with other financial counterparties for a variety of purposes including investing, asset and liability management, mortgage banking, and trading activities. A variety of derivative financial instruments, principally interest rate swaps, caps, swaptions, swaption collars, floors, forward contracts, and forward starting interest rate swaps are used in asset and liability management activities to protect against the risk of adverse price or interest rate movements. We also use derivatives, principally loan sale commitments, in hedging our mortgage loan interest rate lock commitments and mortgage loans held for sale. While there is credit risk associated with derivative activity, we believe this exposure is minimal.

12 Huntington Bancshares Incorporated

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We focus on the early identification, monitoring, and management of all aspects of our credit risk. In addition to the traditional credit risk mitigation strategies of credit policies and processes, market risk management activities, and portfolio diversification, we use quantitative measurement capabilities that utilize external data sources, enhanced modeling technology, and internal stress testing processes. Our disciplined portfolio management processes are central to our commitment to maintaining an aggregate moderate-to-low, through-the-cycle risk appetite. In our efforts to identify risk mitigation techniques, we have focused on product design features, origination policies, and solutions for delinquent or stressed borrowers.

Loan and Lease Credit Exposure Mix

Refer to the “Loan and Lease Credit Exposure Mix” section of our 2023 Annual Report on Form 10-K for a description of each portfolio segment.

At March 31, 2024, our loans and leases totaled $122.8 billion, representing a $785 million, or 1%, increase compared to $122.0 billion at December 31, 2023.

The table below provides the composition of our total loan and lease portfolio:


Table 6 - Loan and Lease Portfolio Composition

(dollar amounts in millions)	At March 31, 2024				At December 31, 2023
Commercial:
Commercial and industrial	$	51,500	42	%	$	50,657	42	%



Commercial real estate	12,342		10		12,422		10
Lease financing	5,133		4		5,228		4
Total commercial	68,975		56		68,307		56
Consumer:
Residential mortgage	23,744		20		23,720		20
Automobile	12,662		10		12,482		10
Home equity	10,047		8		10,113		8
RV and marine	5,887		5		5,899		5
Other consumer	1,452