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 have over 150 years of servicing the financial needs of our customers. Through our subsidiaries, we provide full-service commercial and consumer banking services, mortgage banking services, automobile financing, recreational vehicle and marine financing, equipment financing, inventory finance, investment management, trust services, brokerage services, insurance products and services, and other financial products and services. At March 31, 2022, our 1,030 full-service branches and private client group offices 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. International banking services are available through the headquarters office in Columbus, Ohio. Our foreign banking activities, in total or with any individual country, are not significant.

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 2021 Annual Report on Form 10-K should be read in conjunction with this MD&A as this discussion provides only material updates to the 2021 Annual Report on Form 10-K. This MD&A should also be read in conjunction with the Unaudited Condensed Consolidated Financial Statements, Notes to Unaudited Condensed Consolidated Financial Statements, and other information contained in this report.

EXECUTIVE OVERVIEW

On June 9, 2021, Huntington closed the acquisition of TCF Financial Corporation. Historical periods prior to June 9, 2021 reflect results of legacy Huntington operations. Subsequent to closing, results reflect all post-acquisition activity. See Note 3 "Acquisition of TCF Financial Corporation" of the Notes to Unaudited Condensed Consolidated Financial Statements appearing in Huntington's 2021 Annual Report on Form 10-K for further information.

On March 1, 2022, Huntington announced the signing of a definitive agreement to acquire Capstone Partners, a top tier middle market investment bank and advisory firm. The transaction is expected to close late in the second quarter of 2022, subject to receipt of required regulatory approval and satisfaction of customary closing conditions.

Summary of 2022 First Quarter Results Compared to 2021 First Quarter

For the quarter, we reported net income of $460 million, or $0.29 per diluted common share, compared with $532 million, or $0.48 per diluted common share, in the year-ago quarter. The 2022 first quarter reported net income benefited from the TCF acquisition and organic growth, while the year-ago quarter was favorably impacted by the provision for credit losses benefit and the mark-to-market of interest rate caps.

Net interest income was $1.1 billion, up $174 million, or 18% from the year-ago quarter. FTE net interest income increased $176 million, or 18%, from the year-ago quarter. The increase in FTE net interest income reflected the benefit from a $48.3 billion, or 42%, increase in average earning assets, partially offset by a 60 basis point decrease in the FTE net interest margin to 2.88%. Average earning asset growth included a $30.9 billion, or 38%, increase in average loans and leases and a $16.5 billion, or 63% increase in average securities. The year-over-year decrease in NIM was driven by the 2021 first quarter benefit of a $144 million mark-to-market adjustment on interest rate caps and a $34 million decrease in accelerated PPP loan fees recognized upon forgiveness payments, partially offset by an increase in securities yields and the 2022 first quarter benefit of $19 million of net interest income from purchase accounting accretion.


                                                             2022 1Q Form 10-Q 5

--------------------------------------------------------------------------------

Table of Content

The provision for credit losses increased $85 million from the year-ago quarter to $25 million in the 2022 first quarter. The ACL increased $368 million from the year-ago quarter to $2.1 billion, or 1.87%, of total loans and leases, compared to $1.7 billion, or 2.17% of total loans and leases, primarily due to the acquisition of TCF and organic loan and lease growth. The decrease in ACL as a percentage of total loans and leases reflected the overall continued general improvement in economic conditions, however both inflationary and geopolitical risks remain. NCOs decreased $45 million from the year-ago-quarter to $19 million. Total NCOs represented an annualized 0.07% of average loans and leases in the current quarter, down from 0.32% in the year-ago quarter.

Noninterest income was $499 million, an increase of $104 million, or 26%, and noninterest expense increased $260 million, or 33%, from the year-ago quarter. The increases in both noninterest income and noninterest expense were primarily impacted by the acquisition of TCF.

The tangible common equity to tangible assets ratio was 6.28% at March 31, 2022, down 60 basis points from December 31, 2021, primarily due to a decrease in tangible common equity related to higher interest rates causing a decrease in accumulated other comprehensive income. Common Equity Tier 1 (CET1) risk-based capital ratio was 9.22%, down from 9.33% from December 31, 2021. The regulatory Tier 1 risk-based capital ratio was 10.84% compared to 10.99% at December 31, 2021. The decrease in regulatory capital ratios was primarily driven by growth in risk-weighted assets.

During the 2022 first quarter, considering the pending acquisition of Capstone Partners and growth in the loan and lease portfolio, Huntington repurchased no shares of common stock under the current repurchase authorization. In July of 2021, our Board authorized the repurchase of up to $800 million of common shares which began the third quarter of 2021 and goes through the second quarter of 2022. Purchases of common stock under the authorization may include open market purchases, privately negotiated transactions, and accelerated share repurchase programs. As of March 31, 2022, Huntington has completed $650 million of the share repurchase authorization.

Business Overview

General

Our general business objectives are:



•Build on our vision to become 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 proactive and
personalized guidance, differentiated products, and expertise
•Extend our digital capabilities with focus on ease of use, access to
information, and self-service across products and services
•Add scale and scope by acquiring and deepening relationships and launching of
select partnerships
•Maintain positive operating leverage and execute disciplined capital management
•Execute effective risk management with an aggregate moderate-to-low,
through-the-cycle risk appetite

COVID-19

The COVID-19 pandemic has caused unprecedented disruption that has affected daily living and has negatively impacted the economy. As further discussed in "Discussion of Results of Operations," the volatility in the markets and economic uncertainty caused by the pandemic continue to have impact.

Huntington reacted quickly to the changes required by the pandemic as a result of the commitment and flexibility of our colleagues coupled with well-prepared business continuity plans. We continue to make progress towards our new operating model and have begun to welcome more of our colleagues back to the office as part of our Coming Back Together plan. We offer Workplace Flex to help employees achieve work/life harmony in support of the business. We achieve this with flexible work arrangements, parental leave, and other health, wellness and financial benefits and services that assist employees and their families. We continue to monitor the impact of the virus and evolving government guidelines. 6 Huntington Bancshares Incorporated --------------------------------------------------------------------------------

Table of Content

Throughout the pandemic, we have worked with our customers to originate and renew business loans as well as originate loans made available through the SBA PPP, a lending program established as part of the relief to American consumers and businesses in the CARES Act. During the 2022 first quarter, we continued to work with our customers who received PPP loan forgiveness, though we have not had any new originations. Through March 2022, $10.1 billion of the PPP loans have been forgiven by the SBA of the original $11.4 billion of PPP loans originated by both Huntington and TCF prior to acquisition. As of March 31, 2022, we have outstanding PPP loan balances of $645 million, net of forgiveness and customer payments, with balances continuing to decline.

Economy

Growth in economic activity and demand for goods and services, alongside labor shortages and supply chain complications, have contributed to rising inflation. In response, the FRB has begun raising interest rates and signaled that it will continue to raise rates, taper its purchase of mortgage and other bonds and reduce the size of the balance sheet over time. The timing and impact of inflation and rising interest rates on our business and related financial results will depend on future developments, which are highly uncertain and difficult to predict.

We delivered positive results this quarter, driven by continued execution of strategic initiatives and loan and lease growth. Additionally, we saw net interest income expansion, deposit growth and demonstrated disciplined expense management with continued reductions in noninterest expense. Credit continues to perform well in keeping with our aggregate moderate-to-low risk profile through-the-cycle. Through our disciplined and proactive approach, we believe Huntington is well positioned to manage through the uncertainty in the macroeconomic environment. We continue to look forward with optimism and remain focused on delivering profitable growth.

© Edgar Online, source Glimpses