HUNTINGTON BANCSHARES INC MD

Acquisitions and Divestitures

In March 2023, Huntington completed the sale of the RPS business and entered into an ongoing partnership with the purchaser. The sale of our RPS business resulted in a $57 million gain including associated goodwill allocation, recorded within other noninterest income.

In June 2022, Huntington completed the acquisition of Capstone Partners, a top tier middle market investment bank and advisory firm. The transaction brings a national scale to serve middle market business owners throughout the corporate lifecycle, building on Huntington’s regional banking foundation. Capstone Partners related revenue, including mergers and acquisitions, capital raising and other advisory-related fees, is recognized within capital markets fees in the Consolidated Statements of Income. For further information, refer to Note 3 - “Business Combinations” of the Notes to Consolidated Financial Statements.

In May 2022, Huntington completed the acquisition of Torana, now known as Huntington ChoicePay, a digital payments business focused on business to consumer payments. This acquisition, along with the formation of our enterprise-wide payments group, reflects one of our strategic priorities to accelerate our payments capabilities and expand the services provided to our customers.

In June 2021, Huntington closed the acquisition of TCF Financial Corporation. TCF was a financial holding company headquartered in Detroit, Michigan with operations across the Midwest. The acquisition brought increased scale and market density, as well as added new markets and capabilities. Our operating results include the impact of TCF subsequent to the acquisition on June 9, 2021. For further information, refer to Note 3 - “Business Combinations” of the Notes to Consolidated Financial Statements.

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 the Consolidated Financial Statements.

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 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.

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During the second quarter of 2023, we revised our process for assessing and monitoring the risk and performance of non-real estate secured commercial loans, primarily loans to REITs. These loans were reclassified from commercial real estate to the commercial and industrial loan category to align reporting with this process revision.

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

2023 Financial Performance Review

Selected Financial Data

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

In 2023, we reported net income of $2.0 billion, a $287 million, or 13%, decrease from the prior year. Earnings per common share on a diluted basis for the year were $1.24, down 14% from the prior year. The current year reported net income was negatively impacted by the recognition of the FDIC DIF special assessment totaling $214 million, or $169 million after tax ($0.11 per common share), to recover the cost associated with protecting uninsured depositors as part of the 2023 bank failures and $69 million, or $55 million after tax ($0.04 per common share), of expense from staffing related initiatives and the consolidation of corporate locations. The prior year’s reported net income was negatively impacted by acquisition-related expenses totaling $95 million, or $76 million after tax ($0.05 per common share).

2023 Form 10-K 45

Net interest income for 2023 was $5.4 billion, up $166 million, or 3%, from 2022. FTE net interest income, a non-GAAP financial measure, increased $177 million, or 3%, from 2022. The increase in FTE net interest income reflected an increase in earning asset yields and the benefit of a $8.3 billion, or 5%, increase in average earning assets, partially offset by higher cost of funds and a $15.3 billion, or 13%, increase in average interest-bearing liabilities. Average earning asset growth included a $5.7 billion, or 5%, increase in loans and leases and a $4.5 billion, or 92%, increase in interest-earning deposits with banks, partially offset by a $1.4 billion, or 3%, decrease in average securities. The growth in average interest-bearing liabilities included a $10.1 billion, or 10%, increase in average interest-bearing deposits and a $5.2 billion, or 46%, increase in average borrowings.

The provision for credit losses increased $113 million, or 39%, to $402 million, primarily driven by a combination of loan and lease growth and modest overall ACL coverage ratio builds throughout 2023 that is reflective of the current macroeconomic environment. The ACL was $2.4 billion, or 1.97% of total loans and leases, at December 31, 2023, compared to $2.3 billion, or 1.90% of total loans and leases, at December 31, 2022.

Noninterest income of $1.9 billion, decreased $60 million, or 3%, from the prior year primarily due to lower gain on sale of loans, customer deposit and loan fees, and mortgage banking income, in addition to $24 million of unfavorable mark-to-market on the pay-fixed swaptions program, partially offset by a $57 million gain on the sale of our RPS business and increases in payments and cash management revenue and wealth and asset management revenue. Noninterest expense of $4.6 billion, increased $373 million, or 9%, from the prior year primarily due to the FDIC DIF special assessment of $214 million and an increase in personnel costs, partially offset by a decrease in acquisition-related expenses.

Total assets at December 31, 2023 were $189.4 billion, an increase of $6.5 billion, or 4%, compared to December 31, 2022. The increase in total assets was primarily driven by increases in interest-earning deposits with banks of $3.6 billion, or 71%, and loans and leases of $2.5 billion, or 2%. Total liabilities at December 31, 2023 were $170.0 billion, an increase of $4.8 billion, or 3%, compared to December 31, 2022. The increase in total liabilities was primarily driven by increases in total deposits of $3.3 billion, or 2%, and borrowings of $1.3 billion, or 11%.

The tangible common equity to tangible assets ratio was 6.14% at December 31, 2023, up 59 basis points from December 31, 2022, primarily due to an increase in tangible common equity related to earnings, net of dividends, and a decrease in accumulated other comprehensive loss due in part from a modest decline in interest rates at year-end, partially offset by higher tangible assets. CET1 risk-based capital ratio was 10.25%, up from 9.36% at December 31, 2022. The increase in regulatory capital ratios was primarily driven by earnings and a decrease in risk-weighted assets, partially offset by dividends. The decrease in risk-weighted assets was largely driven by the synthetic CRT related to an approximately $3 billion portfolio of on-balance sheet prime indirect auto loans.

Business Overview

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 launching of select partnerships;

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

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

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Economy

Inflation continues to trend lower while remaining at levels above the Federal Reserve’s long run target. The Federal Reserve has shifted policy to a more balanced interest rate view and continues to further evaluate the impact of their monetary tightening and the overall health of the economy. The economy has continued to expand with fourth quarter of 2023 growth trending towards 2.0%. Equity markets have remained buoyant anticipating easier policy from the Federal Reserve in 2024. Further banking regulation has been delayed as recent regulatory proposals have been in their comment periods for an extended amount of time, with clarity on proposed amendments to the regulatory capital rule and long-term debt requirements for banks anticipated.

The consensus economic outlook assumes a soft landing through the first half of 2024 with modest growth in the second half of 2024. Inflation is expected to continue to fall, approaching target levels of 2% by the third quarter of 2024, as the Federal Reserve actions will likely result in lower GDP growth and higher unemployment.

Our 2023 results reflect the execution of our growth strategy and leveraging the strength of our balance sheet, delivered through sustained deposit growth, bolstered capabilities across our payments and other fee revenue areas, and expansion of our CET1. We have continued our disciplined management of credit 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 manage through the uncertain economic outlook on the horizon. We remain focused on delivering profitable growth and driving value for our shareholders.

Legislative and Regulatory

A comprehensive discussion of legislative and regulatory matters affecting us can be found in Item 1: Business - “Regulatory Matters” section of this Form 10-K.