HUNTINGTON BANCSHARES INC MD

Previous wording

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 June 30, 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.

Current wording

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 September 30, 2024, we have 975 full-service branches and private client group offices which are located in Ohio, Colorado, Florida, Illinois, Indiana, Kentucky, Michigan, Minnesota, North Carolina, Pennsylvania, West Virginia, and Wisconsin. Select financial services and other activities are also conducted in various other states.

Previous wording

Summary of 2024 Second Quarter Results Compared to 2023 Second Quarter

Current wording

Summary of 2024 Third Quarter Results Compared to 2023 Third Quarter

Previous wording

For the second quarter of 2024, we reported net income of $474 million, or $0.30 per diluted common share, compared with $559 million, or $0.35 per diluted common share, in the year-ago quarter.

Current wording

For the third quarter of 2024, we reported net income of $517 million, or $0.33 per diluted common share, compared with $547 million, or $0.35 per diluted common share, in the year-ago quarter.

Previous wording

Net interest income was $1.3 billion for the second quarter of 2024, a decrease of $34 million, or 3%, from the year-ago quarter. FTE net interest income, a non-GAAP financial measure, decreased $32 million, or 2%, from the year-ago quarter. The decrease in FTE net interest income primarily reflected a 12 basis point decrease in the FTE NIM to 2.99% and a $7.8 billion, or 6%, increase in average interest-bearing liabilities, partially offset by a $3.2 billion, or 2%, increase in average earning assets.

Current wording

Net interest income was $1.4 billion for the third quarter of 2024, a decrease of $17 million, or 1%, from the year-ago quarter. FTE net interest income, a non-GAAP financial measure, decreased $15 million, or 1%, from the year-ago quarter. The decrease in FTE net interest income primarily reflected a 22 basis point decrease in the FTE NIM to 2.98% and a $14.4 billion, or 11%, increase in average interest-bearing liabilities, partially offset by a $10.9 billion, or 6%, increase in average earning assets.

Previous wording

The provision for credit losses increased $8 million, or 9%, from the year-ago quarter to $100 million in the second quarter of 2024. The ACL increased $81 million from the year-ago quarter to $2.4 billion in the second quarter of 2024, or 1.95% of total loans and leases, compared to $2.3 billion, or 1.93% of total loans and leases, for the year-ago quarter. 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.

Current wording

The provision for credit losses increased $7 million, or 7%, from the year-ago quarter to $106 million in the third quarter of 2024. The ACL increased $68 million from the year-ago quarter to $2.4 billion in the third quarter of 2024, or 1.93% of total loans and leases, compared to $2.4 billion, or 1.96% of total loans and leases, for the year-ago quarter.

Previous wording

Noninterest income was $491 million, a decrease of $4 million, or 1%, from the year-ago quarter, primarily due to the $18 million favorable mark-to-market on pay-fixed swaptions recognized in the year-ago quarter included within other noninterest income, partially offset by an increase in capital markets and advisory fees. Noninterest expense was $1.1 billion, an increase of $67 million, or 6%, from the year-ago quarter, primarily due to increases in personnel costs and outside data processing and other services.

Current wording

Noninterest income was $523 million, an increase of $14 million, or 3%, from the year-ago quarter, primarily due increases in capital markets and advisory fees, wealth and asset management revenue, and mortgage banking income, partially offset by the $33 million favorable mark-to-market on pay-fixed swaptions recognized in the year-ago quarter. Noninterest expense was $1.1 billion, an increase of $40 million, or 4%, from the year-ago quarter, primarily due to increases in personnel costs and outside data processing and other services, partially offset by decreases in deposit and other insurance expense and net occupancy.

Previous wording

Total assets at June 30, 2024 were $196.3 billion, an increase of $6.9 billion, or 4%, compared to December 31, 2023. The increase in total assets was primarily driven by increases in interest-earning deposits with banks of $2.7 billion, or 31%, loans and leases of $2.4 billion, or 2%, and total investment securities of $1.5 billion, or 4%. Total liabilities at June 30, 2024 were $176.7 billion, an increase of $6.8 billion, or 4%, compared to December 31, 2023. The increase in total liabilities was primarily driven by increases in long-term debt of $4.1 billion, or 33%, and total deposits of $3.1 billion, or 2%.

Current wording

Total assets at September 30, 2024 were $200.5 billion, an increase of $11.2 billion, or 6%, compared to December 31, 2023. The increase in total assets was primarily driven by increases in loans and leases of $4.4 billion, or 4%, total investment securities of $3.5 billion, or 8%, and interest-earning deposits with banks of $2.4 billion, or 27%. Total liabilities at September 30, 2024 were $179.9 billion, an increase of $9.9 billion, or 6%, compared to December 31, 2023. The increase in total liabilities was primarily driven by increases in total deposits of $7.1 billion, or 5%, and long-term debt of $3.3 billion, or 26%.

Previous wording

The tangible common equity to tangible assets ratio decreased slightly to 6.0% at June 30, 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 10.4% at June 30, 2024, compared to 10.2% at December 31, 2023. The increase in CET1 is primarily due to current period earnings, net of dividends, partially offset by the CECL transitional amount and a modest increase in risk-weighted assets. The increase in risk-weighted assets was driven by loan growth, partially offset by the impact of a CLN transaction. Huntington completed a $478 million CLN transaction during the second quarter of 2024 related to an approximately $4 billion reference pool of on-balance sheet prime indirect auto loans as part of the Company's capital optimization strategy.

Current wording

The tangible common equity to tangible assets ratio increased to 6.4% at September 30, 2024, compared to 6.1% at December 31, 2023, primarily due to an improvement in AOCI driven by changes in interest rates, and an increase in tangible common equity from current period earnings, net of dividends, partially offset by an increase in tangible assets. CET1 risk-based capital ratio was 10.4% at September 30, 2024, compared to 10.2% at December 31, 2023. The increase in CET1 is primarily due to current period earnings, net of dividends, partially offset by an increase in risk-weighted assets and a reduction in the CECL transitional amount. The increase in risk-weighted assets was driven by loan growth, partially offset by the impact of the second quarter 2024 CLN transaction.

Previous wording

Our quarterly results reflect continued execution of our growth strategy and leveraging the strength of our balance sheet, delivered through increasing deposit and loan balances, in addition to expanding net interest income and noninterest income. 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 positioned to perform well through the dynamic environment. We remain focused on delivering profitable growth and driving value for our shareholders.

Current wording

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

Previous wording

In June 2024, the FDIC adopted a final rule to modify the required frequency and informational content of resolution plan submissions applicable to insured depository institutions with $50 billion or more in total assets, which describe the insured depository institution’s strategy for a rapid and orderly resolution in the event of material financial distress or failure. As a result of the final rule, the Bank will be required to submit to the FDIC full resolution plans every three years and interim targeted information between full resolution plan submissions. In addition, the final rule introduces a new credibility standard that will be used to evaluate full resolution plan submissions, which would be subject to potential FDIC enforcement action. The final rule is effective beginning October 1, 2024.

Current wording

In June 2024, the FDIC adopted a final rule to modify the required frequency and informational content of resolution plan submissions applicable to insured depository institutions with $50 billion or more in total assets, which describe the insured depository institution’s strategy for a rapid and orderly resolution in the event of material financial distress or failure. As a result of the final rule, the Bank will be required to submit to the FDIC full resolution plans every three years and interim targeted information between full resolution plan submissions. In addition, the final rule introduces a new credibility standard that will be used to evaluate full resolution plan submissions, which would be subject to potential FDIC enforcement action. The final rule became effective October 1, 2024 and the deadline for the first resolution plan submission is July 1, 2025.

Previous wording

Net interest income for the second quarter of 2024 decreased $34 million, or 3%, from the second quarter of 2023. FTE net interest income, a non-GAAP financial measure, for the second quarter of 2024 decreased $32 million, or 2%, from the second quarter of 2023. The decrease in FTE net interest income primarily reflected a 12 basis point decrease in the FTE NIM to 2.99% and a $7.8 billion, or 6%, increase in average interest-bearing liabilities, partially offset by a $3.2 billion, or 2%, increase in average earning assets. The lower NIM was primarily driven by higher cost of funds given the higher interest rate environment and a $13.0 billion, or 12%, increase in interest-bearing deposits, partially offset by higher loan and lease and investment security yields.

Current wording

Net interest income for the third quarter of 2024 decreased $17 million, or 1%, from the third quarter of 2023. FTE net interest income, a non-GAAP financial measure, for the third quarter of 2024 decreased $15 million, or 1%, from the third quarter of 2023. The decrease in FTE net interest income primarily reflected a 22 basis point decrease in the FTE NIM to 2.98% and a $14.4 billion, or 11%, increase in average interest-bearing liabilities, partially offset by a $10.9 billion, or 6%, increase in average earning assets. The lower NIM was primarily driven by higher cost of funds given the higher interest rate environment and a $12.3 billion, or 11%, increase in interest-bearing deposits, partially offset by higher loan and lease and investment security yields.

Previous wording

Average assets for the second quarter of 2024 were $194.6 billion, an increase of $3.8 billion, or 2%, from the second quarter of 2023, primarily due to increases in average loans and leases of $2.0 billion, or 2%, and average total securities of $1.3 billion, or 3%. The increase in average loans and leases was driven by growth in average consumer loans of $1.8 billion, or 3%, and average commercial loans and leases of $267 million.

Current wording

Average assets for the third quarter of 2024 were $198.3 billion, an increase of $11.7 billion, or 6%, from the third quarter of 2023, primarily due to increases in average total securities of $4.2 billion, or 10%, average loans and leases of $3.7 billion, or 3%, and average interest-earning deposits with banks of $3.0 billion, or 31%. The increase in average loans and leases was driven by growth in average consumer loans of $2.1 billion, or 4%, and average commercial loans and leases of $1.7 billion, or 2%.

Previous wording

Average liabilities for the second quarter of 2024 increased $3.4 billion, or 2%, from the second quarter of 2023, primarily due to an increase in average deposits of $8.0 billion, or 6%, partially offset by a decrease in total borrowings of $5.1 billion, or 24%. Average deposits increased due to an increase in average interest-bearing deposits of $13.0 billion, or 12%, partially offset by a decrease in noninterest-bearing deposits of $4.9 billion, or 14%. 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. The decrease in total borrowings was primarily due to lower FHLB borrowings driven by normal management of funding needs.

Current wording

Average liabilities for the third quarter of 2024 increased $10.3 billion, or 6%, from the third quarter of 2023, primarily due to increases in average deposits of $8.3 billion, or 6%, and in total borrowings of $2.1 billion, or 14%. Average deposits increased due to an increase in average interest-bearing deposits of $12.3 billion, or 11%, partially offset by a decrease in noninterest-bearing deposits of $4.0 billion, or 12%. 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. The increase in total borrowings was primarily due to the addition of auto securitization trust in the first quarter of 2024 and the normal management of funding needs.

Previous wording

Average shareholders’ equity for the second quarter of 2024 increased $410 million, or 2%, from the second quarter of 2023 primarily due to earnings, net of dividends, partially offset by an increase in average accumulated other comprehensive loss.

Current wording

Average shareholders’ equity for the third quarter of 2024 increased $1.4 billion, or 7%, from the third quarter of 2023, primarily due to the benefit from a decrease in average accumulated other comprehensive loss and earnings, net of dividends.

Previous wording

Net interest income for the first six-month period of 2024 decreased $156 million, or 6%, from the year-ago period. FTE net interest income, a non-GAAP financial measure, for the first six-month period of 2024 decreased $150 million, or 5%, from the year-ago period. The decrease in FTE net interest income reflected a 25 basis point decrease in the FTE NIM to 3.00% and a $9.8 billion, or 8%, increase in interest-bearing liabilities, partially offset by a $3.9 billion, or 2%, increase in average total earning assets.

Current wording

Net interest income for the first nine-month period of 2024 decreased $173 million, or 4%, from the year-ago period. FTE net interest income, a non-GAAP financial measure, for the first nine-month period of 2024 decreased $165 million, or 4%, from the year-ago period. The decrease in FTE net interest income reflected a 24 basis point decrease in the FTE NIM to 3.00% and a $11.3 billion, or 9%, increase in interest-bearing liabilities, partially offset by a $6.3 billion, or 4%, increase in average total earning assets. The NIM compression was primarily due to the higher rate environment driving higher cost of funds, partially offset by an increase in loans and lease and investment security yields.

Previous wording

Average assets for the first six-month period of 2024 were $192.4 billion, an increase of $4.6 billion, or 2%, from the year-ago period, primarily due to increases in average loans and leases of $1.8 billion, or 1%, interest-earning deposits with banks of $1.6 billion, or 18%, and total securities of $499 million, or 1%. The increase in average loans and leases included growth in average consumer loans of $1.5 billion, or 3%, and average commercial loans and leases of $307 million.

Current wording

Average assets for the first nine-month period of 2024 were $194.4 billion, an increase of $7.0 billion, or 4%, from the year-ago period, primarily due to increases in average loans and leases of $2.4 billion, or 2%, interest-earning deposits with banks of $2.0 billion, or 23%, and total securities of $1.7 billion, or 4%. The increase in average loans and leases included growth in average consumer loans of $1.7 billion, or 3%, and average commercial loans and leases of $764 million, or 1%.

Previous wording

Average liabilities for the first six-month period of 2024 increased $3.9 billion, or 2%, from the year-ago period, primarily due to an increase in average deposits, partially offset by a decrease in average borrowings. Total average deposits increased $6.3 billion, or 4%, due to an increase in average interest-bearing deposits of $12.6 billion, or 11%, partially offset by a decrease in noninterest-bearing deposits of $6.3 billion, or 17%. The increase in average interest-bearing deposits was driven by 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 borrowings decreased $2.8 billion, or 15%, driven by a decrease in short-term FHLB borrowings.

Current wording

Average liabilities for the first nine-month period of 2024 increased $6.1 billion, or 4%, from the year-ago period, primarily due to an increase in average deposits. Total average deposits increased $7.0 billion, or 5%, due to an increase in average interest-bearing deposits of $12.5 billion, or 11%, partially offset by a decrease in noninterest-bearing deposits of $5.5 billion, or 16%. The increase in average interest-bearing deposits was driven by increases in average money market deposits and certificates of deposits, partially offset by a decrease in savings and other domestic deposits.

Previous wording

Average shareholders’ equity for the first six-month period of 2024 increased $695 million, or 4%, from the year-ago period primarily due to earnings, net of dividends.

Current wording

Average shareholders’ equity for the first nine-month period of 2024 increased $922 million, or 5%, from the year-ago period primarily due to earnings, net of dividends, and the benefit from a decrease in average accumulated other comprehensive loss.

Previous wording

The provision for credit losses for the second quarter of 2024 was $100 million, an increase of $8 million, or 9%, compared to the second 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, partially offset by an increase in the coverage ratio in the prior year quarter. Provision for credit losses for the first six-month period of 2024 was $207 million, an increase of $30 million, or 17%, compared to the year-ago period. The increase over the prior year-to-date period reflects increased charge-off activity in the Commercial portfolio in the current year and an increase in loan growth in 2024 driving allowance builds, partially offset by a modest reduction in overall coverage ratios in 2024. Overall coverage ratios remain reflective of the current macroeconomic environment including recognition of near-term recessionary risks.

Current wording

The provision for credit losses for the third quarter of 2024 was $106 million, an increase of $7 million, or 7%, compared to the third quarter of 2023. Provision for credit losses for the first nine-month period of 2024 was $313 million, an increase of $37 million, or 13%, compared to the year-ago period. The increase over the prior year-to-date period reflects increased charge-off activity in the current year partially offset by a slightly higher allowance build in the year-ago period. Overall coverage ratios remain reflective of the current macroeconomic environment including recognition of near-term recessionary risks.

Previous wording

Noninterest income for the second quarter of 2024 was $491 million, a decrease of $4 million, or 1%, from the year-ago quarter. Other noninterest income decreased $28 million, or 85%, primarily due to an $18 million favorable mark-to-market on pay-fixed swaptions recognized in the second quarter of 2023 and $9 million of contra-revenue related to premium costs and mark-to-market associated with credit risk transfer transactions, inclusive of the CLN transaction, recognized in the second quarter of 2024. Partially offsetting these decreases, capital markets and advisory fees increased $11 million, or 18%, primarily due to higher merger and acquisition advisory service fees. Payments and cash management revenue increased $8 million, or 5%, reflecting higher debit card transaction revenue and commercial treasury management revenue. Wealth and asset management revenue increased $7 million, or 8%, reflecting higher fixed annuity commissions and an increase in assets under management.

Current wording

Noninterest income for the third quarter of 2024 was $523 million, an increase of $14 million, or 3%, from the year-ago quarter. Capital markets and advisory fees increased $26 million, or 50%, primarily due to higher underwriting and interest rate derivative fees. Wealth and asset management revenue increased $14 million, or 18%, reflecting an increase in assets under management and higher fixed annuity commissions. Mortgage banking income increased $11 million, or 41%, primarily due to higher saleable spreads. Payments and cash management revenue increased $6 million, or 4%, primarily reflecting higher card and merchant acquiring transaction revenue. Customer deposit and loan fees increased $6 million, or 8%, primarily due to higher loan commitment fees. Partially offsetting these increases, other noninterest income decreased $43 million, or 88%. Other noninterest income in the third quarter of 2023 included a $33 million favorable mark-to-market on pay-fixed swaptions, while the third quarter of 2024 included $8 million of contra-revenue related to premium costs and mark-to-market associated with credit risk transfer transactions. Leasing revenue also decreased $13 million, or 41%, driven by lower income from terminated leases.

Previous wording

Noninterest income for the first six-month period of 2024 decreased $49 million, or 5%, from the year-ago period. Other noninterest income decreased $84 million, or 88%, primarily due to a $57 million gain on the sale of our RPS business and an $18 million favorable mark-to-market on pay-fixed swaptions recognized in the first six-month period of 2023, and $11 million of contra-revenue related to premium costs and mark-to-market associated with credit risk transfer transactions recognized in the first six-month period of 2024. Leasing revenue decreased $10 million, or 20%, primarily driven by a decrease in operating lease income. Partially offsetting these decreases, payments and cash management revenue increased $17 million, or 6%, reflecting higher debit card transaction revenue and commercial treasury management revenue. Wealth and asset management revenue increased $15 million, or 9%, reflecting higher fixed annuity commission and assets under management. Customer deposit and loan fees increased $8 million, or 5%, primarily reflecting higher deposit fees.

Current wording

Noninterest income for the first nine-month period of 2024 decreased $35 million, or 2%, from the year-ago period. Other noninterest income decreased $127 million, or 88%, primarily due to a $57 million gain on the sale of our RPS business and an $18 million favorable mark-to-market on pay-fixed swaptions recognized in the first nine-month period of 2023, and $19 million of contra-revenue related to premium costs and mark-to-market associated with credit risk transfer transactions recognized in the first nine-month period of 2024. Leasing revenue decreased $23 million, or 28%, driven by lower income on terminated leases and operating lease income. Partially offsetting these decreases, wealth and asset management revenue increased $29 million, or 12%, reflecting higher fixed annuity commissions and an increase in assets under management. Capital markets and advisory fees increased $28 million, or 16%, primarily due to higher underwriting fees. Payments and cash management revenue increased $23 million, or 5%, reflecting higher commercial treasury management and card transaction revenue. Customer deposit and loan fees increased $14 million, or 6%, primarily reflecting higher deposit fees. Mortgage banking income increased $13 million, or 15%, primarily reflecting increases in net servicing income and saleable spreads.

Previous wording

Noninterest expense for the second quarter of 2024 was $1.1 billion, an increase of $67 million, or 6%, from the year-ago quarter. Personnel costs increased $50 million, or 8%, primarily due to higher salary, incentive compensation, and benefit expense. Outside data processing and other services increased $17 million, or 11%, reflecting higher technology and data expense. In addition, the second quarter of 2024 included $6 million of additional expense attributable to the FDIC DIF special assessment within deposit and other insurance expense.

Current wording

Noninterest expense for the third quarter of 2024 was $1.1 billion, an increase of $40 million, or 4%, from the year-ago quarter. Personnel costs increased $62 million, or 10%, primarily due to higher salary, benefit, and incentive compensation expense. Outside data processing and other services increased $18 million, or 12%, reflecting higher technology and data expense. Partially offsetting these increases, other noninterest expense decreased $15 million, or 17%, largely due to a gain from the call of subordinated debt and lower franchise and other taxes, deposit and other insurance expense decreased $10 million, or 40%, primarily due to $7 million of expense reduction attributable to the FDIC DIF special assessment, and net occupancy expense decreased $10 million, or 15%, primarily due to a decrease in corporate real estate consolidation expense.

Previous wording

Noninterest expense for the first six-month period of 2024 increased $118 million, or 6%, from the year-ago period. Personnel costs increased $40 million, or 3%, primarily due to increases in salary, incentive compensation, and benefit expense, partially offset by a $35 million decrease in severance expense related to staffing efficiencies. Deposit and other insurance expense increased $36 million, or 84%, primarily due to $38 million of additional expense attributable to the FDIC DIF special assessment. Outside data processing increased $32 million, or 11%, primarily due higher technology and data expense. Professional services increased $14 million, or 38%, driven by an increase in consulting fees.

Current wording

Noninterest expense for the first nine-month period of 2024 increased $158 million, or 5%, from the year-ago period. Personnel costs increased $102 million, or 5%, primarily due to increases in salary, incentive compensation, and benefit expense, partially offset by a $31 million decrease in severance expense related to staffing efficiencies. Outside data processing increased $50 million, or 11%, primarily due to higher technology and data expense. Deposit and other insurance expense increased $26 million, or 38%, primarily due to $31 million of additional expense attributable to the FDIC DIF special assessment. Partially offsetting these increases, lease financing equipment depreciation expense decreased $10 million, or 45%.

Previous wording

The provision for income taxes in the second quarter of 2024 was $106 million, compared to $134 million in the second quarter of 2023. The provision for income taxes for the six-month periods ended June 30, 2024 and June 30, 2023 was $192 million and $278 million, respectively. All 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 second quarter of 2024 and second quarter of 2023 was 18.2% and 19.3%, respectively. The effective tax rates for the six-month periods ended June 30, 2024 and June 30, 2023 were 17.5% and 19.2%, respectively. The variance between the second quarter of 2024 compared to the second quarter of 2023, and the six-month period ended June 30, 2024 compared to the six-month period ended June 30, 2023 provision for income taxes and effective tax rates related primarily to lower pretax income and discrete tax benefits.

Current wording

The provision for income taxes in the third quarter of 2024 was $116 million, compared to $136 million in the third quarter of 2023. The provision for income taxes for the nine-month periods ended September 30, 2024 and September 30, 2023 was $308 million and $414 million, respectively. All 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 third quarter of 2024 and third quarter of 2023 was 18.2% and 19.7%, respectively. The effective tax rates for the nine-month periods ended September 30, 2024 and September 30, 2023 were 17.8% and 19.4%, respectively. The variances between the third quarter of 2024 compared to the third quarter of 2023 related primarily to lower pretax income and capital losses. The variances between the nine-month period ended September 30, 2024 compared to the nine-month period ended September 30, 2023 related primarily to lower pretax income, stock-based compensation, and discrete tax benefits.

Previous wording

The net federal deferred tax asset was $693 million, and the net state deferred tax asset was $114 million at June 30, 2024.

Current wording

The net federal deferred tax asset was $515 million, and the net state deferred tax asset was $80 million at September 30, 2024.

Previous wording

At June 30, 2024, our loans and leases totaled $124.4 billion, representing a $2.4 billion, or 2%, increase compared to $122.0 billion at December 31, 2023.

Current wording

At September 30, 2024, our loans and leases totaled $126.4 billion, representing a $4.4 billion, or 4%, increase compared to $122.0 billion at December 31, 2023.

Previous wording

(2) Amounts include $3.9 billion and $3.3 billion of auto dealer services loans at June 30, 2024 and December 31, 2023, respectively.

Current wording

(2) Amounts include $4.1 billion and $3.3 billion of auto dealer services loans at September 30, 2024 and December 31, 2023, respectively.

Previous wording

Our CRE portfolio totaled $11.9 billion at June 30, 2024, a decrease of $489 million, or 4%, compared to December 31, 2023, driven by loan pay-offs and low demand for new originations. The CRE portfolio had an associated allowance coverage of 4.5% and 4.2% at June 30, 2024 and December 31, 2023, respectively. With remote work options leading to increased vacancy rates and underutilization of office space across the country, the office sector continues to be an area of uncertainty. Our office portfolio, which is predominantly suburban and multi-tenant loans, totaled $1.7 billion, or 1% of total loans and leases, as of June 30, 2024, compared to $1.8 billion, or 1% of total loans and leases, at December 31, 2023. We have established ACL reserves of approximately 12% for our CRE office portfolio as of June 30, 2024, compared to approximately 10% at December 31, 2023. At June 30, 2024, there was $68 million of outstanding balances in the office portfolio that were 30 or more days past due.

Current wording

With remote work options leading to increased vacancy rates and underutilization of office space across the country, the office sector continues to be an area of uncertainty. Our office portfolio, which is predominantly suburban and multi-tenant loans, totaled $1.6 billion, or 1% of total loans and leases, as of September 30, 2024, compared to $1.8 billion, or 1% of total loans and leases, at December 31, 2023. We have established ACL reserves of approximately 11% for our CRE office portfolio as of September 30, 2024, compared to approximately 10% at December 31, 2023. At September 30, 2024, there was $31 million of outstanding balances in the office portfolio that were 30 or more days past due.

Previous wording

Credit quality performance in the second quarter of 2024 reflected NCOs of $90 million, or 0.29% of average total loans and leases, annualized, an increase of $41 million, compared to $49 million, or 0.16%, in the year-ago quarter. The increase was primarily due to a $30 million increase in commercial NCOs to $57 million in the second quarter of 2024. NPAs increased from December 31, 2023 by $69 million, or 10%, primarily driven by a $54 million increase in commercial real estate NALs.

Current wording

Credit quality performance in the third quarter of 2024 reflected NCOs of $93 million, or 0.30% of average total loans and leases, annualized, an increase of $20 million, compared to $73 million, or 0.24%, in the year-ago quarter. The increase reflects an $11 million increase in consumer NCOs to $39 million and a $9 million increase in commercial NCOs to $54 million in the third quarter of 2024. NPAs increased from December 31, 2023 by $73 million, or 10%, primarily driven by a $64 million increase in commercial and industrial NALs.

Previous wording

Commercial loans and leases are placed on nonaccrual status at 90-days past due, or earlier if repayment of principal and interest is in doubt. Of the $553 million of commercial related NALs at June 30, 2024, $258 million, or 47%, represented loans and leases that were less than 30-days past due, demonstrating our continued commitment to proactive credit risk management.

Current wording

Commercial loans and leases are placed on nonaccrual status at 90-days past due, or earlier if repayment of principal and interest is in doubt. Of the $549 million of commercial related NALs at September 30, 2024, $267 million, or 49%, represented loans and leases that were less than 30-days past due, demonstrating our continued commitment to proactive credit risk management.

Previous wording

The baseline scenario used in the June 30, 2024 ACL determination assumes softening of the labor market is underway and will continue through early 2025 causing the unemployment rate to gradually increase, peaking at 4.1% in 2025 before marginally improving to 4.0% by 2026. The Federal Reserve is projected to complete two 25 basis points cuts by the end of 2024. Further cuts of 25 basis points per quarter are expected in 2025 and 2026 until reaching 3% by 2027. Inflation is forecasted to approach the Federal Reserve’s target level of 2% by the end of 2024. The GDP is forecasted to slow from 2.3% in the second quarter to 1.5% by the end of 2024, reflecting volatility throughout 2024. GDP is then forecasted to show more stability throughout 2025, ending the fourth quarter of 2025 at 1.8%.

Current wording

The baseline scenario used in the September 30, 2024 ACL determination assumes the labor market has softened with the unemployment rate peaking at 4.2% in the third quarter of this year. Marginal improvement is expected moving forward with unemployment returning to 4.0% by 2026. The Federal Reserve is projected to enter into a cycle of rate cuts, with regular cuts forecast throughout the remainder of 2024 through 2026 until reaching 3% by 2027. Inflation is forecasted to approach the Federal Reserve’s target level of 2% by the end of 2024 and stabilize in 2025. The GDP is forecasted to continue to slow from 1.8% in the third quarter to 1.5% by the end of 2024. GDP is then forecasted to show marginal improvement throughout 2025, ending the fourth quarter of 2025 at 1.7%.

Previous wording

The ACL was $2.4 billion, or 1.95% of total loans and leases, at June 30, 2024, broadly consistent with December 31, 2023. The marginal absolute increase in the total ACL was driven by loan and lease portfolio growth during the first half of 2024. The marginal reduction in the ACL coverage ratio at June 30, 2024 is reflective of the current macro-economic environment and changes in various risk profiles intended to capture uncertainty not addressed within the quantitative reserve.

Current wording

The ACL was $2.4 billion, or 1.93% of total loans and leases, at September 30, 2024, compared to $2.4 billion, or 1.97% of total loans and leases, at December 31, 2023. The marginal absolute increase in the total ACL was driven by loan and lease portfolio growth during the first nine months of 2024. The reduction in the ACL coverage ratio at September 30, 2024 is reflective of the current macro-economic environment and changes in various risk profiles intended to capture uncertainty not addressed within the quantitative reserve.

Previous wording

NCOs were an annualized 0.29% of average loans and leases in the second quarter of 2024, up from 0.16% in the year-ago quarter, reflecting the continued normalization of net charge-offs. NCOs for commercial loans and leases and consumer loans were higher, with annualized commercial loan and lease net charge-offs of 0.33% in the second quarter of 2024, compared to 0.16% in the year-ago quarter, and annualized consumer loan net charge-offs of 0.24% in the second quarter of 2024, compared to 0.17% in the year-ago quarter.

Current wording

NCOs were an annualized 0.30% of average loans and leases in the third quarter of 2024, up from 0.24% in the year-ago quarter, reflecting the continued normalization of net charge-offs. NCOs for commercial loans and leases and consumer loans were higher, with annualized commercial loan and lease NCOs of 0.31% in the third quarter of 2024, compared to 0.27% in the year-ago quarter, and annualized consumer loan NCOs of 0.28% in the third quarter of 2024, compared to 0.21% in the year-ago quarter.

Previous wording

NCOs were an annualized 0.30% of average loans and leases for the first six-month period of 2024, up from 0.17% in the year ago period. NCOs for the commercial portfolios were higher with annualized net charge-offs of 0.33% in the current period, compared to 0.16% in the year-ago period. Consumer NCOs also increased with annualized net charge-offs of 0.26% in the current period, compared to 0.19% in the year-ago period.

Current wording

NCOs were an annualized 0.30% of average loans and leases for the first nine-month period of 2024, up from 0.20% in the year ago period. NCOs for the commercial loans and leases and consumer loans were higher, with annualized commercial loan and lease NCOs of 0.32% in the current period, compared to 0.20% in the year-ago period, and annualized consumer loan NCOs of 0.27% in the current period, compared to 0.20% in the year-ago period.

Previous wording

Market risk refers to potential losses arising from changes in interest rates, foreign exchange rates, equity prices, and commodity prices, including the correlation among these factors and their volatility. When the value of an instrument is tied to such external factors, the holder faces market risk. We are primarily exposed to interest rate risk as a result of offering a wide array of financial products to our customers and secondarily to price risk from trading securities, securities owned by our broker-dealer subsidiaries, foreign exchange positions, equity investments, and investments in securities backed by mortgage loans.

Current wording

Market risk refers to potential losses arising from changes in interest rates, credit spreads, foreign exchange rates, equity prices, and commodity prices, including the correlation among these factors and their volatility. When the value of an instrument is tied to such external factors, the holder faces market risk. We are primarily exposed to interest rate risk as a result of offering a wide array of financial products to our customers and secondarily to price risk from trading securities, securities owned by our broker-dealer subsidiaries, foreign exchange positions, equity investments, and investments in securities backed by mortgage loans.

Previous wording

A key driver of our interest rate risk profile is our interest-bearing deposit repricing sensitivity assumptions to changes in interest rates, otherwise known as deposit beta. In addition, our interest expense is impacted by the composition of both interest-bearing and noninterest-bearing deposits in relation to our total deposits. Accordingly, we consider the impacts from both interest-bearing and noninterest-bearing deposits on our total deposit beta. Our cumulative to-date total deposit beta (total cost of deposits) is 45% within the current cycle, which started in March 2022.

Current wording

A key driver of our interest rate risk profile is our interest-bearing deposit repricing sensitivity assumptions to changes in interest rates, otherwise known as deposit beta. In addition, our interest expense is impacted by the composition of both interest-bearing and noninterest-bearing deposits in relation to our total deposits. Accordingly, we consider the impacts from both interest-bearing and noninterest-bearing deposits on our total deposit beta. Our cumulative to-date total deposit beta (total cost of deposits) is 46% through the most recent rising rate cycle, which started in March 2022 and concluded in September 2024.

Previous wording

The NII at Risk shows that the balance sheet is asset sensitive at both June 30, 2024, and December 31, 2023. The primary drivers to the change in sensitivity include current and projected balance sheet composition over the simulation horizon and hedging activity.

Current wording

The NII at Risk shows that the balance sheet is asset sensitive at both September 30, 2024, and December 31, 2023. The primary drivers to the change in sensitivity include current and projected balance sheet composition over the simulation horizon, including longer securities portfolio reinvestment duration and executed hedging activity.

Previous wording

The change in sensitivity from December 31, 2023 was driven primarily by market rates, ongoing balance sheet modeling assumption enhancements, and changes to actual balance sheet composition.

Current wording

The change in sensitivity from December 31, 2023 was driven primarily bymarket rates, ongoing balance sheet modeling assumption enhancements, such as updated credit spread discounting methodology and BOLI sensitivity measurement, and changes to actual balance sheet composition.

Previous wording

An integral component of our interest rate risk management strategy is the use of derivative instruments to minimize significant fluctuations in earnings caused by changes in market interest rates. Examples of derivative instruments that we may use as part of our interest rate risk management strategy include interest rate swaps, caps and floors, collars, forward contracts, and forward starting interest rate swaps.

Current wording

An integral component of our interest rate risk management strategy is the use of derivative instruments to minimize significant fluctuations in earnings caused by changes in market interest rates. 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.

Previous wording

Table 17 shows all swap, swaption, swaption collar, and floor positions that are utilized for purposes of managing our exposures to the variability of interest rates. The interest rate variability may impact either the fair value of the assets and liabilities or impact the cash flows attributable to net interest margin. These positions are used to protect the fair value of asset and liabilities by converting the contractual interest rate on a specified amount of assets and liabilities (i.e., notional amounts) to another interest rate index. The positions are also used to hedge the variability in cash flows attributable to the contractually specified interest rate by converting the variable rate index into a fixed rate. The volume, maturity, and mix of derivative positions change frequently as we adjust our broader interest rate risk management objectives and the balance sheet positions to be hedged. For further information, including the notional amount and fair values of these derivatives, refer to Note 13 - “Derivative Financial Instruments” of the Notes to Unaudited Consolidated Financial Statements.

Current wording

Table 17 shows all swap and floor positions that are utilized for purposes of managing our exposures to the variability of interest rates. The interest rate variability may impact either the fair value of the assets and liabilities or impact the cash flows attributable to net interest margin. These positions are used to protect the fair value of asset and liabilities by converting the contractual interest rate on a specified amount of assets and liabilities (i.e., notional amounts) to another interest rate index. The positions are also used to hedge the variability in cash flows attributable to the contractually specified interest rate by converting the variable rate index into a fixed rate. The volume, maturity, and mix of derivative positions change frequently as we adjust our broader interest rate risk management objectives and the balance sheet positions to be hedged. For further information, including the notional amount and fair values of these derivatives, refer to Note 13 - “Derivative Financial Instruments” of the Notes to Unaudited Consolidated Financial Statements.