HBAN — Q3 2026 Financial Report Analysis

Bigger bank, same earnings per share

Huntington Bancshares, the Columbus, Ohio-based regional bank, earned $721 million in the third quarter of 2026 (three months to September 30), up 15% from $629 million a year earlier. Its net interest income, the money it makes from lending after paying for deposits, rose 37% to $2.07 billion. Almost all of that growth came from buying Cadence Bank and Veritex, which made the bank roughly 40% bigger. Huntington paid for those deals largely with new shares, so diluted earnings per share (EPS) fell to $0.33 from $0.41, and it was unchanged from the second quarter. The quarter's main development was not in the profit line: loans that have stopped paying kept rising, and charge-offs reached their highest rate in at least five quarters.

Key figures

bp = basis point, one-hundredth of a percentage point. Figures come from Huntington's October 22, 2026 earnings release (Exhibit 99.1) and its Quarterly Financial Supplement (Exhibit 99.2). The net interest margin is on a fully taxable-equivalent (FTE) basis, which grosses up tax-free income from municipal bonds so it compares with taxable income. The efficiency ratio and ROTCE (return on tangible common equity, profit as a share of shareholders' equity excluding goodwill) are the bank's own non-GAAP figures. The 10-Q has not been filed yet.

Takeaway: Huntington is now a much larger bank, but per share it earns no more than it did before the deals. Profit rose 15% while the share count rose 38%. The return on tangible equity fell to 14.6% from 17.8%, and nonperforming assets kept climbing. Meanwhile the reserve for losses was drawn down rather than added to. On the bank's adjusted basis, EPS was $0.38 against $0.40 a year ago. So far the deals have made the bank bigger without adding to earnings per share.

How the bank made its money

Net interest income rose $17 million (1%) from Q2 and $563 million (37%) from a year ago. Over the year, average earning assets grew $62.5 billion (32%), "primarily due to" a $52.5 billion increase in average loans from Cadence and Veritex "in addition to organic loan growth." Lower funding costs widened the margin by 12 bp. The average cost of total deposits fell to 1.90% from 2.00%, which outweighed a 12 bp drop in the loan yield, to 5.84%.

From Q2 to Q3, the margin gain came from the bond portfolio, not from lending. The yield on investment securities rose 12 bp to 3.59%, while the loan yield was flat at 5.84%. Average borrowings fell $3.6 billion (16%). Deposit costs edged up 2 bp, which offset part of the gain.

Loans were roughly flat. Average loans fell $806 million from Q2. Commercial real estate loans fell $854 million (4%), and residential mortgages and auto loans also declined. Business (commercial and industrial) loans rose $553 million. Period-end loans were $2.0 billion higher than at June 30, at $191.4 billion, so the quarter ended with more momentum than its average suggests.

Deposits averaged $223.8 billion, up $413 million from Q2. The mix shifted: time deposits (CDs) fell $3.0 billion (11%), while money market accounts rose $2.0 billion and interest-bearing checking rose $1.3 billion. Customers moved money out of CDs into accounts that can be repriced faster.

Fee income fell 8% from Q2 to $722 million. Capital markets and advisory fees fell $18 million (13%) on "lower underwriting and advisory fees." Other noninterest income fell $35 million, "due largely to unfavorable valuation changes for strategic investment and other investments and a decrease in leasing revenue." Mortgage banking income fell $8 million (15%). Payments and cash management revenue rose 3% to $211 million, up 21% from a year ago.

Costs: reported expenses fell $37 million from Q2 to $1,772 million, mainly because acquisition costs dropped to $117 million from $152 million. Excluding those costs, expenses were essentially flat at $1,655 million (vs $1,657 million). Personnel costs fell on "lower salary, benefit, and incentive compensation expense" and outside data processing on "lower technology and data expense". Marketing rose 73% on an adjusted basis "in our expanding geographic areas." Average full-time staff fell to 25,900 from 26,400.

What the headline numbers hide

• Credit is getting worse, and reserves are going down. Nonaccrual loans (loans on which the bank has stopped booking interest because payment is in doubt) reached $1,697 million. That is up from $1,589 million in Q2 and more than double the $808 million of a year ago. The release attributes the quarterly rise to business loans, commercial real estate and residential mortgages. Part of the year-on-year increase was acquired with Cadence and Veritex. Loans 90+ days past due but still accruing rose to $477 million from $234 million. Even so, the provision for credit losses ($123 million) was $23 million less than net charge-offs ($146 million). The allowance for credit losses fell to 1.75% of loans from 1.78% in Q2 and 1.86% a year ago. Coverage of nonaccrual loans fell to 198% from 317% a year ago. The bank's reserve is thinner relative to its problem loans than it was before the deals.
• The GAAP vs adjusted gap is mostly deal costs. Adjusted EPS of $0.38 excludes $117 million of pretax acquisition costs ($92 million after tax, $0.05 a share). It also excludes an $8 million loss from an "acquired equity security conversion adjustment." Q3 2025's adjusted figure excludes a $24 million gain on selling part of the corporate trust business and adds back $14 million of deal costs. On the adjusted basis, net income rose 33% ($819 million vs $616 million), while adjusted EPS fell 5%. That gap is the share issuance.
• Higher preferred dividends take a slice before common shareholders. Dividends on preferred stock were $41 million, against $27 million a year ago, so net income to common shareholders rose only 13% ($680 million vs $602 million).
• Buybacks are small. Huntington repurchased $100 million of stock in Q3, $409 million and about 25 million shares year to date. That is a rounding error against the roughly 560 million extra diluted shares added since a year ago. Period-end shares outstanding fell only to 2.015 billion from 2.020 billion at June 30.
• Tax was not a tailwind. The effective tax rate rose to 19.3% from 18.4% in Q2, which the release attributes to "higher non-deductible expenses."
• Tangible book value slipped. Tangible book value per share fell to $9.47 from $9.65 in Q2 and $9.54 a year ago. Higher market interest rates widened the unrealized loss on the bond portfolio: accumulated other comprehensive income went from -$2.2 billion to -$3.0 billion. This is a paper loss that counts against equity on the balance sheet. The regulatory CET1 ratio rose to 10.1%, because that measure excludes these bond losses. Including them, the bank's adjusted CET1 ratio was 8.9%.
• Cash conversion can't be checked yet. Neither the earnings release nor the financial supplement includes a cash flow statement. That comes with the 10-Q.

Did last time's read hold up?

Mostly not. After Q2 we said the deals would start adding to EPS if quarterly deal costs fell "well below" $152 million while revenue held, which would push EPS above the $0.34 of a year earlier. Deal costs did fall, to $117 million, but revenue dropped 2% (fee income down 8%), and EPS stayed at $0.33. The year-ago EPS was $0.41, so the gap widened. Of the two things we said to watch, the margin went the right way: the 3 bp Q2 dip reversed into a 4 bp gain. The other went the wrong way: nonperforming assets did not level off and rose again, from 0.85% to 0.90%.

Outlook

The earnings release gives no numerical guidance. CEO Steve Steinour said the bank is "achieving our targeted cost and revenue synergies" and is "on track to meet our financial targets." Neither the targets nor a timeline is stated in the release.

Our view: the cost side of the integration looks on track. Adjusted expenses were flat and headcount fell, and if deal costs keep shrinking, about $0.05 a share comes back to reported EPS. The revenue side is less convincing. Average loans shrank, fee income fell, and the margin gain came from bond reinvestment, which is a slower and more limited lever than loan growth. The bigger question is credit. Nonaccrual loans have doubled in a year while the reserve ratio has fallen, and this quarter the bank set aside less than it wrote off. For Q4, watch whether nonaccrual loans level off near $1.7 billion. If they keep climbing, the provision will probably have to rise, and that would absorb the cost savings. Also watch whether the $2 billion rise in period-end loans carries into Q4 average balances.