Huntington Bancshares (HBAN) 2025 Earnings Quality Report

Grade: B — Generally Healthy, Minor Concerns

Framework: Bank-specific credit quality analysis + Schilit principles (traditional manufacturing checks partially N/A for banks)

Data: SEC EDGAR 10-K (Filed 2026-02-13) + Yahoo Finance

Auditor: PricewaterhouseCoopers LLP — Unqualified opinion (1 Critical Audit Matter)

One-line verdict: Huntington Bancshares delivered a solid year — net income applicable to common shares of $2.09B, EPS of $1.39, NII growth of 12% to $6.0B, and NIM recovery from 3.00% to 3.13%. The efficiency ratio improved to 59.9%. But this is a bank in aggressive acquisition mode: Huntington completed the Veritex Holdings merger in October 2025 and the Cadence Bank merger in February 2026, materially expanding its footprint into Texas and the Southeast. Goodwill of $6.0B is 28% of equity — manageable but growing. Provision for credit losses rose 10% to $463M, with net charge-offs declining to $316M but nonperforming assets rising 15% to $945M. The screening engine flags cash-to-debt as a watch item (76% coverage), which is normal for a bank. The key risk here is execution: two major bank mergers within four months, each carrying integration, technology, and credit risk.

Important note on bank grading: Standard manufacturing checks (SG&A ratio, gross margin, leverage, soft assets) are not applicable to banks. The M-Score and Z-Score are explicitly not applicable to financial institutions — these models were designed for non-financial companies and produce unreliable results when applied to banks. Bank-specific analysis focuses on NIM, efficiency ratio, credit quality, capital ratios, and ROE.

Financial Performance

Per the 10-K:

Per the filing: "Net interest income was $6.0 billion in 2025, an increase of $646 million, or 12%, from 2024." The increase was driven by higher revolving loan balances and improved asset yields. NIM recovered from 3.00% to 3.13%.

Noninterest income grew 7% to $2.2B, driven by higher customer deposit and loan fees (+$56M, or 17%) and capital markets activity. The filing notes a $24M gain on the sale of a portion of the trust and custody business.

Credit Quality: Manageable but Watch NPAs

Per the filing: provision for credit losses increased $43M (10%) to $463M, "driven primarily by current year loan and lease growth, partially offset by the positive impact of credit migration and lower net charge-offs."

Net charge-offs actually declined 15% from $372M to $316M — a positive signal. But nonperforming assets rose 15% to $945M, indicating that credit stress is migrating from the charge-off stage (resolved losses) to the nonperforming stage (emerging problems). This is a pattern that bears watching.

The ACL ratio declined slightly from 1.88% to 1.83%. Combined with rising NPAs, this means the reserve coverage of problem loans is thinning.

The Acquisition Strategy: Veritex and Cadence

Huntington is executing a dual-acquisition strategy that will transform its geographic footprint:

Veritex Holdings — Completed October 20, 2025. Bank holding company headquartered in Dallas, Texas. Added approximately $10.5B in deposits. Goodwill of $6.0B is "substantially all recorded at the Bank."

Cadence Bank — Completed February 1, 2026 (post-period). Regional bank headquartered in Houston, Texas and Tupelo, Mississippi.

Per the filing: total deposits were $176.6B at December 31, 2025, compared to $162.4B in 2024 — a $14.2B increase (9%), "inclusive of $10.5 billion of deposits acquired in connection with the Veritex Merger."

Total loans were approximately $149.6B, up from $130.0B. The filing notes acquisition-related expenses impacted current-year net income.

Two major bank mergers in four months is an aggressive pace. Integration risk includes technology platform consolidation, personnel retention, and credit quality assessment of acquired loan portfolios.

Efficiency and Capital

The efficiency ratio has improved three consecutive years (61.0% to 59.9%). NIM recovered to 3.13% from the 2024 trough of 3.00%. ROE of 9.1% is below average for regional banks but reflects the dilution from issuing shares for acquisitions and acquisition-related costs.

The 18-Point Screening

Note on B2: The elevated CapEx growth (86.7%) likely reflects technology investments related to the Veritex integration and digital banking platform expansion, not a red flag.

Auditor Critical Audit Matter

PricewaterhouseCoopers flagged one Critical Audit Matter:

Allowance for Credit Losses: The estimation of expected credit losses across the commercial loan portfolio involves "management's use of economic forecasts, including unemployment rates, GDP growth, commercial real estate prices, and other macroeconomic variables" that are "subjective and complex." This is the standard bank CAM — unavoidable given the judgment required in credit loss modeling.

Key Financial Trends (4-Year)

Summary

Grade: B. Generally healthy. A regional bank in aggressive acquisition mode with solid core performance but integration and credit risks.

Huntington's core banking franchise is performing well: NII growth of 12%, improving efficiency ratio, NIM recovery, and declining net charge-offs. CFFO/NI of 1.12 confirms cash-backed earnings. Accruals are negligible. Goodwill at 28% of equity is manageable.

The M-Score and Z-Score are not applicable to banks — these models were designed for non-financial companies and cannot reliably assess bank earnings quality.

The concerns are execution-focused:

This is not a company with accounting manipulation concerns. It is a company taking strategic risk through acquisitions. Watch the Cadence integration, the NPA trend, and whether ROE recovers as integration costs normalize.

**Disclaimer**: This report is based on Huntington Bancshares' fiscal year 2025 10-K filed with the SEC on February 13, 2026. This is NOT investment advice.

**About EarningsGrade**: We screen earnings reports for financial red flags using an 18-point forensic framework. Grade B means the company is generally healthy with minor concerns to monitor.