Q3 2025 Earnings Call Transcript

Greetings, and welcome to the Huntington Bancshares Third Quarter 2025 Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Erik Wasserstrom, Director of Investor Relations. Eric, please go ahead.

Thank you, and good morning, everyone. Welcome to our third quarter call. Our presenters today are Stephen Steinour, Chairman, President and CEO, and Zachary Wasserman, Chief Financial Officer. Brendan Lawlor, Chief Credit Officer, will join us for the Q&A.

Earnings documents, which include our forward-looking statements disclaimer and non-GAAP information and copies of the slides we'll be reviewing are available on the Investor Relations section of our website, which is www.irhuntington.com. As a reminder, this call is being recorded and a replay will be available starting about one hour after the close of the call. With that, let me now turn it over to Steve.

Thanks, Eric. Morning, everyone, and welcome. We delivered another outstanding quarter. The business is performing exceptionally well across all fronts.

We have tremendous momentum and we are poised to accelerate from here. I'll cover the highlights and then Zach will take you through the details. Turning to Slide five, there are three key messages that we'd like you to take away from this call. First, we continue to execute our growth strategy with excellent results.

All elements of our model are contributing to this growth, and we will continue investing to generate a high level of growth into the foreseeable future. Second, we are achieving top-tier profitability and returns as an outgrowth of our revenue generation and strong positive operating leverage. And third, we are poised to further accelerate our growth in Texas. We look forward to welcoming our Veritex colleagues and customers to Huntington next Monday.

The partnership and interim planning efforts led by Malcolm Holland and team have positioned us for a fast start, initiating the springboard we envisioned. So we're very excited for what lies ahead. Slide six illustrates the outcomes of these key messages. Our foundational organic growth strategies deliver our national scale capabilities and expertise through local market relationships.

You can see the results of that on the top of the slide. We have massively outpaced our peers on both loan and deposit growth, the outcome of which is the phenomenal pace of our PPNR expansion. And given our rigorous adherence to our risk management principles, we have not deviated from our aggregate moderate to low-risk appetite while driving this performance. Slide seven illustrates how this operational approach creates value.

We drive powerful growth. This growth enables us to invest to compound our competitive advantage. The investment results in meaningful operating leverage, and we maintain disciplined capital allocation and robust risk management to both protect our balance sheet and enable us to take advantage of moments of disruption. All of this enables us to drive long-term shareholder value.

As evidenced in this quarter's results, we grew revenue 14% year over year, adjusted PPNR 16%, and tangible book value by 10%, while generating an adjusted ROTC above 17%. And as Zach will discuss in a few moments, we are again raising our financial guidance for the year. We also have extensive experience in integrating acquisitions and in mobilizing the combined organization to execute on the cost and revenue synergies that we identify. Based on this experience, we are very confident in the seamless integration of Veritex, which will springboard our growth in Texas.

We remain extremely excited by our partnership with Veritex. When we close this combination on Monday, we will achieve immediate scale in Texas. By our estimate, we will become the fourteenth largest depository in the state and the fifth largest in Dallas, ahead of nearly all of our regional bank peers, including pro forma for recently announced transactions. We will execute on the cost synergies we've identified, which we expect to drive one percentage point improvement in our efficiency ratio and approximately 30 basis points of lift to our ROTCE.

But our greater opportunity is in the revenue growth synergies that we will generate as we accelerate the rollout of the full Huntington franchise into these markets. First, we will leverage Veritex's network to deliver the full suite of our consumer and small businesses as well as digital capabilities. Second are the fee-based opportunities we can offer into Veritex's commercial and consumer customers, including payments, wealth management, and capital markets. Third, we will leverage our combined scale and the benefit of Veritex's deep local relationships to accelerate the growth of our existing commercial verticals and local middle market banking.

We're very confident in our ability to realize these synergies. Additionally, we see substantial incremental opportunities to generate revenue synergy as we further invest into our Texas franchise. We will continue to build out our branch network in Dallas, Fort Worth, and Houston, and expand our commercial banking activities across the state, amongst other actions. As I've said, this partnership will be a springboard for our growth in this incredibly attractive market.

To summarize, we're executing on our organic growth strategies to drive industry-leading revenue growth. We're achieving outstanding profitability, which enables us to reinvest to compound our competitive advantage. We're poised to springboard our growth further through the partnership with Veritex. And all of this is driving a high level of tangible book value growth and increasing our return on tangible common equity.

With that, let me turn it over to Zach to discuss the quarter's financial results in detail.

Thank you, Steve, and good morning, everyone. Let's begin with the highlights of our third quarter results on Slide nine. Huntington delivered another outstanding quarter, with earnings per common share of 41¢. On an adjusted basis, excluding the gain on sale of a portion of our corporate trust and custody business, an FDIC deposit insurance fund assessment benefit, and Veritex acquisition-related expenses, EPS was 40¢, up 18% year over year.

Average loan balances grew by $2.8 billion or 2% from the prior quarter, while average deposits increased by $1.4 billion or 1%. Reported 10.6% with adjusted CET one at 9.2%, up 30 basis points from last year and within our target operating range. Credit performance remains strong, with net charge-offs at 22 basis points and allowance for credit losses ending the quarter at 1.86%. On slide 10, loan growth accelerated to 9.2% year over year, led by strength in commercial lending and significant contributions from our new initiatives.

During the quarter, new initiatives account for $1.2 billion, representing approximately 40% of total loan growth. Key drivers included our geographic expansion in Texas, and North and South Carolina, as well as strong performance in our funds finance and financial institutions group commercial verticals. Of the remaining $1.6 billion in loan growth from the core, we delivered $700 million from corporate and specialty banking, $600 million from auto, $400 million from regional banking, $100 million from middle market, and $200 million from asset finance. These gains were partially offset by a $600 million in distribution finance inventories that was largely seasonal, and a $100 million decrease in commercial real estate.

Turning to deposits on slide 11, average balances increased by $1.4 billion or 0.8% and our overall cost of deposits declined by two basis points during the quarter. Our relentless focus on growing households and deepening primary bank relationships within a disciplined framework has proven a powerful lever in driving sustained deposit gathering, with disciplined pricing. Our teams are performing exceptionally well as we grow our funding base, and we expect to drive funding costs lower with additional Fed cuts. On to slide 12. During the quarter, we drove approximately $40 million or 2.7% sequential growth in net interest income.

This represents almost 12% growth on a year-over-year basis. Net interest margin was 3.13% for the third quarter, up two basis points from the prior quarter. Operating performance accelerated throughout the quarter on a number of fronts, including NIM, powering margin to outperform the expectation I shared at the mid-quarter conference, due to both better than expected funding costs and better asset yields. Turning to slide 13. We continue to manage our hedging program to accomplish our objectives of protecting capital from a potential higher rate environment, while protecting NIM from a potential lower rate environment.

Over the last year, we've reduced our asset sensitivity to a near-neutral position. Moving on to Slide 14. On an adjusted basis, noninterest income increased by 14% or $75 million compared to the prior year. Our fee businesses were strong across virtually every area, but with notable performance in our key strategic areas of focus. Payments, wealth management, and capital markets collectively grew 13% year over year.

Momentum remains strong across these businesses, and we expect them to continue driving fee growth going forward. In addition, loan and deposit fees benefited powerfully from commercial loan commitments. Moving to slide 15. Payments delivered 10% year-over-year growth, propelled by a 20% increase in commercial payment revenues, reflecting deeper customer relationships and contributions from merchant acquiring. Moving to wealth management on slide 16, wealth fees increased by 12% year over year, assets under management up 11%, and advisory households also rising at 9%.

Over the past twelve months, we've gathered approximately $1.7 billion in net flows, as our teams continue to execute against our advice and guidance-focused strategy. Moving to slide 17. Capital markets grew 21% year over year, supported by advisory, syndications, and commercial banking-related activities. In our advisory business, we continue to benefit from efforts to introduce this service to more of our middle market and large corporate customers. The advisory backlog continues to build, and we expect sustained momentum in commercial banking production to carry over to capital markets for another strong result this quarter.

Additionally, our leveraged finance and private equity platform is now fully built out and will start to more meaningfully contribute to our results going forward. Turning to slide 18. GAAP noninterest expense was $1.2 billion, modestly higher than the prior guidance, due to revenue-related compensation from the robust revenue outperformance in the quarter. Our expense management remains focused on driving positive operating leverage, both this year and over our long-range financial plan. As we have noted, we were executing disciplined cost efficiency programs that reduce baseline expenses and create the capacity to robustly grow investments in the business, even as we create overall positive operating leverage.

On a trailing twelve-month adjusted basis, we have generated 500 basis points of positive operating leverage. Our outlook for full-year 2025 operating leverage is now more than two and a half percentage points of efficiency ratio improvement, significantly wider than the original budget of approximately 1% coming into this year. Slide 19 recaps our capital position. We continue to increase our common equity tier one.

Our capital management strategy remains focused on our top priority of funding high-return loan growth and second, supporting our strong dividend yield. As we have noted, we intend to continue driving adjusted CET one higher toward the midpoint of our nine to 10% operating range. Given our progress driving adjusted CET1 higher, and our projections of continued strong capital generation, we expect to have capacity to add repurchases to the mix of distribution in the coming quarters. Our intention is to approach any share repurchase activity in a systematic manner over time, while also remaining opportunistic to overweight activity in quarters when we believe the shares are significantly undervalued.

Our baseline assumption as of now is for approximately $50 million of repurchases per quarter through 2026. We will continue to optimize this amount based on the pace of loan growth and the objective of continuing a gradual upward trajectory of adjusted CET one toward the midpoint of the range. Turning to slide 20. Our disciplined approach is generating powerful returns and driving shareholder value. Over the past year, we've grown adjusted ROTCE by more than one percentage point through robust PPNR expansion while simultaneously increasing our capital base. As noted, tangible book value is up 10% year over year, and we've returned over 45% of earnings through dividends.

Turning to slide 21. Credit quality continues to perform very well, with net charge-offs of 22 basis points. Forward-looking credit metrics remain stable. The criticized asset ratio was 3.79%, while the nonperforming asset ratio declined three basis points since last quarter and has been trending in a narrow range for several quarters. On to slide 22. While economic and policy uncertainty has persisted throughout the year, we continue to deliver terrific performance and are once again raising our expectations for revenue and earnings growth.

The outlook I'll share on this slide reflects both standalone Huntington and the anticipated impacts of the Veritex close. On a standalone basis, we're continuing to see strong loan growth and are expecting to hit the high end of our guidance range at approximately 8% for the full year. Inclusive of Veritex, we expect to see full-year ADB growth of approximately 9% to 9.5%. On deposits, we also see performance at the high end of our prior growth guidance at approximately 5.5%.

Inclusive of Veritex, we expect to see deposits on a full-year ADB basis approximately six and a half to 7%. On a Huntington standalone basis, we are increasing our net interest income full-year guidance by two percentage points to 10 to 11% from the prior range of eight to 9%, driven by better than expected loan growth and higher NIM. We are very pleased with our management of NIM in 2025 and the expansion we have driven. For the fourth quarter, expect our standalone Huntington NIM excluding the impact of Veritex to rise between one and two basis points from the Q3 level.

And as we've noted in past updates, we anticipate standalone NIM to rise again in 2026 by at least 10 basis points, driven primarily by continued benefits from fixed asset repricing. Given our neutral asset sensitivity, our modeling would indicate we could achieve this level of NIM expansion in Fed funds scenarios ranging from zero to as many as seven cuts. We expect NIM expansion and continued strong growth in loans to drive another powerful expansion of spread revenues next year. We expect this higher NIM into 2026 and the continued strong growth in loans to drive another powerful expansion of spread revenues next year.

Speaking briefly about the impact on NIM from the combination with Veritex, we expect Veritex will lift the Q4 reported NIM by an additional two to three basis points. Of this two to three basis points lift from the acquisition, about one basis point is from PAA accretion. We expect a similar dynamic in 2026, in which Veritex adds two to three basis points on top of the NIM expansion we anticipate for next year. We have laid out a schedule of the expected PAA accretion for the fourth quarter and for 2026 in the appendix to the earnings slides.

We expect that we will realize approximately two-thirds of the total PAA benefit from Veritex by the end of next year, with a much smaller amount trailing into 2027 and thereafter. Continuing with guidance on revenue drivers, on a standalone basis, we're increasing our full-year fee income guidance to approximately 7% from our prior range of four to 6%. Momentum is building across the fee businesses, and we expect to carry that momentum into the fourth quarter and beyond. On a standalone basis, we expect expense growth of 6.5% driven by volume-related drivers and higher incentive compensation.

Throughout the year, our outlook for positive operating leverage has continued to expand from approximately 100 basis points at the beginning of the year to now over 250 basis points expected as of today. This is a powerful testament to the strength of our revenue generation and performance on programs to drive efficiency in baseline expenses while we continue to invest powerfully in the business. For the fourth quarter, we expect approximately $20 million of core PPNR benefit from Veritex, which equates to about a penny of earnings per share. We also expect to incur the majority of acquisition-related one-time expenses in the fourth quarter with approximately 125 to $150 million recognized at closing or shortly thereafter.

On credit, we anticipate charge-offs at or below the midpoint of the range on a full-year basis. The tax rate for the full year is expected to be between 17.5% and 18%, benefiting from some discrete items. Lastly, please note that we completed a preferred issuance in the third quarter, which will result in higher preferred dividends in the fourth quarter and subsequently. We included an updated quarterly dividend schedule in the appendix of the earnings deck.

Turning to Slide 23. In closing, our focus remains on driving long-term shareholder value. Our performance reflects disciplined execution, a powerful and scalable franchise, and a durable business model. Risk management is deeply embedded in our culture, and our capital and liquidity positions remain top tier. Organic growth continues to outpace peers, supporting attractive revenue and earnings growth and driving value creation.

The Veritex acquisition provides a springboard for future growth. With that, we'll conclude our prepared remarks and move to Q&A.

Thank you, Zach. We will now take questions. We ask that as a courtesy to your peers, each person ask only one question and one related follow-up question. If you have additional questions, please return to the queue. Thank you.

You. Keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to move your question from the queue. And as a reminder, please ask one question, one follow-up, then return to the queue. Our first question today is coming from Jon Arfstrom from RBC Capital Markets. Your line is now live.

Hey. Thanks. Good morning, everyone. Nice job. Hey. Question first question is on the loan growth outlook. Can you talk a little bit more about the pipelines Zach, you mentioned you felt like growth is still accelerating. And I guess, I'm not as curious about the expansion driven markets, but more about the core trends, what you're seeing and you feel like that's still accelerating?

Yeah. Jon, this is Zach. I'll take that and the short answer is yes. We have a lot of momentum coming into the fourth quarter.

The guidance we provided implies approximately 1.5% sequential growth. That's relative to the 2% sequential growth we just posted in the third quarter. So there's a lot of strength we see right now in pipelines and just the momentum of the business generally. In the core business, in core of the business, we're seeing regional banking, for example, continues to power very strong growth.

Our broad commercial specialty business performing very well. We would always expect the fourth quarter to be a quite good equipment and asset finance production quarter just given the seasonality of that. And a number of other areas continue to perform well. And then also see continued strength in consumer auto is an area that has continued to grow sequentially throughout the year.

And our broad other consumer lending activities continue pretty well. Also. So confidence is high for the fourth quarter. As I look out into next year, the 26, clearly not giving formal guidance at this moment, but you know, our working assumption is somewhere in the mid to high single digits.

For year over year loan growth in 2026 as well.

Okay. Perfect. Appreciate that. And then maybe Brendan or Steve, can you can you talk a little bit more about what you're seeing from a credit quality point of view? There's obviously a lot of fear and uncertainty out there. Your numbers look very clean, but in anything you're watching more closely and curious how you feel about credit in general.

Yeah. We've had just a this is Steve. We've had a really exceptional year in terms of credit performance and our outlook would suggest that's gonna continue. Everything we'll what we see at this point would suggest that's the case.

We, you know, there have been some issues with different companies and and impacting different lenders. We've fortunately not had any issues. I I trace it back. You know, we put aggregate moderate to low risk gap appetites in place fifteen years ago.

You've seen our reporting on the consumer side, how tight it is. We're essentially that tight on the commercial side as well. The policies, the front end guidance, the active portfolio management, the other controls, the the disciplines, the diversification, all have will help us. At some point, there'll be a downturn, but all help us significantly.

And and and, again, you've seen that in the stress tests that have been done over the years as well. So we're we're we're optimistic about about loan growth going forward. As Zach said, a minute ago, and we're confident in our ability to manage the risks.

Okay. We're not seeing anything at this point that concerns us.

Yep. That's helpful. I appreciate it. Thank you.

Thank you. Next question today is coming from Manan Gosalia from Morgan Stanley. Your line is now live.

Hey. Good morning. Thanks for taking my questions. Just as a follow-up to the last question, just given the recent headlines around alleged fraud, double pledging of collateral, can you talk about the safeguards that you implement to guard against that?

Sure, Manan. This is Brendan. I'll I'll take that. Know, as kind of tagging on to what Steve said that the aggregate moderate to low risk appetite that we've that's been sort of the foundational for us for the last fifteen years where it all sort of begins.

The client selection, the disciplined client selection on the front end, active and rigorous portfolio management as we oversee these loans through their financial performance as well as collateral monitoring. You know, help us to pull out any soft spots that we might see because of that active nature we we work with our clients well in advance of anything like like the events that have happened over the last month. So I feel really confident in our ability to actively manage our book.

Manan, we also have always had a relationship orientation. And so that that, I think, helps us avoid situations like those that have recently been reported because we're we're not looking to just make a loan. We're looking for a relationship. And absent the absent that, we, you know, we we tend to pass. In fact, a couple of ones that been that have occurred recently, we we've passed on those.

Great. And and can you talk a little bit more about the NDFI book? You know, what's in there? And how we should think about the risk around that book?

Sure, Manan. I'll take a we I'll take a swing at that. You know, if you if you exclude out things like loans to REITs, and subscription lines and higher rated insurance companies. Our NDFI portfolio exposure is approximately it's right around 2% of total loans.

So you know, those as Steve was talking about, those loans are really characterized through a relationship approach, with, you know, a lot of diversity baked in there. And then the active portfolio management that I talked about. So you know, all in all, as we look at that, we feel very good about how we're positioned against the NDFI portfolio.

Thanks for that.

Thank you. As a reminder, star one to be placed into question queue. Our next question is coming from Christopher McGratty from KBW. Your line is now live.

Oh, there we go. Sorry about that. If we think about operating leverage comments, two fifty million or so, I guess, medium term, how do you how do you see how do you see this trending? Given the balance of synergies and investments to become larger? Thank you.

Yeah. It's a it's a great question, Chris. Let let me let me unpack that for you. So really, really pleased with how we managed operating leverage this year.

Know, rising from, you know, less than 1% in our budget to over 2.5% now, even as we continue to drive very significant investments into the business, investments growing almost 20% year on year in the business. So just a powerful testament to the way we're managing expenses. You know, as as we think about the expense model, going forward, you know, the the the approach we're taking is very sustainable. We're continuing to drive fundamental reengineering into the cost base, taking out about 1% of baseline operating expenses every year and then funneling that into offensive investment related expense categories like technology development, marketing, addition of new people to build out these businesses.

And so, you know, that's the that's the that baseline model can continues to be really strong, and and and it's our approach for the next several years. All things equal, when we do budgeting, we start with an assumption of at least 1% operating leverage. Any given year, and potentially up to 2%. As as I'm thinking about next year, were still finalizing that budget, but that's a pretty reasonable range for you to expect for for twenty six.

Alright. Very helpful. Thank you. And and then maybe maybe, Steve, on the the strategic question. Right? You you've got a a lot of momentum in your business. I think you've got a stock that people want to own. Can you just speak to the M and A conversations that might be happening as you kind of close the Veritex deal?

Chris, I was waiting for that one. Thank you for the question. You know, we've done three combinations in fifteen years. We've invested a lot.

In the last three years in the organic growth of the businesses, the Carolinas, the specialty businesses, Texas expansion, including the combination with Veritex. And we have a lot on our plate that will drive organic growth. That is that has been and continues to be our primary focus. We're extraordinarily pleased and confident of what we have before us in Veritex excited to be closing Monday.

This past Monday through Wednesday, our board was in Texas meeting with our new colleagues. Brantley Standridge has gotten us into a great position for an accelerated start with Malcolm Holland and team. And I I think we've got a lot to go after. So those are the priorities.

You know, we've we've again, we've had three combinations in fifteen years some point, there'll be something else. But but but our focus is driving the the the organic growth of the company. You know, we I'm gonna preempt the potential another question. We were not involved COVID.

Are focused on driving organic growth for the company.

Thank you.

Thanks, Chris. Thank you. This question is coming from Matthew O'Connor from Deutsche Bank. Your line is now live.

Hey, everyone. Good morning. This is Nathan Stein on behalf of Matthew O'Connor. You know, you talked about NII increasing again next year, and you gave some specific commentary on the NIM and loan growth operating assumptions. But how can I think about your operating assumptions for NII on a stand-alone basis relative to up 10 to 11% this year?

Yeah. Great. Great question, Nate. Thank you.

This is Zach. I'll take that. You know, as I as I think about the the spread revenue model, 2025 is a great you know, example of how we're how we're driving it. Strong loan growth, 8% loan growth, this year, and 10 basis points of of NIM expansion is driving that, you know, what we just posted 12% year on year growth in spread in the third quarter.

I think about '26 I think the model is gonna look similar. You know, you just heard me say earlier to to Jon Arfstrom's question that I'd expect, you know, mid to high single digits in loan growth, and from my prepared remarks earlier, I noted my expectation of at least 10 basis points of spread revenue expansion. So that should drive a pretty strong outcome or the of NIM expansion. And so that should drive a pretty strong overall spread revenue outcome for for 2026 as well.

Okay. Sounds good. And then I, you know, I won't ask about M and A, but I guess just on the organic growth, and you guys have demonstrated a lot of really good growth. The past few years and then in March as well.

But the expansion markets are really ultra competitive. And can you just talk about how you're continuing to grow in those regions against both the national players and also the a very you know, long-standing local banks.

Sure. Nate. This is Steve. You know, we we compete against all these banks.

All of our markets are competitive. In Carolinas and Texas, those are rapidly growing local economies. And and Texas is the eighth soon to be the seventh large economy in the world. So you have a massive amount of economic activity there.

In the Carolinas, we made that move couple of years ago. We we we were in early. We have great colleagues who we've attracted to the company, and they've done a phenomenal job. We're very, pleased with the progress we've made in North And South Carolina and the build-out that's occurring.

We opened a handful of branches this year. There'll be a couple of dozen next year. And the same the following year, that will allow us bring the full franchise to all the businesses, that we operate today into the Carolinas. We've also brought some teams on in a couple of adjacent states in Atlanta and a couple of parts of Florida.

That are off to a fabulous start as well. So the average tenure of our our colleagues, in terms of experience in The Carolinas is is a couple decades. So we these are seasoned colleagues. They've got great relationships.

They're well established. They're doing an excellent job carrying our brand forward. And they've accelerated our profitability well beyond what we thought was possible. And in the case of Texas, essentially the same thing.

Our our Texas teams and middle market teams we put in place and Dallas and Houston a year and a half or so ago. Turned profitable very, very quickly. They're growing nicely. Number one SBA lender in Texas.

We've got some specialty in corporate businesses in Texas, and now we have Veritex. And that will allow us to bring the full franchise into Texas. So these markets are competitive to be sure. And the Carolinas were off to a great start.

That started, you know, several years ago. So we're we're we're established. And in Texas, we expect to wrap establish ourselves because we've got great new colleagues joining us from Veritex. We we're not doing a day novel pill.

We're already there at scale. As I mentioned, number five share in Dallas. It's a great position to play Frost. We're very excited, as you can tell, about the opportunities before us but I'll also come back.

The core franchise is performing very well. We expect to grow in the core on a continuing basis, and and I'm optimistic based on the the the great colleagues we have here and the this this the overall strategies of diversification. And bringing our national capabilities through at a local level. And we've had a winning winning set of strategies.

So combined, very optimistic about our organic growth. Well into '26 and and potentially beyond assuming the economy holds up. Thank you.

You. Next question is coming from Steven Alexopoulos from TD Cowen. Your line is now live.

Hey. Good morning, everyone. Wanted to start. So, Steve, you're one of the very few regional bank CEOs which have been in seat since GFC.

And even though you feel good about your credit book, you know as well as anybody, this is an industry where a few banks can take down the rest. I mean, your stock's now down double digit over the past month. Steve, are you concerned that there are more credit quality issues out there lingering in the industry.

Steven, I I suspect there are isolated issues that are in the industry. But I think on the whole, the industry has derisked since the GFC. And that's part of what you're seeing with the rapid rise in in you know, shadow banking system or NDFI, whatever you wanna whatever you wanna call it. I I think the banks are in a much better position today particularly those that are are broadly diversified, and most of us are.

Certainly, we are. And, again, we've managed with this aggregate moderate to low risk app, in place. You've seen fifteen years of consumer quarterly reporting. It's incredibly tight.

And I I think I think the industry's you know, there'll be there'll be some some episodic moments and some one offs. But I think the industry is in in in in very good shape. And, you know, I'm I'm obviously aware of Jamie's position, but comments this week, but but I don't see it broadly. Affecting the industry.

And many of those who reported are are suggesting, you know, the consumer's in relatively good shape. We certainly are. Not seeing forward indicators in terms delinquency or other measures. Sorry for a long-winded answer.

Go ahead, Steven. Alright.

We we I appreciate that answer. If if I could pivot to for a follow-up maybe for Zach. So there were return on tangible equity is very impressive here. And I'm looking at the 16 to 17% medium-term goal you're calling out for 2027, are you are you signaling that the return's going to decline in that range I don't know if it's the Veritex deal.

Can you just walk us through how you get from current returns to that target?

Yeah. Thanks for the question. Steven. I appreciate you you calling that out.

You know, when we set those medium-term targets, we obviously wanted to signal what we thought was most likely the case, but also to be somewhat conservative and give ourselves the chance to to beat it. And so really pleased that we were able to, excuse me, drive ROTCE up over a percentage point this year and already get above the high end of that medium-term range, which, you know, clearly, you can imagine would have us take a step back and see whether we would want to adjust that range going forward. And and we could potentially do that. You know, for us, the focus is really that that kind of dual approach to drive value here for our shareholders.

Drive tangible book value per share, higher in a very powerful way, 10% growth this quarter. In our Investor Day, I signaled high single single digit to low double digit growth for the foreseeable future of that, but also couple it with a really strong return. And so, you know, we're certainly doing that now, and you know, we'll we'll give that target some thought as we go into next year.

Got it. Perfect. Thanks for taking my questions. Steve. Have a great day.

Thank you. Our next question is coming from Kenneth Usdin from Autonomous Research. Your line is now live.

Hey. Good morning, guys. This is Ben on from Ken's team. You guys talked about the deposit pricing outperformance. I guess what's kind of driving that? And then how do you expect betas to look over the next 100 basis points or so of cuts?

Yep. Great question, Ben. I'll take that. This is Zach.

So we feel just incredibly pleased with how our deposit teams are executing on both rate and volume. Frankly, they handily exceeded our plans in the third quarter on both of those fronts. So just execution is extraordinarily good. And if I was to show you and zoom in to the last two weeks of the quarter where the rate cut really occurred, we had a 40% beta.

In the last two weeks of the quarter. So that 40% is is what we've guided for over the long term. It continues to be our expectation for what we'll see over the course of this overall down rate cycle. However, ultimately manifests itself.

You know, I think if I your question was sort of how are we doing it? And what I would tell you is it's an incredibly sophisticated approach that our teams have of managing deposit activities, and it it's all underpinned by the fact that we have primary bank relationships. And we say that a lot, but it's but it really is foundational strategy. We're we're winning the checking and operating accounts of our consumer and commercial customers.

We're gathering other pools of liquidity, and we're managing the overall rate to be very efficient for us to gather gather marginal funding and it's all supported by extraordinarily sophisticated analytical and operational approaches that allow us to do that at a pretty granular level. So that's the playbook. It's working very, very well. And and underlies our expectation of continuing to drive solid volume into next year.

You know, we talked a little bit about our loan growth outlook for next year. I didn't comment on our deposit growth outlook. But that likewise is is in a a pretty solid position as well. We we expect to match fund loan growth as we go into next year with with core deposits.

Great. And just a clarification for next year, the 10 basis points of NIM expansion, is that on a full-year basis, 26 over 25? And then, I guess, is is fixed rate repricing gonna be the biggest driver there? Just any color on that. Thanks.

Yes is the short answer to your first question. And if you unpack the drivers of of of NIM expansion here, you know, the the the biggest and most and most significant kind of net driver is that fixed asset repricing. We've talked about this for a while. You know, we got 12 base points of year over year benefit in fixed asset repricing in 2024. We estimate this year 2025 to be around 10 basis points.

Next year, we're estimating at this point seven basis points of additional fixed asset repricing. And even, frankly, further into 2027, benefits. And it's really driven, you know, foundationally by you know, the the roll off yields we're seeing in categories like auto and equipment leases, is is a lot lower than our new production yield, something like, you know, 70 to 75 basis points today in terms of that that that difference. And so that's really what what drives that, and it's quite sustainable.

You know, we're also generally pretty asset neutral here in terms of our asset sensitivity position, as we indicated in the prepared materials. And so that really helps us to buffer the various scenarios and rate. And so we think that roughly 10 basis points or even more in most likely scenarios is is durable under a very wide range of of ultimate interest rate outcomes here.

Great. Thank you.

Appreciate it. Thank you. Next question today is coming from Ebrahim Poonawala from Bank of America. Your line is now live.

Hey. Good morning. Zach, just following up on the deposit growth. I think the question I had was as we think about this deposit pricing competition and where your able to grow these deposits both in from a market standpoint and price standpoint, just speak to the competitive landscape, and I think the where I'm going with this is, as we think about the balance sheet growth outlook from here, incrementally, that accretive to where the net interest margin is today or dilutive?

Thanks. Yeah. Yep. Terrific question.

And I think the the the short answer is accretive. We're seeing very strong marginal returns, and I think the the combination of what we're doing with asset yields benefiting from feedstock server pricing was a little mechanical. But also actively modulating where we're where we're producing to really optimize rate on the yield side and then couple that with driving down deposit costs. Is a very intentional strategy to drive marginal returns higher.

And so we're seeing that. You know, we get a lot of questions, but certainly a lot of interest on what's the vector right now in the competitive environment. And, you know, what what I would tell you is we're not seeing anything very significant on the whole. Terms of a change.

It has been competitive. It remains competitive. And, you know, we have to be you know, very, very smart in terms of how we how we operate. And, you know, to be honest, it's a it's a battle of sort of, you know, a 100 different levers all at the same time.

It's incredibly sophisticated and granular. And but, you know, the the the team is just executing exceptionally well to to drive both low in volume and yield, but also drive down deposit costs and and and and really make marginal funding as efficient as possible. So high confidence we're gonna keep that going.

Understood. And one just on a loan growth. I'm sorry if you could test this. Steve, you talked about the bonus depreciation seasonally. Equipment finance lending, a strong quarter for Huntington. I'm just wondering, has the tax bill related sort of stimulus flowing through where clients are now beginning to make those investments and is that driving increased lending demand as we go into 2026?

Ebrahim, we we are we typically have a very good fourth quarter for asset finance. The the activity is is firming up now, will be in line with our expectations. I don't think this will be a record year. A part of that is because of of tariffs having some impact on imported components.

And then some delays that occurred earlier in the year in just ordering. That they can't get physical delivery now in the fourth quarter. But but this is a good good quarter, and I think it sets up next year to be very good year.

Got it. Thank you.

Thank you. We reached the end of our question and answer session. I'd turn the call back over to management for any further or closing comments.

Thank you for joining us today. In closing, our teams continue to deliver just exceptional results. Highlighted by our peer-leading growth, our robust profit growth, and strong return on capital. We've never been better positioned, and we're very confident in our ability to drive continued strong performance.

Finally, as usual, I'd like to thank our nearly 20,000 Huntington colleagues who every day look out for each other, for our customers, driven this performance. But as you heard throughout the call today, we're really excited for our partnership with Veritex and to welcome Malcolm and and our new Veritex colleagues this coming Monday. So thank you all for your interest in Huntington. Have a great day.

Thank you. That does conclude today's teleconference webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.