# HUNTINGTON BANCSHARES INC /MD/ (HBAN) FY 2022 MD&A

Verbatim Item 7 Management's Discussion and Analysis from HUNTINGTON BANCSHARES INC /MD/'s 10-K for fiscal year 2022.

SEC filing source: https://www.sec.gov/Archives/edgar/data/49196/000004919623000020/hban-20221231.htm
Accession: 0000049196-23-000020
Filing date: 2023-02-17
Report date: 2022-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Published MD&A gate trimmed front/tail over-capture.
Confidence: high

Company profile: /company/HBAN/
All MD&A years: /company/HBAN/mda/
Previous year: /company/HBAN/mda/fy2021/ (FY 2021)
Next year: /company/HBAN/mda/fy2023/ (FY 2023)

Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations

INTRODUCTION

This MD&A provides information we believe necessary for understanding our financial condition, changes in financial condition, results of operations, and cash flows. The MD&A should be read in conjunction with the Consolidated Financial Statements, Notes to Consolidated Financial Statements, and other information contained in this report. The forward-looking statements in this section and other parts of this report involve assumptions, risks, uncertainties, and other factors, including statements regarding our plans, objectives, goals, strategies, and financial performance. Our actual results could differ materially from the results anticipated in these forward-looking statements as a result of factors set forth under the caption “Forward-Looking Statements” and those set forth in Item 1A.

EXECUTIVE OVERVIEW

Acquisitions

In June 2021, Huntington closed the acquisition of TCF Financial Corporation. Historical periods prior to June 9, 2021 reflect results of legacy Huntington operations. Subsequent to closing, results reflect all post-acquisition activity. For further information, refer to Note 3 “Business Combinations” of the Notes to Consolidated Financial Statements.

In May 2022, Huntington completed the acquisition of Torana, now known as Huntington Choice Pay, a digital

payments business focused on business to consumer payments. This acquisition, along with the formation of our

enterprise-wide payments group, reflects one of our strategic priorities to accelerate our payments capabilities and expand the services provided to our customers.

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

2022 Financial Performance Review

In 2022, we reported net income of $2.2 billion, a $943 million, or 73%, increase from the prior year. Earnings per common share on a diluted basis for the year were $1.45, up 61% from the prior year. The current year reported net income was negatively impacted by acquisition-related expenses totaling $95 million, or $76 million after tax ($0.05 per common share), compared to $701 million, or $566 million after tax ($0.44 per common share) in the prior year.

Net interest income for 2022 was $5.3 billion, up $1.2 billion, or 29%, from 2021. FTE net interest income, a non-GAAP financial measure, increased $1.2 billion, or 29%, from 2021. The increase in FTE net interest income reflected the benefit of a $23.3 billion, or 17%, increase in average earning assets in addition to a 30 basis point increase in the FTE NIM to 3.25%. Average earning asset growth included an $18.4 billion, or 19%, increase in average loans and leases and an $8.9 billion, or 27%, increase in average securities. Average balances across earning asset categories reflect organic growth in addition to the late second-quarter 2021 TCF acquisition. The increase in average securities was additionally driven by the redeployment of excess liquidity into securities in the second half of 2021. The NIM expansion was driven by the higher rate environment driving an increase in loan and lease and investment security yields, partially offset by higher cost of funds and the impact of lower accelerated PPP loan fees recognized upon forgiveness payments from the SBA in 2022.

The provision for credit losses increased $264 million to $289 million, primarily due to loan and lease growth and the likelihood of a worsening economic scenario throughout 2022. The reduction in ACL coverage ratios over the course of 2021 reflected more clarity relating to the economic impacts of COVID-19. The ACL was $2.3 billion, or 1.90% of total loans and leases, at December 31, 2022, compared to $2.1 billion, or 1.89% of total loans and leases, at December 31, 2021. The increase in the total ACL was primarily driven by loan and lease growth, but also recognizes the increased near-term recessionary risks at the end of 2022.

2022 Form 10-K 43

Table of Contents

Noninterest income was $2.0 billion, up $92 million, or 5%, from the prior year. Noninterest expense was $4.2 billion, down $174 million, or 4%, from the prior year. The changes in noninterest income and noninterest expense were impacted by the full-period impact of the TCF acquisition, completed in June 2021, in addition to the capital markets activity associated with the Capstone Partners acquisition, completed in June 2022. Noninterest expense was additionally impacted by a decrease in acquisition-related expenses of $606 million and the execution of cost reduction initiatives associated with the TCF acquisition.

The tangible common equity to tangible assets ratio was 5.55% at December 31, 2022, down 133 basis points from December 31, 2021, primarily due to a decrease in tangible common equity related to the higher interest rates causing an increase in accumulated other comprehensive loss, partially offset by earnings. CET1 risk-based capital ratio was 9.36%, up from 9.33% at December 31, 2021. The increase in regulatory capital ratios was primarily driven by earnings.

Business Overview

General

Our general business objectives are to:

•Build on our vision to be the country’s leading people-first, digitally powered bank

•Drive sustainable long-term revenue growth and efficiency

•Deliver a Category of One customer experience through our distinguished brand and culture

•Extend our digital leadership with focus on ease of use, access to information, and self-service across products and services

•Leverage expertise and capabilities to acquire and deepen relationships and launching of select partnerships

•Maintain positive operating leverage and execute disciplined capital management

•Stability and resilience through risk management, maintaining an aggregate moderate-to-low, through-the-cycle risk appetite

Economy

Growth in economic activity and demand for goods and services, alongside labor shortages, supply chain complications and geopolitical matters, have contributed to rising inflation. In response, the Federal Reserve has raised interest rates and has been reducing the size of its balance sheet. Furthermore, the Federal Reserve has signaled that it would continue to implement these policy actions in order to bring inflation down. The timing and impact of inflation and rising interest rates on our business and related financial results will depend on future developments, which are highly uncertain and difficult to predict. Our businesses and financial results may be impacted by a variety of other factors as well, such as an economic slowdown or recession. Our baseline economic forecast assumes a mild recession in 2023 with modest GDP growth for the full year. We expect the economy to exit the year on the path toward recovery with inflation gradually subsiding.

We delivered positive results in 2022, driven by broad-based loan and lease growth, growth in our deposit base, higher revenue, and disciplined expense management which were marked by the execution of strategic initiatives and acquisition synergies to further expand our capabilities. The addition of Capstone Partners has expanded the expertise we bring to customers, is benefiting our continued efforts to deepen relationships with commercial customers, and is increasing our fee income opportunities. Credit continues to perform well in keeping with our aggregate moderate-to-low, through the-cycle risk appetite. With our disciplined and proactive approach, we believe Huntington is well positioned to manage through the uncertain economic outlook on the horizon. We remain focused on delivering profitable growth and driving value for our shareholders.

Legislative and Regulatory

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

44 Huntington Bancshares Incorporated

Table of Contents

[[GREPCENT_TABLE]]
[["Table 1 - Selected Year to Date Income Statement Data"],["","Year Ended December 31,"],["","","","Change from 2021","","","","Change from 2020"],["(amounts in millions, except per share data)","2022","","Amount","","Percent","","2021","","Amount","","Percent","","2020"],["Interest income","$","5,969","","","$","1,778","","","42","%","","$","4,191","","","$","544","","","15","%","","$","3,647"],["Interest expense","696","","","607","","","NM","","89","","","(334)","","","(79)","","","423"],["Net interest income","5,273","","","1,171","","","29","","","4,102","","","878","","","27","","","3,224"],["Provision for credit losses","289","","","264","","","NM","","25","","","(1,023)","","","(98)","","","1,048"],["Net interest income after provision for credit losses","4,984","","","907","","","22","","","4,077","","","1,901","","","87","","","2,176"],["Service charges on deposit accounts","384","","","12","","","3","","","372","","","71","","","24","","","301"],["Card and payment processing income","374","","","40","","","12","","","334","","","86","","","35","","","248"],["Capital markets fees","252","","","101","","","67","","","151","","","26","","","21","","","125"],["Trust and investment management services","249","","","17","","","7","","","232","","","43","","","23","","","189"],["Mortgage banking income","144","","","(165)","","","(53)","","","309","","","(57)","","","(16)","","","366"],["Leasing revenue","126","","","27","","","27","","","99","","","78","","","NM","","21"],["Insurance income","117","","","12","","","11","","","105","","","8","","","8","","","97"],["Gain on sale of loans","57","","","48","","","NM","","9","","","(33)","","","(79)","","","42"],["Bank owned life insurance income","56","","","(13)","","","(19)","","","69","","","5","","","8","","","64"],["Net gains (losses) on sales of securities","\u2014","","","(9)","","","NM","","9","","","10","","","NM","","(1)"],["Other noninterest income","222","","","22","","","11","","","200","","","61","","","44","","","139"],["Total noninterest income","1,981","","","92","","","5","","","1,889","","","298","","","19","","","1,591"],["Personnel costs","2,401","","","66","","","3","","","2,335","","","643","","","38","","","1,692"],["Outside data processing and other services","610","","","(240)","","","(28)","","","850","","","466","","","121","","","384"],["Equipment","269","","","21","","","8","","","248","","","68","","","38","","","180"],["Net occupancy","246","","","(31)","","","(11)","","","277","","","119","","","75","","","158"],["Marketing","91","","","2","","","2","","","89","","","51","","","134","","","38"],["Professional services","77","","","(36)","","","(32)","","","113","","","58","","","105","","","55"],["Deposit and other insurance expense","67","","","16","","","31","","","51","","","19","","","59","","","32"],["Amortization of intangibles","53","","","5","","","10","","","48","","","7","","","17","","","41"],["Lease financing equipment depreciation","45","","","4","","","10","","","41","","","40","","","NM","","1"],["Other noninterest expense","342","","","19","","","6","","","323","","","109","","","51","","","214"],["Total noninterest expense","4,201","","","(174)","","","(4)","","","4,375","","","1,580","","","57","","","2,795"],["Income before income taxes","2,764","","","1,173","","","74","","","1,591","","","619","","","64","","","972"],["Provision for income taxes","515","","","221","","","75","","","294","","","139","","","90","","","155"],["Income after income taxes","2,249","","","952","","","73","","","1,297","","","480","","","59","","","817"],["Income attributable to non-controlling interest","11","","","9","","","NM","","2","","","2","","","NM","","\u2014"],["Net income attributable to Huntington Bancshares Inc","2,238","","","943","","","73","","","1,295","","","478","","","59","","","817"],["Dividends on preferred shares","113","","","(18)","","","(14)","","","131","","","31","","","31","","","100"],["Impact of preferred stock redemption","\u2014","","","(11)","","","NM","","11","","","11","","","NM","","\u2014"],["Net income applicable to common shares","$","2,125","","","$","972","","","84","%","","$","1,153","","","$","436","","","61","%","","$","717"],["Average common shares\u2014basic","1,441","","","179","","","14","%","","1,262","","","245","","","24","%","","1,017"],["Average common shares\u2014diluted","1,465","","","178","","","14","","","1,287","","","254","","","25","","","1,033"],["Net income per common share\u2014basic","$","1.47","","","$","0.56","","","62","%","","$","0.91","","","$","0.20","","","28","%","","$","0.71"],["Net income per common share\u2014diluted","1.45","","","0.55","","","61","","","0.90","","","0.21","","","30","","","0.69"],["Cash dividends declared","0.62","","","0.015","","","2","","","0.605","","","0.005","","","1","","","0.60"],["Revenue and Net Interest Income\u2014FTE (Non-GAAP)"],["Net interest income","$","5,273","","","$","1,171","","","29","%","","$","4,102","","","$","878","","","27","%","","$","3,224"],["FTE adjustment(1)","31","","","6","","","24","","","25","","","4","","","19","","","21"],["Net interest income, FTE (non-GAAP)(1)","5,304","","","1,177","","","29","","","4,127","","","882","","","27","","","3,245"],["Noninterest income","1,981","","","92","","","5","","","1,889","","","298","","","19","","","1,591"],["Total revenue, FTE (non-GAAP)(1)","$","7,285","","","$","1,269","","","21","%","","$","6,016","","","$","1,180","","","24","%","","$","4,836"]]
[[/GREPCENT_TABLE]]

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

2022 Form 10-K 45

Table of Contents

DISCUSSION OF RESULTS OF OPERATIONS

This section provides a review of financial performance on a consolidated basis. Key consolidated balance sheet and income statement trends are discussed. All earnings per share data are reported on a diluted basis. For additional insight on financial performance, please read this section in conjunction with the “Business Segment Discussion.”

For a discussion of our results of operations for 2021 versus 2020, see “Part II, Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations” Discussion of Results of Operations included in our 2021 Form 10-K, filed with the SEC on February 18, 2022.

Average Balance Sheet / Net Interest Income

Our primary source of revenue is net interest income, which is the difference between interest income from earning assets (primarily loans, leases, and securities), and interest expense of funding sources (primarily interest-bearing deposits and borrowings). Earning asset balances and related funding sources, as well as changes in the levels of interest rates, impact net interest income. The difference between the average yield on earning assets and the average rate paid for interest-bearing liabilities is the net interest spread. Noninterest-bearing sources of funds, such as demand deposits and shareholders’ equity, also support earning assets. The impact of the noninterest-bearing sources of funds, often referred to as “free” funds, is captured in the net interest margin, which is calculated as net interest income divided by average earning assets. Both the net interest margin and net interest spread are presented on an FTE basis, which means that tax-free interest income has been adjusted to a pretax equivalent income, assuming a 21% tax rate.

The following table shows changes in fully-taxable equivalent interest income, interest expense, and net interest income due to volume and rate variances for major categories of earning assets and interest-bearing liabilities:

[[GREPCENT_TABLE]]
[["Table 2 - Change in Net Interest Income Due to Changes in Average Volume and Interest Rates (1)"],["","2022","","2021"],["(dollar amounts in millions)","Increase (Decrease) From Previous Year Due To","","Increase (Decrease) From Previous Year Due To"],["FTE basis (2)","Volume","","Yield/ Rate","","Total","","Volume","","Yield/ Rate","","Total"],["Loans and leases","$","744","","","$","437","","","$","1,181","","","$","659","","","$","(102)","","","$","557"],["Investment securities","165","","","367","","","532","","","174","","","(195)","","","(21)"],["Other earning assets","(30)","","","101","","","71","","","30","","","(18)","","","12"],["Total interest income from earning assets","879","","","905","","","1,784","","","863","","","(315)","","","548"],["Deposits","11","","","307","","","318","","","46","","","(199)","","","(153)"],["Short-term borrowings","30","","","15","","","45","","","(6)","","","(6)","","","(12)"],["Long-term debt","8","","","236","","","244","","","(38)","","","(131)","","","(169)"],["Total interest expense of interest-bearing liabilities","49","","","558","","","607","","","2","","","(336)","","","(334)"],["Net interest income","$","830","","","$","347","","","$","1,177","","","$","861","","","$","21","","","$","882"]]
[[/GREPCENT_TABLE]]

(1)The change in interest income or expense due to both rate and volume has been allocated between the factors in proportion to the relationship of the absolute dollar amounts of the change in each.

(2)Calculated assuming a 21% tax rate.

46 Huntington Bancshares Incorporated

Table of Contents

[[GREPCENT_TABLE]]
[["Table 3 - Consolidated Average Balance Sheet and Net Interest Margin Analysis"],["","Year ended"],["","2022","","2021","","Change from 2021"],["","Average","","Interest","","Yield/","","Average","","Interest","","Yield/","","Average Balances"],["(dollar amounts in millions)","Balances","","Income (FTE) (1)","","Rate (2)","","Balances","","Income (FTE) (1)","","Rate (2)","","Amount","","Percent"],["Assets:"],["Interest-bearing deposits at Federal Reserve Bank","$","4,626","","","$","75","","","1.63","%","","$","8,129","","","$","11","","","0.14","%","","$","(3,503)","","","(43)","%"],["Interest-bearing deposits in banks","226","","","8","","","3.15","","","372","","","1","","","0.04","","","(146)","","","(39)"],["Securities:"],["Trading account securities","32","","","1","","","4.14","","","50","","","1","","","3.32","","","(18)","","","(36)"],["Available-for-sale securities:"],["Taxable","21,994","","","576","","","2.62","","","19,767","","","261","","","1.32","","","2,227","","","11"],["Tax-exempt","2,842","","","94","","","3.32","","","2,916","","","71","","","2.42","","","(74)","","","(3)"],["Total available-for-sale securities","24,836","","","670","","","2.70","","","22,683","","","332","","","1.46","","","2,153","","","9"],["Held-to-maturity securities\u2014taxable","16,509","","","351","","","2.13","","","10,000","","","174","","","1.74","","","6,509","","","65"],["Other securities","845","","","27","","","3.16","","","556","","","10","","","1.75","","","289","","","52"],["Total securities","42,222","","","1,049","","","2.48","","","33,289","","","517","","","1.55","","","8,933","","","27"],["Loans held for sale","973","","","41","","","4.24","","","1,398","","","41","","","2.96","","","(425)","","","(30)"],["Loans and leases: (3)"],["Commercial:"],["Commercial and industrial","43,118","","","1,875","","","4.35","","","36,898","","","1,446","","","3.92","","","6,220","","","17"],["Commercial real estate","15,768","","","683","","","4.33","","","11,412","","","362","","","3.17","","","4,356","","","38"],["Lease financing","4,974","","","251","","","5.04","","","3,739","","","186","","","4.98","","","1,235","","","33"],["Total commercial","63,860","","","2,809","","","4.40","","","52,049","","","1,994","","","3.83","","","11,811","","","23"],["Consumer:"],["Residential mortgage","20,907","","","661","","","3.16","","","15,953","","","479","","","3.00","","","4,954","","","31"],["Automobile","13,454","","","472","","","3.51","","","13,008","","","471","","","3.62","","","446","","","3"],["Home equity","10,409","","","532","","","5.11","","","10,018","","","391","","","3.90","","","391","","","4"],["RV and marine","5,322","","","227","","","4.26","","","4,672","","","199","","","4.27","","","650","","","14"],["Other consumer","1,314","","","126","","","9.51","","","1,118","","","112","","","10.04","","","196","","","18"],["Total consumer","51,406","","","2,018","","","3.92","","","44,769","","","1,652","","","3.69","","","6,637","","","15"],["Total loans and leases","115,266","","","4,827","","","4.19","","","96,818","","","3,646","","","3.77","","","18,448","","","19"],["Total earning assets","163,313","","","6,000","","","3.67","","","140,006","","","4,216","","","3.01","","","23,307","","","17"],["Cash and due from banks","1,666","","","","","","","1,356","","","","","","","310","","","23"],["Goodwill and other intangible assets","5,688","","","","","","","4,108","","","","","","","1,580","","","38"],["All other assets","10,184","","","","","","","8,804","","","","","","","1,380","","","16"],["Allowance for loan and lease losses","(2,083)","","","","","","","(1,993)","","","","","","","(90)","","","(5)"],["Total assets","$","178,768","","","","","","","$","152,281","","","","","","","$","26,487","","","17","%"],["Liabilities and Shareholders\u2019 Equity:"],["Interest-bearing deposits:"],["Demand deposits\u2014interest-bearing","$","41,779","","","$","158","","","0.38","%","","$","32,708","","","$","12","","","0.04","%","","$","9,071","","","28","%"],["Money market deposits","33,733","","","112","","","0.33","","","30,039","","","21","","","0.07","","","3,694","","","12"],["Savings and other domestic deposits","21,316","","","5","","","0.02","","","17,357","","","5","","","0.03","","","3,959","","","23"],["Core certificates of deposit (4)","2,439","","","12","","","0.50","","","2,368","","","1","","","0.03","","","71","","","3"],["Other domestic deposits of $250,000 or more","233","","","1","","","0.47","","","353","","","1","","","0.21","","","(120)","","","(34)"],["Negotiable CDs, brokered and other deposits","3,838","","","75","","","1.96","","","3,525","","","5","","","0.16","","","313","","","9"],["Total interest-bearing deposits","103,338","","","363","","","0.35","","","86,350","","","45","","","0.05","","","16,988","","","20"],["Short-term borrowings","2,485","","","46","","","1.86","","","278","","","1","","","0.20","","","2,207","","","NM"],["Long-term debt (5)","8,724","","","287","","","3.29","","","7,479","","","43","","","0.57","","","1,245","","","17"],["Total interest-bearing liabilities","114,547","","","696","","","0.61","","","94,107","","","89","","","0.09","","","20,440","","","22"],["Demand deposits\u2014noninterest-bearing","41,574","","","","","","","37,960","","","","","","","3,614","","","10"],["All other liabilities","4,353","","","","","","","3,205","","","","","","","1,148","","","36"],["Total Huntington Bancshares Inc shareholders\u2019 equity","18,263","","","","","","","16,997","","","","","","","1,266","","","7"],["Non-controlling interest","31","","","","","","","12","","","","","","","19","","","NM"],["Total equity","18,294","","","","","","","17,009","","","","","","","1,285","","","8"],["Total liabilities and shareholders\u2019 equity","$","178,768","","","","","","","$","152,281","","","","","","","$","26,487","","","17","%"],["Net interest rate spread","","","","","3.06","","","","","","","2.92"],["Impact of noninterest-bearing funds on margin","","","","","0.19","","","","","","","0.03"],["Net interest margin/NII","","","$","5,304","","","3.25","%","","","","$","4,127","","","2.95","%"]]
[[/GREPCENT_TABLE]]

(1)FTE yields are calculated assuming a 21% tax rate.

(2)Average yield/rates include the impact of applicable derivatives. Loan and lease and deposit average yield/rates also include impact of applicable non-deferrable and amortized fees.

(3)For purposes of this analysis, NALs are reflected in the average balances of loans and leases.

(4)Includes consumer certificates of deposit of $250,000 or more.

(5)Reflects the benefit of $89 million mark-to-market of interest rate caps for 2021. There was no impact for 2022.

2022 Form 10-K 47

Table of Contents

[[GREPCENT_TABLE]]
[["Table 3 - Consolidated Average Balance Sheet and Net Interest Margin Analysis (Continued)"],["","Year ended"],["","2021","","2020","","Change from 2020"],["","Average","","Interest","","Yield/","","Average","","Interest","","Yield/","","Average Balances"],["(dollar amounts in millions)","Balances","","Income (FTE) (1)","","Rate (2)","","Balances","","Income (FTE) (1)","","Rate (2)","","Amount","","Percent"],["Assets:"],["Interest-bearing deposits at Federal Reserve Bank","$","8,129","","","$","11","","","0.14","%","","$","3,874","","","$","6","","","0.15","%","","$","4,255","","","110","%"],["Interest-bearing deposits in banks","372","","","1","","","0.04","","","176","","","1","","","0.47","","","196","","","111"],["Securities:"],["Trading account securities","50","","","1","","","3.32","","","59","","","2","","","3.10","","","(9)","","","(15)"],["Available-for-sale securities:"],["Taxable","19,767","","","261","","","1.32","","","11,392","","","237","","","2.08","","","8,375","","","74"],["Tax-exempt","2,916","","","71","","","2.42","","","2,735","","","77","","","2.84","","","181","","","7"],["Total available-for-sale securities","22,683","","","332","","","1.46","","","14,127","","","314","","","2.23","","","8,556","","","61"],["Held-to-maturity securities\u2014taxable","10,000","","","174","","","1.74","","","9,248","","","216","","","2.33","","","752","","","8"],["Other securities","556","","","10","","","1.75","","","443","","","6","","","1.41","","","113","","","26"],["Total securities","33,289","","","517","","","1.55","","","23,877","","","538","","","2.25","","","9,412","","","39"],["Loans held for sale","1,398","","","41","","","2.96","","","1,121","","","34","","","3.06","","","277","","","25"],["Loans and leases: (3)"],["Commercial:"],["Commercial and industrial","36,898","","","1,446","","","3.92","","","31,624","","","1,166","","","3.69","","","5,274","","","17"],["Commercial real estate","11,412","","","362","","","3.17","","","7,054","","","225","","","3.19","","","4,358","","","62"],["Lease financing","3,739","","","186","","","4.98","","","2,293","","","124","","","5.42","","","1,446","","","63"],["Total commercial","52,049","","","1,994","","","3.83","","","40,971","","","1,515","","","3.70","","","11,078","","","27"],["Consumer:"],["Residential mortgage","15,953","","","479","","","3.00","","","11,694","","","406","","","3.47","","","4,259","","","36"],["Automobile","13,008","","","471","","","3.62","","","12,838","","","504","","","3.93","","","170","","","1"],["Home equity","10,018","","","391","","","3.90","","","8,930","","","358","","","4.01","","","1,088","","","12"],["RV and marine","4,672","","","199","","","4.27","","","3,876","","","181","","","4.68","","","796","","","21"],["Other consumer","1,118","","","112","","","10.04","","","1,086","","","125","","","11.48","","","32","","","3"],["Total consumer","44,769","","","1,652","","","3.69","","","38,424","","","1,574","","","4.10","","","6,345","","","17"],["Total loans and leases","96,818","","","3,646","","","3.77","","","79,395","","","3,089","","","3.89","","","17,423","","","22"],["Total earning assets","140,006","","","4,216","","","3.01","","","108,443","","","3,668","","","3.38","","","31,563","","","29"],["Cash and due from banks","1,356","","","","","","","1,124","","","","","","","232","","","21"],["Goodwill and other intangible assets","4,108","","","","","","","2,201","","","","","","","1,907","","","87"],["All other assets","8,804","","","","","","","7,045","","","","","","","1,759","","","25"],["Allowance for loan and lease losses","(1,993)","","","","","","","(1,581)","","","","","","","(412)","","","(26)"],["Total assets","$","152,281","","","","","","","$","117,232","","","","","","","$","35,049","","","30","%"],["Liabilities and Shareholders\u2019 Equity:"],["Interest-bearing deposits:"],["Demand deposits\u2014interest-bearing","$","32,708","","","$","12","","","0.04","%","","$","23,514","","","$","32","","","0.14","%","","$","9,194","","","39","%"],["Money market deposits","30,039","","","21","","","0.07","","","25,695","","","100","","","0.39","","","4,344","","","17"],["Savings and other domestic deposits","17,357","","","5","","","0.03","","","10,720","","","10","","","0.09","","","6,637","","","62"],["Core certificates of deposit (4)","2,368","","","1","","","0.03","","","2,610","","","38","","","1.44","","","(242)","","","(9)"],["Other domestic deposits of $250,000 or more","353","","","1","","","0.21","","","216","","","3","","","1.18","","","137","","","63"],["Negotiable CDs, brokered and other deposits","3,525","","","5","","","0.16","","","3,822","","","15","","","0.38","","","(297)","","","(8)"],["Total interest-bearing deposits","86,350","","","45","","","0.05","","","66,577","","","198","","","0.30","","","19,773","","","30"],["Short-term borrowings","278","","","1","","","0.20","","","1,147","","","13","","","1.18","","","(869)","","","(76)"],["Long-term debt (5)","7,479","","","43","","","0.57","","","9,496","","","212","","","2.24","","","(2,017)","","","(21)"],["Total interest-bearing liabilities","94,107","","","89","","","0.09","","","77,220","","","423","","","0.55","","","16,887","","","22"],["Demand deposits\u2014noninterest-bearing","37,960","","","","","","","25,336","","","","","","","12,624","","","50"],["All other liabilities","3,205","","","","","","","2,373","","","","","","","832","","","35"],["Total Huntington Bancshares Inc shareholders\u2019 equity","16,997","","","","","","","12,303","","","","","","","4,694","","","38"],["Non-controlling interest","12","","","","","","","\u2014","","","","","","","12","","","100"],["Total equity","17,009","","","","","","","12,303","","","","","","","4,706","","","38"],["Total liabilities and shareholders\u2019 equity","$","152,281","","","","","","","$","117,232","","","","","","","$","35,049","","","30","%"],["Net interest rate spread","","","","","2.92","","","","","","","2.83"],["Impact of noninterest-bearing funds on margin","","","","","0.03","","","","","","","0.16"],["Net interest margin/NII","","","$","4,127","","","2.95","%","","","","$","3,245","","","2.99","%"]]
[[/GREPCENT_TABLE]]

(1)FTE yields are calculated assuming a 21% tax rate.

(2)Average yield/rates include the impact of applicable derivatives. Loan and lease and deposit average yield/rates also include impact of applicable non-deferrable and amortized fees.

(3)For purposes of this analysis, NALs are reflected in the average balances of loans and leases.

(4)Includes consumer certificates of deposit of $250,000 or more.

(5)Reflects the benefit of $89 million mark-to-market of interest rate caps for 2021. There was no impact for 2020.

48 Huntington Bancshares Incorporated

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Net interest income for 2022 increased $1.2 billion, or 29%, from 2021. FTE net interest income, a non-GAAP financial measure, for 2022 increased $1.2 billion, or 29%, from 2021. The increase in FTE net interest income reflected the benefit of a $23.3 billion, or 17%, increase in average total earning assets in addition to a 30 basis point increase in the FTE NIM to 3.25%. The increase in average total earning assets included a $18.4 billion, or 19%, increase in average loans and leases and a $8.9 billion, or 27%, increase in average total securities. Average balance increases across earning asset categories for 2022 reflect organic growth in addition to the late second-quarter 2021 TCF acquisition. The increase in average securities was additionally driven by the redeployment of excess liquidity into securities in the second half of 2021.

The NIM expansion was driven by the higher rate environment driving an increase in loan and lease and investment security yields, partially offset by higher cost of funds and the impact of lower accelerated PPP loan fees recognized upon forgiveness payments from the SBA in 2022. Net interest income for 2022 included $21 million in accelerated PPP loan fees recognized upon forgiveness payments from the SBA, compared to $126 million in 2021.

Provision for Credit Losses

(This section should be read in conjunction with the “Credit Risk” section.)

The provision for credit losses is the expense necessary to maintain the ACL at levels appropriate to absorb our estimate of credit losses expected over the life of the loan and lease portfolio, securities portfolio, and unfunded lending commitments.

The provision for credit losses in 2022 was $289 million, an increase of $264 million from 2021. The increase in provision expense over the prior year was due to a combination of loan and lease growth in 2022 and a reduction in ACL coverage ratios over the course of 2021, as there was more clarity relating to the economic impacts of COVID-19.

The components of the provision for credit losses were as follows:

[[GREPCENT_TABLE]]
[["Table 4 - Provision for Credit Losses"],["","Year Ended December 31,"],["(dollar amounts in millions)","2022","","","","","","","","2021","","2020"],["Provision for loan and lease losses","$","212","","","","","","","","","$","(1)","","","$","1,089"],["Provision for unfunded lending commitments","73","","","","","","","","","26","","","(41)"],["Provision for securities","4","","","","","","","","","\u2014","","","\u2014"],["Total provision for credit losses","$","289","","","","","","","","","$","25","","","$","1,048"]]
[[/GREPCENT_TABLE]]

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Noninterest Income

The following table reflects noninterest income for each of the periods presented: 

[[GREPCENT_TABLE]]
[["Table 5 - Noninterest Income"],["","Year Ended December 31,"],["(dollar amounts in millions)","","","Change from 2021","","","","Change from 2020"],["","2022","","Amount","","Percent","","2021","","Amount","","Percent","","2020"],["Service charges on deposit accounts","$","384","","","$","12","","","3","%","","$","372","","","$","71","","","24","%","","$","301"],["Card and payment processing income","374","","","40","","","12","","","334","","","86","","","35","","","248"],["Capital markets fees","252","","","101","","","67","","","151","","","26","","","21","","","125"],["Trust and investment management services","249","","","17","","","7","","","232","","","43","","","23","","","189"],["Mortgage banking income","144","","","(165)","","","(53)","","","309","","","(57)","","","(16)","","","366"],["Leasing revenue","126","","","27","","","27","","","99","","","78","","","NM","","21"],["Insurance income","117","","","12","","","11","","","105","","","8","","","8","","","97"],["Gain on sale of loans","57","","","48","","","NM","","9","","","(33)","","","(79)","","","42"],["Bank owned life insurance income","56","","","(13)","","","(19)","","","69","","","5","","","8","","","64"],["Net gains (losses) on sales of securities","\u2014","","","(9)","","","NM","","9","","","10","","","NM","","(1)"],["Other noninterest income","222","","","22","","","11","","","200","","","61","","","44","","","139"],["Total noninterest income","$","1,981","","","$","92","","","5","%","","$","1,889","","","$","298","","","19","%","","$","1,591"]]
[[/GREPCENT_TABLE]]

Noninterest income was $2.0 billion, up $92 million, or 5%, from the prior year. Capital markets fees increased $101 million, or 67%, primarily reflecting higher advisory fees supported by the impact of Capstone Partners, loan syndication fees, foreign exchange fees, and interest rate derivative fees. Gain on sale of loans increased $48 million, primarily due to sales of SBA loans during the first through third quarters of 2022. Trust and investment management services income increased $17 million, or 7%, primarily reflecting the full-period impact of the TCF acquisition and an increase in sales. Service charges on deposit accounts increased $12 million, or 3%, primarily due to the full-period impact on volume due to TCF customers, partially offset by the impact from Fair Play enhancements implemented in the second half of 2022. Insurance income increased $12 million, or 11%, primarily reflecting an increase in agency commissions. All other increases were largely a result of the full-period impact of the TCF acquisition. Offsetting these increases, mortgage banking income decreased $165 million, or 53%, primarily reflecting lower salable volume and secondary marketing spreads, bank owned life insurance decreased $13 million, or 19%, primarily due to valuation adjustments and lower benefit claims, and net gains on sales of securities decreased $9 million, as the prior year included sales reflecting securities optimization following the acquisition of TCF.

50 Huntington Bancshares Incorporated

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[[GREPCENT_TABLE]]
[["Noninterest Expense"],["The following table reflects noninterest expense for each of the periods presented:"],["Table 6 - Noninterest Expense"],["","Year Ended December 31,"],["(dollar amounts in millions)","","","Change from 2021","","","","Change from 2020"],["","2022","","Amount","","Percent","","2021","","Amount","","Percent","","2020"],["Personnel costs","$","2,401","","","$","66","","","3","%","","$","2,335","","","$","643","","","38","%","","$","1,692"],["Outside data processing and other services","610","","","(240)","","","(28)","","","850","","","466","","","121","","","384"],["Equipment","269","","","21","","","8","","","248","","","68","","","38","","","180"],["Net occupancy","246","","","(31)","","","(11)","","","277","","","119","","","75","","","158"],["Marketing","91","","","2","","","2","","","89","","","51","","","134","","","38"],["Professional services","77","","","(36)","","","(32)","","","113","","","58","","","105","","","55"],["Deposit and other insurance expense","67","","","16","","","31","","","51","","","19","","","59","","","32"],["Amortization of intangibles","53","","","5","","","10","","","48","","","7","","","17","","","41"],["Lease financing equipment depreciation","45","","","4","","","10","","","41","","","40","","","NM","","1"],["Other noninterest expense","342","","","19","","","6","","","323","","","109","","","51","","","214"],["Total noninterest expense","$","4,201","","","$","(174)","","","(4)","%","","$","4,375","","","$","1,580","","","57","%","","$","2,795"],["Number of employees (average FTE)","19,920","","","1,478","","","8","%","","18,442","","","2,864","","","18","%","","15,578"]]
[[/GREPCENT_TABLE]]

Impacts of acquisition-related expenses:

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["(dollar amounts in millions)","2022","","2021","","2020"],["Personnel costs","$","8","","","$","177","","","$","\u2014"],["Outside data processing and other services","41","","","303","","","\u2014"],["Equipment","5","","","16","","","\u2014"],["Net occupancy","32","","","82","","","\u2014"],["Marketing","\u2014","","","5","","","\u2014"],["Professional services","4","","","57","","","\u2014"],["Deposit and other insurance expense","1","","","\u2014","","","\u2014"],["Other noninterest expense","4","","","61","","","\u2014"],["Total noninterest expense adjustments","$","95","","","$","701","","","$","\u2014"]]
[[/GREPCENT_TABLE]]

Noninterest expense was $4.2 billion, a decrease of $174 million, or 4%, from the prior year, primarily reflecting a $606 million decrease in acquisition-related expenses and execution of cost reduction initiatives, partially offset by the full-period impact of the TCF acquisition. Outside data processing and other services decreased $240 million, or 28%, professional services expense decreased $36 million, or 32%, and net occupancy decreased $31 million, or 11%, all primarily reflecting decreases in acquisition-related expenses and execution of cost reduction initiatives, partially offset by the full-period impact of the TCF acquisition. Partially offsetting these decreases, personnel costs increased $66 million, or 3%, primarily due to the impact of the full-period impact of the TCF acquisition, the impact from the addition of Capstone Partners, and other merit increases, partially offset by a decrease in acquisition-related expenses. Equipment expense increased $21 million, or 8%, primarily reflecting timing of technology equipment purchases and amortization and the full-period impact of the TCF acquisition, partially offset by reductions to the post-conversion cost structure. Other noninterest expenses increased $19 million, or 6%, primarily due to Capstone Partners expenses attributable to revenue activity, an increase in travel expenses as travel resumes a more normalized level following the COVID-19 pandemic, and the full-period impact of the TCF acquisition, partially offset by a decrease in acquisition-related expenses. All other increases were primarily a result of the full-period impact of the TCF acquisition, partially offset by cost reduction initiatives.

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Provision for Income Taxes

(This section should be read in conjunction with Note 1 - “Significant Accounting Policies” and Note 18 - “Income Taxes” of the Notes to Consolidated Financial Statements.)

The provision for income taxes was $515 million for 2022, compared with $294 million in 2021. The effective tax rates for 2022 and 2021 were 18.6% and 18.5%, respectively. Both years included the benefits from general business credits, capital losses, tax-exempt income, tax-exempt bank owned life insurance income, and investments in qualified affordable housing projects.

The net federal deferred tax asset was $437 million, and the net state deferred tax asset was $97 million at December 31, 2022. As of December 31, 2022 and 2021 there was no valuation allowance on federal deferred taxes. In 2022, a $3 million decrease in the provision for state income taxes, net of federal tax effect, was recorded for the portion of state deferred tax assets that are not more likely than not to be realized, compared to an increase of $7 million, net of federal tax effect, in 2021.

RISK MANAGEMENT AND CAPITAL

Risk Governance

Risk awareness, identification and assessment, reporting, and active management are key elements in overall risk management. Controls include, among other, effective segregation of duties, access management, and authorization and reconciliation procedures, as well as staff education and a disciplined assessment process.

We use a multi-faceted approach to risk governance. It begins with the Board of Directors defining our risk appetite as aggregate moderate-to-low, through-the-cycle. This does not preclude engagement in select higher risk activities. Rather, the definition is intended to represent an aggregate view of where we want our overall risk to be managed.

Three Board committees primarily oversee implementation and monitoring of this desired risk appetite:

•Our Audit Committee oversees the integrity of the consolidated financial statements, including policies, procedures, and practices regarding the preparation of financial statements, the financial reporting process, disclosures, and internal control over financial reporting. The Audit Committee also provides assistance to our Board in overseeing the internal audit division and the independent registered public accounting firm’s qualifications and independence; compliance with our Financial Code of Ethics for the chief executive officer and senior financial officers; and compliance with corporate securities trading policies.

•Our Risk Oversight Committee assists the Board in overseeing management of material risks, the approval and monitoring of our capital position and plan supporting our overall aggregate moderate-to-low, through-the-cycle risk appetite, the risk governance structure, compliance with applicable laws and regulations, and determining adherence to the board’s stated risk appetite. The ROC has oversight responsibility with respect to the full range of inherent risks: credit, market, liquidity, legal, compliance/regulatory, operational, strategic, and reputational. The ROC provides assistance to our Board in overseeing the credit review group. This committee also oversees our capital management and planning process, ensures that the amount and quality of capital are adequate in relation to expected and unexpected risks, and that our capital levels exceed “well-capitalized” requirements.

•Our Technology Committee assists our Board in fulfilling its oversight responsibilities with respect to all technology, cyber security, and third-party risk management strategies and plans. The committee is charged with evaluating Huntington’s capability to properly perform all technology functions necessary for its business plan, including projected growth, technology capacity, planning, operational execution, product development, and management capacity. Our Technology Committee provides oversight of technology investments and plans to drive efficiency as well as to meet defined standards for risk, information security, and redundancy. Our Technology Committee oversees the allocation of technology costs and ensures that they are understood by the Board. Our Technology Committee monitors and evaluates innovation and technology trends that may affect our strategic plans, including monitoring of overall industry trends. The Technology Committee reviews and provides oversight of our continuity and disaster recovery planning and preparedness.

52 Huntington Bancshares Incorporated

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Our Audit and Risk Oversight Committees routinely hold executive sessions with our key officers engaged in accounting and risk management. On a periodic basis, the two committees meet in joint session to cover matters relevant to both, such as the construct and appropriateness of the ACL, which is reviewed quarterly. All directors have access to information provided to each committee and all scheduled meetings are open to all directors.

Our Risk Oversight and Technology Committees routinely hold joint sessions to cover matters relevant to both such as cybersecurity and IT risk and control projects and risk assessments.

Further, through our Human Resources and Compensation Committee, our Board seeks to ensure its system of rewards is risk-sensitive and aligns the interests of management, creditors, and shareholders. We utilize a variety of compensation-related tools to induce appropriate behavior, including common stock ownership thresholds for the chief executive officer and certain members of senior management, equity deferrals, recoupment provisions, and the right to terminate compensation plans at any time.

Management has implemented an Enterprise Risk Management and Risk Appetite Framework. Critically important is our self-assessment process, in which each business segment produces an analysis of its risks and the strength of its risk controls. The segment analyses are combined with assessments by our risk management organization of major risk sectors (e.g., credit, market, liquidity, operational, compliance, strategic, and reputation) to produce an overall enterprise risk assessment. Outcomes of the process include a determination of the quality of the overall control process, the direction of risk, and our position compared to the defined risk appetite.

Management also utilizes a wide series of metrics (key risk indicators) to monitor risk positions throughout the Company. In general, a range for each metric is established, which allows the Company, in aggregate, to operate within an aggregate moderate-to-low, through-the-cycle risk appetite. Deviations from the range will indicate if the risk being measured exceeds desired tolerance, which may then necessitate corrective action.

We also have four executive level committees to manage risk: ALCO, Credit Policy and Strategy, Risk Management, and Capital Management. Each committee focuses on specific categories of risk and is supported by a series of subcommittees that are tactical in nature. We believe this structure helps ensure appropriate escalation of issues and overall communication of strategies.

Huntington utilizes three lines of defense with regard to risk management: (1) business segments, (2) corporate risk management, and (3) internal audit and credit review. To induce greater ownership of risk within its business segments, segment risk officers have been embedded in the business to identify and monitor risk, elevate and remediate issues, establish controls, perform self-testing, and oversee the self-assessment process. Corporate Risk Management establishes policies, sets operating limits, reviews new or modified products/processes, ensures consistency and quality assurance within the segments, and produces the enterprise risk assessment. The Chief Risk Officer has significant input into the design and outcome of incentive compensation plans as they apply to risk. Internal audit and credit review provide additional assurance that risk-related functions are operating as intended.

Huntington classifies/aggregates risk into seven risk pillars. Huntington recognizes that risks can be interrelated or embedded within each other, and therefore managing across risk pillars is a key component of the framework. The following defines the Company’s risk pillars:

•Credit risk, which is the risk of loss due to loan and lease customers or other counterparties not being able to meet their financial obligations under agreed upon terms;

•Market risk, which occurs when fluctuations in interest rates impact earnings and capital. Financial impacts are realized through changes in the interest rates of balance sheet assets and liabilities (net interest margin) or directly through valuation changes of capitalized MSR and/or trading assets (noninterest income);

•Liquidity risk, which is the risk to current or anticipated earnings or capital arising from an inability to meet obligations when they come due. Liquidity risk includes the inability to access funding sources or manage fluctuations in funding levels. Liquidity risk also results from the failure to recognize or address changes in market conditions that affect our ability to liquidate assets quickly and with minimal loss in value;

2022 Form 10-K 53

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•Operational risk, which is the risk of loss arising from inadequate or failed internal processes or systems, including information security breaches or cyberattacks, human errors or misconduct, or adverse external events. Operational losses result from internal fraud, external fraud, inadequate or inappropriate employment practices and workplace safety, failure to meet professional obligations involving customers, products, and business practices, damage to physical assets, business disruption and systems failures, and failures in execution, delivery, and process management;

•Compliance risk, which exposes us to money penalties, enforcement actions, or other sanctions as a result of non-conformance with laws, rules, and regulations that apply to the financial services industry;

•Strategic risk, which is defined as risk to current or anticipated earnings, capital, or enterprise value arising from adverse business decisions, improper implementation of business decisions or lack of responsiveness to industry / market changes; and

•Reputation risk, which is the risk that negative publicity regarding an institution’s business practices, whether true or not, will cause a decline in the customer base, costly litigation, or revenue reductions.

A comprehensive discussion of risk management and capital matters affecting us can be found in the Risk Factors section included in Item 1A: Risk Factors and the “Regulatory Matters” section of Item 1: Business of this Form 10-K.

Some of the more significant processes used to manage and control credit, market, liquidity, operational, and compliance risks are described in the following sections.

Credit Risk

Credit risk is the risk of financial loss if a counterparty is not able to meet the agreed upon terms of the financial obligation. The majority of our credit risk is associated with lending activities, as the acceptance and management of credit risk is central to profitable lending. We also have credit risk associated with our investment securities portfolios (see Note 4 - "Investment Securities and Other Securities" of the Notes to Consolidated Financial Statements). We engage with other financial counterparties for a variety of purposes including investing, asset and liability management, mortgage banking, and trading activities. A variety of derivative financial instruments, principally interest rate swaps, caps and floors, swaption collars, 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. We also use derivatives, principally loan sale commitments, in hedging our mortgage loan interest rate lock commitments and mortgage loans held for sale. While there is credit risk associated with derivative activity, we believe this exposure is minimal. (See Note 1 - "Significant Accounting Policies" of the Notes to Consolidated Financial Statements.)

We focus on the early identification, monitoring, and management of all aspects of our credit risk. In addition to the traditional credit risk mitigation strategies of credit policies and processes, market risk management activities, and portfolio diversification, we use quantitative measurement capabilities utilizing external data sources, enhanced modeling technology, and internal stress testing processes. Our ongoing expansion of portfolio management resources is central to our commitment to maintaining an aggregate moderate-to-low, through-the-cycle risk appetite. In our efforts to identify risk mitigation techniques, we have focused on product design features, origination policies, and solutions for delinquent or stressed borrowers.

The maximum level of credit exposure to individual credit borrowers is limited by policy guidelines based on the perceived risk of each borrower or related group of borrowers. Authority to grant commitments sits with the independent credit administration function, with limited exceptions, and is closely monitored and regularly updated. Concentration risk is managed through limits on loan type, industry, and loan quality factors. We focus predominantly on extending credit to consumer and commercial customers with existing or expandable relationships within our primary banking markets, although we will consider lending opportunities outside our primary markets if we believe the associated risks are acceptable and aligned with strategic initiatives. Although we offer a broad set of products, we continue to develop new lending products and opportunities. Each of these new products and opportunities goes through a rigorous development and approval process prior to implementation to ensure our overall objective of maintaining an aggregate moderate-to-low risk portfolio profile.

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The checks and balances in the credit process and the separation of the credit administration and risk management functions are designed to appropriately assess and sanction the level of credit risk being accepted, facilitate the early recognition of credit problems when they occur, and provide for effective problem asset management and resolution. For example, we do not extend additional credit to delinquent borrowers except in certain circumstances that substantially improve our overall repayment or collateral coverage position.

Loan and Lease Credit Exposure Mix

At December 31, 2022, our loans and leases totaled $119.5 billion, representing a $8.3 billion, or 7%, increase compared to $111.3 billion at December 31, 2021.

Total commercial loans and leases were $67.0 billion at December 31, 2022 and represented 56% of our total loan and lease credit exposure. Our commercial loan portfolio is diversified by product type, customer size, and geography, and is comprised of the following (see Commercial Credit discussion):

C&I – C&I loans are made to commercial customers for use in normal business operations to finance working capital needs, equipment purchases, or other projects. We focus on borrowers doing business within our geographic markets. C&I loans are generally underwritten individually and secured with the assets of the company and/or the personal guarantee of the business owners. The financing of owner-occupied facilities is considered a C&I loan even though there is improved real estate as collateral. This treatment is a result of the credit decision process, which focuses on cash flow from operations of the business to repay the debt. The operation, sale, rental, or refinancing of the real estate is not considered the primary repayment source for these types of loans. As we have expanded our C&I portfolio, we have developed a series of “vertical specialties” to ensure that new products or lending types are embedded within a structured, centralized Commercial Lending area with designated, experienced credit officers. These specialties are comprised of either targeted industries (for example, healthcare, technology & telecom, finance and insurance, etc.) and/or lending disciplines (equipment finance, distribution finance, asset-based lending, etc.), all of which requires a high degree of expertise and oversight to effectively mitigate and monitor risk. As such, we have dedicated colleagues and teams focused on bringing value-added expertise to these specialty customers.

CRE – The CRE portfolio includes both CRE commercial and CRE construction loans. CRE commercial loans are loans to developers and institutional sponsors supporting income-producing or for-sale commercial real estate properties. We mitigate our risk on these loans by requiring collateral values that exceed the loan amount and underwriting the loan with projected cash flow in excess of the debt service requirement. These loans are made to finance properties such as apartment buildings, office and industrial buildings, and retail shopping centers, and are repaid through cash flows related to the operation, sale, or refinance of the property. For loans secured by real estate, appropriate appraisals are obtained at origination and updated on an as needed basis in compliance with regulatory requirements and our credit policies. CRE construction loans are loans to developers, companies, or individuals used for the construction of a commercial or residential property for which repayment will be generated by the sale or permanent financing of the property. Our CRE construction portfolio primarily consists of multi-family, retail, office, and warehouse project types. Generally, these loans are for construction projects that have been pre-sold or pre-leased, or have secured permanent financing, as well as loans to real estate companies with significant equity invested in each project. These loans are managed by a specialized real estate lending group that actively monitors the construction phase and manages the loan disbursements according to the predetermined construction schedule.

Lease Financing – Lease financing products are designed to address the diverse financing needs of small to large companies primarily for the acquisition of equipment. Our lease financing portfolio will utilize a variety of origination partners and third-party sources including equipment manufacturers, dealers, or vendors set up under program structures to generate transactions from a nationwide footprint. High level business lines comprise of industrial finance, specialty finance, healthcare finance, technology finance, and specialized transportation, franchise, & government.

Total consumer loans were $52.5 billion at December 31, 2022 and represented 44% of our total loan and lease credit exposure. The consumer portfolio is comprised primarily of automobile loans, home equity lines-of-credit, residential mortgages, and RV and marine finance (see Consumer Credit discussion).

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Residential mortgage – Residential mortgage loans represent loans to consumers for the purchase or refinance of a residence. These loans are generally financed over a 15-year to 30-year term, and in most cases, are extended to borrowers to finance their primary residence. Applications are underwritten centrally using consistent credit policies and processes. All residential mortgage loan decisions utilize a full appraisal for collateral valuation. Huntington has not originated or acquired residential mortgages that allow negative amortization or allow the borrower multiple payment options.

Automobile – Automobile loans are comprised primarily of loans made through automotive dealerships and include exposure in selected states outside of our primary banking markets. The exposure outside of our core footprint states represents 18% of the total exposure, with no individual state representing more than 6%. Applications are underwritten using an automated underwriting system that applies consistent policies and processes across the portfolio.

Home equity – Home equity lending includes both home equity loans and lines-of-credit. This type of lending, which is secured by a first-lien or junior-lien on the borrower’s residence, allows customers to borrow against the equity in their home or refinance existing mortgage debt. Products include closed-end loans which are generally fixed-rate with principal and interest payments, and variable-rate, interest-only lines-of-credit which do not require payment of principal during the 10-year revolving period. The home equity line of credit converts to a 20-year amortizing structure at the end of the revolving period. Applications are underwritten centrally in conjunction with an automated underwriting system. The home equity underwriting criteria is based on minimum credit scores, debt-to-income ratios, and LTV ratios, with current collateral valuations. The underwriting for the floating rate lines of credit also incorporates a stress analysis for rising interest rates.

RV and marine – RV and marine loans are loans provided to consumers for the purpose of financing recreational vehicles and boats. Loans are originated on an indirect basis through a series of dealerships across 35 states. The loans are underwritten centrally using an application and decisioning system similar to automobile loans. The current portfolio includes 26% of the balances within our core footprint states.

Other consumer – Other consumer loans primarily consists of consumer loans not secured by real estate, including credit cards, personal unsecured loans, and overdraft balances. We originate these products within our established set of credit policies and guidelines.

The table below provides the composition of our total loan and lease portfolio: 

[[GREPCENT_TABLE]]
[["Table 7 - Loan and Lease Portfolio Composition"],["","At December 31,"],["(dollar amounts in millions)","2022","","2021"],["Commercial:"],["Commercial and industrial","$","45,127","","","38","%","","$","41,688","","","37","%"],["Commercial real estate","16,634","","","14","","","14,961","","","14"],["Lease financing","5,252","","","4","","","5,000","","","4"],["Total commercial","67,013","","","56","","","61,649","","","55"],["Consumer:"],["Residential mortgage","22,226","","","19","","","19,256","","","17"],["Automobile","13,154","","","11","","","13,434","","","12"],["Home equity","10,375","","","9","","","10,550","","","9"],["RV and marine","5,376","","","4","","","5,058","","","5"],["Other consumer","1,379","","","1","","","1,320","","","2"],["Total consumer","52,510","","","44","","","49,618","","","45"],["Total loans and leases","$","119,523","","","100","%","","$","111,267","","","100","%"]]
[[/GREPCENT_TABLE]]

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Our loan and lease portfolio is a managed mix of consumer and commercial credits. We manage the overall credit exposure and portfolio composition via a credit concentration policy. The policy designates specific loan types, collateral types, and loan structures to be formally tracked and assigned maximum exposure limits as a percentage of capital. Commercial lending by NAICS categories, specific limits for CRE project types, loans secured by residential real estate, large dollar exposures, and designated high risk loan categories represent examples of specifically tracked components of our concentration management process. There are no identified concentrations that exceed the assigned exposure limit. Our concentration management policy is approved by the ROC and is used to ensure a high quality, well diversified portfolio that is consistent with our overall objective of maintaining an aggregate moderate-to-low, through-the-cycle risk appetite. Changes to existing concentration limits, incorporating specific information relating to the potential impact on the overall portfolio composition and performance metrics, require the approval of the ROC prior to implementation.

The table below provides our total loan and lease portfolio segregated by industry type. The changes in the industry composition from December 31, 2021 are consistent with the portfolio growth metrics.

[[GREPCENT_TABLE]]
[["Table 8 - Loan and Lease Portfolio by Industry Type","","At December 31,"],["(dollar amounts in millions)","","2022","","2021"],["Commercial loans and leases:"],["Real estate and rental and leasing","","$","16,310","","","14","%","","$","14,287","","","13","%"],["Retail trade (1)","","9,894","","","8","","","6,709","","","6"],["Manufacturing","","7,809","","","7","","","7,401","","","7"],["Finance and insurance","","5,005","","","4","","","4,595","","","4"],["Health care and social assistance","","4,293","","","4","","","4,733","","","4"],["Wholesale Trade","","3,922","","","3","","","4,067","","","4"],["Accommodation and food services","","3,335","","","3","","","3,778","","","3"],["Transportation and warehousing","","3,246","","","3","","","3,096","","","3"],["Other services","","2,097","","","2","","","2,119","","","2"],["Professional, scientific, and technical services","","1,899","","","2","","","1,975","","","2"],["Construction","","1,757","","","1","","","1,980","","","2"],["Arts, entertainment, and recreation","","1,424","","","1","","","1,495","","","1"],["Admin./Support/Waste Mgmt. and Remediation Services","","1,370","","","1","","","1,285","","","1"],["Utilities","","1,298","","","1","","","932","","","1"],["Information","","1,167","","","1","","","870","","","1"],["Public administration","","667","","","1","","","713","","","1"],["Educational services","","513","","","\u2014","","","657","","","\u2014"],["Agriculture, forestry, fishing, and hunting","","455","","","\u2014","","","453","","","\u2014"],["Mining, quarrying, and oil and gas extraction","","196","","","\u2014","","","358","","","\u2014"],["Management of companies and enterprises","","127","","","\u2014","","","130","","","\u2014"],["Unclassified/other","","229","","","\u2014","","","16","","","\u2014"],["Total commercial loans and leases by industry category","","67,013","","","56","%","","61,649","","","55","%"],["Residential mortgage","","22,226","","","19","","","19,256","","","17"],["Automobile","","13,154","","","11","","","13,434","","","12"],["Home Equity","","10,375","","","9","","","10,550","","","9"],["RV and marine","","5,376","","","4","","","5,058","","","5"],["Other consumer loans","","1,379","","","1","","","1,320","","","2"],["Total loans and leases","","$","119,523","","","100","%","","$","111,267","","","100","%"]]
[[/GREPCENT_TABLE]]

(1)    Amounts include $2.3 billion and $1.5 billion of auto dealer services loans at December 31, 2022 and December 31, 2021, respectively.

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Commercial Credit

The primary factors considered in commercial credit approvals are the financial strength of the borrower, assessment of the borrower’s management capabilities, cash flows from operations, industry sector trends, type and sufficiency of collateral, type of exposure, transaction structure, and the general economic outlook. While these are the primary factors considered, there are a number of other factors that may be considered in the decision process. We require the signature approval of both the appropriate line of business leaders and independent credit executives. The risk rating, credit exposure amount, and complexity of the credit determines the threshold for approval. Credit officers who understand each local region and are experienced in the industries and loan structures of the requested credit exposure are involved in all loan decisions and have the primary credit authority, with the exception of small business loans. For small business loans, we utilize a centralized loan approval process for standard products and structures. In this centralized decision environment, certain individuals who understand each local region may make credit-extension decisions to preserve our commitment to the communities in which we operate. In addition to disciplined and consistent judgmental factors, a sophisticated credit scoring process is used as a primary evaluation tool in the determination of approving a loan.

In commercial lending, on-going credit management is dependent on the type and nature of the loan. We monitor all significant exposures. All commercial credit extensions are assigned internal risk ratings reflecting the borrower’s PD and LGD. This two-dimensional rating methodology provides granularity in the portfolio management process. The PD is rated and applied at the borrower level. The LGD is rated and applied based on the specific type of credit extension and the quality and lien position associated with the underlying collateral. The internal risk ratings are assessed at origination and updated at each periodic monitoring event. There is also extensive macro-portfolio management analysis. We review and adjust our risk-rating criteria based on actual experience, which provides us with the current risk level in the portfolio. A centralized portfolio management function monitors and reports on the performance of the entire commercial portfolio, including small business loans, to provide consistent oversight.

In addition to the initial credit analysis conducted during the approval process, our credit review group performs testing to provide an independent review and assessment of the quality and risk of new loan originations. This group is part of our Risk Management area and conducts portfolio reviews on a risk-based cycle to evaluate individual loans, validate risk ratings, and test the consistency of credit processes.

Our standardized loan grading system considers many components that directly correlate to loan quality and likelihood of repayment, one of which is guarantor support. On an at least annual basis, we consider, among other things, the guarantor’s reputation and creditworthiness, where available, along with various key financial metrics such as liquidity and net worth. Our assessment of the guarantor’s credit strength, or lack thereof, is reflected in our risk ratings for such loans, which is directly tied to, and an integral component of, our ACL methodology. When a loan goes to impaired status, viable guarantor support is considered in the determination of a credit loss.

If our assessment of the guarantor’s credit strength yields an inherent capacity to perform, we will seek repayment from the guarantor as part of the collection process and have done so successfully.

Substantially all loans categorized as Classified (See Note 5 “Loans / Leases” of the Notes to Consolidated Financial Statements) are managed by FRG. FRG is a specialized group of credit professionals that handle the day-to-day management of workouts, commercial recoveries, and problem loan sales. Its responsibilities include developing and implementing action plans, assessing risk ratings, and determining the appropriateness of the allowance, the accrual status, and the ultimate collectability of the Classified loan portfolio.

C&I PORTFOLIO

We manage the risks inherent in the C&I portfolio through origination policies, a defined loan concentration policy with established limits, on-going loan-level and portfolio-level reviews, recourse requirements, and continuous portfolio risk management activities. Our origination policies for the C&I portfolio include loan product-type specific policies such as LTV and debt service coverage ratios, as applicable.

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The C&I portfolio continues to have solid origination activity while we maintain a focus on high quality originations. We continue to maintain a proactive approach to identifying borrowers that may be facing financial difficulty in order to maximize the potential credit outcomes. Subsequent to the origination of the loan, the credit review group provides an independent review and assessment of the quality of the underwriting and risk of new loan originations.

CRE PORTFOLIO

We manage the risks inherent in this portfolio specific to CRE lending, focusing on the quality of the developer and the specifics associated with each project. Generally, we: (1) limit our loans to 80% of the appraised value of the commercial real estate at origination, (2) require net operating cash flows to be 120% of required interest and principal payments, and (3) if the commercial real estate is non-owner occupied, require that pre-leasing generate break-even interest-only debt service. We actively monitor project-type concentrations and both geographic and project-type performance metrics of all CRE loan types, with a focus on loans identified as higher risk based on the risk rating methodology. Both macro-level and loan-level stress-test scenarios based on existing and forecast market conditions are part of the on-going portfolio management process for the CRE portfolio.

Dedicated real estate professionals originate and manage the portfolio. The portfolio is diversified by project type and loan size, and this diversification represents a significant portion of the credit risk management strategies employed for this portfolio. Subsequent to the origination of the loan, the credit review group provides an independent review and assessment of the quality of the underwriting and risk of new loan originations.

Appraisal values are obtained in conjunction with all originations and renewals, and on an as-needed basis, in compliance with regulatory requirements and to ensure appropriate decisions regarding the on-going management of the portfolio reflect the changing market conditions. Appraisals are obtained from approved vendors and are reviewed by an internal appraisal review group comprised of certified appraisers to ensure the quality of the valuation used in the underwriting process. We continue to perform on-going portfolio level reviews within the CRE portfolio. These reviews generate action plans based on occupancy levels or leasing revenues associated with the projects being reviewed. This highly individualized process requires working closely with all of our borrowers, as well as an in-depth knowledge of CRE project lending and the market environment.

LEASE FINANCING

We manage the risks inherent in the Lease Financing portfolio through external consumer and business credit scoring solutions, internally developed custom probability of default and loss given default models, continuous portfolio risk management activities, and equipment and customer diversification. Our origination policies are aligned by transaction size with increased use of the personal guarantee of principals and external credit scoring tools for smaller transactions and expanded financial analysis and reporting requirements for larger transactions. Our program focuses on high-quality manufacturer, distributor, vendor, or third party originations sources with in-depth partner diligence. The lease financing group may use manufacturer loss risk share programs that provide additional transaction support, but the origination strategy prioritizes strong customer financial condition.

High level business lines are comprised of Industrial Finance, Specialty Finance, Healthcare Finance, Technology Finance, and Specialized Transportation, Franchise, and Government with multiple segments under each main line. We also have specific equipment types or industries designated as low tolerance with additional front-end guidance and diligence requirements. Subsequent to the origination of the lease, the credit review group provides an independent review and assessment of the quality of the underwriting and risk of new lease originations.

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Consumer Credit

Consumer credit approvals are based on, among other factors, the financial strength and payment history of the borrower, type of exposure, and transaction structure. Consumer credit decisions are generally made in a centralized environment utilizing decision models. Importantly, certain individuals who understand each local region have the authority to make credit extension decisions to preserve our focus on the local communities in which we operate. For all classes within the consumer loan portfolio, loans are assigned pool level PD factors based on the FICO range within which the borrower’s credit bureau score falls. The credit bureau score is widely accepted as the standard measure of consumer credit risk used by lenders, regulators, rating agencies, and consumers. The LGD is related to the type of collateral associated with the credit extension, which typically does not change over the course of the loan term. This allows Huntington to maintain a current view of the customer for credit risk management and ACL purposes.

In consumer lending, credit risk is managed from a segment (i.e., loan type, collateral position, geography, etc.) and vintage performance analysis. All portfolio segments are continuously monitored for changes in delinquency trends and other asset quality indicators. We make extensive use of portfolio assessment models to continuously monitor the quality of the portfolio, which may result in changes to future origination strategies. The credit review group conducts ongoing independent credit origination and process reviews to ensure the effectiveness and efficiency of the consumer credit processes.

Collection actions by our customer assistance team are initiated as needed through a centrally managed collection and recovery function. We employ a series of collection methodologies designed to maintain a high level of effectiveness, while maximizing efficiency. In addition to the consumer loan portfolio, the customer assistance team is responsible for collection activity on all sold and securitized consumer loans and leases. Collection practices include a single contact point for the majority of the residential real estate secured portfolios.

RESIDENTIAL REAL ESTATE SECURED PORTFOLIOS

The properties securing our residential mortgage and home equity portfolios are primarily located within our geographic footprint. Huntington continues to support our local markets with consistent underwriting across all residential secured products. The residential secured portfolio originations continue to be of high quality. Our portfolio management strategies associated with our Home Savers group allow us to focus on effectively helping our customers with appropriate solutions for their specific circumstances.

Huntington underwrites all residential mortgage applications centrally, with a focus on higher quality borrowers. We do not originate residential mortgages that allow negative amortization or allow the borrower multiple payment options. Residential mortgages are originated based on a completed full appraisal during the credit underwriting process. We update values in compliance with applicable regulations to facilitate our portfolio management, as well as our workout and loss mitigation functions.

We are subject to repurchase risk associated with residential mortgage loans sold in the secondary market. An appropriate level of reserve for representations and warranties related to residential mortgage loans sold has been established to address this repurchase risk inherent in the portfolio.

AUTOMOBILE PORTFOLIO

Our strategy in the automobile portfolio continues to focus on high quality borrowers as measured by both FICO and internal custom scores, combined with appropriate LTVs, terms, and profitability. Our strategy and operational capabilities allow us to appropriately manage the origination quality across the entire portfolio, including our newer markets. Although increased origination volume and entering new markets can be associated with increased risk levels, we believe our disciplined strategy and operational processes significantly mitigate these risks.

We have continued to consistently execute our value proposition and take advantage of available market opportunities. Importantly, we have maintained our high credit quality standards while expanding the portfolio.

RV AND MARINE PORTFOLIO

Our strategy in the RV and Marine portfolio focuses on high quality borrowers, combined with appropriate LTVs, terms, and profitability. Although entering new markets can be associated with increased risk levels, we believe our disciplined strategy and operational processes significantly mitigate these risks.

60 Huntington Bancshares Incorporated

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Credit Quality

(This section should be read in conjunction with Note 5 “Loans / Leases and Note 6 “Allowance for Credit Losses” of the Notes to Consolidated Financial Statements.)

We believe the most meaningful way to assess overall credit quality performance is through an analysis of specific performance ratios. This approach forms the basis of the discussion in the sections immediately following: NPAs, NALs, ACL, and NCOs. In addition, we utilize delinquency rates, risk distribution and migration patterns, product segmentation, and origination trends in the analysis of our credit quality performance.

Credit quality performance in 2022 reflected NCOs of $121 million, or 0.11% of average total loans and leases, a decrease from $215 million or 0.22% in the prior year. The decrease was driven by a $145 million decrease in Commercial NCOs, partially offset by a $51 million increase in Consumer NCOs. NPAs decreased by $156 million, or 21%, to $594 million, primarily driven by decreases in commercial and industrial and lease financing NALs.

NPAs and NALs

NPAs consist of (1) NALs, which represent loans and leases no longer accruing interest, (2) OREO properties, and (3) other NPAs. Any loan or lease in our portfolio may be placed on nonaccrual status prior to the policies described below when collection of principal or interest is in doubt. Also, when a borrower with discharged non-reaffirmed debt in a Chapter 7 bankruptcy is identified and the loan or lease is determined to be collateral dependent, the loan is placed on nonaccrual status.

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 $398 million of commercial related NALs at December 31, 2022, $270 million, or 68%, represent loans and leases that were less than 30-days past due, demonstrating our continued commitment to proactive credit risk management. With the exception of residential mortgage loans guaranteed by government organizations which continue to accrue interest, first lien loans secured by residential mortgage collateral are placed on nonaccrual status at 150-days past due. Junior-lien home equity loans are placed on nonaccrual status at the earlier of 120-days past due or when the related first-lien loan has been identified as nonaccrual. Automobile, RV and marine, and other consumer loans are generally fully charged-off at 120-days past due, and if not fully charged-off are placed on non-accrual.

When loans and leases are placed on nonaccrual, any accrued interest is reversed against interest income. When, in our judgment, the borrower’s ability to make required interest and principal payments has resumed and collectability is no longer in doubt, the loan or lease could be returned to accrual status.

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The following table reflects period-end NALs and NPAs detail:

[[GREPCENT_TABLE]]
[["Table 9 - Nonaccrual Loans and Leases and Nonperforming Assets"],["","At December 31,"],["(dollar amounts in millions)","2022","","2021"],["Nonaccrual loans and leases (NALs):"],["Commercial and industrial","$","288","","","$","370"],["Commercial real estate","92","","","104"],["Lease financing","18","","","48"],["Residential mortgage","90","","","111"],["Automobile","4","","","3"],["Home equity","76","","","79"],["RV and marine","1","","","1"],["Total nonaccrual loans and leases","569","","","716"],["Other real estate, net:"],["Residential","11","","","8"],["Commercial","\u2014","","","1"],["Total other real estate, net","11","","","9"],["Other NPAs (1)","14","","","25"],["Total nonperforming assets","$","594","","","$","750"],["Nonaccrual loans and leases as a % of total loans and leases","0.48","%","","0.64","%"],["NPA ratio (2)","0.50","","","0.67"]]
[[/GREPCENT_TABLE]]

(1)Other nonperforming assets include certain impaired investment securities and/or nonaccrual loans held-for-sale.

(2)Nonperforming assets divided by the sum of loans and leases, other real estate owned, and other NPAs.

ACL

Our ACL is comprised of two different components, both of which in our judgment are appropriate to absorb lifetime expected credit losses in our loan and lease portfolio: the ALLL and the AULC.

We use statistically-based models that employ assumptions about current and future economic conditions throughout the contractual life of the loan. The process of estimating expected credit losses is based on three key parameters: PD, EAD, and LGD. Beyond the reasonable and supportable period (two to three years), the economic variables revert to a historical equilibrium at a pace dependent on the state of the economy reflected within the economic scenario.

Future economic conditions consider multiple macroeconomic scenarios provided to us by an independent third party and are reviewed through the appropriate committee governance channels described below. These macroeconomic scenarios contain certain variables that are influential to our modeling process, the most significant being unemployment rates and GDP. The probability weights assigned to each scenario are generally expected to be consistent from period to period and determined through our ACL process. Any changes in probability weights must be supported by appropriate documentation and approval of senior management. Additionally, we consider whether to adjust the modeled estimates to address possible limitations within the models or factors not captured within the macroeconomic scenarios. Lifetime losses for most of our loans and leases are evaluated collectively based on similar risk characteristics, risk ratings, origination credit bureau scores, delinquency status, and remaining months within loan agreements, among other factors.

The baseline scenario used for the 2022 fourth quarter assumes the weaker pace of job growth in 2023 will cause the unemployment rate to gradually increase to 4.1% by the end of 2023. The overnight federal funds rate is forecasted to continue to increase, hitting a terminal rate of approximately 4.6% in the second quarter of 2023 as the Federal Reserve continues to address the elevated inflation levels. The expectation is that the Federal Reserve would start to cut rates late in 2023 and throughout 2024 although monetary policy remains restrictive until the end of 2025 when the federal funds rate returns to its neutral rate. Inflation is forecast to drop from an average of 8.1% in 2022 to 2.4% in 2024 as a result of Federal Reserve’s actions, a reduction in U.S supply chain stress, below potential GDP growth, declines in global energy prices and moderating nominal wage growth.

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The table below is intended to show how the forecasted path of unemployment and GDP has changed since the end of 2021:

[[GREPCENT_TABLE]]
[["Table 10 - Forecasted Key Macroeconomic Variables"],["","","2021","","2022","","2023"],["Baseline scenario forecast","","Q4","","Q2","","Q4","","Q2","","Q4"],["Unemployment rate (1)"],["4Q 2021","","4.5%","","3.7%","","3.5%","","3.5%","","3.5%"],["4Q 2022","","N/A","","N/A","","3.7","","3.9","","4.1"],["Gross Domestic Product (1)"],["4Q 2021","","6.6%","","3.6%","","2.5%","","2.9%","","2.8%"],["4Q 2022","","N/A","","N/A","","(0.1)","","0.4","","2.0"]]
[[/GREPCENT_TABLE]]

(1)Values reflect the baseline scenario forecast inputs for each period presented, not updated for subsequent actual amounts.

Management continues to assess the uncertainty in the macroeconomic environment, including geopolitical instability and current inflation levels, considering multiple macroeconomic forecasts that reflected a range of possible outcomes. While we have incorporated estimates of economic uncertainty into our ACL, the ultimate impact of the current inflation levels and attempts to lower inflation through Federal Reserve rate actions will have on the economy remains unknown.

Management develops additional analytics to support adjustments to our modeled results. Our governance committees reviewed model results of each economic scenario for appropriate usage, concluding that the quantitative transactional reserve will continue to utilize scenario weighting. Given the uncertainty associated with key economic scenario assumptions, the December 31, 2022 ACL included a general reserve that consists of various risk profile components, including profiles to capture uncertainty not addressed within the quantitative transaction reserve.

Our ACL methodology committee is responsible for developing the methodology, assumptions and estimates used in the calculation, as well as determining the appropriateness of the ACL. The ALLL represents the estimate of lifetime expected losses in the loan and lease portfolio at the reported date. The loss modeling process uses an EAD concept to calculate total expected losses on both funded balances and unfunded lending commitments, where appropriate. Losses related to the unfunded lending commitments are then recorded as AULC within other liabilities in the Consolidated Balance Sheet. A liability for expected credit losses for off-balance sheet credit exposures is recognized if Huntington has a present contractual obligation to extend the credit and the obligation is not unconditionally cancelable.

The AULC is determined by applying the same quantitative reserve determination process to the unfunded portion of the loan exposures adjusted by an applicable funding expectation. (See Note 1 - "Significant Accounting Policies" of the Notes to Consolidated Financial Statements).

Our ACL evaluation process includes the on-going assessment of credit quality metrics, and a comparison of certain ACL benchmarks to current performance. For further information, including the ALLL and AULC activity by portfolio segment, refer to Note 6 “Allowance for Credit Losses” of the Notes to Consolidated Financial Statements.

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The table below reflects the allocation of our ALLL among our various loan and lease categories and the reported ACL: 

[[GREPCENT_TABLE]]
[["Table 11 - Allocation of Allowance for Credit Losses"],["(dollar amounts in millions)","At December 31,"],["","2022","","2021"],["","Allocation of Allowance","","% of Total ALLL","","","% of Total Loans and Leases (1)","","","","Allocation of Allowance","","% of Total ALLL","","% of Total Loans and Leases (1)"],["Commercial"],["Commercial and industrial","$","890","","","42","%","","","38","%","","","","$","832","","","41","%","","37","%"],["Commercial real estate","482","","","23","","","","14","","","","","586","","","29","","","14"],["Lease financing","52","","","2","","","","4","","","","","44","","","2","","","4"],["Total commercial","1,424","","","67","","","","56","","","","","1,462","","","72","","","55"],["Consumer"],["Residential mortgage","187","","","8","","","","19","","","","","145","","","8","","","17"],["Automobile","141","","","7","","","","11","","","","","108","","","5","","","12"],["Home equity","105","","","5","","","","9","","","","","88","","","4","","","9"],["RV and marine","143","","","7","","","","4","","","","","105","","","5","","","5"],["Other consumer","121","","","6","","","","1","","","","","122","","","6","","","2"],["Total consumer","697","","","33","","","","44","","","","","568","","","28","","","45"],["Total ALLL","2,121","","","100","%","","","100","%","","","","2,030","","","100","%","","100","%"],["AULC","150","","","","","","","","","","77"],["Total ACL","$","2,271","","","","","","","","","","$","2,107"],["Total ALLL as % of:"],["Total loans and leases","1.77","%","","","","","","","","","1.82","%"],["Nonaccrual loans and leases","373","","","","","","","","","","284"],["NPAs","357","","","","","","","","","","271"],["Total ACL as % of:"],["Total loans and leases","1.90","%","","","","","","","","","1.89","%"],["Nonaccrual loans and leases","400","","","","","","","","","","294"],["NPAs","382","","","","","","","","","","281"]]
[[/GREPCENT_TABLE]]

(1)Percentages represent the percentage of each loan and lease category to total loans and leases.

At December 31, 2022, the ACL was $2.3 billion, or 1.90%, of total loans and leases, compared to $2.1 billion, or 1.89%, at December 31, 2021. The increase in the total ACL was primarily driven by loan and lease growth, but also recognizes the increased near-term recessionary risks at the end of 2022.

NCOs

A loan in any portfolio may be charged-off prior to the policies described below if a loss confirming event has occurred. Loss confirming events include, but are not limited to, bankruptcy (unsecured), continued delinquency, foreclosure, or receipt of an asset valuation indicating a collateral deficiency where that asset is the sole source of repayment. Additionally, discharged, collateral dependent non-reaffirmed debt in Chapter 7 bankruptcy filings will result in a charge-off to estimated collateral value, less anticipated selling costs at the time of discharge.

Commercial loans and leases are either charged-off or written down to net realizable value by 90-days past due with the exception of administrative small ticket lease delinquencies. Automobile loans, RV and marine, and other consumer loans are generally fully charged-off at 120-days past due. First-lien and junior-lien home equity loans are charged-off to the estimated fair value of the collateral, less anticipated selling costs, at 150-days past due and 120-days past due, respectively. Residential mortgages are charged-off to the estimated fair value of the collateral, less anticipated selling costs, at 150-days past due. The remaining balance is in delinquent status until a modification can be completed, or the loan goes through the foreclosure process.

64 Huntington Bancshares Incorporated

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The following table reflects NCO detail: 

[[GREPCENT_TABLE]]
[["Table 12 - Net Loan and Lease Charge-offs"],["(dollar amounts in millions)","Year Ended December 31,"],["","2022","","2021","","2020"],["Net charge-offs by loan and lease type:"],["Commercial:"],["Commercial and industrial","$","(2)","","","$","99","","","$","287"],["Commercial real estate","8","","","17","","","43"],["Lease financing","9","","","44","","","12"],["Total commercial","15","","","160","","","342"],["Consumer:"],["Residential mortgage","(2)","","","(1)","","","3"],["Automobile","6","","","(6)","","","33"],["Home equity","(5)","","","(5)","","","6"],["RV and marine","8","","","5","","","12"],["Other consumer","99","","","62","","","53"],["Total consumer","106","","","55","","","107"],["Total net charge-offs","$","121","","","$","215","","","$","449"],["Net charge-offs - annualized percentages:"],["Commercial:"],["Commercial and industrial","\u2014","%","","0.27","%","","0.91","%"],["Commercial real estate","0.05","","","0.14","","","0.61"],["Lease financing","0.18","","","1.18","","","0.54"],["Total commercial","0.03","","","0.31","","","0.84"],["Consumer:"],["Residential mortgage","(0.01)","","","\u2014","","","0.03"],["Automobile","0.05","","","(0.05)","","","0.26"],["Home equity","(0.05)","","","(0.05)","","","0.07"],["RV and marine","0.15","","","0.10","","","0.31"],["Other consumer","7.55","","","5.56","","","4.84"],["Total consumer","0.21","","","0.12","","","0.28"],["Net charge-offs as a % of average loans","0.11","%","","0.22","%","","0.57","%"]]
[[/GREPCENT_TABLE]]

NCOs decreased $94 million, or 44%, to $121 million in 2022 compared to 2021. NCOs for the commercial portfolios showed significant improvement, with net charge-offs of 0.03% in 2022 compared to 0.31% in 2021, primarily attributable to a reduction in NCOs in the C&I portfolio. Consumer charge-offs were higher in 2022 compared to 2021, primarily due to an increase in the other consumer portfolio.

Market Risk

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.

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We measure market risk exposure via financial simulation models, which provide management with insights on the potential impact to net interest income and other key metrics as a result of changes in market interest rates. Models are used to simulate cash flows and accrual characteristics of the balance sheet based on assumptions regarding the slope or shape of the yield curve, the direction and volatility of interest rates, and the changing composition and characteristics of the balance sheet resulting from strategic objectives and customer behavior. Assumptions and models provide insight on forecasted balance sheet growth and composition, and the pricing and maturity characteristics of current and future business.

In measuring the financial risks associated with interest rate sensitivity in our balance sheet, we compare a set of alternative interest rate scenarios to the results of a base case scenario derived using market forward rates. The market forward reflects the market consensus regarding the future level and slope of the yield curve across a range of tenor points. The standard set of interest rate scenarios includes two types: “shock” scenarios which are immediate parallel rate shifts, and “ramp” scenarios where the parallel shift is applied gradually over the first 12 months of the forecast on a pro rata basis. In both shock and ramp scenarios with falling rates, we presume that market rates will not go below 0%. The scenarios are inclusive of all executed interest rate risk hedging activities. Forward starting hedges are included to the extent that they have been transacted and that they start within the measurement horizon.

Interest rate risk measurement is calculated and reported to the Board of Directors at least quarterly. A comprehensive discussion of risk management governance can be found in Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations and the “Risk Governance” section of this Form 10-K.

We use two approaches to model interest rate risk: Net interest income at risk (NII at risk) and economic value of equity at risk modeling sensitivity analysis (EVE at Risk).

[[GREPCENT_TABLE]]
[["Table 13 - Net Interest Income at Risk"],["","Net Interest Income at Risk (%)"],["Basis point change scenario","-100","","+100","","+200"],["December 31, 2022","-2.0","","","2.0","","","4.0"],["December 31, 2021","-4.2","","","4.6","","","8.9"]]
[[/GREPCENT_TABLE]]

The NII at Risk results included in the table above reflect the analysis used monthly by management. It models gradual “ramp” -100, +100 and +200 basis point parallel shift scenarios, implied by the forward yield curve over the next twelve months.

The NII at Risk shows that the balance sheet is asset sensitive at both December 31, 2022 and December 31, 2021. The change in sensitivity is primarily driven by changes in forecasted market interest rate expectations, and the mix of the balance sheet.

[[GREPCENT_TABLE]]
[["Table 14 - Economic Value of Equity at Risk"],["","Economic Value of Equity at Risk (%)"],["Basis point change scenario","-100","","+100","","+200"],["December 31, 2022","5.9","","","-8.0","","","-17.3"],["December 31, 2021","-4.6","","","-1.5","","","-5.6"]]
[[/GREPCENT_TABLE]]

The EVE results included in the table above reflect the analysis used monthly by management. It models immediate -100, +100 and +200 basis point parallel “shock” scenarios.

The change in sensitivity from December 31, 2021 was driven primarily by increases in the yield curve shortening the duration of liabilities, change in deposit mix, and hedging throughout the year.

66 Huntington Bancshares Incorporated

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As of December 31, 2022, Huntington had outstanding LIBOR-based instruments that mature after June 30, 2023, including loan and lease exposures totaling approximately $19 billion, notional derivative exposure totaling approximately $37 billion, securities of approximately $1 billion, and long-term debt of $347 million. To address the discontinuance of LIBOR in its current form, we established a LIBOR transition team and project plan under the oversight of the CRO and CFO, providing periodic updates to the ROC. Contract remediation efforts coordinated by the LIBOR transition team are scheduled for completion by June 2023. Source systems have been updated to support alternative reference rates. At this time alternative reference rates are predominantly SOFR based. As such, we have developed a SOFR-enabled interest rate risk monitoring framework and a strategy for managing interest rate risk during the transition from LIBOR to SOFR. We continue to monitor market developments and regulatory updates. For a discussion of the risks associated with the LIBOR transition to alternative reference rates, refer to "Item 1A: Risk Factors.”

Use of Derivatives to Manage Interest Rate Risk

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, forward contracts, and forward starting interest rate swaps.

Table 15 shows all swap, swaption collar and floor positions that are utilized for purposes of managing our exposures to the variability of interest rates. The interest rates 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 20 “Derivative Financial Instruments” of the Notes to Consolidated Financial Statements.

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The following tables present additional information about the interest rate swaps, swaption collars, and floors used in Huntington’s asset and liability management activities.

[[GREPCENT_TABLE]]
[["Table 15 - Weighted-Average Maturity, Receive Rate and SOFR/LIBOR Reset Rate on Asset Liability Management Instruments"],["","At December 31, 2022"],["","Notional Value","","Average Maturity (years)","","Fair Value","","Weighted-Average Fixed Rate","","Weighted-Average Reset Rate"],["(dollar amounts in millions)"],["Asset conversion swaps"],["Receive Fixed - Pay 1 month LIBOR","$","7,875","","","1.41","","","$","(390)","","","1.21","%","","4.20","%"],["Receive Fixed - Pay SOFR","8,700","","","3.55","","","(351)","","","2.57","","","3.90"],["Pay Fixed - Receive 1 month LIBOR (1)","8,024","","","3.89","","","834","","","0.93","","","4.37"],["Pay Fixed - Receive SOFR","366","","","7.02","","","49","","","1.46","","","3.82"],["Receive Fixed - Pay SOFR - forward starting (2)","2,950","","","4.91","","","(109)","","","2.64","","","\u2014"],["Pay Fixed - Receive 1 month LIBOR - forward starting (3)","91","","","7.31","","","12","","","1.62","","","\u2014"],["Pay Fixed - Receive SOFR - forward starting (1)(4)","1,926","","","6.17","","","85","","","2.17","","","\u2014"],["Liability conversion swaps"],["Receive Fixed - Pay 1 month LIBOR","1,430","","","1.85","","","(60)","","","2.01","","","4.25"],["Receive Fixed - Pay SOFR","6,299","","","4.91","","","(201)","","","3.16","","","3.36"],["Purchased swaption collars"],["Purchased Interest Rate Swaption Collars (5)","4,800","","","0.27","","","(6)","","","2.87 / 4.05"],["Basis swaps"],["Pay SOFR- Receive Fed Fund (economic hedges) (6)","174","","","3.58","","$","\u2014","","","4.33","","","4.31"],["Pay Fed Fund - Receive SOFR (economic hedges) (6)","1","","","12.81","","","\u2014","","","4.35","","","4.33"],["Total swap portfolio (7)","$","42,636","","","","","$","(137)"],["","At December 31, 2021"],["","Notional Value","","Average Maturity (years)","","Fair Value","","Weighted-Average Fixed Rate","","Weighted-Average Reset Rate"],["(dollar amounts in millions)"],["Asset conversion swaps"],["Receive Fixed - Pay 1 month LIBOR","$","10,775","","","1.88","","","$","58","","","1.38","%","","0.11","%"],["Pay Fixed - Receive 1 month LIBOR (1)","1,625","","","8.83","","","34","","","1.08","","","0.10"],["Pay Fixed - Receive SOFR","67","","","7.98","","","\u2014","","","1.32","","","\u2014"],["Pay Fixed - Receive 1 month LIBOR - forward starting (8)","6,500","","","3.97","","","78","","","0.90","","","\u2014"],["Pay Fixed - Receive SOFR - forward starting (8)","36","","","7.32","","","\u2014","","","1.29","","","\u2014"],["Liability conversion swaps"],["Receive Fixed - Pay 1 month LIBOR","1,928","","","2.16","","","54","","","2.13","","","0.10"],["Basis swaps"],["Pay SOFR- Receive Fed Fund (economic hedges) (6)","230","","","3.66","","$","\u2014","","","0.08","","","0.06"],["Pay Fed Fund - Receive SOFR (economic hedges) (6)","41","","","0.98","","","\u2014","","","0.05","","","0.08"],["Total swap portfolio","$","21,202","","","","","$","224"],["","At December 31, 2021"],["","Notional Value","","Average Maturity (years)","","Fair Value","","Weighted-Average Floor Strike","","Weighted-Average Reset Rate"],["(dollar amounts in millions)"],["Interest rate floors"],["Purchased Interest Rate Floors - 1 month LIBOR","$","375","","","0.06","","","$","2","","","1.93","%","","0.10","%"],["Total floors portfolio","$","375","","","","","$","2"]]
[[/GREPCENT_TABLE]]

(1)Amounts include interest rate swaps as fair value hedges of fixed-rate investment securities using the portfolio layer method.

(2)Forward starting swaps effective starting from January 2023 to July 2024.

(3)Forward starting swaps effective starting from January 2023 to February 2023

(4)Forward starting swaps effective starting from January 2023 to October 2027.

(5)The weighted average fixed rates for the swaption collars are the weighted average strike rates for the upper and lower bounds of the collars.

(6)Swaps have variable pay and variable receive resets. Weighted Average Fixed Rate column represents pay rate reset.

(7)LIBOR swap instruments that remain outstanding in July 2023 will transition to a SOFR-based rate.

(8)Forward starting swaps effective starting from January 2022 to February 2023.

68 Huntington Bancshares Incorporated

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MSRs

(This section should be read in conjunction with Note 7 - “Mortgage Loan Sales and Servicing Rights” of Notes to Consolidated Financial Statements.)

At December 31, 2022, we had a total of $494 million of capitalized MSRs representing the right to service $32.4 billion in mortgage loans.

MSR fair values are sensitive to movements in interest rates as expected future net servicing income depends on the projected outstanding principal balances of the underlying loans, which can be reduced by prepayments and declines in credit quality. Prepayments usually increase when mortgage interest rates decline and decrease when mortgage interest rates rise. We also employ hedging strategies to reduce the risk of MSR fair value changes or impairment. However, volatile changes in interest rates can diminish the effectiveness of these economic hedges. We report changes in the MSR value net of hedge-related trading activity in the mortgage banking income category of noninterest income.

MSR assets are included in servicing rights and other intangible assets in the Consolidated Financial Statements.

Price Risk

Price risk represents the risk of loss arising from adverse movements in the prices of financial instruments that are carried at fair value and are subject to fair value accounting. We have price risk from trading securities, securities owned by our broker-dealer subsidiaries, foreign exchange positions, derivative instruments, and equity investments. We have established loss limits on the trading portfolio, on the amount of foreign exchange exposure that can be maintained, and on the amount of marketable equity securities that can be held.

Liquidity Risk

Liquidity risk is the possibility of us being unable to meet current and future financial obligations in a timely manner. The goal of liquidity management is to ensure adequate, stable, reliable, and cost-effective sources of funds to satisfy changes in loan and lease demand, unexpected levels of deposit withdrawals, investment opportunities, and other contractual obligations. We consider core earnings, strong capital ratios, and credit quality essential for maintaining high credit ratings, which allows us cost-effective access to market-based liquidity. We mitigate liquidity risk by maintaining liquid assets in the form of cash, deposits at the Federal Reserve Bank, and investment securities. In addition, we maintain a large, stable core deposit base and a diversified base of readily available wholesale funding sources, including advances from the FHLB through pledged borrowing capacity, issuance through dealers in the capital markets, and access to certificates of deposit issued through brokers. The Board of Directors approves the liquidity strategy and furthermore reviews the acceptable level of liquidity risk, policy, and procedures established by senior management. The ALCO is appointed by the ROC to oversee liquidity risk management and the establishment of liquidity risk policies and limits. Liquidity Risk is managed centrally by Corporate Treasury. Our liquidity position is evaluated daily, weekly, and monthly by analyzing the composition of all funding sources, reviewing projected liquidity commitments by future months, and identifying sources and uses of funds. The overall management of our liquidity position is also integrated into consumer and commercial pricing policies to ensure a stable core deposit base. Liquidity risk is reviewed and managed continuously for the Bank and the parent company, as well as its subsidiaries. In addition, liquidity working groups meet regularly to identify and monitor liquidity positions, provide policy guidance, review funding strategies, and oversee the adherence to, and maintenance of, the contingency funding plans.

Our primary source of liquidity is our core deposit base. Core deposits comprised approximately 96% of total deposits at December 31, 2022. We also have available unused wholesale sources of liquidity. Liquidity is further provided by unencumbered, or unpledged, investment securities that totaled $13.1 billion as of December 31, 2022.

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The treasury department also maintains a contingency funding plan that provides for liquidity stress testing, which assesses the potential erosion of funds in the event of a systemic financial market crisis or institutional-specific stress scenario. An example of an institution specific event would be a downgrade in our public credit rating by a rating agency due to factors such as deterioration in asset quality, a large charge to earnings, a decline in profitability or other financial measures, or a significant merger or acquisition. Examples of systemic events unrelated to us that could have an effect on our access to liquidity would be terrorism or war, natural disasters, political events, or the default or bankruptcy of a major corporation, mutual fund, or hedge fund. Similarly, market speculation or rumors about us, or the banking industry in general, may adversely affect the cost and availability of normal funding sources. The contingency funding plan outlines the process for addressing a liquidity crisis. The plan provides for an evaluation of funding sources under various market conditions. It also assigns specific roles and responsibilities and communication protocols for effectively managing liquidity through a problem period.

Investment securities portfolio

(This section should be read in conjunction with Note 4 - “Investment Securities and Other Securities” of the Notes to Consolidated Financial Statements.)

Our investment securities portfolio is evaluated under established ALCO objectives. Changing market conditions could affect the profitability of the portfolio, as well as the level of interest rate risk exposure.

The weighted average yield by maturity of the investment securities portfolio is presented on the following table:

[[GREPCENT_TABLE]]
[["Table 16 - Investment Securities Weighted Average Yield by Maturity"],["","","","At December 31, 2022"],["","","","1 year or less","","","","After 1 year through 5 years","","","","After 5 years through 10 years","","","","After 10 years","","","","Total"],["(dollar amounts in millions)","","","Yield (1)","","","","Yield (1)","","","","Yield (1)","","","","Yield (1)","","","","Yield (1)"],["Available-for-sale securities:"],["U.S. Treasury","","","4.64","%","","","","4.15","%","","","","\u2014","%","","","","\u2014","%","","","","4.62","%"],["Federal agencies:"],["Residential CMO","","","\u2014","","","","","\u2014","","","","","\u2014","","","","","2.69","","","","","2.69"],["Residential MBS","","","\u2014","","","","","\u2014","","","","","1.57","","","","","2.16","","","","","2.16"],["Commercial MBS","","","\u2014","","","","","\u2014","","","","","\u2014","","","","","2.82","","","","","2.82"],["Other agencies","","","\u2014","","","","","1.81","","","","","2.59","","","","","4.93","","","","","3.51"],["Total U.S. Treasury, Federal agency, and other agency securities","","","4.64","","","","","2.01","","","","","2.41","","","","","2.34","","","","","2.35"],["Municipal securities","","","4.52","","","","","4.67","","","","","4.10","","","","","4.05","","","","","4.34"],["Private-label CMO","","","\u2014","","","","","0.22","","","","","2.14","","","","","2.68","","","","","2.50"],["Asset-backed securities","","","5.25","","","","","1.90","","","","","1.67","","","","","2.62","","","","","3.02"],["Corporate debt","","","2.77","","","","","2.02","","","","","2.20","","","","","\u2014","","","","","2.25"],["Other securities/Sovereign debt","","","1.64","","","","","0.80","","","","","\u2014","","","","","\u2014","","","","","0.96"],["Total available-for-sale securities","","","4.64","%","","","","3.54","%","","","","3.02","%","","","","2.40","%","","","","2.61","%"],["Held-to-maturity securities:"],["Federal agencies:"],["Residential CMO","","","\u2014","%","","","","\u2014","%","","","","2.56","%","","","","2.44","%","","","","2.45","%"],["Residential MBS","","","\u2014","","","","","\u2014","","","","","\u2014","","","","","2.51","","","","","2.51"],["Commercial MBS","","","\u2014","","","","","\u2014","","","","","2.77","","","","","2.52","","","","","2.52"],["Other agencies","","","\u2014","","","","","2.49","","","","","2.35","","","","","2.60","","","","","2.51"],["Total Federal agencies and other agencies","","","\u2014","","","","","2.49","","","","","2.60","","","","","2.49","","","","","2.49"],["Municipal securities","","","\u2014","","","","","\u2014","","","","","\u2014","","","","","2.63","","","","","2.63"],["Total held-to-maturity securities","","","\u2014","%","","","","2.49","%","","","","2.60","%","","","","2.49","%","","","","2.49","%"]]
[[/GREPCENT_TABLE]]

(1)Weighted average yields were calculated using amortized cost on a fully-taxable equivalent basis, assuming a 21% tax rate where applicable.

70 Huntington Bancshares Incorporated

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Bank Liquidity and Sources of Funding

Our primary sources of funding for the Bank are consumer and commercial core deposits. At December 31, 2022, these core deposits funded 78% of total assets (119% of total loans). Other sources of liquidity include non-core deposits, FHLB advances, wholesale debt instruments, and securitizations. Demand deposit overdrafts that have been reclassified as loan balances were $25 million and $29 million at December 31, 2022 and December 31, 2021, respectively.

The following table reflects deposit composition detail:

[[GREPCENT_TABLE]]
[["Table 17 - Deposit Composition"],["","At December 31,"],["(dollar amounts in millions)","2022","","2021"],["By Type:"],["Demand deposits\u2014noninterest-bearing","$","38,242","","","26","%","","$","43,236","","","30","%"],["Demand deposits\u2014interest-bearing","43,136","","","29","","","39,837","","","28"],["Money market deposits","36,082","","","24","","","32,522","","","23"],["Savings and other domestic deposits","20,357","","","14","","","21,088","","","15"],["Core certificates of deposit (1)","4,324","","","3","","","2,740","","","2"],["Total core deposits:","142,141","","","96","","","139,423","","","98"],["Other domestic deposits of $250,000 or more","220","","","\u2014","","","359","","","\u2014"],["Negotiable CDs, brokered and other deposits","5,553","","","4","","","3,481","","","2"],["Total deposits","$","147,914","","","100","%","","$","143,263","","","100","%"],["Total core deposits:"],["Commercial","$","64,107","","","45","%","","$","61,521","","","44","%"],["Consumer","78,034","","","55","","","77,902","","","56"],["Total core deposits","$","142,141","","","100","%","","$","139,423","","","100","%"]]
[[/GREPCENT_TABLE]]

(1)Includes consumer certificates of deposit of $250,000 or more.

The following table reflects consolidated Huntington Bancshares Incorporated amounts. Uninsured deposits are defined as the portion of deposit accounts in U.S. offices that exceed the FDIC insurance limit or similar state deposit insurance regimes and amounts in any other uninsured investment or deposit accounts that are classified as deposits and not subject to any federal or state deposit insurance regimes.

[[GREPCENT_TABLE]]
[["Table 18 - Uninsured deposits"],["","","","","","","","At December 31,"],["(dollar amounts in millions)","","","","","","","2022","","2021"],["Uninsured deposits (1)","","","","","","","$","47,283","","","$","48,869"]]
[[/GREPCENT_TABLE]]

(1)Uninsured deposits were determined by adjusting the amounts reported in the Bank Call Report by internal deposits to arrive at consolidated Huntington Bancshares Incorporated.

[[GREPCENT_TABLE]]
[["","At December 31, 2022"],["(dollar amounts in millions)","3 months or less","","3 months to 6 months","","6 months to 12 months","","12 months or more","","Total"],["Portion of U.S. time deposits in excess of insurance limit","$","107","","","$","67","","","$","115","","","$","173","","","$","462"]]
[[/GREPCENT_TABLE]]

To the extent we are unable to obtain sufficient liquidity through core deposits, we may meet our liquidity needs through sources of wholesale funding, asset securitization or sale. Sources of wholesale funding include other domestic deposits of $250,000 or more, negotiable CDs, brokered and other deposits, short-term borrowings, and long-term debt. Our wholesale funding for both the Bank and parent company totaled $17.5 billion at December 31, 2022, compared to $11.3 billion at December 31, 2021. The increase from the prior year-end is primarily due to increases in senior debt, brokered funds, and FHLB borrowings.

The Bank may issue long-term debt pursuant to an authorization from the Bank’s board of directors that allows for the periodic issuance of senior and/or subordinated debt securities with fixed or floating interest rates. The aggregate principal amount of the debt securities available for issuance is capped by the board authorization and is reviewed periodically for adjustment.

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The Bank maintains borrowing capacity at the FHLB and the Federal Reserve Bank Discount Window. The Bank does not consider borrowing capacity from the Federal Reserve Bank Discount Window as a primary source of liquidity. Total loans and securities pledged to the Federal Reserve Bank Discount Window and the FHLB were $90.0 billion at December 31, 2022.

At December 31, 2022, we believe the Bank has sufficient liquidity and capital resources to meet its cash flow obligations over the next 12 months and for the foreseeable future.

The following table reflects the composition and maturities of the loan and lease portfolio:

[[GREPCENT_TABLE]]
[["Table 19 - Maturity Schedule of Loans and leases"],["","At December 31, 2022"],["(dollar amounts in millions)","One Year or Less","","One to Five Years","","Five to Fifteen Years","","After Fifteen Years","","Total"],["Commercial:"],["Commercial and industrial","$","12,443","","","$","26,186","","","$","5,789","","","$","709","","","$","45,127"],["Commercial real estate","3,251","","","10,433","","","2,898","","","52","","","16,634"],["Lease financing","447","","","3,721","","","832","","","252","","","5,252"],["Total commercial","16,141","","","40,340","","","9,519","","","1,013","","","67,013"],["Consumer:"],["Residential mortgage","11","","","88","","","1,947","","","20,180","","","22,226"],["Automobile","167","","","7,961","","","4,992","","","34","","","13,154"],["Home equity","195","","","361","","","2,229","","","7,590","","","10,375"],["RV and marine","2","","","102","","","2,994","","","2,278","","","5,376"],["Other consumer","350","","","831","","","154","","","44","","","1,379"],["Total consumer","725","","","9,343","","","12,316","","","30,126","","","52,510"],["Total loans and leases","$","16,866","","","$","49,683","","","$","21,835","","","$","31,139","","","$","119,523"],["Percent of total","14","%","","42","%","","18","%","","26","%","","100","%"]]
[[/GREPCENT_TABLE]]

The following table reflects the loans and leases due after one year:

[[GREPCENT_TABLE]]
[["Table 20 - Loans and leases due after one year"],["","Interest rate"],["(dollar amounts in millions)","Fixed","","Floating or Adjustable"],["Commercial:"],["Commercial and industrial","$","9,781","","","$","22,903"],["Commercial real estate","1,128","","","12,255"],["Lease financing","4,579","","","226"],["Total commercial","15,488","","","35,384"],["Consumer:"],["Residential mortgage","10,137","","","12,078"],["Automobile","12,987","","","\u2014"],["Home equity","2,562","","","7,618"],["RV and marine finance","5,374","","","\u2014"],["Other consumer","459","","","570"],["Total consumer","31,519","","","20,266"],["Total loans and leases","$","47,007","","","$","55,650"]]
[[/GREPCENT_TABLE]]

72 Huntington Bancshares Incorporated

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Parent Company Liquidity

The parent company’s funding requirements consist primarily of dividends to shareholders, debt service, income taxes, operating expenses, funding of nonbank subsidiaries, repurchases of our stock, and acquisitions. The parent company obtains funding to meet obligations from dividends and interest received from the Bank, interest and dividends received from direct subsidiaries, net taxes collected from subsidiaries included in the federal consolidated tax return, fees for services provided to subsidiaries, and the issuance of debt securities.

The parent company had $3.5 billion and $2.8 billion, at December 31, 2022 and December 31, 2021, in cash and cash equivalents, respectively.

On January 18, 2023, our Board of Directors declared a quarterly common stock cash dividend of $0.155 per common share. The dividend is payable on April 3, 2023, to shareholders of record on March 20, 2023. Based on the current quarterly dividend of $0.155 per common share, cash demands required for common stock dividends are estimated to be approximately $224 million per quarter. Additionally, on January 18, 2023, our Board of Directors declared a quarterly Series B, Series E, Series F, Series G, and Series H Preferred Stock dividend payable on April 17, 2023 to shareholders of record on April 1, 2023. On December 8, 2022, our Board of Directors declared a quarterly dividend for the Series I Preferred Stock payable on March 1, 2023 to shareholders of record on February 15, 2023. Based on the current quarterly dividends declared, total cash demands required for Series B, Series E, Series F, Series G, Series H and Series I Preferred Stock are expected to be approximately $29 million per quarter.

During 2022, the Bank paid preferred and common dividends to the parent company of $45 million and $1.5 billion, respectively. To meet any additional liquidity needs, the parent company may issue debt or equity securities. To support the parent company’s ability to issue debt or equity securities, we have filed with the SEC an automatic shelf registration statement covering an indeterminate amount or number of securities to be offered or sold from time to time as authorized by the Huntington’s Board of Directors.

At December 31, 2022, we believe the Company has sufficient liquidity and capital resources to meet its cash flow obligations over the next 12 months and for the foreseeable future.

Off-Balance Sheet Arrangements

In the normal course of business, we enter into various off-balance sheet arrangements. These arrangements include commitments to extend credit, interest rate swaps, caps and floors, swaption collars, financial guarantees contained in standby letters-of-credit issued by the Bank, and commitments by the Bank to sell mortgage loans.

COMMITMENTS TO EXTEND CREDIT

Commitments to extend credit generally have fixed expiration dates, are variable-rate, and contain clauses that permit Huntington to terminate or otherwise renegotiate the contracts in the event of a significant deterioration in the customer’s credit quality. These arrangements normally require the payment of a fee by the customer, the pricing of which is based on prevailing market conditions, credit quality, probability of funding, and other relevant factors. Since many of these commitments are expected to expire without being drawn upon, the contract amounts are not necessarily indicative of future cash requirements. The interest rate risk arising from these financial instruments is insignificant as a result of their predominantly short-term, variable-rate nature. See Note 22 - “Commitments and Contingent Liabilities” of the Notes to Consolidated Financial Statements for more information.

STANDBY LETTERS-OF-CREDIT

Standby letters-of-credit are conditional commitments issued to guarantee the performance of a customer to a third-party. These guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing, and similar transactions. Most of these arrangements mature within two years and are expected to expire without being drawn upon. Standby letters-of-credit are included in the determination of the amount of risk-based capital that the parent company and the Bank are required to hold. Through our credit process, we monitor the credit risks of outstanding standby letters-of-credit. When it is probable that a standby letter-of-credit will be drawn and not repaid in full, a loss is recognized in the provision for credit losses. See Note 22 - “Commitments and Contingent Liabilities” of the Notes to Consolidated Financial Statements for more information.

2022 Form 10-K 73

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COMMITMENTS TO SELL LOANS

Activity related to our mortgage origination activity supports the hedging of the mortgage pricing commitments to customers and the secondary sale to third parties. In addition, we have commitments to sell residential real estate loans. These contracts mature in less than one year. See Note 22 - “Commitments and Contingent Liabilities” of the Notes to Consolidated Financial Statements for more information.

Contractual obligations, including off-balance sheet arrangements are properly considered in our liquidity risk management process. At December 31, 2022, we believe the Company has sufficient liquidity and capital resources to meet its cash flow obligations over the next 12 months and for the foreseeable future.

[[GREPCENT_TABLE]]
[["Table 21 - Contractual Obligations (1)"],["","At December 31, 2022"],["(dollar amounts in millions)","Less than 1 Year","","1 to 3Years","","3 to 5Years","","More than5 Years","","Total"],["Deposits without a stated maturity","$","142,684","","","$","\u2014","","","$","\u2014","","","$","\u2014","","","$","142,684"],["Certificates of deposit and other time deposits","2,411","","","2,734","","","85","","","\u2014","","","5,230"],["Short-term borrowings","2,027","","","\u2014","","","\u2014","","","\u2014","","","2,027"],["Long-term debt (2)","1,035","","","3,733","","","589","","","4,645","","","10,002"],["Operating lease obligations","70","","","125","","","79","","","262","","","536"],["Purchase commitments","164","","","188","","","66","","","70","","","488"]]
[[/GREPCENT_TABLE]]

(1)Amounts do not include associated interest payments.

(2)Maturities are based upon the par value.

Operational Risk

Operational risk is the risk of loss due to human error, third-party performance failures, inadequate or failed internal systems and controls, including the use of financial or other quantitative methodologies that may not adequately predict future results; violations of, or noncompliance with, laws, rules, regulations, prescribed practices, or ethical standards; and external influences such as market conditions, fraudulent activities, disasters, failed business contingency plans, and security risks. We continuously strive to strengthen our system of internal controls to ensure compliance with significant contracts, agreements, laws, rules, and regulations, and to improve the oversight of our operational risk.

We actively monitor cyberattacks such as attempts related to online deception and loss of sensitive customer data. We evaluate internal systems, processes, and controls to mitigate loss from cyber-attacks and, to date, have not experienced any material losses. Cybersecurity threats have increased, primarily through phishing campaigns. We are actively monitoring our email gateways for malicious phishing email campaigns. We have also increased our cybersecurity and fraud monitoring activities through the implementation of specific monitoring of remote connections by geography and volume of connections to detect anomalous remote logins, since a significant portion of our workforce has the option to work remotely.

Our objective for managing cyber security risk is to avoid or minimize the impacts of external threat events or other efforts to penetrate our systems. We work to achieve this objective by hardening networks and systems against attack, and by diligently managing visibility and monitoring controls within our data and communications environment to recognize events and respond before the attacker has the opportunity to plan and execute on its own goals. To this end we employ a set of defense in-depth strategies, which include efforts to make us less attractive as a target and less vulnerable to threats, while investing in threat analytic capabilities for rapid detection and response. Potential concerns related to cyber security may be escalated to our board-level Technology Committee, as appropriate. As a complement to the overall cyber security risk management, we use a number of internal training methods, both formally through mandatory courses and informally through written communications and other updates. Internal policies and procedures have been implemented to encourage the reporting of potential phishing attacks or other security risks. We also use third-party services to test the effectiveness of our cyber security risk management framework, and any such third parties are required to comply with our policies regarding information security and confidentiality.

74 Huntington Bancshares Incorporated

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To govern operational risks, we have an Operational Risk Committee, a Legal, Regulatory, and Compliance Committee, a Funds Movement Committee, and a Third Party Risk Management Committee. The responsibilities of these committees, among other duties, include establishing and maintaining management information systems to monitor material risks and to identify potential concerns, risks, or trends that may have a significant impact and ensuring that recommendations are developed to address the identified issues. In addition, we have a Model Risk Oversight Committee that is responsible for policies and procedures describing how model risk is evaluated and managed and the application of the governance process to implement these practices throughout the enterprise. These committees report any significant findings and remediation recommendations to the Risk Management Committee. Potential concerns may be escalated to our ROC and our Audit Committee, as appropriate. Significant findings or issues are escalated by the Third Party Risk Management Committee to the Technology Committee of the Board, as appropriate.

The goal of this framework is to implement effective operational risk-monitoring; minimize operational, fraud, and legal losses; minimize the impact of inadequately designed models and enhance our overall performance.

Compliance Risk

Financial institutions are subject to many laws, rules, and regulations at both the federal and state levels. These broad-based laws, rules, and regulations include, but are not limited to, expectations relating to anti-money laundering, lending limits, client privacy, fair lending, prohibitions against unfair, deceptive, or abusive acts or practices, protections for military members as they enter active duty, and community reinvestment. The volume and complexity of recent regulatory changes have increased our overall compliance risk. As such, we utilize various resources to help ensure expectations are met, including a team of compliance experts dedicated to ensuring our conformance with all applicable laws, rules, and regulations. Our colleagues receive training for several broad-based laws and regulations including, but not limited to, anti-money laundering and customer privacy. Additionally, colleagues engaged in lending activities receive training for laws and regulations related to flood disaster protection, equal credit opportunity, fair lending, and/or other courses related to the extension of credit. We hold ourselves to a high standard for adherence to compliance management and seek to continuously enhance our performance.

Capital

(This section should be read in conjunction with the “Regulatory Matters” section included in Part I, Item 1: Business and Note 23 - “Other Regulatory Matters” of the Notes to Consolidated Financial Statements.)

Both regulatory capital and shareholders’ equity are managed at the Bank and on a consolidated basis. We have an active program for managing capital and maintain a comprehensive process for assessing the Company’s overall capital adequacy. We believe our current levels of both regulatory capital and shareholders’ equity are adequate.

Regulatory Capital

We are subject to the Basel III capital requirements including the standardized approach for calculating risk-weighted assets in accordance with subpart D of the final capital rule. The following table presents risk-weighted assets and other financial data necessary to calculate certain financial ratios, including CET1, which we use to measure capital adequacy.

2022 Form 10-K 75

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[[GREPCENT_TABLE]]
[["Table 22 - Capital Under Current Regulatory Standards (Basel III)"],["","At December 31,"],["(dollar amounts in millions)","2022","","2021"],["CET1 risk-based capital ratio:"],["Total shareholders\u2019 equity","$","17,731","","","$","19,297"],["Regulatory capital adjustments:"],["CECL transitional amount (1)","328","","","437"],["Shareholders\u2019 preferred equity and related surplus","(2,177)","","","(2,177)"],["Accumulated other comprehensive loss","3,098","","","230"],["Goodwill and other intangible assets, net of taxes","(5,663)","","","(5,484)"],["Deferred tax assets that arise from tax loss and credit carryforwards","(27)","","","(54)"],["CET1 capital","13,290","","","12,249"],["Additional tier 1 capital"],["Shareholders\u2019 preferred equity and related surplus","2,177","","","2,177"],["Tier 1 capital","15,467","","","14,426"],["Long-term debt and other tier 2 qualifying instruments","1,424","","","1,539"],["Qualifying allowance for loan and lease losses","1,682","","","1,281"],["Tier 2 capital","3,106","","","2,820"],["Total risk-based capital","$","18,573","","","$","17,246"],["RWA","$","141,940","","","$","131,266"],["CET1 risk-based capital ratio","9.36","%","","9.33","%"],["Other regulatory capital data:"],["Tier 1 risk-based capital ratio","10.90","","","10.99"],["Total risk-based capital ratio","13.09","","","13.14"],["Tier 1 leverage ratio","8.60","","","8.56"]]
[[/GREPCENT_TABLE]]

(1)Huntington and the Bank elected to temporarily delay certain effects of CECL on regulatory capital until January 1, 2022 pursuant to a rule that allowed BHCs and banks to delay for two years 100% of the day-one impact of adopting CECL and 25% of the cumulative change in the reported allowance for credit losses since adopting CECL. As of December 31, 2022, we have phased in 25% of the cumulative CECL deferral with the remaining impact to be recognized through the first quarter 2025.

[[GREPCENT_TABLE]]
[["Table 23 - Capital Adequacy\u2014Non-Regulatory (Non-GAAP)"],["(dollar amounts in millions)","At December 31,"],["","2022","","2021"],["Consolidated capital calculations:"],["Total shareholders\u2019 equity","$","17,731","","","$","19,297"],["Goodwill and other intangible assets","(5,766)","","","(5,591)"],["Deferred tax liability on other intangible assets (1)","41","","","51"],["Total tangible equity (2)","12,006","","","13,757"],["Preferred equity","(2,167)","","","(2,167)"],["Total tangible common equity (2)","$","9,839","","","$","11,590"],["Total assets","$","182,906","","","$","174,064"],["Goodwill and other intangible assets","(5,766)","","","(5,591)"],["Deferred tax liability on other intangible assets (1)","41","","","51"],["Total tangible assets (2)","$","177,181","","","$","168,524"],["Tangible equity / tangible asset ratio (2)","6.78","%","","8.16","%"],["Tangible common equity / tangible asset ratio (2)","5.55","","","6.88"],["Tangible common equity / RWA ratio (2)","6.93","","","8.83"]]
[[/GREPCENT_TABLE]]

(1)Deferred tax liability related to other intangible assets is calculated at a 21% tax rate.

(2)Tangible equity, tangible common equity, and tangible assets, as well as ratios utilizing these financial measures are non-GAAP financial measures. See Non-GAAP Financial Measures in the Additional Disclosures section.

76 Huntington Bancshares Incorporated

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The following table presents certain regulatory capital data at the consolidated and Bank level:

[[GREPCENT_TABLE]]
[["Table 24 - Regulatory Capital Data (1)"],["","","Basel III"],["(dollar amounts in millions)","","At December 31,"],["","","2022","","2021"],["Total risk-weighted assets","Consolidated","$","141,940","","","$","131,266"],["","Bank","141,571","","","130,597"],["CET1 risk-based capital","Consolidated","13,290","","","12,249"],["","Bank","14,133","","","13,261"],["Tier 1 risk-based capital","Consolidated","15,467","","","14,426"],["","Bank","15,334","","","14,445"],["Tier 2 risk-based capital","Consolidated","3,106","","","2,821"],["","Bank","2,313","","","1,982"],["Total risk-based capital","Consolidated","18,573","","","17,246"],["","Bank","17,647","","","16,427"],["CET1 risk-based capital ratio","Consolidated","9.36","%","","9.33","%"],["","Bank","9.98","","","10.15"],["Tier 1 risk-based capital ratio","Consolidated","10.90","","","10.99"],["","Bank","10.83","","","11.06"],["Total risk-based capital ratio","Consolidated","13.09","","","13.14"],["","Bank","12.47","","","12.58"],["Tier 1 leverage ratio","Consolidated","8.60","","","8.56"],["","Bank","8.54","","","8.60"]]
[[/GREPCENT_TABLE]]

(1)    Huntington and the Bank elected to temporarily delay certain effects of CECL on regulatory capital until January 1, 2022 pursuant to a rule that allowed BHCs and banks to delay for two years 100% of the day-one impact of adopting CECL and 25% of the cumulative change in the reported allowance for credit losses since adopting CECL. As of December 31, 2022, we have phased in 25% of the cumulative CECL deferral with the remaining impact to be recognized through the first quarter 2025.

At December 31, 2022, we, at both the consolidated and Bank level, maintained Basel III capital ratios in excess of the well-capitalized standards established by the Federal Reserve. The increase in the consolidated CET1 risk-based capital ratio compared to the prior year, was primarily driven by current period earnings, partially offset by dividends and growth in risk-weighted assets.

Shareholders’ Equity

We generate shareholders’ equity primarily through the retention of earnings, net of dividends and share repurchases. Other potential sources of shareholders’ equity include issuances of common and preferred stock. Our objective is to maintain capital at an amount commensurate with our risk appetite and risk tolerance objectives, to meet both regulatory and market expectations, and to provide the flexibility needed for future growth and business opportunities.

Shareholders’ equity totaled $17.7 billion at December 31, 2022, a decrease of $1.6 billion, or 8%, when compared with December 31, 2021. The decrease was primarily driven by the higher rate environment causing an increase in accumulated other comprehensive loss, partially offset by earnings, net of dividends.

Huntington is authorized to make capital distributions that are consistent with the requirements in the Federal Reserve’s capital rule, inclusive of the SCB requirement. On April 5, 2022, Huntington submitted its 2022 Capital Plan to the Federal Reserve for supervisory review. By notice dated August 4, 2022, the Federal Reserve informed Huntington that its final SCB requirement associated with its 2022 Capital Plan is 3.3%, effective for the period of October 1, 2022 through September 20, 2023. As of December 31, 2022, Huntington’s SCB requirement was 3.3%.

2022 Form 10-K 77

Table of Contents

Share Repurchases

From time to time the Board of Directors authorizes the Company to repurchase shares of our common stock. Although we announce when our Board authorizes share repurchases, we typically do not give any public notice before we repurchase our shares. Future stock repurchases may be private or open-market repurchases, including block transactions, accelerated or delayed block transactions, forward transactions, and similar transactions. Various factors determine the amount and timing of our share repurchases, including our capital requirements, the number of shares we expect to issue for employee benefit plans and acquisitions, market conditions (including the trading price of our stock), and regulatory and legal considerations.

On January 18, 2023, our Board authorized the repurchase of up to $1.0 billion of common shares within the eight quarter period ending December 31, 2024, subject to the Federal Reserve’s capital regulations. Purchases of common stock under the authorization may include open market purchases, privately negotiated transactions, and accelerated share repurchase programs.

BUSINESS SEGMENT DISCUSSION

Overview

Our business segments are based on our internally-aligned segment leadership structure, which is how we monitor results and assess performance. We have four major business segments: Commercial Banking, Consumer and Business Banking, Vehicle Finance, and Regional Banking and The Huntington Private Client Group (RBHPCG). The Treasury / Other function includes technology and operations, other unallocated assets, liabilities, revenue, and expense.

To align with our strategic priorities, in the second quarter of 2023, we plan to complete an organizational realignment to consolidate three of our current major business segments, consisting of Consumer and Business Banking, Vehicle Finance, and RBHPCG, into one new major business segment called Consumer & Regional Banking. This will result in two major business segments, Consumer & Regional Banking and Commercial Banking.

Business segment results are determined based upon our management practices, which assigns balance sheet and income statement items to each of the business segments. The process is designed around our organizational and management structure and, accordingly, the results derived are not necessarily comparable with similar information published by other financial institutions.

For a discussion of business segment trends for 2021 versus 2020, see “Part II, Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations” Business Segment Discussion included in our 2021 Form 10-K, filed with the SEC on February 18, 2022.

Revenue Sharing

Revenue is recorded in the business segment responsible for the related product or service. Fee sharing is recorded to allocate portions of such revenue to other business segments involved in selling to or providing service to customers. Results of operations for the business segments reflect these fee sharing allocations.

Expense Allocation

The management process that develops the business segment reporting utilizes various estimates and allocation methodologies to measure the performance of the business segments. Expenses are allocated to business segments using a two-phase approach. The first phase consists of measuring and assigning unit costs (activity-based costs) to activities related to product origination and servicing. These activity-based costs are then extended, based on volumes, with the resulting amount allocated to business segments that own the related products. The second phase consists of the allocation of overhead costs to all four business segments from Treasury / Other. We utilize a full-allocation methodology, where all Treasury / Other expenses, except reported acquisition-related expenses, if any, and a small amount of other residual unallocated expenses, are allocated to the four business segments.

78 Huntington Bancshares Incorporated

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Funds Transfer Pricing (FTP)

We use an active and centralized FTP methodology to attribute appropriate net interest income to the business segments. The intent of the FTP methodology is to transfer interest rate risk from the business segments by providing modeled duration funding of assets and liabilities. The result is to centralize the financial impact, management, and reporting of interest rate risk in the Treasury / Other function where it can be centrally monitored and managed. The Treasury / Other function charges (credits) an internal cost of funds for assets held in (or pays for funding provided by) each business segment. The FTP rate is based on prevailing market interest rates for comparable duration assets (or liabilities).

Net Income (Loss) by Business Segment

Net income (loss) by business segment for the past three years is presented in the following table:

[[GREPCENT_TABLE]]
[["Table 25 - Net Income by Business Segment"],["","Year Ended December 31,"],["(dollar amounts in millions)","2022","","2021","","2020"],["Commercial Banking","$","1,143","","","$","798","","","$","78"],["Consumer and Business Banking","789","","","308","","","270"],["Vehicle Finance","191","","","319","","","120"],["RBHPCG","106","","","55","","","85"],["Treasury / Other","9","","","(185)","","","264"],["Net income","$","2,238","","","$","1,295","","","$","817"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["Commercial Banking"],["Table 26 - Key Performance Indicators for Commercial Banking"],["","Year Ended December 31,","","Change from 2021","","","","","","Year Ended December 31,"],["(dollar amounts in millions unless otherwise noted)","2022","","2021","","Amount","","Percent","","","","","","2020"],["Net interest income","$","1,879","","","$","1,284","","","$","595","","","46","%","","","","","","$","903"],["Provision for credit losses","28","","","4","","","24","","","NM","","","","","","626"],["Noninterest income","670","","","523","","","147","","","28","","","","","","","364"],["Noninterest expense","1,061","","","791","","","270","","","34","","","","","","","542"],["Provision for income taxes","307","","","212","","","95","","","45","","","","","","","21"],["Income attributable to non-controlling interest","10","","","2","","","8","","","NM","","","","","","\u2014"],["Net income attributable to Huntington Bancshares Inc","$","1,143","","","$","798","","","$","345","","","43","%","","","","","","$","78"],["Number of employees (average FTE)","2,134","","","1,754","","","380","","","22","%","","","","","","1,276"],["Total average assets","$","59,962","","","$","44,427","","","$","15,535","","","35","","","","","","","$","35,490"],["Total average loans/leases","52,275","","","38,092","","","14,183","","","37","","","","","","","27,234"],["Total average deposits","35,551","","","29,351","","","6,200","","","21","","","","","","","23,321"],["Net interest margin","3.42","%","","3.15","%","","0.27","%","","9","","","","","","","3.04","%"],["NCOs","$","2","","","$","119","","","$","(117)","","","(98)","","","","","","","$","302"],["NCOs as a % of average loans and leases","\u2014","%","","0.31","%","","(0.31)","%","","NM","","","","","","1.11","%"]]
[[/GREPCENT_TABLE]]

2022 Form 10-K 79

Table of Contents

Commercial Banking reported net income of $1.1 billion in 2022, an increase of $345 million, or 43%, compared to the year ago period. Segment net interest income increased $595 million, or 46%, primarily due to an increase in average loans and leases, reflecting the impact of the TCF acquisition and continued organic loan and lease growth, and a 27-basis point increase in NIM, driven by the higher rate environment resulting in an increase in spreads. The provision for credit losses increased $24 million due to a combination of loan and lease growth in 2022 and a reduction in ACL coverage ratios over the course of 2021, as there was more clarity around the economic impacts of COVID-19. Noninterest income increased $147 million, or 28%, reflecting the impact of the TCF acquisition in addition to an increase in capital markets fees, primarily due to higher advisory fees supported by the impact of the Capstone Partners acquisition, loan syndication fees, foreign exchange fees, and interest rate derivatives fees. Noninterest expense increased $270 million, or 34%, primarily reflecting the impact of the TCF and Capstone Partners acquisitions, which led to higher personnel costs and allocated overhead.

[[GREPCENT_TABLE]]
[["Consumer and Business Banking"],["Table 27 - Key Performance Indicators for Consumer and Business Banking"],["","Year Ended December 31,","","Change from 2021","","","","","","Year Ended December 31,"],["(dollar amounts in millions unless otherwise noted)","2022","","2021","","Amount","","Percent","","","","","","2020"],["Net interest income","$","2,577","","","$","1,667","","","$","910","","","55","%","","","","","","$","1,436"],["Provision for credit losses","161","","","91","","","70","","","77","","","","","","","265"],["Noninterest income","1,017","","","1,045","","","(28)","","","(3)","","","","","","","945"],["Noninterest expense","2,434","","","2,231","","","203","","","9","","","","","","","1,774"],["Provision for income taxes","210","","","82","","","128","","","NM","","","","","","72"],["Net income","$","789","","","$","308","","","$","481","","","NM","","","","","","$","270"],["Number of employees (average FTE)","10,573","","","9,211","","","1,362","","","15","%","","","","","","7,908"],["Total average assets","$","38,374","","","$","36,617","","","$","1,757","","","5","","","","","","","$","28,853"],["Total average loans/leases","32,123","","","31,436","","","687","","","2","","","","","","","25,453"],["Total average deposits","94,071","","","81,289","","","12,782","","","16","","","","","","","56,960"],["Net interest margin","2.71","%","","2.02","%","","0.69","%","","34","","","","","","","2.48","%"],["NCOs","$","106","","","$","96","","","$","10","","","10","","","","","","","$","102"],["NCOs as a % of average loans and leases","0.33","%","","0.31","%","","0.02","%","","6","","","","","","","0.40","%"]]
[[/GREPCENT_TABLE]]

Consumer and Business Banking reported net income of $789 million in 2022, an increase of $481 million, compared to the year ago period. Segment net interest income increased $910 million, or 55%, primarily due to a 69 basis point increase in NIM driven by the higher rate environment and an increase in average assets reflecting the impact of the TCF acquisition, partially offset by a decrease in accelerated PPP loan fees recognized upon forgiveness payments from the SBA. The provision for credit losses increased $70 million, or 77%, primarily due to an increase in loan growth and uncertainty in the near-term recessionary risks. Noninterest income decreased $28 million, or 3%, primarily due to lower mortgage banking income reflecting lower salable volume and secondary marketing spreads, partially offset by the impact of the TCF acquisition and an increase in gain on sale of loans, primarily due to sales of SBA loans during the first through third quarters of 2022. Noninterest expense increased $203 million, or 9%, primarily due to the impact of the TCF acquisition largely driven by higher personnel expense reflecting an increase in the number of FTE employees and allocated overhead.

80 Huntington Bancshares Incorporated

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[[GREPCENT_TABLE]]
[["Vehicle Finance"],["Table 28 - Key Performance Indicators for Vehicle Finance"],["","Year Ended December 31,","","Change from 2021","","","","","","Year Ended December 31,"],["(dollar amounts in millions unless otherwise noted)","2022","","2021","","Amount","","Percent","","","","","","2020"],["Net interest income","$","477","","","$","468","","","$","9","","","2","%","","","","","","$","430"],["Provision (benefit) for credit losses","83","","","(86)","","","169","","","NM","","","","","","146"],["Noninterest income","13","","","13","","","\u2014","","","\u2014","","","","","","","9"],["Noninterest expense","165","","","163","","","2","","","1","","","","","","","141"],["Provision for income taxes","51","","","85","","","(34)","","","(40)","","","","","","","32"],["Net income","$","191","","","$","319","","","$","(128)","","","(40)","%","","","","","","$","120"],["Number of employees (average FTE)","272","","","262","","","10","","","4","%","","","","","","266"],["Total average assets","$","21,306","","","$","19,787","","","$","1,519","","","8","","","","","","","$","19,760"],["Total average loans/leases","21,558","","","20,028","","","1,530","","","8","","","","","","","19,939"],["Total average deposits","1,242","","","1,161","","","81","","","7","","","","","","","653"],["Net interest margin","2.21","%","","2.33","%","","(0.12)","%","","(5)","","","","","","","2.15","%"],["NCOs","$","13","","","$","(1)","","","$","14","","","NM","","","","","","$","45"],["NCOs as a % of average loans and leases","0.06","%","","\u2014","%","","0.06","%","","100","","","","","","","0.23","%"]]
[[/GREPCENT_TABLE]]

Vehicle Finance reported net income of $191 million in 2022, a decrease of $128 million, or 40%, compared to the year ago period. Segment net interest income increased $9 million or 2%, primarily due to an increase in average earning assets, partially offset by a 12 basis point decrease in the NIM. The provision for credit losses increased $169 million, primarily due to reserve releases in 2021 as the economic environment was improving, contrasted with reserve builds in 2022 that recognize the increased near-term recessionary risks.

[[GREPCENT_TABLE]]
[["Regional Banking and The Huntington Private Client Group"],["Table 29 - Key Performance Indicators for Regional Banking and The Huntington Private Client Group"],["","Year Ended December 31,","","Change from 2021","","","","","","Year Ended December 31,"],["(dollar amounts in millions unless otherwise noted)","2022","","2021","","Amount","","Percent","","","","","","2020"],["Net interest income","$","232","","","$","159","","","$","73","","","46","%","","","","","","$","160"],["Provision for credit losses","17","","","16","","","1","","","6","","","","","","","11"],["Noninterest income","239","","","227","","","12","","","5","","","","","","","201"],["Noninterest expense","320","","","300","","","20","","","7","","","","","","","243"],["Provision for income taxes","28","","","15","","","13","","","87","","","","","","","22"],["Net income","$","106","","","$","55","","","$","51","","","93","%","","","","","","$","85"],["Number of employees (average FTE)","1,110","","","1,071","","","39","","","4","%","","","","","","1,018"],["Total average assets","$","9,304","","","$","7,496","","","$","1,808","","","24","","","","","","","$","6,845"],["Total average loans/leases","9,016","","","7,199","","","1,817","","","25","","","","","","","6,574"],["Total average deposits","9,375","","","8,187","","","1,188","","","15","","","","","","","6,531"],["Net interest margin","2.39","%","","1.90","%","","0.49","%","","26","","","","","","","2.36","%"],["NCOs","$","\u2014","","","$","\u2014","","","$","\u2014","","","\u2014","","","","","","","$","\u2014"],["NCOs as a % of average loans and leases","(0.01)","%","","\u2014","%","","(0.01)","%","","NM","","","","","","0.01","%"],["Total assets under management (in billions)\u2014eop","$","21.7","","","$","25.2","","","$","(3.5)","","","(14)","","","","","","","$","19.8"],["Total trust assets (in billions)\u2014eop","142.4","","","135.7","","","6.7","","","5","","","","","","","123.0"]]
[[/GREPCENT_TABLE]]

eop—End of Period.

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RBHPCG reported net income of $106 million in 2022, an increase of $51 million, or 93%, compared to the year ago period. Segment net interest income increased $73 million, or 46%, primarily due to an increase in average earning assets and a 49 basis point increase in NIM, largely driven by higher benefit in deposit spreads. Average loans and leases increased $1.8 billion, or 25%, due to growth in both commercial and residential real estate mortgages, and the impact of the TCF acquisition. Average deposits increased $1.2 billion, or 15%, primarily related to the acquired TCF deposit portfolio. Noninterest income increased $12 million, or 5%, reflecting higher sales production and the impact of the TCF acquisition. Total assets under management decreased 14% due to equity and bond market declines, partially offset by strong sales. Noninterest expense increased $20 million, or 7%, primarily due to an increase in personnel expense impacted by the TCF acquisition and impacts of strategic initiative investments.

Treasury / Other

The Treasury / Other function includes revenue and expense related to assets, liabilities, derivatives (including mark-to-market of interest rate caps, as applicable), and equity not directly assigned or allocated to one of the four business segments. Assets include investment securities and bank owned life insurance.

Net interest income includes the impact of administering our investment securities portfolios, the net impact of derivatives used to hedge interest rate sensitivity as well as the financial impact associated with our FTP methodology, as described above. Noninterest income includes miscellaneous fee income not allocated to other business segments, such as bank owned life insurance income and securities and trading asset gains or losses. Noninterest expense includes certain corporate administrative, acquisition-related expenses, if any, and other miscellaneous expenses not allocated to other business segments. The provision for income taxes for the business segments is calculated at a statutory 21% tax rate, although our overall effective tax rate is lower.

ADDITIONAL DISCLOSURES

Forward-Looking Statements

This report, including MD&A, contains certain forward-looking statements, including, but not limited to, certain plans, expectations, goals, projections, and statements, which are not historical facts and are subject to numerous assumptions, risks, and uncertainties. Statements that do not describe historical or current facts, including statements about beliefs and expectations, are forward-looking statements. Forward-looking statements may be identified by words such as expect, anticipate, believe, intend, estimate, plan, target, goal, or similar expressions, or future or conditional verbs such as will, may, might, should, would, could, or similar variations. The forward-looking statements are intended to be subject to the safe harbor provided by Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, and the Private Securities Litigation Reform Act of 1995.

While there is no assurance that any list of risks and uncertainties or risk factors is complete, below are certain factors which could cause actual results to differ materially from those contained or implied in the forward-looking statements: changes in general economic, political, or industry conditions; deterioration in business and economic conditions, including persistent inflation, supply chain issues or labor shortages; instability in global economic conditions and geopolitical matters, as well as volatility in financial markets; the impact of pandemics, including the COVID-19 pandemic and related variants and mutations, and their impact on the global economy and financial market conditions and our business, results of operations, and financial condition; cybersecurity risks; uncertainty in U.S. fiscal and monetary policy, including the interest rate policies of the Federal Reserve; volatility and disruptions in global capital and credit markets; movements in interest rates; transition away from LIBOR; competitive pressures on product pricing and services; success, impact, and timing of our business strategies, including market acceptance of any new products or services including those implementing our “Fair Play” banking philosophy; the nature, extent, timing, and results of governmental actions, examinations, reviews, reforms, regulations, and interpretations, including those related to the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Basel III regulatory capital reforms, as well as those involving the OCC, Federal Reserve, FDIC, and CFPB; and other factors that may affect the future results of Huntington.

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All forward-looking statements speak only as of the date they are made and are based on information available at that time. Huntington does not assume any obligation to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements were made or to reflect the occurrence of unanticipated events except as required by federal securities laws. As forward-looking statements involve significant risks and uncertainties, caution should be exercised against placing undue reliance on such statements.

Non-GAAP Financial Measures

This document contains GAAP financial measures and non-GAAP financial measures where management believes it to be helpful in understanding our results of operations or financial position. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found herein.

Fully-Taxable Equivalent Basis

Interest income, yields, and ratios on an FTE basis are considered non-GAAP financial measures. Management believes net interest income on an FTE basis provides an insightful picture of the interest margin for comparison purposes. The FTE basis also allows management to assess the comparability of revenue arising from both taxable and tax-exempt sources. The FTE basis assumes a federal statutory tax rate of 21 percent. We encourage readers to consider the Consolidated Financial Statements and other financial information contained in this Form 10-K in their entirety, and not to rely on any single financial measure.

Non-Regulatory Capital Ratios

In addition to capital ratios defined by banking regulators, the Company considers various other measures when evaluating capital utilization and adequacy, including:

•Tangible common equity to tangible assets,

•Tangible equity to tangible assets, and

•Tangible common equity to risk-weighted assets using Basel III definitions.

These non-regulatory capital ratios are viewed by management as useful additional methods of reflecting the level of capital available to withstand unexpected market conditions. Additionally, presentation of these ratios allows readers to compare our capitalization to other financial services companies. These ratios differ from capital ratios defined by banking regulators principally in that the numerator excludes goodwill and other intangible assets, the nature and extent of which varies among different financial services companies. These ratios are not defined in GAAP or federal banking regulations. As a result, these non-regulatory capital ratios disclosed by the Company are considered non-GAAP financial measures.

Because there are no standardized definitions for these non-regulatory capital ratios, the Company’s calculation methods may differ from those used by other financial services companies. Also, there may be limits in the usefulness of these measures to investors. As a result, we encourage readers to consider the Consolidated Financial Statements and other financial information contained in this Form 10-K in their entirety, and not to rely on any single financial measure.

Risk Factors

More information on risk is discussed in the Risk Factors section included in Item 1A: “Risk Factors” of this report. Additional information regarding risk factors can also be found in the Risk Management and Capital discussion of this report, as well as the “Regulatory Matters” section included in Item 1: Business of this report.

Critical Accounting Policies and Use of Significant Estimates

Our Consolidated Financial Statements are prepared in accordance with GAAP. The preparation of financial statements in conformity with GAAP requires us to establish accounting policies and make estimates that affect amounts reported in our Consolidated Financial Statements. Note 1 - “Significant Accounting Policies” of the Notes to Consolidated Financial Statements, which is incorporated by reference into this MD&A, describes the significant accounting policies we used in our Consolidated Financial Statements.

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An accounting estimate requires assumptions and judgments about uncertain matters that could have a material effect on the Consolidated Financial Statements. Estimates are made under facts and circumstances at a point in time, and changes in those facts and circumstances could produce results substantially different from those estimates. Our most significant accounting policies and estimates and their related application are discussed below.

Allowance for Credit Losses

Our ACL at December 31, 2022 represents our current estimate of the lifetime credit losses expected from our loan and lease portfolio and our unfunded lending commitments. Management estimates the ACL by projecting probability of default, loss given default and exposure at default conditional on economic parameters, for the remaining contractual term. Internal factors that impact the quarterly allowance estimate include the level of outstanding balances, the portfolio performance and assigned risk ratings.

One of the most significant judgments influencing the ACL estimate is the macroeconomic forecasts. Key external economic parameters that directly impact our loss modeling framework include forecasted unemployment rates and Gross Domestic Product. Changes in the economic forecasts could significantly affect the estimated credit losses which could potentially lead to materially different allowance levels from one reporting period to the next.

Given the dynamic relationship between macroeconomic variables within our modeling framework, it is difficult to estimate the impact of a change in any one individual variable on the allowance. As a result, management uses a probability-weighted approach that incorporates a baseline, an adverse and a more favorable economic scenario when formulating the quantitative estimate.

However, to illustrate a hypothetical sensitivity analysis, management calculated a quantitative allowance using a 100% weighting applied to an adverse scenario. This scenario includes assumptions around OPEC oil supply cuts being more severe than anticipated and the Russian invasion of Ukraine worsening and lasting longer than the baseline scenario. The worsening inflationary pressures cause the Federal Reserve to raise interest rates more than in the baseline scenario to a peak of 5% by mid-2023. The combination of the worsening invasion, higher oil prices, rising inflation and the Federal Reserve’s response collectively cause the stock market to drop further and the economy falls into a recession in the first quarter of 2023. Under this scenario, as an example, the unemployment rate increases from baseline levels and remains elevated for a prolonged period, the rate is estimated at 7.7% and 6.6% at the end of 2023 and 2024, respectively. This forecast reflects unemployment rates that are approximately 3.6% and 2.7% higher than baseline scenario projections of 4.1% and 3.9%, respectively for the same time periods.

To demonstrate the sensitivity to key economic parameters used in the calculation of our ACL at December 31, 2022, management calculated the difference between our quantitative ACL and this 100% adverse scenario. Excluding consideration of qualitative adjustments, this sensitivity analysis would result in a hypothetical increase in our ACL of approximately $1 billion at December 31, 2022. This hypothetical increase is reflective of the sensitivity of the rate of change in the unemployment variable on our models.

The resulting difference is not intended to represent an expected increase in allowance levels for a number of reasons including the following:

•Management uses a weighted approach applied to multiple economic scenarios for its allowance estimation process;

•The highly uncertain economic environment;

•The difficulty in predicting the inter-relationships between the economic parameters used in the various economic scenarios; and

•The sensitivity estimate does not account for any general reserve components and associated risk profile adjustments incorporated by management as part of its overall allowance framework.

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We regularly review our ACL for appropriateness by performing on-going evaluations of the loan and lease portfolio. In doing so, we consider factors such as the differing economic risks associated with each loan category, the financial condition of specific borrowers, the level of delinquent loans, the value of any collateral and, where applicable, the existence of any guarantees or other documented support. We also evaluate the impact of changes in key economic parameters and overall economic conditions on the ability of borrowers to meet their financial obligations when quantifying our exposure to credit losses and assessing the appropriateness of our ACL at each reporting date. There is no certainty that our ACL will be appropriate over time to cover losses in our portfolio as economic and market conditions may ultimately differ from our reasonable and supportable forecast. Additionally, events adversely affecting specific customers, industries, or our markets such as geopolitical instability, risks of inflation including a near-term recession, or the emergence of a more contagious and severe COVID-19 variant, could severely impact our current expectations. If the credit quality of our customer base materially deteriorates or the risk profile of a market, industry, or group of customers changes materially, our net income and capital could be materially adversely affected which, in turn, could have a material adverse effect on our financial condition and results of operations. The extent to which the geopolitical instability, risks of inflation, and the COVID-19 pandemic will continue to negatively impact our businesses, financial condition, liquidity, and results will depend on future developments, which are highly uncertain and cannot be forecasted with precision at this time. For more information, see Note 5 - ”Loans / Leases” and Note 6 - “Allowance for Credit Losses” of the Notes to Consolidated Financial Statements.

Fair Value Measurement

Certain assets and liabilities are measured at fair value on a recurring basis, including securities and derivative instruments. A majority of assets and liabilities measured on a recurring basis are based on quoted market prices or market prices for similar instruments. Assets and liabilities measured at fair value on a non-recurring basis or that result in a Level 3 measurement in the fair value hierarchy, inherently include subjectivity and may require the use of significant assumptions, adjustments and judgment including, among others, discount rates, rates of return on assets, cash flows, default rates, loss rates, terminal values, and liquidation values. A significant change in assumptions may result in a significant change in fair value, which in turn, may result in a higher degree of financial statement volatility and could result in significant impact on our results of operations, financial condition or disclosures of fair value information.

While all non-recurring and Level 3 fair value measurements inherently have a significant level of estimation uncertainty, the following items are those most likely to have a material impact on our financial statements:

•Acquired Loans and Leases - When Huntington acquires loans and leases through an acquisition those loans are recorded at fair value on the acquisition date. This requires significant assumptions to be made about credit quality, likelihood of prepayment and current market conditions for similar loans. These assumptions form the basis for establishing discount rates and projecting future cash flows used to estimate the acquired loans fair value. Management generally will utilize a third-party specialist when these valuations are significant and as a result will perform various sensitivity analysis to determine the significance of specific inputs into the valuation.

•Direct Purchase Municipal Securities - Huntington holds certain municipal securities purchased directly from the issuer in non-public offerings. As a result, these securities use unobservable inputs to estimate fair value each period. Management utilizes a third-party valuation specialist to assist in determining certain assumptions used in the valuation and projecting future cash flows used to estimate fair value of the securities. Management reviews the valuations including understanding how sensitive the valuation is to specific inputs.

The fair values measured at each level of the fair value hierarchy, additional discussion regarding fair value measurements, and a brief description of how fair value is determined for categories that have unobservable inputs, can be found in Note 19 - “Fair Value of Assets and Liabilities” of the Notes to Consolidated Financial Statements.

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Goodwill

The acquisition method of accounting requires that assets and liabilities acquired in a business combination are recorded at fair value as of the acquisition date. The valuation of assets and liabilities often involves estimates based on third party valuations or internal valuations based on discounted cash flow analyses or other valuation techniques, all of which are inherently subjective. This typically results in goodwill, the amount by which the cost of net assets acquired in a business combination exceeds their fair value, which is subject to impairment testing at least annually.

Management reviews the goodwill of each reporting unit for impairment on an annual basis as of October 1 or more often if events or circumstances indicate that it is more-likely-than-not that the fair value of a reporting unit is below its carrying value.

Based on our annual impairment analysis of goodwill as of October 1, it was determined that the fair value of each reporting unit was in excess of its respective carrying value as of October 1, 2022; therefore goodwill is considered not impaired. Huntington additionally performs sensitivity analyses around discount rate assumptions utilized in order to assess the reasonableness of the rates, and the resulting estimated fair values. As of October 1, 2022, a 100 basis point increase in discount rates would reduce estimated entity level fair value by approximately $2 billion and would not result in any impairment, as each reporting unit’s fair value would still exceed its carrying value.

Recent Accounting Pronouncements and Developments

Note 2 - “Accounting Standards Update” of the Notes to Consolidated Financial Statements discusses new accounting pronouncements adopted during 2022 and the expected impact of accounting pronouncements recently issued but not yet required to be adopted. To the extent the adoption of new accounting standards materially affects financial condition, results of operations, or liquidity, the impacts are discussed in the applicable section of this MD&A and the Notes to Consolidated Financial Statements.