Item 1. Financial Statements

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Item 1. Financial Statements

Huntington Bancshares Incorporated

Consolidated Balance Sheets

(Unaudited)


	At September 30,		At December 31,
(dollar amounts in millions)	2023		2022
Assets
Cash and due from banks	$	1,602	$	1,796
Interest-bearing deposits at Federal Reserve Bank	9,833		4,908
Interest-bearing deposits in banks	258		214
Trading account securities	121		19
Available-for-sale securities	21,863		23,423
Held-to-maturity securities	16,148		17,052


Other securities	718		854
Loans held for sale (includes $601 and $520 respectively, measured at fair value)(1)	603		529
Loans and leases (includes $175 and $185 respectively, measured at fair value)(1)	120,853		119,523
Allowance for loan and lease losses	(2,208)		(2,121)
Net loans and leases	118,645		117,402
Bank owned life insurance	2,757		2,753
Accrued income and other receivables	1,496		1,573
Premises and equipment	1,096		1,156
Goodwill	5,561		5,571
Servicing rights and other intangible assets	718		712
Other assets	5,231		4,944
Total assets	$	186,650	$	182,906
Liabilities and shareholders’ equity
Liabilities
Deposits:
Demand deposits—noninterest-bearing	$	31,666	$	38,242
Interest-bearing	117,201		109,672
Total deposits	148,867		147,914
Short-term borrowings	681		2,027
Long-term debt	12,822		9,686
Other liabilities	5,750		5,510
Total liabilities	168,120		165,137
Commitments and Contingent Liabilities (Note 15)
Shareholders’ Equity
Preferred stock	2,484		2,167
Common stock	15		14
Capital surplus	15,363		15,309
Less treasury shares, at cost	(91)		(80)
Accumulated other comprehensive income (loss)	(3,622)		(3,098)
Retained earnings	4,334		3,419
Total Huntington shareholders’ equity	18,483		17,731
Non-controlling interest	47		38
Total equity	18,530		17,769
Total liabilities and equity	$	186,650	$	182,906
Common shares authorized (par value of $0.01)	2,250,000,000		2,250,000,000

Common shares outstanding	1,448,075,093		1,443,068,036
Treasury shares outstanding	7,391,874		6,322,052
Preferred stock, authorized shares	6,617,808		6,617,808

Preferred shares outstanding	882,500		557,500

(1)Amounts represent loans for which Huntington has elected the fair value option. See Note 12 “Fair Values of Assets and Liabilities”.

See Notes to Unaudited Consolidated Financial Statements

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Huntington Bancshares Incorporated
Consolidated Statements of Income
(Unaudited)
	Three months ended September 30,				Nine months ended September 30,
(dollar amounts in millions, except per share data, share count in thousands)	2023		2022		2023		2022
Interest and fee income:
Loans and leases	$	1,764	$	1,268	$	5,022	$	3,350
Available-for-sale securities
Taxable	259		165		743		378
Tax-exempt	29		20		78		52
Held-to-maturity securities—taxable	99		95		303		251
Other securities—taxable	19		7		40		18

Other	143		34		380		66
Total interest income	2,313		1,589		6,566		4,115
Interest expense:
Deposits	713		92		1,689		128
Short-term borrowings	17		22		151		36

Long-term debt	215		71		603		140

Total interest expense	945		185		2,443		304
Net interest income	1,368		1,404		4,123		3,811
Provision for credit losses	99		106		276		198
Net interest income after provision for credit losses	1,269		1,298		3,847		3,613
Service charges on deposit accounts	97		93		267		295
Card and payment processing income	103		96		298		278
Capital markets fees	49		73		165		169
Trust and investment management services	62		60		192		188
Mortgage banking income	27		26		86		119
Leasing revenue	32		29		83		91
Insurance income	31		28		95		86
Gain on sale of loans	2		15		13		55
Bank owned life insurance income	18		13		50		41
Net (losses) gains on sales of securities	—		—		(4)		—

Other noninterest income	88		65		271		160
Total noninterest income	509		498		1,516		1,482
Personnel costs	622		614		1,884		1,771
Outside data processing and other services	149		145		448		463
Equipment	65		60		193		202
Net occupancy	67		63		181		185
Marketing	29		24		86		69
Professional services	27		18		64		56
Deposit and other insurance expense	25		15		68		53
Amortization of intangibles	12		13		38		40
Lease financing equipment depreciation	6		11		22		36

Other noninterest expense	88		90		242		249
Total noninterest expense	1,090		1,053		3,226		3,124
Income before income taxes	688		743		2,137		1,971
Provision for income taxes	136		146		414		371
Income after income taxes	552		597		1,723		1,600
Income attributable to non-controlling interest	5		3		15		7
Net income attributable to Huntington	547		594		1,708		1,593
Dividends on preferred shares	37		29		106		85

Net income applicable to common shares	$	510	$	565	$	1,602	$	1,508
Average common shares—basic	1,447,993		1,442,591		1,445,878		1,440,740
Average common shares—diluted	1,467,611		1,465,083		1,467,537		1,464,234
Per common share:
Net income—basic	$	0.35	$	0.39	$	1.11	$	1.05
Net income—diluted	0.35		0.39		1.09		1.03



See Notes to Unaudited Consolidated Financial Statements

2023 3Q Form 10-Q 41

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Huntington Bancshares Incorporated

Consolidated Statements of Comprehensive Income

(Unaudited)


	Three months ended September 30,				Nine months ended September 30,
(dollar amounts in millions)	2023		2022		2023		2022
Net income attributable to Huntington	$	547	$	594	$	1,708	$	1,593
Other comprehensive income (loss), net of tax:



Net unrealized gains (losses) on available-for-sale securities	(633)		(971)		(529)		(2,970)
Net impact of fair value hedges on available-for-sale securities	67		250		34		705
Net change related to cash flow hedges on loans	(50)		(456)		(30)		(782)


Translation adjustments, net of hedges	(1)		(4)		—		(6)
Change in accumulated unrealized gains for pension and other post-retirement obligations	1		3		1		6
Other comprehensive income (loss), net of tax	(616)		(1,178)		(524)		(3,047)
Comprehensive income (loss) attributable to Huntington	(69)		(584)		1,184		(1,454)
Comprehensive income attributed to non-controlling interest	5		3		15		7
Comprehensive income (loss)	$	(64)	$	(581)	$	1,199	$	(1,447)

See Notes to Unaudited Consolidated Financial Statements

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Huntington Bancshares Incorporated

Consolidated Statements of Changes in Shareholders’ Equity

(Unaudited)


(dollar amounts in millions, share amounts in thousands)	Preferred Stock			Common Stock				Capital Surplus		Treasury Stock			AOCI			Retained Earnings			Huntington Shareholders’ Equity		Non-controlling		Total
Amount			Shares		Amount			Shares		Amount					Interest			Equity
Three months ended September 30, 2023
Balance, beginning of period	$	2,484		1,455,312		$	15	$	15,335	(7,430)	$	(92)	$	(3,006)		$	4,052		$	18,788	$	50	$	18,838
Net income																547			547		5		552
Other comprehensive income (loss), net of tax													(616)						(616)				(616)







Cash dividends declared:
Common ($0.155 per share)																(228)			(228)				(228)
Preferred																(37)			(37)				(37)
Recognition of the fair value of share-based compensation								26											26				26

Other share-based compensation activity				155		—		2								—			2				2

Other								—		38	1		—			—			1		(8)		(7)
Balance, end of period	$	2,484		1,455,467		$	15	$	15,363	(7,392)	$	(91)	$	(3,622)		$	4,334		$	18,483	$	47	$	18,530

Three months ended September 30, 2022
Balance, beginning of period	$	2,167		1,448,885		$	14	$	15,261	(6,691)	$	(85)	$	(2,098)		$	2,691		$	17,950	$	29	$	17,979

Net income																594			594		3		597
Other comprehensive (loss) income, net of tax													(1,178)						(1,178)				(1,178)










Cash dividends declared:
Common ($0.155 per share)																(227)			(227)				(227)
Preferred																(29)			(29)				(29)

Recognition of the fair value of share-based compensation								19											19				19

Other share-based compensation activity				191		—		2								—			2				2
Other								—		349	5					—			5		3		8
Balance, end of period	$	2,167		1,449,076		$	14	$	15,282	(6,342)	$	(80)	$	(3,276)		$	3,029		$	17,136	$	35	$	17,171

See Notes to Unaudited Consolidated Financial Statements

2023 3Q Form 10-Q 43

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(dollar amounts in millions, share amounts in thousands)	Preferred Stock			Common Stock				Capital Surplus		Treasury Stock			AOCI		Retained Earnings		Huntington Shareholders’ Equity		Non-controlling Interest		Total Equity
Amount			Shares		Amount			Shares		Amount
Nine months ended September 30, 2023
Balance, beginning of period	$	2,167		1,449,390		$	14	$	15,309	(6,322)	$	(80)	$	(3,098)	$	3,419	$	17,731	$	38	$	17,769

Net income															1,708		1,708		15		1,723
Other comprehensive income (loss), net of tax													(524)				(524)				(524)




Net proceeds from issuance of Series J Preferred Stock	317																317				317



Cash dividends declared:
Common ($0.465 per share)															(683)		(683)				(683)
Preferred															(106)		(106)				(106)

Recognition of the fair value of share-based compensation								73									73				73
Other share-based compensation activity				6,077		1		(19)							(4)		(22)				(22)

Other								—		(1,070)	(11)		—		—		(11)		(6)		(17)
Balance, end of period	$	2,484		1,455,467		$	15	$	15,363	(7,392)	$	(91)	$	(3,622)	$	4,334	$	18,483	$	47	$	18,530

Nine months ended September 30, 2022
Balance, beginning of period	$	2,167		1,444,040		$	14	$	15,222	(6,298)	$	(79)	$	(229)	$	2,202	$	19,297	$	21	$	19,318

Net income															1,593		1,593		7		1,600
Other comprehensive income (loss), net of tax													(3,047)				(3,047)				(3,047)








Cash dividends declared:
Common ($0.465 per share)															(681)		(681)				(681)
Preferred															(85)		(85)				(85)

Recognition of the fair value of share-based compensation								82									82				82
Other share-based compensation activity				5,036		—		(22)							—		(22)				(22)

Other								—		(44)	(1)				—		(1)		7		6
Balance, end of period	$	2,167		1,449,076		$	14	$	15,282	(6,342)	$	(80)	$	(3,276)	$	3,029	$	17,136	$	35	$	17,171

See Notes to Unaudited Consolidated Financial Statements

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Huntington Bancshares Incorporated

Consolidated Statements of Cash Flows

(Unaudited)


	Nine months ended September 30,
(dollar amounts in millions)	2023		2022
Operating activities
Net income	$	1,723	$	1,600
Adjustments to reconcile net income to net cash provided by operating activities:

Provision for credit losses	276		198
Depreciation and amortization	558		355
Share-based compensation expense	73		82
Deferred income tax expense	12		164


Net change in:
Trading account securities	(102)		15
Loans held for sale	(159)		464

Other assets	(915)		(1,109)
Other liabilities	289		893


Other, net	4		8
Net cash provided by operating activities	1,759		2,670
Investing activities
Change in interest bearing deposits in banks	(24)		287
Net cash paid from business combinations	—		(223)
Proceeds from:
Maturities and calls of available-for-sale securities	1,743		3,298
Maturities and calls of held-to-maturity securities	1,132		2,306
Maturities and calls of other securities	596		829
Sales of available-for-sale securities	738		—
Sales of other securities	143		9
Purchases of available-for-sale securities	(1,710)		(6,365)
Purchases of held-to-maturity securities	(255)		(2,845)
Purchases of other securities	(603)		(1,009)

Net proceeds from sales of portfolio loans and leases	355		937
Principal payments received under direct finance and sales-type leases	1,411		1,389
Net loan and lease activity, excluding sales and purchases	(3,273)		(8,375)

Purchases of premises and equipment	(80)		(165)

Purchases of loans and leases	(52)		(569)
Net accrued income and other receivables activity	126		96


Other, net	65		54
Net cash (used in) provided by investing activities	312		(10,346)
Financing activities
Increase in deposits	953		3,050
Increase (decrease) in short-term borrowings	(1,066)		783

Net proceeds from issuance of long-term debt	14,897		5,379
Maturity/redemption of long-term debt	(11,632)		(1,902)
Dividends paid on preferred stock	(97)		(84)
Dividends paid on common stock	(674)		(673)



Net proceeds from issuance of preferred stock	317		—


Other, net	(38)		(23)
Net cash provided by financing activities	2,660		6,530
Increase (decrease) in cash and cash equivalents	4,731		(1,146)
Cash and cash equivalents at beginning of period	6,704		5,522
Cash and cash equivalents at end of period	$	11,435	$	4,376

2023 3Q Form 10-Q 45

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	Nine months ended September 30,
(dollar amounts in millions)	2023		2022
Supplemental disclosures:
Interest paid	$	2,342	$	269
Income taxes (received) paid	6		(113)

Non-cash activities
Loans transferred to held-for-sale from portfolio	336		764
Loans transferred to portfolio from held-for-sale	18		65


Transfer of securities from available-for-sale to held-to-maturity	—		4,225

See Notes to Unaudited Consolidated Financial Statements

46 Huntington Bancshares Incorporated

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Huntington Bancshares Incorporated

Notes to Unaudited Consolidated Financial Statements

1. BASIS OF PRESENTATION

The accompanying Unaudited Consolidated Financial Statements of Huntington reflect all adjustments consisting of normal recurring accruals which are, in the opinion of management, necessary for a fair statement of the consolidated financial position, the results of operations, and cash flows for the periods presented. These Unaudited Consolidated Financial Statements have been prepared according to the rules and regulations of the SEC and, therefore, certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been omitted. The Notes to Consolidated Financial Statements appearing in Huntington’s 2022 Annual Report on Form 10-K, which include descriptions of significant accounting policies, as updated by the information contained in this report, should be read in conjunction with these interim financial statements.

During the 2023 second quarter, Huntington revised its process for assessing and monitoring the risk and performance of non-real estate secured commercial loans, primarily loans to REITs. These loans were reclassified from commercial real estate to the commercial and industrial loan category to align reporting with this process revision. All prior period results have been adjusted to conform to the current presentation.

During the 2023 second quarter, Huntington completed an organizational realignment and now reports on two business segments: Consumer & Regional Banking and Commercial Banking. The Treasury / Other function includes technology and operations, other unallocated assets, liabilities, revenue, and expense. Huntington’s business segments are based on our internally-aligned segment leadership structure, which is how management monitors results and assesses performance. The organizational realignment primarily involved consolidating our previously reported Consumer and Business Banking, Vehicle Finance and RBHPCG, into one new business segment called Consumer & Regional Banking. Prior period results have been adjusted to conform to the new segment presentation. See Note 16 “Segment Reporting” for a description of our business segments.

Effective January 1, 2023, Huntington adopted ASU 2022-02 Financial Instruments - Credit Losses (Topic 326) Troubled Debt Restructurings (TDR) and Vintage Disclosures, which removed the existing measurement and disclosure requirements for TDR loans and added additional disclosure requirements related to modifications provided to borrowers experiencing financial difficulty. Prior to adoption a change in contractual terms of a loan where a borrower was experiencing financial difficulty and received a concession not available through other sources the loans was required to be disclosed as a TDR, whereas now a borrower that is experiencing financial difficulty and receives a modification in the form of principal forgiveness, interest rate reduction, an other-than-insignificant payment delay or a term extension in the current period needs to be disclosed. Huntington may modify loans to borrowers experiencing financial difficulty as a way of managing risk and mitigating credit loss from the borrower. Huntington may make various types of modifications and may in certain circumstances use a combination of modification types in order to mitigate future loss. The amount of defined modifications given to borrowers experiencing financial difficulty is disclosed in the Notes to the Consolidated Financial Statements, along with the financial impact of those modifications.

In conjunction with applicable accounting standards, all material subsequent events have been either recognized in the Unaudited Consolidated Financial Statements or disclosed in the Notes to Unaudited Consolidated Financial Statements. There were no material subsequent events to disclose for the current period.

2023 3Q Form 10-Q 47

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2. ACCOUNTING STANDARDS UPDATE


Accounting standards adopted in the current period


Standard						Summary of guidance						Effects on financial Statements
ASU 2022-02- Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures Issued March 2022						•The amendments in this update eliminate TDR accounting while enhancing disclosure requirements for certain loan modifications when a borrower is experiencing financial difficulty. The ASU also requires disclosure of current period gross charge-offs by year of origination for financing receivables and net investments in leases.						•Management adopted the guidance during the first quarter 2023. •The ASU has been applied prospectively, except the portion of the standard related to the recognition and measurement of TDRs where we elected to use a modified retrospective transition method. •The adoption did not result in a material impact on Huntington’s Unaudited Consolidated Financial Statements.


Accounting standards yet to be adopted


Standard	Summary of guidance	Effects on financial statements
ASU 2023-02 Investments - Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method Issued: March 2023	•Permits the election of the proportional amortization method for any tax equity investment that meets specific criteria. •Requires that the election be made on a tax-credit-program-by-tax-credit-program basis. •Receipt of tax credits must be accounted for using the flow through method. •Required that a liability be recorded for delayed equity contributions. •Expands disclosure requirements for the nature of investments and financial statement effect.	•Effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. •Early adoption is permitted in any interim period. •If adopted in an interim period, it shall be adopted as if adopted at the beginning of the fiscal year. •The amendments can be applied in retrospective or modified retrospective basis, with a cumulative effect adjustment reflected in retained earnings. •Huntington does not expect adoption of the standard to have a material impact on its Unaudited Consolidated Financial Statements.

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3. INVESTMENT SECURITIES AND OTHER SECURITIES

Debt securities purchased in which Huntington has the intent and ability to hold to their maturity are classified as held-to-maturity securities. All other debt and equity securities are classified as either available-for-sale or other securities.

The following tables provide amortized cost, fair value, and gross unrealized gains and losses by investment category at September 30, 2023 and December 31, 2022:


			Unrealized
(dollar amounts in millions)	Amortized Cost (1)(2)		Gross Gains		Gross Losses		Fair Value
At September 30, 2023
Available-for-sale securities:
U.S. Treasury	$	5	$	—	$	—	$	5
Federal agencies:
Residential CMO	3,661		1		(531)		3,131
Residential MBS	13,445		—		(2,529)		10,916
Commercial MBS	2,544		—		(815)		1,729
Other agencies	168		—		(9)		159
Total U.S. Treasury, federal agency, and other agency securities	19,823		1		(3,884)		15,940
Municipal securities	3,702		1		(226)		3,477
Private-label CMO	133		—		(15)		118
Asset-backed securities	391		—		(40)		351
Corporate debt	2,209		109		(345)		1,973
Other securities/Sovereign debt	4		—		—		4
Total available-for-sale securities	$	26,262	$	111	$	(4,510)	$	21,863

Held-to-maturity securities:
Federal agencies:
Residential CMO	$	4,881	$	—	$	(839)	$	4,042
Residential MBS	9,578		—		(1,691)		7,887
Commercial MBS	1,580		—		(300)		1,280
Other agencies	107		—		(9)		98
Total federal agency and other agency securities	16,146		—		(2,839)		13,307
Municipal securities	2		—		—		2
Total held-to-maturity securities	$	16,148	$	—	$	(2,839)	$	13,309

Other securities, at cost:
Non-marketable equity securities:
Federal Home Loan Bank stock	$	156	$	—	$	—	$	156
Federal Reserve Bank stock	517		—		—		517
Equity securities	15		—		—		15
Other securities, at fair value:
Mutual funds	29		—		—		29
Equity securities	1		—		—		1
Total other securities	$	718	$	—	$	—	$	718

(1)Amortized cost amounts exclude accrued interest receivable, which is recorded within accrued income and other receivables on the Consolidated Balance Sheets. At September 30, 2023, accrued interest receivable on available-for-sale securities and held-to-maturity securities totaled $70 million and $37 million, respectively.

(2)Excluded from the amortized cost are portfolio level basis adjustments for securities designated in fair value hedges under the portfolio layer method. The basis adjustments totaled $916 million and represent a reduction to the amortized cost of the securities being hedged. The securities being hedged under the portfolio layer method are primarily Residential CMO and Residential MBS securities.

2023 3Q Form 10-Q 49

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			Unrealized
(dollar amounts in millions)	Amortized Cost (1)(2)		Gross Gains		Gross Losses		Fair Value
At December 31, 2022
Available-for-sale securities:
U.S. Treasury	$	103	$	—	$	—	$	103
Federal agencies:
Residential CMO	3,336		—		(422)		2,914
Residential MBS	14,349		4		(2,090)		12,263
Commercial MBS	2,565		—		(612)		1,953
Other agencies	190		1		(9)		182
Total U.S. Treasury, federal agency, and other agency securities	20,543		5		(3,133)		17,415
Municipal securities	3,527		1		(238)		3,290
Private-label CMO	146		—		(18)		128
Asset-backed securities	416		—		(44)		372
Corporate debt	2,467		132		(385)		2,214
Other securities/Sovereign debt	4		—		—		4
Total available-for-sale securities	$	27,103	$	138	$	(3,818)	$	23,423

Held-to-maturity securities:
Federal agencies:
Residential CMO	$	4,970	$	4	$	(714)	$	4,260
Residential MBS	10,295		—		(1,375)		8,920
Commercial MBS	1,652		—		(204)		1,448
Other agencies	133		—		(9)		124
Total federal agency and other agency securities	17,050		4		(2,302)		14,752
Municipal securities	2		—		—		2
Total held-to-maturity securities	$	17,052	$	4	$	(2,302)	$	14,754

Other securities, at cost:
Non-marketable equity securities:
Federal Home Loan Bank stock	$	312	$	—	$	—	$	312
Federal Reserve Bank stock	500		—		—		500
Equity securities	10		—		—		10
Other securities, at fair value:
Mutual funds	31		—		—		31
Equity securities	1		—		—		1
Total other securities	$	854	$	—	$	—	$	854

(1)Amortized cost amounts exclude accrued interest receivable, which is recorded within accrued income and other receivables on the Consolidated Balance Sheets. At December 31, 2022, accrued interest receivable on available-for-sale securities and held-to-maturity securities totaled $64 million and $39 million, respectively.

(2)Excluded from the amortized cost are portfolio level basis adjustments for securities designated in fair value hedges under the portfolio layer method. The basis adjustments totaled $849 million and represent a reduction to the amortized cost of the securities being hedged. The securities being hedged under the portfolio layer method are primarily Residential CMO and Residential MBS securities.

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The following table provides the amortized cost and fair value of securities by contractual maturity at September 30, 2023 and December 31, 2022. Expected maturities may differ from contractual maturities as issuers may have the right to call or prepay obligations with or without incurring penalties.


	At September 30, 2023				At December 31, 2022
(dollar amounts in millions)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Available-for-sale securities:
Under 1 year	$	434	$	425	$	518	$	511
After 1 year through 5 years	2,636		2,437		2,182		2,033
After 5 years through 10 years	2,537		2,321		3,106		2,814
After 10 years	20,655		16,680		21,297		18,065
Total available-for-sale securities	$	26,262	$	21,863	$	27,103	$	23,423

Held-to-maturity securities:
Under 1 year	$	1	$	1	$	—	$	—
After 1 year through 5 years	52		49		72		68
After 5 years through 10 years	72		66		71		66
After 10 years	16,023		13,193		16,909		14,620
Total held-to-maturity securities	$	16,148	$	13,309	$	17,052	$	14,754

The following tables provide detail on investment securities with unrealized losses aggregated by investment category and the length of time the individual securities have been in a continuous loss position at September 30, 2023 and December 31, 2022:


	Less than 12 Months				Over 12 Months				Total
(dollar amounts in millions)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
At September 30, 2023
Available-for-sale securities:
Federal agencies:
Residential CMO	$	544	$	(16)	$	2,587	$	(515)	$	3,131	$	(531)
Residential MBS	456		(21)		10,461		(2,508)		10,917		(2,529)
Commercial MBS	—		—		1,729		(815)		1,729		(815)
Other agencies	16		—		73		(9)		89		(9)
Total federal agency and other agency securities	1,016		(37)		14,850		(3,847)		15,866		(3,884)
Municipal securities	713		(29)		2,665		(197)		3,378		(226)
Private-label CMO	—		—		95		(15)		95		(15)
Asset-backed securities	—		—		351		(40)		351		(40)
Corporate debt	—		—		1,973		(345)		1,973		(345)

Total temporarily impaired available-for-sale securities	$	1,729	$	(66)	$	19,934	$	(4,444)	$	21,663	$	(4,510)

Held-to-maturity securities:
Federal agencies:
Residential CMO	$	561	$	(16)	$	3,481	$	(823)	$	4,042	$	(839)
Residential MBS	150		(7)		7,737		(1,684)		7,887		(1,691)
Commercial MBS	—		—		1,280		(300)		1,280		(300)
Other agencies	—		—		98		(9)		98		(9)
Total federal agency and other agency securities	711		(23)		12,596		(2,816)		13,307		(2,839)

Total temporarily impaired held-to-maturity securities	$	711	$	(23)	$	12,596	$	(2,816)	$	13,307	$	(2,839)

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	Less than 12 Months				Over 12 Months				Total
(dollar amounts in millions)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
At December 31, 2022
Available-for-sale securities:
Federal agencies:
Residential CMO	$	2,096	$	(224)	$	818	$	(198)	$	2,914	$	(422)
Residential MBS	2,455		(286)		9,490		(1,804)		11,945		(2,090)
Commercial MBS	1,090		(249)		863		(363)		1,953		(612)
Other agencies	40		(1)		56		(8)		96		(9)
Total federal agency and other agency securities	5,681		(760)		11,227		(2,373)		16,908		(3,133)
Municipal securities	2,298		(174)		807		(64)		3,105		(238)
Private-label CMO	64		(13)		43		(5)		107		(18)
Asset-backed securities	174		(10)		199		(34)		373		(44)
Corporate debt	727		(105)		1,487		(280)		2,214		(385)

Total temporarily impaired available-for-sale securities	$	8,944	$	(1,062)	$	13,763	$	(2,756)	$	22,707	$	(3,818)

Held-to-maturity securities:
Federal agencies:
Residential CMO	$	1,702	$	(238)	$	2,283	$	(476)	$	3,985	$	(714)
Residential MBS	4,151		(462)		4,711		(913)		8,862		(1,375)
Commercial MBS	1,201		(154)		247		(50)		1,448		(204)
Other agencies	124		(9)		—		—		124		(9)
Total federal agency and other agency securities	7,178		(863)		7,241		(1,439)		14,419		(2,302)

Total temporarily impaired held-to-maturity securities	$	7,178	$	(863)	$	7,241	$	(1,439)	$	14,419	$	(2,302)

At September 30, 2023 and December 31, 2022, the carrying value of investment securities pledged: (i) to secure certain uninsured deposits, trading account liabilities, U.S. Treasury demand notes, and security repurchase agreements, and (ii) to support borrowing capacity totaled $32.6 billion and $26.9 billion, respectively. There were no securities of a single issuer, which were not governmental or government-sponsored, that exceeded 10% of shareholders’ equity at either September 30, 2023 or December 31, 2022. At September 30, 2023, all HTM debt securities are considered investment grade. In addition, there were no HTM debt securities considered past due at September 30, 2023.

Based on an evaluation of available information including security type, counterparty credit quality, past events, current conditions, and reasonable and supportable forecasts that are relevant to collectability of cash flows, as of September 30, 2023, Huntington has concluded that it expects to receive all contractual cash flows from each security held in its AFS and HTM debt securities portfolio. There was no allowance related to investment securities as of September 30, 2023 or December 31, 2022. A $4 million charge-off was recognized during the 2022 first quarter for one municipal bond classified as an AFS debt security.

52 Huntington Bancshares Incorporated

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4. LOANS AND LEASES

The following table provides a detailed listing of Huntington’s loan and lease portfolio at September 30, 2023 and December 31, 2022.


(dollar amounts in millions)	At September 30, 2023		At December 31, 2022


















Commercial loan and lease portfolio:
Commercial and industrial	$	49,422	$	48,121
Commercial real estate	12,668		13,640
Lease financing	5,161		5,252
Total commercial loan and lease portfolio	67,251		67,013
Consumer loan portfolio:
Residential mortgage	23,427		22,226
Automobile	12,724		13,154
Home equity	10,118		10,375
RV and marine	5,937		5,376
Other consumer	1,396		1,379
Total consumer loan portfolio	53,602		52,510
Total loans and leases (1)(2)	120,853		119,523
Allowance for loan and lease losses	(2,208)		(2,121)
Net loans and leases	$	118,645	$	117,402

(1)Loans and leases are reported at principal amount outstanding including unamortized purchase premiums and discounts, unearned income, and net direct fees and costs associated with originating and acquiring loans and leases. The aggregate amount of these loan and lease adjustments was a net (discount) premium of $(150) million and $3 million at September 30, 2023 and December 31, 2022, respectively.

(2)The total amount of accrued interest recorded for these loans and leases at September 30, 2023, was $323 million and $209 million of commercial and consumer loan and lease portfolios, respectively, and at December 31, 2022, was $274 million and $186 million of commercial and consumer loan and lease portfolios, respectively. Accrued interest is presented in accrued income and other receivables within the Consolidated Balance Sheets.

Lease Financing

The following table presents net investments in lease financing receivables by category at September 30, 2023 and December 31, 2022.


(dollar amounts in millions)	At September 30, 2023		At December 31, 2022

Lease payments receivable	$	4,867	$	4,916
Estimated residual value of leased assets	805		788
Gross investment in lease financing receivables	5,672		5,704
Deferred origination costs	53		46
Deferred fees, unearned income and other	(564)		(498)
Total lease financing receivables	$	5,161	$	5,252

The carrying value of residual values guaranteed was $481 million and $466 million as of September 30, 2023 and December 31, 2022, respectively. The future lease rental payments due from customers on sales-type and direct financing leases at September 30, 2023, totaled $4.9 billion and were due as follows: $813 million in 2023, $792 million in 2024, $722 million in 2025, $778 million in 2026, $764 million in 2027, and $998 million thereafter. Interest income recognized for these types of leases was $73 million and $41 million for the three-month periods ended September 30, 2023 and 2022, respectively. For the nine-month periods ended September 30, 2023 and 2022, interest income recognized for these types of leases was $211 million and $117 million, respectively.

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Nonaccrual and Past Due Loans and Leases

The following table presents NALs by class at September 30, 2023 and December 31, 2022:


	At September 30, 2023				At December 31, 2022
(dollar amounts in millions)	Nonaccrual loans and leases with no ACL		Total nonaccrual loans and leases		Nonaccrual loans and leases with no ACL		Total nonaccrual loans and leases
Commercial and industrial	$	48	$	314	$	49	$	288
Commercial real estate	69		102		63		92
Lease financing	3		14		—		18
Residential mortgage	—		75		—		90
Automobile	—		4		—		4
Home equity	—		82		—		76
RV and marine	—		1		—		1

Total nonaccrual loans and leases	$	120	$	592	$	112	$	569

The following tables present an aging analysis of loans and leases, by class at September 30, 2023 and December 31, 2022:


	Past Due (1)										Loans Accounted for Under FVO		Total Loans and Leases		90 or more days past due and accruing
(dollar amounts in millions)	30-59 Days		60-89 Days		90 or more days		Total		Current
At September 30, 2023
Commercial and industrial	$	45	$	31	$	81	$	157	$	49,265	$	—	$	49,422	$	—
Commercial real estate	21		5		27		53		12,615		—		12,668		—
Lease financing	39		18		9		66		5,095		—		5,161		7		(2)
Residential mortgage	230		68		170		468		22,785		174		23,427		124		(3)
Automobile	81		20		11		112		12,612		—		12,724		8
Home equity	56		28		76		160		9,957		1		10,118		19
RV and marine	17		5		3		25		5,912		—		5,937		2
Other consumer	11		5		3		19		1,377		—		1,396		3
Total loans and leases	$	500	$	180	$	380	$	1,060	$	119,618	$	175	$	120,853	$	163
At December 31, 2022
Commercial and industrial	$	53	$	19	$	108	$	180	$	47,941	$	—	$	48,121	$	23	(4)
Commercial real estate	2		1		9		12		13,628		—		13,640		—
Lease financing	36		18		10		64		5,188		—		5,252		9		(2)
Residential mortgage	246		69		199		514		21,528		184		22,226		146		(3)
Automobile	88		20		11		119		13,035		—		13,154		9
Home equity	56		30		66		152		10,222		1		10,375		15
RV and marine	15		5		3		23		5,353		—		5,376		3
Other consumer	13		3		3		19		1,360		—		1,379		2
Total loans and leases	$	509	$	165	$	409	$	1,083	$	118,255	$	185	$	119,523	$	207

(1)NALs are included in this aging analysis based on the loan’s past due status.

(2)Amounts include Huntington Technology Finance administrative lease delinquencies.

(3)Amounts include mortgage loans insured by U.S. government agencies.

(4)Amounts include SBA loans and leases.

54 Huntington Bancshares Incorporated

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Credit Quality Indicators

See Note 5 “Loans and Leases” to the Consolidated Financial Statements appearing in Huntington’s 2022 Annual Report on Form 10-K for a description of the credit quality indicators Huntington utilizes for monitoring credit quality and for determining an appropriate ACL level.

For all classes within the consumer loan portfolios, borrower credit bureau scores are monitored as an indicator of credit quality. A credit bureau score is a credit score developed by FICO based on data provided by the credit bureaus. The credit bureau score is widely accepted as the standard measure of consumer credit risk used by lenders, regulators, rating agencies, and consumers. The higher the credit bureau score, the higher likelihood of repayment and therefore, an indicator of higher credit quality.

Huntington assesses the risk in the loan portfolio by utilizing numerous risk characteristics. The classifications described above, and also presented in the table below, represent one of those characteristics that are closely monitored in the overall credit risk management processes.

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The following tables present the amortized cost basis of loans and leases by vintage and credit quality indicator at September 30, 2023 and December 31, 2022 respectively:


	At September 30, 2023
	Term Loans Amortized Cost Basis by Origination Year												Revolver Total at Amortized Cost Basis		Revolver Total Converted to Term Loans
(dollar amounts in millions)	2023		2022		2021		2020		2019		Prior				Total
Commercial and industrial
Credit Quality Indicator (1):
Pass	$	12,138	$	11,025	$	4,096	$	2,354	$	1,381	$	1,593	$	13,929	$	5	$	46,521
OLEM	98		214		81		31		15		13		344		—		796
Substandard	306		324		193		159		151		230		732		—		2,095
Doubtful	9		1		—		—		—		—		—		—		10
Total Commercial and industrial	$	12,551	$	11,564	$	4,370	$	2,544	$	1,547	$	1,836	$	15,005	$	5	$	49,422
Commercial real estate
Credit Quality Indicator (1):
Pass	$	1,200	$	3,562	$	2,050	$	1,154	$	1,294	$	1,469	$	533	$	—	$	11,262
OLEM	117		290		116		53		33		25		1		—		635
Substandard	152		234		103		18		133		115		16		—		771

Total Commercial real estate	$	1,469	$	4,086	$	2,269	$	1,225	$	1,460	$	1,609	$	550	$	—	$	12,668
Lease financing
Credit Quality Indicator (1):
Pass	$	1,449	$	1,479	$	933	$	680	$	298	$	155	$	—	$	—	$	4,994
OLEM	4		10		9		9		3		1		—		—		36
Substandard	8		49		38		13		14		8		—		—		130
Doubtful	—		—		1		—		—		—		—		—		1
Total Lease financing	$	1,461	$	1,538	$	981	$	702	$	315	$	164	$	—	$	—	$	5,161
Residential mortgage
Credit Quality Indicator (2):
750+	$	1,609	$	3,972	$	6,077	$	3,330	$	769	$	2,253	$	—	$	—	$	18,010
650-749	882		1,023		970		515		188		794		—		—		4,372
<650	54		72		81		64		86		514		—		—		871

Total Residential mortgage	$	2,545	$	5,067	$	7,128	$	3,909	$	1,043	$	3,561	$	—	$	—	$	23,253
Automobile
Credit Quality Indicator (2):
750+	$	1,993	$	2,158	$	1,709	$	862	$	457	$	135	$	—	$	—	$	7,314
650-749	1,250		1,423		1,007		426		205		78		—		—		4,389
<650	164		306		294		134		75		48		—		—		1,021

Total Automobile	$	3,407	$	3,887	$	3,010	$	1,422	$	737	$	261	$	—	$	—	$	12,724
Home equity
Credit Quality Indicator (2):
750+	$	322	$	443	$	530	$	553	$	18	$	261	$	4,490	$	231	$	6,848
650-749	99		103		68		59		7		105		2,046		231		2,718
<650	2		6		4		3		2		45		360		129		551

Total Home equity	$	423	$	552	$	602	$	615	$	27	$	411	$	6,896	$	591	$	10,117
RV and marine
Credit Quality Indicator (2):
750+	$	1,070	$	1,007	$	899	$	616	$	308	$	647	$	—	$	—	$	4,547
650-749	273		256		260		164		95		222		—		—		1,270
<650	4		13		22		19		15		47		—		—		120

Total RV and marine	$	1,347	$	1,276	$	1,181	$	799	$	418	$	916	$	—	$	—	$	5,937
Other consumer
Credit Quality Indicator (2):
750+	$	152	$	89	$	44	$	22	$	20	$	53	$	398	$	3	$	781
650-749	75		48		19		7		6		13		366		14		548
<650	4		6		3		1		2		1		37		13		67

Total Other consumer	$	231	$	143	$	66	$	30	$	28	$	67	$	801	$	30	$	1,396

(1)Consistent with the credit quality disclosures, indicators for the Commercial portfolio are based on internally defined categories of credit grades.

(2)Consistent with the credit quality disclosures, indicators for the Consumer portfolio are based on updated customer credit scores refreshed at least quarterly.

56 Huntington Bancshares Incorporated

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	At December 31, 2022
	Term Loans Amortized Cost Basis by Origination Year												Revolver Total at Amortized Cost Basis		Revolver Total Converted to Term Loans
(dollar amounts in millions)	2022		2021		2020		2019		2018		Prior				Total
Commercial and industrial
Credit Quality Indicator (1):
Pass	$	18,092	$	6,742	$	3,332	$	2,107	$	1,156	$	1,186	$	13,060	$	3	$	45,678
OLEM	108		139		72		21		49		26		113		—		528
Substandard	368		183		203		212		142		256		550		—		1,914
Doubtful	—		—		—		—		—		1		—		—		1
Total Commercial and industrial	$	18,568	$	7,064	$	3,607	$	2,340	$	1,347	$	1,469	$	13,723	$	3	$	48,121
Commercial real estate
Credit Quality Indicator (1):
Pass	$	4,022	$	3,115	$	1,562	$	1,662	$	829	$	1,020	$	519	$	—	$	12,729
OLEM	61		53		1		43		6		9		—		—		173
Substandard	231		116		92		74		84		140		1		—		738

Total Commercial real estate	$	4,314	$	3,284	$	1,655	$	1,779	$	919	$	1,169	$	520	$	—	$	13,640
Lease financing
Credit Quality Indicator (1):
Pass	$	1,930	$	1,291	$	952	$	447	$	186	$	143	$	—	$	—	$	4,949
OLEM	32		9		15		18		6		3		—		—		83
Substandard	65		37		74		24		9		11		—		—		220

Total Lease financing	$	2,027	$	1,337	$	1,041	$	489	$	201	$	157	$	—	$	—	$	5,252
Residential mortgage
Credit Quality Indicator (2):
750+	$	3,666	$	6,274	$	3,566	$	846	$	469	$	2,070	$	—	$	—	$	16,891
650-749	1,394		1,172		617		211		137		777		—		—		4,308
<650	49		68		61		95		90		480		—		—		843

Total Residential mortgage	$	5,109	$	7,514	$	4,244	$	1,152	$	696	$	3,327	$	—	$	—	$	22,042
Automobile
Credit Quality Indicator (2):
750+	$	2,770	$	2,212	$	1,243	$	777	$	289	$	98	$	—	$	—	$	7,389
650-749	1,944		1,508		683		367		162		52		—		—		4,716
<650	307		352		173		115		67		35		—		—		1,049

Total Automobile	$	5,021	$	4,072	$	2,099	$	1,259	$	518	$	185	$	—	$	—	$	13,154
Home equity
Credit Quality Indicator (2):
750+	$	463	$	573	$	611	$	23	$	20	$	301	$	4,787	$	252	$	7,030
650-749	131		88		68		9		8		122		2,129		261		2,816
<650	3		3		3		2		2		51		335		129		528

Total Home equity	$	597	$	664	$	682	$	34	$	30	$	474	$	7,251	$	642	$	10,374
RV and marine
Credit Quality Indicator (2):
750+	$	1,148	$	1,031	$	731	$	361	$	354	$	438	$	—	$	—	$	4,063
650-749	290		315		200		118		113		169		—		—		1,205
<650	5		18		15		17		17		36		—		—		108

Total RV and marine	$	1,443	$	1,364	$	946	$	496	$	484	$	643	$	—	$	—	$	5,376
Other consumer
Credit Quality Indicator (2):
750+	$	207	$	64	$	35	$	34	$	13	$	52	$	393	$	3	$	801
650-749	71		30		12		15		4		14		355		16		517
<650	3		3		2		3		1		2		33		14		61

Total Other consumer	$	281	$	97	$	49	$	52	$	18	$	68	$	781	$	33	$	1,379

(1)Consistent with the credit quality disclosures, indicators for the Commercial portfolio are based on internally defined categories of credit grades.

(2)Consistent with the credit quality disclosures, indicators for the Consumer portfolio are based on updated customer credit scores refreshed at least quarterly.

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The following tables present the gross charge-offs of loans and leases by vintage.


	Term Loans Gross Charge-offs by Origination Year												Revolver Gross Charge-offs		Revolver Converted to Term Loans Gross Charge-offs
(dollar amounts in millions)	2023		2022		2021		2020		2019		Prior				Total
Three months ended September 30, 2023
Commercial and industrial	$	2	$	21	$	6	$	6	$	15	$	1	$	3	$	—	$	54
Commercial real estate	5		6		—		—		10		—		7		—		28
Lease Financing	—		3		—		—		—		—		—		—		3
Residential mortgage	—		—		—		—		—		1		—		—		1
Automobile	1		5		3		1		1		1		—		—		12
Home equity	—		—		—		—		—		1		—		1		2
RV and marine	—		—		1		1		1		2		—		—		5
Other consumer	5		5		3		1		1		4		—		7		26
Total	$	13	$	40	$	13	$	9	$	28	$	10	$	10	$	8	$	131
Nine months ended September 30, 2023
Commercial and industrial	$	4	$	39	$	23	$	13	$	26	$	11	$	7	$	1	$	124
Commercial real estate	5		9		19		—		15		5		7		—		60
Lease Financing	—		3		1		1		—		1		—		—		6
Residential mortgage	—		—		1		—		—		3		—		—		4
Automobile	1		11		11		5		4		3		—		—		35
Home equity	—		—		—		—		—		1		1		4		6
RV and marine	—		1		2		2		2		5		—		—		12
Other consumer	8		18		11		4		4		10		—		20		75
Total	$	18	$	81	$	68	$	25	$	51	$	39	$	15	$	25	$	322

Modifications to Debtors Experiencing Financial Difficulty

Effective January 1, 2023, Huntington adopted ASU 2022-02- Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. For additional information on the adoption, refer to both Note 1 “Basis of Presentation” and Note 2 “Accounting Standards Update.”

Huntington will modify the contractual terms of loans to a borrower experiencing financial difficulties as a way to mitigate loss, proactively work with borrowers in financial difficulty, or to comply with regulations regarding the treatment of certain bankruptcy filing and discharge situations.

A debtor is considered to be experiencing financial difficulty when there is significant doubt about the debtor’s ability to make required payments on the debt or to get equivalent financing from another creditor at a market rate for similar debt. A loan placed on nonaccrual because the borrower is experiencing financial difficulty may be returned to accrual status when all contractually due interest and principal has been paid and the borrower demonstrates the financial capacity to continue to pay as agreed, with the risk of loss diminished.

Reported Modification Types

Modifications in the form of principal forgiveness, an interest rate reduction, an other than insignificant payment delay or a term extension that have occurred in the current reporting period to a borrower experiencing financial difficulty are disclosed along with the financial impact of the modifications.

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Huntington will generally try other forms of relief before principal forgiveness but would define any contractual reduction in the amount of principal due without receiving payment or assets as forgiveness. For the purpose of the disclosure Huntington considers any contractual change in interest rate that results in the borrower receiving a below market rate to be an interest rate reduction. Many factors can go into what is considered an other than insignificant payment delay such as the significance of the restructured payment amount relative to the normal loan payment or the relative significance of the delay to the original loan terms. Generally, Huntington would consider any delay in payment of greater than 90 days in the last 12 months to be significant. For the purpose of the disclosure modification of contingent payment features or covenants that would have accelerated payment are not considered term extensions.

Following is a description of what is considered a borrower experiencing financial difficulty by the different loan types:

Commercial loan modifications – Our strategy involving commercial borrowers generally includes working with these borrowers to allow them time to improve their financial position and remain a Huntington customer through restructuring their notes or to restructure elsewhere if necessary. Borrowers that are rated substandard or worse in accordance with the regulatory definition, or that cannot otherwise restructure at market terms and conditions, are considered to be experiencing financial difficulty. A subsequent restructuring or modification of a loan may occur when either the loan matures according to the terms of the modified agreement, or the borrower requests a change to the loan agreements. It is subjected to the normal underwriting standards and processes for other similar credit extensions, both new and existing. The restructured note is evaluated to determine if it is considered a new loan or a continuation of the prior loan.

Consumer loan modifications – Consumer loans in which a borrower requires a modification as a result of negative changes to their financial condition or to avoid default, generally indicate the borrower is experiencing financial difficulty. The primary modifications made to consumer loans are amortization, maturity date and interest rate changes. Consumer borrowers identified as experiencing financial difficulty are unable to refinance their loans through the Company’s normal origination channels or through other independent sources. Most, but not all, of the loans may be delinquent. The Company’s primary loan categories that receive modifications are residential mortgage, automobile, home equity, RV and marine, and other consumer loans.

Impact on Credit Quality of Borrowers Experiencing Financial Difficulty

Huntington’s ALLL is influenced by loan level characteristics that inform the assessed propensity to default. As such, the provision for credit losses is impacted primarily by changes in such loan level characteristics, such as payment performance. Commercial borrowers experiencing financial difficulty are risk rated to reflect the increase in default characteristics so that that the ALLL reflects the future risk of loss. Borrowers experiencing financial difficulty can be classified as either accrual or nonaccrual loans.

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The following table summarizes the amortized cost basis of loans modified during the reporting period to borrowers experiencing financial difficulty, disaggregated by class of financing receivable and type of modification.


	Amortized Cost
(dollar amounts in millions)	Interest rate reduction		Term extension		Payment deferral		Combo - interest rate reduction and term extension		Total		% of total loan class (1)
Three months ended September 30, 2023
Commercial and industrial	$	1	$	147	$	—	$	1	$	149	0.30	%
Commercial real estate	—		52		—		4		56		0.44
Residential mortgage	—		15		—		1		16		0.07
Automobile	—		4		—		—		4		0.03
Home equity	—		—		—		3		3		0.03


Total loans to borrowers experiencing financial difficulty in which modifications were made	$	1	$	218	$	—	$	9	$	228	0.19	%
Nine months ended September 30, 2023
Commercial and industrial	$	33	$	291	$	—	$	4	$	328	0.66	%
Commercial real estate	—		138		—		4		142		1.12
Residential mortgage	—		50		2		3		55		0.23
Automobile	—		11		—		1		12		0.09
Home equity	—		1		—		8		9		0.09
RV and marine	—		1		—		—		1		0.02
Other consumer	1		—		—		—		1		0.07
Total loans to borrowers experiencing financial difficulty in which modifications were made	$	34	$	492	$	2	$	20	$	548	0.45	%

(1)Represents the amortized cost of loans modified during the reporting period as a percentage of the period-end loan balance by class.

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The following table describes the financial effect of the modification made to borrowers experiencing financial difficulty.


	Interest Rate Reduction (1)				Term Extension (1)
	Weighted-average contractual interest rate				Weighted-average years added to the life
	From		To
Three months ended September 30, 2023
Commercial and industrial	10.56	%	8.11	%	1.0
Commercial real estate	13.78		9.12		0.6
Residential mortgage	6.98		5.14		8.4




Nine months ended September 30, 2023
Commercial and industrial	7.96	%	7.25	%	1.0
Commercial real estate	13.76		9.12		0.7
Residential mortgage	6.04		4.59		7.6
Automobile	6.53		6.18		2.0
Home equity	8.71		6.04		14.6

(1) Certain disclosures related to financial effects of modifications do not include those deemed to be immaterial.

The performance of loans made to borrowers experiencing financial difficulty in which modifications were made is closely monitored to understand the effectiveness of modification efforts. Loans are considered to be in payment default at 90 or more days past due. The following table depicts the performance of loans that have been modified during the reporting period.


	At September 30, 2023
	Past Due
(dollar amounts in millions)	30-59 Days		60-89 Days		90 or more days		Total		Current		Total
Commercial and industrial	$	2	$	1	$	3	$	6	$	322	$	328
Commercial real estate	—		5		1		6		136		142
Residential mortgage	10		5		7		22		33		55
Automobile	1		—		—		1		11		12
Home equity	—		—		1		1		8		9
RV and marine	—		—		—		—		1		1
Other consumer	—		—		—		—		1		1
Total loans to borrowers experiencing financial difficulty in which modifications were made in the nine months ended September 30, 2023	$	13	$	11	$	12	$	36	$	512	$	548

TDR Loans

The following provides additional disclosures previously required by ASC Subtopic 310-40, Receivables—Troubled Debt Restructurings by Creditors, related to the three-month and nine-month period ended September 30, 2022.

TDRs are modified loans where a concession was provided to a borrower experiencing financial difficulties. Loan modifications are considered TDRs when the concessions provided would not otherwise be considered. However, not all loan modifications are TDRs. See Note 1 “Significant Accounting Policies” and Note 5 “Loans and Leases” to the Consolidated Financial Statements appearing in Huntington’s 2022 Annual Report on Form 10-K for additional discussion of TDRs.

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The following table presents, by class and modification type, the number of contracts, post-modification outstanding balance, and the financial effects of the modification for the three-month and nine-month period ended September 30, 2022.


	New Troubled Debt Restructurings (1)

	Number of Contracts		Post-modification Outstanding Recorded Investment (2)
(dollar amounts in millions)		Interest rate reduction			Amortization or maturity date change			Chapter 7 bankruptcy			Other			Total
Three months ended September 30, 2022
Commercial and industrial	81		$	39		$	22		$	—		$	13		$	74
Commercial real estate	7		5			10			—			—			15

Residential mortgage	184		—			25			1			—			26
Automobile	697		—			6			1			—			7
Home equity	54		—			1			—			—			1
RV and marine	31		—			1			1			—			2
Other consumer	38		—			—			—			—			—
Total new TDRs	1,092		$	44		$	65		$	3		$	13		$	125





Nine months ended September 30, 2022
Commercial and industrial	222		$	69		$	37		$	—		$	14		$	120
Commercial real estate	12		42			10			—			—			52

Residential mortgage	629		—			85			5			—			90
Automobile	1,791		—			13			2			—			15
Home equity	166		—			5			3			—			8
RV and marine	105		—			2			1			—			3
Other consumer	91		—			—			—			—			—
Total new TDRs	3,016		$	111		$	152		$	11		$	14		$	288

(1)TDRs may include multiple concessions and the disclosure classifications are based on the primary concession provided to the borrower.

(2)Post-modification balances approximate pre-modification balances.

Pledged Loans

The Bank has access to the Federal Reserve’s discount window and advances from the FHLB. As of September 30, 2023 and December 31, 2022, these borrowings and advances are secured by $101.5 billion and $70.9 billion, respectively, of loans.

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5. ALLOWANCE FOR CREDIT LOSSES

Allowance for Credit Losses - Roll-forward

The following tables present ACL activity by portfolio segment for the three-month and nine-month periods ended September 30, 2023 and 2022.


(dollar amounts in millions)	Commercial		Consumer		Total
Three months ended September 30, 2023
ALLL balance, beginning of period	$	1,483	$	694	$	2,177

Loan and lease charge-offs	(85)		(46)		(131)
Recoveries of loans and leases previously charged-off	40		18		58
Provision for loan and lease losses	66		38		104


ALLL balance, end of period	$	1,504	$	704	$	2,208
AULC balance, beginning of period	$	78	$	87	$	165

Provision for unfunded lending commitments	(2)		(3)		(5)


AULC balance, end of period	$	76	$	84	$	160
ACL balance, end of period	$	1,580	$	788	$	2,368
Nine months ended September 30, 2023
ALLL balance, beginning of period	$	1,424	$	697	$	2,121

Loan and lease charge-offs	(190)		(132)		(322)
Recoveries of loans and leases previously charged-off	89		54		143
Provision for loan and lease losses	181		85		266


ALLL balance, end of period	$	1,504	$	704	$	2,208
AULC balance, beginning of period	$	71	$	79	$	150

Provision for unfunded lending commitments	5		5		10


AULC balance, end of period	$	76	$	84	$	160
ACL balance, end of period	$	1,580	$	788	$	2,368



(dollar amounts in millions)	Commercial		Consumer		Total
Three months ended September 30, 2022
ALLL balance, beginning of period	$	1,342	$	732	$	2,074

Loan and lease charge-offs	(35)		(48)		(83)
Recoveries of loans and leases previously charged-off	20		19		39
Provision (benefit) for loan and lease losses	87		(7)		80


ALLL balance, end of period	$	1,414	$	696	$	2,110
AULC balance, beginning of period	$	53	$	41	$	94

Provision (benefit) for unfunded lending commitments	8		18		26


AULC balance, end of period	$	61	$	59	$	120
ACL balance, end of period	$	1,475	$	755	$	2,230
Nine months ended September 30, 2022
ALLL balance, beginning of period	$	1,462	$	568	$	2,030

Loan and lease charge-offs	(77)		(139)		(216)
Recoveries of loans and leases previously charged-off	83		62		145
Provision (benefit) for loan and lease losses	(54)		205		151


ALLL balance, end of period	$	1,414	$	696	$	2,110
AULC balance, beginning of period	$	41	$	36	$	77

Provision for unfunded lending commitments	20		23		43


AULC balance, end of period	$	61	$	59	$	120
ACL balance, end of period	$	1,475	$	755	$	2,230

At September 30, 2023, the ACL was $2.4 billion, an increase of $97 million compared to December 31, 2022.

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The commercial ACL was $1.6 billion at September 30, 2023 and $1.5 billion at December 31, 2022. The increase of $85 million since year end was due to a combination of C&I loan growth and increased coverage levels in the commercial real estate portfolio during 2023.

The consumer ACL was $788 million, relatively flat compared to the December 31, 2022 balance of $776 million. The modest increase is attributable to loan and lease growth in the consumer portfolio.

The baseline economic scenario used in the September 30, 2023 ACL determination included the federal funds rate projected to peak in the third quarter of 2023 as the Federal Reserve continues to address inflation levels and tightness in the labor market. As a result, inflation is forecast to drop from an average of 4.1% in 2023 to 2.7% by 2024. However, unemployment is expected to gradually increase to a projected level of 4.2% by Q4 2024.

The economic scenarios used included elevated levels of economic uncertainty associated with geopolitical instability, high inflation readings, and the expected path of interest rate increases by the Federal Reserve. Given the uncertainty associated with key economic scenario assumptions, the September 30, 2023 ACL included a general reserve that consists of various risk profile components to capture uncertainty not addressed within the quantitative transaction reserve.

6. MORTGAGE LOAN SALES AND SERVICING RIGHTS

Residential Mortgage Portfolio

The following table summarizes activity relating to residential mortgage loans sold with servicing retained for the three-month and nine-month periods ended September 30, 2023 and 2022:


	Three months ended September 30,				Nine months ended September 30,
(dollar amounts in millions)	2023		2022		2023		2022
Residential mortgage loans sold with servicing retained	$	1,100	$	1,310	$	3,079	$	4,557
Pretax gains resulting from above loan sales (1)	21		11		43		110

(1)Recorded in mortgage banking income.

The following table summarizes the changes in MSRs recorded using the fair value method for the three-month and nine-month periods ended September 30, 2023 and 2022:


	Three months ended September 30,				Nine months ended September 30,
(dollar amounts in millions)	2023		2022		2023		2022
Fair value, beginning of period	$	505	$	463	$	494	$	351


New servicing assets created	17		20		48		68
Change in fair value during the period due to:
Time decay (1)	(6)		(6)		(18)		(16)
Payoffs (2)	(7)		(8)		(18)		(29)
Changes in valuation inputs or assumptions (3)	38		17		41		112
Fair value, end of period	$	547	$	486	$	547	$	486

(1)Represents decrease in value due to passage of time, including the impact from both regularly scheduled principal payments and partial loan paydowns.

(2)Represents decrease in value associated with loans that paid off during the period.

(3)Represents change in value resulting primarily from market-driven changes in interest rates.

A summary of key assumptions and the sensitivity of the MSR value to changes in these assumptions at September 30, 2023, and December 31, 2022 follows:


	At September 30, 2023							At December 31, 2022
				Decline in fair value due to							Decline in fair value due to
(dollar amounts in millions)	Actual			10% adverse change		20% adverse change		Actual			10% adverse change		20% adverse change
Constant prepayment rate (annualized)	6.86	%		$	(13)	$	(26)	7.05	%		$	(13)	$	(25)
Spread over forward interest rate swap rates	557		bps	(12)		(24)		578		bps	(12)		(22)

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Total servicing, late and other ancillary fees included in mortgage banking income was $25 million and $23 million for the three-month periods ended September 30, 2023 and 2022, respectively. Total servicing, late and other ancillary fees included in mortgage banking income was $72 million and $68 million for the nine-month periods ended September 30, 2023 and 2022, respectively. The unpaid principal balance of residential mortgage loans serviced for third parties was $33 billion and $32.4 billion at September 30, 2023 and December 31, 2022, respectively.

7. BORROWINGS

Borrowings with original maturities of one year or less are classified as short-term and were comprised of the following at September 30, 2023 and December 31, 2022, respectively:


(dollar amounts in millions)	At September 30, 2023		At December 31, 2022
Federal funds purchased and securities sold under agreements to repurchase	$	656	$	253
FHLB advances	—		1,700

Other borrowings	25		74
Total short-term borrowings	$	681	$	2,027

Huntington’s long-term debt consisted of the following at September 30, 2023 and December 31, 2022, respectively:


(dollar amounts in millions)	At September 30, 2023		At December 31, 2022
The Parent Company:
Senior Notes	$	4,116	$	3,005





Subordinated Notes	730		975







Total notes issued by the parent	4,846		3,980
The Bank:
Senior Notes	4,114		4,272











Subordinated Notes	651		651


Total notes issued by the bank	4,765		4,923
FHLB Advances (1)	2,707		211

Other	504		572





Total long-term debt	$	12,822	$	9,686

(1) 4.21% weighted average rate, varying maturities greater than one year.

During the 2023 third quarter, Huntington issued $1.3 billion of fixed-to-floating senior notes. The fixed-to-floating senior notes are due August 21, 2029 and bear an initial fixed interest rate of 6.208%. Commencing August 21, 2028, the interest rate will reset to a floating rate equal to a benchmark rate based on the Compounded SOFR Index Rate plus 202 basis points.

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8. OTHER COMPREHENSIVE INCOME

The components of Huntington’s OCI for the three-month and nine-month periods ended September 30, 2023 and 2022, were as follows:


(dollar amounts in millions)	Pretax		Tax (expense) benefit		After-tax
Three months ended September 30, 2023

Unrealized gains (losses) on available-for-sale securities arising during the period	$	(826)	$	190	$	(636)
Reclassification adjustment for realized net losses included in net income	3		—		3
Total unrealized gains (losses) on available-for-sale securities	(823)		190		(633)

Net impact of fair value hedges on available-for-sale securities	87		(20)		67
Unrealized gains (losses) on cash flow hedges during the period	(119)		28		(91)
Reclassification adjustment for cash flow hedges included in net income	67		(26)		41
Net change related to cash flow hedges on loans	(52)		2		(50)
Foreign currency translation adjustment (1)	(6)		—		(6)
Net unrealized gains (losses) on net investment hedges	5		—		5
Translation adjustments, net of hedges (1)	(1)		—		(1)
Change in accumulated unrealized gains for pension and other post-retirement obligations	1		—		1
Other comprehensive income (loss)	$	(788)	$	172	$	(616)
Three months ended September 30, 2022

Unrealized losses on available-for-sale securities arising during the period	$	(1,265)	$	291	$	(974)
Reclassification adjustment for realized net losses included in net income	4		(1)		3
Total unrealized losses on available-for-sale securities	(1,261)		290		(971)



Net impact of fair value hedges on available-for-sale securities	325		(75)		250
Net change related to cash flow hedges on loans	(591)		135		(456)


Translation adjustments, net of hedges (1)	(4)		—		(4)
Change in accumulated unrealized gains for pension and other post-retirement obligations	3		—		3
Other comprehensive income (loss)	$	(1,528)	$	350	$	(1,178)
Nine months ended September 30, 2023

Unrealized gains (losses) on available-for-sale securities arising during the period	$	(729)	$	168	$	(561)
Reclassification adjustment for realized net losses included in net income	41		(9)		32
Total unrealized gains (losses) on available-for-sale securities	(688)		159		(529)

Net impact of fair value hedges on available-for-sale securities	44		(10)		34
Unrealized gains (losses) on cash flow hedging relationships arising during the period	(154)		40		(114)
Reclassification adjustment for cash flow hedges included in net income	113		(29)		84
Net change related to cash flow hedges	(41)		11		(30)


Translation adjustments, net of hedges (1)	—		—		—
Change in accumulated unrealized gains for pension and other post-retirement obligations	1		—		1
Other comprehensive income (loss)	$	(684)	$	160	$	(524)
Nine months ended September 30, 2022

Unrealized losses on available-for-sale securities arising during the period	$	(3,952)	$	909	$	(3,043)
Reclassification adjustment for realized net losses included in net income	95		(22)		73
Total unrealized losses on available-for-sale securities	(3,857)		887		(2,970)

Net impact of fair value hedges on available-for-sale securities	917		(212)		705


Net change related to cash flow hedges	(1,012)		230		(782)


Translation adjustments, net of hedges (1)	(6)		—		(6)
Change in accumulated unrealized gains for pension and other post-retirement obligations	8		(2)		6
Other comprehensive income (loss)	$	(3,950)	$	903	$	(3,047)

(1)Foreign investments are deemed to be permanent in nature and, therefore, Huntington does not provide for taxes on foreign currency translation adjustments.

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Activity in accumulated OCI for the three-month and nine-month periods ended September 30, 2023 and 2022, were as follows:


(dollar amounts in millions)	Unrealized gains (losses) on available-for-sale securities (1)		Net impact of fair value hedges on available-for-sale securities		Net change related to cash flow hedges on loans		Translation adjustments, net of hedges		Unrealized gains (losses) for pension and other post- retirement obligations		Total
Three months ended September 30, 2023
Balance, beginning of period	$	(2,898)	$	721	$	(612)	$	(7)	$	(210)	$	(3,006)

Other comprehensive income (loss) before reclassifications	(636)		67		(91)		(1)		—		(661)
Amounts reclassified from accumulated OCI to earnings	3		—		41		—		1		45
Period change	(633)		67		(50)		(1)		1		(616)
Balance, end of period	$	(3,531)	$	788	$	(662)	$	(8)	$	(209)	$	(3,622)

Three months ended September 30, 2022
Balance, beginning of period	$	(2,152)	$	544	$	(263)	$	(5)	$	(222)	$	(2,098)

Other comprehensive income (loss) before reclassifications	(974)		250		(456)		(4)		—		(1,184)
Amounts reclassified from accumulated OCI to earnings	3		—		—		—		3		6
Period change	(971)		250		(456)		(4)		3		(1,178)

Balance, end of period	$	(3,123)	$	794	$	(719)	$	(9)	$	(219)	$	(3,276)

Nine months ended September 30, 2023
Balance, beginning of period	$	(3,002)	$	754	$	(632)	$	(8)	$	(210)	$	(3,098)
Other comprehensive income (loss) before reclassifications	(561)		34		(114)		—		—		(641)
Amounts reclassified from accumulated OCI to earnings	32				84		—		1		117
Period change	(529)		34		(30)		—		1		(524)
Balance, end of period	$	(3,531)	$	788	$	(662)	$	(8)	$	(209)	$	(3,622)

Nine months ended September 30, 2022
Balance, beginning of period	$	(153)	$	89	$	63	$	(3)	$	(225)	$	(229)
Other comprehensive income (loss) before reclassifications	(3,043)		705		(782)		(6)		—		(3,126)
Amounts reclassified from accumulated OCI to earnings	73		—		—		—		6		79
Period change	(2,970)		705		(782)		(6)		6		(3,047)
Balance, end of period	$	(3,123)	$	794	$	(719)	$	(9)	$	(219)	$	(3,276)

(1)AOCI amounts at September 30, 2023 and September 30, 2022 include $60 million and $69 million, respectively, of net unrealized losses (after-tax) on securities transferred from the available-for-sale securities portfolio to the held-to-maturity securities portfolio. The net unrealized losses will be recognized in earnings over the remaining life of the security using the effective interest method.

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9. SHAREHOLDERS' EQUITY

Preferred Stock

The following is a summary of Huntington’s non-cumulative, non-voting, perpetual preferred stock outstanding.



(dollar amounts in millions)				Carrying Amount
Series	Issuance Date	Shares Outstanding	Dividend Rate	Earliest Redemption Date (1)	At September 30, 2023		At December 31, 2022
Series B (2)	12/28/2011	35,500	Variable (3)	1/15/2017	$	23	$	23



Series E (4)	2/27/2018	5,000	Variable (5)	4/15/2023	495		495
Series F (4)	5/27/2020	5,000	5.625	7/15/2030	494		494
Series G (4)	8/3/2020	5,000	4.45	10/15/2027	494		494
Series H (2)	2/2/2021	500,000	4.50	4/15/2026	486		486
Series I (6)	6/9/2021	7,000	5.70	12/01/2022	175		175
Series J (2)	3/6/2023	325,000	6.875	4/15/2028	317		—
Total		882,500			$	2,484	$	2,167

(1) Redeemable at Huntington’s option on the date stated or on a quarterly basis thereafter.

(2) Series B, H, and J preferred stock have a liquidation value and redemption price per share of $1,000, plus any declared and unpaid dividends.

(3) Series B dividend rate converted to 3-month CME Term SOFR + 26 bps LIBOR spread adjustment + 270 bps effective July 15, 2023. Prior to July 15, 2023, the dividend rate was 3-mo. LIBOR + 270 bps.

(4) Series E, F, and G preferred stock have a liquidation value and redemption price per share of $100,000, plus any declared and unpaid dividends.

(5) Series E dividend rate converted to 3-month CME Term SOFR + 26 bps LIBOR spread adjustment + 288 bps effective July 15, 2023. Prior to July 15, 2023, the dividend rate was 3-mo. LIBOR +288 bps.

(6) Series I preferred stock has a liquidation value and redemption price per share of $25,000, plus any declared and unpaid dividends.

The following table presents the dividends declared for each series of Preferred shares for the three-month and nine-month periods ended September 30, 2023 and 2022:


		Three months ended September 30,											Nine months ended September 30,
(amounts in millions, except per share data)		2023						2022					2023					2022
	Cash Dividend Declared Per Share						Cash Dividend Declared Per Share					Cash Dividend Declared Per Share					Cash Dividend Declared Per Share
Preferred Series				Amount ($)				Amount ($)				Amount ($)			Amount ($)
Series B		$	20.67		$	(1)		$	16.95	$	—		$	59.39	$	(2)		$	39.34	$	—


Series E		2,112.39			(11)			1,425.00		(7)			5,572.46		(28)			4,275.00		(21)
Series F		1,406.25			(7)			1,406.25		(7)			4,218.75		(21)			4,218.75		(21)
Series G		1,112.50			(5)			1,112.50		(6)			3,337.50		(17)			3,337.50		(18)
Series H		11.25			(5)			11.25		(6)			33.75		(17)			33.75		(18)
Series I		356.25			(2)			356.25		(3)			1,068.75		(7)			1,068.75		(7)
Series J		17.19			(6)			—		—			41.83		(14)			—		—
Total					$	(37)				$	(29)				$	(106)				$	(85)

10. EARNINGS PER SHARE

Basic earnings per share is the amount of earnings (adjusted for dividends declared on preferred stock) available to each share of common stock outstanding during the reporting period. Diluted earnings per share is the amount of earnings available to each share of common stock outstanding during the reporting period adjusted to include the effect of potentially dilutive common shares. Potentially dilutive common shares include incremental shares issued for stock options, restricted stock units and awards, and distributions from deferred compensation plans. Potentially dilutive common shares are excluded from the computation of diluted earnings per share in periods in which the effect would be antidilutive.

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The calculation of basic and diluted earnings per share for the three-month and nine-month periods ended September 30, 2023 and 2022 was as follows:


	Three months ended September 30,				Nine months ended September 30,
(dollar amounts in millions, except per share data, share count in thousands)	2023		2022		2023		2022
Basic earnings per common share:
Net income attributable to Huntington	$	547	$	594	$	1,708	$	1,593
Preferred stock dividends	37		29		106		85

Net income available to common shareholders	$	510	$	565	$	1,602	$	1,508
Average common shares issued and outstanding	1,447,993		1,442,591		1,445,878		1,440,740
Basic earnings per common share	$	0.35	$	0.39	$	1.11	$	1.05
Diluted earnings per common share:




Average dilutive potential common shares:
Stock options and restricted stock units and awards	12,183		16,064		14,670		17,078
Shares held in deferred compensation plans	7,435		6,428		6,989		6,416


Average dilutive potential common shares	19,618		22,492		21,659		23,494
Total diluted average common shares issued and outstanding	1,467,611		1,465,083		1,467,537		1,464,234
Diluted earnings per common share	$	0.35	$	0.39	$	1.09	$	1.03
Anti-dilutive awards (1)	11,736		7,121		11,188		5,565

(1)Reflects the total number of shares related to outstanding options that have been excluded from the computation of diluted earnings per share because the impact would have been anti-dilutive.

11. NONINTEREST INCOME

Huntington earns a variety of revenue including interest and fees from customers as well as revenues from non-customers. Certain sources of revenue are recognized within interest or fee income and are outside of the scope of ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). Other sources of revenue fall within the scope of ASC 606 and are generally recognized within noninterest income. These revenues are included within various sections of the Unaudited Consolidated Financial Statements. The following table shows Huntington’s total noninterest income segregated between contracts with customers within the scope of ASC 606 and those within the scope of other GAAP Topics.


(dollar amounts in millions)	Three months ended September 30,				Nine months ended September 30,
Noninterest income	2023		2022		2023		2022
Noninterest income from contracts with customers	$	338	$	345	$	1,047	$	975
Noninterest income within the scope of other GAAP topics	171		153		469		507
Total noninterest income	$	509	$	498	$	1,516	$	1,482

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The following table illustrates the disaggregation by operating segment and major revenue stream and reconciles disaggregated revenue to segment revenue presented in Note 16 “Segment Reporting”.


(dollar amounts in millions)	Consumer & Regional Banking		Commercial Banking		Treasury / Other		Huntington Consolidated
Major Revenue Streams
Three months ended September 30, 2023
Service charges on deposit accounts	$	78	$	19	$	—	$	97
Card and payment processing income	89		7		—		96
Trust and investment management services	58		4		—		62
Insurance income	29		2		—		31
Capital markets fees	2		25		(1)		26
Other noninterest income	9		18		(1)		26
Net revenue from contracts with customers	265		75		(2)		338
Noninterest income within the scope of other GAAP topics	42		81		48		171
Total noninterest income	$	307	$	156	$	46	$	509
Three months ended September 30, 2022
Service charges on deposit accounts	$	73	$	20	$	—	$	93
Card and payment processing income	84		6		—		90
Trust and investment management services	59		1		—		60
Insurance income	25		2		1		28
Capital markets fees	3		37		(2)		38
Other noninterest income	8		29		(1)		36
Net revenue from contracts with customers	252		95		(2)		345
Noninterest income within the scope of other GAAP topics	53		85		15		153
Total noninterest income	$	305	$	180	$	13	$	498
Nine months ended September 30, 2023
Service charges on deposit accounts	$	211	$	56	$	—	$	267
Card and payment processing income	258		20		—		278
Trust and investment management services	181		11		—		192
Insurance income	88		7		—		95
Capital markets fees	9		71		(1)		79
Other noninterest income	79		59		(2)		136
Net revenue from contracts with customers	826		224		(3)		1,047
Noninterest income within the scope of other GAAP topics	127		255		87		469
Total noninterest income	$	953	$	479	$	84	$	1,516
Nine months ended September 30, 2022
Service charges on deposit accounts	$	230	$	65	$	—	$	295
Card and payment processing income	242		17		—		259
Trust and investment management services	185		3		—		188
Insurance income	79		6		1		86
Capital markets fees	9		48		(2)		55
Other noninterest income	21		72		(1)		92
Net revenue from contracts with customers	766		211		(2)		975
Noninterest income within the scope of other GAAP topics	213		259		35		507
Total noninterest income	$	979	$	470	$	33	$	1,482

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Huntington generally provides services for customers in which it acts as principal. Payment terms and conditions vary amongst services and customers, and thus impact the timing and amount of revenue recognition. Some fees may be paid before any service is rendered and accordingly, such fees are deferred until the obligations pertaining to those fees are satisfied. Most Huntington contracts with customers are cancelable by either party without penalty or they are short-term in nature, with a contract duration of less than one year. Accordingly, most revenue deferred for the reporting period ended September 30, 2023 is expected to be earned within one year. Huntington does not have significant balances of contract assets or contract liabilities and any change in those balances during the reporting period ended September 30, 2023 was determined to be immaterial.

12. FAIR VALUES OF ASSETS AND LIABILITIES

See Note 19 “Fair Value of Assets and Liabilities” to the Consolidated Financial Statements appearing in Huntington’s 2022 Annual Report on Form 10-K for a description of the valuation methodologies used for instruments measured at fair value. Assets and liabilities measured at fair value rarely transfer between Level 1 and Level 2 measurements. There were no such transfers during the three-month and nine-month periods ended September 30, 2023 and 2022.

Assets and Liabilities measured at fair value on a recurring basis


	Fair Value Measurements at Reporting Date Using						Netting Adjustments (1)		At September 30, 2023
(dollar amounts in millions)	Level 1		Level 2		Level 3
Assets
Trading account securities:
U.S. Treasury securities	$	90	$	—	$	—	$	—	$	90


Municipal securities	—		20		—		—		20
Corporate debt	—		11		—		—		11
Total trading account securities	90		31		—		—		121
Available-for-sale securities:
U.S. Treasury securities	5		—		—		—		5
Residential CMO	—		3,131		—		—		3,131
Residential MBS	—		10,916		—		—		10,916
Commercial MBS	—		1,729		—		—		1,729
Other agencies	—		159		—		—		159
Municipal securities	—		40		3,437		—		3,477
Private-label CMO	—		98		20		—		118
Asset-backed securities	—		276		75		—		351
Corporate debt	—		1,973		—		—		1,973
Other securities/sovereign debt	—		4		—		—		4
Total available-for-sale securities	5		18,326		3,532		—		21,863
Other securities	29		1		—		—		30
Loans held for sale	—		601		—		—		601
Loans held for investment	—		122		53		—		175
MSRs	—		—		547		—		547
Other assets:
Derivative assets	—		2,383		4		(1,923)		464
Assets held in trust for deferred compensation plans	161		—		—		—		161
Liabilities



Derivative liabilities	—		2,232		5		(1,160)		1,077

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	Fair Value Measurements at Reporting Date Using						Netting Adjustments (1)		At December 31, 2022
(dollar amounts in millions)	Level 1		Level 2		Level 3
Assets
Trading account securities:

Municipal securities	$	—	$	19	$	—	$	—	$	19


Available-for-sale securities:
U.S. Treasury securities	103		—		—		—		103
Residential CMOs	—		2,914		—		—		2,914
Residential MBS	—		12,263		—		—		12,263
Commercial MBS	—		1,953		—		—		1,953
Other agencies	—		182		—		—		182
Municipal securities	—		42		3,248		—		3,290
Private-label CMO	—		108		20		—		128
Asset-backed securities	—		298		74		—		372
Corporate debt	—		2,214		—		—		2,214
Other securities/sovereign debt	—		4		—		—		4
Total available-for-sale securities	103		19,978		3,342		—		23,423
Other securities	31		1		—		—		32
Loans held for sale	—		520		—		—		520
Loans held for investment	—		169		16		—		185
MSRs	—		—		494		—		494
Other assets:
Derivative assets	—		2,161		3		(1,808)		356
Assets held in trust for deferred compensation plans	155		—		—		—		155
Liabilities
Derivative liabilities	—		2,332		5		(1,345)		992

(1)Amounts represent the impact of legally enforceable master netting agreements that allow the Company to settle positive and negative positions and cash collateral held or placed with the same counterparties.

The following tables present a rollforward of the balance sheet amounts measured at fair value on a recurring basis and classified as Level 3. The classification of an item as Level 3 is based on the significance of the unobservable inputs to the overall fair value measurement. However, Level 3 measurements may also include observable components of value that can be validated externally. Accordingly, the gains and losses in the table below include changes in fair value due in part to observable factors that are part of the valuation methodology.

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	Level 3 Fair Value Measurements
					Available-for-sale securities						Loans held for investment
(dollar amounts in millions)	MSRs		Derivative instruments		Municipal securities		Private- label CMO		Asset-backed securities
Three months ended September 30, 2023
Opening balance	$	505	$	(2)	$	3,496	$	20	$	75		$	33
Transfers into Level 3	—		—		—		—		—			21
Transfers out of Level 3 (1)	—		(8)		—		—		—			—
Total gains/losses for the period:
Included in earnings:
Mortgage banking income	37		9		—		—		—			—

Interest and fee income	—		—		(2)		—		—			(3)
Included in OCI	—		—		17		—		—			—
Purchases/originations	18		—		160		—		—			—

Repayments	—		—		—		—		—			2

Settlements	(13)		—		(234)		—		—			—
Closing balance	$	547	$	(1)	$	3,437	$	20	$	75		$	53
Change in unrealized gains or losses for the period included in earnings for assets held at end of the reporting date	$	37	$	(3)	$	—	$	—	$	—		$	—
Change in unrealized gains or losses for the period included in other comprehensive income for assets held at the end of the reporting period	—		—		12		—		—			—
Three months ended September 30, 2022
Opening balance	$	463	$	(5)	$	3,377	$	22	$	44		$	17

Transfers out of Level 3 (1)	—		(6)		—		—		—			—
Total gains/losses for the period:
Included in earnings:
Mortgage banking income	17		2		—		—		—			—


Included in OCI	—		—		(66)		—		—			—
Purchases/originations	20		—		309		—		26			—

Repayments	—		—		—		—		—			(1)

Settlements	(14)		—		(288)		(1)		—			—
Closing balance	$	486	$	(9)	$	3,332	$	21	$	70		$	16
Change in unrealized gains or losses for the period included in earnings for assets held at end of the reporting date	$	17	$	(8)	$	—	$	—	$	—		$	—
Change in unrealized gains or losses for the period included in other comprehensive income for assets held at the end of the reporting period	—		—		(69)		—		(1)			—
(1)Transfers out of Level 3 represent the settlement value of the derivative instruments (i.e., interest rate lock agreements) that are transferred to loans held for sale, which is classified as Level 2.

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	Level 3 Fair Value Measurements
					Available-for-sale securities						Loans held for investment
(dollar amounts in millions)	MSRs		Derivative instruments		Municipal securities		Private- label CMO		Asset-backed securities
Nine months ended September 30, 2023
Opening balance	$	494	$	(2)	$	3,248	$	20	$	74	$	16
Transfers into Level 3	—		—		—		—		—		40
Transfers out of Level 3 (1)	—		(18)		—		—		—		—
Total gains/losses for the period:
Included in earnings:
Mortgage banking income	40		19		—		—		—		—
Interest and fee income	—		—		(2)		(1)		—		(3)

Included in OCI	—		—		13		—		1		—
Purchases/originations	49		—		715		1		—		—



Settlements	(36)		—		(537)		—		—		—
Closing balance	$	547	$	(1)	$	3,437	$	20	$	75	$	53
Change in unrealized gains or losses for the period included in earnings for assets held at end of the reporting date	$	40	$	1	$	—	$	—	$	—	$	—
Change in unrealized gains or losses for the period included in other comprehensive income for assets held at the end of the reporting period	—		—		2		—		—		—
Nine months ended September 30, 2022
Opening balance	$	351	$	4	$	3,477	$	20	$	71	$	19

Transfers out of Level 3 (1)	—		(6)		—		—		—		—
Total gains/losses for the period:
Included in earnings
Mortgage banking income	112		(7)		—		—		—		—
Interest and fee income	—		—		(2)		(2)		—		—
Provision for credit losses	—		—		(4)		—		—		—
Included in OCI	—		—		(274)		—		(1)		—
Purchases/originations	68		—		867		4		26		—

Repayments	—		—		—		—		—		(3)

Settlements	(45)		—		(732)		(1)		(26)		—
Closing balance	$	486	$	(9)	$	3,332	$	21	$	70	$	16
Change in unrealized gains or losses for the period included in earnings for assets held at end of the reporting date	$	112	$	(17)	$	—	$	—	$	—	$	—
Change in unrealized gains or losses for the period included in other comprehensive income for assets held at the end of the reporting period	—		—		(274)		—		(1)		—
(1)Transfers out of Level 3 represent the settlement value of the derivative instruments (i.e., interest rate lock agreements) that are transferred to loans held for sale, which is classified as Level 2.

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Assets and liabilities under the fair value option

The following table presents the fair value and aggregate principal balance of certain assets and liabilities under the fair value option:


	Total Loans						Loans that are 90 or more days past due
(dollar amounts in millions)	Fair value carrying amount		Aggregate unpaid principal		Difference		Fair value carrying amount		Aggregate unpaid principal		Difference
At September 30, 2023

Loans held for sale	$	601	$	598	$	3	$	—	$	—	$	—
Loans held for investment	175		185		(10)		3		3		—
At December 31, 2022

Loans held for sale	$	520	$	513	$	7	$	—	$	—	$	—
Loans held for investment	185		190		(5)		11		11		—

The following table presents the net gains (losses) from fair value changes.



	Three months ended September 30,				Nine months ended September 30,
(dollar amounts in millions)	2023		2022		2023		2022
Loans held for sale (1)	$	(4)	$	(22)	$	(4)	$	(56)
Loans held for investment	(2)		—		(5)		1

(1)The net gains (losses) from fair value changes are included in Mortgage banking income on the Unaudited Consolidated Statements of Income.

Assets and Liabilities measured at fair value on a nonrecurring basis

Certain assets and liabilities may be required to be measured at fair value on a nonrecurring basis in periods subsequent to their initial recognition. These assets and liabilities are not measured at fair value on an ongoing basis; however, they are subject to fair value adjustments in certain circumstances, such as when there is evidence of impairment. The amounts presented represent the fair value on the various measurement dates throughout the period. The gains (losses) represent the amounts recorded during the period regardless of whether the asset is still held at period end.

The amounts measured at fair value on a nonrecurring basis were as follows:


	Fair Value Measurements Using Significant Other Unobservable Inputs (Level 3)					Total Losses
					Three months ended September 30,			Nine months ended September 30,
(dollar amounts in millions)	At September 30, 2023		At December 31, 2022			2023			2022		2023		2022

Collateral-dependent loans	$	24	$	16		$	6		$	—	$	13	$	(1)

Loans held for sale	—		—			—			1		—		1

Huntington records nonrecurring adjustments of collateral-dependent loans held for investment. Such amounts are generally based on the fair value of the underlying collateral supporting the loan. Appraisals are generally obtained to support the fair value of the collateral and incorporate measures such as recent sales prices for comparable properties and cost of construction. Periodically, in cases where the carrying value exceeds the fair value of the collateral less cost to sell, an impairment charge is recognized in the form of a charge-off.

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Significant unobservable inputs for assets and liabilities measured at fair value on a recurring and nonrecurring basis

The table below presents quantitative information about the significant unobservable inputs for assets and liabilities measured at fair value on a recurring and nonrecurring basis:


	Quantitative Information about Level 3 Fair Value Measurements
			At September 30, 2023 (1)							At December 31, 2022 (1)
(dollar amounts in millions)	Valuation Technique	Significant Unobservable Input	Range					Weighted Average		Range					Weighted Average
Measured at fair value on a recurring basis:
MSRs	Discounted cash flow	Constant prepayment rate	4	%	-	33	%	7	%	5	%	-	40	%	7	%
		Spread over forward interest rate swap rates	5	%	-	13	%	6	%	5	%	-	13	%	6	%






Municipal securities and asset-backed securities	Discounted cash flow	Discount rate	5	%	-	6	%	6	%	5	%	-	5	%	5	%
		Cumulative default	—	%	-	64	%	7	%	—	%	-	64	%	7	%
		Loss given default	20	%	-	20	%	20	%	20	%	-	20	%	20	%

(1) Certain disclosures related to quantitative level 3 fair value measurements do not include those deemed to be immaterial.

The following provides a general description of the impact of a change in an unobservable input on the fair value measurement and the interrelationship between unobservable inputs, where relevant/significant. Interrelationships may also exist between observable and unobservable inputs.

Credit loss estimates, such as probability of default, constant default, cumulative default, loss given default, cure given deferral, and loss severity, are driven by the ability of the borrowers to pay their loans and the value of the underlying collateral and are impacted by changes in macroeconomic conditions, typically increasing when economic conditions worsen and decreasing when conditions improve. An increase in the estimated prepayment rate typically results in a decrease in estimated credit losses and vice versa. Higher credit loss estimates generally result in lower fair values. Credit spreads generally increase when liquidity risks and market volatility increase and decrease when liquidity conditions and market volatility improve.

Discount rates and spread over forward interest rate swap rates typically increase when market interest rates increase and/or credit and liquidity risks increase and decrease when market interest rates decline and/or credit and liquidity conditions improve. Higher discount rates and credit spreads generally result in lower fair market values.

Fair values of financial instruments

Many of the assets and liabilities subject to the disclosure requirements are not actively traded, requiring fair values to be estimated by management. These estimations necessarily involve the use of judgment about a wide variety of factors, including but not limited to, relevancy of market prices of comparable instruments, expected future cash flows, and appropriate discount rates.

The short-term nature of certain assets and liabilities result in their carrying value approximating fair value. These include trading account securities, customers’ acceptance liabilities, short-term borrowings, bank acceptances outstanding, FHLB advances, and cash and short-term assets, which include cash and due from banks, interest-bearing deposits in banks, interest-bearing deposits at the Federal Reserve Bank, and federal funds sold. Loan commitments and letters-of-credit generally have short-term, variable-rate features and contain clauses that limit Huntington’s exposure to changes in customer credit quality. Accordingly, their carrying values, which are immaterial at the respective balance sheet dates, are reasonable estimates of fair value.

Certain assets, the most significant being operating lease assets, bank owned life insurance, and premises and equipment, do not meet the definition of a financial instrument and are excluded from this disclosure. Similarly, mortgage servicing rights and relationship intangibles are not considered financial instruments and are not included in following tables. Accordingly, this fair value information is not intended to, and does not, represent Huntington’s underlying value.

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The following table provides the carrying amounts and estimated fair values of Huntington’s financial instruments:


(dollar amounts in millions)	Amortized Cost		Lower of Cost or Market		Fair Value or Fair Value Option		Total Carrying Amount		Estimated Fair Value
At September 30, 2023
Financial Assets
Cash and short-term assets	$	11,693	$	—	$	—	$	11,693	$	11,693
Trading account securities	—		—		121		121		121
Available-for-sale securities	—		—		21,863		21,863		21,863
Held-to-maturity securities	16,148		—		—		16,148		13,309
Other securities	688		—		30		718		718
Loans held for sale	—		2		601		603		603
Net loans and leases (1)	118,470		—		175		118,645		114,540
Derivative assets	—		—		464		464		464
Assets held in trust for deferred compensation plans	—		—		161		161		161
Financial Liabilities
Deposits	148,867		—		—		148,867		148,771
Short-term borrowings	681		—		—		681		681
Long-term debt	12,822		—		—		12,822		12,584
Derivative liabilities	—		—		1,077		1,077		1,077
At December 31, 2022
Financial Assets
Cash and short-term assets	$	6,918	$	—	$	—	$	6,918	$	6,918
Trading account securities	—		—		19		19		19
Available-for-sale securities	—		—		23,423		23,423		23,423
Held-to-maturity securities	17,052		—		—		17,052		14,754
Other securities	822		—		32		854		854
Loans held for sale	—		9		520		529		529
Net loans and leases (1)	117,217		—		185		117,402		112,591
Derivative assets	—		—		356		356		356
Assets held in trust for deferred compensation plans	—		—		155		155		155
Financial Liabilities
Deposits	147,914		—		—		147,914		147,796
Short-term borrowings	2,027		—		—		2,027		2,027
Long-term debt	9,686		—		—		9,686		9,564
Derivative liabilities	—		—		992		992		992

(1)Includes collateral-dependent loans.

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The following table presents the level in the fair value hierarchy for the estimated fair values at September 30, 2023 and December 31, 2022:


	Estimated Fair Value Measurements at Reporting Date Using						Netting Adjustments (1)		Presented Balance
(dollar amounts in millions)	Level 1		Level 2		Level 3
At September 30, 2023
Financial Assets
Trading account securities	$	90	$	31	$	—			$	121
Available-for-sale securities	5		18,326		3,532				21,863
Held-to-maturity securities	—		13,309		—				13,309
Other securities (2)	29		1		—				30
Loans held for sale	—		603		—				603
Net loans and leases	—		122		114,418				114,540
Derivative assets	—		2,383		4		$	(1,923)	464
Financial Liabilities
Deposits	—		134,529		14,242				148,771
Short-term borrowings	—		681		—				681
Long-term debt	—		9,275		3,309				12,584
Derivative liabilities	—		2,232		5		(1,160)		1,077
At December 31, 2022
Financial Assets
Trading account securities	$	—	$	19	$	—			$	19
Available-for-sale securities	103		19,978		3,342				23,423
Held-to-maturity securities	—		14,754		—				14,754
Other securities (2)	31		1		—				32
Loans held for sale	—		520		9				529
Net loans and leases	—		169		112,422				112,591
Derivative assets	—		2,161		3		$	(1,808)	356
Financial Liabilities
Deposits	—		142,081		5,715				147,796
Short-term borrowings	—		2,027		—				2,027
Long-term debt	—		8,680		884				9,564
Derivative liabilities	—		2,332		5		(1,345)		992

(2)Excludes securities without readily determinable fair values.

13. DERIVATIVE FINANCIAL INSTRUMENTS

Derivative financial instruments are recorded in the Unaudited Consolidated Balance Sheets as either an asset or a liability (in other assets or other liabilities, respectively) and measured at fair value.

Derivative financial instruments can be designated as accounting hedges under GAAP. Designating a derivative as an accounting hedge allows Huntington to recognize gains and losses on the hedging instruments in the income statement line item where the gains and losses on the hedged item are recognized. Gains and losses on derivatives that are not designated in an effective hedge relationship under GAAP immediately impact earnings within the period they occur.

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The following table presents the fair values and notional values of all derivative instruments included in the Unaudited Consolidated Balance Sheets at September 30, 2023 and December 31, 2022. Amounts in the table below are presented gross without the impact of any net collateral arrangements.


	At September 30, 2023						At December 31, 2022
(dollar amounts in millions)	Notional Value		Asset		Liability		Notional Value		Asset		Liability
Derivatives designated as Hedging Instruments
Interest rate contracts	$	36,962	$	1,089	$	981	$	42,461	$	1,008	$	1,145
Foreign exchange contracts	216		—		—		202		2		—
Derivatives not designated as Hedging Instruments
Interest rate contracts	57,539		1,182		1,135		37,562		968		1,008
Foreign exchange contracts	4,654		65		50		4,889		68		68
Commodities contracts	688		51		49		762		114		113
Equity contracts	682		—		22		636		4		3
Total contracts	$	100,741	$	2,387	$	2,237	$	86,512	$	2,164	$	2,337

The following table presents the amount of gain or loss recognized in income for derivatives not designated as hedging instruments under ASC Subtopic 815-10 in the Unaudited Consolidated Income Statement for the three-month and nine-month periods ended September 30, 2023 and 2022, respectively.


	Location of Gain or (Loss) Recognized in Income on Derivative		Amount of Gain or (Loss) Recognized in Income on Derivative
		Three months ended September 30,						Nine months ended September 30,
(dollar amounts in millions)		2023			2022			2023			2022
Interest rate contracts:
Customer	Capital markets fees		$	6		$	12		$	23		$	37
Mortgage banking	Mortgage banking income		(37)			—			(28)			(80)

Interest rate swaptions	Other noninterest income		33			—			50			—
Foreign exchange contracts	Capital markets fees		9			12			34			32
Commodities contracts	Capital markets fees		1			1			4			4

Equity contracts	Other noninterest expense		(2)			(1)			(7)			(4)
Total			$	10		$	24		$	76		$	(11)

Derivatives used in asset and liability management activities

Huntington engages in balance sheet hedging activity, principally for asset and liability management purposes. Balance sheet hedging activity is generally arranged to receive hedge accounting treatment that can be classified as either fair value or cash flow hedges. Fair value hedges are executed to hedge changes in fair value of outstanding fixed-rate debt and investment securities caused by fluctuations in market interest rates. Cash flow hedges are executed to modify interest rate characteristics of designated commercial loans in order to reduce the impact of changes in future cash flows due to market interest rate changes.

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The following table presents the gross notional values of derivatives used in Huntington’s asset and liability management activities at September 30, 2023 and December 31, 2022, identified by the underlying interest rate-sensitive instruments.



(dollar amounts in millions)	Fair Value Hedges		Cash Flow Hedges		Economic Hedges		Total
At September 30, 2023
Instruments associated with:
Investment securities	$	11,719	$	—	$	15,450	$	27,169
Loans	—		17,675		175		17,850


Long-term debt	7,568		—		—		7,568

Total notional value	$	19,287	$	17,675	$	15,625	$	52,587



At December 31, 2022
Instruments associated with:
Investment securities	$	10,407	$	—	$	—	$	10,407
Loans	—		24,325		175		24,500


Long-term debt	7,729		—		—		7,729
Total notional value	$	18,136	$	24,325	$	175	$	42,636

These derivative financial instruments were entered into for the purpose of managing the interest rate risk of assets and liabilities. Net amounts receivable or payable on contracts hedging either interest earning assets or interest bearing liabilities were accrued as an adjustment to either interest income or interest expense. Adjustments to interest income were also recorded for the amounts related to the amortization of premiums for collars and floors that were not included in the measurement of hedge effectiveness, as well as the amounts related to terminated hedges reclassified from AOCI. The net amounts resulted in a decrease to net interest income of $62 million and an increase to net interest income of $21 million for the three-month periods ended September 30, 2023, and 2022, respectively. For the nine-month periods ended September 30, 2023, and 2022, the net amounts resulted in a decrease to net interest income of $178 million and an increase to net interest income of $108 million, respectively.

Fair Value Hedges

The changes in fair value of the fair value hedges are recorded through earnings and offset against changes in the fair value of the hedged item.

Huntington has designated $11.1 billion of interest rate swaps as fair value hedges of fixed-rate investment securities using the portfolio layer method. This approach allows the Company to designate as the hedged item a stated amount of the assets that are not expected to be affected by prepayments, defaults and other factors affecting the timing and amount of cash flows. The fair value portfolio level basis adjustment on our hedged mortgage-backed securities portfolio has not been attributed to the individual available-for-sale securities in our Unaudited Consolidated Statements of Financial Condition. Huntington has also designated $662 million of interest rate swaps as fair value hedges of fixed-rate corporate bonds.

The following table presents the change in fair value for derivatives designated as fair value hedges as well as the offsetting change in fair value on the hedged item for the three-month and nine-month periods ended September 30, 2023 and 2022.


	Three months ended September 30,				Nine months ended September 30,
(dollar amounts in millions)	2023		2022		2023		2022
Interest rate contracts
Change in fair value of interest rate swaps hedging investment securities (1)	$	88	$	340	$	44	$	926
Change in fair value of hedged investment securities (1)	(87)		(324)		(45)		(914)


Change in fair value of interest rate swaps hedging long-term debt (2)	(87)		(178)		(109)		(314)
Change in fair value of hedged long term debt (2)	87		178		109		315

(1)Recognized in Interest income—available-for-sale securities—taxable in the Unaudited Consolidated Statements of Income.

(2)Recognized in Interest expense—long-term debt in the Unaudited Consolidated Statements of Income.

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As of September 30, 2023 and December 31, 2022, the following amounts were recorded on the balance sheet related to cumulative basis adjustments for fair value hedges.


	Amortized Cost				Cumulative Amount of Fair Value Hedging Adjustment To Hedged Items
(dollar amounts in millions)	At September 30, 2023		At December 31, 2022		At September 30, 2023		At December 31, 2022
Assets
Investment securities (1)	$	18,291	$	18,029	$	(1,024)	$	(979)

Liabilities
Long-term debt (2)	7,134		7,175		(365)		(256)

(1)Amounts include the amortized cost basis of closed portfolios used to designate hedging relationships under the portfolio layer method. The hedged item is a layer of the closed portfolio which is expected to be remaining at the end of the hedging relationship. As of September 30, 2023, the amortized cost basis of the closed portfolios used in these hedging relationships was $17.7 billion, the cumulative basis adjustments associated with these hedging relationships was $916 million, and the amounts of the designated hedging instruments were $11.1 billion.

(2)Excluded from the above table are the cumulative amount of fair value hedge adjustments remaining for long-term debt for which hedge accounting has been discontinued in the amounts of $(71) million at September 30, 2023 and $(70) million at December 31, 2022.

Cash Flow Hedges

At September 30, 2023, Huntington has $17.7 billion of interest rate swaps, swaption collars, and floors. These are designated as cash flow hedges for variable rate commercial loans. The change in the fair value of a derivative instrument designated as a cash flow hedge is initially recognized in OCI and is reclassified into income when the hedged item impacts earnings. The initial premium paid for the interest rate collar and floor contracts represents the time value of the contracts and is not included in the measurement of hedge effectiveness. The initial premium paid is amortized on a straight line basis as a reduction to interest income over the contractual life of these contracts.

At September 30, 2023, the net losses recognized in AOCI that are expected to be reclassified into earnings within the next 12 months were $261 million.

Economic Hedges

At September 30, 2023, Huntington has $15.5 billion of interest rate swaptions to reduce the impact on capital from rising rates. These swaptions are economic hedges of interest rate risk attributable to our investment securities with the change in value of these instruments recorded in other noninterest income.

Derivatives used in mortgage banking activities

Mortgage loan origination hedging activity

Huntington’s mortgage origination hedging activity is related to economically hedging Huntington’s mortgage pricing commitments to customers and the secondary sale to third parties. The value of a newly originated mortgage is not firm until the interest rate is committed or locked. Forward commitments to sell economically hedge the possible loss on interest rate lock commitments due to interest rate change. The position of these derivatives at September 30, 2023 and December 31, 2022 were a net asset of $12 million and a net liability of $3 million, respectively. At September 30, 2023 and December 31, 2022, Huntington had commitments to sell residential real estate loans of $893 million and $766 million, respectively. These contracts mature in less than one year.

MSR hedging activity

Huntington’s MSR economic hedging activity uses securities and derivatives to manage the value of the MSR asset and to mitigate the various types of risk inherent in the MSR asset, including risks related to duration, basis, convexity, volatility, and yield curve. The hedging instruments include forward commitments, TBA securities, Treasury futures contracts, interest rate swaps, and options on interest rate swaps.

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MSR hedging trading assets and liabilities are included in other assets and other liabilities, respectively, in the Unaudited Balance Sheets. Trading gains (losses) are included in mortgage banking income in the Unaudited Consolidated Statement of Income. The notional value of the derivative financial instruments, the corresponding trading assets and liabilities positions, and net trading gains (losses) related to MSR hedging activity is summarized in the following tables:



(dollar amounts in millions)	At September 30, 2023		At December 31, 2022
Notional value	$	1,200	$	1,120
Trading assets	1		4
Trading liabilities	(102)		(78)


	Three months ended September 30,				Nine months ended September 30,
(dollar amounts in millions)	2023		2022		2023		2022
Trading losses	$	(37)	$	(25)	$	(43)	$	(105)

Derivatives used in customer related activities

Various derivative financial instruments are offered to enable customers to meet their financing and investing objectives and for their risk management purposes. Derivative financial instruments used in trading activities consist of commodity, interest rate, and foreign exchange contracts. Huntington enters into offsetting third-party contracts with approved, reputable counterparties with substantially matching terms and currencies in order to economically hedge significant exposure related to derivatives used in trading activities.

The interest rate or price risk of customer derivatives is mitigated by entering into similar derivatives having offsetting terms with other counterparties. The credit risk to these customers is evaluated and included in the calculation of fair value. Foreign currency derivatives help the customer hedge risk and reduce exposure to fluctuations in exchange rates. Transactions are primarily in liquid currencies with Canadian dollars and Euros comprising a majority of all transactions. Commodity derivatives help the customer hedge risk and reduce exposure to fluctuations in the price of various commodities. Hedging of energy-related products and base metals comprise the majority of these transactions.

The net fair values of these derivative financial instruments, for which the gross amounts are included in other assets or other liabilities at both September 30, 2023 and December 31, 2022, were $61 million and $59 million, respectively. The total notional values of derivative financial instruments used by Huntington on behalf of customers, including offsetting derivatives, were $44.6 billion and $40.7 billion at September 30, 2023 and December 31, 2022, respectively. Huntington’s credit risk from customer derivatives was $64 million and $118 million at the same dates, respectively.

Financial assets and liabilities that are offset in the Unaudited Consolidated Balance Sheets

Huntington records derivatives at fair value as further described in Note 12 “Fair Values of Assets and Liabilities”.

Derivative balances are presented on a net basis taking into consideration the effects of legally enforceable master netting agreements. Additionally, collateral exchanged with counterparties is also netted against the applicable derivative fair values. Huntington enters into derivative transactions with two primary groups: broker-dealers and banks, and Huntington’s customers. Different methods are utilized for managing counterparty credit exposure and credit risk for each of these groups.

Huntington enters into transactions with broker-dealers and banks for various risk management purposes. These types of transactions generally are high dollar volume. Huntington enters into collateral and master netting agreements with these counterparties, and routinely exchanges cash and high quality securities collateral. Huntington enters into transactions with customers to meet their financing, investing, payment and risk management needs. These types of transactions generally are low dollar volume. Huntington enters into master netting agreements with customer counterparties; however, collateral is generally not exchanged with customer counterparties.

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In addition to the customer derivative credit exposure, aggregate credit risk associated with broker-dealer and bank derivative transactions was net credit risk of $359 million and $227 million at September 30, 2023 and December 31, 2022, respectively. The net credit risk associated with derivatives is calculated after considering master netting agreements and is reduced by collateral that has been pledged by the counterparty.

At September 30, 2023, Huntington pledged $207 million of investment securities and cash collateral to counterparties, while other counterparties pledged $1.1 billion of investment securities and cash collateral to Huntington to satisfy collateral netting agreements. In the event of credit downgrades, Huntington would not be required to provide additional collateral.

The following tables present the gross amounts of these assets and liabilities with any offsets to arrive at the net amounts recognized in the Unaudited Consolidated Balance Sheets at September 30, 2023 and December 31, 2022.


Offsetting of Financial Assets and Derivative Assets
			Gross amounts offset in the unaudited consolidated balance sheets		Net amounts of assets presented in the unaudited consolidated balance sheets		Gross amounts not offset in the unaudited consolidated balance sheets
(dollar amounts in millions)	Gross amounts of recognized assets				Financial instruments		Cash collateral received		Net amount
At September 30, 2023	$	2,387	$	(1,923)	$	464	$	(267)	$	(12)	$	185
At December 31, 2022	2,164		(1,808)		356		(7)		(56)		293


Offsetting of Financial Liabilities and Derivative Liabilities
			Gross amounts offset in the unaudited consolidated balance sheets		Net amounts of liabilities presented in the unaudited consolidated balance sheets		Gross amounts not offset in the unaudited consolidated balance sheets
(dollar amounts in millions)	Gross amounts of recognized liabilities				Financial instruments		Cash collateral delivered		Net amount
At September 30, 2023	$	2,237	$	(1,160)	$	1,077	$	—	$	(114)	$	963
At December 31, 2022	2,337		(1,345)		992		(79)		(118)		795

14. VARIABLE INTEREST ENTITIES

Unconsolidated VIEs

The following tables provide a summary of the assets and liabilities included in Huntington’s Unaudited Consolidated Financial Statements, as well as the maximum exposure to losses, associated with its interests related to unconsolidated VIEs for which Huntington holds an interest in, but is not the primary beneficiary, of the VIE at September 30, 2023, and December 31, 2022:


	At September 30, 2023
(dollar amounts in millions)	Total Assets		Total Liabilities		Maximum Exposure to Loss
Affordable Housing Tax Credit Partnerships	$	2,231	$	1,309	$	2,231
Trust Preferred Securities	14		248		—
Other Investments	777		136		777
Total	$	3,022	$	1,693	$	3,008


	At December 31, 2022
(dollar amounts in millions)	Total Assets		Total Liabilities		Maximum Exposure to Loss
Affordable Housing Tax Credit Partnerships	$	2,036	$	1,260	$	2,036
Trust Preferred Securities	14		248		—
Other Investments	522		141		522
Total	$	2,572	$	1,649	$	2,558

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Affordable Housing Tax Credit Partnerships

Huntington makes certain equity investments in various limited partnerships that sponsor affordable housing projects utilizing the LIHTC pursuant to Section 42 of the Internal Revenue Code. The purpose of these investments is to achieve a satisfactory return on capital, to facilitate the sale of additional affordable housing product offerings, and to assist in achieving goals associated with the Community Reinvestment Act. The primary activities of the limited partnerships include the identification, development, and operation of multi-family housing that is leased to qualifying residential tenants. Generally, these types of investments are funded through a combination of debt and equity.

Huntington uses the proportional amortization method to account for a majority of its investments in these entities. These investments are included in other assets. Investments that do not meet the requirements of the proportional amortization method are accounted for using the equity method. Investment losses are included in Other noninterest income in the Unaudited Consolidated Statements of Income.

The following table presents the balances of Huntington’s affordable housing tax credit investments and related unfunded commitments at September 30, 2023 and December 31, 2022.


(dollar amounts in millions)	At September 30, 2023		At December 31, 2022
Affordable housing tax credit investments	$	3,229	$	2,891
Less: amortization	(998)		(855)
Net affordable housing tax credit investments	$	2,231	$	2,036
Unfunded commitments	$	1,309	$	1,260

The following table presents other information relating to Huntington’s affordable housing tax credit investments for the three-month and nine-month periods ended September 30, 2023 and 2022.


	Three months ended September 30,				Nine months ended September 30,
(dollar amounts in millions)	2023		2022		2023		2022
Tax credits and other tax benefits recognized	$	66	$	52	$	197	$	159

Proportional amortization expense included in provision for income taxes	55		45		164		131

There were no sales of affordable housing tax credit investments during the three-month and nine-month periods ended September 30, 2023 and 2022. There was no impairment recognized for the three-month and nine-month periods ended September 30, 2023 and 2022.

Trust-Preferred Securities

Huntington has certain wholly-owned trusts whose assets, liabilities, equity, income, and expenses are not included within Huntington’s Unaudited Consolidated Financial Statements. These trusts have been formed for the sole purpose of issuing trust-preferred securities, from which the proceeds are then invested in Huntington junior subordinated debentures, which are reflected in Huntington’s Unaudited Consolidated Balance Sheet as long-term debt. The trust securities are the obligations of the trusts, and as such, are not consolidated within Huntington’s Unaudited Consolidated Financial Statements.

Other investments

Other investments determined to be VIE’s include investments in Small Business Investment Companies, Historic Tax Credit Investments, certain equity method investments, renewable energy financings, and other miscellaneous investments.

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15. COMMITMENTS AND CONTINGENT LIABILITIES

Commitments to extend credit

In the ordinary course of business, Huntington makes various commitments to extend credit that are not reflected in the Unaudited Consolidated Financial Statements. The contract amounts of these financial agreements at September 30, 2023 and December 31, 2022, were as follows:


(dollar amounts in millions)	At September 30, 2023		At December 31, 2022
Contract amount representing credit risk
Commitments to extend credit:
Commercial	$	32,426	$	32,500
Consumer	19,598		19,064
Commercial real estate	2,816		3,393
Standby letters of credit and guarantees on industrial revenue bonds	761		714
Commercial letters of credit	10		15

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. Collateral to secure any funding of these commitments predominately consists of residential and commercial real estate mortgage loans.

Standby letters-of-credit and guarantees on industrial revenue bonds 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. Since the conditions under which Huntington is required to fund these commitments may not materialize, the cash requirements are expected to be less than the total outstanding commitments. The carrying amount of deferred revenue associated with these guarantees was $13 million and $27 million at September 30, 2023 and December 31, 2022, respectively.

Commercial letters-of-credit represent short-term, self-liquidating instruments that facilitate customer trade transactions and generally have maturities of no longer than 90 days. The goods or cargo being traded normally secure these instruments.

Litigation and Regulatory Matters

In the ordinary course of business, Huntington is routinely a defendant in or party to pending and threatened legal and regulatory actions and proceedings.

In view of the inherent difficulty of predicting the outcome of such matters, particularly where the claimants seek very large or indeterminate damages or where the matters present novel legal theories or involve a large number of parties, Huntington generally cannot predict what the eventual outcome of the pending matters will be, what the timing of the ultimate resolution of these matters will be, or what the eventual loss, fines or penalties related to each matter may be.

Huntington establishes an accrued liability when those matters present loss contingencies that are both probable and estimable. In such cases, there may be an exposure to loss in excess of any amounts accrued. Huntington thereafter continues to monitor the matter for further developments that could affect the amount of the accrued liability that has been previously established.

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For certain matters, Huntington is able to estimate a range of possible loss. In cases in which Huntington possesses information to estimate a range of possible loss, that estimate is aggregated and disclosed below. There may be other matters for which a loss is probable or reasonably possible but such an estimate of the range of possible loss may not be possible. For those matters where an estimate of the range of possible loss is possible, management currently estimates the aggregate range of reasonably possible loss is $0 to $20 million at September 30, 2023 in excess of the accrued liability (if any) related to those matters. This estimated range of possible loss is based upon currently available information and is subject to significant judgment, a variety of assumptions, and known and unknown uncertainties. The matters underlying the estimated range will change from time to time, and actual results may vary significantly from the current estimate. The estimated range of possible loss does not represent Huntington’s maximum loss exposure.

Based on current knowledge, management does not believe that loss contingencies arising from pending matters will have a material adverse effect on the consolidated financial position of Huntington. Further, management believes that amounts accrued are adequate to address Huntington’s contingent liabilities. However, in light of the inherent uncertainties involved in these matters, some of which are beyond Huntington’s control, and the large or indeterminate damages sought in some of these matters, an adverse outcome in one or more of these matters could be material to Huntington’s results of operations for any particular reporting period.

Following the failure of several financial institutions in the first half of 2023, the FDIC issued a notice of proposed rulemaking in May 2023 that would implement a special assessment to recover the cost associated with protecting uninsured depositors as part of those financial institution failures. We continue to monitor the status of the proposed special assessment and the impact to our future operating results. We expect to record the impact when the final rule is enacted.

16. SEGMENT REPORTING

Huntington’s business segments are based on our internally-aligned segment leadership structure, which is how management monitors results and assesses performance. The Company has two business segments: Consumer & Regional Banking and Commercial Banking. The Treasury / Other function includes technology and operations, other unallocated assets, liabilities, revenue, and expense. See Note 1 “Basis of Presentation” for a description of the changes made during the second quarter 2023. Prior period results have been adjusted to conform to the new segment presentation.

Consumer & Regional Banking - Consumer & Regional Banking offers a comprehensive set of digitally powered consumer and business financial solutions to Consumer Lending, Regional Banking, Branch Banking, and Wealth Management customers. The Consumer & Regional Banking segment provides a wide array of financial products and services to consumer and business customers including, but not limited to, deposits, lending, payments, mortgage banking, dealer financing, investment management, trust, brokerage, insurance, and other financial products and services. We serve our customers through our network of channels, including branches, online banking, mobile banking, telephone banking, and ATMs.

Commercial Banking - The Commercial Banking segment provides expertise through bankers, capabilities, and digital channels, and includes a comprehensive set of product offerings. Our target clients span from mid-market to large corporates across a national footprint. The Commercial Banking segment leverages internal partnerships for wealth management, trust, insurance, payments, and treasury management capabilities. In particular, our payments capabilities continue to expand as we develop unique solutions for our diverse client segments, including Huntington ChoicePay. This segment includes customers in Middle Market Banking, Corporate, Specialty, and Government Banking, Asset Finance, Commercial Real Estate Banking, and Capital Markets.

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Listed in the following tables is certain operating basis financial information reconciled to Huntington’s September 30, 2023, December 31, 2022, and September 30, 2022, reported results by business segment.



Income Statements	Consumer & Regional Banking		Commercial Banking		Treasury / Other		Huntington Consolidated
(dollar amounts in millions)
Three months ended September 30, 2023
Net interest income (loss)	$	1,211	$	582	$	(425)	$	1,368
Provision for credit losses	82		17		—		99
Noninterest income	307		156		46		509
Noninterest expense	764		278		48		1,090
Provision (benefit) for income taxes	141		93		(98)		136
Income attributable to non-controlling interest	—		5		—		5
Net income (loss) attributable to Huntington	$	531	$	345	$	(329)	$	547
Three months ended September 30, 2022
Net interest income	$	896	$	490	$	18	$	1,404
Provision for credit losses	22		84		—		106
Noninterest income	305		180		13		498
Noninterest expense	726		270		57		1,053
Provision (benefit) for income taxes	94		67		(15)		146
Income attributable to non-controlling interest	—		3		—		3
Net income (loss) attributable to Huntington	$	359	$	246	$	(11)	$	594
Nine months ended September 30, 2023
Net interest income (loss)	$	3,569	$	1,722	$	(1,168)	$	4,123
Provision for credit losses	192		84		—		276
Noninterest income	953		479		84		1,516
Noninterest expense	2,283		830		113		3,226
Provision (benefit) for income taxes	430		270		(286)		414
Income attributable to non-controlling interest	—		15		—		15
Net income (loss) attributable to Huntington	$	1,617	$	1,002	$	(911)	$	1,708
Nine months ended September 30, 2022
Net interest income	$	2,237	$	1,327	$	247	$	3,811
Provision for credit losses	189		9		—		198
Noninterest income	979		470		33		1,482
Noninterest expense	2,179		763		182		3,124
Provision (benefit) for income taxes	178		215		(22)		371
Income attributable to non-controlling interest	—		7		—		7
Net income attributable to Huntington	$	670	$	803	$	120	$	1,593


	Assets at				Deposits at
(dollar amounts in millions)	September 30, 2023		December 31, 2022		September 30, 2023		December 31, 2022
Consumer & Regional Banking	$	72,192	$	70,268	$	108,182	$	105,064
Commercial Banking	63,473		63,611		36,023		36,807


Treasury / Other	50,985		49,027		4,662		6,043
Total	$	186,650	$	182,906	$	148,867	$	147,914

2023 3Q Form 10-Q 87

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