Quarterly report pursuant to Section 13 or 15(d)

FAIR VALUES OF ASSETS AND LIABILITIES

v3.23.1
FAIR VALUES OF ASSETS AND LIABILITIES
 3 Months Ended
Mar. 31, 2023
Fair Value Disclosures [Abstract]  
FAIR VALUES OF ASSETS AND LIABILITIES 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 periods ended March 31, 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 March 31, 2023
(dollar amounts in millions) Level 1 Level 2 Level 3
Assets
Trading account securities:
Municipal securities $ —  $ 18  $ —  $ —  $ 18 
Available-for-sale securities:
U.S. Treasury securities 5  —  —  —  5 
Residential CMO —  3,450  —  —  3,450 
Residential MBS —  12,333  —  —  12,333 
Commercial MBS —  1,967  —  —  1,967 
Other agencies —  176  —  —  176 
Municipal securities —  42  3,339  —  3,381 
Private-label CMO —  110  20  —  130 
Asset-backed securities —  301  74  —  375 
Corporate debt —  2,265  —  —  2,265 
Other securities/sovereign debt —  4  —  —  4 
Total available-for-sale securities
 5  20,648  3,433  —  24,086 
Other securities 32  1  —  —  33 
Loans held for sale —  446  —  —  446 
Loans held for investment —  172  15  —  187 
MSRs —  —  485  —  485 
Other assets:
Derivative assets —  1,984  6  (1,564) 426 
Assets held in trust for deferred compensation plans 164  —  —  —  164 
Liabilities
Derivative liabilities —  1,595  3  (861) 737 
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.
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 March 31, 2023
Opening balance $ 494  $ (2) $ 3,248  $ 20  $ 74  $ 16 
Transfers out of Level 3 (1) —  (2) —  —  —  — 
Total gains/losses for the period:
Included in earnings:
Mortgage banking income (12) 7  —  —  —  — 
Interest and fee income —  —  —  (1) —  — 
Included in OCI —  —  3  —  —  — 
Purchases/originations 13  —  177  —  —  — 
Repayments —  —  —  —  —  (1)
Settlements (10) —  (89) 1  —  — 
Closing balance $ 485  $ 3  $ 3,339  $ 20  $ 74  $ 15 
Change in unrealized gains or losses for the period included in earnings for assets held at end of the reporting date $ (12) $ 5  $ —  $ —  $ —  $ — 
Change in unrealized gains or losses for the period included in other comprehensive income for assets held at the end of the reporting period —  —  3  —  —  — 
Three Months Ended March 31, 2022
Opening balance $ 351  $ 4  $ 3,477  $ 20  $ 70  $ 19 
Transfers out of Level 3 (1) —  (7) —  —  —  — 
Total gains/losses for the period:
Included in earnings:
Mortgage banking income 51  (7) —  —  —  — 
Interest and fee income —  —  (2) (1) —  — 
Provision for credit losses —  —  (4) —  —  — 
Included in OCI —  —  (120) —  (1) — 
Purchases/originations 29  —  172  —  —  — 
Repayments —  —  —  —  —  (1)
Settlements (15) —  (241) —  (7) — 
Closing balance $ 416  $ (10) $ 3,282  $ 19  $ 62  $ 18 
Change in unrealized gains or losses for the period included in earnings for assets held at end of the reporting date $ 51  $ (16) $ —  $ —  $ —  $ — 
Change in unrealized gains or losses for the period included in other comprehensive income for assets held at the end of the reporting period —  —  (118) —  (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.
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 March 31, 2023
Loans held for sale $ 446  $ 439  $ 7  $ —  $ —  $ — 
Loans held for investment 187  192  (5) 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 March 31,
(dollar amounts in millions) 2023 2022
Loans held for sale (1) $ —  $ (44)
Loans held for investment —  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 March 31,
(dollar amounts in millions) At March 31, 2023 At December 31, 2022 2023 2022
Collateral-dependent loans $ 30  $ 16  $ (6) $ (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.
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 March 31, 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 5  % - 27% 8  % 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 4  % - 5% 5  % 5  % - 5% 5  %
Cumulative default —  % - 64% 8  % —  % - 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 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.
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 March 31, 2023
Financial Assets
Cash and short-term assets $ 10,572  $ —  $ —  $ 10,572  $ 10,572 
Trading account securities —  —  18  18  18 
Available-for-sale securities —  —  24,086  24,086  24,086 
Held-to-maturity securities 16,977  —  —  16,977  14,939 
Other securities 1,266  —  33  1,299  1,299 
Loans held for sale —  11  446  457  457 
Net loans and leases (1) 118,850  —  187  119,037  115,020 
Derivative assets —  —  426  426  426 
Assets held in trust for deferred compensation plans —  —  164  164  164 
Financial Liabilities
Deposits 145,278  —  —  145,278  145,179 
Short-term borrowings 6,898  —  —  6,898  6,898 
Long-term debt 13,072  —  —  13,072  12,591 
Derivative liabilities —  —  737  737  737 
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.
The following table presents the level in the fair value hierarchy for the estimated fair values at March 31, 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 March 31, 2023
Financial Assets
Trading account securities $ —  $ 18  $ —  $ 18 
Available-for-sale securities 5  20,648  3,433  24,086 
Held-to-maturity securities —  14,939  —  14,939 
Other securities (2) 32  1  —  33 
Loans held for sale —  446  11  457 
Net loans and leases —  172  114,848  115,020 
Derivative assets —  1,984  6  $ (1,564) 426 
Financial Liabilities
Deposits —  136,712  8,467  145,179 
Short-term borrowings —  6,898  —  6,898 
Long-term debt —  8,205  4,386  12,591 
Derivative liabilities —  1,595  3  (861) 737 
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 
(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.
(2)Excludes securities without readily determinable fair values.