HUNTINGTON BANCSHARES INC MD
For the period ended Dec 31, 2023. Filed Feb 16, 2024.
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FY2023 · Filed Feb 16, 2024
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Allowance for Credit Losses
- ALLOWANCE FOR CREDIT LOSSES
The following table presents ACL activity by portfolio segment.
| (dollar amounts in millions) | Commercial | Consumer | Total |
|---|---|---|---|
| Year Ended December 31, 2023: | |||
| ALLL balance, beginning of period | $1,424 | $697 | $2,121 |
| Loan and lease charge-offs | (270) | (184) | (454) |
| Recoveries of loans and leases previously charged-off | 112 | 69 | 181 |
| Provision for loan and lease losses | 297 | 110 | 407 |
| ALLL balance, end of period | $1,563 | $692 | $2,255 |
| AULC balance, beginning of period | $71 | $79 | $150 |
| Benefit for unfunded lending commitments | (5) | — | (5) |
| AULC balance, end of period | $66 | $79 | $145 |
| ACL balance, end of period | $1,629 | $771 | $2,400 |
| Year Ended December 31, 2022: | |||
| ALLL balance, beginning of period | $1,462 | $568 | $2,030 |
| Loan and lease charge-offs | (129) | (184) | (313) |
| Recoveries of loans and leases previously charged-off | 114 | 78 | 192 |
| Provision (benefit) for loan and lease losses | (23) | 235 | 212 |
| ALLL balance, end of period | $1,424 | $697 | $2,121 |
| AULC balance, beginning of period | $41 | $36 | $77 |
| Provision for unfunded lending commitments | 30 | 43 | 73 |
| AULC balance, end of period | $71 | $79 | $150 |
| ACL balance, end of period | $1,495 | $776 | $2,271 |
| Year Ended December 31, 2021: | |||
| ALLL balance, beginning of period | $1,236 | $578 | $1,814 |
| Loan and lease charge-offs | (243) | (139) | (382) |
| Recoveries of loans and leases previously charged-off | 83 | 84 | 167 |
| Provision (benefit) for loan and lease losses | 12 | (13) | (1) |
| Allowance on PCD loans and leases at acquisition | 374 | 58 | 432 |
| ALLL balance, end of period | $1,462 | $568 | $2,030 |
| AULC balance, beginning of period | $34 | $18 | $52 |
| Provision for unfunded lending commitments | 8 | 18 | 26 |
| Unfunded lending commitment losses | (1) | — | (1) |
| AULC balance, end of period | $41 | $36 | $77 |
| ACL balance, end of period | $1,503 | $604 | $2,107 |
At December 31, 2023, the ACL was $2.4 billion, an increase of $129 million from the December 31, 2022 balance of $2.3 billion. The increase in the total ACL was primarily driven by a combination of loan and lease growth and modest overall coverage ratio builds throughout 2023.
The Commercial ACL was $1.6 billion at December 31, 2023, an increase of $134 million from the December 31, 2022 balance of $1.5 billion. The primary drivers were approximately $1.3 billion of commercial loan growth and an increase in the coverage ratio for the commercial real estate loan portfolio, reflecting the ongoing risks presented by higher interest rates, increased vacancy rates and deteriorating property values.
The Consumer ACL balance was $771 million at December 31, 2023, relatively flat compared to the December 31, 2022 balance of $776 million. Consumer loan growth over the course of 2023 was offset by modest improvement in the macroeconomic environment.
121 Huntington Bancshares Incorporated
The baseline economic scenario used in the December 31, 2023 ACL determination included the federal funds rate projected to have peaked during the third quarter of 2023 and is forecast to remain at this terminal level until mid-2024 as the Federal Reserve continues to address the elevated inflation levels and tightness in the labor market. The Federal Reserve is expected to start cutting rates in the third quarter of 2024 at a rate of 25 basis points per quarter until reaching 3% in late 2026. Inflation is forecast to drop from 3.3% year over year at the end of 2023, to the Federal Reserve’s target level of 2% by the fourth quarter of 2024. Unemployment is projected to gradually increase, peaking at 4.1% in the first quarter of 2025 before marginally improving to 3.9% by 2027.
The economic scenarios used included elevated levels of economic uncertainty including the impact of specific challenges in the Commercial Real Estate industry, high inflation readings, the U.S labor market, the expected path of interest rate changes by the Federal Reserve, and the impact of significant conflicts on-going around the world. Given the uncertainty associated with key economic scenario assumptions, the December 31, 2023 ACL included a general reserve that consists of various risk profile components to address uncertainty not measured within the quantitative transaction reserve.
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