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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Mortgage Loan Sales and Servicing Rights
- MORTGAGE LOAN SALES AND SERVICING RIGHTS
Residential Mortgage Portfolio
The following table summarizes activity relating to residential mortgage loans sold with servicing retained.
| Year Ended December 31, | |||
|---|---|---|---|
| (dollar amounts in millions) | 2023 | 2022 | 2021 |
| Residential mortgage loans sold with servicing retained | $4,109 | $5,686 | $9,702 |
| Pretax gains resulting from above loan sales (1) | 58 | 137 | 356 |
(1)Recorded in mortgage banking income.
The following table summarizes the changes in MSRs recorded using the fair value method:
| Year Ended December 31, | ||
|---|---|---|
| (dollar amounts in millions) | 2023 | 2022 |
| Fair value, beginning of period | $494 | $351 |
| New servicing assets created | 63 | 85 |
| Servicing assets sold | (1) | — |
| Change in fair value during the period due to: | ||
| Time decay (1) | (24) | (22) |
| Payoffs (2) | (24) | (34) |
| Changes in valuation inputs or assumptions (3) | 7 | 114 |
| Fair value, end of period | $515 | $494 |
(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.
MSRs do not trade in an active, open market with readily observable prices. Therefore, the fair value of MSRs is estimated using a discounted future cash flow model. Changes in the assumptions used may have a significant impact on the valuation of MSRs. MSR values are sensitive to movement in interest rates as expected future net servicing income depends on the projected outstanding principal balances of the underlying loans, which are impacted by the level of prepayments.
2023 Form 10-K 122
The following table summarizes the key assumptions and the sensitivity of the MSR value to changes in these assumptions.
| At December 31, 2023 · At December 31, 2022 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Decline in fair value due to · Decline in fair value due to | ||||||||
| (dollar amounts in millions) · Actual · 10%adversechange · 20%adversechange · Actual · 10%adversechange · 20%adversechange | ||||||||
| Constant prepayment rate (annualized) | 8.61% | $(15) | $(28) | 7.05% | $(13) | $(25) | ||
| Spread over forward interest rate swap rates | 538 | bps | (11) | (22) | 578 | bps | (12) | (22) |
Total servicing, late and other ancillary fees included in mortgage banking income was $98 million, $91 million, and $79 million for the years ended December 31, 2023, 2022, and 2021, respectively. The unpaid principal balance of residential mortgage loans serviced for third parties was $33.2 billion, $32.4 billion, and $31.0 billion at December 31, 2023, 2022, and 2021, respectively.
- GOODWILL AND OTHER INTANGIBLE ASSETS
Business segments are based on segment leadership structure, which reflects how segment performance is monitored and assessed. We havetwo major business segments: Consumer & Regional Banking and Commercial Banking. The Treasury / Other function includes technology and operations, other unallocated assets, liabilities, revenue, and expense.
A rollforward of goodwill by business segment for which goodwill is allocated is presented in the table below. No goodwill impairment was recorded in 2023 or 2022.
| Consumer & | Commercial | Huntington | |
|---|---|---|---|
| (dollar amounts in millions) | Regional Banking | Banking | Consolidated |
| Balance, January 1, 2022 | $3,650 | $1,699 | $5,349 |
| Acquisitions | — | 222 | 222 |
| Balance, December 31, 2022 | 3,650 | 1,921 | 5,571 |
| RPS sale | (10) | — | (10) |
| Balance, December 31, 2023 | $3,640 | $1,921 | $5,561 |
Huntington’s other intangible assets consisted of the following:
| (dollar amounts in millions) | GrossCarryingAmount | AccumulatedAmortization | NetCarryingValue |
|---|---|---|---|
| Core deposit intangible | $385 | $(259) | $126 |
| Customer relationship | 92 | (75) | 17 |
| Total other intangible assets | $477 | $(334) | $143 |
| Core deposit intangible | $385 | $(216) | $169 |
| Customer relationship | 107 | (81) | 26 |
| Total other intangible assets | $492 | $(297) | $195 |
The estimated amortization expense of other intangible assets for the next five years is as follows:
| (dollar amounts in millions) | AmortizationExpense |
|---|---|
| 2024 | $47 |
| 2025 | 43 |
| 2026 | 29 |
| 2027 | 9 |
| 2028 | 6 |
123 Huntington Bancshares Incorporated
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