HUNTINGTON BANCSHARES INC MD

Liquidity risk is the possibility of us being unable to meet current and future financial obligations in a timely manner. The goal of liquidity management is to ensure adequate, stable, reliable, and cost-effective sources of funds to satisfy changes in loan and lease demand, unexpected levels of deposit withdrawals, investment opportunities, and other contractual obligations. We consider core earnings, strong capital ratios, and credit quality essential for maintaining high credit ratings, which allows us cost-effective access to market-based liquidity. We mitigate liquidity risk by maintaining liquid assets in the form of cash, cash equivalents, and securities. In addition, we maintain a large, stable core deposit base and a diversified base of readily available wholesale funding sources, including secured funding sources from the FHLB and Federal Reserve through pledged borrowing capacity, issuance through dealers in the capital markets, and access to certificates of deposit issued through brokers.

The Board of Directors is responsible for establishing an acceptable level of liquidity risk at Huntington, including approval of the liquidity risk appetite at least annually. The liquidity risk appetite includes certain structural and contingent liquidity risk metrics and limits that are designed and monitored to ensure Huntington maintains adequate liquidity to meet current and future funding needs, including during periods of potential stress. Further, the Board receives and reviews information on at least a semi-annual basis to ensure Huntington is operating in accordance with its established risk tolerance.

Liquidity risk is reviewed and managed continuously for the Bank and the parent company, as well as its subsidiaries. In addition, liquidity working groups meet regularly to identify and monitor liquidity positions, provide policy guidance, review funding strategies, and oversee the adherence to, and maintenance of, contingency funding plans. At September 30, 2024, management believes current sources of liquidity are sufficient to meet Huntington’s on and off-balance sheet obligations.

2024 3Q Form 10-Q 25

We maintain a contingency funding plan that provides for liquidity stress testing, which assesses the potential erosion of funds in the event of an institution-specific event or systemic financial market crisis. Examples of institution specific events could include a downgrade in our public credit rating by a rating agency, a large charge to earnings, declines in profitability or other financial measures, declines in liquidity sources including reductions in deposit balances or access to contingent funding sources, or a significant merger or acquisition. Examples of systemic events unrelated to us that could have an effect on our access to liquidity would be terrorism or war, natural disasters, political events, failure of a major financial institution, or the default or bankruptcy of a major corporation, mutual fund, or hedge fund. Similarly, market speculation or rumors about us, or the banking industry in general, may adversely affect the cost and availability of normal funding sources. The contingency funding plan, which is reviewed and approved by the ROC at least annually, outlines the process for addressing a liquidity crisis and provides for an evaluation of funding sources under various market conditions. It also assigns specific roles and responsibilities and communication protocols for effectively managing liquidity through a problem period and outlines early warning indicators that are used to monitor emerging liquidity stress events.

Our largest source of liquidity on a consolidated basis is core deposits, which provide stable and lower-cost funding. Core deposits were $151.3 billion at September 30, 2024, which comprised 96% of total deposits, compared to $145.5 billion, and 96% of total deposits, at December 31, 2023. The $5.8 billion, or 4%, increase in core deposits, compared to December 31, 2023 was primarily driven by an increase in money market deposits. Our core deposits come from a base of primary bank customer relationships, and we continue to focus on acquiring and deepening those relationships resulting in our granular and diversified deposit base.

Non-core deposits consist primarily of brokered money market balances. Non-core deposits were $7.1 billion, or 4% of total deposits, at September 30, 2024, compared to $5.8 billion, or 4% of total deposits, at December 31, 2023. Non-core deposits were below our established liquidity risk metric limits at September 30, 2024.

Insured deposits comprised approximately 69% and 70% of our total deposits at September 30, 2024 and December 31, 2023, respectively.

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

(2)Represents consolidated Huntington uninsured deposits, determined by adjusting the amounts reported in the Bank Call Report (FFIEC 031) by inter-company deposits, which are not customer deposits and are therefore eliminated through consolidation. As of September 30, 2024, the Bank Call Report estimated uninsured deposit balance was $53.3 billion, which includes $4.6 billion of inter-company deposits. As of December 31, 2023, the Bank Call Report estimated uninsured deposit balance was $49.8 billion, which includes $4.6 billion of inter-company deposits.

26 Huntington Bancshares Incorporated

Cash and cash equivalents were $12.6 billion and $10.1 billion at September 30, 2024 and December 31, 2023, respectively. The $2.5 billion increase in cash and cash equivalents is primarily due to an increase in interest-bearing deposits at the Federal Reserve Bank to support short-term liquidity.

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

Total investment securities were $44.6 billion at September 30, 2024, compared to $41.2 billion at December 31, 2023. The $3.5 billion increase in securities compared to December 31, 2023, was primarily due to increased investment in U.S. Treasury securities. At September 30, 2024, the duration of the investment securities portfolio was 4.3 years, or 3.7 years net of hedging. Securities are pledged to secure borrowing capacity with the FHLB and the Federal Reserve, discussed further in the Bank Liquidity and Sources of Funding section below. At September 30, 2024, investment securities with a market value of $7.2 billion were unpledged.

Sources of wholesale funding include non-core deposits (other domestic deposits of $250,000 or more, negotiable CDs, brokered and other deposits), short-term borrowings, and long-term debt. Our wholesale funding totaled $23.6 billion at September 30, 2024, compared to $18.8 billion at December 31, 2023. The increase from year end is primarily due to increases in FHLB borrowings and collateralized borrowings.

Bank Liquidity and Sources of Funding

Our primary sources of funding for the Bank are consumer and commercial core deposits. At September 30, 2024, these core deposits funded 75% of total assets (120% of total loans and leases). To the extent we are unable to obtain sufficient liquidity through core deposits and cash and cash equivalents, we may meet our liquidity needs through sources of wholesale funding and asset securitization or sale.

The Bank maintains borrowing capacity at both the FHLB and the Federal Reserve secured by pledged loans and securities. The Bank does not consider borrowing capacity at the Federal Reserve a primary source of funding; however, it could be used as a potential source of liquidity in a stressed environment or during a market disruption. At September 30, 2024, the Bank’s available contingent borrowing capacity at the FHLB and Federal Reserve totaled $82.2 billion, compared to $83.0 billion at December 31, 2023. The amount of available contingent borrowing capacity may fluctuate based on the level of borrowings outstanding and level of assets pledged.

At September 30, 2024, we believe the Bank has sufficient liquidity and capital resources to meet its cash flow obligations over the next 12 months and for the foreseeable future.

Parent Company Liquidity

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

The parent company had cash and cash equivalents of $4.2 billion and $4.0 billion at September 30, 2024 and December 31, 2023, respectively.

On October 16, 2024, our Board of Directors declared a quarterly common stock cash dividend of $0.155 per common share. The dividend is payable on January 2, 2025, to shareholders of record on December 18, 2024. Based on the current quarterly dividend of $0.155 per common share, cash demands required for common stock dividends are estimated to be approximately $225 million per quarter. Additionally, on October 16, 2024, our Board of Directors declared a quarterly Series B, Series F, Series G, Series H, and Series J Preferred Stock dividend payable on January 15, 2025 to shareholders of record on January 1, 2025. On September 11, 2024, our Board of Directors declared a quarterly dividend for the Series I Preferred Stock payable on December 2, 2024 to shareholders of record on November 15, 2024. Total cash demands required for preferred stock dividends are expected to be approximately $27 million per quarter.

2024 3Q Form 10-Q 27

During the first nine months of 2024, the Bank paid common and preferred dividends to the parent company of $1.8 billion and $34 million, respectively. To meet any additional liquidity needs, the parent company may issue debt or equity securities. To support the parent company’s ability to issue debt or equity securities, we have filed with the SEC an automatic registration statement covering an indeterminate amount or number of securities to be offered or sold from time to time as authorized by Huntington’s Board of Directors.

At September 30, 2024, we believe the Company has sufficient liquidity and capital resources to meet its cash flow obligations over the next 12 months and for the foreseeable future.

Contractual Obligations and Commitments

In the normal course of business, we enter into various contractual obligations and commitments that could impact our liquidity and capital resources. These arrangements include commitments to extend credit, interest rate swaps, floors, financial guarantees contained in standby letters-of-credit issued by the Bank, commitments by the Bank to sell mortgage loans, operating lease payments, and other purchase and marketing obligations.