HUNTINGTON BANCSHARES INC MD

Overview

Our business segments are based on our internally-aligned segment leadership structure, which is how management monitors results and assesses performance. We have two business segments: Consumer & Regional Banking and Commercial Banking. The Treasury / Other function includes all other items not included within our two business segments, including technology and operations, and other unallocated assets, liabilities, revenue, and expense.

Business segment results are determined based upon our management practices, which assigns balance sheet and income statement items to each of the business segments. The process is designed around our organizational and management structure and, accordingly, the results derived are not necessarily comparable with similar information published by other financial institutions.

Revenue Sharing

Revenue is recorded in the business segment responsible for the related product or service. Fee sharing is recorded to allocate portions of such revenue to other business segments involved in selling to or providing service to customers. Results of operations for the business segments reflect these fee sharing allocations.

Expense Allocation

The management process that develops the business segment reporting utilizes various estimates and allocation methodologies to measure the performance of the business segments. Expenses are allocated to business segments using a two-phase approach. The first phase consists of measuring and assigning unit costs (activity-based costs) to activities related to product origination and servicing. These activity-based costs are then extended, based on volumes, with the resulting amount allocated to business segments that own the related products. The second phase consists of the allocation of overhead costs to the business segments from Treasury / Other. We utilize a full-allocation methodology, where all Treasury / Other expenses, except reported acquisition-related expenses, if any, and a small amount of other residual unallocated expenses, are allocated to the business segments.

Funds Transfer Pricing (FTP)

We use an active and centralized FTP methodology to attribute appropriate net interest income to the business segments. The intent of the FTP methodology is to transfer interest rate risk from the business segments by providing modeled duration funding of assets and liabilities. The result is to centralize the financial impact, management, and reporting of interest rate risk in the Treasury / Other function where it can be centrally monitored and managed. The Treasury / Other function charges (credits) an internal cost of funds for assets held in (or pays for funding provided by) each business segment. The FTP rate is based on prevailing market interest rates for comparable duration assets (or liabilities). The primary components of the FTP rate include a base (market) rate, a liquidity premium, contingent liquidity and collateral charges, and option cost.

2024 Form 10-K 83

Net Income (Loss) by Business Segment

Net income (loss) for our business segments and Treasury/Other function for the past three years is presented in the following table.

Consumer & Regional Banking

Consumer & Regional Banking reported net income of $1.5 billion in 2024, an increase of $197 million, or 15%, compared to the year-ago period. Segment net interest income increased $353 million, or 9%, primarily due to a $3.8 billion, or 6%, increase in average loans and leases and an 18 basis point increase in NIM. The provision for credit losses increased $38 million, or 15%, driven by a combination of current year loan and lease growth and increased charge off activity, largely offset by a modest reduction in overall coverage ratios. Noninterest income increased $44 million, or 4%, primarily due to increases in wealth and asset management revenue, reflecting higher assets under management, payments and cash management revenue, reflecting higher card transaction revenue, customer deposit and loan fees, and mortgage banking income, partially offset by a $57 million gain on the sale of our RPS business recognized during 2023. Noninterest expense increased $109 million, or 4%, driven by an increase in corporate allocations.

84 Huntington Bancshares Incorporated

Commercial Banking

Commercial Banking reported net income of $1.2 billion in 2024, a decrease of $26 million, or 2%, compared to the year-ago period. Segment net interest income decreased $39 million, or 2%, primarily due to an 8 basis point decrease in NIM driven by higher deposit rates and a $310 million decrease in average loans and leases, partially offset by a $2.6 billion, or 7%, increase in average deposits. The provision for credit losses decreased $20 million due to a modest reduction in coverage ratio in the commercial portfolio, reflecting the current macroeconomic environment, partially offset by an increase in charge-off activity in 2024. Noninterest income increased $70 million, or 11%, primarily due to increases in capital markets and advisory fees, commitment and other loan fees, and payment and cash management fees, partially offset by a decrease in leasing revenue. Noninterest expense increased $84 million, or 7%, primarily due to increased personnel expense reflecting higher incentive compensation due to increased capital markets and advisory fees, investment in industry verticals, and new teams related to expansion across new geographies.

Treasury / Other

The Treasury / Other function includes revenue and expense related to assets, liabilities, derivatives (including mark-to-market of interest rate swaps, as applicable), and equity not directly assigned or allocated to one of the business segments. Assets include investment securities and bank owned life insurance.

2024 Form 10-K 85

Net interest income includes the impact of administering our investment securities portfolios, the net impact of derivatives used to hedge interest rate sensitivity, as well as the financial impact associated with our FTP methodology, as described above. Noninterest income includes miscellaneous fee income not allocated to other business segments, such as bank owned life insurance income and securities and trading asset gains or losses. Noninterest expense includes certain corporate administrative, acquisition-related expenses, if any, and other miscellaneous expenses not allocated to other business segments. The provision for income taxes for the business segments is calculated at a statutory 21% tax rate, although our overall effective tax rate is lower.

Treasury / Other reported a net loss of $725 million in 2024, an increase in net loss of $182 million, compared to the year-ago period, driven by a decrease in net interest income, partially offset by a decrease in noninterest expense. Net interest income decreased $408 million primarily due to a higher cost of funds and the impact from derivatives. Noninterest expense decreased $205 million primarily due to an increase in corporate allocations.