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 a large, stable customer deposit base and a diversified base of readily available wholesale funding sources, including secured funding sources from the FHLB and FRB through pledged borrowing capacity, issuance through dealers in the capital markets, and access to deposits issued through brokers. We further mitigate liquidity risk by maintaining liquid assets in the form of cash and cash equivalents and securities.

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 liquidity risk metrics 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 ALCO is appointed by the ROC to oversee liquidity risk management, including the establishment of liquidity risk policies and additional liquidity risk metrics and limits to support our overall liquidity risk appetite. Liquidity risk appetite metrics monitored by senior management and reported to the Board at least semi-annually include loans as a percentage of customer deposits, a structural funding ratio, internal liquidity stress test coverage ratios, an investment portfolio market value to book value ratio, and a holding company cash coverage ratio. Additional key liquidity risk metrics monitored by senior management and reported to ALCO monthly include unsecured wholesale funding as a percentage of liquid assets, wholesale funding as a percentage of tangible assets, and varying types of internally defined liquidity coverage ratios, including minimum reserve balances at the FRB and U.S. Treasury holdings relative to internal liquidity stress outflows. Our liquidity risk metric monitoring thresholds are evaluated at a minimum annually, and more frequently if conditions warrant.

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Liquidity risk is managed centrally by Corporate Treasury with independent oversight of liquidity risk performed by Corporate Risk Management. Our liquidity position is evaluated daily, weekly, and monthly by analyzing the composition of all funding sources, reviewing projected liquidity commitments by future months, and identifying sources and uses of funds. The overall management of our liquidity position is also integrated into consumer and commercial pricing policies to ensure a stable deposit base. 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 December 31, 2024, management believes current sources of liquidity are sufficient to meet Huntington’s on and off-balance sheet obligations.

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.

Deposits

Our largest source of liquidity on a consolidated basis is customer deposits, which provide stable and lower-cost funding. Our customer deposits come from a base of primary bank customer relationships, and we continue to focus on acquiring and deepening those relationships resulting in a diversified deposit base. Total deposits were $162.4 billion at December 31, 2024, compared to $151.2 billion at December 31, 2023. The $11.2 billion, or 7%, increase in total deposits during 2024 was primarily driven by an increase in money market and interest-bearing demand deposits, partially offset by a decrease in time deposits. Total deposits included $7.0 billion of brokered deposits primarily consisting of brokered money market balances at December 31, 2024, compared to $5.3 billion at December 31, 2023. The level of brokered deposits was below our established liquidity risk metric limits at December 31, 2024.

Insured deposits comprised approximately 69% of our total deposits at December 31, 2024, compared to 70% at December 31, 2023.

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The following table presents a summary of deposits.

(1)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 December 31, 2024, the Bank Call Report uninsured deposit balance was $54.6 billion, which includes $4.5 billion of inter-company deposits. As of December 31, 2023, the Bank Call Report uninsured deposit balance was $49.8 billion, which includes $4.6 billion of inter-company deposits.

The majority of our time deposits have a contractual maturity of less than one year. The following table presents the contractual maturities of time deposits in excess of the FDIC insurance limit.

Wholesale funding

Sources of wholesale funding include non-customer brokered deposits, short-term borrowings, and long-term debt. Our wholesale funding totaled $23.6 billion at December 31, 2024, compared to $18.3 billion at December 31, 2023, with the increase primarily due to increases in long-term FHLB borrowings, brokered deposits, and long-term collateralized borrowings. For further information on our short-term borrowings and long-term debt, refer to Note 10 - “Borrowings” of the Notes to Consolidated Financial Statements.

Cash and cash equivalents and securities

Cash and cash equivalents were $12.8 billion and $10.1 billion at December 31, 2024 and December 31, 2023, respectively. The $2.7 billion increase in cash and cash equivalents during 2024 was primarily due to an increase in interest-earning deposits at the FRB 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 $43.7 billion at December 31, 2024, compared to $41.2 billion at December 31, 2023. The $2.5 billion increase in securities compared to December 31, 2023, was due to increased investment in U.S. Treasury securities, partially offset by maturities and sales during the year. At December 31, 2024, the duration of the investment securities portfolio was 4.3 years, or 3.8 years net of hedging. Securities are pledged to secure borrowing capacity with the FHLB and FRB, discussed further in the Bank Liquidity and Sources of Funding section below. At December 31, 2024, investment securities with a market value of $5.8 billion were unpledged.

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The weighted average yield by maturity of the investment securities portfolio is presented in the following table.

(1)Weighted average yields were calculated using amortized cost on a fully-taxable equivalent basis, assuming a 21% tax rate where applicable.

Bank Liquidity and Sources of Funding

Our primary sources of funding for the Bank are customer deposits. At December 31, 2024, customer deposits funded 76% of total assets (120% of total loans). To the extent we are unable to obtain sufficient liquidity through customer deposits, cash and cash equivalents, and securities, we may meet our liquidity needs through wholesale funding and asset securitization or sale. Additionally, the Bank may also access funding through intercompany notes or parent company deposits placed at the bank.

The Bank maintains borrowing capacity at both the FHLB and FRB 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 December 31, 2024, the Bank’s available contingent borrowing capacity at the FHLB and FRB totaled $85.5 billion, compared to $83.0 billion at December 31, 2023. The increase reflects our continued optimization of contingent borrowing capacity through the pledging of incremental assets. The amount of available contingent borrowing capacity may fluctuate based on the level of borrowings outstanding and level of assets pledged.

At December 31, 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.

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Parent Company Liquidity

The parent company’s primary financial obligations consist 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 instruments.

The parent company had cash and cash equivalents of $4.1 billion and $4.0 billion at December 31, 2024 and December 31, 2023, respectively, which was held in deposit at the Bank. See Note 23 - “Parent-Only Financial Statements” of the Notes to Consolidated Financial Statements for details on parent company cash flows.

On January 15, 2025, our Board of Directors declared a quarterly common stock cash dividend of $0.155 per common share. The dividend is payable on April 1, 2025, to shareholders of record on March 18, 2025. 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 January 15, 2025, our Board of Directors declared quarterly Series B, F, G, H, and J Preferred Stock dividends payable on April 15, 2025 to shareholders of record on April 1, 2025. On December 5, 2024, our Board of Directors declared a quarterly dividend for the Series I Preferred Stock payable on March 3, 2025 to shareholders of record on February 15, 2025. Total cash demands required for preferred stock dividends are expected to be approximately $27 million per quarter.

During 2024, the Bank paid common and preferred dividends to the parent company of $2.0 billion and $56 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 shelf registration statement covering an indeterminate amount or number of securities to be offered or sold from time to time as authorized by the Huntington’s Board of Directors.

At December 31, 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.

Off-Balance Sheet Arrangements

In the normal course of business, we enter into various off-balance sheet arrangements. These arrangements include commitments to extend credit, interest rate swaps, floors, financial guarantees contained in standby letters-of-credit issued by the Bank, and commitments by the Bank to sell mortgage loans.

COMMITMENTS TO EXTEND CREDIT

Commitments to extend credit generally have fixed expiration dates, are variable-rate, and contain clauses that permit Huntington to terminate or otherwise renegotiate the contracts in the event of a significant deterioration in the customer’s credit quality. These arrangements normally require the payment of a fee by the customer, the pricing of which is based on prevailing market conditions, credit quality, probability of funding, and other relevant factors. Since many of these commitments are expected to expire without being drawn upon, the contract amounts are not necessarily indicative of future cash requirements. The interest rate risk arising from these financial instruments is insignificant as a result of their predominantly short-term, variable-rate nature. See Note 21 - “Commitments and Contingent Liabilities” of the Notes to Consolidated Financial Statements for more information.

STANDBY LETTERS-OF-CREDIT

Standby letters-of-credit are conditional commitments issued to guarantee the performance of a customer to a third-party. These guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing, and similar transactions. Most of these arrangements mature within two years and are expected to expire without being drawn upon. Standby letters-of-credit are included in the determination of the amount of risk-based capital that the parent company and the Bank are required to hold. Through our credit process, we monitor the credit risks of outstanding standby letters-of-credit. When it is probable that a standby letter-of-credit will be drawn and not repaid in full, a loss is recognized in the provision for credit losses. See Note 21 - “Commitments and Contingent Liabilities” of the Notes to Consolidated Financial Statements for more information.

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COMMITMENTS TO SELL LOANS

Activity related to our mortgage origination activity supports the hedging of the mortgage pricing commitments to customers and the secondary sale to third parties. In addition, we have commitments to sell residential real estate loans. These contracts mature in less than one year. See Note 21 - “Commitments and Contingent Liabilities” of the Notes to Consolidated Financial Statements for more information.

CONTRACTUAL OBLIGATIONS

We enter into various contractual obligations in the normal course of business, certain of which require future payments that could impact our liquidity and capital resources. These obligations include purchase commitments, which represent substantial agreements to purchase goods or receive services, such as data management, media, and other software and third-party services that are enforceable and legally binding. Purchase commitments totaled $716 million as of December 31, 2024 and $581 million as of December 31, 2023. These obligations additionally include deposits, borrowings, operating lease obligations, commitments to extend credit, commitments to fund certain equity investments, and obligations to fund pension and post-retirement benefit plans. See Note 10 - “Borrowings”, Note 9 - “Operating Leases”, Note 21 - “Commitments and Contingent Liabilities”, Note 20 - “Variable Interest Entities”, and Note 16 - “Benefit Plans” of the Notes to Consolidated Financial Statements for more information.