Company: HBAN
Filing Date: 2025-02-14
Form Type: 10-K
Source: 0000049196-25-000020
Chunk: 204

Company: HUNTINGTON BANCSHARES INC /MD/
Filing Date: 2025-02-14
Form: 10-K
Item: Item 7
Chunk 204
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dollar amounts in millions)20242023Nonaccrual loans and leases (NALs):Commercial and industrial$457 $344 Commercial real estate118 140 Lease financing10 14 Residential mortgage83 72 Automobile6 4 Home equity107 91 RV and marine2 2 Total nonaccrual loans and leases783 667 Other real estate, net8 10 Other NPAs (1)31 34 Total nonperforming assets$822 $711 Nonaccrual loans and leases as a % of total loans and leases0.60 %0.55 %NPA ratio (2)0.63 0.58 

(1)Other nonperforming assets include certain impaired investment securities and/or nonaccrual loans held-for-sale.

(2)Nonperforming assets divided by the sum of loans and leases, other real estate owned, and other NPAs.

ACL

Our ACL is comprised of two different components, both of which in our judgment are appropriate to absorb lifetime expected credit losses in our loan and lease portfolio: the ALLL and the AULC. 

We use statistically-based models that employ assumptions about current and future economic conditions throughout the contractual life of the loan. The process of estimating expected credit losses is based on three key parameters: PD, EAD, and LGD. Beyond the reasonable and supportable period (two to three years), the economic variables revert to a historical equilibrium at a pace dependent on the state of the economy reflected within the economic scenario.

Future economic conditions consider multiple macroeconomic scenarios provided to us by an independent third party and are reviewed through the Allowance for Credit Loss Development Methodology Committee described below. These macroeconomic scenarios contain certain variables that are influential to our modeling process, the most significant being unemployment rates and GDP. Management uses a probability-weighted approach that incorporates a baseline, an adverse and a more favorable economic scenario when formulating the quantitative estimate for the allowance. Any changes in probability weights must be supported by appropriate documentation and approval of senior management. Additionally, we consider whether to adjust the modeled estimates to address possible limitations within the models or factors not captured within the macroeconomic scenarios. Lifetime losses for most of our loans and leases are evaluated collectively based on similar risk characteristics such as risk ratings, origination credit bureau scores, delinquency status, and remaining months within loan agreements, among other factors.

The baseline scenario used in the December 31, 202