Company: HBAN
Filing Date: 2025-04-29
Form Type: 10-Q
Source: 0000049196-25-000038
Chunk: 96

Company: HUNTINGTON BANCSHARES INC /MD/
Filing Date: 2025-04-29
Form: 10-Q
Item: Part I, Item 2
Chunk 96
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 assess modeling approaches and identify potential model enhancements, which may result in updates to our statistically based models from time-to-time.

One of the most significant judgments influencing the ACL estimate is the macroeconomic forecasts. Key external economic parameters that directly impact our loss modeling framework include forecasted unemployment rates and GDP. Changes in the economic forecasts could significantly affect the estimated credit losses, which could potentially lead to materially different allowance levels from one reporting period to the next.

Given the dynamic relationship between macroeconomic variables within our modeling framework, it is difficult to estimate the impact of a change in any one individual variable on the allowance. As a result, management uses a probability-weighted approach that incorporates a baseline, an adverse, and a more favorable economic scenario when formulating the quantitative estimate.

34     Huntington Bancshares Incorporated

To illustrate a hypothetical sensitivity analysis, management calculated a quantitative allowance using a 100% weighting applied to an adverse scenario reflecting an amount of stress in excess of current expectations. This scenario contemplates elevated interest rates weakening credit-sensitive consumer spending and confidence. The impact of tariffs on the economy is significantly worse than expected, causing inflation to accelerate. In response, the Federal Reserve raises rates in the second and third quarter of 2025. Increased geopolitical tensions heighten the risk that China might block the Taiwan strait, limiting the supply chain for semiconductors and raising fears of a broader conflict. Business and consumer confidence declines. Additionally, the Russian invasion of Ukraine lasts longer than in the baseline scenario and concerns increase that the ceasefire in in the Middle East will collapse. The combination of tariffs, rising inflation, still elevated interest rates, political tensions, and reduced credit availability causes the economy to fall into a recession in the second quarter of 2025. Under this scenario, as an example, the unemployment rate increases significantly from baseline levels and remains elevated for a prolonged period. The rate in this adverse scenario is projected at 7.9% at the end of 2025, and 8.0% at the end of 2026, approximately 380 basis points higher than the baseline scenario projections of 4.1% at the end of 2025 and 4.2% at the end of 2026.

To demonstrate the sensitivity to key economic parameters used in the calculation of our ACL at March 31, 2025, management calculated the difference between our quantitative ACL and this 100% adverse scenario. Excluding consideration of qualitative adjustments, this sensitivity analysis would result in a hypothetical increase in our ACL of approximately $0.