Company: HBAN
Filing Date: 2025-04-29
Form Type: 10-Q
Source: 0000049196-25-000038
Chunk: 141

Company: HUNTINGTON BANCSHARES INC /MD/
Filing Date: 2025-04-29
Form: 10-Q
Item: Part I, Item 2
Chunk 141
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 the fair value of a derivative instrument designated as a cash flow hedge is initially recognized in OCI and is reclassified into income when the hedged item impacts earnings. The initial premium paid for the interest rate floor contracts represents the time value of the contracts and is not included in the measurement of hedge effectiveness. The initial premium paid is amortized on a straight-line basis as a reduction to interest income over the contractual life of these contracts.At March 31, 2025, net losses recognized in AOCI that are expected to be reclassified into earnings within the next 12 months totaled $30 million.Derivatives used in mortgage banking activitiesMortgage loan origination hedging activityHuntington uses derivatives, principally loan sale commitments, in hedging its mortgage loan interest rate lock commitments and its mortgage loans held for sale. Mortgage loan sale commitments and the related interest rate lock commitments are carried at fair value on the Unaudited Consolidated Balance Sheets with changes in fair value reflected in mortgage banking income. Huntington’s mortgage origination hedging activity is related to economically hedging Huntington’s mortgage pricing commitments to customers and the secondary sale to third parties. The value of a newly originated mortgage is not firm until the interest rate is committed or locked. Forward commitments to sell economically hedge the possible loss on interest rate lock commitments due to interest rate change. The positions of these derivatives at March 31, 2025 and December 31, 2024 were net assets of $1 million and $7 million, respectively. At March 31, 2025 and December 31, 2024, Huntington had commitments to sell residential real estate loans of $1.0 billion and $869 million, respectively. These contracts mature in less than one year.MSR hedging activityHuntington also uses certain derivative financial instruments to offset changes in value of its MSRs. These derivatives consist primarily of forward interest rate agreements and forward mortgage contracts. The derivative instruments used are not designated as qualifying hedges. Accordingly, such derivatives are recorded at fair value with changes in fair value reflected in mortgage banking income. Huntington’s MSR economic hedging activity uses securities and derivatives to manage the value of the MSR asset and to mitigate the various types of risk inherent in the MSR asset, including risks related to duration, basis, convexity, volatility, and yield curve. The hedging instruments include forward commitments, TBA securities, Treasury futures contracts, interest rate swaps, and options on interest rate swaps.

72     Huntington Bancshares Incorporated

MSR hedging trading assets