Company: HBAN
Filing Date: 2025-02-14
Form Type: 10-K
Source: 0000049196-25-000020
Chunk: 237

Company: HUNTINGTON BANCSHARES INC /MD/
Filing Date: 2025-02-14
Form: 10-K
Item: Item 7
Chunk 237
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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.

88     Huntington Bancshares Incorporated

Table of Contents

To illustrate a hypothetical sensitivity analysis, management calculated a quantitative allowance using a 100% weighting applied to an adverse scenario. This scenario contemplates elevated interest rates weakening credit-sensitive consumer spending and confidence, growing concerns about the impact of potential tariffs reducing consumer and business sentiment, and deepening fiscal disputes in Congress causing further sentiment decline. Concerns about the banking industry also impact consumer confidence, causing banks to tighten lending standards. Increased geopolitical tensions between China and Taiwan briefly impact the supply chain for semiconductors and the threat of a wider conflict causes consumer confidence to fall. Additionally, the Russian invasion of Ukraine lasts longer than in the baseline scenario and concerns increase around the current conflict in the Middle East leading to a broader war in the region. The combination of still elevated interest rates, political tensions, and tightening lending standards cause the stock market to fall. The economy falls into a recession in the first quarter of 2025. In response to the recession, the Federal Reserve cuts the federal funds rate more aggressively with rates significantly below the baseline forecast starting in the first quarter of 2025. Under this scenario, as an example, the unemployment rate increases from baseline levels and remains elevated for a prolonged period. The rate in this adverse scenario is projected at 8.2% at the end of 2025, approximately 4.1% higher than the baseline scenario projection.

To demonstrate the sensitivity to key economic parameters used in the calculation of our ACL at December 31, 2024, 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 $0.8 billion at December 31, 202