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FAIR VALUES OF ASSETS AND LIABILITIES
3 Months Ended
Mar. 31, 2021
Fair Value Disclosures [Abstract]  
FAIR VALUES OF ASSETS AND LIABILITIES FAIR VALUES OF ASSETS AND LIABILITIES
See Note 20 “Fair Value of Assets and Liabilities” to the Consolidated Financial Statements of the Annual Report on Form 10-K for the year ended December 31, 2020 for a description of the valuation methodologies used for instruments measured at fair value. Assets and liabilities measured at fair value rarely transfer between Level 1 and Level 2 measurements. There were no such transfers during the three-month periods ended March 31, 2021 and 2020.
Assets and Liabilities measured at fair value on a recurring basis
Assets and liabilities measured at fair value on a recurring basis at March 31, 2021 and December 31, 2020 are summarized below:
Fair Value Measurements at Reporting Date UsingNetting Adjustments (1)March 31, 2021
(dollar amounts in millions)Level 1Level 2Level 3
Assets
Trading account securities:
Municipal securities$— $48 $— $— $48 
Corporate debt— — — 
— 51 — — 51 
Available-for-sale securities:
U.S. Treasury securities— — — 
Residential CMOs— 3,172 — — 3,172 
Residential MBS— 10,645 — — 10,645 
Commercial MBS— 1,227 — — 1,227 
Other agencies— 46 — — 46 
Municipal securities— 52 3,070 — 3,122 
Private-label CMO— 39 11 — 50 
Asset-backed securities— 200 47 — 247 
Corporate debt— 857 — — 857 
Other securities/sovereign debt— — — 
16,242 3,128 — 19,375 
Other securities42 17 — — 59 
Loans held for sale— 1,531 — — 1,531 
Loans held for investment— 96 22 — 118 
MSRs— — 274 — 274 
Derivative assets— 1,808 21 (816)1,013 
Liabilities
Derivative liabilities— 863 11 (703)171 
Fair Value Measurements at Reporting Date Using
Netting Adjustments (1)
December 31, 2020
(dollar amounts in millions)
Level 1
Level 2
Level 3
Assets
Trading account securities:
Municipal securities$— $62 $— $— $62 
Available-for-sale securities:
U.S. Treasury securities— — — 
Residential CMOs— 3,666 — — 3,666 
Residential MBS— 7,935 — — 7,935 
Commercial MBS— 1,163 — — 1,163 
Other agencies— 62 — — 62 
Municipal securities— 53 2,951 — 3,004 
Private-label CMO— — — 
Asset-backed securities— 182 10 — 192 
Corporate debt— 445 — — 445 
Other securities/sovereign debt— — — 
13,510 2,970 — 16,485 
Other securities59 — — — 59 
Loans held for sale— 1,198 — — 1,198 
Loans held for investment— 71 23 — 94 
MSRs— — 210 — 210 
Derivative assets— 1,903 43 (889)1,057 
Liabilities
Derivative liabilities— 1,031 (917)116 
(1)Amounts represent the impact of legally enforceable master netting agreements that allow the Company to settle positive and negative positions and cash collateral held or placed with the same counterparties.
The tables below present a rollforward of the balance sheet amounts for the three-month periods ended March 31, 2021 and 2020, for financial instruments measured on a recurring basis and classified as Level 3. The classification of an item as Level 3 is based on the significance of the unobservable inputs to the overall fair value measurement. However, Level 3 measurements may also include observable components of value that can be validated externally. Accordingly, the gains and losses in the table below include changes in fair value due in part to observable factors that are part of the valuation methodology.
Level 3 Fair Value Measurements
Three Months Ended March 31, 2021
Available-for-sale securitiesLoans held for investment
(dollar amounts in millions)MSRs
Derivative
instruments
Municipal
securities
Private-
label CMO
Asset-backed
securities
Opening balance$210 $41 $2,951 $$10 $23 
Transfers out of Level 3 (1)— (39)— — — — 
Total gains/losses for the period:
Included in earnings51 — — — — 
Included in OCI— — (4)— — — 
Purchases/originations33 — 209 37 — 
Repayments— — — — — (1)
Settlements(20)— (86)— — — 
Closing balance$274 $10 $3,070 $11 $47 $22 
Change in unrealized gains or losses for the period included in earnings for assets held at end of the reporting date$51 $(26)$— $— $— $— 
Change in unrealized gains or losses for the period included in other comprehensive income for assets held at the end of the reporting period— — (5)— — — 
Level 3 Fair Value Measurements
Three Months Ended March 31, 2020
MSRs
Derivative
instruments
Available-for-sale securitiesLoans held for investment
(dollar amounts in millions)
Municipal
securities
Private-
label
CMO
Asset-backed
securities
Opening balance$$$2,999 $$48 $26 
Fair value election for servicing assets previously measured using the amortized method205 — — — — — 
Transfers out of Level 3 (1)— (20)— — — — 
Total gains/losses for the period:
Included in earnings(47)53 (1)— — — 
Included in OCI— — (68)— — — 
Purchases/originations— — 73 — 27 — 
Settlements— — (66)— (6)— 
Closing balance$165 $39 $2,937 $$69 $26 
Change in unrealized gains or losses for the period included in earnings for assets held at end of the reporting date$(47)$34 $— $— $— $— 
Change in unrealized gains or losses for the period included in other comprehensive income for assets held at the end of the reporting period$— $— (68)$— 0$— $— 
(1)Transfers out of Level 3 represent the settlement value of the derivative instruments (i.e. interest rate lock agreements) that is transferred to loans held for sale, which is classified as Level 2.
The tables below summarize the classification of gains and losses due to changes in fair value, recorded in earnings for Level 3 assets and liabilities for the three-month periods ended March 31, 2021 and 2020:
Level 3 Fair Value Measurements
Three Months Ended March 31, 2021
(dollar amounts in millions)MSRs
Derivative
instruments
Classification of gains and losses in earnings:
Mortgage banking income$51 $
Total$51 $
Level 3 Fair Value Measurements
Three Months Ended March 31, 2020
Available-for-sale securities
(dollar amounts in millions)MSRs
Derivative
instruments
Municipal
securities
Classification of gains and losses in earnings:
Mortgage banking income$(47)$53 $— 
Interest and fee income— — (1)
Total$(47)$53 $(1)
Assets and liabilities under the fair value option
The following tables present the fair value and aggregate principal balance of certain assets and liabilities under the fair value option:
March 31, 2021
(dollar amounts in millions)Total LoansLoans that are 90 or more days past due
Assets
Fair value
carrying
amount
Aggregate
unpaid
principal
Difference
Fair value
carrying
amount
Aggregate
unpaid
principal
Difference
Loans held for sale$1,531 $1,501 $30 $— $— $— 
Loans held for investment118 123 (5)(1)
December 31, 2020
(dollar amounts in millions)Total LoansLoans that are 90 or more days past due
Assets
Fair value
carrying
amount
Aggregate
unpaid
principal
Difference
Fair value
carrying
amount
Aggregate
unpaid
principal
Difference
Loans held for sale$1,198 $1,134 $64 $$$— 
Loans held for investment94 99 (5)(1)
The following table present the net gains (losses) from fair value changes for the three-month periods ended March 31, 2021 and 2020.
Net gains (losses) from fair value changes
(dollar amounts in millions)Three Months Ended March 31,
Assets20212020
Loans held for sale (1)$(34)$19 
(1)The net gains (losses) from fair value changes are included in Mortgage banking income on the Unaudited Condensed Consolidated Statements of Income.
Assets and Liabilities measured at fair value on a nonrecurring basis
Certain assets and liabilities may be required to be measured at fair value on a nonrecurring basis in periods subsequent to their initial recognition. These assets and liabilities are not measured at fair value on an ongoing basis; however, they are subject to fair value adjustments in certain circumstances, such as when there is evidence of impairment. The amounts presented represent the fair value on the various measurement dates throughout the period. The gains (losses) represent the amounts recorded during the period regardless of whether the asset is still held at period end.
The amounts measured at fair value on a nonrecurring basis at March 31, 2021 were as follows:
Fair Value Measurements Using
(dollar amounts in millions)Fair Value
Quoted Prices
In Active
Markets for
Identical Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Other
Unobservable
Inputs
(Level 3)
Total
Gains/(Losses)
Three Months Ended
March 31, 2021
Collateral-dependent loans12 — — 12 (1)
Huntington records nonrecurring adjustments of collateral-dependent loans held for investment. Such amounts are generally based on the fair value of the underlying collateral supporting the loan. Appraisals are generally obtained to support the fair value of the collateral and incorporate measures such as recent sales prices for comparable properties and cost of construction. Periodically, in cases where the carrying value exceeds the fair value of the collateral less cost to sell, an impairment charge is recognized in the form of a charge-off.
Significant unobservable inputs for assets and liabilities measured at fair value on a recurring and nonrecurring basis
The table below presents quantitative information about the significant unobservable inputs for assets and liabilities measured at fair value on a recurring and nonrecurring basis at March 31, 2021 and December 31, 2020:
Quantitative Information about Level 3 Fair Value Measurements at March 31, 2021 (1) (1)
(dollar amounts in millions)Fair ValueValuation TechniqueSignificant Unobservable InputRange Weighted Average
Measured at fair value on a recurring basis:
MSRs$274 Discounted cash flowConstant prepayment rate%-22%12 %
Spread over forward interest rate swap rates%-11%%
Derivative assets21 Consensus PricingNet market price(5)%-12%%
Estimated Pull through %%-100%90 %
Municipal securities3,070 Discounted cash flowDiscount rate— %-2%%
Asset-backed securities47 Cumulative default— %-39%%
Loss given default%-80%25 %
Measured at fair value on a nonrecurring basis:
Collateral-dependent loans12 Appraisal valueN/AN/A
Quantitative Information about Level 3 Fair Value Measurements at December 31, 2020 (1)
(dollar amounts in millions)Fair ValueValuation TechniqueSignificant Unobservable InputRangeWeighted Average
Measured at fair value on a recurring basis:
MSRs$210 Discounted cash flowConstant prepayment rate%-24%17 %
Spread over forward interest rate swap rates%-11%%
Derivative assets43 Consensus PricingNet market price(4)%-11%%
Estimated Pull through %%-100%88 %
Municipal securities2,951 Discounted cash flowDiscount rate— %1%%
Asset-backed securities10 Cumulative default— %39%%
Loss given default%80%25 %
Measured at fair value on a nonrecurring basis:
Collateral-dependent loans144 Appraisal valueN/ANA
(1)     Certain disclosures related to quantitative level 3 fair value measurements do not include those deemed to be immaterial.
The following provides a general description of the impact of a change in an unobservable input on the fair value measurement and the interrelationship between unobservable inputs, where relevant/significant. Interrelationships may also exist between observable and unobservable inputs.
Credit loss estimates, such as probability of default, constant default, cumulative default, loss given default, cure given deferral, and loss severity, are driven by the ability of the borrowers to pay their loans and the value of the underlying collateral and are impacted by changes in macroeconomic conditions, typically increasing when economic conditions worsen and decreasing when conditions improve. An increase in the estimated prepayment rate typically results in a decrease in estimated credit losses and vice versa. Higher credit loss estimates generally result in lower fair values. Credit spreads generally increase when liquidity risks and market volatility increase and decrease when liquidity conditions and market volatility improve.
Discount rates and spread over forward interest rate swap rates typically increase when market interest rates increase and/or credit and liquidity risks increase and decrease when market interest rates decline and/or credit and liquidity conditions improve. Higher discount rates and credit spreads generally result in lower fair market values.
Net market price and pull through percentages generally increase when market interest rates increase and decline when market interest rates decline. Higher net market price and pull through percentages generally result in higher fair values.
Fair values of financial instruments
The following table provides the carrying amounts and estimated fair values of Huntington’s financial instruments at March 31, 2021 and December 31, 2020:
March 31, 2021
(dollar amounts in millions)Amortized CostLower of Cost or Market
Fair Value or
Fair Value Option
Total Carrying AmountEstimated Fair Value
Financial Assets
Cash and short-term assets$8,641 $— $— $8,641 $8,641 
Trading account securities— — 51 51 51 
Available-for-sale securities— — 19,375 19,375 19,375 
Held-to-maturity securities7,815 — — 7,815 8,062 
Other securities352 — 59 411 411 
Loans held for sale— 1,531 1,537 1,537 
Net loans and leases (1)78,409 — 118 78,527 78,603 
Derivative assets— — 1,013 1,013 1,013 
Financial Liabilities
Deposits102,184 — — 102,184 102,231 
Short-term borrowings219 — — 219 219 
Long-term debt7,210 — — 7,210 7,305 
Derivative liabilities— — 171 171 171 
December 31, 2020
(dollar amounts in millions)Amortized CostLower of Cost or Market
Fair Value or
Fair Value Option
Total Carrying AmountEstimated Fair Value
Financial Assets
Cash and short-term assets$6,712 $— $— $6,712 $6,712 
Trading account securities— — 62 62 62 
Available-for-sale securities— — 16,485 16,485 16,485 
Held-to-maturity securities8,861 — — 8,861 9,255 
Other securities359 — 59 418 418 
Loans held for sale— 77 1,198 1,275 1,275 
Net loans and leases (1)79,700 — 94 79,794 80,477 
Derivative assets— — 1,057 1,057 1,057 
Financial Liabilities
Deposits98,948 — — 98,948 99,021 
Short-term borrowings183 — — 183 183 
Long-term debt8,352 — — 8,352 8,568 
Derivative liabilities— — 116 116 116 
(1)Includes collateral-dependent loans.
The following table presents the level in the fair value hierarchy for the estimated fair values at March 31, 2021 and December 31, 2020:
Estimated Fair Value Measurements at Reporting Date UsingNetting Adjustments (1) March 31, 2021
(dollar amounts in millions)Level 1Level 2Level 3
Financial Assets
Trading account securities$— $51 $— $51 
Available-for-sale securities16,242 3,128 19,375 
Held-to-maturity securities— 8,062 — 8,062 
Other securities (2)42 17 — 59 
Loans held for sale— 1,531 1,537 
Net loans and direct financing leases— 96 78,507 78,603 
Derivative assets— 1,808 21 $(816)1,013 
Financial Liabilities
Deposits— 99,998 2,233 102,231 
Short-term borrowings— 219 — 219 
Long-term debt— 6,736 569 7,305 
Derivative liabilities— 863 11 (703)171 
Estimated Fair Value Measurements at Reporting Date UsingNetting Adjustments (1)December 31, 2020
(dollar amounts in millions)Level 1Level 2Level 3
Financial Assets
Trading account securities$— $62 $— $62 
Available-for-sale securities13,510 2,970 16,485 
Held-to-maturity securities— 9,255 — 9,255 
Other securities (2)59 — — 59 
Loans held for sale— 1,198 77 1,275 
Net loans and direct financing leases— 71 80,406 80,477 
Derivative assets— 1,903 43 $(889)1,057 
Financial Liabilities
Deposits— 96,656 2,365 99,021 
Short-term borrowings— 183 — 183 
Long-term debt— 7,999 569 8,568 
Derivative liabilities— 1,031 (917)116 
(1)Amounts represent the impact of legally enforceable master netting agreements that allow the Company to settle positive and negative positions and cash collateral held or placed with the same counterparties.
(2)Excludes securities without readily determinable fair values.
The short-term nature of certain assets and liabilities result in their carrying value approximating fair value. These include trading account securities, customers’ acceptance liabilities, short-term borrowings, bank acceptances outstanding, FHLB advances, and cash and short-term assets, which include cash and due from banks, interest-bearing deposits in banks, interest-bearing deposits at Federal Reserve Bank, federal funds sold, and securities purchased under resale agreements. Loan commitments and letters-of-credit generally have short-term, variable-rate features and contain clauses that limit Huntington’s exposure to changes in customer credit quality. Accordingly, their carrying values, which are immaterial at the respective balance sheet dates, are reasonable estimates of fair value.
Certain assets, the most significant being operating lease assets, bank owned life insurance, and premises and equipment, do not meet the definition of a financial instrument and are excluded from this disclosure. Similarly, mortgage servicing rights, deposit base, and other customer relationship intangibles are not considered financial instruments and are not included above. Accordingly, this fair value information is not intended to, and does not,
represent Huntington’s underlying value. Many of the assets and liabilities subject to the disclosure requirements are not actively traded, requiring fair values to be estimated by Management. These estimations necessarily involve the use of judgment about a wide variety of factors, including but not limited to, relevancy of market prices of comparable instruments, expected future cash flows, and appropriate discount rates.