Trading liabilities

[Table of](#ib75bcbc468d84ef69c01608c63d6bb19_10) [Content](#ib75bcbc468d84ef69c01608c63d6bb19_10)MSR hedging activityHuntington’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.MSR hedging trading assets and liabilities are included in other assets and other liabilities, respectively, in the Unaudited Condensed Balance Sheets. Trading gains (losses) are included in mortgage banking income in the Unaudited Condensed Consolidated Statement of Income. The notional value of the derivative financial instruments, the corresponding trading assets and liabilities positions, and net trading gains (losses) related to MSR hedging activity is summarized in the following table:

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| (dollar amounts in millions) | September 30,2022 | December 31,2021 |
| Notional value | $ | 1,095  |  |  | $ | 1,330  |  |
| Trading assets | 4  |  |  | 19  |  |
| Trading liabilities | (80) |  |  | —  |  |
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|  | Three Months EndedSeptember 30, 2022 |  | Nine Months EndedSeptember 30, 2022 |
| (dollar amounts in millions) | 2022 |  | 2021 |  | 2022 |  | 2021 |
| Trading gains (losses) | $ | (25) |  |  | $ | (4) |  |  | $ | (105) |  |  | $ | (28) |  |
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Derivatives used in customer related activitiesVarious derivative financial instruments are offered to enable customers to meet their financing and investing objectives and for their risk management purposes. Derivative financial instruments used in trading activities consist of commodity, interest rate, and foreign exchange contracts. Huntington enters into offsetting third-party contracts with approved, reputable counterparties with substantially matching terms and currencies in order to economically hedge significant exposure related to derivatives used in trading activities.The interest rate or price risk of customer derivatives is mitigated by entering into similar derivatives having offsetting terms with other counterparties. The credit risk to these customers is evaluated and included in the calculation of fair value. Foreign currency derivatives help the customer hedge risk and reduce exposure to fluctuations in exchange rates. Transactions are primarily in liquid currencies with Canadian dollars and Euros comprising a majority of all transactions. Commodity derivatives help the customer hedge risk and reduce exposure to fluctuations in the price of various commodities. Hedging of energy-related products and base metals comprise the majority of these transactions.The net fair values of these derivative financial instruments, for which the gross amounts are included in other assets or other liabilities at both September 30, 2022 and December 31, 2021, were $76 million and $51 million, respectively. The total notional values of derivative financial instruments used by Huntington on behalf of customers, including offsetting derivatives, were $42.1 billion and $45.1 billion at September 30, 2022 and December 31, 2021, respectively. Huntington’s credit risk from customer derivatives was $146 million and $551 million at the same dates, respectively.Financial assets and liabilities that are offset in the Unaudited Condensed Consolidated Balance SheetsHuntington records derivatives at fair value as further described in Note 13 “[Fair Values of Assets and Liabilities](#ib75bcbc468d84ef69c01608c63d6bb19_298)”.Derivative balances are presented on a net basis taking into consideration the effects of legally enforceable master netting agreements. Additionally, collateral exchanged with counterparties is also netted against the applicable derivative fair values. Huntington enters into derivative transactions with two primary groups: broker-dealers and banks, and Huntington’s customers. Different methods are utilized for managing counterparty credit exposure and credit risk for each of these groups.2022 3Q Form 10-Q 81  

