| AVAILABLE-FOR-SALE AND OTHER SECURITIES |
AVAILABLE-FOR-SALE AND OTHER SECURITIES
Listed below are the contractual maturities of available-for-sale and other securities at September 30, 2017 and December 31, 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017 |
|
December 31, 2016 |
(dollar amounts in thousands) |
Amortized
Cost
|
|
Fair Value |
|
Amortized
Cost
|
|
Fair Value |
U.S. Treasury and Federal agency securities: |
|
|
|
|
|
|
|
U.S. Treasury: |
|
|
|
|
|
|
|
1 year or less |
$ |
11,256 |
|
|
$ |
11,260 |
|
|
$ |
4,978 |
|
|
$ |
4,988 |
|
After 1 year through 5 years |
— |
|
|
— |
|
|
502 |
|
|
509 |
|
After 5 years through 10 years |
— |
|
|
— |
|
|
— |
|
|
— |
|
After 10 years |
— |
|
|
— |
|
|
— |
|
|
— |
|
Total U.S. Treasury |
11,256 |
|
|
11,260 |
|
|
5,480 |
|
|
5,497 |
|
Federal agencies: mortgage-backed securities: |
|
|
|
|
|
|
|
1 year or less |
— |
|
|
— |
|
|
— |
|
|
— |
|
After 1 year through 5 years |
32,749 |
|
|
32,515 |
|
|
46,591 |
|
|
46,762 |
|
After 5 years through 10 years |
257,032 |
|
|
255,488 |
|
|
173,941 |
|
|
176,404 |
|
After 10 years |
10,496,277 |
|
|
10,351,747 |
|
|
10,630,929 |
|
|
10,450,176 |
|
Total Federal agencies: mortgage-backed securities |
10,786,058 |
|
|
10,639,750 |
|
|
10,851,461 |
|
|
10,673,342 |
|
Other agencies: |
|
|
|
|
|
|
|
1 year or less |
4,201 |
|
|
4,223 |
|
|
4,302 |
|
|
4,367 |
|
After 1 year through 5 years |
8,892 |
|
|
9,034 |
|
|
5,092 |
|
|
5,247 |
|
After 5 years through 10 years |
82,692 |
|
|
83,194 |
|
|
63,618 |
|
|
63,928 |
|
After 10 years |
— |
|
|
— |
|
|
— |
|
|
— |
|
Total other agencies |
95,785 |
|
|
96,451 |
|
|
73,012 |
|
|
73,542 |
|
Total U.S. Treasury and Federal agency securities |
10,893,099 |
|
|
10,747,461 |
|
|
10,929,953 |
|
|
10,752,381 |
|
Municipal securities: |
|
|
|
|
|
|
|
1 year or less |
163,747 |
|
|
160,032 |
|
|
169,636 |
|
|
166,887 |
|
After 1 year through 5 years |
905,872 |
|
|
905,075 |
|
|
933,893 |
|
|
933,903 |
|
After 5 years through 10 years |
1,656,860 |
|
|
1,655,384 |
|
|
1,463,459 |
|
|
1,464,583 |
|
After 10 years |
703,350 |
|
|
705,618 |
|
|
693,440 |
|
|
684,684 |
|
Total municipal securities |
3,429,829 |
|
|
3,426,109 |
|
|
3,260,428 |
|
|
3,250,057 |
|
Asset-backed securities: |
|
|
|
|
|
|
|
1 year or less |
— |
|
|
— |
|
|
— |
|
|
— |
|
After 1 year through 5 years |
80,003 |
|
|
80,330 |
|
|
80,700 |
|
|
80,560 |
|
After 5 years through 10 years |
162,079 |
|
|
163,439 |
|
|
223,352 |
|
|
224,565 |
|
After 10 years |
326,724 |
|
|
311,422 |
|
|
520,072 |
|
|
488,356 |
|
Total asset-backed securities |
568,806 |
|
|
555,191 |
|
|
824,124 |
|
|
793,481 |
|
Corporate debt: |
|
|
|
|
|
|
|
1 year or less |
3,143 |
|
|
3,157 |
|
|
43,223 |
|
|
43,603 |
|
After 1 year through 5 years |
66,878 |
|
|
68,450 |
|
|
78,430 |
|
|
80,196 |
|
After 5 years through 10 years |
38,471 |
|
|
39,902 |
|
|
32,523 |
|
|
32,865 |
|
After 10 years |
13,211 |
|
|
14,120 |
|
|
40,361 |
|
|
42,019 |
|
Total corporate debt |
121,703 |
|
|
125,629 |
|
|
194,537 |
|
|
198,683 |
|
Other: |
|
|
|
|
|
|
|
1 year or less |
3,150 |
|
|
3,144 |
|
|
1,650 |
|
|
1,650 |
|
After 1 year through 5 years |
800 |
|
|
791 |
|
|
2,302 |
|
|
2,283 |
|
After 5 years through 10 years |
— |
|
|
— |
|
|
— |
|
|
— |
|
After 10 years |
— |
|
|
— |
|
|
10 |
|
|
10 |
|
Nonmarketable equity securities |
583,019 |
|
|
583,019 |
|
|
547,704 |
|
|
547,704 |
|
Mutual funds |
10,416 |
|
|
10,416 |
|
|
15,286 |
|
|
15,286 |
|
Marketable equity securities |
861 |
|
|
1,301 |
|
|
861 |
|
|
1,302 |
|
Total other |
598,246 |
|
|
598,671 |
|
|
567,813 |
|
|
568,235 |
|
Total available-for-sale and other securities |
$ |
15,611,683 |
|
|
$ |
15,453,061 |
|
|
$ |
15,776,855 |
|
|
$ |
15,562,837 |
|
Other securities at September 30, 2017 and December 31, 2016 include non-marketable equity securities of $287 million and $249 million of stock issued by the FHLB and $296 million and $299 million of Federal Reserve Bank stock, respectively. Non-marketable equity securities are recorded at amortized cost.
The following tables provide amortized cost, fair value, and gross unrealized gains and losses recognized in OCI by investment category at September 30, 2017 and December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized |
|
|
(dollar amounts in thousands) |
Amortized
Cost
|
|
Gross
Gains
|
|
Gross
Losses
|
|
Fair Value |
September 30, 2017 |
|
|
|
|
|
|
|
U.S. Treasury |
$ |
11,256 |
|
|
$ |
4 |
|
|
$ |
— |
|
|
$ |
11,260 |
|
Federal agencies: |
|
|
|
|
|
|
|
Mortgage-backed securities |
10,786,058 |
|
|
5,851 |
|
|
(152,159 |
) |
|
10,639,750 |
|
Other agencies |
95,785 |
|
|
722 |
|
|
(56 |
) |
|
96,451 |
|
Total U.S. Treasury, Federal agency securities |
10,893,099 |
|
|
6,577 |
|
|
(152,215 |
) |
|
10,747,461 |
|
Municipal securities |
3,429,829 |
|
|
31,043 |
|
|
(34,763 |
) |
|
3,426,109 |
|
Asset-backed securities |
568,806 |
|
|
2,409 |
|
|
(16,024 |
) |
|
555,191 |
|
Corporate debt |
121,703 |
|
|
3,927 |
|
|
(1 |
) |
|
125,629 |
|
Other securities |
598,246 |
|
|
439 |
|
|
(14 |
) |
|
598,671 |
|
Total available-for-sale and other securities |
$ |
15,611,683 |
|
|
$ |
44,395 |
|
|
$ |
(203,017 |
) |
|
$ |
15,453,061 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized |
|
|
(dollar amounts in thousands) |
Amortized
Cost
|
|
Gross
Gains
|
|
Gross
Losses
|
|
Fair Value |
December 31, 2016 |
|
|
|
|
|
|
|
U.S. Treasury |
$ |
5,480 |
|
|
$ |
17 |
|
|
$ |
— |
|
|
$ |
5,497 |
|
Federal agencies: |
|
|
|
|
|
|
|
Mortgage-backed securities |
10,851,461 |
|
|
12,548 |
|
|
(190,667 |
) |
|
10,673,342 |
|
Other agencies |
73,012 |
|
|
536 |
|
|
(6 |
) |
|
73,542 |
|
Total U.S. Treasury, Federal agency securities |
10,929,953 |
|
|
13,101 |
|
|
(190,673 |
) |
|
10,752,381 |
|
Municipal securities |
3,260,428 |
|
|
28,431 |
|
|
(38,802 |
) |
|
3,250,057 |
|
Asset-backed securities |
824,124 |
|
|
1,492 |
|
|
(32,135 |
) |
|
793,481 |
|
Corporate debt |
194,537 |
|
|
4,161 |
|
|
(15 |
) |
|
198,683 |
|
Other securities |
567,813 |
|
|
441 |
|
|
(19 |
) |
|
568,235 |
|
Total available-for-sale and other securities |
$ |
15,776,855 |
|
|
$ |
47,626 |
|
|
$ |
(261,644 |
) |
|
$ |
15,562,837 |
|
The following tables provide detail on investment securities with unrealized gross losses aggregated by investment category and the length of time the individual securities have been in a continuous loss position as of September 30, 2017 and December 31, 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 12 Months |
|
Over 12 Months |
|
Total |
(dollar amounts in thousands) |
Fair Value |
|
Unrealized
Losses
|
|
Fair Value |
|
Unrealized
Losses
|
|
Fair Value |
|
Unrealized
Losses
|
September 30, 2017 |
|
|
|
|
|
|
|
|
|
|
|
Federal agencies: |
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities |
$ |
8,283,266 |
|
|
$ |
(125,950 |
) |
|
$ |
1,003,097 |
|
|
$ |
(26,209 |
) |
|
$ |
9,286,363 |
|
|
$ |
(152,159 |
) |
Other agencies |
11,607 |
|
|
(56 |
) |
|
— |
|
|
— |
|
|
11,607 |
|
|
(56 |
) |
Total Federal agency securities |
8,294,873 |
|
|
(126,006 |
) |
|
1,003,097 |
|
|
(26,209 |
) |
|
9,297,970 |
|
|
(152,215 |
) |
Municipal securities |
1,293,344 |
|
|
(23,995 |
) |
|
277,157 |
|
|
(10,768 |
) |
|
1,570,501 |
|
|
(34,763 |
) |
Asset-backed securities |
199,109 |
|
|
(1,471 |
) |
|
122,568 |
|
|
(14,553 |
) |
|
321,677 |
|
|
(16,024 |
) |
Corporate debt |
200 |
|
|
(1 |
) |
|
— |
|
|
— |
|
|
200 |
|
|
(1 |
) |
Other securities |
791 |
|
|
(8 |
) |
|
1,494 |
|
|
(6 |
) |
|
2,285 |
|
|
(14 |
) |
Total temporarily impaired securities |
$ |
9,788,317 |
|
|
$ |
(151,481 |
) |
|
$ |
1,404,316 |
|
|
$ |
(51,536 |
) |
|
$ |
11,192,633 |
|
|
$ |
(203,017 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 12 Months |
|
Over 12 Months |
|
Total |
(dollar amounts in thousands) |
Fair Value |
|
Unrealized
Losses
|
|
Fair Value |
|
Unrealized
Losses
|
|
Fair Value |
|
Unrealized
Losses
|
December 31, 2016 |
|
|
|
|
|
|
|
|
|
|
|
Federal agencies: |
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities |
$ |
8,908,470 |
|
|
$ |
(189,318 |
) |
|
$ |
41,706 |
|
|
$ |
(1,349 |
) |
|
$ |
8,950,176 |
|
|
$ |
(190,667 |
) |
Other agencies |
924 |
|
|
(6 |
) |
|
— |
|
|
— |
|
|
924 |
|
|
(6 |
) |
Total Federal agency securities |
8,909,394 |
|
|
(189,324 |
) |
|
41,706 |
|
|
(1,349 |
) |
|
8,951,100 |
|
|
(190,673 |
) |
Municipal securities |
1,412,152 |
|
|
(29,175 |
) |
|
272,292 |
|
|
(9,627 |
) |
|
1,684,444 |
|
|
(38,802 |
) |
Asset-backed securities |
361,185 |
|
|
(3,043 |
) |
|
178,924 |
|
|
(29,092 |
) |
|
540,109 |
|
|
(32,135 |
) |
Corporate debt |
3,567 |
|
|
(15 |
) |
|
200 |
|
|
— |
|
|
3,767 |
|
|
(15 |
) |
Other securities |
790 |
|
|
(11 |
) |
|
1,492 |
|
|
(8 |
) |
|
2,282 |
|
|
(19 |
) |
Total temporarily impaired securities |
$ |
10,687,088 |
|
|
$ |
(221,568 |
) |
|
$ |
494,614 |
|
|
$ |
(40,076 |
) |
|
$ |
11,181,702 |
|
|
$ |
(261,644 |
) |
At September 30, 2017 and December 31, 2016, the carrying value of investment securities pledged to secure public and trust deposits, trading account liabilities, U.S. Treasury demand notes, and security repurchase agreements totaled $6.2 billion and $5.0 billion, respectively. There were no securities of a single issuer, which are not governmental or government-sponsored, that exceeded 10% of shareholders’ equity at either September 30, 2017 or December 31, 2016.
The following table is a summary of realized securities gains and losses for the three-month and nine-month periods ended September 30, 2017 and 2016, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
(dollar amounts in thousands) |
2017 |
|
2016 |
|
2017 |
|
2016 |
Gross gains on sales of securities |
$ |
4,201 |
|
|
$ |
3,770 |
|
|
$ |
8,311 |
|
|
$ |
7,161 |
|
Gross (losses) on sales of securities |
(4,130 |
) |
|
(2,739 |
) |
|
(4,530 |
) |
|
(5,398 |
) |
Net gain on sales of securities |
$ |
71 |
|
|
$ |
1,031 |
|
|
$ |
3,781 |
|
|
$ |
1,763 |
|
OTTI recognized in earnings |
(104 |
) |
|
— |
|
|
(3,687 |
) |
|
(76 |
) |
Net securities gains (losses) |
$ |
(33 |
) |
|
$ |
1,031 |
|
|
$ |
94 |
|
|
$ |
1,687 |
|
Security Impairment
Huntington evaluates the available-for-sale securities portfolio on a quarterly basis for impairment and conducts a comprehensive security-level assessment on all available-for-sale securities. Impairment exists when the present value of the expected cash flows are not sufficient to recover the entire amortized cost basis at the balance sheet date. Under these circumstances, any credit impairment would be recognized in earnings. At the end of the second quarter of 2017, Huntington changed its intent from able and willing to hold to sell sometime in the near future prior to final maturity for the two Reg Diversified CDO securities. Related to this change in intent, Huntington estimated the fair value of these bonds by obtaining bids. As a result of this analysis, Huntington recognized $3.6 million of OTTI on these two securities. In addition, Huntington recognized an additional $0.1 million of OTTI in the 2017 third quarter relating an investment in the Municipal Securities portfolio. For all other securities, Huntington does not intend to sell, nor does it believe it will be required to sell these securities until the amortized cost is recovered, which may be at maturity.
The highest risk investments in the portfolio are the trust-preferred CDO securities which are in the asset-backed securities portfolio. This portfolio is in runoff, and the Company has not purchased these types of securities since 2005. The fair values of the CDO assets have been impacted by various market conditions. The unrealized losses are primarily the result of wider liquidity spreads on asset-backed securities and the longer expected average lives of the trust-preferred CDO securities, due to changes in the expectations of when the underlying securities will be repaid.
Collateralized Debt Obligations are backed by a pool of debt securities issued by financial institutions. The collateral generally consists of trust-preferred securities and subordinated debt securities issued by banks, bank holding companies, and insurance companies. Many collateral issuers have the option of deferring interest payments on their debt for up to five years. A full cash flow analysis is used to estimate fair values and assess impairment for each security within this portfolio. A third-party pricing specialist with direct industry experience in pooled-trust-preferred security evaluations is engaged to provide assistance estimating the fair value and expected cash flows on this portfolio. The full cash flow analysis is completed by evaluating the relevant credit and structural aspects of each pooled-trust-preferred security in the portfolio, including collateral performance projections for each piece of collateral in the security and terms of the security’s structure. The credit review includes an analysis of profitability, credit quality, operating efficiency, leverage, and liquidity using available financial and regulatory information for each underlying collateral issuer. The analysis also includes a review of historical industry default data, current / near-term operating conditions, and the impact of macroeconomic and regulatory changes. Using the results of the analysis, the Company estimates appropriate default and recovery probabilities for each piece of collateral, then estimates the expected cash flows for each security. The fair value of each security is obtained by discounting the expected cash flows at a market discount rate. The market discount rate is determined by reference to yields observed in the market for similarly rated collateralized debt obligations, specifically high-yield collateralized loan obligations. The relatively high market discount rate is reflective of the uncertainty of the cash flows and illiquid nature of these securities. The large differential between the fair value and amortized cost of some of the securities reflects the high market discount rate and the expectation that the majority of the cash flows will not be received until near the final maturity of the security (the final maturities range from 2032 to 2035).
The following table summarizes the relevant characteristics of the Company's CDO securities portfolio, which are included in asset-backed securities, at September 30, 2017. Each security is part of a pool of issuers and supports a more senior tranche of securities except for the MM Comm III securities, which are the most senior class.
Collateralized Debt Obligation Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollar amounts in thousands) |
|
|
|
|
|
|
|
Lowest
Credit
Rating
(2)
|
|
# of Issuers
Currently
Performing/
Remaining (3)
|
|
Actual
Deferrals
and
Defaults
as a % of
Original
Collateral
|
|
Expected
Defaults
as a % of
Remaining
Performing
Collateral
|
|
Excess
Subordination
(4)
|
Deal Name |
Par Value |
|
Amortized
Cost
|
|
Fair
Value
|
|
Unrealized
Loss (1)
|
|
|
|
|
|
MM Comm III |
4,509 |
|
|
4,308 |
|
|
3,641 |
|
|
(667 |
) |
|
BB+ |
|
5/8 |
|
5 |
|
7 |
|
34 |
Reg Diversified |
25,500 |
|
|
100 |
|
|
510 |
|
|
410 |
|
|
D |
|
|
|
— |
|
— |
|
— |
Tropic III |
31,000 |
|
|
30,989 |
|
|
19,976 |
|
|
(11,013 |
) |
|
BB |
|
27/36 |
|
16 |
|
6 |
|
41 |
Total at September 30, 2017 |
$ |
61,009 |
|
|
$ |
35,397 |
|
|
$ |
24,127 |
|
|
$ |
(11,270 |
) |
|
|
|
|
|
|
|
|
|
|
Total at December 31, 2016 |
$ |
137,197 |
|
|
$ |
101,210 |
|
|
$ |
76,003 |
|
|
$ |
(25,207 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
The majority of securities have been in a continuous loss position for 12 months or longer. |
|
|
(2) |
For purposes of comparability, the lowest credit rating expressed is equivalent to Fitch ratings even where the lowest rating is based on another nationally recognized credit rating agency. |
|
|
(3) |
Includes both banks and/or insurance companies. |
|
|
(4) |
Excess subordination percentage represents the additional defaults in excess of both current and projected defaults that the CDO can absorb before the bond experiences credit impairment. Excess subordinated percentage is calculated by (a) determining what percentage of defaults a deal can experience before the bond has credit impairment, and (b) subtracting from this default breakage percentage both total current and expected future default percentages. |
For the three-month and nine-month periods ended September 30, 2017 and 2016, the following table summarizes by security type the total OTTI losses recognized in the Unaudited Condensed Consolidated Statements of Income for securities evaluated for impairment as described above.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
(dollar amounts in thousands) |
2017 |
|
2016 |
|
2017 |
|
2016 |
Available-for-sale and other securities: |
|
|
|
|
|
|
|
Collateralized Debt Obligations |
$ |
— |
|
|
$ |
— |
|
|
$ |
3,559 |
|
|
$ |
— |
|
Municipal Securities |
104 |
|
|
— |
|
|
128 |
|
|
76 |
|
Total available-for-sale and other securities |
$ |
104 |
|
|
$ |
— |
|
|
$ |
3,687 |
|
|
$ |
76 |
|
The following table presents the OTTI recognized in earnings on debt securities held by Huntington for the three-month and nine-month periods ended September 30, 2017 and 2016, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
(dollar amounts in thousands) |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Balance, beginning of period |
|
$ |
10,821 |
|
|
$ |
9,831 |
|
|
$ |
11,796 |
|
|
$ |
18,368 |
|
Reductions from sales |
|
(5,373 |
) |
|
(76 |
) |
|
(9,931 |
) |
|
(8,689 |
) |
Additional credit losses |
|
104 |
|
|
— |
|
|
3,687 |
|
|
76 |
|
Balance, end of period |
|
$ |
5,552 |
|
|
$ |
9,755 |
|
|
$ |
5,552 |
|
|
$ |
9,755 |
|
|