Huntington Bancshares Incorporated Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

VIEs

(dollar amounts in millions)

Amount Transferred

2016-1 Automobile Trust

2015-1 Automobile Trust

VIEs

9 Months Ended

Sep. 30, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Consolidated VIEs

Consolidated VIEs at September 30, 2017, consisted of certain loan and lease securitization trusts. Huntington has determined that the trusts are VIEs. Huntington has concluded that it is the primary beneficiary of these trusts because it has the power to direct the activities of the entity that most significantly affect the entity’s economic performance and it has either the obligation to absorb losses of the entity that could potentially be significant to the VIE or the right to receive benefits from the entity that could potentially be significant to the VIE.

The following tables present the carrying amount and classification of the consolidated trusts’ assets and liabilities that were included in the Unaudited Condensed Consolidated Balance Sheets at September 30, 2017 and December 31, 2016.



	September 30, 2017
	Huntington Technology Funding Trust		Other Consolidated VIEs		Total
(dollar amounts in thousands)	Series 2014A		Other Consolidated VIEs		Total
Assets:
Cash	$	1,569	$	—	$	1,569
Net loans and leases	33,148		—		33,148
Accrued income and other assets	—		269		269
Total assets	$	34,717	$	269	$	34,986
Liabilities:
Other long-term debt	$	28,120	$	—	$	28,120
Accrued interest and other liabilities	—		269		269
Total liabilities	28,120		269		28,389
Equity:
Beneficial Interest owned by third party	6,597		—		6,597
Total liabilities and equity	$	34,717	$	269	$	34,986



	December 31, 2016
	Huntington Technology Funding Trust		Other Consolidated VIEs		Total
(dollar amounts in thousands)	Series 2014A		Other Consolidated VIEs		Total
Assets:
Cash	$	1,564	$	—	$	1,564
Net loans and leases	69,825		—		69,825
Accrued income and other assets	—		281		281
Total assets	$	71,389	$	281	$	71,670
Liabilities:
Other long-term debt	$	57,494	$	—	$	57,494
Accrued interest and other liabilities	—		281		281
Total liabilities	57,494		281		57,775
Equity:
Beneficial Interest owned by third party	13,895		—		13,895
Total liabilities and equity	$	71,389	$	281	$	71,670

The loans and leases were designated to repay the securitized notes. Huntington services the loans and leases and uses the proceeds from principal and interest payments to pay the securitized notes during the amortization period. Huntington has not provided financial or other support that was not previously contractually required.

Unconsolidated VIEs

The following tables provide a summary of the assets and liabilities included in Huntington’s Unaudited Condensed Consolidated Financial Statements, as well as the maximum exposure to losses, associated with its interests related to unconsolidated VIEs for which Huntington holds an interest, but is not the primary beneficiary to the VIE at September 30, 2017, and December 31, 2016.



	September 30, 2017
(dollar amounts in thousands)	Total Assets		Total Liabilities		Maximum Exposure to Loss
2016-1 Automobile Trust	$	8,674	$	—	$	8,674
2015-1 Automobile Trust	1,506		—		1,506
Trust Preferred Securities	13,919		252,577		—
Low Income Housing Tax Credit Partnerships	638,171		348,733		638,171
Other Investments	108,556		48,339		108,556
Total	$	770,826	$	649,649	$	756,907



	December 31, 2016
(dollar amounts in thousands)	Total Assets		Total Liabilities		Maximum Exposure to Loss
2016-1 Automobile Trust	$	14,770	$	—	$	14,770
2015-1 Automobile Trust	2,227		—		2,227
Trust Preferred Securities	13,919		252,552		—
Low Income Housing Tax Credit Partnerships	576,880		292,721		576,880
Other Investments	79,195		42,316		79,195
Total	$	686,991	$	587,589	$	673,072

The following table provides a summary of automobile transfers to trusts in separate securitization transactions.

The securitizations and the resulting sale of all underlying securities qualified for sale accounting. Huntington has concluded that it is not the primary beneficiary of these trusts because it has neither the obligation to absorb losses of the entities that could potentially be significant to the VIEs nor the right to receive benefits from the entities that could potentially be significant to the VIEs. Huntington is not required and does not currently intend to provide any additional financial support to the trusts. Investors and creditors only have recourse to the assets held by the trusts. The interest Huntington holds in the VIEs relates to servicing rights which are included in servicing rights of Huntington’s Unaudited Consolidated Balance Sheets. The maximum exposure to loss is equal to the carrying value of the servicing asset. See Note 6 for more information.

Trust Preferred Securities

Huntington has certain wholly-owned trusts whose assets, liabilities, equity, income, and expenses are not included in Huntington’s Unaudited Condensed Consolidated Financial Statements. These trusts have been formed for the sole purpose of issuing trust-preferred securities, from which the proceeds are then invested in Huntington junior subordinated debentures, which are reflected in Huntington’s Unaudited Condensed Consolidated Balance Sheets as subordinated notes. The trust securities are the obligations of the trusts, and as such, are not consolidated in Huntington’s Unaudited Condensed Consolidated Financial Statements. A list of trust preferred securities outstanding at September 30, 2017 follows.



(dollar amounts in thousands)	Rate			Principal amount of subordinated note/ debenture issued to trust (1)		Investment in unconsolidated subsidiary
Huntington Capital I	2.01	%	(2)	$	69,730	$	6,186
Huntington Capital II	1.95		(3)	32,093		3,093
Sky Financial Capital Trust III	2.74		(4)	72,165		2,165
Sky Financial Capital Trust IV	2.70		(4)	74,320		2,320
Camco Financial Trust	3.76		(5)	4,269		155
Total				$	252,577	$	13,919


(1)	Represents the principal amount of debentures issued to each trust, including unamortized original issue discount.


(2)	Variable effective rate at September 30, 2017, based on three-month LIBOR +0.70%.


(3)	Variable effective rate at September 30, 2017, based on three-month LIBOR +0.625%.


(4)	Variable effective rate at September 30, 2017, based on three-month LIBOR +1.40%.


(5)	Variable effective rate at September 30, 2017, based on three-month LIBOR +1.33%.

Each issue of the junior subordinated debentures has an interest rate equal to the corresponding trust securities distribution rate. Huntington has the right to defer payment of interest on the debentures at any time, or from time-to-time for a period not exceeding five years provided that no extension period may extend beyond the stated maturity of the related debentures. During any such extension period, distributions to the trust securities will also be deferred and Huntington’s ability to pay dividends on its common stock will be restricted. Periodic cash payments and payments upon liquidation or redemption with respect to trust securities are guaranteed by Huntington to the extent of funds held by the trusts. The guarantee ranks subordinate and junior in right of payment to all indebtedness of the Company to the same extent as the junior subordinated debt. The guarantee does not place a limitation on the amount of additional indebtedness that may be incurred by Huntington.

Low Income Housing Tax Credit Partnerships

Huntington makes certain equity investments in various limited partnerships that sponsor affordable housing projects utilizing the Low Income Housing Tax Credit (LIHTC) pursuant to Section 42 of the Internal Revenue Code. The purpose of these investments is to achieve a satisfactory return on capital, to facilitate the sale of additional affordable housing product offerings, and to assist in achieving goals associated with the Community Reinvestment Act. The primary activities of the limited partnerships include the identification, development, and operation of multi-family housing that is leased to qualifying residential tenants. Generally, these types of investments are funded through a combination of debt and equity.

Huntington uses the proportional amortization method to account for all qualified investments in these entities. These investments are included in accrued income and other assets. Investments that do not meet the requirements of the proportional amortization method are recognized using the equity method. Investment gains/losses related to these investments are included in noninterest income in the Unaudited Condensed Consolidated Statements of Income.

The following table presents the balances of Huntington’s affordable housing tax credit investments and related unfunded commitments at September 30, 2017 and December 31, 2016.



(dollar amounts in thousands)	September 30, 2017			December 31, 2016
Affordable housing tax credit investments	$	980,984		$	877,237
Less: amortization	(342,813		)	(300,357		)
Net affordable housing tax credit investments	$	638,171		$	576,880
Unfunded commitments	$	348,733		$	292,721

The following table presents other information related to Huntington’s affordable housing tax credit investments for the three-month and nine-month periods ended September 30, 2017 and 2016.



	Three Months Ended September 30,				Nine Months Ended September 30,
(dollar amounts in thousands)	2017		2016		2017		2016
Tax credits and other tax benefits recognized	$	22,471	$	21,200	$	68,426	$	57,634
Proportional amortization method
Tax credit amortization expense included in provision for income taxes	17,292		13,608		51,474		38,513
Equity method
Tax credit investment (gains) losses included in noninterest income	—		132		—		396

Huntington recognized immaterial impairment losses on tax credit investments during the three-month and nine-month periods ended September 30, 2017 and 2016. The impairment losses recognized related to the fair value of the tax credit investments that were less than carrying value.

Other Investments

Other investments determined to be VIEs include investments in New Market Tax Credit Investments, Historic Tax Credit Investments, Small Business Investment Companies, Rural Business Investment Companies, certain equity method investments and other miscellaneous investments.