Quarterly report pursuant to Section 13 or 15(d)

VIEs

v3.5.0.2
VIEs
6 Months Ended
Jun. 30, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
VIEs
VIEs
Consolidated VIEs
Consolidated VIEs at June 30, 2016, consisted of certain loan and lease securitization trusts. Huntington has determined 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. During the 2015 first quarter, Huntington acquired two securitization trusts with its acquisition of Huntington Technology Finance. During the 2016 first quarter, Huntington canceled the Series 2012A Trust. As a result, any remaining assets at the time of the cancellation were no longer part of the trust.
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 June 30, 2016 and December 31, 2015:
 
June 30, 2016
 
Huntington Technology
Funding Trust
 
Other Consolidated VIEs
 
Total
(dollar amounts in thousands)
 
Series 2014A
 
 
Assets:
 
 
 
 
 
 
Cash
 
$
1,561

 
$

 
$
1,561

Loans and leases
 
105,810

 

 
105,810

Allowance for loan and lease losses
 

 

 

Net loans and leases
 
105,810

 

 
105,810

Accrued income and other assets
 

 
219

 
219

Total assets
 
$
107,371

 
$
219

 
$
107,590

Liabilities:
 
 
 
 
 
 
Other long-term debt
 
$
86,315

 
$

 
$
86,315

Accrued interest and other liabilities
 

 
219

 
219

Total liabilities
 
86,315

 
219

 
86,534

Equity:
 
 
 
 
 
 
Beneficial Interest owned by third party
 
21,056

 

 
21,056

Total liabilities and equity
 
$
107,371

 
$
219

 
$
107,590

 
December 31, 2015
 
Huntington Technology
Funding Trust
 
Other Consolidated VIEs
 
Total
(dollar amounts in thousands)
Series 2012A
 
Series 2014A
 
 
Assets:
 
 
 
 
 
 
 
Cash
$
1,377

 
$
1,561

 
$

 
$
2,938

Loans and leases
32,180

 
152,331

 

 
184,511

Allowance for loan and lease losses

 

 

 

Net loans and leases
32,180

 
152,331

 

 
184,511

Accrued income and other assets

 

 
229

 
229

Total assets
$
33,557

 
$
153,892

 
$
229

 
$
187,678

Liabilities:
 
 
 
 
 
 
 
Other long-term debt
$
27,153

 
$
123,577

 
$

 
$
150,730

Accrued interest and other liabilities

 

 
229

 
229

Total liabilities
27,153

 
123,577

 
229

 
150,959

Equity:
 
 
 
 
 
 
 
Beneficial Interest owned by third party
6,404

 
30,315

 

 
36,719

Total liabilities and equity
$
33,557

 
$
153,892

 
$
229

 
$
187,678


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 June 30, 2016, and December 31, 2015:

June 30, 2016
(dollar amounts in thousands)
Total Assets

Total Liabilities

Maximum Exposure to Loss
2015-1 Automobile Trust
$
5,203


$


$
5,203

2012-2 Automobile Trust
147




147

Trust Preferred Securities
13,919


317,122



Low Income Housing Tax Credit Partnerships
452,526


210,297


452,526

Other Investments
62,564


24,586


62,564

Total
$
534,359


$
552,005


$
520,440

 
December 31, 2015
(dollar amounts in thousands)
Total Assets
 
Total Liabilities
 
Maximum Exposure to Loss
2015-1 Automobile Trust
$
7,695

 
$

 
$
7,695

2012-1 Automobile Trust
94

 

 
94

2012-2 Automobile Trust
771

 

 
771

Trust Preferred Securities
13,919

 
317,106

 

Low Income Housing Tax Credit Partnerships
425,500

 
196,001

 
425,500

Other Investments
68,746

 
25,762

 
68,746

Total
$
516,725


$
538,869


$
502,806


2015-1, 2012-1, 2012-2, and 2011 AUTOMOBILE TRUST
During the 2015 second quarter, 2012 fourth quarter, 2012 first quarter and 2011 third quarter, we transferred automobile loans totaling $0.8 billion, $1.0 billion, $1.3 billion and $1.0 billion, respectively, to trusts in securitization transactions. The securitizations and the resulting sale of all underlying securities qualified for sale accounting. The interest Huntington holds in the VIEs relates to servicing rights which are included within accrued income and other assets of Huntington’s Unaudited Condensed Consolidated Balance Sheets. The maximum exposure to loss is equal to the carrying value of the servicing asset.

During the 2016 first quarter, Huntington canceled the 2012-1 Automobile Trust. As a result, any remaining assets at the time of the cancellation were no longer part of the trust. In July 2016, Huntington has elected to exercise its option to purchase the assets of the 2012-2 Automobile Trust. As a result, any remaining assets at the time of the exercise will no longer be part of the trust.
TRUST PREFERRED SECURITIES
Huntington has certain wholly-owned trusts whose assets, liabilities, equity, income, and expenses are not included within 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 within Huntington’s Unaudited Condensed Consolidated Financial Statements. A list of trust preferred securities outstanding at June 30, 2016 follows:
(dollar amounts in thousands)
Rate
 
Principal amount of
subordinated note/
debenture issued to trust (1)
 
Investment in
unconsolidated
subsidiary
Huntington Capital I
1.34
%
(2)
$
111,816

 
$
6,186

Huntington Capital II
1.28

(3)
54,593

 
3,093

Sky Financial Capital Trust III
2.03

(4)
72,165

 
2,165

Sky Financial Capital Trust IV
2.03

(4)
74,320

 
2,320

Camco Financial Trust
3.09

(5)
4,228

 
155

Total
 
 
$
317,122

 
$
13,919

(1)
Represents the principal amount of debentures issued to each trust, including unamortized original issue discount.
(2)
Variable effective rate at June 30, 2016, based on three-month LIBOR +0.70%.
(3)
Variable effective rate at June 30, 2016, based on three-month LIBOR +0.625%.
(4)
Variable effective rate at June 30, 2016, based on three-month LIBOR +1.40%.
(5)
Variable effective rate (including impact of purchase accounting accretion) at June 30, 2016, 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 a majority of its 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 June 30, 2016 and December 31, 2015:
(dollar amounts in thousands)
June 30,
2016
 
December 31,
2015
Affordable housing tax credit investments
$
725,193

 
$
674,157

Less: amortization
(272,667
)
 
(248,657
)
Net affordable housing tax credit investments
$
452,526

 
$
425,500

Unfunded commitments
$
210,297

 
$
196,001


The following table presents other information relating to Huntington’s affordable housing tax credit investments for the three-month and six-month periods ended June 30, 2016 and 2015:
 
 
Three Months Ended
June 30,
 
Six months ended
June 30,
(dollar amounts in thousands)
 
2016
 
2015
 
2016
 
2015
Tax credits and other tax benefits recognized
 
$
18,150

 
$
14,434

 
$
36,434

 
$
30,181

Proportional amortization method
 
 
 
 
 
 
 
 
Tax credit amortization expense included in provision for income taxes
 
12,499

 
11,218

 
24,905

 
22,292

Equity method
 
 
 
 
 
 
 
 
Tax credit investment (gains) losses included in non-interest income
 
132

 
147

 
264

 
294


Huntington recognized immaterial impairment losses on tax credit investments during the three-month and six-month periods ended June 30, 2016 and 2015. 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 VIE’s include investments in Historic Tax Credit Investments, Small Business Investment Companies, Rural Business Investment Companies, certain equity method investments and other miscellaneous investments.