Huntington Bancshares Incorporated Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

GOODWILL AND OTHER INTANGIBLE ASSETS

GOODWILL AND OTHER INTANGIBLE ASSETS

12 Months Ended

Dec. 31, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Business segments are based on segment leadership structure, which reflects how segment performance is monitored and assessed. We have five major business segments: Consumer and Business Banking, Commercial Banking, Commercial Real Estate and Vehicle Finance (CREVF), Regional Banking and The Huntington Private Client Group (RBHPCG), and Home Lending. A Treasury / Other function includes technology and operations, other unallocated assets, liabilities, revenue, and expense.

A rollforward of goodwill by business segment for the years ended December 31, 2016 and 2015, is presented in the table below:



	Consumer &
	Business		Commercial							Home		Treasury/			Huntington
(dollar amounts in thousands)	Banking		Banking		CREVF		RBHPCG			Lending		Other			Consolidated
Balance, January 1, 2015	$	368,097	$	59,594	$	—	$	90,012		$	—	$	4,838		$	522,541
Goodwill acquired during the period	—		155,828		—		—			—		—			155,828
Adjustments	—		—		—		(1,500		)	—		—			(1,500		)
Balance, December 31, 2015	368,097		215,422		—		88,512			—		4,838			676,869
Goodwill acquired during the period	1,030,046		237,542		—		53,230			—		—			1,320,818
Adjustments	—		—		—		—			—		(4,838		)	(4,838		)
Balance, December 31, 2016	$	1,398,143	$	452,964	$	—	$	141,742		$	—	$	—		$	1,992,849

On August 16, 2016, Huntington completed its acquisition of FirstMerit in a stock and cash transaction valued at approximately $3.7 billion. In connection with the acquisition, the Company recorded $1.3 billion of goodwill, $310 million core deposit intangible asset and $95 million of other intangible assets. Huntington allocated goodwill recognized in the acquisition of FirstMerit to its existing operating segments. The allocation was performed using the ‘with and without’ approach, where an entity calculates the fair value of each segment before and after the acquisition, with the difference attributable to the fair value acquired via the acquisition. This method is most appropriate when multiple segments are expected to benefit from synergies realized in an acquisition. The results of the allocation are presented in the table above. For additional information on the acquisition, see Note 3 Acquisition of FirstMerit Corporation.

During the 2016 third quarter, Huntington reclassified $5 million of goodwill in the Treasury / Other segment related to a held for sale disposal group.

On March 31, 2015, Huntington completed its acquisition of Macquarie Equipment Finance, which was re-branded Huntington Technology Finance. As part of the transaction, Huntington recorded $156 million of goodwill and $8 million of other intangible assets.

During 2015, Huntington adjusted the goodwill in the RBHPCG segment related to a sale of HASI and HAA. The amount was adjusted based on relative fair value methodology.

Goodwill is not amortized but is evaluated for impairment on an annual basis at October 1 of each year or whenever events or changes in circumstances indicate the carrying value may not be recoverable. As a result of the 2014 first quarter reorganization in our reported business segments, goodwill was reallocated among the business segments. Immediately following the reallocation, impairment of $3 million was recorded in the Home Lending reporting segment. No impairment was recorded in 2016 or 2015.

At December 31, 2016 and 2015, Huntington’s other intangible assets consisted of the following:



(dollar amounts in thousands)	Gross Carrying Amount			Accumulated Amortization			Net Carrying Value
December 31, 2016
Core deposit intangible	$	324,619		$	(26,778	)	$	297,841
Customer relationship	194,956		(1)	(90,383		)	104,573
Other	150			(106		)	44
Total other intangible assets	$	519,725		$	(117,267	)	$	402,458
December 31, 2015
Core deposit intangible	$	400,058		$	(384,606	)	$	15,452
Customer relationship	116,094			(76,656		)	39,438
Other	25,164			(25,076		)	88
Total other intangible assets	$	541,316		$	(486,338	)	$	54,978


(1)	During the 2016 third quarter, certain commercial merchant relationships, which resulted in an intangible of $14 million, were contributed to a joint venture in which Huntington holds a minority interest.

The estimated amortization expense of other intangible assets for the next five years is as follows:



(dollar amounts in thousands)	Amortization Expense
2017	$	56,333
2018	53,161
2019	50,446
2020	42,291
2021	39,783

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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