Quarterly report pursuant to Section 13 or 15(d)

VIEs

v3.7.0.1
VIEs
6 Months Ended
Jun. 30, 2017
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
VIEs
VIEs
Consolidated VIEs
Consolidated VIEs at June 30, 2017, 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.
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, 2017 and December 31, 2016:
 
 
June 30, 2017
 
 
Huntington Technology
Funding Trust
 
Other Consolidated VIEs
 
Total
(dollar amounts in thousands)
 
Series 2014A
 
 
Assets:
 
 
 
 
 
 
Cash
 
$
1,566

 
$

 
$
1,566

Net loans and leases
 
43,039

 

 
43,039

Accrued income and other assets
 

 
271

 
271

Total assets
 
$
44,605

 
$
271

 
$
44,876

Liabilities:
 
 
 
 
 
 
Other long-term debt
 
$
36,040

 
$

 
$
36,040

Accrued interest and other liabilities
 

 
271

 
271

Total liabilities
 
36,040

 
271

 
36,311

Equity:
 
 
 
 
 
 
Beneficial Interest owned by third party
 
8,565

 

 
8,565

Total liabilities and equity
 
$
44,605

 
$
271

 
$
44,876

 
 
December 31, 2016
 
 
Huntington Technology
Funding Trust
 
Other Consolidated VIEs
 
Total
(dollar amounts in thousands)
 
Series 2014A
 
 
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 June 30, 2017, and December 31, 2016:

June 30, 2017
(dollar amounts in thousands)
Total Assets

Total Liabilities

Maximum Exposure to Loss
2016-1 Automobile Trust
$
10,464

 
$

 
$
10,464

2015-1 Automobile Trust
2,046




2,046

Trust Preferred Securities
13,919


252,568



Low Income Housing Tax Credit Partnerships
615,691


327,793


615,691

Other Investments
110,318


55,026


110,318

Total
$
752,438


$
635,387


$
738,519

 
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.
(dollar amounts in millions)
 
Year
 
Amount Transferred
2016-1 Automobile Trust
 
2016
 
$
1,500

2015-1 Automobile Trust
 
2015
 
750


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 within 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 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, 2017 follows:
(dollar amounts in thousands)
Rate
 
Principal amount of
subordinated note/
debenture issued to trust (1)
 
Investment in
unconsolidated
subsidiary
Huntington Capital I
1.87
%
(2)
$
69,730

 
$
6,186

Huntington Capital II
1.87

(3)
32,093

 
3,093

Sky Financial Capital Trust III
2.70

(4)
72,165

 
2,165

Sky Financial Capital Trust IV
2.55

(4)
74,320

 
2,320

Camco Financial Trust
3.69

(5)
4,260

 
155

Total
 
 
$
252,568

 
$
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, 2017, based on three-month LIBOR +0.70%.
(3)
Variable effective rate at June 30, 2017, based on three-month LIBOR +0.625%.
(4)
Variable effective rate at June 30, 2017, based on three-month LIBOR +1.40%.
(5)
Variable effective rate at June 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 June 30, 2017 and December 31, 2016:
(dollar amounts in thousands)
June 30,
2017
 
December 31,
2016
Affordable housing tax credit investments
$
942,769

 
$
877,237

Less: amortization
(327,078
)
 
(300,357
)
Net affordable housing tax credit investments
$
615,691

 
$
576,880

Unfunded commitments
$
327,793

 
$
292,721


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, 2017 and 2016:
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
(dollar amounts in thousands)
2017
 
2016
 
2017
 
2016
Tax credits and other tax benefits recognized
$
22,671

 
$
18,150

 
$
45,955

 
$
36,434

Proportional amortization method
 
 
 
 
 
 
 
Tax credit amortization expense included in provision for income taxes
17,220

 
12,499

 
34,182

 
24,905

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

 
132

 
109

 
264


Huntington recognized immaterial impairment losses on tax credit investments during the three-month and six-month periods ended June 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 VIE’s 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.