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

Annual report pursuant to Section 13 and 15(d)

VIEs

(dollar amounts in millions)

Amount Transferred

2016-1 Automobile Trust

2015-1 Automobile Trust

VIEs

12 Months Ended

Dec. 31, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Consolidated VIEs

Certain loan and lease securitization trusts are consolidated at December 31, 2016. During the 2017 fourth quarter, Huntington canceled the Series 2014A Trust. As a result, any remaining assets at the time of the cancellation were no longer part of the trust.

The following table present the carrying amount and classification of the consolidated trusts’ assets and liabilities that were included in the Consolidated Balance Sheet at December 31, 2016:



	December 31, 2016
		Huntington Technology Funding Trust		Other Consolidated VIEs		Total
(dollar amounts in millions)		Series 2014A		Other Consolidated VIEs		Total
Assets:
Cash		$	2	$	—	$	2
Net loans and leases		70		—		70
Accrued income and other assets		—		—		—
Total assets		$	72	$	—	$	72
Liabilities:
Other long-term debt		$	57	$	—	$	57
Accrued interest and other liabilities		—		—		—
Total liabilities		57		—		57
Equity:
Beneficial Interest owned by third party		$	14	—		14
Total liabilities and equity		$	71	$	—	$	71

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 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 December 31, 2017, and 2016:



	December 31, 2017
(dollar amounts in millions)	Total Assets		Total Liabilities		Maximum Exposure to Loss
2016-1 Automobile Trust	$	7	$	—	$	7
2015-1 Automobile Trust	1		—		1
Trust Preferred Securities	14		252		—
Affordable Housing Tax Credit Partnerships	636		335		636
Other Investments	117		53		117
Total	$	775	$	640	$	761



	December 31, 2016
(dollar amounts in millions)	Total Assets		Total Liabilities		Maximum Exposure to Loss
2016-1 Automobile Trust	$	15	$	—	$	15
2015-1 Automobile Trust	2		—		2
Trust Preferred Securities	14		253		—
Affordable Housing Tax Credit Partnerships	577		293		577
Other Investments	79		42		79
Total	$	687	$	588	$	673

Automobile Securitizations

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 within accrued income and other assets of Huntington’s Consolidated Balance Sheets. The maximum exposure to loss is equal to the carrying value of the servicing asset. See Note 7 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 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 Consolidated Balance Sheet as subordinated notes. The trust securities are the obligations of the trusts, and as such, are not consolidated within Huntington’s Consolidated Financial Statements.

A list of trust-preferred securities outstanding at December 31, 2017 follows:



(dollar amounts in millions)	Rate			Principal amount of subordinated note/ debenture issued to trust (1)		Investment in unconsolidated subsidiary
Huntington Capital I	2.39	%	(2)	$	70	$	6
Huntington Capital II	2.32		(3)	32		3
Sky Financial Capital Trust III	3.09		(4)	72		2
Sky Financial Capital Trust IV	3.09		(4)	74		2
Camco Financial Trust	3.02		(5)	4		1
Total				$	252	$	14


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


(2)	Variable effective rate at December 31, 2017, based on three-month LIBOR + 0.70%.


(3)	Variable effective rate at December 31, 2017, based on three-month LIBOR + 0.625%.


(4)	Variable effective rate at December 31, 2017, based on three-month LIBOR + 1.40%.


(5)	Variable effective rate at December 31, 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.

Affordable 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 losses related to these investments are included in noninterest income in the Consolidated Statements of Income.

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



(dollar amounts in millions)	December 31, 2017			December 31, 2016
Affordable housing tax credit investments	$	996		$	877
Less: amortization	(360		)	(300		)
Net affordable housing tax credit investments	$	636		$	577
Unfunded commitments	$	335		$	293

The following table presents other information relating to Huntington’s affordable housing tax credit investments for the years ended December 31, 2017, 2016, and 2015:



	Year Ended December 31,
(dollar amounts in millions)	2017		2016		2015
Tax credits and other tax benefits recognized	$	91	$	80	$	60
Proportional amortization method
Tax credit amortization expense included in provision for income taxes (1)	70		53		43
Equity method
Tax credit investment losses included in noninterest income	—		1		—


(1)	Includes an adjustment of $4 million tax related to the TCJA for the year ended December 31, 2017.

There were no material sales of affordable housing tax credit investments in 2017, 2016 or 2015. Huntington recognized immaterial impairment losses for the years ended December 31, 2017, 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 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.