Quarterly report pursuant to Section 13 or 15(d)

VARIABLE INTEREST ENTITIES

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VARIABLE INTEREST ENTITIES
 3 Months Ended
Mar. 31, 2024
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
VARIABLE INTEREST ENTITIES VARIABLE INTEREST ENTITIES
Consolidated VIEs
During the first quarter of 2024, Huntington entered into an auto securitization involving a VIE. The VIE evaluation determined that Huntington is the primary beneficiary of the VIE, and therefore, must account for the VIE as a consolidated subsidiary. In addition, Huntington engages in activities with other VIEs in the normal course of business that result in Huntington being the primary beneficiary and which are consolidated in Huntington’s financial statements.
The following table provides a summary of the assets and liabilities of VIEs carried on Huntington’s Unaudited Consolidated Balance Sheets.
(dollar amounts in millions) At March 31, 2024 At December 31, 2023
Assets
Net loans and leases $ 1,537  $ — 
Other assets 136  82 
Total assets $ 1,673  $ 82 
Liabilities
Long-term borrowings $ 1,401  $ — 
Other liabilities 55  57 
Total liabilities $ 1,456  $ 57 
As part of the securitization transaction, Huntington transferred $1.6 billion in aggregate automobile loans to a SPE which was deemed to be a VIE. This SPE then issued approximately $1.6 billion of asset-backed notes, of which approximately $128 million were retained by Huntington. The primary purpose of the VIE in the securitization transaction is to issue asset-backed securities with varying levels of credit subordination and payment priority. Huntington retained notes and residual interest in the VIE and, therefore, has an obligation to absorb losses and a right to receive benefits that could potentially be significant to the VIE. In addition, Huntington retained servicing rights for the underlying loans and, therefore, holds the power to direct the activities of the VIE that most significantly impact the economic performance of the VIE. The assets of the VIE are restricted to the settlement of the asset-backed securities and other obligations of the VIE. Third-party holders of the asset-backed notes do not have recourse to the general assets of Huntington.
The economic performance of the VIE is most significantly impacted by the performance of the underlying loans. The VIE is exposed to credit and prepayment risk, which are managed through credit enhancements in the form of reserve accounts, over-collateralization, excess interest on the loans, and the subordination of certain classes of asset-backed securities.
Consolidated VIEs at March 31, 2024 and December 31, 2023 also included investments in LIHTC operating entities that were syndicated and where we serve as the general partner and manager. As manager of these entities, we have the power to direct the activities that most significantly impact economic performance, as well as an obligation to absorb significant expected losses, of the entities.
Unconsolidated VIEs
The following tables provide a summary of the assets and liabilities included in Huntington’s Unaudited 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 in, but is not the primary beneficiary.
(dollar amounts in millions) Total Assets Total Liabilities Maximum Exposure to Loss
At March 31, 2024
Affordable Housing Tax Credit Partnerships $ 2,349  $ 1,267  $ 2,349 
Trust Preferred Securities 14  248  — 
Other Investments 922  146  922 
Total $ 3,285  $ 1,661  $ 3,271 
At December 31, 2023
Affordable Housing Tax Credit Partnerships $ 2,297  $ 1,279  $ 2,297 
Trust Preferred Securities 14  248  — 
Other Investments 894  140  894 
Total $ 3,205  $ 1,667  $ 3,191 
Affordable Housing and Other Tax Credit Investments
Huntington makes certain equity investments in various limited partnerships that sponsor affordable housing projects utilizing the 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.
In the first quarter of 2024, Huntington adopted ASU 2023-02 which expanded the proportional amortization method to tax credit programs beyond LIHTC investments. In addition to LIHTC investments, Huntington elected to apply the proportional amortization method to certain tax credit investments that combine LIHTC with other types of credits and historical tax credits. Huntington does not have a material amount of investments in these additional categories.
Huntington uses the proportional amortization method to account for a majority of its investments in these entities. These investments are included in other assets. Investments that do not meet the requirements of the proportional amortization method are accounted for using the equity method. Investment losses are included in Other noninterest income in the Unaudited Consolidated Statements of Income.
The following table presents the balances of Huntington’s affordable housing tax credit investments and related unfunded commitments.
(dollar amounts in millions) At March 31, 2024 At December 31, 2023
Affordable housing tax credit investments $ 3,450  $ 3,335 
Less: amortization (1,101) (1,038)
Net affordable housing tax credit investments $ 2,349  $ 2,297 
Unfunded commitments $ 1,267  $ 1,279 
The following table presents other information relating to Huntington’s affordable housing tax credit investments.
Three Months Ended
(dollar amounts in millions) March 31, 2024 March 31, 2023
Tax credits and other tax benefits recognized $ 76  $ 66 
Proportional amortization expense included in provision for income taxes 63  54 
There were no sales of affordable housing tax credit investments during the three-month periods ended March 31, 2024 and 2023. There was no impairment recognized for the three-month periods ended March 31, 2024 and 2023.
Trust-Preferred Securities
Huntington has certain wholly-owned trusts whose assets, liabilities, equity, income, and expenses are not included within Huntington’s Unaudited 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 Consolidated Balance Sheet as long-term debt. The trust securities are the obligations of the trusts, and as such, are not consolidated within Huntington’s Unaudited Consolidated Financial Statements.
Other investments
Other investments determined to be VIE’s include investments in Small Business Investment Companies, Historic Tax Credit Investments, certain equity method investments, renewable energy financings, and other miscellaneous investments.