Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

xAnnual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 20142016

or

¨Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number 1-34073

Huntington Bancshares Incorporated

(Exact name of registrant as specified in its charter)

Maryland 31-0724920

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

41 S. High Street, Columbus, Ohio 43287
(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code (614) 480-8300

Securities registered pursuant to Section 12(b) of the Act:

Title of class

 

Name of exchange on which registered

8.50% Series A non-voting, perpetual convertible preferred stock NASDAQ
5.875% Series C Non-Cumulative, perpetual preferred stockNASDAQ
6.250% Series D Non-Cumulative, perpetual preferred stockNASDAQ
Common Stock—Par Value $0.01 per Share NASDAQ

Securities registered pursuant to Section 12(g) of the Act:

Title of class

Floating Rate Series B Non-Cumulative Perpetual Preferred Stock


Depositary Shares (each representing a 1/40th interest in a share of Floating Rate Series B Non-Cumulative Perpetual Preferred Stock)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Exchange Act.  x    Yes  ¨    No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.  ¨    Yes  x    No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  x    Yes  ¨    No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  x    Yes  ¨    No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filerxAccelerated filer¨
Non-accelerated filer
¨  (Do not check if a smaller reporting company)
Smaller reporting company¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act)  ¨    Yes  x    No

The aggregate market value of voting and non-voting common equity held by non-affiliates of the registrant as of June 30, 2014,2016, determined by using a per share closing price of $9.54,$8.94, as quoted by NASDAQ on that date, was $7,626,169,305.$6,959,125,311. As of January 31, 2015,2017, there were 810,025,6771,085,887,404 shares of common stock with a par value of $0.01 outstanding.

Documents Incorporated By Reference

Part III of this Form 10-K incorporates by reference certain information from the registrant’s definitive Proxy Statement for the 20152017 Annual Shareholders’ Meeting.




HUNTINGTON BANCSHARES INCORPORATED

INDEX

Part I.
Item 1.

Business

5
Item 1A.

Risk Factors

15
Item 1B.

Unresolved Staff Comments

21
Item 2.

Properties

21
Item 3.

Legal Proceedings

21
Item 4.

Mine Safety Disclosures

21
Part II.
Item 5. 

Part I.
Part II.
21

23

 25

Introduction

25

 25

 29

 38

 38

 52

 53

 59

 60

Capital

60

 62

83

87

87

Part III.  177

Item 9A.

Controls and Procedures

177
Item 9B.

Other Information

178
Part III.
Item 10.

178
Item 11.

178

178

Part IV.  178
Item 15.

178
Signatures180 



Glossary of Acronyms and Terms

The following listing provides a comprehensive reference of common acronyms and terms used throughout the document:

ABLAsset Based Lending
ACLABSAsset-Backed Securities
ACLAllowance for Credit Losses
AFCREAutomobile Finance and Commercial Real Estate
AFSAvailable-for-Sale
ALCOAsset-Liability Management Committee
ALLLAllowance for Loan and Lease Losses
ANPR
ARMAdjustable Rate Mortgage
Advance Notice of Proposed Rulemaking
ASCAccounting Standards Codification
ASUAccounting Standards Update
ATMAutomated Teller Machine
AULCAllowance for Unfunded Loan Commitments
Basel IIIRefers to the final rule issued by the FRB and OCC and published in the Federal Register on October 11, 2013
BHCBank Holding Companies
BHC ActBank Holding Company Act of 1956
C&ICommercial and Industrial
Camco FinancialCamco Financial Corp.
CCARComprehensive Capital Analysis and Review
CDOCollateralized Debt Obligations
CDsCertificate of Deposit
CET1Common equity tier 1 on a transitional Basel III basis
CFPBBureau of Consumer Financial Protection Bureau
CISA
CFTCCommodity Futures Trading Commission
Cybersecurity Information Sharing Act
CMOCollateralized Mortgage Obligations
CRACommunity Reinvestment Act
CRECommercial Real Estate
CREVFCommercial Real Estate and Vehicle Finance
DIFDeposit Insurance Fund
Dodd-Frank ActDodd-Frank Wall Street Reform and Consumer Protection Act
EFTElectronic Fund Transfer
EPSEarnings Per Share
EVEEconomic Value of Equity
Fannie Mae(see FNMA)
FDICFederal Deposit Insurance Corporation
FDICIAFederal Deposit Insurance Corporation Improvement Act of 1991
FHAFederal Housing Administration
FHCFinancial Holding Company
FHLBFederal Home Loan Bank
FHLMCFederal Home Loan Mortgage Corporation
FICOFair Isaac Corporation
FIRSTMERIT
FNMAFederal National Mortgage Association
FirstMerit Corporation
FRBFederal Reserve Bank
Freddie Mac(see FHLMC)
FTEFully-Taxable Equivalent
FTPFunds Transfer Pricing
GAAPGenerally Accepted Accounting Principles in the United States of America
HAAHuntington Asset Advisors, Inc.
HAMPHome Affordable Modification Program
HARPHome Affordable Refinance Program
HIPHASIHuntington Investment and Tax Savings Plan
Asset Services, Inc.
HQLAHigh-Quality Liquid Assets
HTMHeld-to-Maturity

IRSInternal Revenue Service
LCRLiquidity Coverage Ratio
LIBORLondon Interbank Offered Rate
LGDLoss-Given-Default
LIHTCLow Income Housing Tax Credit


LTVLoan to Value
NAICSNorth American Industry Classification System
MacquarieMacquarie Equipment Finance, Inc. (U.S. Operations)
MBSMortgage-Backed Securities
MD&AManagement’s Discussion and Analysis of Financial Condition and Results of Operations
MSAMetropolitan Statistical Area
MSRMortgage Servicing Rights
NALsNonaccrual Loans
NCONet Charge-off
NIINoninterest Income
NIMNet interest margin
Interest Margin
NPAsNonperforming Assets
N.R.Not relevant. Denominator of calculation is a gain in the current period compared with a loss in the prior period, or vice-versa
OCCOffice of the Comptroller of the Currency
OCIOther Comprehensive Income (Loss)
OCROptimal Customer Relationship
OLEMOther Loans Especially Mentioned
OREOOther Real Estate Owned
OTTIOther-Than-Temporary Impairment
PDProbability-Of-Default
PlanHuntington Bancshares Retirement Plan
Problem LoansIncludes nonaccrual loans and leases (Table 13), accruing loans and leases past due 90 days or more (Table 14), troubled debt restructured loans (Table 15), and criticized commercial loans (credit quality indicators section of Footnote 3)4).
RBHPCGRegional Banking and The Huntington Private Client Group
REITReal Estate Investment Trust
RWA
ROCRisk Oversight Committee
Risk-Weighted Assets
SADSpecial Assets Division
SBASmall Business Administration
SECSecurities and Exchange Commission
SERPSupplemental Executive Retirement Plan
SRIPSupplemental Retirement Income Plan
SSFASimplified Supervisory Formula Approach
TCETangible Common Equity
TDRTroubled Debt Restructured loan
U.S. TreasuryU.S. Department of the Treasury
UCSUniform Classification System
Unified
UDAPUnfair or Deceptive Acts or Practices
Unified Financial Securities, Inc.
UPBUnpaid Principal Balance
USDAU.S. Department of Agriculture
VAU.S. Department of Veteran Affairs
VIEVariable Interest Entity
XBRLeXtensible Business Reporting Language


Huntington Bancshares Incorporated

PART I

When we refer to “we”"Huntington", “our”"we", "our", "us", and “us”"the Company" in this report, we mean Huntington Bancshares Incorporated and our consolidated subsidiaries, unless the context indicates that we refer only to the parent company, Huntington Bancshares Incorporated. When we refer to the “Bank”"Bank" in this report, we mean our only bank subsidiary, The Huntington National Bank, and its subsidiaries.

Item 1: Business

We are a multi-state diversified regional bank holding company organized under Maryland law in 1966 and headquartered in Columbus, Ohio. We have 11,87315,993 average full-time equivalent employees. Through the Bank, we have 149150 years of serving the financial needs of our customers. WeThrough our subsidiaries, we provide full-service commercial small business,and consumer andbanking services, mortgage banking services, as well as automobile financing, recreational vehicle and marine financing, equipment leasing, investment management, trust services, brokerage services, insurance programs, and other financial products and services. The Bank, organized in 1866, is our only bank subsidiary. At December 31, 2014,2016, the Bank had 1424 private client group offices and 7151,091 branches as follows:

•    523 branches in Ohio  

•    40439 branches in Ohio

Illinois
•    353 branches in Michigan  

•    4337 branches in Indiana

Wisconsin
•    53 branches in Pennsylvania  

•    179 branches in Michigan

•    3130 branches in West Virginia

•    46 branches in Indiana  

•    48 branches in Pennsylvania

•    10 branches in Kentucky

 

Select financial services and other activities are also conducted in various other states. International banking services are available through the headquarters office in Columbus, Ohio, a limited purpose office located in the Cayman Islands, and another located in Hong Kong.Ohio. Our foreign banking activities, in total or with any individual country, are not significant.

Our business segments are based on our internally-aligned segment leadership structure, which is how we monitor results and assess performance. For each of our five business segments, we expect the combination of our business model and exceptional service to provide a competitive advantage that supports revenue and earnings growth. Our business model emphasizes the delivery of a complete set of banking products and services offered by larger banks, but distinguished by local delivery and customer service.

A key strategic emphasis has been for our business segments to operate in cooperation to provide products and services to our customers and to build stronger and more profitable relationships using our OCR sales and service process. The objectives of OCR are to:

1.Provide a consultative sales approach to provide solutions that are specific to each customer.

2.Leverage each business segment in terms of its products and expertise to benefit customers.

3.Target prospects who may want to have multiple products and services as part of their relationship with us.

1.Use a consultative sales approach to provide solutions that are specific to each customer.
2.Leverage each business segment in terms of its products and expertise to benefit customers.
3.Develop prospects who may want to have multiple products and services as part of their relationship with us.

Following is a description of our five business segments and a Treasury / Other function:

RetailConsumer and Business BankingBanking: The RetailConsumer and Business Banking segment provides a wide array of financial products and services to consumer and small business customers including but not limited to checking accounts, savings accounts, money market accounts, certificates of deposit, investments, consumer loans, credit cards and small business loans. Other financial services available to consumer and small business customers include investments,mortgages, insurance, interest rate risk protection, foreign exchange, hedging, and treasury management. Huntington serves customers primarily through our network of branches in Ohio, Illinois, Indiana, Kentucky, Michigan, Pennsylvania, Indiana, West Virginia, and Kentucky.Wisconsin. In addition to our extensive branch network, customers can access Huntington through online banking, mobile banking, telephone banking and ATMs.

Huntington has established

We have a “Fair Play”"Fair Play" banking philosophyphilosophy; providing differentiated products and services, built on a reputation for meeting the banking needsstrong foundation of customer advocacy. Our brand resonates with consumers in a manner which makes them feel supported and appreciated. Huntington believesbusinesses; earning us new customers are recognizing this and other efforts as key differentiators, and it has earned us more customers, deeper relationships and the J.D. Power retail service excellence award for 2013 and 2014.

with current customers.


Business Banking is a dynamic and growing part of our business and we are committed to being the bank of choice for small businesses in our markets. Business Banking is defined as serving companies with annual revenues underup to $20 million and we currently serveconsists of approximately 160,000254,000 businesses. Huntington continues to develop products and services that are designed specifically to meet the needs of small business. Huntington continues tobusiness and look for ways to help companies find solutions to their capital needs and is the number one SBA lender in the country. We have also won the J.D. Power award for small business service excellence in 2012 and 2014.

financing needs.

Commercial Banking: Through a relationship banking model, this segment provides a wide array of products and services to the middle market, large corporate, and government public sector customers located primarily within our geographic footprint. The segment is divided into seven business units: middle market, large corporate, specialty banking, asset finance, capital markets, treasury management, and insurance. During the 2014 third quarter, we moved our insurance brokerage business from Treasury / Other to Commercial Banking to align with a change in management responsibilities. During the 2014 fourth quarter, we moved the Asset Based Lending group back into the commercial division and combined management with equipment finance and public capital to form the Asset Finance division.

Middle Market Banking primarily focuses on providing banking solutions to companies with annual revenues of $20 million to $250$500 million. Through a relationship management approach, various products, capabilities and solutions are seamlessly orchestrateddelivered in a client centric way.

Large Corporate Banking works with larger, often more complex companies with annual revenues greater than $250$500 million. These entities, many of which are publicallypublicly traded, require a different and customized approach to their banking needs.

Specialty Banking offers tailored products and services to select industries that have a foothold in the Midwest. Each banking team is comprised of industry experts with a dynamic understanding of the market and industry. Many of these industries are experiencing tremendous change, which creates opportunities for Huntington to leverage our expertise and help clients navigate, adapt, and succeed.

Asset Finance is a combination of our Equipment Finance, Public Capital, Asset Based Lending, Technology and Healthcare Equipment Leasing, and Lender Finance divisions that focus on providing financing solutions against these respective asset classes.

Capital Markets has two distinct product capabilities:offerings: corporate risk management services and institutional sales, trading, and underwriting. The Capital Markets Group offers a full suite of risk management tools including commodities, foreign exchange, and interest rate hedging services. The Institutional Sales, Trading & Underwriting team provides access to capital and investment solutions for both municipal and corporate institutions.

Treasury Management teams help businesses manage their working capital programs and reduce expenses. Our liquidity solutions help customers save and invest wisely, while our payables and receivables capabilities help them manage purchases and the receipt of payments for goods and services. All of this is provided while helping customers take a sophisticated approach to managing their overhead, inventory, equipment, and labor.

Insurance brokerage business specializes in commercial property and casualty, employee benefits, personal lines, life, and disability and specialty lines of insurance. WeThe group also provideprovides brokerage and agency services for residential and commercial title insurance and excess and surplus product lines of insurance. As an agent and broker, we dothis business does not assume underwriting risks; instead, we providerisks but alternatively provides our customers with access to quality, noninvestment insurance contracts.

Automobile Finance and Commercial Real Estate:Estate and Vehicle Finance: This segment provides lending and other banking products and services to customers outside of our traditional retail and commercial banking segments. Our products and services include providing financing for the purchase of vehicles by customers at franchised automotive dealerships, financing the acquisition of new and used vehicle inventory of franchised automotive dealerships, and financing for land, buildings, and other commercial real estate owned or constructed by real estate developers, automobile dealerships, or other customers with real estate project financing needs.needs, and financing for the purchase of automobiles, light-duty trucks, recreational vehicles and marine craft at franchised dealerships, financing the acquisition of new and used vehicle inventory of franchised automotive dealerships. Products and services are delivered through highly specialized relationship-focused bankers and product partners. Huntington creates well-defined relationship plans which identify needs where solutions are developed and customer commitments are obtained.

The AutomotiveCommercial Real Estate team serves real estate developers, REITs, and other customers with lending needs that are secured by commercial properties. Most of these customers are located within our footprint. Within Commercial Real Estate, Huntington Community Development focuses on improving the quality of life for our communities and the residents of low-to moderate-income neighborhoods by developing and delivering innovative products and services to support affordable housing and neighborhood stabilization.

The Vehicle Finance team services automobile dealerships, its owners, and consumers buying automobiles through these franchised dealerships. Huntington has provided new and used automobile financing and dealer services throughout the Midwest since the early 1950s. This consistency in the market and our focus on working with strong dealerships has allowed us to expand into selectedselect markets outside of the Midwest and to actively deepen relationships while building a strong reputation.

The Commercial Real Estate team serves real estate developers, REITs, RV and other customers with borrowing needs thatmarine loans are secured by commercial properties. Mostoriginated on an indirect basis through a series of these customers are located within our footprint.

dealerships.

Regional Banking and The Huntington Private Client Group:RBHPCG business segment was created as the result of an organizational and management realignment that occurred in January 2014. Regional Banking and The Huntington

Private Client Group is well positioned competitively as we have closely aligned with our eleven regional banking markets. A fundamental point of differentiation is our commitment to be actively engaged within our local markets - building connections with community and business leaders and offering a uniquely personal experience delivered by colleagues working within those markets.

The Huntington Private Client Group is organized into units consistingclosely aligned with our regional banking markets. A fundamental point of differentiation is our commitment to be actively engaged within our local markets - building connections with community and business leaders and offering a uniquely personal experience delivered by colleagues working within those markets.

The core business of The Huntington Private Bank,Client Group is The Huntington Trust, The HuntingtonPrivate Bank, which consists of Private Banking, Wealth & Investment Company, Huntington Community Development, Huntington Asset Advisors,Management, and Huntington Asset Services. Our private banking, trust, investment and community development functions focus their efforts in our Midwest footprint and Florida, while our proprietary funds and ETFs, fund administration, custody and settlements functions target a national client base.

Retirement plan services. The Huntington Private Bank provides high net-worth customers with deposit, lending (including specialized lending options), and other banking services.

The Huntington TrustPrivate Bank also serves high net-worth customers and delivers wealth management and legacy planning through investment and portfolio management, fiduciary administration, trust services and trust operations.services. This group also provides retirement plan services andto corporate businesses. The Huntington Private Client Group also provides corporate trust to businessesservices and municipalities.

The Huntington Investment Company, a dually registered broker-dealerinstitutional and registered investment advisor, employs representatives who work with our Retail and Private Bank to provide investment solutions for our customers. This team offers a wide range of products and services, including brokerage, annuities, advisory and other investment products.

Huntington Community Development focuses on improving the quality of life for our communities and the residents of low-to moderate-income neighborhoods by developing and delivering innovative products and services to support affordable housing and neighborhood stabilization.

Huntington Asset Advisors provides investment management services solely advising The Huntington Funds, our proprietary family of mutual funds, and Huntington Strategy Shares, our Exchange Trade Funds.

Huntington Asset Services has a national clientele and offers administrative and operational support to fund complexes, including fund accounting, transfer agency, administration, custody and distribution services. This group also includes National Settlements, which works with law firms and the court system to provide custody and settlement distribution services.

Home Lending:Home Lending originates and services consumer loans and mortgages for customers who are generally located in our primary banking markets. Consumer and mortgage lending products are primarily distributed through the RetailConsumer and Business Banking segment,and Regional Banking and The Huntington Private Client Group segments, as well as through commissioned loan originators.  Home Lending earns interest on portfolio loans held in the warehouse and portfolio,loans held-for-sale, earns fee income from the origination and servicing of mortgage loans, and recognizes gains or losses from the sale of mortgage loans. Home Lending supports the origination and servicing of mortgage loans across all segments.

The Treasury / Other function includes technology and operations, other unallocated assets, liabilities, revenue, and expense.

The financial results for each of these business segments are included in Note 24 of Notes to Consolidated Financial Statements and are discussed in the Business Segment Discussion of our MD&A.

Business Combination
On August 16, 2016, Huntington completed its acquisition of FirstMerit Corporation in a stock and cash transaction valued at approximately $3.7 billion. FirstMerit Corporation was a diversified financial services company headquartered in Akron, Ohio, with operations in Ohio, Michigan, Wisconsin, Illinois and Pennsylvania. Post acquisition, Huntington now operates across an eight-state Midwestern footprint. The acquisition resulted in a combined company with a larger market presence and more diversified loan portfolio, as well as a larger core deposit funding base and economies of scale associated with a larger financial institution. For further discussion, see Note 3 of the Notes to Consolidated Financial Statements.
Competition

We compete with other banks and financial services companies such as savings and loans, credit unions, and finance and trust companies, as well as mortgage banking companies, automobile and equipment financing companies (including captive automobile finance companies), insurance companies, mutual funds, investment advisors, and brokerage firms, both within and outside of our primary market areas. Internet companiesFinTech startups are also providing nontraditional, but increasingly strong, competition for our borrowers, depositors, and other customers.

We compete for loans primarily on the basis of a combination of value and service by building customer relationships as a result of addressing our customers’ entire suite of banking needs, demonstrating expertise, and providing convenience to our customers. We also consider the competitive pricing pressures in each of our markets.

We compete for deposits similarly on a basis of a combination of value and service and by providing convenience through a banking network of branches and ATMs within our markets and our website at www.huntington.com. We have also instituted customer friendly practices, such as our 24-Hour Grace® account feature, which gives customers an additional business day to cover overdrafts to their consumer account without being charged overdraft fees.

The table below shows our combined Huntington and FirstMerit competitive ranking and market share based on deposits of FDIC-insured institutions as of June 30, 2014,2016, in the top 10 metropolitan statistical areas (MSA) in which we compete:

MSA  Rank   Deposits (in
millions)
   Market Share 

Columbus, OH

   1    $14,879     28

Cleveland, OH

   5     4,782     8  

Detroit, MI

   6     4,753     5  

Indianapolis, IN

   4     2,852     7  

Pittsburgh, PA

   8     2,487     3  

Cincinnati, OH

   4     2,274     3  

Toledo, OH

   2     2,238     23  

Grand Rapids, MI

   2     2,111     12  

Youngstown, OH

   1     2,017     23  

Canton, OH

   1     1,610     26  

Source: FDIC.gov, based on June 30, 2014 survey.


MSA Rank 
Deposits
(in millions)
 Market Share
Columbus, OH 1
 $20,453
 32%
Cleveland, OH 5
 8,976
 14
Detroit, MI 7
 6,542
 5
Akron, OH 1
 5,611
 39
Indianapolis, IN 4
 3,272
 7
Cincinnati, OH 4
 2,727
 3
Pittsburgh, PA 9
 2,689
 2
Chicago, IL 16
 2,581
 1
Toledo, OH 1
 2,474
 25
Grand Rapids, MI 2
 2,466
 12
Source: FDIC.gov, based on June 30, 2016 survey.      
Many of our nonfinancial institution competitors have fewer regulatory constraints, broader geographic service areas, greater capital, and, in some cases, lower cost structures. In addition, competition for quality customers has intensified as a result of changes in regulation, advances in technology and product delivery systems, consolidation among financial service providers, and bank failures,failures.
Financial Technology, or FinTech, startups are emerging in key areas of banking.  In response, we are monitoring activity in marketplace lending along with businesses engaged in money transfer, investment advice, and money management tools. Our strategy involves assessing the conversion of certain former investment banksmarketplace, determining our near term plan, while developing a longer term approach to bank holding companies.

effectively service our existing customers and attract new customers. This includes evaluating which products we develop in-house, as well as evaluating partnership options, where applicable.

Regulatory Matters

General
We are subject to supervision, regulation and examination by the SEC,various federal and state regulators, including the Federal Reserve, OCC, SEC, CFPB, FDIC, FINRA, and various state regulatory agencies. The statutory and regulatory framework that governs us is generally intended to protect depositors and customers, the OCC,DIF, the CFPB,banking and financial system, and financial markets as a whole. Any change in the statutes, regulations or regulatory policies applicable to us, including changes in their interpretation or implementation, could have a material effect on our business or organization.
The banking industry is highly regulated. During the past several years, there has been a significant increase in regulation and regulatory oversight of U.S. financial services firms, primarily resulting from the Dodd-Frank Act. The Dodd-Frank Act implements numerous and far-reaching changes that affect financial companies, including banking organizations. Many of the provisions of the Dodd-Frank Act and other federal and state regulators.

Because we are a public company, welaws are subject to regulationfurther rulemaking, guidance and interpretation by the SEC. The SEC has established five categoriesapplicable federal regulators. Some of issuers for the purpose of filing periodic and annual reports. Underregulations related to these regulations, wereforms are considered to be a large accelerated filerstill in the implementation stage and, as such, must comply with SEC accelerated reporting requirements.

We are a bank holding companyresult, there is significant uncertainty concerning their ultimate impact on us.

The following discussion describes certain elements of the comprehensive regulatory framework applicable to us.
Supervision, Regulation and are qualifiedExamination
Huntington is registered as a financial holding companyBHC with the Federal Reserve. We areReserve under the BHC Act and qualifies for and has elected to become a FHC under the Gramm-Leach-Bliley Act of 1999. As a FHC, Huntington is subject to examinationprimary supervision, regulation and supervisionexamination by the Federal Reserve, pursuantand is permitted to engage in, and be affiliated with companies engaging in, a broader range of activities than permitted for a BHC, including underwriting, dealing and making markets in securities, and making merchant banking investments in non-financial companies. Huntington and the Bank Holding Company Act. Wemust each remain “well-capitalized” and “well-managed” in order for Huntington to maintain its status as a FHC. In addition, the Bank must receive a CRA rating of at least “Satisfactory” at its most recent examination for Huntington to engage in the full range of activities permissible for FHCs.

The Bank is a national banking association chartered under the laws of the United States and is subject to comprehensive primary supervision, regulation and examination by the OCC. As a national bank, the activities of the Bank are requiredlimited to file reportsthose specifically authorized under the National Bank Act and other information regarding our business operationsrelated regulations and interpretations by the OCC. As a member of the DIF, the Bank is also subject to regulation and examination by the FDIC. In addition, the Bank is subject to supervision, regulation and examination by the CFPB, which is the primary administrator of most federal consumer financial statutes and the business operationsprimary consumer financial regulator of banking organizations with $10 billion or more in assets.
Under the system of “functional regulation” established under the BHC Act, the Federal Reserve serves as the primary regulator of our consolidated organization. The primary regulators of our non-bank subsidiaries directly regulate the activities of those subsidiaries, with the Federal Reserve.

Reserve exercising a supervisory role. Such “functionally regulated” non-bank subsidiaries include, for example, broker-dealers registered with the SEC and investment advisers registered with the SEC with respect to their investment advisory activities.

Regulatory Capital Requirements
Huntington and the Bank are subject to certain risk-based capital and leverage ratio requirements. The Federal Reserve maintainsestablishes capital and leverage requirements for Huntington and evaluates its compliance with such requirements. The OCC establishes similar capital and leverage requirements for the Bank. In 2013, the Federal Reserve and OCC issued final rules (and the FDIC issued interim final rules that were adopted as final rules in April 2014) to implement the Basel III capital accord, as well as certain requirements of the Dodd-Frank Act. The final capital rules made a bank holding company rating systemnumber of significant changes to the regulatory capital ratios applicable to Huntington and the Bank, as well as all other banks and BHCs of their size. In addition, the capital rules modified the types of capital instruments that emphasizesmay be included in regulatory capital and how certain assets are risk-weighted for purposes of these calculations.
Under the final capital rules, Huntington and the Bank must maintain a minimum CET1 risk-based ratio, a minimum Tier I risk-based capital ratio, a minimum total risk-based capital ratio, and a minimum leverage ratio. The final capital rules also limit capital distributions and certain discretionary bonuses if a banking organization does not maintain certain capital ratios. The preamble to the final capital rules states that these quantitative calculations are minimums and that the agencies may determine that a banking organization, based on its size, complexity or risk management, introducesprofile, must maintain a framework for analyzinghigher level of capital in order to be operate in a safe and ratingsound manner.
In addition, the final capital rules generally provide that trust preferred securities and certain preferred securities no longer count as Tier I capital. Banking organizations with more than $15 billion in total consolidated assets were required to phase-out of additional Tier 1 capital any non-qualifying capital instruments (such as trust preferred securities and cumulative preferred shares) issued before September 12, 2010. We have phased out the additional tier 1 capital treatment of our trust preferred securities but are including these instruments in tier 2 capital as allowed by Basel III.
The final capital rules take effect in phases. Huntington and the Bank were required to be in compliance with certain calculation requirements and begin transitioning to other requirements by January 1, 2015, with full compliance with the modified calculations on January 1, 2019. The rules concerning capital conservation and countercyclical capital buffers became effective on January 1, 2016.
The following are the minimum Basel III regulatory capital levels that we must satisfy to avoid limitations on capital distributions and discretionary bonus payments during the applicable transition period, from January 1, 2016, until January 1, 2019:
 Minimum Basel III Regulatory Capital Levels
 
January 1,
2016
 
January 1,
2017
 
January 1,
2018
 
January 1,
2019
Common equity tier 1 risk-based capital ratio5.125% 5.75% 6.375% 7.0%
Tier 1 risk-based capital ratio6.625% 7.25% 7.875% 8.5%
Total risk-based capital ratio8.625% 9.25% 9.875% 10.5%
Failure to meet applicable capital guidelines may subject a financial factors, and providesinstitution to a framework for assessing and ratingvariety of enforcement remedies available to the potential impact of non-depository entitiesfederal regulatory authorities. These include limitations on the ability to pay dividends, the issuance by the regulatory authority of a holding company on its subsidiary depository institution(s). The ratings assigneddirective to us, like those assigned to otherincrease capital, and the termination of deposit insurance by the FDIC. In addition, the financial institutions, are confidential and may notinstitution could be disclosed, exceptsubject to the extent required by law.

The Federal Reserve utilizes an updated frameworkmeasures described below under “Prompt Corrective Action” as applicable to under-capitalized institutions.


Huntington’s regulatory capital ratios and those of the Bank were in excess of the levels established for well-capitalized institutions throughout 2016. An institution is deemed to be “well-capitalized” if it meets or exceeds the consolidated supervision of large financial institutions, including bank holding companieswell-capitalized minimums listed below, and is not subject to a regulatory order, agreement, or directive to meet and maintain a specific capital level for any capital measure.
     At December 31, 2016
(dollar amounts in billions)  Well-capitalized minimums Actual 
Excess
Capital (1)
Ratios:       
Tier 1 leverage ratioConsolidated N/A
 8.70% N/A
 Bank 5.00% 9.29
 $4.2
Common equity tier 1 risk-based capital ratioConsolidated N/A
 9.56
 N/A
 Bank 6.50
 10.42
 3.1
Tier 1 risk-based capital ratioConsolidated 6.00
 10.92
 2.7
 Bank 8.00
 11.61
 1.3
Total risk-based capital ratioConsolidated 10.00
 13.05
 2.4
 Bank 10.00
 13.83
 3.0
(1)Amount greater than the well-capitalized minimum percentage.
Enhanced Prudential Standardsand Early Remediation Requirements
Under the Dodd-Frank Act, BHCs with consolidated assets of more than $50 billion, or more. The objectives of the frameworksuch as Huntington, are subject to enhance the resilience ofcertain enhanced prudential standards and early remediation requirements. As a firm, lower the probability of its failure,result, Huntington is subject to more stringent standards and reduce the impact on the financial system in the event of an institution’s failure.requirements, including liquidity and capital requirements, leverage limits, stress testing, risk management standards, than those applicable to smaller institutions. With regard to resiliency, each firm iswe are expected to ensure that the consolidated organization and its core business lines can survive under a broad range of internal or external stresses. This requires financial resilience by maintaining sufficient capital and liquidity, and operational resilience by maintaining effective corporate governance, risk management, and recovery planning. With respect to lowering the probability of failure, each firm iswe are expected to ensure the sustainability of itsour critical operations and banking offices under a broad range of internal or external stresses. This requires, among other things, that we have robust, forward-looking capital-planning processes that account for our unique risks.

The Bank, which

Comprehensive Capital Analysis and Review
Huntington is chartered by the OCC, is a national bank and our only bank subsidiary. It is subject to examination and supervision by the OCC and also by the CFPB, which was established by the Dodd-Frank Act in 2010. Our nonbank subsidiaries are also subject to examination and supervision by the Federal Reserve or, in the case of nonbank subsidiaries of the Bank, by the OCC. All subsidiaries are subject to examination and supervision by the CFPB to the extent they offer any consumer financial products or services. Our subsidiaries are subject to examination by other federal and state agencies, including, in the case of certain securities and investment management activities, regulation by the SEC and the Financial Industry Regulatory Authority.

In September 2014, the OCC published final guidelines to strengthen the governance and risk management practices of large financial institutions, including the Bank. The guidelines became effective November 10, 2014, and require covered banks to establish and adhere to a written governance framework in order to manage and control their risk-taking activities. In addition, the guidelines provide standards for the institutions’ boards of directors to oversee the risk governance framework. Given its size and the phased implementation schedule, the Bank is subject to these heightened standards effective May 2016. As discussed in Item 1A: Risk Factors, the Bank currently has a written governance framework and associated controls.

Legislative and regulatory reforms continue to have significant impacts throughout the financial services industry.

The Dodd-Frank Act, enacted in 2010, is complex and broad in scope and several of its provisions are still being implemented. The Dodd-Frank Act established the CFPB, which has extensive regulatory and enforcement powers over consumer financial products and services, and the Financial Stability Oversight Council, which has oversight authority for monitoring and regulating systemic risk. In addition, the Dodd-Frank Act altered the authority and duties of the federal banking and securities regulatory agencies, implemented certain corporate governance requirements for all public companies including financial institutions with regard to executive compensation, proxy access by shareholders, and certain whistleblower provisions, and restricted certain proprietary trading, and hedge fund and private equity activities of banks and their affiliates. The Dodd-Frank Act also required the issuance of numerous implementing regulations, many of which have not yet been issued. The regulations will continue to take effect over several more years, continuing to make it difficult to anticipate the overall impact to us, our customers, or the financial industry in general.

In January 2014, seven final regulations issued by the CFPB, including the ability to repay and qualified mortgage standards, various mortgage servicing rules, a rule expanding the scope of the high-cost mortgage provision in the Truth in Lending Act, loan originator compensation requirements and appraisal rules, became effective and were successfully implemented by Huntington. On November 20, 2013, the CFPB issued its final rule on integrated mortgage disclosures under the Truth in Lending Act and the Real Estate Settlement Procedures Act, for which compliance is required by August 1, 2015. The CFPB finalized amendments to the integrated mortgage disclosures on January 20, 2015, which are also effective on August 1, 2015. On October 22, 2014, the CFPB finalized minor Amendments to the 2013 Mortgage Rules under the Truth in Lending Act (Regulation Z), making certain nonprofits exempt from some servicing rules and the ability to repay rule, and allowing a cure period for points and fees in Qualified Mortgages. These changes were effective as of November 3, 2014. In addition, the CFPB proposed changes to its servicing rules. We continue to monitor, evaluate and implement these new regulations.

Throughout 2014, the CFPB has continued its focus on fair lending practices of indirect automobile lenders. This focus has led to some lenders acknowledging that the CFPB and Department of Justice are considering taking public enforcement actions against them for their fair lending practices. Indirect automobile lenders have also received continuing pressure from the CFPB to limit or eliminate discretionary pricing by dealers. Finally, the CFPB has proposed its larger participant rule for indirect automobile lending which will bring larger non-bank indirect automobile lenders under CFPB supervision.

Banking regulatory agencies have increasingly over the last few years used their authority under Section 5 of the Federal Trade Commission Act to take supervisory or enforcement action with respect to UDAP by banks under standards developed many years ago by the Federal Trade Commission in order to address practices that may not necessarily fall within the scope of a specific banking or consumer finance law. The Dodd-Frank Act also gave to the CFPB similar authority to take action in connection with unfair, deceptive or abusive acts or practices by entities subject to CFPB supervisory or enforcement authority.

Large bank holding companies and national banks are required to submit annuala capital plansplan annually to the Federal Reserve and OCC, respectively, and conduct stress tests.

The Federal Reserve’s Regulation Y requires large bank holding companiesfor supervisory review in connection with its annual CCAR process. Huntington is required to submitinclude within its capital plans to the Federal Reserve on an annual basis and to require such bank holding companies to obtain approval from the Federal Reserve under certain circumstances before making a capital distribution. This rule applies to us and all other bank holding companies with $50 billion or more of total consolidated assets.

A large bank holding company’s capital plan must include an assessment of the expected uses and sources of capital over at least the next nine quarters,and a description of all planned capital actions over the planning horizon, a detailed description of the entity’s process for assessing capital adequacy, the entity’sits capital policy, and a discussion of any expected changes to the bank holding company’sits business plan that are likely to have a material impact on the firm’sits capital adequacy or liquidity.adequacy. The planning horizon for the most recentrecently completed capital planning and stress testing cycle encompassesencompassed the 2014 fourthnine-quarter period from the first quarter of 2016 through the 2016 fourthfirst quarter as was submitted in our capital plan in January 2015. Rules to implement the Basel III capital reforms in the United States were finalized in July 2013 and will be phased-in by us beginning with 1Q 2015 results under the standardized approach. As such, the most recent

CCAR cycle, which began October 1, 2014, overlaps with the implementation of the Basel III capital reforms based on the required nine quarter projection horizon. In accordance with stress test rules, we incorporated the revised capital framework into the capital planning projections and into the stress tests required under the Dodd-Frank Act. Capital adequacy at large banking organizations, including us, is assessed against a minimum 4.5 percent tier 1 common ratio and a 5 percent tier 1 leverage ratio as determined by2018.

Currently, the Federal Reserve.

Capital plans for 2015 were required to be submitted by January 5, 2015. The Federal Reserve will eithermay object to a BHC’s capital plan in wholebased on either quantitative or in part, or provide a notice of non-objection no later than March 31, 2015, for plans submitted by the January 5, 2015, submission date.qualitative grounds. If the Federal Reserve objects to a BHC’s capital plan, the bank holding companyBHC may not make any capital distribution unless the Federal Reserve indicates in writing that it does not object to the distribution. Under CCAR, the Federal Reserve makes a qualitative assessment of capital adequacy on a forward-looking basis and reviews the strength of a BHC’s capital adequacy process. The Federal Reserve also makes a quantitative assessment of capital based on supervisory-run stress tests that assess the ability to maintain capital levels above certain minimum ratios, after taking all capital actions included in a BHC’s capital plan, under baseline and stressful conditions throughout a nine-quarter planning horizon. As part of CCAR, the Federal Reserve evaluates whether BHCs have sufficient capital to continue operations throughout times of economic and financial market stress and whether they have robust, forward-looking capital planning processes that account for their unique risks.

The Federal Reserve expects BHCs subject to CCAR, such as Huntington, to have sufficient capital to withstand a highly adverse operating environment and to be able to continue operations, maintain ready access to funding, meet obligations to creditors and counterparties, and serve as credit intermediaries. In addition, the Federal Reserve evaluates the planned capital actions of these BHCs, including planned capital distributions other than thosesuch as dividend payments or stock repurchases. We generally may pay dividends and repurchase stock only in accordance with respecta capital plan that has been reviewed by the Federal Reserve and as to which the Federal Reserve has indicated its non-objection. Whilenot objected. In addition, we can give no assurances asare generally prohibited from making a capital distribution unless, after giving effect to the outcome or specific interactions withdistribution, we will meet all minimum regulatory capital ratios.

On September 30, 2016, the regulators, based onFederal Reserve issued a proposed rule to amend the capital plan weand stress test rules for large and non-complex BHCs, such as Huntington, to provide, among other things, that beginning with the 2017 CCAR cycle, such BHCs would continue to submit a capital plan for quantitative assessment but would no longer be subject to a non-objection from a qualitative aspect. The Federal Reserve is proposing to evaluate the strength of a large and non-complex company’s qualitative capital planning process through the regular supervisory process and targeted horizontal reviews of particular aspects of capital planning. A final rule implementing the changes described above was issued on February 3, 2017.
Huntington submitted on January 5, 2015, we believe we have a strongits 2016 capital position and that our capital adequacy process is robust.

In additionplan to the CCAR submission, section 165 ofFederal Reserve in April 2016. The Federal Reserve did not object to Huntington’s 2016 capital plan. Huntington is required and intends to submit to the Federal Reserve its capital plan for 2017 by April 5, 2017. There can be no assurance that the Federal Reserve will respond favorably to Huntington’s 2017 capital plan, capital actions or stress test results.

Stress Testing
The Dodd-Frank Act requires that national banks, likea semi-annual supervisory stress test of BHCs, including Huntington, with $50 billion or more of total consolidated assets. This Dodd-Frank Act supervisory stress testing is a forward-looking quantitative evaluation of the impact of stressful economic and financial market conditions on BHC capital. The Huntington National Bank,Dodd-Frank Act also requires BHCs to conduct company-run annual and semi-annual stress tests, for submission in January 2015. Thethe results of the stress tests will provide the OCCwhich are filed with forward-looking information that will be used in bank supervision and will assist the agency in assessing a company’s risk profile and capital adequacy. We submitted our stress test results to the OCC on January 5, 2015.

The regulatory capital rules indicate that common stockholders’ equity should be the dominant element within Tier 1 capital and that banking organizations should avoid overreliance on non-common equity elements. Under the Dodd-Frank Act, the ratio of common equity Tier 1 to risk-weighted assets became significant as a measurement of the predominance of common equity in Tier 1 capital and an indication of the quality of capital.

Conforming Covered Activities to implement the Volcker Rule.

On December 10, 2013, the Federal Reserve and publicly disclosed. A BHC’s ability to make capital distributions is limited to the OCC,extent the FDIC,BHC’s actual capital levels are less than the CFTCamount indicated in its capital plan submission.

The Dodd-Frank Act also requires a national bank, such as the Bank, with total consolidated assets of more than $10 billion to conduct annual company-run stress tests. The objective of the annual company-run stress test is to ensure that covered institutions have robust, forward-looking capital planning processes that account for their unique risks, and to help ensure that institutions have sufficient capital to continue operations throughout times of economic and financial stress. A covered institution is required to publish a summary of the SEC issuedresults of its annual stress tests.
Liquidity Coverage Ratio
On September 3, 2014, the U.S. banking regulators approved a final rulesrulewhich became effective on January 1, 2015 to implement a minimum LCR requirement for banking organizations with total consolidated assets of $250 billion or more, and a less stringent modified LCR requirement to depository institution holding companies, such as Huntington, below the threshold but with total consolidated assets of $50 billion or more. The LCR requires covered banking organizations to maintain HQLA equal to projected stressed cash outflows over a 30 calendar-day stress scenario. Huntington is covered by the “modified LCR” requirement and therefore subject to the phase-in of the rule beginning January 2016 at 90% and January 2017 at 100%. Huntington is required to calculate the LCR monthly. The LCR assigns less severe outflow assumptions to certain types of customer deposits, which should increase the demand, and perhaps the cost, among banks for these deposits. Additionally, the HQLA requirements has increased the demand for direct U.S. government and U.S. government-guaranteed debt that, while high quality, generally carry lower yields than other securities that banks hold in their investment portfolios.
Restrictions on Dividends
At the holding company level, Huntington relies on dividends, distributions and other payments from its subsidiaries, particularly the Bank, to fund the dividends paid to its shareholders, as well as to satisfy its debt and other obligations. Certain federal and state statutes, regulations and contractual restrictions limit the ability of our subsidiaries, including the Bank, to pay dividends to us. The OCC has authority to prohibit or limit the payment of dividends by the Bank if, in the OCC’s view, payment of a dividend would constitute an unsafe or unsound practice in light of the financial condition of the Bank.
In addition, Huntington’s ability to pay dividends or return capital to its shareholders, whether through an increase in common stock dividends or through a share repurchase program, is subject to the oversight of the Federal Reserve. The dividend and share repurchase policies of certain BHCs, such as Huntington, are reviewed by the Federal Reserve through the CCAR process, based on capital plans and stress tests submitted by the BHC, and are assessed against, among other things, the BHC’s ability to meet and exceed minimum regulatory capital ratios under stressed scenarios, its expected sources and uses of capital over the planning horizon under baseline and stressed scenarios, and any potential impact of changes to its business plan and activities on its capital adequacy and liquidity. The Federal Reserve’s capital planning rule includes a limitation on capital distributions to the extent that actual capital issuances are less than the amount indicated in the capital plan submission.

Volcker Rule
The Dodd-Frank Act introduced restrictions to prohibit or restrict the ability of banking entities from engaging in short-term proprietary trading and sponsoring of or investing in private equity and hedge funds (the “Volcker Rule”). The final regulations implementing the Volcker Rule contained in section 619were adopted by the regulatory agencies on December 10, 2013.
The Volcker Rule and final regulations contain a number of exceptions to the Dodd-Frank Act, and established July 21, 2015, as the end of the conformance period. Section 619 generally prohibits insured depository institutions and any company affiliated with an insured depository institution from engaging inprohibition on proprietary trading and from acquiring or retaining ownership interests in, sponsoring or having certain relationships with a hedge fund oracquiring any ownership interest in private equity fund. These prohibitions are subjector hedge funds (“covered funds”). The Volcker Rule permits banking entities to engage in certain activities such as underwriting, market-making and risk-mitigation hedging, and exempts from the definition of a numbercovered fund certain entities, such as wholly-owned subsidiaries, joint ventures, and acquisitions vehicles, as well as SEC registered investment companies. In addition, the Volcker Rule limits certain types of statutory exemptions, restrictions,transactions between a banking entity and definitions.any covered fund forwhich it serves as investment manager or investment advisor.
The final rules implementing the Volcker Rule extended the conformance period generally until July 21, 2015. On December 18, 2014, Thethe Federal Reserve Board announced that it acted under Section 619 towould give banking entities an additional one year, until July 21, 2016, to conform investments in and relationships with covered funds and foreign funds that were in place prior to December 31, 2013 (“legacy covered funds”funds). The Board also announced its intention to act next year to grantOn July 7, 2016, the Federal Reserve granted banking entities an additional one-year extension of the conformance period until July 21, 2017, to conform ownership interests in and relationships withto legacy covered funds. The Bank continues its “good faith” efforts to conformIn February 2017, the Federal Reserve approved our application for an extended transition period with proprietary trading prohibitions and associated compliance requirements. The company does not expect Volcker compliance to have a material impact on its business model.

The Volcker Rule prohibits an insured depository institution and any company that controls an insured depository institution (such as a bank holding company), and any of their subsidiaries and affiliates (referred to as “banking entities”) from: (i) engaging in “proprietary trading” and (ii) investing in or sponsoring certain types of funds (“covered funds”) subjectrespect to certain limited exceptions. These prohibitions impact the ability of U.S. banking entities to provide investment management products and services that are competitive with nonbanking firms generally and with non-U.S. banking organizations in overseas markets. The rule also effectively prohibits short-term trading strategies by any U.S. banking entity if those strategies involve instruments other than those specifically permitted for trading.

The final Volcker Rule regulations do provide certain exemptions allowing banking entities to continue underwriting, market-making and hedging activities and trading certain government obligations, as well as various exemptions and exclusions from the definition of “covered funds”. The level of required compliance activity depends on the size of the banking entity and the extent of its trading. CEOs of larger banking entities, including Huntington, will have to attest annually in writing that their organization has in place processes to establish, maintain, enforce, review, test and modify compliance with the Volcker Rule regulations. Banking entities with significant permitted trading operations will have to report certain quantitative information, beginning between June 30, 2014 and December 31, 2016, depending on the size of the banking entity’s trading assets and liabilities.

legacy illiquid fund investments.

On January 14, 2014, the five federal agencies approved an interim final rule to permit banking entities to retain interests in certain collateralized debt obligations backed primarily by trust preferred securities from the investment prohibitions of the Volcker Rule. Under the interim final rule, the agencies permit the retention of an interest in or sponsorship of covered funds by banking entities if certain qualifications are met. In addition, the agencies released a non-exclusive list of issuers that meet the requirements of the interim final rule. At December 31, 2014,2016, we had investments in nineseven different pools of trust preferred securities. EightSix of our pools are included in the list of non-exclusive issuers. We have analyzed the other pool that was not included on the list and believe that we will continue to be able to own this investment under the final Volcker Rule regulations.

There are restrictions on our ability to pay dividends.

Dividends from the Bank to the parent company are the primary sourceregulations as well.

Resolution Planning
As a BHC with assets of funds for payment of dividends to our shareholders. However, there are statutory limits on the amount of dividends that the Bank can pay to the holding company. Regulatory approval$50 billion or more, Huntington is required priorto submit annually to the declaration of any dividends in an amount greater than its undivided profits or if the total of all dividends declared in a calendar year would exceed the total of its net income for the year combined with its retained net income for the two preceding years, less any required transfers to surplus or common stock. The Bank is currently able to pay dividends to the holding company subject to these limitations.

If, in the opinion of the applicable regulatory authority, a bank under its jurisdiction is engaged in, or is about to engage in, an unsafe or unsound practice, such authority may require, after notice and hearing, that such bank cease and desist from such practice. Depending on the financial condition of the Bank, the applicable regulatory authority might deem us to be engaged in an unsafe or unsound practice if the Bank were to pay dividends to the holding company.

The Federal Reserve and the OCC have issued policy statements that provide that insured banksFDIC a plan for the orderly resolution of Huntington and bank holding companies should generally only pay dividends outits significant legal entities under the U.S. Bankruptcy Code or other applicable insolvency laws in a rapid and orderly fashion in the event of current operating earnings. Additionally, the Federal Reserve may prohibitfuture material financial distress or limit bank holding companies from making capital distributions, including payment of preferred and common dividends, as part of the annual capital plan approval process.

We are subject to the current capital requirements mandated byfailure (a “resolution plan”). If the Federal Reserve and final Basel IIIthe FDIC jointly determine that the resolution plan is not credible and the deficiencies are not cured in a timely manner, they may jointly impose on us more stringent capital, andleverage or liquidity frameworks.

The Federal Reserve sets risk-based capital ratio and leverage ratio guidelines for bank holding companies. Underrequirements or restrictions on our growth, activities or operations. In addition, the guidelines and related policies, bank holding companies must maintain capital sufficientFDIC requires each insured depository institution with $50 billion or more in assets, such the Bank, periodically to meet bothfile a risk-based asset ratio test and a leverage ratio test on a consolidated basis. The risk-based ratio is determined by allocating assets and specified off-balance sheet commitments into risk-weighted categories, with higher weighting assigned to categories perceived as representing greater risk. The risk-based ratio represents total capital divided by total risk-weighted assets. The leverage ratio is core capital divided by total assets adjusted as specified in the guidelines. The Bank is subject to substantially similar capital requirements.

On July 2, 2013, the Federal Reserve voted to adopt final capital rules implementing Basel III requirements for U.S. Banking organizations. The final rules establish an integrated regulatory capital framework and will implement in the United States the Basel III regulatory capital reforms from the Basel Committee on Banking Supervision and certain changes required by the Dodd-Frank Act. Under the final rule, minimum requirements will increase for both the quantity and quality of capital held by banking organizations. Consistentresolution plan with the international Basel framework,FDIC.

In July 2016, we were informed that the final rule includes a new minimum ratio of common equity tier 1 capital (Tier 1 Common) to risk-weighted assets and a Tier 1 Common capital conservation buffer of 2.5% of risk-weighted assets that will apply to all supervised financial institutions. The rule also raisesFDIC extended the minimum ratio of tier 1 capital to risk-weighted assets and includes a minimum leverage ratio of 4%date for all banking organizations. These new minimum capital ratios were effective for us on January 1, 2015, and will be fully phased-in on January 1, 2019.

The following are the Basel III regulatory capital levels that we must satisfy to avoid limitations on capital distributions and discretionary bonus payments during the applicable transition period, from January 1, 2015, until January 1, 2019:

   Basel III Regulatory Capital Levels 
   January 1,
2015
  January 1,
2016
  January 1,
2017
  January 1,
2018
  January 1,
2019
 

Tier 1 Common

   4.5  5.125  5.75  6.375  7.0

Tier 1 risk-based capital ratio

   6.0  6.625  7.25  7.875  8.5

Total risk-based capital ratio

   8.0  8.625  9.25  9.875  10.5

The final rule emphasizes Tier 1 Common capital, the most loss-absorbing form of capital, and implements strict eligibility criteria for regulatory capital instruments. The final rule also improves the methodology for calculating risk-weighted assets to enhance risk sensitivity. Banks and regulators use risk weighting to assign different levels of risk to different classes of assets.

We have evaluated the impactsubmission of the Basel III final rule on our regulatory capital ratios and estimate, on a fully phased-in basis, a reduction of approximately 40 basis pointsBank’s 2016 resolution plan to our Basel I tier I common risk-based capital ratio. The estimate is based on management’s current interpretation, expectations, and understanding ofDecember 31, 2017. In August 2016, we were informed that the final U.S. Basel III rules. We anticipate that our capital ratios, on a Basel III basis, will continue to exceed the well-capitalized minimum capital requirements. We are evaluating options to mitigate the capital impact of the final rule prior to its effective implementation date.

Based on the final Basel III rule, banking organizations with more than $15 billion in total consolidated assets are required to phase-out of additional tier 1 capital any non-qualifying capital instruments (such as trust preferred securities and cumulative preferred shares) issued before September 12, 2010. We will begin the additional tier I capital phase-out of our trust preferred securities in 2015, but will be able to include these instruments in Tier II capital as a non-advanced approaches institution.

Generally, under the currently applicable guidelines, a financial institution’s capital is divided into two tiers. Institutions that must incorporate market risk exposure into their risk-based capital requirements may also have a third tier of capital in the form of restricted short-term subordinated debt. These tiers are:

Tier 1 risk-based capital, or core capital, which includes total equity plus qualifying capital securities and minority interests subject to phase-out, excluding unrealized gains and losses accumulated in other comprehensive income, and nonqualifying intangible and servicing assets.

Tier 2 risk-based capital, or supplementary capital, which includes, among other things, cumulative and limited-life preferred stock, mandatory convertible securities, qualifying subordinated debt, and the ACL, up to 1.25% of risk-weighted assets.

Total risk-based capital is the sum of Tier 1 and Tier 2 risk-based capital.

The Federal Reserve and the other federal banking regulators requireFDIC also had extended the date for the submission of Huntington’s 2016 resolution plan to December 31, 2017. In each case, we were informed that all intangible assets (net of deferred tax), except originated or purchased MSRs, nonmortgage servicing assets, and purchased credit card relationships intangible assets, be deducted from Tier 1 capital. However, the total amount of these items included in capital cannot exceed 100% of its Tier 1 capital.

Under the general risk-based guidelines to remain adequately-capitalized, financial institutions are required to maintain a total risk-based capital ratio of 8%, with 4% being Tier 1 risk-based capital. The appropriate regulatory authority may set higher capital requirements when they believe an institution’s circumstances warrant an increase.

Under the leverage guidelines, financial institutions are required to maintain a Tier 1 leverage ratio of at least 3%. The minimum ratio is applicable only to financial institutions that meet certain specified criteria, including excellent asset quality, high liquidity, low interest rate risk exposure, and the highest regulatory rating. Financial institutions not meeting these criteria are required to maintain a minimum Tier 1 leverage ratio of 4%.

Failure to meet applicable capital guidelines could subject the financial institution to a variety of enforcement remedies available to the federal regulatory authorities. These include limitations on the ability to pay dividends, the issuance by the regulatory authoritysubmission of a directive to increase capital, andresolution plan in 2017 will satisfy the termination of deposit insurance by the FDIC. In addition, the financial institution could be subject to the measures described below under Prompt Corrective Action as applicable to under-capitalized institutions.

The risk-based capital standards of the Federal Reserve,2016 resolution plan requirement.

On September 29, 2016, the OCC and the FDIC specify that evaluationspublished final guidelines establishing standards for recovery planning by the banking agencies of a bank’s capital adequacy will include an assessment of the exposure to declines in the economic value of a bank’s capital due to changes in interest rates. These banking agencies issued a joint policy statement on interest rate risk describing prudent methods for monitoring such risk that rely principally on internal measures of exposure and active oversight of risk management activities by senior management.

FDICIA requires federal banking regulatory authorities to take Prompt Corrective Action insured national bankswith respect to depository institutions that do not meet minimum capital requirements. For these purposes, FDICIA establishes five capital tiers: well-capitalized, adequately-capitalized, under-capitalized, significantly under-capitalized, and critically under-capitalized.

Throughout 2014, our regulatory capital ratios and those of the Bank were in excess of the levels established for well-capitalized institutions. An institution is deemed to be well-capitalized if it has a total risk-based capital ratio of 10% or greater, a Tier 1 risk-based capital ratio of 6% or greater, and a Tier 1 leverage ratio of 5% or greater and is not subject to a regulatory order, agreement, or directive to meet and maintain a specific capital level for any capital measure.

         At December 31, 2014 

(dollar amounts in billions)

  Well-capitalized minimums  Actual  Excess
Capital (1)
 

Ratios:

      

Tier 1 leverage ratio

  Consolidated   5.00  9.74 $3.0  
  Bank   5.00    9.56    2.9  

Tier 1 risk-based capital ratio

  Consolidated   6.00    11.50    3.0  
  Bank   6.00    11.28    2.9  

Total risk-based capital ratio

  Consolidated   10.00    13.56    1.9  
  Bank   10.00    12.79    1.5  

(1)Amount greater than the well-capitalized minimum percentage.

FDICIA generally prohibits a depository institution from making any capital distribution, including payment of a cash dividend or paying any management fee to its holding company, if the depository institution would become under-capitalized after such payment. Under-capitalized institutions are also subject to growth limitations and are required by the appropriate federal banking agency to submit a capital restoration plan. If any depository institution subsidiary of a holding company is required to submit a capital restoration plan, the holding company would be required to provide a limited guarantee regarding compliance with the plan as a condition of approval of such plan.

Depending upon the severity of the under capitalization, the under-capitalized institutions may be subject to a number of requirements and restrictions, including orders to sell sufficient voting stock to become adequately-capitalized, requirements to reduce total assets, cessation of receipt of deposits from correspondent banks, and restrictions on making any payment of principal or interest on their subordinated debt. Critically under-capitalized institutions are subject to appointment of a receiver or conservator within 90 days of becoming so classified.

Under FDICIA, a depository institution that is not well-capitalized is generally prohibited from accepting brokered deposits and offering interest rates on deposits higher than the prevailing rate in its market. Since the Bank is well-capitalized, the FDICIA brokered deposit rule did not adversely affect its ability to accept brokered deposits. The Bank had $2.2 billion of such brokered deposits at December 31, 2014.

On September 3, 2014, the U.S. banking regulators approved a final rule to implement a minimum liquidity coverage ratio (LCR) requirement for banking organizations with total consolidated assets of $250 billion or more, and a less stringent modified LCR requirement to depository institution holding companies below the threshold but withaverage total consolidated assets of $50 billion or more.more, including the Bank. The LCR requiresfinal guidelines provide, among other things, that a covered banking organizations tobank should develop and maintain HQLA equal to projected stressed cash outflows over a 30 calendar-day stress scenario. We arerecovery plan that is appropriate for its individual size, risk profile, activities, and complexity, including the complexity of its organizational and legal entity structure. OCC examiners will assess the appropriateness and adequacy of a covered by the modified LCR requirement and therefore subject to the phase-inbank’s ongoing recovery planning process as part of the rule beginningagency’s regular supervisory activities. Our compliance date is within 18 months from January 2016 at 90% and January 2017 at 100%. We will also be1, 2017.

Source of Strength
Huntington is required to calculate the LCR monthly.

As a bank holding company, we must actserve as a source of financial and managerial strength to the Bank.

Under the Dodd-Frank Act, a bank holding company must act as a source of financialBank and managerial strength to each of its subsidiary banks and must commit resources to support each such subsidiary bank.the Bank. This support may be required by the Federal Reserve at times when we might otherwise determine not to provide it or when doing so is not otherwise in the interests of Huntington or our stockholders or creditors. The Federal Reserve may require a bank holding companyBHC to make capital injections into a troubled subsidiary bank. Itbank and may charge the bank holding companyBHC with engaging in unsafe and unsound practices if the bank holding companyBHC fails to commit resources to such a subsidiary bank or if it undertakes actions that the Federal Reserve believes might jeopardize the bank holding company’sBHC’s ability to commit resources to such subsidiary bank.

Any loans


Prompt Corrective Action
FDICIA requires federal banking agencies to take “prompt corrective action” against banks that do not meet minimum capital requirements. Under this regime, the FDICIA imposes progressively more restrictive constraints on a bank’s operations, management and capital distributions, depending on the capital category in which an institution is classified. For instance, only a well-capitalized bank may accept brokered deposits without prior regulatory approval and an adequately capitalized bank may only do so with such prior approval.
Under FDICIA, five capital levels or categories are established: well capitalized; adequately capitalized; undercapitalized; significantly undercapitalized; and critically undercapitalized. These capital categories are determined solely for purposes of applying the prompt corrective action provisions, and such capital categories may not constitute an accurate representation of our overall financial condition or prospects. An institution may be downgraded to, or deemed to be in, a capital category that is lower than is indicated by a holding companyits capital ratios if it is determined to a subsidiary bank are subordinatebe in right of payment to deposits andan unsafe or unsound condition or if it receives an unsatisfactory examination rating with respect to certain other indebtedness of such subsidiary bank. In the event of a bank holding company’s bankruptcy, an appointed bankruptcy trustee will assume any commitment by the holding company to a federal bank regulatory agency to maintainmatters. FDICIA imposes progressively more restrictive constraints on operations, management and capital distributions, as the capital category of a subsidiary bank. Moreover, the bankruptcy law provides that claims based on any such commitment will be entitledan institution declines. Failure to a priority of payment over the claims of the institution’s general unsecured creditors, including the holders of its note obligations.

Federal law permits the OCC to order the pro-rata assessment of shareholders of a national bank whose capital stock has become impaired, by losses or otherwise, to relieve a deficiency in such national bank’s capital stock. This statute also provides for the enforcement of any such pro-rata assessment of shareholders of such national bank to cover such impairment of capital stock by sale, to the extent necessary, ofmeet the capital stock owned by any assessed shareholder failingrequirements could also require a depository institution to pay the assessment. As the sole shareholder of the Bank, weraise capital. Ultimately, critically undercapitalized institutions are subject to such provisions.

Moreover, the claimsappointment of a receiver or conservator.

Upon the insolvency of an insured depository institution, for administrative expensessuch as the Bank, the FDIC may be appointed as the conservator or receiver of the institution. The FDIC has broad powers to transfer any assets and liabilities without the claims of holders of deposit liabilities of such an institution are accorded priority over the claims of general unsecured creditors of such an institution, including the holdersapproval of the institution’s note obligations, in the event of liquidation or other resolution of such institution. Claims ofcreditors.
Transactions between a receiver for administrative expensesBank and claims of holders of deposit liabilities of the Bank, including the FDIC as the insurer of such holders, would receive priority over the holders of notes and other senior debt of the Bank in the event of liquidation or other resolution and over our interests as sole shareholder of the Bank.

Bank transactions with affiliates.

its Affiliates

Federal banking lawlaws and regulation imposesregulations impose qualitative standards and quantitative limitations upon certain transactions bybetween a bank withand its affiliates, including the bank’sbetween a bank and its holding company and certain companies that the bank holding companyBHC may be deemed to control for these purposes. Transactions covered by these provisions must be on arm’s-length terms, and cannot exceed certain

amounts which are determined with reference to the bank’s regulatory capital. Moreover, if the transaction is a loan or other extension of credit, it must be secured by collateral in an amount and quality expressly prescribed by statute, and if the affiliate is unable to pledge sufficient collateral, the bank holding companyBHC may be required to provide it.

Provisions added by the The Dodd-Frank Act expanded the coverage and scope of (i) the definition of affiliate to include any investment fund having any bank or BHC-affiliated company as an investment advisor, (ii) credit exposures subjectthese regulations, including by applying them to the prohibition on the acceptance of low-quality assets or securities issued by an affiliate as collateral, the quantitative limits,credit exposure arising under derivative transactions, repurchase and the collateralization requirements to now include credit exposures arising out of derivative,reverse repurchase agreement,agreements, and securities lending/borrowing transactions, and (iii) transactions subjectlending transactions.

Heightened Governance and Risk Management Standards
The OCC has published final guidelines to quantitative limits to now also include credit collateralized by affiliate-issued debt obligations that are not securities. In addition, these provisions require that a credit extension to an affiliate remain securedupdate expectations for the governance and risk management practices of certain large financial institutions, including national banks with $50 billion or more in accordance withaverage total consolidated assets, such as the collateral requirements at all times that it is outstanding, rather than the previous requirement of only at the inception or upon material modification of the transaction. They also raise significantly the procedural and substantive hurdles required to obtain a regulatory exemption from the affiliate transaction requirements. While these provisionsBank. The guidelines, which became effective on July 21, 2012,November 10, 2014, require covered banks to establish and adhere to a written governance framework in order to manage and control their risk-taking activities. In addition, the Federal Reserve has not yet issued a proposed ruleguidelines provide standards for the institutions’ boards of directors to implement them.

As a financial holding company, we areoversee the risk governance framework. Given its size and the phased implementation schedule, the Bank became subject to additional laws and regulations.these heightened standards effective May 2016. As discussed in

In order to maintain its status as a financial holding company, a bank holding company’s depository subsidiaries must all be both well-capitalized and well-managed, and must meet their Community Reinvestment Act obligations.

Financial holding company powers relate to financial activities that are specified inItem 1A: Risk Factors, the Bank Holding Companycurrently has a written governance framework and associated controls.

Anti-Money Laundering
The Bank Secrecy Act, or determinedas amended by the Federal Reserve, in coordination with the Secretary of the Treasury, to be financial in nature, incidental to an activity that is financial in nature, or complementary to a financial activity, provided that the complementary activity does not pose a safety and soundness risk. In addition, we are required by the Bank Holding CompanyPatriot Act, to obtain Federal Reserve approval prior to acquiring, directly or indirectly, ownership or control of voting shares of any bank, if, after such acquisition, we would own or control more than 5% of its voting stock. Furthermore, the Dodd-Frank Act added a new provision to the Bank Holding Company Act, which requires bank holding companies with total consolidated assets equal to or greater than $50 billion to obtain prior approval from the Federal Reserve to acquire a nondepository company having total consolidated assets of $10 billion or more.

We also must comply withcontains anti-money laundering and customer privacyfinancial transparency laws and mandated the implementation of various regulations as well as corporate governance, accounting,applicable to all financial institutions, including standards for verifying client identification at account opening, and reporting requirements.

obligations to monitor client transactions and report suspicious activities.

The USA Patriot Act is intended to strengthen the ability of 2001U.S. law enforcement agencies and its related regulations requireintelligence communities to cooperate in the prevention, detection and prosecution of international money laundering and the financing of terrorism. The Patriot Act contains anti-money laundering measures requiring insured depository institutions, broker-dealers, and certain other financial institutions to have policies, procedures, and controls to detect, prevent, and report money laundering and terrorist financing. Failure to comply with these regulations may result in fines, penalties, lawsuits, regulatory sanctions, reputation damage, or restrictions on business. Federal banking regulators are required, when reviewing bank holding company acquisition and bank merger applications, to take into account the effectiveness of the anti-money laundering activities of the applicants.

Privacy
Federal law contains extensive consumer privacy protection provisions, including substantial consumer privacy protections provided under the Gramm-Leach-Bliley Act of 1999. Under these provisions, a financial institution must provide to its customers, at the inception of the customer relationship and generally annually thereafter, the institution’s policies and procedures regarding the handling and safeguarding of customers’ nonpublic personal information. These provisions also provide that, except for certain limited exceptions, an institution may not provide such nonpublic personal information to unaffiliated third parties unless the institution discloses to the customer that such information may be so provided and the customer is given the opportunity to opt out of such disclosure. Federal law makes it a criminal offense, except in limited circumstances, to obtain or attempt to obtain customer information of a financial nature by fraudulent or deceptive means.
FDIC Insurance
DIF provides insurance coverage for certain deposits, which is funded through assessments on banks. The Financial Crimes Enforcement Network hasBank accepts deposits that are insured by the DIF. As a DIF member, the Bank must pay insurance premiums. The FDIC may take action to increase the Bank’s insurance premiums based on various factors, including the FDIC’s assessment of its risk profile. The Dodd-Frank Act required the FDIC to change the deposit insurance assessment base from deposits to average consolidated total assets minus average tangible equity. In March 2016, the FDIC issued a final rule to increase the DIF from 1.15% to the statutorily required minimum level of 1.35%. Under the Dodd-Frank Act, banks with $10 billion or more in total assets, such as the Bank, are responsible for funding this increase.
On November 15, 2016, the FDIC adopted a final rule to facilitate prompt payment of FDIC-insured deposits when large insured depository institutions (those with more than two million deposit accounts) fail. The final rule, which is expected to become effective on April 1, 2017, requires us to configure our information technology system to be capable of calculating the insured and uninsured amount in each deposit account by ownership right and capacity, which would be used by the FDIC to make deposit insurance determinations in the event of our failure, and maintain complete and accurate information needed by the FDIC to determine deposit insurance coverage with respect to each deposit account, except as otherwise provided. We will have three years after the effective date for implementation.
Compensation
Our compensation practices are subject to oversight by the Federal Reserve and, with respect to some of our subsidiaries and employees, by other financial regulatory bodies. The scope and content of compensation regulation in the financial industry are continuing to develop, and we expect that these regulations and resulting market practices will continue to evolve over a number of years.
The federal bank regulatory agencies have provided guidance designed to ensure that incentive compensation arrangements at banking organizations take into account risk and are consistent with safe and sound practices. The guidance provides that supervisory findings with respect to incentive compensation will be incorporated, as appropriate, into the organization’s supervisory ratings, which can affect its ability to make acquisitions or perform other actions. The guidance also provides that enforcement actions may be taken against a banking organization if its incentive compensation arrangements or related risk management, control or governance processes pose a risk to the organization’s safety and soundness.
In 2016 the federal banking regulatory agencies, including the Federal Reserve, the OCC and the SEC, jointly proposed a rule to implement Section 956 of the Dodd-Frank Act. Section 956 generally requires the federal bank regulatory agencies to jointly issue regulations or guidelines: (1) prohibiting incentive-based payment arrangements that the agencies determine encourage inappropriate risks by certain financial institutions by providing excessive compensation or that could lead to material financial loss; and (2) requiring those financial institutions to disclose information concerning incentive-based compensation arrangements to the appropriate federal regulator.
Cyber Security
The CISA, which became effective on December 18, 2015, is intended to improve cyber security in the United States by enhanced sharing of information about security threats among the U.S. government and private sector entities, including financial institutions. The CISA also authorizes companies to monitor their own systems notwithstanding any other provision of law, and allows companies to carry out defensive measures on their own systems from cyber-attacks. The law includes liability protections for those samecompanies that share cyber threat information with third parties so long as such sharing activity is conducted in accordance with CISA.

Enhanced Cyber Risk Management Standards
On November 22, 2016, the federal banking agencies released an ANPR regarding enhanced cyber risk management standards (enhanced standards) for large and interconnected entities under their supervision. The agencies stated that they were considering establishing enhanced standards to increase the operational resilience of covered entities and if adopted,reduce the proposal will prescribe customer due diligence requirements, includingimpact on the financial system in case of a new regulatory mandatecyber event experienced by a covered entity. The ANPR describes potential enhanced cyber standards that are divided into five general categories: cyber risk governance; cyber risk management; internal dependency management; external dependency management; and incident response, cyber resilience, and situational awareness. The agencies are considering implementing the enhanced standards in a tiered manner, imposing more stringent standards on the systems of those entities that are critical to identify the beneficial owners of legal entities which are customers.

Pursuant to Title Vfunctioning of the Gramm-Leach-Blileyfinancial sector. The Federal Reserve is considering applying the enhanced standards on an enterprise-wide basis to all BHCs, such as us, with total consolidated assets of $50 billion or more. The OCC is considering applying the standards to any national bank, such as the Bank, that is a subsidiary of a bank holding company with total consolidated assets of $50 billion or more.

Community Reinvestment Act we, like all other
The CRA requires the Bank’s primary federal bank regulatory agency, the OCC, to assess the bank’s record in meeting the credit needs of the communities served by the Bank, including low- and moderate-income neighborhoods and persons. Institutions are assigned one of four ratings: “Outstanding,” “Satisfactory,” “Needs to Improve” or “Substantial Noncompliance.” This assessment is reviewed for any bank that applies to merge or consolidate with or acquire the assets or assume the liabilities of an insured depository institution, or to open or relocate a branch office. The CRA record of each subsidiary bank of a BHC, such as the Bank, also is assessed by the Federal Reserve in connection with any acquisition or merger application.
CFPB Regulation and Supervision
We are subject to supervision and regulation by the CFPB with respect to federal consumerprotection laws, including laws relating to fair lending and the prohibition of unfair, deceptive or abusive acts or practices in connection with the offer, sale or provision of consumer financial institutions, are required to:

provide notice to our customers regarding privacy policiesproducts and practices,

services.

inform our customers regardingOn October 3, 2015, the conditionsCFPB’s final rules on integrated mortgage disclosures under which their nonpublic personal information may be disclosed to nonaffiliated third parties,the Truth in Lending Act and

give our customers an option to prevent certain disclosure the Real Estate Settlement Procedures Act became effective. On January 1, 2016, most requirements of such information to nonaffiliated third parties.

The Sarbanes-Oxley Act of 2002 imposed new or revised corporate governance, accounting, and reporting requirements on us. In addition to athe OCC’s Final Rule in Loans in Areas Having Special Flood Hazards (the Flood Final Rule) became effective, including the requirement that chief executive officersflood insurance premiums and chief financial officers certify financial statementsfees for most mortgage loans be escrowed subject to certain exceptions. The Flood Final Rule also incorporated other existing flood insurance requirements and exceptions (e.g. the exemption from flood insurance requirements for non-residential detached structures - a discretionary item) with those portions of the Flood Final Rule becoming effective on October 1, 2015.

Throughout 2016, the CFPB continued its focus on fair lending practices of indirect automobile lenders. This focus led to some lenders to enter into consent orders with the CFPB and Department of Justice. Indirect automobile lenders have also received continued pressure from the CFPB to limit or eliminate discretionary pricing by dealers. Finally, the CFPB has implemented its larger participant rule for indirect automobile lending which brings larger non-bank indirect automobile lenders under CFPB supervision.
Banking regulatory agencies have increasingly used their authority under Section 5 of the Federal Trade Commission Act to take supervisory or enforcement action with respect to unfair or deceptive acts or practices by banks under standards developed many years ago by the Federal Trade Commission in writing,order to address practices that may not necessarily fall within the statute imposed requirements affecting, among other matters,scope of a specific banking or consumer finance law.  The Dodd-Frank Act also gave to the composition and activitiesCFPB similar authority to take action in connection with unfair, deceptive, or abusive acts or practices by entities subject to CFPB supervisory or enforcement authority.  Banks face considerable uncertainty as to the regulatory interpretation of audit committees, disclosures relating to corporate insiders and insider transactions, code of ethics, and the effectiveness of internal controls over financial reporting.

“abusive” practices.

Available Information

This information may be read and copied at the Public Reference Room of the SEC at 100 F Street, N.E., Washington, D.C. 20549. You can obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet web site that contains reports, proxy statements, and other information about issuers, like us, who file electronically with the SEC. The address of the site ishttp://www.sec.gov. The reports and other information filed by us with the SEC are also available free of charge at our Internet web site. The address of the site ishttp://www.huntington.com. Except as specifically incorporated by reference into this Annual Report on Form 10-K, information on those web sites is not part of this report. You also should be able to inspect reports, proxy statements, and other information about us at the offices of the NASDAQ National Market at 33 Whitehall Street, New York, New York.



Item 1A: Risk Factors

Risk Governance

We use a multi-faceted approach to risk governance. It begins with the board of directors defining our risk appetite as aggregate moderate-to-low. This does not preclude engagement in select higher risk activities. Rather, the definition is intended to represent an averageaggregate view of where we want our overall risk to be managed.

Three board committees primarily oversee implementation of this desired risk appetite and monitoring of our risk profile:
The Audit Committee Risk Oversight Committee,oversees the integrity of the consolidated financial statements, including policies, procedures, and practices regarding the Technology Committee:

preparation of financial statements, the financial reporting process, disclosures, and internal control over financial reporting. The Audit Committee is principally involved withalso provides assistance to the board in overseeing the integrity of financial statements, providing oversight of the internal audit department,division and selectingthe independent registered public accounting firm’s qualifications and independence; compliance with our external auditors. OurFinancial Code of Ethics for the chief auditor reports directly to the Audit Committee Chair.

executive officer and senior financial officers; and compliance with corporate securities trading policies.

The Risk Oversight Committee supervisesassists the board of directors in overseeing management of material risks, the approval and monitoring of the Company’s capital position and plan supporting our overall aggregate moderate-to-low risk profile, the risk governance structure, compliance with applicable laws and regulations, and determining adherence to the board’s stated risk appetite. The committee has oversight responsibility with respect to the full range of inherent risks: market, credit, liquidity, legal, compliance/regulatory, operational, strategic, and reputational. This committee also oversees our capital management and planning process, ensures that the amount and quality of capital are adequate in relation to expected and unexpected risks, and that our capital levels exceed “well-capitalized” requirements.

The Technology Committee assists the board of directors in fulfilling its oversight responsibilities with respect to all technology, cyber security, and third-party risk management processes which primarily cover credit, market, liquidity,strategies and plans. The committee is charged with evaluating Huntington’s capability to properly perform all technology functions necessary for its business plan, including projected growth, technology capacity, planning, operational compliance, legal, strategic,execution, product development, and reputational risks. It also approves the charters of executive risk management committees, sets risk limits on certain risk measures (e.g., economic value of equity), receives results of the risk self-assessment process, and routinely engages management in review of key risks. Our credit review executive reports directly to the Risk Oversight Committee.

capacity. The Technology Committeecommittee provides oversight of technology investments and plans to drive efficiency as well as to meet defined standards for risk, security, and Company-defined targets;redundancy. The Committee oversees the allocation of technology costs and ensureensures that exposure to securitythey are understood by the board of directors. The Technology Committee monitors and redundancy risks are definedevaluates innovation and transparenttechnology trends that may affect the Company’s strategic plans, including monitoring of overall industry trends. The Technology Committee reviews and provides oversight of the Bank’s overall third party relationship risk management process.

company’s continuity and disaster recovery planning and preparedness.

The Audit and Risk Oversight committeesCommittees routinely hold executive sessions with our key officers engaged in accounting and risk management. On a periodic basis, the two committees meet in joint session to cover matters relevant to both, such as the construct and appropriateness of the ACL, which is reviewed quarterly. All directors have access to information provided to each committee and all scheduled meetings are open to all directors.

Further, through its Compensation Committee, the board of directors seeks to ensure its system of rewards is risk-sensitive and aligns the interests of management, creditors, and shareholders. We utilize a variety of compensation-related tools to induce appropriate behavior, including common stock ownership thresholds for the chief executive officer and certain members of senior management, a requirement to hold until retirement or exit from the company,Company, a portion of net shares received upon exercise of stock options or release of restricted stock awards (50% for executive officers and 25% for other award recipients), equity deferrals, recoupment provisions, and the right to terminate compensation plans at any time.

Management has implemented an Enterprise Risk Management and Risk Appetite Framework. Critically important is our self-assessment process, in which each business segment produces an analysis of its risks and the strength of its risk controls. The segment analyses are combined with assessments by our risk management organization of major risk sectors (e.g., credit, market, liquidity, operational, legal, compliance, reputational, compliance, etc.)and strategic) to produce an overall enterprise risk assessment. Outcomes of the process include a determination of the quality of the overall control process, the direction of risk, and our position compared to the defined risk appetite.

Management also utilizes a wide series of metrics (key risk indicators) to monitor risk positions throughout the Company. In general, a range for each metric is established, which allows the company,Company, in aggregate, to operate within aan aggregate moderate-to-low risk profile. Deviations from the range will indicate if the risk being measured is moving,exceeds desired tolerance, which may then necessitate corrective action.

We also have four other executive level committees to manage risk: ALCO, Credit Policy and Strategy, Risk Management, and Capital Management. Each committee focuses on specific categories of risk and is supported by a series of subcommittees that are tactical in nature. We believe this structure helps ensure appropriate escalation of issues and overall communication of strategies.


Huntington utilizes three lines of defense with regard to risk management: (1) business segments, (2) corporate risk management, and (3) internal audit and credit review. To induce greater ownership of risk within its business segments, segment risk officers have been embedded in the business to identify and monitor risk, elevate and remediate issues, establish controls, perform self-testing, and oversee the self-assessment process. Corporate Risk Management establishes policies, sets operating limits, reviews new or modified products/processes, ensures consistency and quality assurance within the segments, and produces the enterprise risk assessment. The Chief Risk Officer has significant input into the design and outcome of incentive compensation plans as they apply to risk. Internal Audit and Credit Review provide additional assurance that risk-related functions are operating as intended.

Risk Overview

We, like other financial companies, are subject to a number of risks that may adversely affect our financial condition or results of operations, many of which are outside of our direct control, though efforts are made to manage those risks while optimizing returns. Among the risks assumed are: (1) credit
Credit risk, which is the risk of loss due to loan and lease customers or other counterparties not being able to meet their financial obligations under agreed upon terms, (2) terms;
Market risk, which occurs when fluctuations in interest rates impact earnings and capital. Financial impacts are realized through changes in the interest rates of balance sheet assets and liabilities (net interest margin) or directly through valuation changes of capitalized MSR and/or trading assets (noninterest income);
Liquidity risk, which is the risk to current or anticipated earnings or capital arising from an inability to meet obligations when they come due. Liquidity risk includes the inability to access funding sources or manage fluctuations in funding levels. Liquidity risk also results from the failure to recognize or address changes in market conditions that affect the Bank’s ability to liquidate assets quickly and with minimal loss in value;
Operational and legal risk, which is the risk of loss due to changes in the market value of assets and liabilities due to changes in market interest rates, foreign exchange rates, equity prices, and credit spreads, (3) liquidity risk, which is (a) the risk of loss due to the possibility that funds may not be available to satisfy current or future commitments based on external macro market issues, investor and customer perception of financial strength, and events unrelated to us such as war, terrorism, or financial institution market specific issues, and (b) the risk of loss based on our ability to satisfy current or future funding commitments due to the mix and maturity structure of our balance sheet, amount of on-hand cash and unencumbered securities and the availability of contingent sources of funding, (4) operational and legal risk, which is the risk of loss due to human error,arising from inadequate or failed internal processes or systems, human errors or misconduct, or adverse external events. Operational losses result from internal fraud; external fraud, inadequate or inappropriate employment practices and controls, including the use of financialworkplace safety, failure to meet professional obligations involving customers, products, and business practices, damage to physical assets, business disruption and systems failures, and failures in execution, delivery, and process management.  Legal risk includes, but is not limited to, exposure to orders, fines, penalties, or other quantitative methodologies that may not adequately predict future results, violations of, or noncompliance with, laws, rules, regulations, prescribed practices, or ethical standards, and external influences suchpunitive damages resulting from litigation, as market conditions, fraudulent activities, disasters, and security risks, and (5) compliancewell as regulatory actions;
Compliance risk, which exposes us to money penalties, enforcement actions or other sanctions as a result of nonconformancenon-conformance with laws, rules, and regulations that apply to the financial services industry.industry; and

Strategic risk, which is defined as risk to current or anticipated earnings, capital, or enterprise value arising from adverse business decisions, improper implementation of business decisions or lack of responsiveness to industry / market changes.
We also expend considerable effort to containprotect our reputation. Reputation risk which emanates from execution of our business strategies and work relentlessly to protect the Company’s reputation.Strategic risk andreputational risk do does not easily lend themselvesitself to traditional methods of measurement. Rather, we closely monitor themit through processes such as new product / initiative reviews, frequent financial performance reviews, employeecolleague and client surveys, monitoring market intelligence,media tone, periodic discussions between management and our board, and other such efforts.

In addition to the other information included or incorporated by reference into this report, readers should carefully consider that the following important factors, among others, could negatively impact our business, future results of operations, and future cash flows materially.

Credit Risks:

1. Our ACL level may prove to be inappropriate or be negatively affected by credit risk exposures which could materially adversely affect our net income and capital.

Our business depends on the creditworthiness of our customers. Our ACL of $666.0$736 million at December 31, 2014,2016, represented Management’s estimate of probable losses inherent in our loan and lease portfolio as well as our unfunded loan commitments and letters of credit. We periodicallyregularly review our ACL for appropriateness. In doing so, we consider economic conditions and trends, collateral values, and credit quality indicators, such as past charge-off experience, levels of past due loans, and NPAs. There is no certainty that our ACL will be appropriate over time to cover losses in the portfolio because of unanticipated adverse changes in the economy, market conditions, or events adversely affecting specific customers, industries, or markets. If the credit quality of our customer base materially decreases, if the risk profile of a market, industry, or group of customers changes materially, or if the ACL is not appropriate, our net income and capital could be materially adversely affected, which in turn, could have a material adverse effect on our financial condition and results of operations.

In addition, bank regulators periodicallyregulatory review our ACLof risk ratings and may require us to increase our provision for loan and lease losses or loan charge-offs. Any increase in ourmay impact the level of the ACL or loan charge-offs as required by these regulatory authoritiesand could have a material adverse effect on our financial condition and results of operations.


2. Weakness in economic conditions could materially adversely affect our business.

Our performance could be negatively affected to the extent there is deterioration in business and economic conditions which have direct or indirect material adverse impacts on us, our customers, and our counterparties. These conditions could result in one or more of the following:

A decrease in the demand for loans and other products and services offered by us;

A decrease in customer savings generally and in the demand for savings and investment products offered by us; and

An increase in the number of customers and counterparties who become delinquent, file for protection under bankruptcy laws, or default on their loans or other obligations to us.

An increase in the number of delinquencies, bankruptcies, or defaults could result in a higher level of NPAs, NCOs, provision for credit losses, and valuation adjustments on loans held for sale. The markets we serve are dependent on industrial and manufacturing businesses and, thus, are particularly vulnerable to adverse changes in economic conditions affecting these sectors.

Market Risks:

1. Changes in interest rates could reduce our net interest income, reduce transactional income, and negatively impact the value of our loans, securities, and other assets. This could have a materialan adverse impact on our cash flows, financial condition, results of operations, and capital.

Our results of operations depend substantially on net interest income, which is the difference between interest earned on interest earning assets (such as investments and loans) and interest paid on interest bearing liabilities (such as deposits and borrowings). Interest rates are highly sensitive to many factors, including governmental monetary policies and domestic and international economic and political conditions. Conditions such as inflation, deflation, recession, unemployment, money supply, and other factors beyond our control may also affect interest rates. If our interest earning assets mature or reprice faster than interest bearing liabilities in a declining interest rate environment, net interest income could be materially adversely impacted. Likewise, if interest bearing liabilities mature or reprice more quickly than interest earning assets in a rising interest rate environment, net interest income could be adversely impacted. The continuation of the current low interest rate environment could affect consumer and business behavior in ways that are adverse to us and could also constrict our net interest income margin which may restrict our ability to increase net interest income.

Changes in interest rates can affect the value of loans, securities, assets under management, and other assets, including mortgage and nonmortgage servicing rights. An increase in interest rates that adversely affects the ability of borrowers to pay the principal or interest on loans and leases may lead to an increase in NPAs and a reduction of income recognized, which could have a material adverse effect on our results of operations and cash flows. When we place a loan on nonaccrual status, we reverse any accrued but unpaid interest receivable, which decreases interest income. However, we continue to incur interest expense as a cost of funding NALs without any corresponding interest income. In addition, transactional income, including trust income, brokerage income, and gain on sales of loans can vary significantly from period-to-period based on a number of factors, including the interest rate environment.

A decline in interest rates along with a flattening yield curve limits our ability to reprice deposits given the current historically low level of interest rates and could result in declining net interest margins if longer duration assets reprice faster than deposits.

Rising interest rates reduce the value of our fixed-rate debt securities and cash flow hedging derivatives portfolio. Any unrealized loss from these portfolios impacts OCI, shareholders’ equity, and the Tangible Common Equity ratio. Any realized loss from these portfolios impacts regulatory capital ratios, notably Tier I and Total risk-based capital ratios. In a rising interest rate environment, pension and other post-retirement obligations somewhat mitigate negative OCI impacts from securities and financial instruments. For more information, refer to “Market Risk” of the MD&A.

Certain investment securities, notably mortgage-backed securities, are very sensitive to rising and falling rates. Generally, when rates rise, prepayments of principal and interest will decrease and the duration of mortgage-backed securities will increase. Conversely, when rates fall, prepayments of principal and interest will increase and the duration of mortgage-backed securities will decrease. In either case, interest rates have a significant impact on the value of mortgage-backed securities investments.

securities.

MSR fair values are sensitive to movements in interest rates, as expected future net servicing income depends on the projected outstanding principal balances of the underlying loans, which can be reduced by prepayments. Prepayments usually increase when mortgage interest rates decline and decrease when mortgage interest rates rise.
In addition to volatility associated with interest rates, the Company also has exposure to equity markets related to the investments within the benefit plans and other income from client based transactions.

2. Industry competition may have an adverse effect on our success.
Our profitability depends on our ability to compete successfully. We operate in a highly competitive environment, and we expect competition to intensify. Certain of our competitors are larger and have more resources than we do, enabling them to be more aggressive than us in competing for loans and deposits. In our market areas, we face competition from other banks and financial service companies that offer similar services. Some of our non-bank competitors are not subject to the same extensive regulations we are and, therefore, may have greater flexibility in competing for business. Our ability to compete successfully depends on a number of factors, including customer convenience, quality of service by investing in new products and services, personal contacts, pricing, and range of products. If we are unable to successfully compete for new customers and retain our current customers, our business, financial condition, or results of operations may be adversely affected. In particular, if we experience an outflow of deposits as a result of our customers seeking investments with higher yields or greater financial stability, or a desire to do business with our competitors, we may be forced to rely more heavily on borrowings and other sources of funding to operate our business and meet withdrawal demands, thereby adversely affecting our net interest margin.  For more information, refer to “Competition” section of Item 1: Business.
Liquidity Risks:

1. Changes in either Huntington’s financial condition or in the general banking industry could result in a loss of depositor confidence.

Liquidity is the ability to meet cash flow needs on a timely basis at a reasonable cost. The Bank uses its liquidity to extend credit and to repay liabilities as they become due or as demanded by customers. The board of directors establishes liquidity policies, including contingency funding plans, and limits and management establishes operating guidelines for liquidity.

Our primary source of liquidity is our large supply of deposits from consumer and commercial customers. The continued availability of this supply depends on customer willingness to maintain deposit balances with banks in general and us in particular. The availability of deposits can also be impacted by regulatory changes (e.g. changes in FDIC insurance, the Liquidity Coverage Ratio, etc.), and other events which can impact the perceived safety or economic benefits of bank deposits. While we make significant efforts to consider and plan for hypothetical disruptions in our deposit funding, market related, geopolitical, or other events could impact the liquidity derived from deposits.

2. We are a holding company and depend on dividends by our subsidiaries for most of our funds.
Huntington is an entity separate and distinct from the Bank. The Bank conducts most of our operations and Huntington depends upon dividends from the Bank to service Huntington's debt and to pay dividends to Huntington's shareholders. The availability of dividends from the Bank is limited by various statutes and regulations. It is possible, depending upon the financial condition including liquidity and capital adequacy of the Bank and other factors, that the OCC could limit the payment of dividends or other payments by the Bank. In addition, the payment of dividends by our other subsidiaries is also subject to the laws of the subsidiary’s state of incorporation, and regulatory capital and liquidity requirements applicable to such subsidiaries. In the event that the Bank was unable to pay dividends to us, we in turn would likely have to reduce or stop paying dividends on our Preferred and Common Stock. Our failure to pay dividends on our Preferred and Common Stock could have a material adverse effect on the market price of our Common Stock. Additional information regarding dividend restrictions is provided in Item 1. Regulatory Matters.
3. If we lose access to capital markets, we may not be able to meet the cash flow requirements of our depositors, creditors, and borrowers, or have the operating cash needed to fund corporate expansion and other corporate activities.

Wholesale funding sources include securitization, federal funds purchased, securities sold under repurchase agreements, non-core deposits, and long-term debt. The Bank is also a member of the Federal Home Loan Bank of Cincinnati, which provides members access to funding through advances collateralized with mortgage-related assets. We maintain a portfolio of highly-rated, marketable securities that is available as a source of liquidity.

Capital markets disruptions can directly impact the liquidity of Huntington and the Bank and Corporation.Bank. The inability to access capital markets funding sources as needed could adversely impact our financial condition, results of operations, cash flows, and level of regulatory-qualifying capital. We may, from time-to-time, consider using our existing liquidity position to opportunistically retire outstanding securities in privately negotiated or open market transactions.


4. A reduction in our credit rating could adversely affect our ability to raise funds including capital, and/or the holders of our securities.
The credit rating agencies regularly evaluate Huntington and the Bank, and credit ratings are based on a number of factors, including our financial strength and ability to generate earnings, as well as factors not entirely within our control, including conditions affecting the financial services industry, the economy, and changes in rating methodologies. There can be no assurance that we will maintain our current credit ratings. A downgrade of the credit ratings of Huntington or the Bank could adversely affect our access to liquidity and capital, and could significantly increase our cost of funds, trigger additional collateral or funding requirements, and decrease the number of investors and counterparties willing to lend to us or purchase our securities. This could affect our growth, profitability and financial condition, including liquidity.
Operational and Legal Risks:

1. We face security risks, including denial of service attacks, hacking, social engineering attacks targeting our colleagues and customers, malware intrusion or data corruption attempts, and identity theft that could result in the disclosure of confidential information, adversely affect our business or reputation, and create significant legal and financial exposure.

Our computer systems and network infrastructure are subject to security risks and could be susceptible to cyber-attacks, such as denial of service attacks, hacking, terrorist activities or identity theft. Financial services institutions and companies engaged in data processing have reported breaches in the security of their websites or other systems, some of which have involved sophisticated and targeted attacks intended to obtain unauthorized access to confidential information, destroy data, disable or degrade service, or sabotage systems, often through the introduction of computer viruses or malware, cyber-attacks and other means. Denial of service attacks have been launched against a number of large financial services institutions, including us. None of these events against us resulted in a breach of our client data or account information; however, the performance of our website, www.huntington.com, was adversely affected, and in some instances customers were prevented from accessing our website. We expect to be subject to similar attacks in the future. While events to date primarily resulted in inconvenience, future cyber-attacks could be more disruptive and damaging. Hacking and identity theft risks, in particular, could cause serious reputational harm. Cyber threats are rapidly evolving and we may not be able to anticipate or prevent all such attacks and could be held liable for any security breach or loss.

Despite efforts to ensure the integrity of our systems, we willmay not be able to anticipate all security breaches of these types, nor willmay we be able to implement guaranteed preventive measures against such security breaches. Persistent attackers may succeed in penetrating defenses given enough resources, time, and motive. The techniques used by cyber criminals change frequently, may not be recognized until launched and can originate from a wide variety of sources, including outside groups such as external service providers, organized crime affiliates, terrorist organizations or hostile foreign governments. These risks may increase in the future as we continue to increase our mobile-payment and other internet-based product offerings and expand our internal usage of web-based products and applications.

Even the most advanced internal control environment may be vulnerable to compromise. Targeted social engineering attacks and "spear phishing" attacks are becoming more sophisticated and are extremely difficult to prevent. The successful social engineer will attempt to fraudulently induce employees,colleagues, customers or other users of our systems to disclose sensitive information in order to gain access to its data or that of its clients.

A successful penetration or circumvention of system security could cause us serious negative consequences, including significant disruption of operations, misappropriation of confidential information, or damage to our computers or systems or those of our customers and counterparties. A successful security breach could result in violations of applicable privacy and other laws, financial loss to us or to our customers, loss of confidence in our security measures, significant litigation exposure, and harm to our reputation, all of which could have a material adverse effect on the Company.

2. The resolution of significant pending litigation, if unfavorable, could have a materialan adverse effect on our results of operations for a particular period.

We face legal risks in our businesses, and the volume of claims and amount of damages and penalties claimed in litigation and regulatory proceedings against financial institutions remain high. Substantial legal liability against us could have material adverse financial effects or cause significant reputational harm to us, which in turn could seriously harm our business prospects. It is possible that the ultimate resolution of these matters, if unfavorable, may be material to the results of operations for a particular reporting period.

Note 2021 of the Notes to Consolidated Financial Statements updates the status of certain material litigation concerningincluding litigation related to the bankruptcy of Cyberco Holdings, Inc. Although the bank maintains litigation reserves related to this case, the ultimate resolution of the matter, if unfavorable, may be material to our results of operations for a particular reporting period.


3. We face significant operational risks which could lead to financial loss, expensive litigation, and loss of confidence by our customers, regulators, and capital markets.

We are exposed to many types of operational risks, including the risk of fraud or theft by employeescolleagues or outsiders, unauthorized transactions by employeescolleagues or outsiders, or operational errors by employees.colleagues, business disruption, and system failures. Huntington executes against a significant number of controls, a large percent of which are manual and dependent on adequate execution by colleagues and third partythird-party service providers. There is inherent risk that unknown single points of failure through the execution chain could give rise to material loss through inadvertent errors or malicious attack. These operational risks could lead to financial loss, expensive litigation, and loss of confidence by our customers, regulators, and the capital markets.

Moreover, negative public opinion can result from our actual or alleged conduct in any number of activities, including lending practices,clients, products and business practices; corporate governance, and acquisitionsgovernance; acquisitions; and from actions taken by government regulators and community organizations in response to those activities. Negative public opinion can adversely affect our ability to attract and retain customers and can also expose us to litigation and regulatory action.

Relative to acquisitions, we cannot predict if, or when, we will be able to identify and attract acquisition candidates or make acquisitions on favorable terms. We incur risks and challenges associated with the integration of employees, accounting systems, and technology platforms from acquired businesses and institutions in a timely and efficient manner, and we cannot guarantee that we will be successful in retaining existing customer relationships or achieving anticipated operating efficiencies.

efficiencies expected from such acquisitions.  Acquisitions may be subject to the receipt of approvals from certain governmental authorities, including the Federal Reserve, the OCC, and the United States Department of Justice, as well as the approval of our shareholders and the shareholders of companies that we seek to acquire. These approvals for acquisitions may not be received, may take longer than expected, or may impose conditions that are not presently anticipated or that could have an adverse effect on the combined company following the acquisitions. Subject to requisite regulatory approvals, future business acquisitions may result in the issuance and payment of additional shares of stock, which would dilute current shareholders’ ownership interests.  Additionally, acquisitions may involve the payment of a premium over book and market values. Therefore, dilution of our tangible book value and net income per common share could occur in connection with any future transaction.

4. Failure to maintain effective internal controls over financial reporting in the future could impair our ability to accurately and timely report our financial results or prevent fraud, resulting in loss of investor confidence and adversely affecting our business and our stock price.

Effective internal controls over financial reporting are necessary to provide reliable financial reports and prevent fraud. As a financial holding company, weWe are subject to regulation that focuses on effective internal controls and procedures. Such controls and procedures are modified, supplemented, and changed from time-to-time as necessitated by our growth and in reaction to external events and developments. Any failure to maintain in the future, an effective internal control environment could impact our ability to report our financial results on an accurate and timely basis, which could result in regulatory actions, loss of investor confidence, and adverselyan adverse impact on our business and our stock price.

5. We rely on quantitative models to measure risks and to estimate certain financial values.

Quantitative models may be used to help manage certain aspects of our business and to assist with certain business decisions, including estimating probable loan losses, measuring the fair value of financial instruments when reliable market prices are unavailable, estimating the effects of changing interest rates and other market measures on our financial condition and results of operations, managing risk, and for capital planning purposes (including during the CCAR capital planning and capital adequacy process). Our measurement methodologies rely on many assumptions, historical analyses, and correlations. These assumptions may not capture or fully incorporate conditions leading to losses, particularly in times of market distress, and the historical correlations on which we rely may no longer be relevant. Additionally, as businesses and markets evolve, our measurements may not accurately reflect this evolution. Even if the underlying assumptions and historical correlations used in our models are adequate, our models may be deficient due to errors in computer code, badinaccurate data, misuse of data, or the use of a model for a purpose outside the scope of the model’s design.

All models have certain limitations. Reliance on models presents the risk that our business decisions based on information incorporated from models will be adversely affected due to incorrect, missing, or misleading information. In addition, our models may not capture or fully express the risks we face, may suggest that we have sufficient capitalization when we do not, or may lead us to misjudge the business and economic environment in which we will operate. If our models fail to produce reliable results on an ongoing basis, we may not make appropriate risk management, capital planning, or other business or financial decisions. Strategies that we employ to manage and govern the risks associated with our use of models may not be effective or fully reliable. Also, information that we provide to the public or regulators based on poorly designed models could be inaccurate or misleading.

Banking regulators continue to focus on the models used by banks and bank holding companies in their businesses. Some of our decisions that the regulators evaluate, including distributions to our shareholders, could be affected adversely due to their perception that the quality of the models used to generate the relevant information is insufficient.


6. We rely on third parties to provide key components of our business infrastructure.
We rely on third-party service providers to leverage subject matter expertise and industry best practice, provide enhanced products and services, and reduce costs. Although there are benefits in entering into third-party relationships with vendors and others, there are risks associated with such activities. When entering a third-party relationship, the risks associated with that activity are not passed to the third-party but remain our responsibility. The Technology Committee of the board of directors provides oversight related to the overall risk management process associated with third-party relationships. Management is accountable for the review and evaluation of all new and existing third-party relationships. Management is responsible for ensuring that adequate controls are in place to protect us and our customers from the risks associated with vendor relationships.
Increased risk could occur based on poor planning, oversight, control, and inferior performance or service on the part of the third-party, and may result in legal costs or loss of business. While we have implemented a vendor management program to actively manage the risks associated with the use of third-party service providers, any problems caused by third-party service providers could adversely affect our ability to deliver products and services to our customers and to conduct our business. Replacing a third-party service provider could also take a long period of time and result in increased expenses.
7. Changes in accounting policies, standards, and interpretations could affect how we report our financial condition and results of operations.
The FASB, regulatory agencies, and other bodies that establish accounting standards periodically change the financial accounting and reporting standards governing the preparation of our financial statements. Additionally, those bodies that establish and interpret the accounting standards (such as the FASB, SEC, and banking regulators) may change prior interpretations or positions on how these standards should be applied. These changes can be difficult to predict and can materially affect how we record and report our financial condition and results of operations.
For further discussion, see Note 2 of the Notes to Consolidated Financial Statements.
8. Impairment of goodwill could require charges to earnings, which could result in a negative impact on our results of operations.
Our goodwill could become impaired in the future. If goodwill were to become impaired, it could limit the ability of the Bank to pay dividends to Huntington Bancshares Incorporated, adversely impacting Huntington Bancshares Incorporated's liquidity and ability to pay dividends or repay debt. The most significant assumptions affecting our goodwill impairment evaluation are variables including the market price of our Common Stock, projections of earnings, and the control premium above our current stock price that an acquirer would pay to obtain control of us. We are required to test goodwill for impairment at least annually or when impairment indicators are present. If an impairment determination is made in a future reporting period, our earnings and book value of goodwill will be reduced by the amount of the impairment. If an impairment loss is recorded, it will have little or no impact on the tangible book value of our Common Stock, or our regulatory capital levels, but such an impairment loss could significantly reduce the Bank’s earnings and thereby restrict the Bank's ability to make dividend payments to us without prior regulatory approval, because Federal Reserve policy states the bank holding company dividends should be paid from current earnings. At December 31, 2016, the book value of our goodwill was $2.0 billion, all of which was recorded at the Bank. Any such write down of goodwill or other acquisition related intangibles will reduce Huntington’s earnings, as well.
9. Negative publicity could damage our reputation and could significantly harm our business.
Our ability to attract and retain customers, clients, investors, and highly-skilled management and employees is affected by our reputation. Public perception of the financial services industry in general was damaged as a result of the credit crisis that started in 2008. We face increased public and regulatory scrutiny resulting from the credit crisis and economic downturn. Significant harm to our reputation can also arise from other sources, including employee misconduct, actual or perceived unethical behavior, conflicts of interest, litigation, GSE or regulatory actions, failing to deliver minimum or required standards of service and quality, failing to address customer and agency complaints, compliance failures, unauthorized release of confidential information due to cyber-attacks or otherwise, and the activities of our clients, customers and counterparties, including vendors. Actions by the financial service industry generally or by institutions or individuals in the industry can adversely affect our reputation, indirectly by association. All of these could adversely affect our growth, results of operation and financial condition.

Compliance Risks:

1. Bank regulations regarding capital and liquidity, including the annual CCAR assessment process and the Basel III capital and liquidity standards, could require higher levels of capital and liquidity. Among other things, these regulations could impact our ability to pay common stock dividends, repurchase common stock, attract cost-effective sources of deposits, or require the retention of higher amounts of low yielding securities.

The Federal Reserve administers the annual CCAR, an assessment of the capital adequacy of bank holding companies with consolidated assets of $50 billion or more and of the practices used by covered banks to assess capital needs. Under CCAR, the Federal Reserve makes a qualitative assessment of capital adequacy on a forward-looking basis and reviews the strength of a bank holding company’s capital adequacy process. The Federal Reserve also makes a quantitative assessment of capital based on supervisory-run stress tests that assess the ability to maintain capital levels above each minimum regulatory capital ratio and above a

tier 1 common ratio of 5% and common equity tier 1 CET1 ratio of 4.5%, after making all capital actions included in a bank holding company’s capital plan, under baseline and stressful conditions throughout a nine-quarter planning horizon. Capital plans for 2015 were2017 are required to be submitted by JanuaryApril 5, 2015,2017, and the Federal Reserve will either object to the capital plan and/or planned capital actions, or provide a notice of non-objection, no later than March 31, 2015.June 30, 2017. We submittedintend to submit our capital plan to the Federal Reserve on Januaryor before April 5, 2015.2017. The Bank also must submit a capital plan to the OCC on or before April 5, 2017. There can be no assurance that the Federal Reserve will respond favorably to our capital plan, capital actions or stress test and the Federal Reserve, OCC, or other regulatory capital requirements may limit or otherwise restrict how we utilize our capital, including common stock dividends and stock repurchases.

On July 2,

In 2013, the Federal Reserve votedand the OCC adopted final rules to adopt finalimplement the Basel III capital rules for U.S. Banking organizations. The final rules establish an integrated regulatory capital framework and will implement in the United States the Basel III regulatory capital reforms from the Basel Committee on Banking Supervision and certain changes required by the Dodd-Frank Act. Under the final rule, minimum requirements will increase for both the quantity and quality of capital held by banking organizations. As a Standardized Approach institution, the Basel III minimum capital requirements became effective for us on January 1, 2015, and will be fully phased-in on January 1, 2019.

On September 3, 2014, the U.S. banking regulators approved a final rule to implement a minimum liquidity coverage ratio (LCR)LCR requirement for banking organizations with total consolidated assets of $250 billion or more, and a less stringent modified LCR requirement to depository institution holding companies below the threshold but with total consolidated assets of $50 billion or more. The LCR requires covered banking organizations to maintain HQLA equal to projected stressed cash outflows over a 30 calendar-day stress scenario. We are covered by the modified LCR requirement and therefore subject to the phase-in of the rule beginningwhich, as of January 2016 at 90% and January 2017, is at 100%. We will also be required to calculate the LCR monthly. The LCR assigns less severe outflow assumptions to certain types of customer deposits, which should increase the demand, and perhaps the cost, among banks for these deposits. Additionally, the HQLA requirements will increase the demand for direct US government and US government- guaranteed debt that, while high quality, generally carry lower yields than other securities that banks hold in their investment portfolios.

2. If our regulators deem it appropriate, they can take regulatory actions that could result in a material adverse impact on our financial results, ability to compete for new business, or preclude mergers or acquisitions. In addition, regulatory actions could constrain our ability to fund our liquidity needs or pay dividends, anddividends. Any of these actions could increase the cost of our services.

We are subject to the supervision and regulation of various state and federal regulators, including the OCC, Federal Reserve, FDIC, SEC, CFPB, Financial Industry Regulatory Authority, and various state regulatory agencies. As such, we are subject to a wide variety of laws and regulations, many of which are discussed in theItem 1. Regulatory Matters section.Matters. As part of their supervisory process, which includes periodic examinations and continuous monitoring, the regulators have the authority to impose restrictions or conditions on our activities and the manner in which we manage the organization. Such actions could negatively impact us in a variety of ways, including charging monetary fines, impacting our ability to pay dividends, precluding mergers or acquisitions, limiting our ability to offer certain products or services, or imposing additional capital requirements.

With

Under the developmentsupervision of the CFPB, our consumer products and services are subject to increasing regulatory oversight and scrutiny with respect to compliance under consumer laws and regulations. We may face a greater number or wider scope of investigations, enforcement actions, and litigation in the future related to consumer practices, thereby increasing costs associated with responding to or defending such actions. In addition, increased regulatory inquiries and investigations, as well as any additional legislative or regulatory developments affecting our consumer businesses, and any required changes to our business operations resulting from these developments, could result in significant loss of revenue, require remuneration to our customers, trigger fines or penalties, limit the products or services we offer, require us to increase our prices and, therefore, reduce demand for our products, impose additional compliance costs on us, cause harm to our reputation, or otherwise adversely affect our consumer businesses.


3. Legislative and regulatory actions taken now or in the future that impact the financial industry may materially adversely affect us by increasing our costs, adding complexity in doing business, impeding the efficiency of our internal business processes, negatively impacting the recoverability of certain of our recorded assets, requiring us to increase our regulatory capital, limiting our ability to pursue business opportunities, and otherwise resultresulting in a material adverse impact on our financial condition, results of operation, liquidity, or stock price.

The Dodd-Frank Act representswas a comprehensive overhaul of the financial services industry within the United States, establishesestablished the CFPB, and requiresrequired the bureauCFPB and other federal agencies to implement many new and significant rules and regulations. It is not possible to predict the full extent to which the Dodd-Frank Act, or the resulting rules and regulations in their entirety, will impact our business. Compliance with these new laws and regulations have and will continue to result in additional costs, which could be significant, and may have a material and adverse effect on our results of operations. In addition, if we do not appropriately comply with current or future legislation and regulations that apply to our consumer operations, we may be subject to fines, penalties or judgments, or material regulatory restrictions on our businesses, which could adversely affect operations and, in turn, financial results.

4. We may become subject to more stringent regulatory requirements and activity restrictions if the Federal Reserve and FDIC determine that our resolution plan is not credible.
The Dodd-Frank Act and implementing regulations jointly issued by Federal Reserve and the FDIC require bank holding companies with more than $50 billion in assets to annually submit a resolution plan to the Federal Reserve and the FDIC that, in the event of material financial distress or failure, establish the rapid, orderly resolution of the Company under the U.S. Bankruptcy Code. If the Federal Reserve and the FDIC jointly determine that our 2015 resolution plan is not “credible,” we could become subjected to more stringent capital, leverage or liquidity requirements or restrictions, or restrictions on our growth, activities or operations, and could eventually be required to divest certain assets or operations in ways that could negatively impact its operations and strategy.
5. Our business, financial condition, and results of operations could be adversely affected if we lose our financial holding company status.
In order for us to maintain our status as a financial holding company, we and the Bank must remain “well capitalized,” and “well managed.” If we or our Bank cease to meet the requirements necessary for us to continue to qualify as a financial holding company, the Federal Reserve may impose upon us corrective capital and managerial requirements, and may place limitations on our ability to conduct all of the business activities that we conduct as a financial holding company. If the failure to meet these standards persists, we could be required to divest our Bank, or cease all activities other than those activities that may be conducted by bank holding companies that are not financial holding companies. In addition, our ability to commence or engage in certain activities as a financial holding company will be restricted if the Bank fails to maintain at least a “Satisfactory” rating on its most recent Community Reinvestment Act examination.

Item 1B: Unresolved Staff Comments

None.


Item 2: Properties

Our headquarters, as well as the Bank’s, is located in the Huntington Center, a thirty seven story office building located in Columbus, Ohio. Of the building’s total office space available, we lease approximately 28%22%. The lease term expires in 2030, with six five-year renewal options for up to 30 years but with no purchase option. The Bank has an indirect minority equity interest of 18.4% in the building.


Our other major properties consist of the following:

Description

 

Location

 Own
DescriptionLocation OwnLease
13 story office building, located adjacent to the Huntington CenterColumbus, Ohio ü 
12 story office building, located adjacent to the Huntington CenterColumbus, Ohio ü 
3 story office building - the Crosswoods building (1)Columbus, Ohio  ü
A portion of 200 Public Square BuildingCleveland, Ohio  ü
12 story office buildingYoungstown, Ohio ü 
10 story office buildingWarren, Ohio  ü
10 story office buildingToledo, Ohio ü 
A portion of the Grant BuildingPittsburgh, PAPennsylvania  ü
18 story office buildingCharleston, West Virginia  ü
3 story office buildingHolland, Michigan  ü
2 building office complexTroy, Michigan  ü
Data processing and operations center (Easton)Columbus, Ohio ü 
Data processing and operations center (Northland) (1)Columbus, Ohio  ü
Data processing and operations center (Parma)Cleveland, Ohio  ü
8 story office buildingIndianapolis, Indiana ü 
A portion of Huntington Center at 525 VineCincinnati, OHü
A portion of 222 LaSalle St.Chicago, ILü
A portion of Two Towne SquareSouthfield, MIü
7 story office buildingAkron, OHü
27 story office buildingAkron, OHü
Operations CenterAkron, OHü
12 story office buildingSaginaw, MIü
2 building office complexFlint, MIü
4 story office buildingMelrose Park, ILü

(1) During the 2016 fourth quarter, we announced our intent to vacate these properties and invest in a facility in Columbus, Ohio.

Item 3: Legal Proceedings

Information required by this item is set forth in Note 2021 of the Notes to Consolidated Financial Statements under the caption "Litigation" and is incorporated into this Item by reference.

Item 4: Mine Safety Disclosures

Not applicable.

PART II

Item 5: Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities

The common stock of Huntington Bancshares Incorporated is traded on the NASDAQ Stock Market under the symbol “HBAN”. The stock is listed as “HuntgBcshr” or “HuntBanc” in most newspapers. As of January 31, 2015,2017, we had 28,36934,831 shareholders of record.

Information regarding the high and low sale prices of our common stock and cash dividends declared on such shares, as required by this Item, is set forth in TableTables 46 entitledand 48 Selected Quarterly Income Statement Data and is incorporated into this Item by reference. Information regarding restrictions on dividends, as required by this Item, is set forth in Item 1 Business-Regulatory1: Business - Regulatory Matters and in Note 2122 of the Notes to Consolidated Financial Statements and incorporated into this Item by reference.


The following graph shows the changes, over the five-year period, in the value of $100 invested in (i) shares of Huntington’s Common Stock; (ii) the Standard & Poor’s 500 Stock Index (the “SS&P 500 Index”)Index) and (iii) Keefe, Bruyette & Woods Bank Index, (the “KBW Bank Index”), for the period December 31, 2009,2011, through December 31, 2014.2016. The KBW Bank Index is a market capitalization-weighted bank stock index published by Keefe, Bruyette & Woods. The index is composed of the largest banking companies and includes all money center banks and regional banks, including Huntington. An investment of $100 on December 31, 2009,2011, and the reinvestment of all dividends, are assumed. The plotted points represent the closing pricecumulative total return on the last trading day of the fiscal year indicated.

The following table provides


 2011 2012 2013 2014 2015 2016
HBAN$100 $116 $180 $200 $215 $265
S&P 500$100 $114 $151 $172 $174 $195
KBW Bank Index$100 $129 $177 $194 $195 $251
For information regarding Huntington’s purchases of its Common Stock duringsecurities authorized for issuance under Huntington's equity compensation plans, see Part III, Item 12.
During the three-month period ended December 31, 2014:

Period

  Total Number
of Shares
Purchased
   Average
Price Paid
Per Share
   Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs (1)
   Maximum Number of Shares (or
Approximate Dollar Value) that
May Yet Be Purchased Under

the Plans or Programs (2)
 

October 1, 2014 to October 31, 2014

   2,647,087    $9.46     20,179,890    $61,369,532  

November 1, 2014 to November 30, 2014

   958,144     10.08     21,138,034     51,711,440  

December 1, 2014 to December 31, 2014

   —       —       21,138,034     51,711,440  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   3,605,231    $9.63     21,138,034    $51,711,440  
  

 

 

   

 

 

   

 

 

   

 

 

 

2016, Huntington did not repurchase any of its common stock. The approximate dollar value of common stock that may yet be purchased under publicly announced stock repurchase authorizations was $166 million.
(1)
The reported shares were repurchased pursuant to Huntington’s publicly announced stock repurchase authorization, which became effective April 1, 2014.
(2)The number shown represents, as of the end of each period, the maximum number of shares (approximate dollar value) of Common Stock that may yet be purchased under publicly announced stock repurchase authorizations. The shares may be purchased, from time-to-time, depending on market conditions.

On March 26, 2014,June 29, 2016, Huntington announced that the Federal Reserve did not object to Huntington’sthe proposed capital actions included in Huntington’sHuntington's capital plan submitted to the Federal Reserve in January 2014.April 2016 as part of the 2016 CCAR. These actions included a potential repurchase of upan increase in the quarterly dividend per common share to $250 million of common stock through$0.08, starting in the firstfourth quarter of 2015. This repurchase authorization represented a $23 million, or 10%, increase from2016. Huntington’s capital plan also included the prior common stock repurchase authorization. Purchasesissuance of common stock may include open market purchases, privately negotiated transactions,capital in connection with the acquisition of FirstMerit Corporation and accelerated repurchase programs. Huntington’s boardcontinues the previously announced suspension of directors authorized athe company’s 2015 share repurchase program consistent with Huntington’s capital plan. During the 2014 fourth quarter, Huntington repurchased a total of 3.6 million shares at a weighted average share price of $9.63. For the year ended December 31, 2014, Huntington purchased 35.7 million common shares at a weighted average price of $9.37 per share. For the year ended December 31, 2013, Huntington purchased 16.7 million common shares at a weighted average price of $7.46 per share.

Item 6: Selected Financial Data

Table 1—Selected Financial Data(1)

    Year Ended December 31, 

(dollar amounts in thousands, except per share amounts)

  2014  2013  2012  2011  2010 

Interest income

  $1,976,462   $1,860,637   $1,930,263   $1,970,226   $2,145,392  

Interest expense

   139,321    156,029    219,739    341,056    526,587  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net interest income

   1,837,141    1,704,608    1,710,524    1,629,170    1,618,805  

Provision for credit losses

   80,989    90,045    147,388    174,059    634,547  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net interest income after provision for credit losses

   1,756,152    1,614,563    1,563,136    1,455,111    984,258  

Noninterest income

   979,179    1,012,196    1,106,321    992,317    1,053,660  

Noninterest expense

   1,882,346    1,758,003    1,835,876    1,728,500    1,673,805  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Income before income taxes

   852,985    868,756    833,581    718,928    364,113  

Provision for income taxes

   220,593    227,474    202,291    172,555    57,465  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net income

  $632,392   $641,282   $631,290   $546,373   $306,648  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Dividends on preferred shares

   31,854    31,869    31,989    30,813    172,032  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net income applicable to common shares

  $600,538   $609,413   $599,301   $515,560   $134,616  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net income per common share—basic

  $0.73   $0.73   $0.70   $0.60   $0.19  

Net income per common share—diluted

   0.72    0.72    0.69    0.59    0.18  

Cash dividends declared per common share

   0.21    0.19    0.16    0.10    0.04  

Balance sheet highlights

      
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total assets (period end)

  $66,298,010   $59,467,174   $56,141,474   $54,448,673   $53,813,903  

Total long-term debt (period end)

   4,335,962    2,458,272    1,364,834    2,747,857    3,663,826  

Total shareholders’ equity (period end)

   6,328,170    6,090,153    5,778,500    5,416,121    4,974,803  

Average long-term debt

   3,494,987    1,670,502    1,986,612    3,182,900    3,893,246  

Average shareholders’ equity

   6,269,884    5,914,914    5,671,455    5,237,541    5,482,502  

Average total assets

   62,498,880    56,299,313    55,673,599    53,750,054    52,574,231  

Key ratios and statistics

      

Margin analysis—as a % of average earnings assets

      

Interest income(2)

   3.47  3.66  3.85  4.09  4.55

Interest expense

   0.24    0.30    0.44    0.71    1.11  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net interest margin(2)

   3.23  3.36  3.41  3.38  3.44
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Return on average total assets

   1.01  1.14  1.13  1.02  0.58

Return on average common shareholders’ equity

   10.2    11.0    11.3    10.6    3.5  

Return on average tangible common shareholders’ equity(3), (7)

   11.8    12.7    13.3    12.8    5.4  

Efficiency ratio(4)

   65.1    62.6    63.2    63.5    60.1  

Dividend payout ratio

   28.8    26.0    22.9    16.7    21.1  

Average shareholders’ equity to average assets

   10.03    10.51    10.19    9.74    10.43  

Effective tax rate

   25.9    26.2    24.3    24.0    15.8  

Tier 1 common risk-based capital ratio
(period end)
(7), (8)

   10.23    10.90    10.48    10.00    9.29  

Tangible common equity to tangible assets (period end) (5), (7)

   8.17    8.82    8.74    8.30    7.55  

Tangible equity to tangible assets (period end)(6), (7)

   8.76    9.47    9.44    9.01    8.23  

Tier 1 leverage ratio (period end)(9)

   9.74    10.67    10.36    10.28    9.41  

Tier 1 risk-based capital ratio (period end)(9)

   11.50    12.28    12.02    12.11    11.55  

Total risk-based capital ratio (period end)(9)

   13.56    14.57    14.50    14.77    14.46  

Other data

      

Full-time equivalent employees (average)

   11,873    11,964    11,494    11,398    11,038  

Domestic banking offices (period end)

   729    711    705    668    620  

program.

Item 6: Selected Financial Data
          
Table 1 - Selected Annual Income Statement Data (1)
(dollar amounts in thousands, except per share amounts)
 Year Ended December 31,
 2016 2015 2014 2013 2012
Interest income$2,632,113
 $2,114,521
 $1,976,462
 $1,860,637
 $1,930,263
Interest expense262,795
 163,784
 139,321
 156,029
 219,739
Net interest income2,369,318
 1,950,737
 1,837,141
 1,704,608
 1,710,524
Provision for credit losses190,802
 99,954
 80,989
 90,045
 147,388
Net interest income after provision for credit losses2,178,516
 1,850,783
 1,756,152
 1,614,563
 1,563,136
Noninterest income1,149,731
 1,038,730
 979,179
 1,012,196
 1,106,321
Noninterest expense2,408,485
 1,975,908
 1,882,346
 1,758,003
 1,835,876
Income before income taxes919,762
 913,605
 852,985
 868,756
 833,581
Provision for income taxes207,941
 220,648
 220,593
 227,474
 202,291
Net income711,821
 692,957
 632,392
 641,282
 631,290
Dividends on preferred shares65,274
 31,873
 31,854
 31,869
 31,989
Net income applicable to common shares$646,547
 $661,084
 $600,538
 $609,413
 $599,301
Net income per common share—basic$0.72
 $0.82
 $0.73
 $0.73
 $0.70
Net income per common share—diluted0.70
 0.81
 0.72
 0.72
 0.69
Cash dividends declared per common share0.29
 0.25
 0.21
 0.19
 0.16
Balance sheet highlights         
Total assets (period end)$99,714,097
 $71,018,301
 $66,283,130
 $59,454,113
 $56,131,660
Total long-term debt (period end)8,309,159
 7,041,364
 4,321,082
 2,445,493
 1,356,570
Total shareholders’ equity (period end)10,308,146
 6,594,606
 6,328,170
 6,090,153
 5,778,500
Average total assets83,054,283
 68,560,023
 62,483,232
 56,289,181
 55,661,162
Average total long-term debt8,048,477
 5,585,458
 3,479,438
 1,661,169
 1,975,990
Average total shareholders’ equity8,391,361
 6,536,018
 6,269,884
 5,914,914
 5,671,455
Key ratios and statistics         
Margin analysis—as a % of average earnings assets         
Interest income(2)3.50% 3.41% 3.47% 3.66% 3.85%
Interest expense0.34
 0.26
 0.24
 0.30
 0.44
Net interest margin(2)3.16% 3.15% 3.23% 3.36% 3.41%
Return on average total assets0.86% 1.01% 1.01% 1.14% 1.13%
Return on average common shareholders’ equity8.6
 10.7
 10.2
 11.0
 11.3
Return on average tangible common shareholders’ equity(3), (7)10.7
 12.4
 11.8
 12.7
 13.3
Efficiency ratio(4)66.8
 64.5
 65.1
 62.6
 63.2
Dividend payout ratio40.3
 30.5

28.8

26.0

22.9
Average shareholders’ equity to average assets10.10
 9.53
 10.03
 10.51
 10.19
Effective tax rate22.6
 24.2
 25.9
 26.2
 24.3
Non-regulatory capital         
Tangible common equity to tangible assets (period end) (5), (7)7.16
 7.82
 8.17
 8.82
 8.74
Tangible equity to tangible assets (period end)(6), (7)8.26
 8.37
 8.76
 9.48
 9.44
Tier 1 common risk-based capital ratio (period end)(7), (8)N.A.
 N.A.
 10.23
 10.90
 10.48
Tier 1 leverage ratio (period end)(9), (10)N.A.
 N.A.
 9.74
 10.67
 10.36
Tier 1 risk-based capital ratio (period end)(9), (10)N.A.
 N.A.
 11.50
 12.28
 12.02
Total risk-based capital ratio (period end)(9), (10)N.A.
 N.A.
 13.56
 14.57
 14.50
Capital under current regulatory standards (Basel III)         
Common equity tier 1 risk-based capital ratio9.56
 9.79% N.A.
 N.A.
 N.A.
Tier 1 leverage ratio (period end)8.70
 8.79% N.A.
 N.A.
 N.A.
Tier 1 risk-based capital ratio (period end)10.92
 10.53% N.A.
 N.A.
 N.A.
Total risk-based capital ratio (period end)13.05
 12.64% N.A.
 N.A.
 N.A.
Other data         
Full-time equivalent employees (average)15,993
 12,243
 11,873
 11,964
 11,494
Domestic banking offices (period end)1,115
 777
 729
 711
 705
(1)

(1)Comparisons for presented periods are impacted by a number of factors. Refer to the Significant Items"Significant Items" in the Discussion of Results of Operations for additional discussion regarding these key factors.


(2)

(2)On an FTE basis assuming a 35% tax rate.

(3)

(3)Net income (loss)applicable to common shares excluding expense for amortization of intangibles for the period divided by average tangible shareholders’ equity. Average tangible shareholders’ equity equals average total shareholders’ equity less average intangible assets and goodwill. Expense for amortization of intangibles and average intangible assets are net of deferred tax liability, and calculated assuming a 35% tax rate.

(4)

(4)Noninterest expense less amortization of intangibles divided by the sum of FTE net interest income and noninterest income excluding securities gains.

(Non-GAAP)
(5)

(5)Tangible common equity (total common equity less goodwill and other intangible assets) divided by tangible assets (total assets less goodwill and other intangible assets). Other intangible assets are net of deferred tax and calculated assuming a 35% tax rate.

(Non-GAAP)
(6)

(6)Tangible equity (total equity less goodwill and other intangible assets) divided by tangible assets (total assets less goodwill and other intangible assets). Other intangible assets are net of deferred tax and calculated assuming a 35% tax rate.

(7)

(7)Tier 1 common equity, tangible equity, tangible common equity, and tangible assets are non-GAAP financial measures. Additionally, any ratios utilizing these financial measures are also non-GAAP. These financial measures have been included as they are considered to be critical metrics with which to analyze and evaluate financial condition and capital strength. Other companies may calculate these financial measures differently.

(8)

(8)In accordance with applicable regulatory reporting guidance, we are not required to retrospectively update historical filings for newly adopted accounting principles. Therefore, Tiertier 1 capital, Tiertier 1 common equity, and risk-weighted assets have not been updated for the adoption of ASU 2014-01.

(9)

(9)In accordance with applicable regulatory reporting guidance, we are not required to retrospectively update historical filings for newly adopted accounting principles. Therefore, regulatory capital data has not been updated for the adoption of ASU 2014-01.

(10)Ratios are calculated on the Basel I basis.
N.A.On January 1, 2015, we became subject to the Basel III capital requirements and the standardized approach for calculating risk-weighted assets in accordance with subpart D of the final capital rule.


Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations

INTRODUCTION

We are a multi-state diversified regional bank holding company organized under Maryland law in 1966 and headquartered in Columbus, Ohio. Through the Bank, we have 149 years of servicing the financial needs of our customers. Through our subsidiaries, we provide full-service commercial and consumer banking services, mortgage banking services, automobile financing, equipment leasing, investment management, trust services, brokerage services, insurance service programs, and other financial products and services. Our 715 branches are located in Ohio, Michigan, Pennsylvania, Indiana, West Virginia, and Kentucky. Selected financial services and other activities are also conducted in various other states. International banking services are available through the headquarters office in Columbus, Ohio and a limited purpose office located in the Cayman Islands and another limited purpose office located in Hong Kong. Our foreign banking activities, in total or with any individual country, are not significant.

This MD&A provides information we believe necessary for understanding our financial condition, changes in financial condition, results of operations, and cash flows. The MD&A should be read in conjunction with the Consolidated Financial Statements, Notes to Consolidated Financial Statements, and other information contained in this report.

Our discussion is divided into key segments:

Executive Overview – Provides a summary The forward-looking statements in this section and other parts of our current financial performancethis report involve assumptions, risks, uncertainties, and business overview,other factors, including our thoughts on the impact of the economy, legislative and regulatory initiatives, and recent industry developments. This section also provides our outlookstatements regarding our expectations forplans, objectives, goals, strategies, and financial performance. Our actual results could differ materially from the next several quarters.

Discussionresults anticipated in these forward-looking statements as a result of Resultsfactors set forth under the caption "Forward-Looking Statements" and those set forth in Item 1A.


EXECUTIVE OVERVIEW
Business Combinations
On August 16, 2016, Huntington completed its acquisition of Operations—ReviewsFirstMerit Corporation in a stock and cash transaction valued at approximately $3.7 billion. FirstMerit Corporation was a diversified financial performance fromservices company headquartered in Akron, Ohio, with operations in Ohio, Michigan, Wisconsin, Illinois and Pennsylvania. Post acquisition, Huntington now operates across an eight-state Midwestern footprint. The acquisition resulted in a consolidated Company perspective. It also includescombined company with a Significant Items section that summarizes key issues helpful for understanding performance trends. Key consolidated average balance sheetlarger market presence and income statement trends are also discussed in this section.

Risk Management and Capital- Discusses credit, market, liquidity, operational, and compliance risks, including how these are managed,more diversified loan portfolio, as well as performance trends. It also includes a larger core deposit funding base and economies of scale associated with a larger financial institution. For further discussion, see Note 3 of liquidity policies, how we obtain funding, and related performance. In addition, there is a discussion of guarantees and / or commitments made for items such as standby letters of credit and commitmentsthe Notes to sell loans, and a discussion that reviews the adequacy of capital, including regulatory capital requirements.

Consolidated Financial Statements.

Business Segment Discussion—Provides an overview of financial performance for each of our major business segments and provides additional discussion of trends underlying consolidated financial performance.

Results for the Fourth Quarter - Provides a discussion of results for the 2014 fourth quarter compared with the 2013 fourth quarter.

Additional Disclosures - Provides comments on important matters including forward-looking statements, critical accounting policies and use of significant estimates, and recent accounting pronouncements and developments.

A reading of each section is important to understand fully the nature of our financial performance and prospects.

EXECUTIVE OVERVIEW

20142016 Financial Performance Review

In 2014,2016, we reported net income of $632.4$712 million, or $0.72 per common share, relatively unchangeda 3% increase from the prior year. This resulted inEarnings per common share on a 1.01% return on average assets and a 11.8% return on average tangible common equity. In addition, we grew our base of consumer and business customers as we increased 2014 average earning assets by $6.1 billion, or 12%, overdiluted basis for the year was $0.70, down 14% from the prior year. Our strategic business investmentsReported net income was impacted by FirstMerit acquisition related expenses totaling $282 million pre-tax, or $0.20 per common share and OCR sales approach continueda reduction to generate positive results in 2014.(Also, see Significant Items Influencing Financial Performance Comparisons within the Discussion of Results of Operations.)

litigation reserve totaling $42 million pre-tax, or $0.03 per common share.

Fully-taxable equivalent net interest income was $1.9$2.4 billion, in 2014, an increase of $132.7 million,up $0.4 billion, or 8%, compared with 2013.22%. This reflected the impact of 12%21% earning asset growth, partially offset by 13%22% interest-bearing liability growth, and a 131 basis point decreaseincrease in the NIM to 3.23%3.16%. The average earning asset growth reflected a $3.6included an $8.8 billion, or 9%18%, increase in average loans and leases and a $2.7$4.1 billion, or 29%30%, increase in average securities.securities, both of which were impacted by the FirstMerit acquisition. The loan growth reflected an increase in average automobile loans, as the growth in originations remained strong. Also, average C&I loans increased which primarily reflected growth in trade finance in support of our middle market and corporate customers. The securities growth primarily reflected an increase in LCR level 1 qualified securities and direct purchase municipal instruments. This earnings asset growth was partially offset by a $4.7 billion, or 13%, increase in interest-bearing liabilities. The interest-bearing liability growthnet interest margin expansion reflected a $3.2 billion, or 104%, increase in short- and long-term borrowings

and a $2.2 billion, or 14%, increase in money market deposits, partially offset by a $1.2 billion, or 27%, decrease in average core certificates of deposit. Borrowings have been a cost effective method to fund our incremental securities growth and the change in deposit mix reflects our strategic focus on changing funding sources. The NIM contraction reflected a 199 basis point decrease related topositive impact from the mix and yield ofon earning assets, anda 3 basis point reductionincrease in the benefit to the margin from the impact of noninterest-bearing funds, partially offset by the 9an 11 basis point reductionincrease in funding costs.

The provision for credit losses was $191 million, up $91 million, or 91%. The higher provision expense was due to several factors, including the migration of the acquired portfolio to the originated portfolio, and the corresponding reserve build, portfolio growth and transitioning the FirstMerit portfolio to Huntington’s reserving methodology. Net charge-offs represented an annualized 0.19% of average loans and leases, which remains below our long-term target of 35 to 55 basis points.
Noninterest income was $979.2 million in 2014, a decrease of $33.0$1.1 billion, up $111 million, or 3%11%. Service charges on deposit accounts increased $44 million, or 16%, compared with 2013. Mortgage banking income was down due to a reduction in origination and secondary marketing revenue as originations decreased and gain-on-sale margins compressed, and a negative impact from net MSR hedging activity.reflecting the benefit of continued new customer acquisition. In addition, othercards and payment processing income declined primarily due to a decrease in LIHTC gains and lower fees associated with commercial loan activity and trust services primarily due to a reduction in fees. These declines were partially offset by an increase in securities gains as we adjusted the mix of our securities portfolio to prepare for the LCR requirements and an increase in electronic banking incomeincreased $26 million, or 18%, due to higher card related income and underlying customer growth.

Also, mortgage banking income increased $16 million, or 15%, reflecting a 24% increase in mortgage origination volume. Finally, gain on sale of loans increased $14 million, or 43%, primarily reflecting an increase of $6 million in SBA loan sales gains and the $7 million gains on non-relationship C&I and CRE loan sales, both of which were related to the balance sheet optimization strategy completed in the 2016 fourth quarter.

Noninterest expense was $1.9$2.4 billion, in 2014, an increase of $124.3up $433 million, or 7%22%. Reported noninterest expense was impacted by FirstMerit acquisition-related expenses totaling $282 million. Personnel costs increased $227 million, or 20%, compared with 2013. This reflected anprimarily reflecting $76 million of acquisition-related expense and a 31% increase in personnel costs, other expense, professional services,the number of average full-time equivalent employees largely related to the in-store branch expansion and the addition of colleagues from FirstMerit. In addition, outside data processing and other services, professional services, equipment expense, and equipment. The increase included $65.5net occupancy expense all increased as a result of acquisition-related expenses. Also, other expense decreased $17 million, of significant itemsor 8%, primarily reflecting a $42 million reduction to litigation reserves, which was mostly offset by a $40 million contribution in the 2016 fourth quarter to achieve the philanthropic plans related to franchise repositioning, merger and acquisition costs, and additions to the litigation reserves (This section should be read in conjunction with Table 8 – Noninterest Expense). Excluding the impact of the significant items, other noninterest expense increased due to state franchise taxes, protective advances, and litigation expense. Professional services increased due to outside consultant expenses related to strategic planning and legal services. Outside data processing and other services increased, primarily reflecting higher debit and credit card processing costs and increased other technology investment expense, as we continue to invest in technology supporting our products, services, and our Continuous Improvement initiatives.

Credit quality continued to improve in 2014. NALs declined $21.8 million, or 7%, from 2013 to $300.2 million, or 0.63% of total loans and leases. NPAs declined $14.4 million, or 4%, compared to a year-ago to $337.7 million, or 0.71% of total loans and leases, OREO, and other NPAs. The decreases primarily reflected meaningful improvement in both CRE and residential mortgage NALs. The provision for credit losses decreased $9.1 million, or 10%, from 2013 due to the continued decline in NCOs and nonaccrual loans. NCOs decreased $64.0 million, or 34%, from the prior year to $124.6 million. NCOs were an annualized 0.27% of average loans and leases in the current year compared to 0.45% in 2013. The ACL as a percentage of total loans and leases decreased to 1.40% from 1.65% a year ago, while the ACL as a percentage of period-end total NALs increased slightly to 222% from 221%. However, criticized and classified loans did increase $95.1 million, or 7%, from prior year.

FirstMerit.


The tangible common equity to tangible assets ratio at December 31, 2014, was 8.17%7.16%, down 6566 basis points from a year ago. Our Tier 1 commonpoints. The CET1 risk-based capital ratio at year end was 10.23%9.56%, down from 10.90% at the end of 2013.23 basis points. The regulatory Tiertier 1 risk-based capital ratio at December 31, 2014, was 11.50%10.92%, down from 12.28% at December 31, 2013. The decreases in the capital ratios were due to balance sheet growth and share repurchases that were partially offset by increased retained earnings and the stock issued in the Camco Financial acquisition. Specifically, allup 39 basis points. All capital ratios were impacted by the repurchase$1.3 billion of 35.7 million common shares over the last four quarters, 3.6 million of which were repurchased during the 2014 fourth quarter. This decrease was offset partially by the increase in retained earnings, as well asgoodwill created and the issuance of 8.7$2.8 billion of common stock as part of the FirstMerit acquisition. The regulatory Tier 1 risk-based and total risk-based capital ratios benefited from the issuance of $600 million of Class D preferred equity and separately, the issuance of $100 million of Class C preferred equity in exchange for FirstMerit preferred equity in conjunction with the acquisition. The total risk-based capital ratio was impacted by the repurchase of $65 million of trust preferred securities. In addition, $5 million of trust preferred securities acquired in the FirstMerit acquisition were subsequently redeemed. There were no common shares in the Camco acquisition. Huntington estimates the negative impact to Tier 1 common risk-based capital from the 2015 first quarter implementation of the Federal Reserve’s revised Basel III capital rules will be approximately 40 basis points on a fully phased-in basis.

repurchased during 2016.

Business Overview

General

Our general business objectives are: (1) grow net interest income and fee income, (2) deliver positive operating leverage, (3) increase primary relationships across all business segments, (4) continue to strengthen risk management, and reduce volatility, and (5) maintain strong capital and liquidity positions.

Huntington enjoys a unique and advantaged position in the industry andpositions consistent with our future is bright. Werisk appetite. Additionally, we are focused on executing our strategic plan, andthe successful integration of FirstMerit in 2017.

Economy
Looking forward into 2017, we are very pleased with the results we are achieving. For the past several years we have investedoptimistic that improved consumer confidence and jobs growth will translate into overall economic growth in the company at a time when mostmarkets where we do business. Operationally, we expect to realize the full financial benefits of integration completion within the second half of the industry has been pulling back.year, meeting our commitment for cost savings. We haveare driving revenue synergies and organic revenue growth, leveraging our expanded and optimized our retail distribution, both physical and digital. We have invested in small business and commercial specialty lending verticals. We have added new products, such as our consumer and commercial credit cards and our new business and consumer checking accounts. These represent just a handful of the investments we have made. Our 2014 earnings reflected results from these investments. Yet significant opportunity remains as none of these investments are mature. We have a strong outlook for the future.

Economy

We remain optimistic on the economy in our footprint as fundamentals look positive. Home prices are improving, and the recent reduction in interest rates provides another refinance window. Automobile sales were very strong in 2014 and appear poised for another great, if not even better, year in 2015. The state governments in our footprint are operating with surpluses, and most of the municipalities are on solid footing. We have good momentum on the consumer side. Our loan pipeline remains stable, and customer activity amongbase. We will see minor benefits from the Federal Reserve’s December interest rate action, and any additional rate increases in 2017 would be additive to our core small and middle market business customer base continues to trend favorably.

bottom line.

Legislative and Regulatory

A comprehensive discussion of legislative and regulatory matters affecting us can be found in the Regulatory Matters section included in Item 1 of this Form 10-K.

2015 Expectations

As we move into 2015, customer activity is strong, pipelines are stable, and our balance sheet is well positioned. We built our plan with an assumption of no change in interest rates and with the flexibility to quickly adjust to the evolving operating environment. We remain committed to investing in the business, disciplined expense control, and delivering full-year positive operating leverage.

Excluding Significant Items and net MSR hedging activity, we expect to deliver positive operating leverage in 2015 with revenue growth exceeding noninterest expense growth of 2-4%.

Overall, asset quality metrics are expected to remain near current levels, although moderate quarterly volatility also is expected, given the absolute low level of problem assets and credit costs. We anticipate NCOs will remain within or below our long-term normalized range of 35 to 55 basis points.

The effective tax rate for 2015 is expected to be in the range of 25% to 28%.

Table 2—Selected Annual Income Statements (1)

   Year Ended December 31, 
       Change from 2013      Change from 2012    

(dollar amounts in thousands, except per share amounts)

  2014   Amount  Percent  2013   Amount  Percent  2012 

Interest income

  $1,976,462    $115,825    6 $1,860,637    $(69,626  (4)%  $1,930,263  

Interest expense

   139,321     (16,708  (11  156,029     (63,710  (29  219,739  
  

 

 

   

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 

Net interest income

   1,837,141     132,533    8    1,704,608     (5,916  —      1,710,524  

Provision for credit losses

   80,989     (9,056  (10  90,045     (57,343  (39  147,388  
  

 

 

   

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 

Net interest income after provision for credit losses

   1,756,152     141,589    9    1,614,563     51,427    3    1,563,136  
  

 

 

   

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 

Service charges on deposit accounts

   273,741     1,939    1    271,802     9,623    4    262,179  

Trust services

   115,972     (7,035  (6  123,007     1,110    1    121,897  

Electronic banking

   105,401     12,810    14    92,591     10,301    13    82,290  

Mortgage banking income

   84,887     (41,968  (33  126,855     (64,237  (34  191,092  

Brokerage income

   68,277     (1,347  (2  69,624     (3,060  (4  72,684  

Insurance income

   65,473     (3,791  (5  69,264     (2,055  (3  71,319  

Bank owned life insurance income

   57,048     629    1    56,419     377    1    56,042  

Capital markets fees

   43,731     (1,489  (3  45,220     (2,126  (4  48,160  

Gain on sale of loans

   21,091     2,920    16    18,171     (40,011  (69  58,182  

Securities gains (losses)

   17,554     17,136    4,100    418     (4,351  (91  4,769  

Other income

   126,004     (12,821  (9  138,825     304    —      137,707  
  

 

 

   

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 

Total noninterest income

   979,179     (33,017  (3  1,012,196     (94,125  (9  1,106,321  
  

 

 

   

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 

Personnel costs

   1,048,775     47,138    5    1,001,637     13,444    1    988,193  

Outside data processing and other services

   212,586     13,039    7    199,547     9,292    5    190,255  

Net occupancy

   128,076     2,732    2    125,344     14,184    13    111,160  

Equipment

   119,663     12,870    12    106,793     3,846    4    102,947  

Professional services

   59,555     18,968    47    40,587     (25,171  (38  65,758  

Marketing

   50,560     (625  (1  51,185     (13,078  (20  64,263  

Deposit and other insurance expense

   49,044     (1,117  (2  50,161     (18,169  (27  68,330  

Amortization of intangibles

   39,277     (2,087  (5  41,364     (5,185  (11  46,549  

Gain on early extinguishment of debt

   —       —      —      —       798    (100  (798

Other expense

   174,810     33,425    24    141,385     (57,834  (29  199,219  
  

 

 

   

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 

Total noninterest expense

   1,882,346     124,343    7    1,758,003     (77,873  (4  1,835,876  
  

 

 

   

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 

Income before income taxes

   852,985     (15,771  (2  868,756     35,175    4    833,581  

Provision for income taxes

   220,593     (6,881  (3  227,474     25,183    12    202,291  
  

 

 

   

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 

Net income

  $632,392    $(8,890  (1)%  $641,282    $9,992    2 $631,290  
  

 

 

   

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 

Dividends on preferred shares

   31,854     (15  —      31,869     (120  —      31,989  
  

 

 

   

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 

Net income applicable to common shares

  $600,538    $(8,875  (1)%  $609,413    $10,112    2 $599,301  
  

 

 

   

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 

Average common shares—basic

   819,917     (14,288  (2)%   834,205     (23,757  (3)%   857,962  

Average common shares—diluted

   833,081     (10,893  (1  843,974     (19,428  (2  863,402  

Per common share:

          

Net income—basic

  $0.73    $—       $0.73    $0.03    4 $0.70  

Net income—diluted

   0.72     —      —      0.72     0.03    4    0.69  

Cash dividends declared

   0.21     0.02    11    0.19     0.03    19    0.16  

Revenue—FTE

          

Net interest income

  $1,837,141    $132,533    8 $1,704,608    $(5,916   $1,710,524  

FTE adjustment

   27,550     210    1    27,340     6,934    34    20,406  
  

 

 

   

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 

Net interest income(2)

   1,864,691     132,743    8    1,731,948     1,018    —      1,730,930  

Noninterest income

   979,179     (33,017  (3  1,012,196     (94,125  (9  1,106,321  
  

 

 

   

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 

Total revenue(2)

  $2,843,870    $99,726    4 $2,744,144    $(93,107  (3)%  $2,837,251  
  

 

 

   

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 


Table 2 - Selected Annual Income Statements (1)
(dollar amounts in thousands, except per share amounts)
 Year Ended December 31,
   Change from 2015   Change from 2014  
 2016 Amount Percent 2015 Amount Percent 2014
Interest income$2,632,113
 $517,592
 24 % $2,114,521
 $138,059
 7 % $1,976,462
Interest expense262,795
 99,011
 60
 163,784
 24,463
 18
 139,321
Net interest income2,369,318
 418,581
 21
 1,950,737
 113,596
 6
 1,837,141
Provision for credit losses190,802
 90,848
 91
 99,954
 18,965
 23
 80,989
Net interest income after provision for credit losses2,178,516
 327,733
 18
 1,850,783
 94,631
 5
 1,756,152
Service charges on deposit accounts324,299
 43,950
 16
 280,349
 6,608
 2
 273,741
Cards and payment processing income169,064
 26,349
 18
 142,715
 37,314
 35
 105,401
Mortgage banking income128,257
 16,404
 15
 111,853
 26,966
 32
 84,887
Trust services108,274
 2,441
 2
 105,833
 (10,139) (9) 115,972
Insurance income64,523
 (741) (1) 65,264
 (209) 
 65,473
Brokerage income61,834
 1,629
 3
 60,205
 (8,072) (12) 68,277
Capital markets fees59,527
 5,911
 11
 53,616
 9,885
 23
 43,731
Bank owned life insurance income57,567
 5,167
 10
 52,400
 (4,648) (8) 57,048
Gain on sale of loans47,153
 14,116
 43
 33,037
 11,946
 57
 21,091
Securities gains (losses)(84) (828) (111) 744
 (16,810) (96) 17,554
Other income129,317
 (3,397) (3) 132,714
 6,710
 5
 126,004
Total noninterest income1,149,731
 111,001
 11
 1,038,730
 59,551
 6
 979,179
Personnel costs1,349,124
 226,942
 20
 1,122,182
 73,407
 7
 1,048,775
Outside data processing and other services304,743
 73,390
 32
 231,353
 18,767
 9
 212,586
Equipment164,839
 39,882
 32
 124,957
 5,294
 4
 119,663
Net occupancy153,090
 31,209
 26
 121,881
 (6,195) (5) 128,076
Professional services105,266
 54,975
 109
 50,291
 (9,264) (16) 59,555
Marketing62,957
 10,744
 21
 52,213
 1,653
 3
 50,560
Deposit and other insurance expense54,107
 9,498
 21
 44,609
 (4,435) (9) 49,044
Amortization of intangibles30,456
 2,589
 9
 27,867
 (11,410) (29) 39,277
Other expense183,903
 (16,652) (8) 200,555
 25,745
 15
 174,810
Total noninterest expense2,408,485
 432,577
 22
 1,975,908
 93,562
 5
 1,882,346
Income before income taxes919,762
 6,157
 1
 913,605
 60,620
 7
 852,985
Provision for income taxes207,941
 (12,707) (6) 220,648
 55
 
 220,593
Net income711,821
 18,864
 3
 692,957
 60,565
 10
 632,392
Dividends on preferred shares65,274
 33,401
 105
 31,873
 19
 
 31,854
Net income applicable to common shares$646,547
 $(14,537) (2)% $661,084
 $60,546
 10 % $600,538
Average common shares—basic904,438
 101,026
 13 % 803,412
 (16,505) (2)% 819,917
Average common shares—diluted918,790
 101,661
 12
 817,129
 (15,952) (2) 833,081
Per common share:    
     
  
Net income—basic$0.72
 $(0.10) (12)% $0.82
 $0.09
 12 % $0.73
Net income—diluted0.70
 (0.11) (14) 0.81
 0.09
 13
 0.72
Cash dividends declared0.29
 0.04
 16
 0.25
 0.04
 19
 0.21
Revenue—FTE    
     
  
Net interest income$2,369,318
 $418,581
 21 % $1,950,737
 $113,596
 6 % $1,837,141
FTE adjustment42,408
 10,293
 32
 32,115
 4,565
 17
 27,550
Net interest income(2)
2,411,726
 428,874
 22
 1,982,852
 118,161
 6
 1,864,691
Noninterest income1,149,731
 111,001
 11
 1,038,730
 59,551
 6
 979,179
Total revenue(2)
$3,561,457
 $539,875
 18 % $3,021,582
 $177,712
 6 % $2,843,870

(1)

(1)Comparisons for presented periods are impacted by a number of factors. Refer to “Significant Items”.

in the Discussion of Results of Operations.
(2)

(2)On a fully-taxable equivalent (FTE) basis assuming a 35% tax rate.



DISCUSSION OF RESULTS OF OPERATIONS

This section provides a review of financial performance from a consolidated perspective. It also includes a “Significant Items” section that summarizes key issues important for a complete understanding of performance trends. Key consolidated balance sheet and income statement trends are discussed. All earnings per share data are reported on a diluted basis. For additional insight on financial performance, please read this section in conjunction with the “Business Segment Discussion.”

Significant Items

Definition of Significant Items

From time-to-time, revenue, expenses, or taxes are impacted by items judged by us to be outside of ordinary banking activities and / or by items that, while they may be associated with ordinary banking activities, are so unusually large that their outsized impact is believed by us at that time to be infrequent or short-term in nature. We refer to such items as Significant Items. Most often, these Significant Items result from factors originating outside the company; e.g., regulatory actions / assessments, windfall gains, changes in accounting principles, one-time tax assessments / refunds, litigation actions, etc. In other cases, they may result from our decisions associated with significant corporate actions outside of the ordinary course of business; e.g., merger / restructuring charges, recapitalization actions, goodwill impairment, etc.

Even though certain revenue and expense items are naturally subject to more volatility than others due to changes in market and economic environment conditions, as a general rule volatility alone does not define a Significant Item. For example, changes in the provision for credit losses, gains / losses from investment activities, asset valuation writedowns, etc., reflect ordinary banking activities and are, therefore, typically excluded from consideration as a Significant Item.

We believe the disclosure of Significant Items provides a better understanding of our performance and trends to ascertain which of such items, if any, to include or exclude from an analysis of our performance; i.e., within the context of determining how that performance differed from expectations, as well as how, if at all, to adjust estimates of future performance accordingly. To this end, we adopted a practice of listing Significant Items in our external disclosure documents; e.g., earnings press releases, investor presentations, Forms 10-Q and10-K.

Significant Items for any particular period are not intended to be a complete list of items that may materially impact current or future period performance.

Significant Items Influencing Financial Performance Comparisons

Earnings comparisons among the three years ended December 31, 2014, 2013,2016, 2015, and 20122014 were impacted by a number of Significant Items summarized below.

1.
Franchise Repositioning Related Expense.Mergers and Acquisitions. Significant events relating to franchise repositioning related expense,mergers and acquisitions, and the impacts of those events on our reported results, were as follows:

During 2016, $282 million of noninterest expense and $1 million of noninterest income was recorded related to the acquisition of FirstMerit. This resulted in a negative impact of $0.20 per common share in 2016.

During 2015, $9 million of noninterest expense was recorded related to the acquisition of Macquarie Equipment Finance, which was rebranded Huntington Technology Finance. Also during 2015, $4 million of noninterest expense and $3 million of noninterest income was recorded related to the sale of HAA, HASI, and Unified. This resulted in a negative impact of $0.01 per common share in 2015.
During 2014, $28.0$16 million of net noninterest expense was recorded related to the acquisition of 24 Bank of America branches and Camco Financial. This resulted in a net negative impact of $0.01 per common share in 2014.
2.
Litigation Reserve. Significant events relating to our litigation reserve, and the impacts of those events on our reported results, were as follows:
During 2016, a $42 million reduction to litigation reserves was recorded as other noninterest expense. This resulted in a positive impact of $0.03 per common share in 2016.
During 2015 and 2014, $38 million and $21 million of net additions to litigation reserves were recorded as other noninterest expense, respectively. This resulted in a negative impact of $0.03 and $0.02 per common share in 2015 and 2014, respectively.
3.
Franchise Repositioning Related Expense. Significant events relating to franchise repositioning, and the impacts of those events on our reported results, were as follows:
During 2015, $8 million of franchise repositioning related expense was recorded for the consolidation of 26 branches and organizational actions.recorded. This resulted in a negative impact of $0.02$0.01 per common share in 2014.

2015.

During 2013, $23.52014, $28 million of franchise repositioning related expense was recorded. This resulted in a negative impact of $0.02 per common share in 2013.

2014.

2.

Litigation Reserve. $20.9 million and $23.5 million of net additions to litigation reserves were recorded as other noninterest expense in 2014 and 2012, respectively. This resulted in a negative impact of $0.02 per common share in 2014 and 2012.

3.Mergers and Acquisitions.During 2014, $15.8 million of net noninterest expense was recorded related to the acquisition of 24 Bank of America branches and Camco Financial. This resulted in a negative impact of $0.01 per common share in 2014.

4.Pension Curtailment Gain. During 2013, a $33.9 million pension curtailment gain was recorded in personnel costs. This resulted in a positive impact of $0.03 per common share in 2013.

5.State deferred tax asset valuation allowance adjustment. During 2012, a valuation allowance of $21.3 million (net of tax) was released for the portion of the deferred tax asset and state net operating loss carryforwards expected to be realized. This resulted in a positive impact of $0.02 per common share in 2012. Additional information can be found in the Provision for Income Taxes section within this MD&A.

6.Bargain Purchase Gain. During 2012, an $11.2 million bargain purchase gain associated with the FDIC-assisted Fidelity Bank acquisition was recorded in noninterest income. This resulted in a positive impact of $0.01 per common share in 2012.

The following table reflects the earnings impact of the above-mentioned Significant Items for periods affected by this Results of Operations discussion:

Table 3—Significant Items Influencing Earnings Performance Comparison

   2014  2013  2012 

(dollar amounts in thousands, except per share amounts)

  After-tax  EPS  After-tax  EPS  After-tax  EPS 

Net income—GAAP

  $632,392    $641,282    $631,290   

Earnings per share, after-tax

  

 $0.72    $0.72    $0.69  

Significant items—favorable (unfavorable) impact:

  Earnings (1)  EPS (2)(3)  Earnings (1)  EPS (2)(3)  Earnings (1)  EPS (2)(3) 

Franchise repositioning related expense

  $(27,976 $(0.02 $(23,461 $(0.02 $—     $—    

Net additions to litigation reserve

   (20,909  (0.02  —      —      (23,500  (0.02

Mergers and acquisitions, net

   (15,818  (0.01  —      —      —      —    

Pension curtailment gain

   —      —      33,926    0.03    —      —    

State deferred tax asset valuation allowance adjustment(3)

   —      —      —      —      21,251    0.02  

Bargain purchase gain

   —      —      —      —      11,217    0.01  

(1)Pretax unless otherwise noted.

(2)Based upon the annual average outstanding diluted common shares.

(3)After-tax.

Table 3 - Significant Items Influencing Earnings Performance Comparison
(dollar amounts in thousands, except per share amounts)  
            
 2016 2015 2014
 Amount EPS (1) Amount EPS (1) Amount EPS (1)
Net income$711,821
   $692,957
   $632,392
  
Earnings per share, after-tax  $0.70
   $0.81
   $0.72
Significant items—favorable (unfavorable) impact:Earnings EPS Earnings EPS Earnings EPS
            
Mergers and acquisitions, net expenses$(282,086)   $(9,323)   $(15,818)  
Tax impact94,709
   3,263
   5,436
  
Mergers and acquisitions, after-tax$(187,377) $(0.20) $(6,060) $(0.01) $(10,382) $(0.01)
            
Litigation reserves$41,587
   $(38,186)   $(20,909)  
Tax impact(14,888)   13,365
   7,318
  
Litigation reserves, after-tax$26,699
 $0.03
 $(24,821) $(0.03) $(13,591) $(0.02)
            
Franchise repositioning related expense$
   $(7,588)   $(27,976)  
Tax impact
   2,656
   9,792
  
Franchise repositioning related expense, after-tax$
 $
 $(4,932) $(0.01) $(18,184) $(0.02)
(1)Based upon the annual average outstanding diluted common shares.
Net Interest Income / Average Balance Sheet

Our primary source of revenue is net interest income, which is the difference between interest income from earning assets (primarily loans, securities, and direct financing leases), and interest expense of funding sources (primarily interest-bearing deposits and borrowings). Earning asset balances and related funding sources, as well as changes in the levels of interest rates, impact net interest income. The difference between the average yield on earning assets and the average rate paid for interest-bearing liabilities is the net interest spread. Noninterest-bearing sources of funds, such as demand deposits and shareholders’ equity, also support earning assets. The impact of the noninterest-bearing sources of funds, often referred to as “free” funds, is captured in the net interest margin, which is calculated as net interest income divided by average earning assets. Both the net interest margin and net interest spread are presented on a fully-taxable equivalent basis, which means that tax-free interest income has been adjusted to a pretax equivalent income, assuming a 35% tax rate.


The following table shows changes in fully-taxable equivalent interest income, interest expense, and net interest income due to volume and rate variances for major categories of earning assets and interest-bearing liabilities:

Table 4—Change in Net Interest Income Due to Changes in Average Volume and Interest Rates(1)

   2014  2013 
   Increase (Decrease) From
Previous Year Due To
  Increase (Decrease) From
Previous Year Due To
 

Fully-taxable equivalent basis(2)

(dollar amounts in millions)

  Volume  Yield/
Rate
  Total  Volume  Yield/
Rate
  Total 

Loans and leases

  $136.7   $(94.5 $42.2   $66.1   $(108.7 $(42.6

Investment securities

   69.7    10.2    79.9    (3.7  2.0    (1.7

Other earning assets

 �� (6.3  0.2    (6.1  (16.8  (1.7  (18.5
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total interest income from earning assets

   200.1    (84.1  116.0    45.6    (108.4  (62.8
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Deposits

   5.2    (35.0  (29.8  1.0    (46.9  (45.9

Short-term borrowings

   1.5    —      1.5    (0.3  (0.7  (1.0

Long-term debt

   30.1    (18.5  11.6    (7.9  (9.0  (16.9
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total interest expense of interest-bearing liabilities

   36.8    (53.5  (16.7  (7.2  (56.6  (63.8
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net interest income

  $163.3   $(30.6 $132.7   $52.8   $(51.8 $1.0  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Table 4 - Change in Net Interest Income Due to Changes in Average Volume and Interest Rates (1)
(dollar amounts in millions)
 2016 2015
 
Increase (Decrease) From
Previous Year Due To
 
Increase (Decrease) From
Previous Year Due To
Fully-taxable equivalent basis(2)
Volume 
Yield/
Rate
 Total Volume 
Yield/
Rate
 Total
Loans and leases$332.3
 $87.0
 $419.3
 $117.6
 $(35.1) $82.5
Investment securities104.7
 (7.0) 97.7
 45.8
 3.2
 49.0
Other earning assets12.5
 (1.7) 10.8
 10.4
 0.7
 11.1
Total interest income from earning assets449.5
 78.3
 527.8
 173.8
 (31.2) 142.6
Deposits16.3
 3.5
 19.8
 5.6
 (9.9) (4.3)
Short-term borrowings0.2
 3.3
 3.5
 (1.6) 0.3
 (1.3)
Long-term debt42.2
 33.5
 75.7
 30.1
 
 30.1
Total interest expense of interest-bearing liabilities58.7
 40.3
 99.0
 34.1
 (9.6) 24.5
Net interest income$390.8
 $38.0
 $428.8
 $139.7
 $(21.6) $118.1

(1)

(1)The change in interest rates due to both rate and volume has been allocated between the factors in proportion to the relationship of the absolute dollar amounts of the change in each.

(2)

(2)Calculated assuming a 35% tax rate.

Table 5—Consolidated Average Balance Sheet and Net Interest Margin Analysis

   Average Balances 
Fully-taxable equivalent basis (1)     Change from 2013     Change from 2012    

(dollar amounts in millions)

  2014  Amount  Percent  2013  Amount  Percent  2012 

Assets

        

Interest-bearing deposits in banks

  $85   $15    21 $70   $(25  (26)%  $95  

Loans held for sale

   323    (198  (38  521    (566  (52  1,087  

Available-for-sale and other securities:

        

Taxable

   6,785    402    6    6,383    (1,515  (19  7,898  

Tax-exempt

   1,429    866    154    563    136    32    427  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total available-for-sale and other securities

   8,214    1,268    18    6,946    (1,379  (17  8,325  

Trading account securities

   46    (34  (43  80    13    19    67  

Held-to-maturity securities—taxable

   3,612    1,457    68    2,155    1,230    133    925  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total securities

   11,872    2,691    29    9,181    (136  (1  9,317  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Loans and leases: (2)

        

Commercial:

        

Commercial and industrial

   18,342    1,168    7    17,174    1,230    8    15,944  

Commercial real estate:

        

Construction

   728    148    26    580    (2  —      582  

Commercial

   4,271    (178  (4  4,449    (749  (14  5,198  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Commercial real estate

   4,999    (30  (1  5,029    (751  (13  5,780  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total commercial

   23,341    1,138    5    22,203    479    2    21,724  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Consumer:

        

Automobile loans and leases

   7,670    1,991    35    5,679    1,153    25    4,526  

Home equity

   8,395    85    1    8,310    (5  —      8,315  

Residential mortgage

   5,623    425    8    5,198    8    —      5,190  

Other consumer

   396    (40  (9  436    (19  (4  455  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total consumer

   22,084    2,461    13    19,623    1,137    6    18,486  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total loans and leases

   45,425    3,599    9    41,826    1,616    4    40,210  

Allowance for loan and lease losses

   (638  87    (12  (725  151    (17  (876
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net loans and leases

   44,787    3,686    9    41,101    1,767    4    39,334  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total earning assets

   57,705    6,107    12    51,598    889    2    50,709  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Cash and due from banks

   898    (10  (1  908    (182  (17  1,090  

Intangible assets

   578    21    4    557    (43  (7  600  

All other assets

   3,956    (5  —      3,961    (190  (5  4,151  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total assets

  $62,499   $6,200    11 $56,299   $625    1 $55,674  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Liabilities and Shareholders’ Equity

        

Deposits:

        

Demand deposits—noninterest-bearing

  $13,988   $1,117    9 $12,871   $671    6 $12,200  

Demand deposits—interest-bearing

   5,896    41    1    5,855    44    1    5,811  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total demand deposits

   19,884    1,158    6    18,726    715    4    18,011  

Money market deposits

   17,917    2,242    14    15,675    1,774    13    13,901  

Savings and other domestic deposits

   5,031    2    —      5,029    96    2    4,933  

Core certificates of deposit

   3,315    (1,234  (27  4,549    (1,672  (27  6,221  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total core deposits

   46,147    2,168    5    43,979    913    2    43,066  

Other domestic time deposits of $250,000 or more

   242    (64  (21  306    (20  (6  326  

Brokered time deposits and negotiable CDs

   2,139    533    33    1,606    16    1    1,590  

Deposits in foreign offices

   375    29    8    346    (26  (7  372  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total deposits

   48,903    2,666    6    46,237    883    2    45,354  

Short-term borrowings

   2,761    1,358    97    1,403    (194  (12  1,597  

Long-term debt

   3,495    1,825    109    1,670    (317  (16  1,987  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total interest-bearing liabilities

   41,171    4,732    13    36,439    (299  (1  36,738  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

All other liabilities

   1,070    (4  —      1,074    9    1    1,065  

Shareholders’ equity

   6,270    355    6    5,915    244    4    5,671  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total liabilities and shareholders’ equity

  $62,499   $6,200    11 $56,299   $625    1 $55,674  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Continued

Table 6—Consolidated Average Balance Sheet and Net Interest Margin Analysis (Continued)

Fully-taxable equivalent basis (1)  Interest Income / Expense   Average Rate (2) 

(dollar amounts in thousands)

  2014   2013   2012   2014  2013  2012 

Assets

          

Interest-bearing deposits in banks

  $103    $102    $202     0.12  0.15  0.21

Loans held for sale

   12,728     18,905     36,769     3.94    3.63    3.38  

Securities:

          

Available-for-sale and other securities:

          

Taxable

   171,080     148,557     184,340     2.52    2.33    2.33  

Tax-exempt

   44,562     25,663     17,659     3.12    4.56    4.14  
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Total available-for-sale and other securities

   215,642     174,220     201,999     2.63    2.51    2.43  

Trading account securities

   421     355     853     0.92    0.44    1.27  

Held-to-maturity securities—taxable

   88,724     50,214     24,088     2.46    2.33    2.60  
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Total securities

   304,787     224,789     226,940     2.57    2.45    2.43  
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Loans and leases: (2)

          

Commercial:

          

Commercial and industrial

   643,484     643,731     639,458     3.51    3.75    4.01  

Commercial real estate:

          

Construction

   31,414     23,440     22,886     4.31    4.04    3.93  

Commercial

   163,192     182,622     208,552     3.82    4.11    4.01  
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Commercial real estate

   194,606     206,062     231,438     3.89    4.10    4.00  
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Total commercial

   838,090     849,793     870,896     3.59    3.83    4.01  
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Consumer:

          

Automobile loans and leases

   262,931     221,469     214,053     3.43    3.90    4.73  

Home equity

   343,281     345,379     355,869     4.09    4.16    4.28  

Residential mortgage

   213,268     199,601     212,661     3.79    3.84    4.10  

Other consumer

  ��28,824     27,939     33,279     7.30    6.41    7.31  
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Total consumer

   848,304     794,388     815,862     3.84    4.05    4.41  
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Total loans and leases

   1,686,394     1,644,181     1,686,758     3.71    3.93    4.19  
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Total earning assets

  $2,004,012    $1,887,977    $1,950,669     3.47  3.66  3.85
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Liabilities and Shareholders’ Equity

          

Deposits:

          

Demand deposits—noninterest-bearing

  $—      $—      $—           

Demand deposits—interest-bearing

   2,272     2,525     3,579     0.04    0.04    0.06  
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Total demand deposits

   2,272     2,525     3,579     0.01    0.01    0.02  

Money market deposits

   42,156     38,830     40,164     0.24    0.25    0.29  

Savings and other domestic deposits

   8,779     13,292     18,928     0.17    0.26    0.38  

Core certificates of deposit

   26,998     50,544     84,983     0.81    1.11    1.37  
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Total core deposits

   80,205     105,191     147,654     0.25    0.34    0.48  

Other domestic time deposits of $250,000 or more

   1,036     1,442     2,140     0.43    0.47    0.66  

Brokered time deposits and negotiable CDs

   4,728     9,100     11,694     0.22    0.57    0.74  

Deposits in foreign offices

   483     508     679     0.13    0.15    0.18  
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Total deposits

   86,452     116,241     162,167     0.25    0.35    0.49  

Short-term borrowings

   2,940     1,475     2,391     0.11    0.11    0.15  

Long-term debt

   49,929     38,313     55,181     1.43    2.29    2.78  
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Total interest-bearing liabilities

   139,321     156,029     219,739     0.34    0.43    0.60  
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Net interest income

  $1,864,691    $1,731,948    $1,730,930      
  

 

 

   

 

 

   

 

 

     

Net interest rate spread

         3.13    3.23    3.25  

Impact of noninterest-bearing funds on margin

         0.10    0.13    0.16  
        

 

 

  

 

 

  

 

 

 

Net interest margin

         3.23  3.36  3.41
        

 

 

  

 

 

  

 

 

 

Table 5 - Consolidated Average Balance Sheet and Net Interest Margin Analysis (3)
(dollar amounts in millions)             
 Average Balances
   Change from 2015   Change from 2014  
Fully-taxable equivalent basis (1)2016 Amount Percent 2015 Amount Percent 2014
Assets             
Interest-bearing deposits in banks$100
 $10
 11 % $90
 $5
 6 % $85
Loans held for sale1,054
 400
 61
 654
 331
 102
 323
Available-for-sale and other securities:             
Taxable9,278
 1,279
 16
 7,999
 1,214
 18
 6,785
Tax-exempt2,716
 641
 31
 2,075
 646
 45
 1,429
Total available-for-sale and other securities11,994
 1,920
 19
 10,074
 1,860
 23
 8,214
Trading account securities67
 21
 46
 46
 
 
 46
Held-to-maturity securities—taxable5,693
 2,180
 62
 3,513
 (99) (3) 3,612
Total securities17,754
 4,121
 30
 13,633
 1,761
 15
 11,872
Loans and leases: (2)             
Commercial:             
Commercial and industrial23,684
 3,950
 20
 19,734
 1,392
 8
 18,342
Commercial real estate:             
Construction1,088
 71
 7
 1,017
 289
 40
 728
Commercial4,919
 709
 17
 4,210
 (61) (1) 4,271
Commercial real estate6,007
 780
 15
 5,227
 228
 5
 4,999
Total commercial29,691
 4,730
 19
 24,961
 1,620
 7
 23,341
Consumer:             
Automobile loans and leases10,540
 1,780
 20
 8,760
 1,090
 14
 7,670
Home equity9,058
 564
 7
 8,494
 99
 1
 8,395

Residential mortgage6,730
 780
 13
 5,950
 327
 6
 5,623
RV and marine finance693
 693
 
 
 
 
 
Other consumer742
 261
 54
 481
 85
 21
 396
Total consumer27,763
 4,078
 17
 23,685
 1,601
 7
 22,084
Total loans and leases57,454
 8,808
 18
 48,646
 3,221
 7
 45,425
Allowance for loan and lease losses(614) (8) 1
 (606) 32
 (5) (638)
Net loans and leases56,840
 8,800
 18
 48,040
 3,253
 7
 44,787
Total earning assets76,362
 13,339
 21
 63,023
 5,318
 9
 57,705
Cash and due from banks1,220
 (3) 
 1,223
 325
 36
 898
Intangible assets1,359
 656
 93
 703
 125
 22
 578
All other assets4,727
 510
 12
 4,217
 276
 7
 3,941
Total assets$83,054
 $14,494
 21 % $68,560
 $6,076
 10 % $62,484
Liabilities and Shareholders’ Equity             
Deposits:             
Demand deposits—noninterest-bearing$19,045
 $2,703
 17 % $16,342
 $2,354
 17 % $13,988
Demand deposits—interest-bearing10,985
 4,412
 67
 6,573
 677
 11
 5,896
Total demand deposits30,030
 7,115
 31
 22,915
 3,031
 15
 19,884
Money market deposits19,069
 (314) (2) 19,383
 1,466
 8
 17,917
Savings and other domestic deposits7,981
 2,761
 53
 5,220
 189
 4
 5,031
Core certificates of deposit2,300
 (303) (12) 2,603
 (712) (21) 3,315
Total core deposits59,380
 9,259
 18
 50,121
 3,974
 9
 46,147
Other domestic time deposits of $250,000 or more408
 152
 59
 256
 14
 6
 242
Brokered time deposits and negotiable CDs3,499
 746
 27
 2,753
 614
 29
 2,139
Deposits in foreign offices204
 (298) (59) 502
 127
 34
 375
Total deposits63,491
 9,859
 18
 53,632
 4,729
 10
 48,903
Short-term borrowings1,530
 184
 14
 1,346
 (1,415) (51) 2,761
Long-term debt8,048
 2,463
 44
 5,585
 2,105
 60
 3,480
Total interest-bearing liabilities54,024
 9,803
 22
 44,221
 3,065
 7
 41,156
All other liabilities1,594
 133
 9
 1,461
 391
 37
 1,070
Shareholders’ equity8,391
 1,855
 28
 6,536
 266
 4
 6,270
Total liabilities and shareholders’ equity$83,054
 $14,494
 21 % $68,560
 $6,076
 10 % $62,484
(1)

(3)Yield/rates and amounts include the effects of hedge and risk management activities associated with the respective asset and liability categories.

Table 6 - Consolidated Average Balance Sheet and Net Interest Margin Analysis (Continued) (3)
(dollar amounts in thousands)           
 Interest Income / Expense Average Rate (2)
Fully-taxable equivalent basis (1)2016 2015 2014 2016 2015 2014
Assets           
Interest-bearing deposits in banks$443
 $90
 $103
 0.44% 0.10% 0.12%
Loans held for sale34,480
 23,812
 12,728
 3.27
 3.64
 3.94
Securities:           
Available-for-sale and other securities:           
Taxable221,782
 202,104
 171,080
 2.39
 2.53
 2.52
Tax-exempt90,972
 64,637
 44,562
 3.35
 3.11
 3.12

Total available-for-sale and other securities312,754
 266,741
 215,642
 2.61
 2.65
 2.63
Trading account securities284
 493
 421
 0.42
 1.06
 0.92
Held-to-maturity securities—taxable138,312
 86,614
 88,724
 2.43
 2.47
 2.46
Total securities451,350
 353,848
 304,787
 2.54
 2.60
 2.57
Loans and leases: (2)           
Commercial:           
Commercial and industrial878,873
 700,139
 643,484
 3.71
 3.55
 3.51
Commercial real estate:           
Construction40,467
 36,956
 31,414
 3.72
 3.63
 4.31
Commercial175,491
 146,526
 163,192
 3.57
 3.48
 3.82
Commercial real estate215,958
 183,482
 194,606
 3.60
 3.51
 3.89
Total commercial1,094,831
 883,621
 838,090
 3.69
 3.54
 3.59
Consumer:           
Automobile loans and leases350,358
 282,379
 262,931
 3.32
 3.22
 3.43
Home equity381,002
 340,342
 343,281
 4.21
 4.01
 4.09
Residential mortgage244,077
 220,678
 213,268
 3.63
 3.71
 3.79
RV and marine finance39,243
 
 
 5.67
 
 
Other consumer78,737
 41,866
 28,824
 10.62
 8.71
 7.30
Total consumer1,093,417
 885,265
 848,304
 3.94
 3.74
 3.84
Total loans and leases2,188,248
 1,768,886
 1,686,394
 3.81
 3.64
 3.71
Total earning assets$2,674,521
 $2,146,636
 $2,004,012
 3.50% 3.41% 3.47%
Liabilities and Shareholders’ Equity           
Deposits:           
Demand deposits—noninterest-bearing$
 $
 $
 % % %
Demand deposits—interest-bearing11,278
 4,278
 2,272
 0.10
 0.07
 0.04
Total demand deposits11,278
 4,278
 2,272
 0.04
 0.02
 0.01
Money market deposits45,411
 43,406
 42,156
 0.24
 0.22
 0.24
Savings and other domestic deposits15,337
 7,340
 8,779
 0.19
 0.14
 0.17
Core certificates of deposit12,961
 20,646
 26,998
 0.56
 0.79
 0.81
Total core deposits84,987
 75,670
 80,205
 0.21
 0.22
 0.25
Other domestic time deposits of $250,000 or more1,624
 1,078
 1,036
 0.40
 0.42
 0.43
Brokered time deposits and negotiable CDs15,125
 4,767
 4,728
 0.43
 0.17
 0.22
Deposits in foreign offices268
 659
 483
 0.13
 0.13
 0.13
Total deposits102,004
 82,174
 86,452
 0.23
 0.22
 0.25
Short-term borrowings5,140
 1,584
 2,940
 0.34
 0.12
 0.11
Long-term debt155,651
 80,026
 49,929
 1.93
 1.43
 1.43
Total interest-bearing liabilities262,795
 163,784
 139,321
 0.48
 0.37
 0.34
Net interest income$2,411,726
 $1,982,852
 $1,864,691
      
Net interest rate spread      3.02
 3.04
 3.13
Impact of noninterest-bearing funds on margin      0.14
 0.11
 0.10
Net interest margin      3.16% 3.15% 3.23%


(1)FTE yields are calculated assuming a 35% tax rate.

(2)

(2)For purposes of this analysis, nonaccrual loans are reflected in the average balances of loans.

(3)Yield/rates and amounts include the effects of hedge and risk management activities associated with the respective asset and liability categories.


20142016 vs. 20132015

Fully-taxable equivalent net interest income for 20142016 increased $132.7$429 million, or 8%22%, from 2013.2015. This reflected the impact of 12%21% earning asset growth, a 1 basis point increase in the NIM to 3.16%, partially offset by 22% interest-bearing liability growth.
Average earning assets increased $13.3 billion, or 21%, from the prior year, driven by:
$4.1 billion, or 30%, increase in average securities, primarily reflecting the FirstMerit acquisition, as well as the reinvestment of cash flows and additional investment in LCR Level 1 qualifying securities. The 2016 average balance also included $2.1 billion of direct purchase municipal instruments in our Commercial segment, up from $1.7 billion in the year-ago period.
$4.0 billion, or 20%, increase in average C&I loans and leases was impacted by the FirstMerit acquisition. The increase in average C&I loans and leases also reflects organic growth in equipment finance leases, automobile dealer floorplan lending, and corporate banking.
$1.8 billion, or 20%, increase in average automobile loans, which reflects continued strength in new and used automobile originations, while maintaining our underwriting consistency and discipline. This increase was also impacted by the FirstMerit acquisition and was partially offset by the $1.5 billion auto loan securitization during the 2016 fourth quarter.
Average noninterest-bearing demand deposits increased $2.7 billion, or 17%, while average total interest-bearing liabilities increased $9.8 billion, or 22%, primarily reflecting:
$4.4 billion, or 67%, increase in average interest-bearing demand deposits.
$2.8 billion, or 53%, increase in savings and other domestic deposits, reflecting continued banker focus across all segments on obtaining our customers' full deposit relationship.
$2.4 billion, or 44% increase in average long-term debt, reflecting the issuance of $2.0 billion of senior debt during 2016, as well as $0.5 billion of subordinate debt assumed during the acquisition of FirstMerit.
The 1 basis point increase in NIM primary reflected:
9 basis point positive impact from the mix and yield on earning assets, a 3 basis point increase in the benefit from noninterest-bearing funds, partially offset by an 11 basis point increase in funding costs.
2015 vs. 2014
Fully-taxable equivalent net interest income for 2015 increased $118 million, or 6%, from 2014. This reflected the impact of 9% earning asset growth, partially offset by 13%7% interest-bearing liability growth and a 13an 8 basis point decrease in the NIM to 3.23%3.15%.

Average earning assets increased $6.1$5.3 billion, or 12%9%, from the prior year, driven by:

$2.71.8 billion, or 29%15%, increase in average securities, primarily reflecting an increase of Liquidity Coverage Ratio (LCR)additional investment in LCR Level 1 qualified securities andqualifying securities. The 2015 average balance also included $1.7 billion of direct purchase municipal instruments.

instruments originated by our Commercial segment, up from $1.0 billion in the year-ago period.

$2.01.4 billion, or 35%, increase in average Automobile loans, as originations remained strong.

$1.2 billion, or 7%8%, increase in average C&I loans and leases, primarily reflecting growththe $0.9 billion increase in tradeasset finance, including the $0.8 billion of equipment finance leases acquired in supportthe Huntington Technology Finance transaction at the end of our middle market and corporate customers.

the 2015 first quarter.

$0.41.1 billion, or 8%14%, increase in average Automobile loans, as originations remained strong.

$0.3 billion, or 6%, increase in average Residential mortgage loans as a result of the Camco Financial acquisition and a decrease in the rate of payoffs due to lower levels of refinancing.

loans.

Average noninterest bearingnoninterest-bearing demand deposits increased $1.1$2.4 billion, or 9%17%, while average total interest-bearing liabilities increased $4.7$3.1 billion, or 13%7%, from 2013, primarily reflecting:

$3.21.5 billion, or 104%, increase in short- and long-term borrowings, which are a cost effective method of funding incremental securities growth.

$2.2 billion, or 14%8%, increase in money market deposits, reflecting the strategiccontinued banker focus across all segments on customerobtaining our customers’ full deposit relationship.


$0.7 billion, or 11%, increase in average interest-bearing demand deposits. The increase reflected growth and increased share-of-wallet amongin both consumer and commercial customers.

accounts.

$0.50.7 billion, or 33%11%, increase in average total debt, reflecting a $2.1 billion, or 60%, increase in average long-term debt partially offset by a $1.4 billion, or 51%, reduction in average short-term borrowings. The increase in average long-term debt reflected the issuance of $3.1 billion of bank-level senior debt during 2015, including $0.9 billion during the 2015 fourth quarter, as well as $0.5 billion of debt assumed in the Huntington Technology Finance acquisition at the end of the 2015 first quarter.

$0.6 billion, or 29%, increase in brokered deposits and negotiated CDs, which were used to efficiently finance balance sheet growth while continuing to manage the overall cost of funds.

Partially offset by:

$1.20.7 billion, or 27%21%, decrease in average core certificates of deposit due to the strategic focus on changing the funding sources to low- and no-cost demand deposits and lower-cost money market deposits.

The primary items impacting the decrease in the NIM were:

196 basis point negative impact from the mix and yield on earning assets, primarily reflecting lower rates on loans and the impact of an increasedincrease in total securities balance.

balances.

3 basis point decrease in the benefit to the margin of non-interest bearing funds, reflecting lower interest rates on total interest bearing liabilities from the prior year.

Partially offset by:

9 basis point positive impact from the mix and yield of total interest-bearing liabilities, reflecting the strategic focus on changing the funding sources from higher rate time deposits to no-cost demand deposits and low-cost money market deposits.

2013 vs. 2012

Fully-taxable equivalent net interest income for 2013 increased $1.0 million, or less than 1%, from 2012. This reflected the impact of 4% loan growth, a 5 basis point decrease in the NIM to 3.36%, as well as a 7% reduction in other earning assets, the majority of which were loans held for sale. The primary items impacting the decrease in the NIM were:

19 basis point negative impact from the mix and yield of earning assets primarily reflecting a decrease in consumer loan yields.

total interest-bearing liabilities.

3Partially offset by:

1 basis point decreaseincrease in the benefit to the margin of non-interest bearing funds, reflecting lower interest rates on total interest bearing liabilities from the prior year.

Partially offset by:

14 basis point positive impact from the mix and yield of deposits reflecting the strategic focus on changing the funding sources from higher rate time deposits to no-cost demand deposits and low-cost money market deposits.

3 basis point positive impact from noncore funding primarily reflecting lower debt costs.

Average earning assets increased $0.9 billion, or 2%, from the prior year, driven by:

$1.2 billion, or 8%, increase in average C&I loans and leases. This reflected the continued growth within the middle market healthcare vertical, equipment finance, and dealer floorplan.

$1.2 billion, or 25%, increase in average on balance sheet automobile loans, as the growth in originations remained strong and our investments in the Northeast and upper Midwest continued to grow as planned.

Partially offset by:

$0.8 billion, or 13%, decrease in average CRE loans, as acceptable returns for new originations were balanced against internal concentration limits and increased competition for projects sponsored by high quality developers.

$0.6 billion, or 52%, decrease in loans held-for-sale reflecting the impact of automobile loan securitizations completed in 2012.

While there was minimal impact on the full-year average balance sheet, $1.9 billion of net investment securities were purchased during the 2013 fourth quarter. Our investment securities portfolio is evaluated under established asset/liability management objectives. Additionally, $0.6 billion of direct purchase municipal instruments were reclassified on December 31, 2013, from C&I loans to available-for-sale securities.

Average noninterest-bearing deposits increased $0.7 billion, or 6%, while average interest-bearing liabilities decreased $0.3 billion, or 1%, from 2012, primarily reflecting:

funds.

$1.7 billion, or 27%, decrease in average core certificates of deposit due to the strategic focus on changing the funding sources to no-cost demand deposits and low-cost money market deposits.

$0.6 billion, or 47%, decrease in short-term borrowings due to a focused effort to reduce collateralized deposits.

Partially offset by:

$1.8 billion, or 13%, increase in money market deposits reflecting the strategic focus on customer growth and increased share of wallet among both consumer and commercial customers.

While there was minimal impact on the full-year average balance sheet, average subordinated notes and other long-term debt reflect the issuance of $0.5 billion and $0.8 billion of long-term debt in the 2013 fourth quarter and the 2013 third quarter, respectively.

Provision for Credit Losses

(This section should be read in conjunction with the Credit Risk section.)

The provision for credit losses is the expense necessary to maintain the ALLL and the AULC at levels appropriate to absorb our estimate of credit losses inherent in the loan and lease portfolio and the portfolio of unfunded loan commitments and letters-of-credit.

The provision for credit losses in 20142016 was $81.0$191 million, down $9.1up $91 million, or 10%91%, from 2013,2015. The higher provision expense was due to several factors, including the migration of the acquired loan portfolio to the originated portfolio, which requires a reserve build, portfolio growth and transitioning the FirstMerit portfolio to our reserve methodology. NCOs represented 19 basis points of average loans and leases, consistent with 2015, and below our long-term target of 35 to 55 basis points.
The provision for credit losses in 2015 was $100 million, up $19 million, or 23%, from 2014, reflecting a $64.0$37 million, or 34%30%, decrease in NCOs. The provision for credit losses in 20142015 was $43.6$12 million lessmore than total NCOs.

The provision for credit losses in 2013 was $90.0 million, down $57.3 million, or 39%, from 2012, reflecting a $153.8 million, or 45%, decrease in NCOs. The provision for credit losses in 2013 was $98.6 million less than total NCOs.


Noninterest Income

(This section should be read in conjunction with Significant Item 6.)

The following table reflects noninterest income for the past three years:

Table 7 - Noninterest Income
(dollar amounts in thousands)             
 Year Ended December 31,
   Change from 2015   Change from 2014  
 2016 Amount Percent 2015 Amount Percent 2014
Service charges on deposit accounts$324,299
 $43,950
 16 % $280,349
 $6,608
 2 % $273,741
Cards and payment processing income169,064
 26,349
 18
 142,715
 37,314
 35
 105,401
Mortgage banking income128,257
 16,404
 15
 111,853
 26,966
 32
 84,887
Trust services108,274
 2,441
 2
 105,833
 (10,139) (9) 115,972
Insurance income64,523
 (741) (1) 65,264
 (209) 
 65,473
Brokerage income61,834
 1,629
 3
 60,205
 (8,072) (12) 68,277
Capital markets fees59,527
 5,911
 11
 53,616
 9,885
 23
 43,731
Bank owned life insurance income57,567
 5,167
 10
 52,400
 (4,648) (8) 57,048
Gain on sale of loans47,153
 14,116
 43
 33,037
 11,946
 57
 21,091
Securities gains (losses)(84) (828) (111) 744
 (16,810) (96) 17,554
Other income129,317
 (3,397) (3) 132,714
 6,710
 5
 126,004
Total noninterest income$1,149,731
 $111,001
 11 % $1,038,730
 $59,551
 6 % $979,179
Table 7—Noninterest Income

   Twelve Months Ended December 31, 
       Change from 2013      Change from 2012    

(dollar amounts in thousands)

  2014   Amount  Percent  2013   Amount  Percent  2012 

Service charges on deposit accounts

  $273,741    $1,939    1 $271,802    $9,623    4 $262,179  

Trust services

   115,972     (7,035  (6  123,007     1,110    1    121,897  

Electronic banking

   105,401     12,810    14    92,591     10,301    13    82,290  

Mortgage banking income

   84,887     (41,968  (33  126,855     (64,237  (34  191,092  

Brokerage income

   68,277     (1,347  (2  69,624     (3,060  (4  72,684  

Insurance income

   65,473     (3,791  (5  69,264     (2,055  (3  71,319  

Bank owned life insurance income

   57,048     629    1    56,419     377    1    56,042  

Capital markets fees

   43,731     (1,489  (3  45,220     (2,940  (6  48,160  

Gain on sale of loans

   21,091     2,920    16    18,171     (40,011  (69  58,182  

Securities gains (losses)

   17,554     17,136    4,100    418     (4,351  (91  4,769  

Other income

   126,004     (12,821  (9  138,825     1,118    1    137,707  
  

 

 

   

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 

Total noninterest income

  $979,179    $(33,017  (3)%  $1,012,196    $(94,125  (9)%  $1,106,321  
  

 

 

   

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 

20142016 vs. 20132015

Noninterest income decreased $33.0increased $111 million, or 3%11%, from the prior year, primarily reflecting:

$42.044 million, or 33%16%, decreaseincrease in service charges on deposit accounts, reflecting the benefit of continued new customer acquisition.

$26 million, or 18%, increase in cards and payment processing income, due to higher card related income and underlying customer growth.
$16 million, or 15%, increase in mortgage banking income, reflecting a 24% increase in mortgage origination volume.
$14 million, or 43%, increase in gain on sale of loans primarily reflecting an increase of $6 million in SBA loan sales gains. In addition, there was a $7 million gain on non-relationship C&I and CRE loan sales, which was related to the balance sheet optimization strategy completed in the 2016 fourth quarter.
2015 vs. 2014
Noninterest income increased $60 million, or 6%, from the prior year, primarily reflecting:
$37 million, or 35%, increase in cards and payment processing income due to higher card related income and underlying customer growth.
$27 million, or 32%, increase in mortgage banking income primarily driven by a $27.7$33 million, or 33%58%, reductionincrease in origination and secondary marketing revenue as originations decreased and gain-on-sale margins compressed, and a $14.2 million negative impact from net MSR hedging activity.

revenue.

$12.812 million, or 9%57%, decreaseincrease in other incomegain on sale of loans primarily due to a decreasereflecting an increase of $7 million in LIHTCSBA loan sales gains and lower fees associated with commercialthe $5 million automobile loan activity.

securitization gain during the 2015 second quarter.

$7.010 million, or 6%23%, decreaseincrease in trust servicescapital market fees primarily duerelated to a reduction in fees.

customer foreign exchange and commodities derivatives products.

Partially offset by:

$17.117 million, increaseor 96% decrease in securities gains as we adjusted the mix of our securities portfolio to prepare for the LCR requirements.

requirements during the 2014 first quarter.


$12.8 million, or 14%, increase in electronic banking income due to higher card related income and underlying customer growth.

2013 vs. 2012

Noninterest income decreased $94.110 million, or 9%, fromdecrease in trust services primarily related to our fiduciary trust businesses moving to a more open architecture platform and a decline in assets under management in proprietary mutual funds. During the prior year, primarily reflecting:

2015 fourth quarter, Huntington sold HAA, HASI, and Unified.

$64.2

Noninterest Expense             
(This section should be read in conjunction with Significant Items section.)    
     
The following table reflects noninterest expense for the past three years:    
              
Table 8 - Noninterest Expense
(dollar amounts in thousands)             
 Year Ended December 31,
   Change from 2015   Change from 2014  
 2016 Amount Percent 2015 Amount Percent 2014
Personnel costs$1,349,124
 $226,942
 20 % $1,122,182
 $73,407
 7 % $1,048,775
Outside data processing and other services304,743
 73,390
 32
 231,353
 18,767
 9
 212,586
Equipment164,839
 39,882
 32
 124,957
 5,294
 4
 119,663
Net occupancy153,090
 31,209
 26
 121,881
 (6,195) (5) 128,076
Professional services105,266
 54,975
 109
 50,291
 (9,264) (16) 59,555
Marketing62,957
 10,744
 21
 52,213
 1,653
 3
 50,560
Deposit and other insurance expense54,107
 9,498
 21
 44,609
 (4,435) (9) 49,044
Amortization of intangibles30,456
 2,589
 9
 27,867
 (11,410) (29) 39,277
Other expense183,903
 (16,652) (8) 200,555
 25,745
 15
 174,810
Total noninterest expense$2,408,485
 $432,577
 22 % $1,975,908
 $93,562
 5 % $1,882,346
Number of employees (average full-time equivalent)15,993
 3,750
 31 % 12,243
 370
 3 % 11,873
Impact of Significant Items:     
 Year Ended December 31,
(dollar amounts in thousands)2016 2015 2014
Personnel costs$76,020
 $5,457
 $19,850
Outside data processing and other services46,467
 4,365
 5,507
Equipment24,742
 110
 2,248
Net occupancy14,772
 4,587
 11,153
Professional services57,817
 5,087
 2,228
Marketing5,520
 28
 1,357
Other expense14,010
 38,733
 23,140
Total impact of significant items on noninterest expense$239,348
 $58,367
 $65,483

Adjusted Noninterest Expense (See Non-GAAP Financial Measures in the Additional Disclosures section):        
          
 Year Ended December 31, Change from 2015 Change from 2014
(dollar amounts in thousands)2016 2015 2014 Amount Percent Amount Percent
Personnel costs1,273,104
 1,116,725
 1,028,925
 156,379
 14
 87,800
 9
Outside data processing and other services258,276
 226,988
 207,079
 31,288
 14
 19,909
 10
Equipment140,097
 124,847
 117,415
 15,250
 12
 7,432
 6
Net occupancy138,318
 117,294
 116,923
 21,024
 18
 371
 
Professional services47,449
 45,204
 57,327
 2,245
 5
 (12,123) (21)
Marketing57,437
 52,185
 49,203
 5,252
 10
 2,982
 6
Deposit and other insurance expense54,107
 44,609
 49,044
 9,498
 21
 (4,435) (9)
Amortization of intangibles30,456
 27,867
 39,277
 2,589
 9
 (11,410) (29)
Other expense169,893
 161,822
 151,670
 8,071
 5
 10,152
 7
Total adjusted noninterest expense (Non-GAAP)$2,169,137
 $1,917,541
 $1,816,863
 $251,596
 13% $100,678
 6 %
2016 vs. 2015
Noninterest expense increased $433 million, or 34%22%, from 2015:
$227 million, or 20%, increase in personnel costs, primarily reflecting a 31% increase in the number of average full-time equivalent employees largely related to the in-store branch expansion and the addition of colleagues from FirstMerit.
$73 million, or 32%, increase in outside data processing and other services, primarily reflecting $46 million of acquisition-related expense and ongoing technology investments.
$55 million, or 109%, increase in professional services, primarily reflecting $58 million of acquisition-related expense.
$40 million, or 32%, increase in equipment expense, primarily reflecting $25 million of acquisition-related expense.
$31 million, or 26%, increase in net occupancy expense, primarily reflecting $15 million of acquisition-related expense.
Partially offset by:
$17 million, or 8%, decrease in mortgage banking incomeother expense, primarily driven by 9%reflecting a $42 million reduction in volume, lower gain on sale margin, and a higher percentage of originations held on the balance sheet.

$40.0 million, or 69%, decrease in gain on sale of loans as no auto loan securitizations occurred in 2013 compared to $2.3 billion of auto loan securitizations in 2012.

$4.4 million, or 91%, decrease in securities gains as the prior year had certain securities designated as available-for-sale that were sold and the proceeds from those sales were reinvested into the held-to-maturity portfolio.

Partially offset by:

$10.3 million, or 13%, increase in electronic banking income due to continued consumer household growth.

$9.6 million, or 4%, increase in service charges on deposit accounts reflecting 8% consumer household and 6% commercial relationship growth and changing customer usage patterns. This more than offset the approximately $28.0 million negative impact of the February 2013 implementation of a new posting order for consumer transaction accounts.

$1.1 million, or 1%, increase in other income. In accordance with ASC 323-740, the low income housing tax credit investment amortization expense is now presented as a component of provision for income taxes. Previously, the amortization expenselitigation reserves which was included in other income. This change resulted in higher other income. In addition, there was an increase in fees associated with commercial loan activity. These increases were partiallymostly offset by an $11.2a $40 million bargain purchase gain associated with the FDIC-assisted Fidelity Bank acquisitioncontribution in the prior year.

Noninterest Expense

(This section should be read in conjunction with Significant Items 1, 2, 3 and 4.)

The following table reflects noninterest expense for2016 fourth quarter to achieve the past three years:

philanthropic plans related to FirstMerit.

Table 8—Noninterest Expense

   Twelve Months Ended December 31, 
       Change from 2013      Change from 2012    

(dollar amounts in thousands)

  2014   Amount  Percent  2013   Amount  Percent  2012 

Personnel costs

  $1,048,775    $47,138    5 $1,001,637    $13,444    1 $988,193  

Outside data processing and other services

   212,586     13,039    7    199,547     9,292    5    190,255  

Net occupancy

   128,076     2,732    2    125,344     14,184    13    111,160  

Equipment

   119,663     12,870    12    106,793     3,846    4    102,947  

Professional services

   59,555     18,968    47    40,587     (25,171  (38  65,758  

Marketing

   50,560     (625  (1  51,185     (13,078  (20  64,263  

Deposit and other insurance expense

   49,044     (1,117  (2  50,161     (18,169  (27  68,330  

Amortization of intangibles

   39,277     (2,087  (5  41,364     (5,185  (11  46,549  

Gain on early extinguishment of debt

   —       —      —      —       798    (100  (798

Other expense

   174,810     33,425    24    141,385     (57,834  (29  199,219  
  

 

 

   

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 

Total noninterest expense

  $1,882,346    $124,343    7 $1,758,003    $(77,873  (4)%  $1,835,876  
  

 

 

   

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 

Number of employees (average full-time equivalent)

   11,873     (91  (1)%   11,964     470    4  11,494  

Impacts of Significant Items:

   Twelve Months Ended December 31, 

(dollar amounts in thousands)

  2014   2013   2012 

Personnel costs

  $19,850    $(27,249  $—    

Outside data processing and other services

   5,507     1,350     —    

Net occupancy

   11,153     12,117     —    

Equipment

   2,248     2,364     —    

Professional services

   2,228     —       —    

Marketing

   1,357     —       —    

Other expense

   23,140     953     23,500  
  

 

 

   

 

 

   

 

 

 

Total noninterest expense adjustments

  $65,483    $(10,465  $23,500  
  

 

 

   

 

 

   

 

 

 

Adjusted Noninterest Expense (Non-GAAP):

   Twelve Months Ended December 31,  Change from 2013  Change from 2012 

(dollar amounts in thousands)

  2014   2013   2012  Amount  Percent  Amount  Percent 

Personnel costs

  $1,028,925    $1,028,886    $988,193   $39     $40,693    4

Outside data processing and other services

   207,079     198,197     190,255    8,882    4    7,942    4  

Net occupancy

   116,923     113,227     111,160    3,696    3��   2,067    2  

Equipment

   117,415     104,429     102,947    12,986    12    1,482    1  

Professional services

   57,327     40,587     65,758    16,740    41    (25,171  (38

Marketing

   49,203     51,185     64,263    (1,982  (4  (13,078  (20

Deposit and other insurance expense

   49,044     50,161     68,330    (1,117  (2  (18,169  (27

Amortization of intangibles

   39,277     41,364     46,549    (2,087  (5  (5,185  (11

Gain on early extinguishment of debt

   —       —       (798  —      —      798    (100

Other expense

   151,670     140,432     175,719    11,238    8    (35,287  (20
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total adjusted noninterest expense

  $1,816,863    $1,768,468    $1,812,376   $48,395    3 $(43,908  (2)% 
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

20142015 vs. 20132014

Noninterest expense increased $124.3$94 million, or 7%5%, from 2013:

2014:

$47.173 million, or 5%7%, increase in personnel costs. Excluding the impact of significant items, personnel costs were relatively unchanged.

$33.4increased $88 million, or 24%9%, reflecting a $79 million increase in salaries related to the 2015 second quarter implementation of annual merit increases, the addition of Huntington Technology Finance, and a 3% increase in the number of average full-time equivalent employees, largely related to the build-out of the in-store strategy.

$26 million, or 15%, increase in other noninterest expense. Excluding the impact of significant items, other noninterest expense increased $11.2$10 million, or 8%7%, due to an increase in state franchise taxes, protective advances, and litigation expense.

operating lease expense related to Huntington Technology Finance.

$19.019 million, or 47%, increase in professional services. Excluding the impact of significant items, professional services increased $16.7 million, or 41%, reflecting an increase in outside consultant expenses related to strategic planning and legal services.

$13.0 million, or 7%9%, increase in outside data processing and other services. Excluding the impact of significant items, outside data processing and other services increased $8.9$20 million, or 4%10%, primarily reflecting higher debit and credit card processing costs and increased other technology investment expense, as we continue to invest in technology supporting our products, services, and our Continuous Improvement initiatives.

Partially offset by:

$12.911 million, or 12%29%, increasedecrease in equipment.amortization of intangibles reflecting the full amortization of the core deposit intangible at the end of the 2015 second quarter from the Sky Financial acquisition.

$9 million, or 16%, decrease in professional services. Excluding the impact of significant items, equipment increased $13.0professional services decreased $12 million, or 12%21%, primarily reflecting higher depreciation expense.

2013 vs. 2012

Noninterest expense decreased $77.9 million, or 4%, from 2012, and primarily reflected:

$57.8 million, or 29%, decline in other expense, reflecting a reduction in litigation expense, mortgage repurchases and warranty expense, OREO and foreclosure costs, and reduction in operating lease expense.

$25.2 million, or 38%, decrease in professional services, reflecting a decrease in outside consultant expenses and legal services, primarily collections.

$18.2 million, or 27%, decrease in deposit and other insurance expense due to lower insurance premiums.

$13.1 million, or 20%, decrease in marketing, primarily reflecting lower levels of advertising, and reduced promotional offers.

$5.2 million, or 11%, decrease due to the continued amortization of core deposit intangibles.

Partially offset by:

$14.2 million, or 13%, increase in net occupancy expense, reflecting $12.1 million of franchise repositioning expense related to branch consolidation and facilities optimization.

strategic planning.

$13.4 million, or 1%, increase in personnel costs, primarily reflecting the $38.8 million increase in salaries due to a 4% increase in the number of average full-time equivalent employees as employee count increased mainly in technology and consumer areas and $6.7 million of franchise repositioning expense related to branch consolidation and severance expenses. This was partially offset by the $33.9 million one-time, non-cash gain related to the pension curtailment.

$9.36 million, or 5%, increasedecrease in outside data processing as we continue to invest in technology supporting our products, services, and our Continuous Improvement initiatives.

$3.9 million, or 4%, increase in equipment, including $2.4 millionnet occupancy. Excluding the impact of branch consolidation and facilities optimization related expenses.

significant items, net occupancy remained relatively unchanged.

Provision for Income Taxes

(This section should be read in conjunction with Significant Item 5, and Note 1517 of the Notes to Consolidated Financial Statements.)

2014

2016 versus 2013

2015

The provision for income taxes was $220.6$208 million for 20142016 compared with a provision for income taxes of $227.5$221 million in 2013.2015. Both years included the benefits from tax-exempt income, tax-advantaged investments, general business credits, and the change in accounting for investments in qualified affordable housing projects.projects, and capital losses. As of December 31, 2016 and 2015 there was no valuation allowance on federal deferred taxes. In 2014,2015, a $26.9$69 million reduction in the 2014 provision for federal income taxes was recorded for the portion of federal capital loss carryforward deferred tax assets related to capital loss carryforwardsasset that are more likely than not

to be realized compared to a $93.3 million increaserealized. In 2016 and 2015 there was essentially no change recorded in 2013. In 2014, a $7.4 million reduction in the 2014 provision for state income taxes, net of federal, was recorded for the portion of state deferred tax assets and state net operating loss carryforwards that are more likely than not to be realized, compared to a $6.0 million reduction in 2013.realized. At December 31, 2014,2016, we had a net federal deferred tax asset of $72.1$76 million and a net state deferred tax asset of $45.3$41 million. For regulatory capital purposes, there was no disallowed net deferred tax asset at December 31, 2014 and December 31, 2013.

We file income tax returns with the IRS and various state, city, and foreign jurisdictions. Federal income tax audits have been completed for tax years through 2009. In the first quarter of 2013, theThe IRS began an examination ofis currently examining our 2010 and 2011 consolidated federal income tax returns. Certain proposed adjustments resulting from the IRS examination of our 2005 through 2009 tax returns have been settled with the IRS Appeals Office, subject to final approval by the Joint Committee on Taxation of the U.S. Congress. Various state and other jurisdictions remain open to examination, including Ohio, Kentucky, Indiana, Michigan, Pennsylvania, West Virginia, Wisconsin, and Illinois.

2013

2015 versus 2012

2014

The provision for income taxes was $227.5$221 million for 20132015 compared with a provision for income taxes of $202.3$221 million in 2012.2014. Both years included the benefits from tax-exempt income, tax-advantaged investments, general business credits, and the change in accounting for investments in qualified affordable housing projects.projects, and capital losses. In 2013,2015, a $93.3$69 million increasereduction in the 2013 provision for federal income taxes was recorded for the portion of federal deferred tax assets related to capital loss carryforward deferred tax assetcarryforwards that are more likely than not to be realized compared to $3.0 million in 2012. In 2013, a $6.0$27 million reduction in 2014. In 2015, there was essentially no change recorded in the 2013 provision for state income taxes, net of federal was recordedtaxes, for the portion of state deferred tax assets and state net operating loss carryforwards that are more likely than not to be realized, compared to a $21.3$7 million reduction, net of federal taxes, in 2012.

the 2014.

RISK MANAGEMENT AND CAPITAL

A comprehensive discussion of risk management and capital matters affecting us can be found in the Risk Governance section included in Item 1A and the Regulatory Matters section of Item 1 of this Form 10-K.

Some of the more significant processes used to manage and control credit, market, liquidity, operational, and compliance risks are described in the following paragraphs.

sections.

Credit Risk

Credit risk is the risk of financial loss if a counterparty is not able to meet the agreed upon terms of the financial obligation. The majority of our credit risk is associated with lending activities, as the acceptance and management of credit risk is central to profitable lending. We also have credit risk associated with our AFS and HTM securities portfolios(see Note 45 and Note 56 of the Notes to Consolidated Financial Statements). We engage with other financial counterparties for a variety of purposes including investing, asset and liability management, mortgage banking, and trading activities. While there is credit risk associated with derivative activity, based on our underwriting practices we believe this exposure is minimal.

(see Note 1 of the Notes to Consolidated Financial Statements)

We continue to focus on the identification, monitoring, and managing of our credit risk. In addition to the traditional credit risk mitigation strategies of credit policies and processes, market risk management activities, and portfolio diversification, we use additional quantitative measurement capabilities utilizing external data sources, enhanced use of modeling technology, and internal stress testing processes. Our portfolio management resources demonstrate our commitment to maintaining an aggregate moderate-to-low risk profile. In our efforts to continue to identify risk mitigation techniques, we have focused on product design features, origination policies, and treatment strategiessolutions for delinquent or stressed borrowers.


The maximum level of credit exposure to individual credit borrowers is limited by policy guidelines based on the perceived risk of each borrower or related group of borrowers. All authority to grant commitments is delegated through the independent credit administration function and is closely monitored and regularly updated. Concentration risk is managed through limits on loan type, geography, industry, and loan quality factors. We focus predominantly on extending credit to retail and commercial customers with existing or expandable relationships within our primary banking markets, although we will consider lending opportunities outside our primary markets if we believe the associated risks are acceptable and aligned with strategic initiatives. Although we offer a broad set of products, we continue to develop new lending products and opportunities. Each of these new products and opportunities goes through a rigorous development and approval process prior to implementation to ensure our overall objective of maintaining an aggregate moderate-to-low risk portfolio profile.

The checks and balances in the credit process and the separation of the credit administration and risk management functions are designed to appropriately assess and sanction the level of credit risk being accepted, facilitate the early recognition of credit problems when they occur, and to provide for effective problem asset management and resolution. For example, we do not extend additional credit to delinquent borrowers except in certain circumstances that substantially improve our overall repayment or collateral coverage position.

Our asset quality indicators reflected continued overall improvement of our credit quality performance in 2014.

Loan and Lease Credit Exposure Mix

At December 31, 2014,2016, our loans and leases totaled $47.7$67.0 billion, representing a $4.6$16.6 billion, or 11%33%, increase compared to $43.1$50.3 billion at December 31, 2013. The majority of the portfolio growth occurred in the Automobile and C&I portfolios. Huntington remained committed to a high quality origination strategy. The CRE portfolio remained relatively consistent, as a result of continued runoff offset by new production within the requirements associated with achieving an acceptable return, our internal concentration limits and increased competition for projects sponsored by high quality developers.

2015.

Total commercial loans and leases were $24.2$35.4 billion at December 31, 2014,2016, and represented 51%53% of our total loan and lease credit exposure. Our commercial loan portfolio is diversified alongby product type, customer size, and geography within our footprint, and is comprised of the following (see Commercial Credit discussion):

C&I – C&I loans and leases are made to commercial customers for use in normal business operations to finance working capital needs, equipment purchases, or other projects. The majority of these borrowers are customers doing business within our geographic regions. C&I loans and leases are generally underwritten individually and secured with the assets of the company and/or the personal guarantee of the business owners. The financing of owner occupied facilities is considered a C&I loan even though there is improved real estate as collateral. This treatment is a result of the credit decision process, which focuses on cash flow from operations of the business to repay the debt. The operation, sale, rental, or refinancing of the real estate is not considered the primary repayment source for these types of loans. As we have expanded our C&I portfolio, we have developed a series of “vertical specialties” to ensure that new products or lending types are embedded within a structured, centralized Commercial Lending area with designated, experienced credit officers. These specialties are comprised of either targeted industries (for example, Healthcare, Food & Agribusiness, Energy, etc)etc.) and/or lending disciplines (Equipment Finance, ABL, etc)etc.), all of which requires a high degree of expertise and oversight to effectively mitigate and monitor risk. As such, we have dedicated colleagues and teams focused on bringing value added expertise to these specialty clients.

CRE– CRE loans consist of loans to developers and REITs supporting income-producing or for-sale commercial real estate properties. We mitigate our risk on these loans by requiring collateral values that exceed the loan amount and underwriting the loan with projected cash flow in excess of the debt service requirement. These loans are made to finance properties such as apartment buildings, office and industrial buildings, and retail shopping centers, and are repaid through cash flows related to the operation, sale, or refinance of the property. For loans secured by real estate, appropriate appraisals are obtained at origination and updated on an as needed basis in compliance with regulatory requirements.

Construction CRE– Construction CRE loans are loans to developers, companies, or individuals used for the construction of a commercial or residential property for which repayment will be generated by the sale or permanent financing of the property. Our construction CRE portfolio primarily consists of retail, multi family, office, and warehouse project types. Generally, these loans are for construction projects that have been presold or preleased, or have secured permanent financing, as well as loans to real estate companies with significant equity invested in each project. These loans are underwritten and managed by a specialized real estate lending group that actively monitors the construction phase and manages the loan disbursements according to the predetermined construction schedule.

Total consumer loans and leases were $23.4$31.6 billion at December 31, 2014,2016, and represented 49%47% of our total loan and lease credit exposure. The consumer portfolio is comprised primarily of automobile loans, home equity loans and lines-of-credit, and residential mortgages(see Consumer Credit discussion). The increase from December 31, 2013 primarily relates to strong consumer demand for automobile originations and adjustable rate residential mortgages (ARMs).

Automobile – Automobile loans are comprised primarily of loans made through automotive dealerships and include exposure in selected states outside of our primary banking markets. The exposure outside of our primary banking markets represents 19%16% of the total exposure, with no individual state representing more than 6%5%. Applications are underwritten utilizingusing an automated underwriting system that applies consistent policies and processes across the portfolio.


Home equity – Home equity lending includes both home equity loans and lines-of-credit. This type of lending, which is secured by a first-lien or junior-lien on the borrower’s residence, allows customers to borrow against the equity in their home or refinance existing mortgage debt. Products include closed-end loans which are generally fixed-rate with principal and interest payments, and variable-rate, interest-only lines-of-credit which do not require payment of principal during the 10-year revolving period. The home equity line of credit may convert to a 20-year amortizing structure at the end of the revolving period. Applications are underwritten centrally in conjunction with an automated underwriting system. The home equity underwriting criteria is based on minimum credit scores, debt-to-income ratios, and LTV ratios, with current collateral valuations. The underwriting for the floating rate lines of credit also incorporates a stress analysis for a rising interest rate.

Residential mortgage – Residential mortgage loans represent loans to consumers for the purchase or refinance of a residence. These loans are generally financed over a 15-year to 30-year term, and in most cases, are extended to borrowers to finance their primary residence. Applications are underwritten centrally using consistent credit policies and processes. All residential mortgage loan decisions utilize a full appraisal for collateral valuation. Huntington has not originated or acquired residential mortgages that allow negative amortization or allow the borrower multiple payment options.


RV and marine finance – RV and marine finance loans are loans provided to consumers for the purpose of financing recreational vehicles and boats. Loans are originated on an indirect basis through a series of dealerships across 26 states. The loans are underwritten centrally using an application and decisioning system similar to automobile loans. The current portfolio includes 60% of the balances within our core footprint states.
Other consumerPrimarilyOther consumer loans primarily consists of consumer loans not secured by real estate, including personal unsecured loans, overdraft balances, and credit cards. We introduced a consumer credit card product during 2013, utilizing a centralized underwriting system and focusing on existing Huntington customers.

The table below provides the composition of our total loan and lease portfolio:

Table 9—Loan and Lease Portfolio Composition

   At December 31, 

(dollar amounts in millions)

  2014  2013  2012  2011  2010 

Commercial:(1)

                

Commercial and industrial

  $19,033     40 $17,594     41 $16,971     42 $14,699     38 $13,063     34

Commercial real estate:

                

Construction

   875     2    557     1    648     2    580     1    650     2  

Commercial

   4,322     9    4,293     10    4,751     12    5,246     13    6,001     16  
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

 

Total commercial real estate

   5,197     11    4,850     11    5,399     14    5,826     14    6,651     18  
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

 

Total commercial

   24,230     51    22,444     52    22,370     56    20,525     52    19,714     52  
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

 

Consumer:

                

Automobile(2)

   8,690     18    6,639     15    4,634     11    4,458     11    5,614     15  

Home equity

   8,491     18    8,336     19    8,335     20    8,215     21    7,713     20  

Residential mortgage

   5,831     12    5,321     12    4,970     12    5,228     13    4,500     12  

Other consumer

   414     1    380     2    419     1    498     3    566     1  
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

 

Total consumer

   23,426     49    20,676     48    18,358     44    18,399     48    18,393     48  
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

 

Total loans and leases

  $47,656     100 $43,120     100 $40,728     100 $38,924     100 $38,107     100
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

 

Table 9 - Loan and Lease Portfolio Composition
(dollar amounts in millions)                   
 At December 31,
 2016 2015 2014 2013 2012
Ending Balances by Type:                   
Originated loans                   
Commercial:                   
Commercial and industrial$21,631
 41% $20,560
 41% $19,033
 40% $17,594
 41% $16,971
 42%
Commercial real estate:                   
Construction979
 2
 1,031
 2
 875
 2
 557
 1
 648
 2
Commercial4,740
 9
 4,237
 8
 4,322
 9
 4,293
 10
 4,751
 12
Commercial real estate5,719
 11
 5,268
 10
 5,197
 11
 4,850
 11
 5,399
 14
Total commercial27,350
 52
 25,828
 51
 24,230
 51
 22,444
 52
 22,370
 56
Consumer:                   
Automobile9,619
 18
 9,481
 19
 8,690
 18
 6,639
 15
 4,634
 11
Home equity8,665
 16
 8,471
 17
 8,491
 18
 8,336
 19
 8,335
 20
Residential mortgage6,717
 13
 5,998
 12
 5,831
 12
 5,321
 12
 4,970
 12
RV and marine finance166
 
 
 
 
 
 
 
 
 
Other consumer730
 1
 563
 1
 414
 1
 380
 2
 419
 1
Total consumer25,897
 48
 24,513
 49
 23,426
 49
 20,676
 48
 18,358
 44
Total originated loans and leases$53,247
 100% $50,341
 100% $47,656
 100% $43,120
 100% $40,728
 100%
                    
Acquired loans (1)                   
Commercial:                   
Commercial and industrial$6,428
 47%                
Commercial real estate:                   
Construction467
 3
                
Commercial1,115
 8
                
Commercial real estate1,582
 11
                
Total commercial8,010
 58
                
Consumer:                   
Automobile1,350
 10
                
Home equity1,441
 11
                

Residential mortgage1,008
 7
                
RV and marine finance1,680
 12
                
Other consumer226
 2
                
Total consumer5,705
 42
                
Total acquired loans and leases$13,715
 100%                
                    
Total loans                   
Commercial:                   
Commercial and industrial$28,059
 42% $20,560
 41% $19,033
 40% $17,594
 41% $16,971
 42%
Commercial real estate:                   
Construction1,446
 2
 1,031
 2
 875
 2
 557
 1
 648
 2
Commercial5,855
 9
 4,237
 8
 4,322
 9
 4,293
 10
 4,751
 12
Commercial real estate7,301
 11
 5,268
 10
 5,197
 11
 4,850
 11
 5,399
 14
Total commercial35,360
 53
 25,828
 51
 24,230
 51
 22,444
 52
 22,370
 56
Consumer:                   
Automobile10,969
 16
 9,481
 19
 8,690
 18
 6,639
 15
 4,634
 11
Home equity10,106
 15
 8,471
 17
 8,491
 18
 8,336
 19
 8,335
 20
Residential mortgage7,725
 12
 5,998
 12
 5,831
 12
 5,321
 12
 4,970
 12
RV and marine finance1,846
 3
 
 
 
 
 
 
 
 
Other consumer956
 1
 563
 1
 414
 1
 380
 2
 419
 1
Total consumer31,602
 47
 24,513
 49
 23,426
 49
 20,676
 48
 18,358
 44
Total loans and leases$66,962
 100% $50,341
 100% $47,656
 100% $43,120
 100% $40,728
 100%
(1)As defined by regulatory guidance, there were no commercialRepresents loans outstanding that would be considered a concentration of lending to a particular industry or group of industries.from FirstMerit acquisition.
(2)2011 included a decrease of $1.3 billion resulting from the transfer of automobile loans to loans held for a sale reflecting an automobile securitization transaction completed in 2012. 2010 included an increase of $0.5 billion resulting from the adoption of a new accounting standard to consolidate a previously off-balance sheet automobile loan securitization transaction.

As shown


Loans originated for investment are stated at their principal amount outstanding adjusted for partial charge-offs, and net deferred loan fees and costs. Acquired loans are those purchased in the table above, ourFirstMerit acquisition and are recorded at estimated fair value at the acquisition date with no carryover of the related ALLL. The difference between acquired contractual balance and estimated fair value at acquisition date was recorded as a purchase premium or discount. The acquired loan portfolio will show a continuous decline as a result of payments, payoffs, charge-offs or other disposition, unless Huntington acquires additional loans in the future.

Our loan portfolio is diversified bycomposed of consumer and commercial credit.credits. At the corporate level, we manage the credit exposure and portfolio composition in part via a credit concentration policy. The policy designates specific loan types, collateral types, and loan structures to be formally tracked and assigned limits as a percentage of capital. C&I lending by NAICS categories, specific limits for CRE primary project types, loans secured by residential real estate, shared national credit exposure, and designated high risk loan definitions represent examples of specifically tracked components of our concentration management process. Currently there are no identified concentrations that exceed the established limit.limit, including the impact of the FirstMerit acquisition. Our concentration management processpolicy is approved by our board level Risk Oversight Committeethe ROC of the Board and is one of the strategies utilizedused to ensure a high quality, well diversified portfolio that is consistent with our overall objective of maintaining an aggregate moderate-to-low risk profile.

Changes to existing concentration limits require the approval of the ROC prior to implementation, incorporating specific information relating to the potential impact on the overall portfolio composition and performance metrics.

The table below provides our total loan and lease portfolio segregated by the type of collateral securing the loan or lease. The changes in the collateral composition from December 31, 2015 are consistent with the portfolio growth metrics, with increases noted in the residential and vehicle categories. metrics.
The increase in the unsecured exposure is centered in high quality commercial credit customers.

Table 10—Loan and Lease Portfolio by Collateral Type

   At December 31, 

(dollar amounts in millions)

  2014  2013  2012  2011  2010 

Secured loans:

                

Real estate—commercial

  $8,631     18 $8,622     20 $9,128     22 $9,557     25 $10,389     27

Real estate—consumer

   14,322     30    13,657     32    13,305     33    13,444     35    12,214     32  

Vehicles

   10,932     23    8,989     21    6,659     16    6,021     15    7,134     19  

Receivables/Inventory

   5,968     13    5,534     13    5,178     13    4,450     11    3,763     10  

Machinery/Equipment

   3,863     8    2,738     6    2,749     7    1,994     5    1,766     5  

Securities/Deposits

   964     2    786     2    826     2    800     2    734     2  

Other

   919     2    1,016     2    1,090     3    1,018     3    990     2  
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

 

Total secured loans and leases

   45,599     96    41,342     96    38,935     96    37,284     96    36,990     97  

Unsecured loans and leases

   2,057     4    1,778     4    1,793     4    1,640     4    1,117     3  
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

 

Total loans and leases

  $47,656     100 $43,120     100 $40,728     100 $38,924     100 $38,107     100
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

 


Table 10 - Loan and Lease Portfolio by Collateral Type
(dollar amounts in millions)                   
 At December 31,
 2016 2015 2014 2013 2012
Secured loans:                   
Real estate—commercial$11,729
 18% $8,296
 16% $8,631
 18% $8,622
 20% $9,128
 22%
Real estate—consumer17,831
 27
 14,469
 29
 14,322
 30
 13,657
 32
 13,305
 33
Vehicles, RV and marine15,934
 24
 11,880
 24
 10,932
 23
 8,989
 21
 6,659
 16
Receivables/Inventory6,277
 9
 5,961
 12
 5,968
 13
 5,534
 13
 5,178
 13
Machinery/Equipment9,465
 14
 5,171
 10
 3,863
 8
 2,738
 6
 2,749
 7
Securities/Deposits1,305
 2
 974
 2
 964
 2
 786
 2
 826
 2
Other1,154
 1
 987
 2
 919
 2
 1,016
 2
 1,090
 3
Total secured loans and leases63,695
 95
 47,738
 95
 45,599
 96
 41,342
 96
 38,935
 96
Unsecured loans and leases3,267
 5
 2,603
 5
 2,057
 4
 1,778
 4
 1,793
 4
Total loans and leases$66,962
 100% $50,341
 100% $47,656
 100% $43,120
 100% $40,728
 100%
Commercial Credit

The primary factors considered in commercial credit approvals are the financial strength of the borrower, assessment of the borrower’s management capabilities, cash flows from operations, industry sector trends, type and sufficiency of collateral, type of exposure, transaction structure, and the general economic outlook. While these are the primary factors considered, there are a number of other factors that may be considered in the decision process. We utilize a centralized preview and senior loan approval committee, led by our chief credit officer. The risk rating(see next paragraph), size, and complexity of the credit determines the threshold for approval of the senior loan committee with a minimum credit exposure of $10.0 million. For loans not requiring senior loan committee approval, with the exception of small business loans, credit officers who understand each local region and are experienced in the industries and loan structures of the requested credit exposure are involved in all loan decisions and have the primary credit authority. For small business loans, we utilize a centralized loan approval process for standard products and structures. In this centralized decision environment, certain individuals who understand each local region may make credit-extension decisions to preserve our commitment to the communities in which we operate in.operate. In addition to disciplined and consistent judgmental factors, a sophisticated credit scoring process is used as a primary evaluation tool in the determination of approving a loan within the centralized loan approval process.

In commercial lending, on-going credit management is dependent on the type and nature of the loan. We monitor all significant exposures on an on-going basis. All commercial credit extensions are assigned internal risk ratings reflecting the borrower’s PD and LGD. This two-dimensional rating methodology provides granularity in the portfolio management process. The PD is rated and applied at the borrower level. The LGD is rated and applied based on the specific type of credit extension and the quality and lien position associated with the underlying collateral. The internal risk ratings are assessed at origination and updated at each periodic monitoring event. There is also extensive macro portfolio management analysis on an on-going basis. We continually review and adjust our risk-rating criteria based on actual experience, which provides us with the current risk level in the portfolio and is the basis for determining an appropriate allowance for credit losses (ACL) amount for the commercial portfolio. A centralized portfolio management team monitors and reports on the performance of the entire commercial portfolio, including small business loans, to provide consistent oversight.

In addition to the initial credit analysis conducted during the approval process, our Credit Review group performs testing to provide an independent review and assessment of the quality and risk of new loan originations. This group is part of our Risk Management area and conducts portfolio reviews on a risk-based cycle to evaluate individual loans, validate risk ratings, as well asand test the consistency of credit processes.

Our standardized loan grading system considers many components that directly correlate to loan quality and likelihood of repayment, one of which is guarantor support. On an annual basis, or more frequently if warranted, we consider, among other things, the guarantor’s reputation and creditworthiness, along with various key financial metrics such as liquidity and net worth, assuming such information is available. Our assessment of the guarantor’s credit strength, or lack thereof, is reflected in our risk ratings for such loans, which is directly tied to, and an integral component of, our ACL methodology. When a loan goes to impaired status, viable guarantor support is considered in the determination of a credit loss.


If our assessment of the guarantor’s credit strength yields an inherent capacity to perform, we will seek repayment from the guarantor as part of the collection process and have done so successfully. However, we do not formally track the repayment success from guarantors.

Substantially all loans categorized as Classified(see Note 34 of Notes to Consolidated Financial Statements) are managed by our Special Assets Department (SAD). TheSAD. SAD group is a specialized group of credit professionals that handle the day-to-day management of workouts, commercial recoveries, and problem loan sales. Its responsibilities include developing and implementing action plans, assessing risk ratings, and determining the appropriateness of the allowance, the accrual status, and the ultimate collectability of the Classified loan portfolio.

C&I PORTFOLIO

The C&I portfolio is comprised of loans to businesses where the source of repayment is associated with the on-going operations of the business. Generally, the loans are secured by the borrower’s assets, such as equipment, accounts receivable, and/or inventory. In many cases, the loans are secured by real estate, although the operation, sale, or refinancing of the real estate is not a primary source of repayment for the loan. For loans secured by real estate, appropriate appraisals are obtained at origination and updated on an as needed basis in compliance with regulatory requirements.

Currently, higher-risk segments of the C&I portfolio include loans to borrowers supporting the home building industry, contractors, and leveraged lending.

We manage the risks inherent in thisthe C&I portfolio through origination policies, a defined loan concentration policy with established limits, on-going loan level reviews and portfolio level reviews, recourse requirements, and continuous portfolio risk management activities. Our origination policies for thisthe C&I portfolio include loan product-type specific policies such as LTV and debt service coverage ratios, as applicable.

During 2016, the most volatile segment of the C&I portfolio was loans to borrowers supporting oil and gas exploration and production, and currently represents less than 1% of the total loan portfolio. While the energy industry remains a focus, the performance of the energy related portfolio has stabilized over the past three quarters.

The C&I portfolio continues to have strongsolid origination activity as evidenced by theits growth over the past 12 months. The credit quality of the portfolio remains strong asmonths and we maintain a focus on high quality originations. The loans added as a result of the FirstMerit acquisition have a very similar risk profile and composition to the legacy Huntington portfolio. The only material new geographic location is the Chicago market. Problem loans havehad trended downward over the last several years, reflecting a combination of proactive risk identification and effective workout strategies implemented by the SAD. However, in the first quarter of 2016 C&I problem loans began to increase, primarily as a result of oil and gas exploration and production customers and the increase in overall C&I loan portfolio size. We have seen some improvement in the Energy portfolio risk profile since the 2016 first quarter. We continue to maintain a proactive approach to identifying borrowers that may be facing financial difficulty in order to maximize the potential solutions.

Subsequent to the origination of the loan, the Credit Review group provides an independent review and assessment of the quality of the underwriting and risk of new loan originations.

CRE PORTFOLIO

We manage the risks inherent in this portfolio specific to CRE lending, focusing on the quality of the developer and the specifics associated with each project. Generally, we: (1) limit our loans to 80% of the appraised value of the commercial real estate at origination, (2) require net operating cash flows to be 125% of required interest and principal payments, and (3) if the commercial real estate is nonownernon-owner occupied, require that at least 50% of the space of the project be preleased. We actively monitor both geographic and project-type concentrations and performance metrics of all CRE loan types, with a focus on loans identified as higher risk based on the risk rating methodology. Both macro-level and loan-level stress-test scenarios based on existing and forecast market conditions are part of the on-going portfolio management process for the CRE portfolio.

Dedicated real estate professionals originate and manage the majority of the portfolio, with the remainder obtained from prior bank acquisitions.portfolio. The portfolio is diversified by project type and loan size, and this diversification represents a significant portion of the credit risk management strategies employed for this portfolio. Subsequent to the origination of the loan, the Credit Review group provides an independent review and assessment of the quality of the underwriting and risk of new loan originations.


Appraisal values are obtained in conjunction with all originations and renewals, and on an as needed basis, in compliance with regulatory requirements.requirements and to ensure appropriate decisions regarding the on-going management of the portfolio reflect the changing market conditions. Appraisals are obtained from approved vendors and are reviewed by an internal appraisal review group comprised of certified appraisers to ensure the quality of the valuation used in the underwriting process. We continue to perform on-going portfolio level reviews within the CRE portfolio. These reviews generate action plans based on occupancy levels or sales volume associated with the projects being reviewed. Property values are updated using appraisals on a regular basis to ensure appropriate decisions regarding the on-going management of the portfolio reflect the changing market conditions. This highly individualized process requires working closely with all of our borrowers, as well as an in-depth knowledge of CRE project lending and the market environment.

Consumer Credit

Consumer credit approvals are based on, among other factors, the financial strength and payment history of the borrower, type of exposure, and the transaction structure. Consumer credit decisions are generally made in a centralized environment utilizing decision models. Importantly, certain individuals who understand each local region have the authority to make credit extension decisions to preserve our focus on the local communities in which we operate in.operate. Each credit extension is assigned a specific PD and LGD. The PD is generally based on the borrower’s most recent credit bureau score (FICO), which we update quarterly, whileproviding an ongoing view of the borrowers PD. The LGD is related to the type of collateral and the LTV ratio associated with the credit extension.

extension, which typically does not change over the course of the loan term. This allows Huntington to maintain a current view of the customer for credit risk management and ACL purposes.


In consumer lending, credit risk is managed from a segment (i.e., loan type, collateral position, geography, etc.) and vintage performance analysis. All portfolio segments are continuously monitored for changes in delinquency trends and other asset quality indicators. We make extensive use of portfolio assessment models to continuously monitor the quality of the portfolio, which may result in changes to future origination strategies. The on-goingongoing analysis and review process results in a determination of an appropriate ALLL amount for our consumer loan portfolio. The independent risk management group has a consumer process review component to ensure the effectiveness and efficiency of the consumer credit processes.

Collection action isactions by our customer assistance team are initiated as needed through a centrally managed collection and recovery function. The collection group employsWe employ a series of collection methodologies designed to maintain a high level of effectiveness, while maximizing efficiency. In addition to the consumer loan portfolio, the collection groupcustomer assistance team is responsible for collection activity on all sold and securitized consumer loans and leases. Collection practices include a single contact point for the majority of the residential real estate secured portfolios.

AUTOMOBILE PORTFOLIO

Our strategy in the automobile portfolio continues to focus on high quality borrowers as measured by both FICO and internal custom scores, combined with appropriate LTVs, terms, and profitability. Our strategy and operational capabilities allow us to appropriately manage the origination quality across the entire portfolio, including our newer markets. Although increased origination volume and entering new markets can be associated with increased risk levels, we believe our disciplined strategy and operational processes significantly mitigate these risks.

We have continued to consistently execute our value proposition and take advantage of available market opportunities. Importantly, we have maintained our high credit quality standards while expanding the portfolio.

RESIDENTIAL REAL ESTATE SECURED PORTFOLIOS

The properties securing our residential mortgage and home equity portfolios are primarily located within our geographic footprint. Huntington continues to support our local markets with consistent underwriting across all residential secured products. The residential-secured portfolio originations continue to be of high quality, with the majority of the negative credit impact coming from loans originated in 2006 and earlier. Our portfolio management strategies associated with our Home Savers group allow us to focus on effectively helping our customers with appropriate solutions for their specific circumstances.

Table 11—Selected Home Equity and Residential Mortgage Portfolio Data

   Home Equity  Residential Mortgage 
   Secured by first-lien  Secured by junior-lien  

 

 
   December 31, 
(dollar amounts in millions)  2014  2013  2014  2013  2014  2013 

Ending balance

  $5,129   $4,842   $3,362   $3,494   $5,831   $5,321  

Portfolio weighted average LTV ratio(1)

   71  71  81  81  74  74

Portfolio weighted average FICO score(2)

   759    758    752    741    752    743  
   Home Equity  Residential
Mortgage (3)
 
   Secured by first-lien  Secured by junior-lien  

 

 
   Year Ended December 31, 
   2014  2013  2014  2013  2014  2013 

Originations

  $1,566   $1,745   $872   $529   $1,192   $1,625  

Origination weighted average LTV ratio(1)

   74  69  83  81  83  79

Origination weighted average FICO score(2)

   775    771    765    756    752    757  


Table 11 - Selected Home Equity and Residential Mortgage Portfolio Data
(dollar amounts in millions)        
 Home Equity Residential Mortgage
 December 31,
  2016 2015 2016 2015
Ending balance $10,106
 $8,471
 $7,725
 $5,998
Portfolio weighted-average LTV ratio (1) 75% 75% 75% 75%
Portfolio weighted-average FICO score (2) 760
 760
 748
 752
         
 Home Equity Residential Mortgage (3)
 Twelve months ended December 31,
  2016 2015 2016 2015
Originations $2,717
 $2,606
 $1,878
 $1,409
Origination weighted-average LTV ratio (1) 78% 77% 84% 83%
Origination weighted-average FICO score (2) 775
 774
 751
 754

(1)The LTV ratios for home equity loans and home equity lines-of-credit are cumulative and reflect the balance of any senior loans. LTV ratios reflect collateral values at the time of loan origination.
(2)Portfolio weighted average FICO scores reflect currently updated customer credit scores whereas origination weighted averageweighted-average FICO scores reflect the customer credit scores at the time of loan origination.
(3)Represents only owned-portfolio originations.


Home Equity Portfolio

Our home equity portfolio (loans and lines-of-credit) consists of both first-lien and junior-lien mortgage loans with underwriting criteria based on minimum credit scores, debt-to-income ratios, and LTV ratios. We offer closed-end home equity loans which are generally fixed-rate with principal and interest payments, and variable-rate interest-only home equity lines-of-credit which do not require payment of principal during the 10-year revolving period of the line-of-credit. Applications are underwritten centrally in conjunction with an automated underwriting system.

Given the low interest rate environment over the past several years, many borrowers have utilized the line-of-credit home equity product as the primary source of financing their home versus residential mortgages. The proportion of the home equity portfolio secured by a first-lien has increased significantly over the past three years, positively impacting the portfolio’s risk profile. At December 31, 2014, $5.1 billion or 60% of our total home equity portfolio was secured by first-lien mortgages compared to 58% in the prior year. The first-lien position, combined with continued high average FICO scores and high LTV, significantly reduces the credit risk associated with these loans.

Within the home equity portfolio, the standard product is a 10-year interest-only draw period with a 20-year fully amortizing term at the end of the draw period. Prior to 2007,2006, the standard product was a 10-year draw period with a balloon payment. In either case, after the 10-year draw period, the borrower must reapply, subject to full underwriting guidelines, to continue with the interest only revolving structure or begin repaying the debt in a term structure.

The principal and interest payment associated with the term structure will be higher than the interest-only payment, resulting in maturityend of draw period risk. Our maturityHELOC risk can be segregated into two distinct segments: (1) home equity lines-of-credit underwritten with a balloon payment at maturity acquired from FirstMerit and (2) home equity lines-of-credit with an automatic conversion to a 20-year amortizing loan. We manage this risk based on both the actual maturity date of the line-of-credit structure and at the end of the 10-year draw period. This maturity risk is embedded in the portfolio which we address with proactive contact strategies beginning one year prior to maturity.either maturity or the end of draw period. In certain circumstances, our Home Saver group is able to provide payment and structure relief to borrowers experiencing significant financial hardship associated with the payment adjustment. Our existing HELOC maturity strategy is consistent with the recent regulatory guidance.


The table below summarizes our home equity line-of-credit portfolio by the actual maturity date as described above.

Table 12—Maturity Scheduleend of Home Equity Line-of-Credit Portfolio

   December 31, 2014 

(dollar amounts in millions)

  1 Year or Less   1 to 2 years   2 to 3 years   3 to 4 years   More than
4 years
   Total 

Secured by first-lien

  $32    $3    $1    $2    $2,859    $2,897  

Secured by junior-lien

   197     120     104     17     2,532     2,970  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total home equity line-of-credit

  $229    $123    $105    $19    $5,391    $5,867  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

December 31, 2013

            

Total home equity line-of-credit

  $281    $245    $130    $112    $4,684    $5,452  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The reduction in maturities presented in over 1-year categories is a result of our change to a product with a 20-year amortization period after 10-year draw period structure. Loans with a balloon payment structure risk is essentially eliminated after 2015.

The amounts in the above table maturing in four years or less primarily consist of balloon payment structures and represent the most significant maturity risk. The amounts maturing in more than four years primarily consist of exposure with a 20-year amortization period after the 10-year draw period.

Historically, less than 30% of our home equity lines-of-credit that are one year or less from maturity actually reach the maturity date.

described above:

Table 12 - Draw Schedule of Home Equity Line-of-Credit Portfolio
(dollar amounts in millions)             
              
 December 31, 2016
 Amortizing 1 year or less 1 to 2 years 2 to 3 years 3 to 4 years More than
4 years
 Total
Current Balance             
     First Lien$94
 $98
 $255
 $134
 $168
 $3,486
 $4,235
     Second Lien380
 220
 256
 115
 127
 2,403
 3,501
Total Current Balance$474
 $318
 $511
 $249
 $295
 $5,889
 $7,736
Residential Mortgages Portfolio

Huntington underwrites all applications centrally, with a focus on higher quality borrowers. We do not originate residential mortgages that allow negative amortization or allow the borrower multiple payment options and have incorporated regulatory requirements and guidance into our underwriting process. All residentialResidential mortgages are originated based on a completed full appraisal during the credit underwriting process. We update values in compliance with applicable regulations to facilitate our portfolio management, as well as our workout and loss mitigation functions.

Several government programs continued to impact the residential mortgage portfolio, including various refinance programs such as HAMP and HARP, which positively affected the availability of credit for the industry. During the year ended December 31, 2014, we closed $248.0 million in HARP residential mortgages and $1.8 million in HAMP residential mortgages. The HARP and HAMP residential mortgage loans are part of our residential mortgage portfolio or serviced for others.

We are subject to repurchase risk associated with residential mortgage loans sold in the secondary market. An appropriate level of reserve for representations and warranties related to residential mortgage loans sold has been established to address this repurchase risk inherent in the portfolio.
RV AND MARINE FINANCE PORTFOLIO
Our strategy in the RV and Marine portfolio (see Operational Risk discussion).

focuses on high quality borrowers, combined with appropriate LTVs, terms, and profitability. Although entering new markets can be associated with increased risk levels, we believe our disciplined strategy and operational processes significantly mitigate these risks.

Credit Quality

(This section should be read in conjunction with Note 34 of the Notes to Consolidated Financial Statements.)

We believe the most meaningful way to assess overall credit quality performance is through an analysis of credit quality performance ratios. This approach forms the basis of most of the discussion in the sections immediately following: NPAs and NALs, TDRs, ACL, and NCOs. In addition, we utilize delinquency rates, risk distribution and migration patterns, and product segmentation in the analysis of our credit quality performance.

Credit quality performance in 20142016, including the FirstMerit acquisition, reflected continued overall improvement. NPAs declined 4% to $337.7positive results. Total NCOs were $109 million compared to December 31, 2013, as the CRE, automobileor 0.19% of average total loans and residential portfolio segments showed declines. This was partially offset by increases in C&I, primarily due to two credit relationships, and home equity as a result of lower partial charge-offs due the housing market recovery from the lows in 2010-2011. NCOs decreased 34% compared to the prior year, as a result of declines in the CRE, home equity and residential portfolios. Total criticized loans continued to decline, across both the commercial and consumer segments on a percentage basis. As a result of the continued credit quality improvement, theleases. The ACL to total loans and leases ratio declineddecreased by 2523 basis points to 1.40%.

NPAs, NALs, AND TDRs

(This section should be read in conjunction with Note 31.10%, due to the impact of the Notes to Consolidated Financial Statements.)FirstMerit acquisition as acquired loans are recorded at fair value with no associated ALLL on the date of acquisition.

NPAs and NALs

NPAs consist of (1) NALs, which represent loans and leases no longer accruing interest, (2) OREO properties, and (3) other NPAs. Any loan in our portfolio may be placed on nonaccrual status prior to the policies described below when collection of principal

or interest is in doubt. Also, when a borrower with discharged non-reaffirmed debt in a Chapter 7 bankruptcy is identified and the loan is determined to be collateral dependent, the loan is placed on nonaccrual status.

C&I and CRE loans (except for purchased credit impaired loans) are placed on nonaccrual status at 90-days past due, or earlier if repayment of principal and interest is in doubt. Of the $120.5$255 million of CRE and C&I-related NALs at December 31, 2014, $65.72016, $173 million, or 54%68%, represented loans that were less than 30-days past due, demonstrating our continued commitment to proactive credit risk management. With the exception of residential mortgage loans guaranteed by government organizations which continue to accrue interest, first lien loans secured by residential mortgage collateral are placed on nonaccrual status at 150-days past due. Junior-lien home equity loans are placed on nonaccrual status at the earlier of 120-days past due or when the related first-lien loan has been identified as nonaccrual. Automobile and other consumer loans are generally charged-off prior to the loan reachingat 120-days past due.

When loans are placed on nonaccrual, accrued interest income is reversed with current year accruals charged to interest income and prior year amounts generally charged-off as a credit loss. When, in our judgment, the borrower’s ability to make required interest and principal payments has resumed and collectability is no longer in doubt, the loan or lease could be returned to accrual status.

The table reflects period-end NALs and NPAs detail for each of the last five years:

Table 13—Nonaccrual Loans and Leases and Nonperforming Assets

    At December 31, 

(dollar amounts in thousands)

  2014   2013   2012   2011   2010 

Nonaccrual loans and leases:

          

Commercial and industrial

  $71,974    $56,615    $90,705    $201,846    $346,720  

Commercial real estate

   48,523     73,417     127,128     229,889     363,692  

Automobile

   4,623     6,303     7,823     —       —    

Residential mortgages

   96,564     119,532     122,452     68,658     45,010  

Home equity

   78,560     66,189     59,525     40,687     22,526  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total nonaccrual loans and leases

   300,244     322,056     407,633     541,080     777,948  

Other real estate owned, net

          

Residential

   29,291     23,447     21,378     20,330     31,649  

Commercial

   5,748     4,217     6,719     18,094     35,155  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other real estate, net

   35,039     27,664     28,097     38,424     66,804  

Other nonperforming assets(1)

   2,440    2,440    10,045    10,772    —    
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total nonperforming assets

  $337,723   $352,160   $445,775   $590,276   $844,752  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Nonaccrual loans as a % of total loans and leases

   0.63  0.75  1.00  1.39  2.04

Nonperforming assets ratio(2)

   0.71    0.82    1.09    1.51    2.21  

Allowance for loan and lease losses as % of:

      

Nonaccrual loans and leases

   202  201  189  178  161

Nonperforming assets

   179    184    173    163    148  

Allowance for credit losses as % of:

      

Nonaccrual loans and leases

   222  221  199  187  166

Nonperforming assets

   197    202    182    172    153  

Table 13 - Nonaccrual Loans and Leases and Nonperforming Assets
(dollar amounts in thousands)         
 December 31,
 2016 2015 2014 2013 2012
Nonaccrual loans and leases (NALs): (1)         
Originated NALs         
Commercial and industrial$225,162
 $175,195
 $71,974
 $56,615
 $90,705
Commercial real estate19,565
 28,984
 48,523
 73,417
 127,128
Automobile4,696
 6,564
 4,623
 6,303
 7,823
Residential mortgage83,159
 94,560
 96,564
 119,532
 122,452
RV and marine
 
 
 
 
Home equity66,033
 66,278
 78,515
 66,169
 59,519
Other consumer
 
 45
 20
 6
Total nonaccrual loans and leases398,615
 371,581
 300,244
 322,056
 407,633
Other real estate, net:         
Residential23,326
 24,194
 29,291
 23,447
 21,378
Commercial3,404
 3,148
 5,748
 4,217
 6,719
Total other real estate, net26,730
 27,342
 35,039
 27,664
 28,097
Other NPAs(2)6,968
 
 2,440
 2,440
 10,045
Total nonperforming assets (4)$432,313
 $398,923
 $337,723
 $352,160
 $445,775
          
Acquired NALs (5)         
Commercial and industrial$9,022
        
Commercial real estate943
        
Automobile1,070
        
Residential mortgage7,343
        
RV and marine245
        
Home equity5,765
        
Other consumer
        
Total nonaccrual loans and leases24,388
        
Other real estate, net:         
Residential7,606
        
Commercial16,594
        
Total other real estate, net24,200
        
Other NPAs(2)
        

Total nonperforming assets (4)$48,588
        
          
Total NALs         
Commercial and industrial$234,184
 $175,195
 $71,974
 $56,615
 $90,705
Commercial real estate20,508
 28,984
 48,523
 73,417
 127,128
Automobile5,766
 6,564
 4,623
 6,303
 7,823
Residential mortgage90,502
 94,560
 96,564
 119,532
 122,452
RV and marine245
 
 
 
 
Home equity71,798
 66,278
 78,515
 66,169
 59,519
Other consumer
 
 45
 20
 6
Total nonaccrual loans and leases423,003
 371,581
 300,244
 322,056
 407,633
Other real estate, net:         
Residential30,932
 24,194
 29,291
 23,447
 21,378
Commercial19,998
 3,148
 5,748
 4,217
 6,719
Total other real estate, net50,930
 27,342
 35,039
 27,664
 28,097
Other NPAs(2)6,968
 
 2,440
 2,440
 10,045
Total nonperforming assets (4)$480,901
 $398,923
 $337,723
 $352,160
 $445,775
          
Nonaccrual loans and leases as a % of total loans and leases0.63% 0.74% 0.63% 0.75% 1.00%
NPA ratio(3)0.72
 0.79
 0.71
 0.82
 1.09

(1)

(1)Excludes loans transferred to held-for-sale.
(2)Other nonperforming assets includes certain impairedrepresent an investment securities.

security backed by a municipal bond.
(2)

This ratio is calculated as nonperforming

(3)Nonperforming assets divided by the sum of loans and leases, impaired loans held for sale, net other real estate owned, and other nonperforming assets.

NPAs.

(4)Nonaccruing troubled debt restructured loans are included in the total nonperforming assets balance.
(5)Represents loans from FirstMerit acquisition.

The $14.4$82 million, or 4%21%, declineincrease in NPAs compared with December 31, 2013,2015, primarily reflected:

$24.959 million, or 34%, decline in CRE NALs, reflecting both NCO activity and problem credit resolutions, including borrower payments and payoffs partially resulting from successful workout strategies implemented by our SAD group.

$23.0 million, or 19%, decline in residential mortgage NALs, reflecting resolution of foreclosure processes and improved delinquency trends.

Partially offset by:

$15.4 million, or 27%, increase in C&I NALs, primarily due to two credit relationships.

with the majority of the increase in our energy related portfolios, noting that the performance of the energy portfolio has stabilized since the 2016 first quarter.

$12.424 million, or 19% increase in home equity NALs primarily due to increasing TDR NALs.

$7.4 million, or 27%86%, increase in net OREO, predominantly associated with an increase in commercial properties primarily related to consumer OREO, reflecting the impact from the acquisition of Camco Financial.

FirstMerit acquisition.

As discussed previously, residential mortgages are placed on nonaccrual status at 150-days past due, with

Partially offset by declines in the exception of residential mortgages guaranteed by government organizations which continue to accrue interest. First-lien home equity loans are placed on nonaccrual status at 150-days past due. Junior-lien home equity loans are placed on nonaccrual status at the earlier of 120-days past due or when the related first-lien loan has been identified as nonaccrual.

Residential and CRE portfolios.


The following table reflects period-end accruing loans and leases 90 days or more past due for each of the last five years:

Table 14—Accruing Past Due Loans and Leases

    At December 31, 

(dollar amounts in thousands)

  2014   2013   2012   2011   2010 

Accruing loans and leases past due 90 days or more

          

Commercial and industrial(1)

  $4,937    $14,562    $26,648    $—      $—    

Commercial real estate(1)

   18,793     39,142     56,660     —       —    

Automobile

   5,703     5,055     4,418     6,265     7,721  

Residential mortgage (excluding loans guaranteed by the U.S. government)(1)

   33,040     2,469     2,718     45,198     53,983  

Home equity

   12,159     13,983     18,200     20,198     23,497  

Other loans and leases

   837     998     1,672     1,988     2,456  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total, excl. loans guaranteed by the U.S. government

   75,469     76,209     110,316     73,649     87,657  

Add: loans guaranteed by the U.S. government

   55,012     87,985     90,816     96,703     98,288  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total accruing loans and leases past due 90 days or more, including loans guaranteed by the U.S. government

  $130,481    $164,194    $201,132    $170,352    $185,945  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ratios:

      

Excluding loans guaranteed by the U.S. government, as a percent of total loans and leases

   0.16  0.18  0.27  0.19  0.23

Guaranteed by the U.S. government, as a percent of total loans and leases

   0.12    0.20    0.22    0.25    0.26  

Including loans guaranteed by the U.S. government, as a percent of total loans and leases

   0.27    0.38    0.49    0.44    0.49  

Table 14 - Accruing Past Due Loans and Leases
(dollar amounts in thousands) 
 December 31,
 2016 2015 2014 2013 2012
Accruing loans and leases past due 90 days or more:         
Commercial and industrial (1)$18,148
 $8,724
 $4,937
 $14,562
 $26,648
Commercial real estate (2)17,215
 9,549
 18,793
 39,142
 56,660
Automobile10,182
 7,162
 5,703
 5,055
 4,418
Residential mortgage (excluding loans guaranteed by the U.S. Government)15,074
 14,082
 33,040
 2,469
 2,718
RV and marine finance1,462
 
 
 
 
Home equity11,508
 9,044
 12,159
 13,983
 18,200
Other consumer3,895
 1,394
 837
 998
 1,672
Total, excl. loans guaranteed by the U.S. Government77,484
 49,955
 75,469
 76,209
 110,316
Add: loans guaranteed by U.S. Government51,878
 55,835
 55,012
 87,985
 90,816
Total accruing loans and leases past due 90 days or more, including loans guaranteed by the U.S. Government$129,362
 $105,790
 $130,481
 $164,194
 $201,132
Ratios:         
Excluding loans guaranteed by the U.S. Government, as a percent of total loans and leases0.12% 0.10% 0.16% 0.18% 0.27%
Guaranteed by U.S. Government, as a percent of total loans and leases0.08
 0.11
 0.12
 0.20
 0.22
Including loans guaranteed by the U.S. Government, as a percent of total loans and leases0.19
 0.21
 0.27
 0.38
 0.49
(1)

(1)Amounts representinclude Huntington Technology Finance administrative lease delinquencies and accruing purchasedpurchase impaired loans related to the FDIC-assisted Fidelity Bank and Camco Financial acquisition. Under the applicable accounting guidance (ASC 310-30), theacquisitions.
(2)Amounts include accruing purchase impaired loans were recorded at fair value upon acquisition and remain in accruing status.

related to acquisitions.

TDR Loans

(This section should be read in conjunction with Note 3 of the Notes to Consolidated Financial Statements.)

TDRs are modified loans where a concession was provided to a borrower experiencing financial difficulties. TDRs can be classified as either accrualaccruing or nonaccrualnonaccruing loans. NonaccrualNonaccruing TDRs are included in NALs whereas accruing TDRs are excluded from NALs, as it is probable that all contractual principal and interest due under the restructured terms will be collected. TDRs primarily reflect our loss mitigation efforts to proactively work with borrowers in financial difficulty.

difficulty or to comply with regulations regarding the treatment of certain bankruptcy filing and discharge situations. Acquired, non-purchased credit impaired loans are only considered for TDR reporting for modifications made subsequent to acquisition. Over the past five quarters, the accruing component of the total TDR balance has been between 80% and 84% indicating there is no identified credit loss and the borrowers continue to make their monthly payments.  In fact, over 80% of the $513 million of accruing TDRs secured by residential real estate (Residential mortgage and Home Equity in Table 15) are current on their required payments.  In addition, over 60% of the accruing pool have had no delinquency at all in the past 12 months. There is very limited migration from the accruing to non-accruing components, and virtually all of the charge-offs as presented in Table 16 come from the non-accruing TDR balances.


The following table below presents our accruing and nonaccruing TDRs at period-end for each of the past five years:

Table 15—Accruing and Nonaccruing Troubled Debt Restructured Loans

    December 31, 

(dollar amounts in thousands)

  2014   2013   2012   2011   2010 

Troubled debt restructured loans—accruing:

          

Commercial and industrial

  $116,331    $83,857    $76,586    $54,007    $70,136  

Commercial real estate

   177,156     204,668     208,901     249,968     152,496  

Automobile

   26,060     30,781     35,784     36,573     29,764  

Home equity

   252,084     188,266     110,581     52,224     37,257  

Residential mortgage

   265,084     305,059     290,011     309,678     328,411  

Other consumer

   4,018     1,041     2,544     6,108     9,565  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total troubled debt restructured loans—accruing

   840,733     813,672     724,407     708,558     627,629  

Troubled debt restructured loans—nonaccruing:

          

Commercial and industrial

   20,580     7,291     19,268     48,553     15,275  

Commercial real estate

   24,964     23,981     32,548     21,968     18,187  

Automobile

   4,552     6,303     7,823     —       —    

Home equity

   27,224     20,715     6,951     369     —    

Residential mortgage

   69,305     82,879     84,515     26,089     5,789  

Other consumer

   70     —       113     113     —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total troubled debt restructured loans—nonaccruing

   146,695     141,169     151,218     97,092     39,251  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total troubled debt restructured loans

  $987,428    $954,841    $875,625    $805,650    $666,880  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Table 15 - Accruing and Nonaccruing Troubled Debt Restructured Loans
(dollar amounts in thousands)         
          
  
December 31,
 2016 2015 2014 2013 2012
TDRs—accruing:         
Commercial and industrial$210,119
 $235,689
 $116,331
 $83,857
 $76,586
Commercial real estate76,844
 115,074
 177,156
 204,668
 208,901
Automobile26,382
 24,893
 26,060
 30,781
 35,784
Home equity269,709
 199,393
 252,084
 188,266
 110,581
Residential mortgage242,901
 264,666
 265,084
 305,059
 290,011
RV and marine finance
 
 
 
 
Other consumer3,780
 4,488
 4,018
 1,041
 2,544
Total TDRs—accruing829,735
 844,203
 840,733
 813,672
 724,407
TDRs—nonaccruing:         
Commercial and industrial107,087
 56,919
 20,580
 7,291
 19,268
Commercial real estate4,507
 16,617
 24,964
 23,981
 32,548
Automobile4,579
 6,412
 4,552
 6,303
 7,823
Home equity28,128
 20,996
 27,224
 20,715
 6,951
Residential mortgage59,157
 71,640
 69,305
 82,879
 84,515
RV and marine finance
 
 
 
 
Other consumer118
 151
 70
 
 113
Total TDRs—nonaccruing203,576
 172,735
 146,695
 141,169
 151,218
Total TDRs$1,033,311
 $1,016,938
 $987,428
 $954,841
 $875,625

Our strategy is to structure TDRs in a manner that avoids new concessions subsequent to the initial TDR terms. However, there are times when subsequent modifications are required, such as when the modified loan matures. Often the loans are performing in accordance with the TDR terms, and a new note is originated with similar modified terms. These loans are subjected to the normal underwriting standards and processes for other similar credit extensions, both new and existing. If the loan is not performing in accordance with the existing TDR terms, typically an individualized approach to repayment is established. In accordance with ASC 310-20-35,GAAP, the refinanced note is evaluated to determine if it is considered a new loan or a continuation of the prior loan. A new loan is considered for removal of the TDR designation. A continuation of the prior note requires the continuation of the TDR designation, and because the refinanced note constitutes a new or amended debt instrument, it is included in our TDR activity table (below) as a new TDR and a restructured TDR removal during the period.

The types of concessions granted for existing TDRs are consistent with those granted on new TDRs and include interest rate reductions, amortization or maturity date changes beyond what the collateral supports, and principal forgiveness based on the borrower’s specific needs at a point in time. Our policy does not limit the number of times a loan may be modified. A loan may be modified multiple times if it is considered to be in the best interest of both the borrower and Huntington.

us.

Commercial loans are not automatically considered to be accruing TDRs upon the granting of a new concession. If the loan is in accruing status and no loss is expected based on the modified terms, the modified TDR remains in accruing status. For loans that are on nonaccrual status before the modification, collection of both principal and interest must not be in doubt, and the borrower must be able to exhibit sufficient cash flows for at least a six-month period of time to service the debt in order to return to accruing status. This six-month period could extend before or after the restructure date.

TDRs in the home equity and residential mortgage portfolio may continue to increase in the near term as we continue to appropriately manage the portfolio and work with our borrowers.

Any granted change in terms or conditions that are not readily available in the market for that borrower, requires the designation as a TDR. There are no provisions for the removal of the TDR designation based on payment activity for consumer loans.

A loan may be returned to accrual status when all contractually due interest and principal has been paid and the borrower demonstrates the financial capacity to continue to pay as agreed, with the risk of loss diminished. During the 2016 third quarter, Huntington transferred $81 million of home equity TDRs from loans held for sale back to loans.


The following table reflects TDR activity for each ofduring the past four years:

Table 16—Troubled Debt Restructured Loan Activityperiods indicated:

(dollar amounts in thousands)

  2014   2013   2012   2011 

TDRs, beginning of period

  $954,841    $875,625    $805,650    $666,880  

New TDRs

   667,315     611,556     597,425     583,439  

Payments

   (252,285   (191,367   (191,035   (138,467

Charge-offs

   (35,150   (29,897   (81,115   (37,341

Sales

   (23,424   (11,164   (13,787   (54,715

Refinanced to non-TDR

   —       —       —       (40,091

Transfer to OREO

   (12,668   (8,242   (21,709   (5,016

Restructured TDRs—accruing(1)

   (243,225   (211,131   (153,583   (154,945

Restructured TDRs—nonaccruing(1)

   (45,705   (26,772   (63,080   (47,659

Other

   (22,271   (53,767   (3,141   33,565  
  

 

 

   

 

 

   

 

 

   

 

 

 

TDRs, end of period

  $987,428    $954,841    $875,625    $805,650  
  

 

 

   

 

 

   

 

 

   

 

 

 

Table 16 - Troubled Debt Restructured Loan Activity
(dollar amounts in thousands)         
  Year Ended December 31,      
 2016 2015      
TDRs—accruing: (3)         
TDRs, beginning of period$844,203
 $840,733
      
New TDRs543,006
 731,783
      
Payments(214,144) (225,219)      
Charge-offs(3,547) (5,816)      
Sales(18,801) (14,204)      
Transfer from (to) held-for-sale74,424
 (88,415)      
Transfer to OREO(435) (668)      
Restructured TDRs—accruing (1)(289,745) (297,688)      
Restructured TDRs—nonaccruing (1)
 
      
Other (2)(105,226) (96,303)      
TDRs, end of period$829,735
 $844,203
      
          
TDRs—nonaccruing: (3)         
TDRs, beginning of period$172,735
 $146,695
      
New TDRs134,708
 162,917
      
Payments(82,258) (65,139)      
Charge-offs(34,605) (37,675)      
Sales(1,445) (2,858)      
Transfer from (to) held-for-sale6,656
 (8,371)      
Transfer to OREO(10,140) (9,444)      
Restructured TDRs—accruing (1)
 
      
Restructured TDRs—nonaccruing (1)(42,937) (98,474)      
Other (2)60,862
 85,084
      
TDRs, end of period$203,576
 $172,735
      
          
  Year Ended December 31,
 2016 2015 2014 2013 2012
Total TDRs, beginning of period (3)$1,016,938
 $987,428
 $954,841
 $875,625
 $805,650
New TDRs677,714
 894,700
 667,315
 611,556
 597,425
Payments(296,402) (290,358) (252,285) (191,367) (191,035)
Charge-offs(38,152) (43,491) (35,150) (29,897) (81,115)
Sales(20,246) (17,062) (23,424) (11,164) (13,787)
Transfer from (to) held-for-sale81,080
 (96,786) 
 
 
Transfer to OREO(10,575) (10,112) (12,668) (8,242) (21,709)
Restructured TDRs—accruing (1)(289,745) (297,688) (243,225) (211,131) (153,583)
Restructured TDRs—nonaccruing (1)(42,937) (98,474) (45,705) (26,772) (63,080)
Other(44,364) (11,219) (22,271) (53,767) (3,141)
Total TDRs, end of period$1,033,311
 $1,016,938
 $987,428
 $954,841
 $875,625


(1)Represents existing TDRs that were reunderwrittenunderwritten with new terms providing a concession. A corresponding amount is included in the New TDRs amount above.

(2)Primarily includes transfers between accruing and nonaccruing categories.
(3)Effective 2015, we began tracking accruing and non-accruing TDR information.

ACL
ACL

(This section should be read in conjunction with Note 3 of the Notes to Consolidated Financial Statements.)

Our total credit reserve is comprised of two different components, both of which in our judgment are appropriate to absorb credit losses inherent in our loan and lease portfolio: the ALLL and the AULC. Combined, these reserves comprise the total ACL. Our Credit Administration groupACL methodology committee is responsible for developing the methodology, assumptions and estimates used in the calculation, as well as determining the appropriateness of the ACL. The ALLL represents the estimate of losses inherent in the loan portfolio at the reported date. Additions to the ALLL result from recording provision expense for loan losses or increased risk levels resulting from loan risk-rating downgrades, while reductions reflect charge-offs (net of recoveries), decreased risk levels resulting from loan risk-rating upgrades, or the sale of loans. The AULC is determined by applying the transactionsame quantitative reserve determination process to the unfunded portion of the loan exposures adjusted by an applicable funding expectation.

(see Note 1 of the Notes to Consolidated Financial Statements)

The acquired loans were recorded at their fair value as of the acquisition date and the prior ALLL was eliminated. An ALLL for acquired loans is estimated using a methodology similar to that used for originated loans. The allowance determined for each acquired loan is compared to the remaining fair value adjustment for that loan. If the computed allowance is greater, the excess is added to the allowance through a provision for credit losses in 2014 was $81.0 million, compared with $90.0 million in 2013.

We regularly evaluateloan losses. If the appropriateness of the ACL by performing on-going evaluations of the loan and lease portfolio, including such factors as the differing economic risks associated with each loan category, the financial condition of specific borrowers, the level of delinquent loans, the value of any collateral and, where applicable, the existence of any guarantees or other documented support. We evaluate the impact of changes in interest rates and overall economic conditions on the ability of borrowers to meet their financial obligations when quantifying our exposure to credit losses and assessing the appropriateness of our ACL at each reporting date. In addition to general economic conditions and the other factors described above, we also consider the impact of collateral value trends and portfolio diversification. A provision for credit lossescomputed allowance is recorded to adjust the ACL to the level we have determined to be appropriate to absorb credit losses inherent in our loan and lease portfolio.

less, no additional allowance is recognized.

Our ACL evaluation process includes the on-going assessment of credit quality metrics, and a comparison of certain ACL benchmarks to current performance. While the total ACL balance has declined in recent quarters,increased year over year, all of the relevant benchmarks remain strong.


The following table reflects activity in the ALLL and AULC for each of the last five years:

Table 17 - Summary of Allowance for Credit Losses
(dollar amounts in thousands)         
 Year Ended December 31,
 2016 2015 2014 2013 2012
ALLL, beginning of year$597,843
 $605,196
 $647,870
 $769,075
 $964,828
Loan and lease charge-offs         
Commercial:         
Commercial and industrial(76,802) (79,724) (76,654) (45,904) (101,475)
Commercial real estate:         
Construction(2,124) (1,843) (5,626) (9,585) (12,131)
Commercial(12,988) (16,233) (19,078) (59,927) (105,920)
Commercial real estate(15,112) (18,076) (24,704) (69,512) (118,051)
Total commercial(91,914) (97,800) (101,358) (115,416) (219,526)
Consumer:         
Automobile(49,541) (36,489) (31,330) (23,912) (26,070)
Home equity(25,527) (36,481) (54,473) (98,184) (124,286)
Residential mortgage(10,851) (15,696) (25,946) (34,236) (52,228)
RV and marine finance(2,769) 
 
 
 
Other consumer(46,712) (31,415) (33,494) (34,568) (33,090)
Total consumer(135,400) (120,081) (145,243) (190,900) (235,674)
Total charge-offs(227,314) (217,881) (246,601) (306,316) (455,200)
Recoveries of loan and lease charge-offs         
Commercial:         
Commercial and industrial31,687
 51,800
 44,531
 29,514
 37,227
Commercial real estate:         
Construction4,208
 2,667
 4,455
 3,227
 4,090
Commercial37,243
 31,952
 29,616
 41,431
 35,532
Total commercial real estate41,451
 34,619
 34,071
 44,658
 39,622
Total commercial73,138
 86,419
 78,602
 74,172
 76,849
Consumer:         
Automobile17,550
 16,198
 13,762
 13,375
 16,628
Home equity16,523
 16,631
 17,526
 15,921
 7,907
Residential mortgage5,027
 5,570
 6,194
 7,074
 4,305
RV and marine finance481
 
 
 
 
Other consumer5,699
 5,270
 5,890
 7,108
 7,049
Total consumer45,280
 43,669
 43,372
 43,478
 35,889
Total recoveries118,418
 130,088
 121,974
 117,650
 112,738
Net loan and lease charge-offs(108,896) (87,793) (124,627) (188,666) (342,462)
Provision for loan and lease losses169,407
 88,679
 83,082
 67,797
 155,193
Allowance for assets sold and securitized or transferred to loans held for sale(19,941) (8,239) (1,129) (336) (8,484)
ALLL, end of year638,413
 597,843
 605,196
 647,870
 769,075
AULC, beginning of year72,081
 60,806
 62,899
 40,651
 48,456
(Reduction in) Provision for unfunded loan commitments and letters of credit losses21,395
 11,275
 (2,093) 22,248
 (7,805)
AULC recorded at acquisition4,403
 
 
 
 
AULC, end of year97,879
 72,081
 60,806
 62,899
 40,651
ACL, end of year$736,292
 $669,924
 $666,002
 $710,769
 $809,726

Table 17—Summary of Allowance for Credit Losses and Related Statistics

   Year Ended December 31, 

(dollar amounts in thousands)

  2014  2013  2012  2011  2010 

Allowance for loan and lease losses, beginning of year

  $647,870   $769,075   $964,828   $1,249,008   $1,482,479  

Loan and lease charge-offs

      

Commercial:

      

Commercial and industrial

   (76,654  (45,904  (101,475  (134,385  (316,771

Commercial real estate:

      

Construction

   (5,626  (9,585  (12,131  (42,012  (116,428

Commercial

   (19,078  (59,927  (105,920  (140,747  (187,567
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Commercial real estate

   (24,704  (69,512  (118,051  (182,759  (303,995
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total commercial

   (101,358  (115,416  (219,526  (317,144  (620,766
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Consumer:

      

Automobile

   (31,330  (23,912  (26,070  (33,593  (46,308

Home equity

   (54,473  (98,184  (124,286  (109,427  (140,831

Residential mortgage

   (25,946  (34,236  (52,228  (65,069  (163,427

Other consumer

   (33,494  (34,568  (33,090  (32,520  (32,575
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total consumer

   (145,243  (190,900  (235,674  (240,609  (383,141
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total charge-offs

   (246,601  (306,316  (455,200  (557,753  (1,003,907
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Recoveries of loan and lease charge-offs

      

Commercial:

      

Commercial and industrial

   44,531    29,514    37,227    44,686    61,839  

Commercial real estate:

      

Construction

   4,455    3,227    4,090    10,488    7,420  

Commercial

   29,616    41,431    35,532    24,170    21,013  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total commercial real estate

   34,071    44,658    39,622    34,658    28,433  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total commercial

   78,602    74,172    76,849    79,344    90,272  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Consumer:

      

Automobile

   13,762    13,375    16,628    18,526    19,736  

Home equity

   17,526    15,921    7,907    7,630    1,458  

Residential mortgage

   6,194    7,074    4,305    8,388    10,532  

Other consumer

   5,890    7,108    7,049    6,776    7,435  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total consumer

   43,372    43,478    35,889    41,320    39,161  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total recoveries

   121,974    117,650    112,738    120,664    129,433  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net loan and lease charge-offs

   (124,627  (188,666  (342,462  (437,089  (874,474
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Provision for loan and lease losses

   83,082    67,797    155,193    167,730    641,299  

Allowance for assets sold and securitized or transferred to loans held for sale

   (1,129  (336  (8,484  (14,821  (296
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Allowance for loan and lease losses, end of year

   605,196    647,870    769,075    964,828    1,249,008  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Allowance for unfunded loan commitments, beginning of year

   62,899    40,651    48,456    42,127    48,879  

(Reduction in) Provision for unfunded loan commitments and letters of credit losses

   (2,093  22,248    (7,805  6,329    (6,752

Allowance for unfunded loan commitments, end of year

   60,806    62,899    40,651    48,456    42,127  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Allowance for credit losses, end of year

  $666,002   $710,769   $809,726   $1,013,284   $1,291,135  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

The table below reflects the allocation of our ACL among our various loan categories during each of the past five years:

Table 18—Allocation of Allowance for Credit Losses (1)

  At December 31, 

(dollar amounts in thousands)

  2014    2013    2012    2011    2010  

Commercial:

          

Commercial and industrial

 $286,995    40 $265,801    41 $241,051    42 $275,367    38 $340,614    34

Commercial real estate

  102,839    11    162,557    11    285,369    14    388,706    14    588,251    18  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total commercial

  389,834    51    428,358    52    526,420    56    664,073    52    928,865    52  

Consumer:

          

Automobile

  33,466    18    31,053    15    34,979    11    38,282    11    49,488    15  

Home equity

  96,413    18    111,131    19    118,764    20    143,873    21    150,630    20  

Residential mortgage

  47,211    12    39,577    12    61,658    12    87,194    13    93,289    12  

Other loans

  38,272    1    37,751    2    27,254    1    31,406    3    26,736    1  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total consumer

  215,362    49    219,512    48    242,655    44    300,755    48    320,143    48  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total allowance for loan and lease losses

  605,196    100  647,870    100  769,075    100  964,828    100  1,249,008    100
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Allowance for unfunded loan commitments

  60,806     62,899     40,651     48,456     42,127   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

Total allowance for credit losses

 $666,002    $710,769    $809,726    $1,013,284    $1,291,135   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

Total allowance for loan and leases losses as % of:

          

Total loans and leases

   1.27   1.50   1.89   2.48   3.28

Nonaccrual loans and leases

   202     201     189     178     161  

Nonperforming assets

   179     184     173     163     148  

Total allowance for credit losses as % of:

          

Total loans and leases

   1.40   1.65   1.99   2.60   3.39

Nonaccrual loans and leases

   222     221     199     187     166  

Nonperforming assets

   197     202     182     172     153  

Table 18 - Allocation of Allowance for Credit Losses (1)
(dollar amounts in thousands)                   
 December 31,
 2016 2015 2014 2013 2012
ACL                   
Originated loans                   
Commercial                   
Commercial and industrial$324,737
 41% $298,746
 41% $286,995
 40% $265,801
 41% $241,051
 42%
Commercial real estate95,483
 11
 100,007
 10
 102,839
 11
 162,557
 11
 285,369
 14
Total commercial420,220
 52
 398,753
 51
 389,834
 51
 428,358
 52
 526,420
 56
Consumer                   
Automobile47,970
 18
 49,504
 19
 33,466
 18
 31,053
 15
 34,979
 11
Home equity65,474
 16
 83,671
 17
 96,413
 18
 111,131
 19
 118,764
 20
Residential mortgage30,986
 13
 41,646
 12
 47,211
 12
 39,577
 12
 61,658
 12
RV and marine finance832
 
 
 
 
 
 
 
 
 
Other consumer34,233
 1
 24,269
 1
 38,272
 1
 37,751
 2
 27,254
 1
Total consumer179,495
 48
 199,090
 49
 215,362
 49
 219,512
 48
 242,655
 44
Total ALLL599,715
 100% 597,843
 100% 605,196
 100% 647,870
 100% 769,075
 100%
AULC81,299
   72,081
   60,806
   62,899
   40,651
  
Total ACL$681,014
   $669,924
   $666,002
   $710,769
   $809,726
  
                    
Acquired loans (2)                   
Commercial                   
Commercial and industrial$30,687
 47%                
Commercial real estate184
 11
                
Total commercial30,871
 58
                
Consumer                   
Automobile
 10
                
Home equity
 11
                
Residential mortgage2,412
 7
                
RV and marine finance4,479
 12
                
Other consumer936
 2
                
Total consumer7,827
 42
                
Total ALLL38,698
 100%                
AULC16,580
                  
Total ACL$55,278
                  
                    
Total loans                   
Commercial                   
Commercial and industrial$355,424
 42% $298,746
 41% $286,995
 40% $265,801
 41% $241,051
 42%
Commercial real estate95,667
 11
 100,007
 10
 102,839
 11
 162,557
 11
 285,369
 14
Total commercial451,091
 53
 398,753
 51
 389,834
 51
 428,358
 52
 526,420
 56
Consumer                   
Automobile47,970
 16
 49,504
 19
 33,466
 18
 31,053
 15
 34,979
 11
Home equity65,474
 15
 83,671
 17
 96,413
 18
 111,131
 19
 118,764
 20
Residential mortgage33,398
 12
 41,646
 12
 47,211
 12
 39,577
 12
 61,658
 12
RV and marine finance5,311
 3
 
 
 
 
 
 
 
 
Other consumer35,169
 1
 24,269
 1
 38,272
 1
 37,751
 2
 27,254
 1
Total consumer187,322
 47
 199,090
 49
 215,362
 49
 219,512
 48
 242,655
 44
Total ALLL638,413
 100% 597,843
 100% 605,196
 100% 647,870
 100% 769,075
 100%
AULC97,879
   72,081
   60,806
   62,899
   40,651
  
Total ACL$736,292
   $669,924
   $666,002
   $710,769
   $809,726
  
Total ALLL as % of:

Total loans and leases  0.95%   1.19%   1.27%   1.50%   1.89%
Nonaccrual loans and leases  151
   161
   202
   201
   189
NPAs  133
   150
   179
   184
   173
Total ACL as % of:                   
Total loans and leases  1.10%   1.33%   1.40%   1.65%   1.99%
Nonaccrual loans and leases  174
   180
   222
   221
   199
NPAs  153
   168
   197
   202
   182
(1)Percentages represent the percentage of each loan and lease category to total loans and leases.

(2)Represents loans from FirstMerit acquisition.


The C&I ACL increased $21.2$66 million, or 8%10%, compared with December 31, 2013, primarily due to the risk rating composition and overall growth in the portfolio. The CRE ACL decreased $59.7 million, or 37%, compared with December 31, 2013, due to the continued improving portfolio asset quality metrics and performance. The current portfolio management practices focus on increasing borrower equity in the projects, and recent underwriting includes meaningfully lower LTV. The December 31, 2014, CRE ACL covers NALs by more than two times. The home equity portfolio ALLL declined, consistent with the improving credit quality metrics. The ALLL for the other consumer portfolio is consistent with expectations given the increasing level of overdraft exposure. The reductionincrease in the ACL compared with December 31, 2013, is2015, was driven by:
$57 million, or 19%, increase in the ALLL of the C&I portfolio was primary driven by the impact of the acquisition and loan growth within the portfolio along with an increase in NALs within our energy related portfolios.
$26 million, or 36%, increase in the AULC driven primarily a functionby acquired commercial exposures.
$11 million, or 45%, increase in the ALLL of the other consumer portfolio driven primarily by growth within the credit card portfolio.
Partially offset by:
$18 million, or 22%, decline in the CRE portfolio and improving economic conditions.

Compared with December 31, 2013, the AULC decreased $2.1 million, primarily reflecting the impact of an updated assessmentALLL of the unfunded commercial exposure.

home equity portfolio. The decline was driven by a reduction in delinquent and nonaccrual loans.

$8 million, or 20%, decline in the ALLL of the residential mortgage portfolio, also driven by a reduction in delinquency rates within the portfolio.
The ACL to total loans declined to 1.40%1.10% at December 31, 2014,2016, compared to 1.65%1.33% at December 31, 2013. Management believes2015. The reduction in the decline inratio can be attributed directly to the acquisition of the FirstMerit loan portfolio. We believe the ratio is appropriate given the continued improvement in the risk profile of our loan portfolio. Further, the continuedWe continue to focus on early identification of loans with changes in credit metrics and proactive action plans for these loans, combined with originating high quality new loans will contribute to maintaining our strong key credit quality metrics.

loans. Given the combination of these noted positive and negative factors, we believe that our ACL is appropriate and its coverage level is reflective of the quality of our portfolio and the current operating environment.

NCOs

Any loan in any portfolio may be charged-off prior to the policies described below if a loss confirming event has occurred. Loss confirming events include, but are not limited to, bankruptcy (unsecured), continued delinquency, foreclosure, or receipt of an asset valuation indicating a collateral deficiency andwhere that asset is the sole source of repayment. Additionally, discharged, collateral dependent non-reaffirmed debt in Chapter 7 bankruptcy filings will result in a charge-off to estimated collateral value, less anticipated selling costs at the time of discharge.

C&I and CRE loans are either charged-off or written down to net realizable value at 90-days past due.due with the exception of administrative small ticket lease delinquencies. Automobile loans, RV and marine finance, and other consumer loans are generally charged-off at 120-days past due. First-lien and junior-lien home equity loans are charged-off to the estimated fair value of the collateral, less anticipated selling costs, at 150-days past due and 120-days past due, respectively. Residential mortgages are charged-off to the estimated fair value of the collateral, less anticipated selling costs, at 150-days past due.


The following table reflects NCO detail for each of the last five years:

Table 19—Net Loan and Lease Charge-offs

   Year Ended December 31, 

(dollar amounts in thousands)

  2014  2013  2012  2011  2010 

Net charge-offs by loan and lease type

      

Commercial:

      

Commercial and industrial

  $32,123   $16,390   $64,248   $89,699   $254,932  

Commercial real estate:

      

Construction

   1,171    6,358    8,041    31,524    109,008  

Commercial

   (10,538  18,496    70,388    116,577    166,554  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total commercial real estate

   (9,367  24,854    78,429    148,101    275,562  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total commercial

   22,756    41,244    142,677    237,800    530,494  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Consumer:

      

Automobile

   17,568    10,537    9,442    15,067    26,572  

Home equity

   36,947    82,263    116,379    101,797    139,373  

Residential mortgage

   19,752    27,162    47,923    56,681    152,895  

Other consumer

   27,604    27,460    26,041    25,744    25,140  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total consumer

   101,871    147,422    199,785    199,289    343,980  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total net charge-offs

  $124,627   $188,666   $342,462   $437,089   $874,474  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net charge-offs ratio: (1)

      

Commercial:

      

Commercial and industrial

   0.18  0.10  0.40  0.66  2.05

Commercial real estate:

      

Construction

   0.16    1.10    1.38    5.33    9.95  

Commercial

   (0.25  0.42    1.35    2.08    2.72  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Commercial real estate

   (0.19  0.49    1.36    2.39    3.81  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total commercial

   0.10    0.19    0.66    1.20    2.70  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Consumer:

      

Automobile

   0.23    0.19    0.21    0.26    0.54  

Home equity

   0.44    0.99    1.40    1.28    1.84  

Residential mortgage

   0.35    0.52    0.92    1.20    3.42  

Other consumer

   6.99    6.30    5.72    4.85    3.80  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total consumer

   0.46    0.75    1.08    1.05    1.95  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net charge-offs as a % of average loans

   0.27  0.45  0.85  1.12  2.35
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Table 19 - Net Loan and Lease Charge-offs         
(dollar amounts in thousands)         
 Year Ended December 31,
 2016 (2) 2015 2014 2013 2012
Net charge-offs by loan and lease type:         
Originated Loans         
Commercial:         
Commercial and industrial$43,929
 $27,924
 $32,123
 $16,390
 $64,248
Commercial real estate:         
Construction(2,084) (824) 1,171
 6,358
 8,041
Commercial(24,460) (15,719) (10,538) 18,496
 70,388
Commercial real estate(26,544) (16,543) (9,367) 24,854
 78,429
Total commercial17,385
 11,381
 22,756
 41,244
 142,677
Consumer:         
Automobile27,057
 20,291
 17,568
 10,537
 9,442
Home equity8,073
 19,850
 36,947
 82,263
 116,379
Residential mortgage5,560
 10,126
 19,752
 27,162
 47,923
RV and marine finance
 
 
 
 
Other consumer38,627
 26,145
 27,604
 27,460
 26,041
Total consumer79,317
 76,412
 101,871
 147,422
 199,785
Total originated net charge-offs$96,702
 $87,793
 $124,627
 $188,666
 $342,462
          
Acquired loans (1)         
Commercial:         
Commercial and industrial$1,186
        
Commercial real estate:         
Construction
        
Commercial205
        
Commercial real estate205
        
Total commercial1,391
        
Consumer:         
Automobile4,934
        
Home equity931
        
Residential mortgage264
        
RV and marine finance2,288
        
Other consumer2,386
        
Total consumer10,803
        
Total acquired net charge-offs$12,194
        
          
Total Loans         
Commercial:         
Commercial and industrial$45,115
 $27,924
 $32,123
 $16,390
 $64,248
Commercial real estate:         
Construction(2,084) (824) 1,171
 6,358
 8,041
Commercial(24,255) (15,719) (10,538) 18,496
 70,388
Commercial real estate(26,339) (16,543) (9,367) 24,854
 78,429
Total commercial18,776
 11,381
 22,756
 41,244
 142,677
Consumer:         
Automobile31,991
 20,291
 17,568
 10,537
 9,442
Home equity9,004
 19,850
 36,947
 82,263
 116,379

Residential mortgage5,824
 10,126
 19,752
 27,162
 47,923
RV and marine finance2,288
 
 
 
 
Other consumer41,013
 26,145
 27,604
 27,460
 26,041
Total consumer90,120
 76,412
 101,871
 147,422
 199,785
Total net charge-offs$108,896
 $87,793
 $124,627
 $188,666
 $342,462
          
Net charge-offs - annualized percentages:         
Commercial:         
Commercial and industrial0.19 % 0.14 % 0.18 % 0.10% 0.40%
Commercial real estate:         
Construction(0.19) (0.08) 0.16
 1.10
 1.38
Commercial(0.49) (0.37) (0.25) 0.42
 1.35
Commercial real estate(0.44) (0.32) (0.19) 0.49
 1.36
Total commercial0.06
 0.05
 0.10
 0.19
 0.66
Consumer:         
Automobile0.30
 0.23
 0.23
 0.19
 0.21
Home equity0.10
 0.23
 0.44
 0.99
 1.40
Residential mortgage0.09
 0.17
 0.35
 0.52
 0.92
RV and marine finance0.33
 
 
 
 
Other consumer5.53
 5.44
 6.99
 6.30
 5.72
Total consumer0.32
 0.32
 0.46
 0.75
 1.08
Net charge-offs as a % of average loans0.19 % 0.18 % 0.27 % 0.45% 0.85%
(1)
Represents loans from FirstMerit acquisition.
(2)Amounts presented above exclude write-downs of loans transferred to loans held-for-sale.
In assessing NCO trends, it is helpful to understand the process of how commercial loans are treated as they deteriorate over time. The ALLL established is consistent with the level of risk associated with the original underwriting. As a part of our normal portfolio management process for commercial loans, the loan is periodically reviewed and the ALLL is increased or decreased based on the updated risk rating. In certain cases, the standard ALLL is determined to not be appropriate, and a specific reserve is established based on the projected cash flow or collateral value of the specific loan. Charge-offs, if necessary, are generally recognized in a period after the specific ALLL was established. If the previously established ALLL exceeds that necessary to satisfactorily resolve the problem loan, a reduction in the overall level of the ALLL could be recognized. Consumer loans are treated in much the same manner as commercial loans, with increasing reserve factors applied based on the risk characteristics of the loan, although specific reserves are not identified for consumer loans. In summary, if loan quality deteriorates, the typical credit sequence would be periods of reserve building, followed by periods of higher NCOs as the previously established ALLL is utilized. Additionally, an increase in the ALLL either precedes or is in conjunction with increases in NALs. When a loan is classified as NAL, it is evaluated for specific ALLL or charge-off. As a result, an increase in NALs does not necessarily result in an increase in the ALLL or an expectation of higher future NCOs.

All residential mortgage loans greater than 150-days past due are charged-down to the estimated value of the collateral, less anticipated selling costs. The remaining balance is in delinquent status until a modification can be completed, or the loan goes through the foreclosure process. For the home equity portfolio, virtually all of the defaults represent full charge-offs, as there is no remaining equity, creating a lower delinquency rate but a higher NCO impact.

20142016 versus 20132015

NCOs decreased $64.0increased $21 million, or 34%24%, in 2014, primarily as2016. Given the low level of C&I and CRE NCO’s, there will continue to be some volatility on a result of continued credit quality. This improvement was partially offset by an increase in C&I primarily relating to large losses associated with a small number of credit relationships.

period-to-period comparison basis.


Market Risk

Market risk represents the risk of loss duerefers to potential losses arising from changes in market values of assets and liabilities. We incur market risk in the normal course of business through exposures to market interest rates, foreign exchange rates, equity prices and credit spreads.commodity prices, including the correlation among these factors and their volatility. When the value of an instrument is tied to such external factors, the holder faces market risk. We have identified two primary sources of market risk:are primarily exposed to interest rate risk as a result of offering a wide array of financial products to our customers and secondarily to price risk.

risk from trading securities, securities owned by our broker-dealer subsidiary, foreign exchange positions, equity investments, and investments in securities backed by mortgage loans.



Interest Rate Risk

OVERVIEW

Huntington

We actively managesmanage interest rate risk, as changes in market interest rates can have a significant impact on reported earnings. Changes in market interest rates may result in changes in the fair market value of our financial instruments, cash flows, and net interest income. We seek to achieve consistent growth in net interest income and capital while managing volatility arising from shifts in market interest rates. ALCO oversees market risk management, establishing risk measures, limits, and policy guidelines for managing the amount of interest rate risk and its effect on net interest income and capital. According to these policies, responsibility for measuring and the management of interest rate risk resides in the corporate treasury group.
Interest rate risk on our balance sheet consists of reprice, option, and basis risks. Reprice risk results from differences in the maturity, or repricing, of asset and liability portfolios. Option risk arises from embedded options present in the investment portfolio and in many financial instruments such as loan prepayment options, deposit early withdrawal options, and interest rate options. These options allow customers opportunities to benefit when market interest rates change, which typically results in higher costs or lower revenue for us. Basis risk refers to the potential for changes in the underlying relationship between market rates or indices, which subsequently result in a narrowing of profit spread on an earning asset or liability. Basis risk is also present in administered rate liabilities, such as interest-bearing checking accounts, savings accounts, and money market accounts where historical pricing relationships to market rates may change due to the level or directional change in market interest rates. The interest rate risk processposition is designed to compare income simulations in market scenarios designed to alter the direction, magnitude,measured and speed ofmonitored using risk management tools, including earnings simulation modeling and EVE sensitivity analysis, which capture both short-term and long-term interest rate changes, as well asrisk exposures. Combining the slope of the yield curve. These scenarios are designed to illustrate the embedded optionality in the balance sheetresults from among other things, faster or slower mortgage prepayments and changes in deposit mix.

During the 2014 fourth quarter, we updated various assumptions associated with the modeling of non-maturity deposit behavior as interest rates change. The most significant change was the removal ofthese separate risk measurement processes allows a stress component that caused forecasted deposit balances to be lower than actual deposit balances. The new assumptions better align the behaviorreasonably comprehensive view of our non-maturity deposits with our experienceshort-term and expectations. The assumption changes primarily impacted EVE at Risk by making the +100 and +200 shock scenarios less liability sensitive. The assumption changes did not materially impact the NII at Risk. The results are further discussed below.

INCOME SIMULATION AND ECONOMIC VALUE ANALYSIS

long-term interest rate risk.

Interest rate risk measurement is calculated and reported to the ALCO monthly and ROC at least quarterly. The information reported includes period-end results and identifies any policy limits exceeded, along with an assessment of the policy limit breach and the action plan and timeline for resolution, mitigation, or assumption of the risk.

Huntington uses

We use two approaches to model interest rate risk: Net Interest Incomeinterest income at Riskrisk (NII at Risk)risk) and Economic Value of Equity (EVE). Under EVE.
NII at Risk,risk uses net interest income simulation analysis which involves forecasting net interest earnings under a variety of scenarios including changes in the level of interest rates, the shape of the yield curve, and spreads between market interest rates. The sensitivity of net interest income to changes in interest rates is modeled utilizing various assumptions for assets, liabilities, and derivative positions under variousmeasured using numerous interest rate scenarios overincluding shocks, gradual ramps, curve flattening, curve steepening as well as forecasts of likely interest rates scenarios. Modeling the sensitivity of net interest earnings to changes in market interest rates is highly dependent on numerous assumptions incorporated into the modeling process. To the extent that actual performance is different than what was assumed, actual net interest earnings sensitivity may be different than projected. The assumptions used in the models are our best estimates based on studies conducted by the treasury department. The treasury department uses a one-year time horizon. EVE measures the period enddata warehouse to study interest rate risk at a transactional level and uses various ad-hoc reports to refine assumptions continuously. Assumptions and methodologies regarding administered rate liabilities (e.g., savings, money market and interest-bearing checking accounts), balance trends, and repricing relationships reflect our best estimate of expected behavior and these assumptions are reviewed regularly.
We also have longer-term interest rate risk exposure, which may not be appropriately measured by earnings sensitivity analysis. ALCO uses economic value of assets minusequity at risk modeling, or EVE, sensitivity analysis to study the marketimpact of long-term cash flows on earnings and capital. EVE involves discounting present values of all cash flows of on-balance sheet and off-balance sheet items under different interest rate scenarios. The discounted present value of liabilitiesall cash flows represents our EVE. The analysis requires modifying the expected cash flows in each interest rate scenario, which will impact the discounted present value. The amount of base-case measurement and its sensitivity to shifts in the changeyield curve allow us to measure longer-term repricing and option risk in this value as rates change. EVE is a period end measurement.

Table 20—Net Interest Income at Risk

   Net Interest Income at Risk (%) 

Basis point change scenario

   -25    +100    +200  
  

 

 

  

 

 

  

 

 

 

Board policy limits

   —      -2.0  -4.0
  

 

 

  

 

 

  

 

 

 

December 31, 2014

   -0.2  0.5  0.2

Through December 31, 2013, we reported ISE at Risk. We now report NII at Risk to isolate the change in income related solely to interest earning assets and interest bearing liabilities. The difference between the results for ISE at Risk and NII at Risk are not significant for this or any previous fiscal year.

balance sheet.


Table 20 - Net Interest Income at Risk
      
 Net Interest Income at Risk (%)
Basis point change scenario-25
 +100
 +200
Board policy limits % -2.0 % -4.0 %
December 31, 2016-1.0 % 2.7 % 5.6 %
December 31, 2015-0.3 % 0.7 % 0.3 %
The NII at Risk results included in the table above reflect the analysis used monthly by management. It models gradual -25, +100 and +200 basis point parallel shifts in market interest rates, implied by the forward yield curve over the next one-year period.twelve months. Due to the current low level of short-term interest rates, the analysis reflects a declining interest rate scenario of 25 basis points, the point at which many assets and liabilities reach zero percent.

Huntington


Our NII at Risk is within Boardour board of director's policy limits for the +100 and +200 basis point scenarios. There is no policy limit for the -25 basis point scenario. The NII at Risk reported shows that our earnings are more asset sensitive at December 31, 2014, shows that Huntington’s earnings are not particularly sensitive to changes in interest rates over2016 than at December 31, 2015, as a result of the next year. In recent periods, the amount of fixed rate assets, primarily indirect auto loans and securities, increased resulting in a$4.9 billion notional value reduction in asset sensitivity. This reduction is somewhat accentuated by our portfolioreceive-fixed cash flow swaps, the introduction of mortgage-related loansnew non-maturity deposit models in the 2016 first quarter, and securities, whosethe FirstMerit acquisition in the third quarter.
As of December 31, 2016, we had $10.8 billion of notional value in receive-fixed cash flow swaps, which we use for asset and liability management purposes. At December 31, 2016, the following table shows the expected maturities lengthen as rates rise. The reducedmaturity for asset sensitivity for the +200 basis points scenario (relative to the +100 basis points scenario) relates to the modeled migration of money market accounts balances into CDs thereby shifting deposits from a variable rate to a fixed rate.

Table 21—Economic Value of Equity at Riskand liability receive-fixed cash flow swaps:

   Economic Value of Equity at Risk (%) 

Basis point change scenario

   -25    +100    +200  
  

 

 

  

 

 

  

 

 

 

Board policy limits

   —      -5.0  -12.0
  

 

 

  

 

 

  

 

 

 

December 31, 2014

   -0.6  0.4  -1.5
  

 

 

  

 

 

  

 

 

 

December 31, 2013

   0.6  -3.9  -9.3

Table 21 - Expected Maturity for Asset and Liability Receive-Fixed Cash Flow Swaps  
(dollar amounts in thousands)Asset receive fixed-generic cash flow swaps Liability receive fixed-generic cash flow swaps
2017$3,250,000
 $500,000
201875,000
 2,610,000
2019
 575,000
2020
 1,300,000
2021
 990,000
2022
 1,000,000
Thereafter
 500,000
Table 22 - Economic Value of Equity at Risk
      
 Economic Value of Equity at Risk (%)
Basis point change scenario-25
 +100
 +200
Board policy limits % -5.0 % -12.0 %
December 31, 2016-0.6 % 0.9 % 0.2 %
December 31, 2015-0.4 % 0.5 % -2.1 %
The EVE results included in the table above reflect the analysis used monthly by management. It models immediate -25, +100 and +200 basis point parallel shifts in market interest rates. Due to the current low level of short-term interest rates, the analysis reflects a declining interest rate scenario of 25 basis points, the point at which many assets and liabilitiesdeposit costs reach zero percent.

Huntington is

We are within Boardour board of director's policy limits for the +100 and +200 basis point scenarios. There is no policy limit for the -25 basis point scenario. The EVE reported at December 31, 2014 shows that asdepicts a moderate level of long-term interest rates increase (decrease) immediately,rate risk, which indicates the economic value of equity position will decrease (increase). Whenbalance sheet is positioned favorably for rising interest rates rise, fixed rate assets generally lose economic value; the longer the duration, the greater the value lost. The opposite is true when interest rates fall. The EVE at risk reported as of December 31, 2014 for the +200 basis points scenario shows a change to a less liability sensitive position compared with December 31, 2013. The primary factor contributing to this change was the impact of substantially lower interest rates. In addition, the assumption changes mentioned above reduced liability sensitivity in the +200 basis point scenario by +3.4%.

MSR

MSRs
(This section should be read in conjunction with Note 67 of the Notes to the Consolidated Financial Statements.)

At December 31, 20142016, we had a total of $155.6$186 million of capitalized MSRs representing the right to service $15.6$18.9 billion in mortgage loans. Of this $155.6$186 million, $22.8$13.7 million was recorded using the fair value method and $132.8$172.5 million was recorded using the amortization method.

MSR fair values are very sensitive to movements in interest rates as expected future net servicing income depends on the projected outstanding principal balances of the underlying loans, which can be greatly reduced by prepayments. Prepayments usually increase when mortgage interest rates decline and decrease when mortgage interest rates rise. We have employed hedging strategies to reduce the risk of MSR fair value changes or impairment. However, volatile changes in interest rates can diminish the effectiveness of these economic hedges. We typically report MSR fair value adjustments net of hedge-related trading activity in the mortgage banking income category of noninterest income. Changes in fair value between reporting dates are recorded as an increase or a decrease in mortgage banking income.

MSRs recorded using the amortization method generally relate to loans originated with historically low interest rates, resulting in a lower probability of prepayments and, ultimately, impairment. MSR assets are included in accrued income and other assetsservicing rights in the Consolidated Financial Statements.


Price Risk

Price risk represents the risk of loss arising from adverse movements in the prices of financial instruments that are carried at fair value and are subject to fair value accounting. We have price risk from trading securities, securities owned by our broker-dealer subsidiaries,subsidiary, foreign exchange positions, equity investments, and investments in securities backed by mortgage loans, and marketable equity securities held by our insurance subsidiaries.loans. We have established loss limits on the trading portfolio, on the amount of foreign exchange exposure that can be maintained, and on the amount of marketable equity securities that can be held by the insurance subsidiaries.

held.


Liquidity Risk

Liquidity risk is the riskpossibility of loss due to the possibility that funds may not be available to satisfy current or future commitments resulting from external macro market issues, investor and customer perception of financial strength, and events unrelated to us such as war, terrorism, or financial institution market specific issues. In addition, the mix and maturity structure of Huntington’s balance sheet, the amount of on-hand cash and unencumbered securities, and the availability of contingent sources of funding can have an impact on Huntington’s ability to satisfy current or future funding commitments. We manage liquidity risk at both the Bank and the parent company.

The overall objective of liquidity risk management is to ensure that we can obtain cost-effective fundingbeing unable to meet current and future financial obligations in a timely manner. Liquidity is managed to ensure stable, reliable, and can maintain sufficient levelscost-effective sources of on-handfunds to satisfy demand for credit, deposit withdrawals and investment opportunities. We consider core earnings, strong capital ratios, and credit quality essential for maintaining high credit ratings, which allows us cost-effective access to market-based liquidity. We rely on a large, stable core deposit base and a diversified base of wholesale funding sources to manage liquidity under both normal business-as-usual and unanticipated stressed circumstances.risk. The ALCO wasis appointed by the ROC to oversee liquidity risk management and the establishment of liquidity risk policies and limits. ContingencyThe treasury department is responsible for identifying, measuring, and monitoring our liquidity profile. The position is evaluated daily, weekly, and monthly by analyzing the composition of all funding plans are in place, which measure forecastedsources, reviewing projected liquidity commitments by future months, and identifying sources and uses of funds under various scenarios in orderfunds. The overall management of our liquidity position is also integrated into retail and commercial pricing policies to prepare for unexpected liquidity shortages.ensure a stable core deposit base. Liquidity risk is reviewed monthlyand managed continuously for the Bank and the parent company, as well as its subsidiaries. In addition, liquidity working groups meet regularly to identify and monitor liquidity positions, provide policy guidance, review funding strategies, and oversee the adherence to, and maintenance of, the contingency funding plans.

Our primary source of liquidity is our core deposit base. Core deposits comprised approximately 94% of total deposits at December 31, 2016. We also have available unused wholesale sources of liquidity, including advances from the FHLB of Cincinnati, issuance through dealers in the capital markets, and access to certificates of deposit issued through brokers. Liquidity is further provided by unencumbered, or unpledged, investment securities that totaled $15.0 billion as of December 31, 2016. The treasury department also prepares a contingency funding plan that details the potential erosion of funds in the event of a systemic financial market crisis or institutional-specific stress scenario. An example of an institution specific event would be a downgrade in our public credit rating by a rating agency due to factors such as deterioration in asset quality, a large charge to earnings, a decline in profitability or other financial measures, or a significant merger or acquisition. Examples of systemic events unrelated to us that could have an effect on our access to liquidity would be terrorism or war, natural disasters, political events, or the default or bankruptcy of a major corporation, mutual fund or hedge fund. Similarly, market speculation or rumors about us, or the banking industry in general, may adversely affect the cost and availability of normal funding sources. The liquidity contingency plan therefore outlines the process for addressing a liquidity crisis. The plan provides for an evaluation of funding sources under various market conditions. It also assigns specific roles and responsibilities and communication protocols for effectively managing liquidity through a problem period.
Available-for-sale and other securities portfolio

(This section should be read in conjunction with Note 45 of the Notes to Consolidated Financial Statements.)

Our investment securities portfolio is evaluated under established asset/liability management objectives. Changing market conditions could affect the profitability of the portfolio, as well as the level of interest rate risk exposure.

Our available-for-sale and other securities portfolio is comprised of various financial instruments. At December 31, 2014, our available-for-sale and other securities portfolio totaled $9.4 billion, an increase of $2.1 billion from 2013. The duration of the portfolio decreased by 0.3 years to 3.9 years.

The composition and maturity of the portfolio is presented on the following two tables:

Table 22—Available-for-sale and other securities Portfolio Summary at Fair Value

   At December 31, 

(dollar amounts in thousands)

  2014   2013   2012 

U.S. Treasury, Federal agency, and other agency securities

  $5,679,696    $3,937,713    $4,676,607  

Other

   3,704,974     3,371,040     2,889,568  
  

 

 

   

 

 

   

 

 

 

Total available-for-sale and other securities

  $9,384,670    $7,308,753    $7,566,175  
  

 

 

   

 

 

   

 

 

 

Duration in years (1)

   3.9     4.2     2.9  
  

 

 

   

 

 

   

 

 

 

Table 23 - Available-for-sale and other securities Portfolio Summary at Fair Value     
(dollar amounts in thousands)At December 31,
 2016 2015 2014
U.S. Treasury, Federal agency, and other agency securities$10,752,381
 $4,643,073
 $5,679,696
Other4,810,456
 4,132,368
 3,704,974
Total available-for-sale and other securities$15,562,837
 $8,775,441
 $9,384,670
Duration in years (1)4.7
 5.2
 3.9
(1)The average duration assumes a market driven prepayment rate on securities subject to prepayment.

Table 23—Available-for-sale and other securities Portfolio Composition and Maturity

   At December 31, 2014 
   Amortized         

(dollar amounts in thousands)

  Cost   Fair Value   Yield (1) 

U.S. Treasury:

      

Under 1 year

  $—      $—       —  

1-5 years

   5,435     5,452     1.20  

6-10 years

   —       —       —    

Over 10 years

   —       —       —    
  

 

 

   

 

 

   

 

 

 

Total U.S. Treasury

   5,435     5,452     1.20  
  

 

 

   

 

 

   

 

 

 

Federal agencies: mortgage-backed securities

      

Under 1 year

   47,023     47,190     1.99  

1-5 years

   216,775     221,078     2.30  

6-10 years

   184,576     186,938     2.87  

Over 10 years

   4,825,525     4,867,495     2.42  
  

 

 

   

 

 

   

 

 

 

Total Federal agencies: mortgage-backed securities

   5,273,899     5,322,701     2.43  
  

 

 

   

 

 

   

 

 

 

Other agencies:

      

Under 1 year

   33,047     33,237     1.56  

1-5 years

   9,122     9,575     2.95  

6-10 years

   103,530     105,019     2.58  

Over 10 years

   204,016     203,712     2.60  
  

 

 

   

 

 

   

 

 

 

Total other Federal agencies

   349,715     351,543     2.51  
  

 

 

   

 

 

   

 

 

 

Total U.S. Treasury, Federal agency, and other agency securities

   5,629,049     5,679,696     2.43  
  

 

 

   

 

 

   

 

 

 

Municipal securities:

      

Under 1 year

   256,399     255,835     2.42  

1-5 years

   269,385     274,003     3.45  

6-10 years

   938,780     945,954     2.86  

Over 10 years

   376,747     392,777     4.23  
  

 

 

   

 

 

   

 

 

 

Total municipal securities

   1,841,311     1,868,569     3.16  
  

 

 

   

 

 

   

 

 

 

Private label CMO:

      

Under 1 year

   —       —       —    

1-5 years

   —       —       —    

6-10 years

   1,314     1,371     5.60  

Over 10 years

   42,416     40,555     2.49  
  

 

 

   

 

 

   

 

 

 

Total private label CMO

   43,730     41,926     2.58  
  

 

 

   

 

 

   

 

 

 

Asset-backed securities:

      

Under 1 year

   —       —       —    

1-5 years

   228,852     229,364     1.90  

6-10 years

   144,163     144,193     2.20  

Over 10 years

   641,984     582,441     2.15  
  

 

 

   

 

 

   

 

 

 

Total asset-backed securities

   1,014,999     955,998     2.10  
  

 

 

   

 

 

   

 

 

 

Corporate debt securities:

      

Under 1 year

   18,767     18,953     3.28  

1-5 years

   314,773     323,503     3.30  

6-10 years

   145,611     143,720     2.85  

Over 10 years

   —       —       —    
  

 

 

   

 

 

   

 

 

 

Total corporate debt securities

   479,151     486,176     3.16  
  

 

 

   

 

 

   

 

 

 

Other:

      

Under 1 year

   250     250     1.48  

1-5 years

   3,150     3,066     2.50  

6-10 years

   —       —       NA  

Over 10 years

   —       —       NA  

Nonmarketable equity securities (2)

   331,559     331,559     5.05  

Marketable equity securities (3)

   16,687     17,430     NA  
  

 

 

   

 

 

   

 

 

 

Total other

   351,646     352,305     4.79  
  

 

 

   

 

 

   

 

 

 

Total available-for-sale and other securities

  $9,359,886    $9,384,670     2.67
  

 

 

   

 

 

   

 

 

 


Table 24 - Available-for-sale and other securities Portfolio Composition and Maturity
(dollar amounts in thousands)At December 31, 2016
Amortized

 Cost Fair Value Yield (1)
U.S. Treasury, Federal agency, and other agency securities:     
U.S. Treasury:     
1 year or less$4,978
 $4,988
 1.12%
After 1 year through 5 years502
 509
 1.94
After 5 years through 10 years
 
 
After 10 years
 
 
Total U.S. Treasury5,480
 5,497
 1.20
Federal agencies: mortgage-backed securities:     
1 year or less
 
 
After 1 year through 5 years46,591
 46,762
 2.72
After 5 years through 10 years173,941
 176,404
 2.90
After 10 years10,630,929
 10,450,176
 2.22
Total Federal agencies: mortgage-backed securities10,851,461
 10,673,342
 2.24
Other agencies:     
1 year or less4,302
 4,367
 3.39
After 1 year through 5 years5,092
 5,247
 3.00
After 5 years through 10 years63,618
 63,928
 2.48
After 10 years
 
 
Total other agencies73,012
 73,542
 2.57
Total U.S. Treasury, Federal agency, and other agency securities10,929,953
 10,752,381
 
Municipal securities:     
1 year or less169,636
 166,887
 3.70
After 1 year through 5 years933,893
 933,903
 3.36
After 5 years through 10 years1,463,459
 1,464,583
 3.58
After 10 years693,440
 684,684
 4.28
Total municipal securities3,260,428
 3,250,057
 3.68
Private-label CMO:    
1 year or less
 
 
After 1 year through 5 years
 
 3.19
After 5 years through 10 years
 
 
After 10 years
 
 3.21
Total private-label CMO
 
 3.21
Asset-backed securities:     
1 year or less
 
 
After 1 year through 5 years80,700
 80,560
 2.54
After 5 years through 10 years223,352
 224,565
 2.80
After 10 years520,072
 488,356
 2.93
Total asset-backed securities824,124
 793,481
 2.86
Corporate debt:     
1 year or less43,223
 43,603
 4.29
After 1 year through 5 years78,430
 80,196
 3.74
After 5 years through 10 years32,523
 32,865
 3.66
After 10 years40,361
 42,019
 3.15
Total corporate debt194,537
 198,683
 3.73
Other:     
1 year or less1,650
 1,650
 2.39

After 1 year through 5 years2,302
 2,283
 2.76
After 5 years through 10 years
 
 N/A
After 10 years10
 10
 N/A
Non-marketable equity securities (2)547,704
 547,704
 3.17
Mutual funds15,286
 15,286
 N/A
Marketable equity securities (3)861
 1,302
 N/A
Total other567,813
 568,235
 3.07
Total available-for-sale and other securities$15,776,855
 $15,562,837
 2.61%
(1)Weighted average yields were calculated using amortized cost on a fully-taxable equivalent basis, assuming a 35% tax rate.
(2)Consists of FHLB and FRB restricted stock holding carried at par. For 2016, the Federal Reserve reduced the dividend rate on FRB stock from 6% to 2.45%, the current 10-year Treasury rate for banks with more than $10 billion in assets.
(3)Consists of certain mutual fund and equity security holdings.

Investment securities portfolio

The expected weighted average maturities of our AFS and HTM portfolios are significantly shorter than their contractual maturities as reflected in Note 45 and Note 56 of the Notes to Consolidated Financial Statements. Particularly regarding the MBS and ABS, prepayments of principal and interest that historically occur in advance of scheduled maturities will shorten the expected life of these portfolios. The expected weighted average maturities, which take into account expected prepayments of principal and interest under existing interest rate conditions, are shown in the following table:

Table 25 - Expected Life of Investment Securities      
(dollar amounts in thousands)At December 31, 2016
 Available-for-Sale & Other
Securities
 Held-to-Maturity
Securities
 Amortized
Cost
 Fair
Value
 Amortized
Cost
 Fair
Value
1 year or less$394,532
 $389,422
 $11,479
 $11,469
After 1 year through 5 years4,135,992
 4,131,335
 2,544,725
 2,534,949
After 5 years through 10 years (1)9,895,629
 9,709,394
 5,244,564
 5,234,948
After 10 years786,442
 767,986
 6,171
 5,902
Other securities564,260
 564,700
 
 
Total$15,776,855
 $15,562,837
 $7,806,939
 $7,787,268

Table 24—Expected Life(1) The average duration of Investment Securitiesthe securities with an average life of 5 years to 10 years is 5.28 years

   December 31, 2014 
    Available-for-Sale & Other
Securities
   Held-to-Maturity
Securities
 

(dollar amounts in thousands)

  Amortized
Cost
   Fair
Value
   Amortized
Cost
   Fair
Value
 

Under 1 year

  $569,054    $565,853    $—      $—    

1—5 years

   4,882,061     4,938,893     2,200,359     2,201,471  

6—10 years

   3,039,362     3,031,093     1,171,565     1,173,650  

Over 10 years

   521,163     499,841     7,981     7,594  

Other securities

   348,246     348,990     —       —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $9,359,886    $9,384,670    $3,379,905    $3,382,715  
  

 

 

   

 

 

   

 

 

   

 

 

 

Bank Liquidity and Sources of Funding

Our primary sources of funding for the Bank are retail and commercial core deposits. As ofAt December 31, 2014,2016, these core deposits funded 73%72% of total assets (102%(107% of total loans). At December 31, 2014, total core deposits represented 94%Other sources of total deposits, a slight decrease from December 31, 2013, when core deposits represented 95% of total deposits.

Core deposits may increase our need for liquidity as certificates of deposit mature or are withdrawn before maturity and as nonmaturity deposits, such as checking and savings account balances, are withdrawn. To the extent we are unable to obtain sufficient liquidity through core deposits, we may meet our liquidity needs through other sources, asset securitization, or sale. Other sources include non-core deposits, FHLB advances, and other wholesale debt instruments.

instruments, and securitizations. Demand deposit overdrafts that have been reclassified as loan balances and were $23 million and $16 million at December 31, 2016 and December 31, 2015, respectively.

The following tables reflect contractual maturities of other domestic time deposits of $250,000 or more and brokered deposits and negotiable CDs as well as other domestic time deposits of $100,000 or more and brokered deposits and negotiable CDs at December 31, 2014.

Demand deposit overdrafts that have been reclassified as loan balances were $18.7 million and $19.3 million at December 31, 2014 and 2013, respectively.

Table 25—Maturity Schedule of time deposits, brokered deposits, and negotiable CDs

   December 31, 2014 

(dollar amounts in millions)

  3 Months
or Less
   3 Months
to 6 Months
   6 Months
to 12 Months
   12 Months
or More
   Total 

Other domestic time deposits of $250,000 or more and brokered deposits and negotiable CDs

  $1,793    $169    $213    $545    $2,720  

Other domestic time deposits of $100,000 or more and brokered deposits and negotiable CDs

  $1,809    $179    $229    $568    $2,785  

2016.

Table 26 - Maturity Schedule of time deposits, brokered deposits, and negotiable CDs 
(dollar amounts in millions)At December 31, 2016
 
3 Months
or Less
 
3 Months
to 6 Months
 
6 Months
to 12 Months
 
12 Months
or More
 Total
Other domestic time deposits of $250,000 or more and brokered deposits and negotiable CDs$3,770
 $60
 $145
 $203
 $4,178
Other domestic time deposits of $100,000 or more and brokered deposits and negotiable CDs$3,938
 $170
 $350
 $438
 $4,896

The following table reflects deposit composition detail for each of the last fivethree years:

Table 26—Deposit Composition

   At December 31, 

(dollar amounts in millions)

  2014  2013  2012  2011  2010 

By Type

                

Demand deposits—noninterest-bearing

  $15,393     30 $13,650     29 $12,600     27 $11,158     26 $7,217     17

Demand deposits—interest-bearing

   6,248     12    5,880     12    6,218     13    5,722     13    5,469     13  

Money market deposits

   18,986     37    17,213     36    14,691     32    13,117     30    13,410     32  

Savings and other domestic deposits

   5,048     10    4,871     10    5,002     11    4,698     11    4,643     11  

Core certificates of deposit

   2,936     5    3,723     8    5,516     12    6,513     15    8,525     20  
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

 

Total core deposits

   48,611     94    45,337     95    44,027     95    41,208     95    39,264     93  

Other domestic deposits of $250,000 or more

   198     —      274     1    354     1    390     1    675     2  

Brokered deposits and negotiable CDs

   2,522     5    1,580     3    1,594     3    1,321     3    1,532     4  

Deposits in foreign offices

   401     1    316     1    278     1    361     1    383     1  
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

 

Total deposits

  $51,732     100 $47,507     100 $46,253     100 $43,280     100 $41,854     100
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

 

Core deposits:

                

Commercial

  $22,725     47 $19,982     44 $18,358     42 $16,366     40 $12,476     32

Personal

   25,886     53    25,355     56    25,669     58    24,842     60    26,788     68  
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

 

Total core deposits

  $48,611     100 $45,337     100 $44,027     100 $41,208     100 $39,264     100
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

 

Note 9 to Consolidated Financial Statements discusses

Table 27 - Deposit Composition           
(dollar amounts in millions)At December 31,
 2016 2015 2014
By Type:           
Demand deposits—noninterest-bearing$22,836
 30% $16,480
 30% $15,393
 30%
Demand deposits—interest-bearing15,676
 21
 7,682
 14
 6,248
 12
Money market deposits18,407
 24
 19,792
 36
 18,986
 37
Savings and other domestic deposits11,975
 16
 5,246
 9
 5,048
 10
Core certificates of deposit2,535
 3
 2,382
 4
 2,936
 5
Total core deposits:71,429
 94
 51,582
 93
 48,612
 94
Other domestic deposits of $250,000 or more394
 1
 501
 1
 198
 
Brokered deposits and negotiable CDs3,784
 5
 2,944
 5
 2,522
 5
Deposits in foreign offices
 
 268
 1
 401
 1
Total deposits$75,608
 100% $55,295
 100% $51,733
 100%
Total core deposits:           
Commercial$31,887
 45% $24,474
 47% $19,982
 44%
Consumer39,542
 55
 27,108
 53
 25,355
 56
Total core deposits$71,429
 100% $51,582
 100% $45,337
 100%
The following table reflects short-term borrowings detail for each of the last five years.

three years:

Table 28 - Federal Funds Purchased and Repurchase Agreements     
(dollar amounts in millions)At December 31,
 2016 2015 2014
Weighted average interest rate at year-end     
Federal Funds purchased and securities sold under agreements to repurchase0.35% 0.13% 0.08%
Federal Home Loan Bank advances0.65
 
 0.14
Other short-term borrowings0.66
 0.27
 1.11
Maximum amount outstanding at month-end during the year     
Federal Funds purchased and securities sold under agreements to repurchase$1,537
 $1,120
 $1,491
Federal Home Loan Bank advances2,425
 1,850
 2,375
Other short-term borrowings64
 43
 56
Average amount outstanding during the year     
Federal Funds purchased and securities sold under agreements to repurchase$690
 $784
 $987
Federal Home Loan Bank advances822
 542
 1,753
Other short-term borrowings18
 20
 21
Weighted average interest rate during the year     
Federal Funds purchased and securities sold under agreements to repurchase0.14% 0.06% 0.07%
Federal Home Loan Bank advances0.44
 0.16
 0.06
Other short-term borrowings2.86
 1.17
 1.63
The Bank maintains borrowing capacity at the FHLB and the Federal Reserve Bank Discount Window. The Bank does not consider borrowing capacity from the Federal Reserve Bank Discount Window as a primary source of liquidity. Total loansInformation regarding amounts pledged, for the ability to borrow if necessary, and securities pledged tothe unused borrowing capacity at both the Federal Reserve Discount WindowBank and the FHLB, is outlined in the following table:

Table 29 - Federal Reserve Bank and FHLB Borrowing Capacity   
    
(dollar amounts in billions)At December 31,
 2016 2015
Loans and securities pledged:   
Federal Reserve Bank$10.0
 $8.3
FHLB9.7
 9.2
Total loans and securities pledged$19.7
 $17.5
Total unused borrowing capacity at Federal Reserve Bank and FHLB$14.1
 $13.6
(For further information related to debt issuances please see Note 11 of the Notes to Consolidated Financial Statements.)
To the extent we are $18.0unable to obtain sufficient liquidity through core deposits, we may meet our liquidity needs through sources of wholesale funding, asset securitization, or sale.  Sources of wholesale funding include other domestic deposits of $250,000 or more, brokered deposits and negotiable CDs, deposits in foreign offices, short-term borrowings, and long-term debt. At December 31, 2016, total wholesale funding was $16.2 billion, and $19.8an increase from $11.4 billion at December 31, 2014 and 2013, respectively.

In February 2014, the Bank issued $500.0 million of senior notes at 99.842% of face value. The senior bank note issuances mature on April 1, 2019 and have a fixed coupon rate of 2.20%. In April 2014, the Bank issued $500.0 million of senior notes at 99.842% of face value. The senior note issuances mature on April 24, 2017 and have a fixed coupon rate of 1.375%. In April 2014, the Bank also issued $250.0 million of senior notes at 100% of face value. The senior bank note issuances mature on April 24, 2017 and have a variable coupon rate equal to the three-month LIBOR plus 0.425%. All senior note issuances may be redeemed one month prior to their maturity date at 100% of principal plus accrued and unpaid interest.

At December 31, 2014, total wholesale funding was $9.9 billion, an increase from $7.0 billion at December 31, 2013.2015. The increase from prior year-end primarily relates to an increase in long-term debt,short-term borrowings, brokered time deposits and negotiable CDs.

CDs, and long-term debt, partially offset by a decrease in deposits in foreign offices and domestic time deposits of $250,000 or more.

Liquidity Coverage Ratio

On October 24, 2013, the U.S. banking regulators jointly issued a proposal that would implement a quantitative liquidity requirement consistent with the Liquidity Coverage Ratio (LCR) standard established by the Basel Committee on Banking Supervision. The LCR is designed to promote the short-term resilience of the liquidity risk profile of banks to which it applies.

On September 3, 2014, the U.S. banking regulators adopted a final LCR for internationally active banking organizations, generally those with $250 billion or more in total assets, and a Modified LCR rule for banking organizations, similar to Huntington, with $50 billion or more in total assets that are not internationally active banking organizations. The Modified LCR requires Huntington to maintain High Quality Liquid Assets (HQLA) to meet its net cash outflows over a prospective 30 calendar-day period, which takes into account the potential impact of idiosyncratic and market-wide shocks. The Modified LCR transition period begins on January 1, 2016, with Huntington required to maintain HQLA equal to 90 percent of the stated requirement. The ratio increases to 100 percent on January 1, 2017. Huntington expects to be compliant with the Modified LCR requirement within the transition periods established in the Modified LCR rule.

At December 31, 2014,2016, we believe the Bank had sufficient liquidity to be in compliance with the LCR requirements and to meet its cash flow obligations for the foreseeable future.

Table 27—Maturity Schedule of Commercial Loans

   December 31, 2014 

(dollar amounts in millions)

  One Year
or Less
  One to
Five Years
  After
Five Years
  Total  Percent
of

total
 

Commercial and industrial

  $4,988   $10,258   $ 3,787   $19,033    78

Commercial real estate—construction

   163    590    122    875    4  

Commercial real estate—commercial

   1,184    2,516    622    4,322    18  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

  $6,335   $13,364   $4,531   $24,230    100
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Variable-interest rates

  $5,748   $10,528   $2,589   $18,865    78

Fixed-interest rates

   587    2,836    1,942    5,365    22  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

  $6,335   $13,364   $4,531   $24,230    100
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Percent of total

   26  55  19  100 

Table 30 - Maturity Schedule of Commercial Loans
(dollar amounts in millions)At December 31, 2016
 One Year
or Less
 One to
Five Years
 After
Five Years
 Total Percent
of
total
Commercial and industrial$6,557
 $16,805
 $4,697
 $28,059
 79%
Commercial real estate—construction536
 823
 87
 1,446
 4
Commercial real estate—commercial1,374
 3,465
 1,016
 5,855
 17
Total$8,467
 $21,093
 $5,800
 $35,360
 100%
Variable-interest rates$7,170
 $16,487
 $3,419
 $27,076
 77%
Fixed-interest rates1,297
 4,606
 2,381
 8,284
 23
Total$8,467
 $21,093
 $5,800
 $35,360
 100%
Percent of total24% 60% 16% 100%  
At December 31, 2014, AFS securities, with a fair2016, the carrying value of $3.6 billion, wereinvestment securities pledged to secure public and trust deposits, interest rate swap agreements,trading account liabilities, U.S. Treasury demand notes, and security repurchase agreements totaled $5.0 billion. There were no securities sold under repurchase agreements.

of a non-governmental single issuer that exceeded 10% of shareholders’ equity at December 31, 2016.

Parent Company Liquidity

The parent company’s funding requirements consist primarily of dividends to shareholders, debt service, income taxes, operating expenses, funding of nonbank subsidiaries, repurchases of our stock, and acquisitions. The parent company obtains funding to meet obligations from dividends and interest received from the Bank, interest and dividends received from direct subsidiaries, net taxes collected from subsidiaries included in the federal consolidated tax return, fees for services provided to subsidiaries, and the issuance of debt securities.

At December 31, 20142016 and December 31, 2013,2015, the parent company had $0.7$1.8 billion and $1.0$0.9 billion, respectively, in cash and cash equivalents.

The increase primarily relates to 2016 issuances of long-term debt and preferred stock.


On January 21, 2015,18, 2017, the board of directors declared a quarterly common stock cash dividend of $0.06$0.08 per common share. The dividend is payable on April 1, 2015,3 2017, to shareholders of record on March 18, 2015.20, 2017. Based on the current quarterly dividend of $0.06

$0.08 per common share, cash demands required for common stock dividends are estimated to be approximately $48.7$87 million per quarter. On January 21, 2015,18, 2017, the board of directors declared a quarterly Series A, Series, B, Series, C, and Series BD Preferred Stock dividend payable on April 15, 201517, 2017 to shareholders of record on April 1, 2015.2017. Based on the current dividend, cash demands required for Series A Preferred Stock are estimated to be approximately $7.7$8 million per quarter. Cash demands required for Series B Preferred Stock are expected to be approximately $0.3less than $1 million per quarter.

Cash demands required for Series C Preferred Stock are expected to be approximately $2 million per quarter. Cash demands required for Series D Preferred Stock are expected to be approximately $9 million per quarter.

During 2014,the fourth quarter, the Bank paid dividendsdeclared a return of $244.0 million to the holding company. We anticipate that the Bank will declare additional dividendscapital to the holding company of $225 million payable in the 2017 first quarter of 2015.quarter. To help meet any additional liquidity needs, we have an open-ended, automatic shelf registration statement filed and effective with the SEC, which permits us toparent company may issue an unspecified amount of debt or equity securities.

Withsecurities from time to time. In April 2016, the exceptionBank issued $490 million of preferred stock to the items discussed above,holding company. In the parent company does not have any significant cash demands. It is our policy2016 third and fourth quarter, the Bank declared and paid a preferred dividend of $7 million to keep operating cash on hand at the parent company to satisfy cash demands for at least the next 18 months. Considering the factors discussed above, and other analyses that we have performed, we believe the parent company has sufficient liquidity to meet its cash flow obligations for the foreseeable future.

holding company.

Off-Balance Sheet Arrangements

In the normal course of business, we enter into various off-balance sheet arrangements. These arrangements include commitments to extend credit, interest rate swaps, financial guarantees contained in standby letters-of-credit issued by the Bank, and commitments by the Bank to sell mortgage loans.

COMMITMENTS TO EXTEND CREDIT
Commitments to extend credit generally have fixed expiration dates, are variable-rate, and contain clauses that permit Huntington to terminate or otherwise renegotiate the contracts in the event of a significant deterioration in the customer’s credit quality. These arrangements normally require the payment of a fee by the customer, the pricing of which is based on prevailing market conditions, credit quality, probability of funding, and other relevant factors. Since many of these commitments are expected to expire without being drawn upon, the contract amounts are not necessarily indicative of future cash requirements. The interest rate risk arising from these financial instruments is insignificant as a result of their predominantly short-term, variable-rate nature. See Note 21 for more information.

INTEREST RATE SWAPS

Balance sheet hedging activity is arranged to receive hedge accounting treatment and is classified as either fair value or cash flow hedges. Fair value hedges are purchased to convert deposits and subordinated and other long-term debt from fixed-rate obligations to floating rate. Cash flow hedges are also used to convert floating rate loans made to customers into fixed rate loans. See Note 1819 for more information.

STANDBY LETTERS-OF-CREDIT

Standby letters-of-credit are conditional commitments issued to guarantee the performance of a customer to a third party.third-party. These guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing, and similar transactions. Most of these arrangements mature within two years and are expected to expire without being drawn upon. Standby letters-of-credit are included in the determination of the amount of risk-based capital that the parent company and the Bank are required to hold. Through our credit process, we monitor the credit risks of outstanding standby letters-of-credit. When it is probable that a standby letter-of-credit will be drawn and not repaid in full, a loss is recognized in the provision for credit losses. See Note 2021 for more information.

COMMITMENTS TO SELL LOANS

Activity relatingrelated to our mortgage origination activity supports the hedging of the mortgage pricing commitments to customers and the secondary sale to third parties. At December 31, 2014 and December 31, 2013,In addition, we hadhave commitments to sell residential real estate loans of $545.0 million and $452.6 million, respectively.loans. These contracts mature in less than one year.

See Note 21 for more information.

We do not believe that off-balance sheet arrangements will have a material impact onare properly considered in our liquidity or capital resources.

Table 28—Contractual Obligations (1)

   December 31, 2014 

(dollar amounts in millions)

  One Year
or Less
   1 to 3
Years
   3 to 5
Years
   More than
5 Years
   Total 

Deposits without a stated maturity

  $45,069    $—      $—      $—      $45,069  

Certificates of deposit and other time deposits

   4,630     1,803     98     132     6,663  

Short-term borrowings

   2,397     —       —       —       2,397  

Long-term debt

   —       2,453     1,126     757     4,336  

Operating lease obligations

   51     92     79     237     459  

Purchase commitments

   76     107     14     5     202  

risk management process.

Table 31 - Contractual Obligations (1)
(dollar amounts in millions)At December 31, 2016
 
One Year
or Less
 
1 to 3
Years
 
3 to 5
Years
 
More than
5 Years
 Total
Deposits without a stated maturity$67,786
 $
 $
 $
 $67,786
Certificates of deposit and other time deposits4,498
 1,839
 1,164
 321
 7,822
Short-term borrowings3,693
 
 
 
 3,693
Long-term debt814
 3,385
 2,426
 1,758
 8,383
Operating lease obligations59
 102
 76
 152
 389
Purchase commitments96
 112
 34
 16
 258
(1)Amounts do not include associated interest payments.

Operational Risk

As with all companies, we are subject to operational risk.

Operational risk is the risk of loss due to human error; inadequate or failed internal systems and controls, including the use of financial or other quantitative methodologies that may not adequately predict future results; violations of, or noncompliance with, laws, rules, regulations, prescribed practices, or ethical standards; and external influences such as market conditions, fraudulent activities, disasters, and security risks. We continuously strive to strengthen our system of internal controls to ensure compliance with laws, rules, and regulations, and to improve the oversight of our operational risk. For example, weWe actively and continuously monitor cyber-attacks such as attempts related to online deception and loss of sensitive customer data. We evaluate internal systems, processes and controls to mitigate loss from cyber-attacks and, to date, have not experienced any material losses. In addition,
Our objective for managing cyber security risk is to avoid or minimize the impacts of external threat events or other efforts to penetrate our systems. We work to achieve this objective by hardening networks and systems against attack, and by diligently managing visibility and monitoring controls within our data and communications environment to recognize events and respond before the attacker has the opportunity to plan and execute on its own goals. To this end we employ a set of defense in-depth strategies, which include efforts to make us less attractive as a target and less vulnerable to threats, while investing in threat analytic capabilities for rapid detection and response. Potential concerns related to cyber security may be escalated to our board-level Technology Committee, as appropriate. As a complement to the overall cyber security risk management, we use a number of internal training methods, both formally through mandatory courses and informally through written communications and other updates. Internal policies and procedures have been implemented to encourage the reporting of potential phishing attacks or other security risks. We also use third-party services to test the effectiveness of our cyber security risk management framework, and any such third parties are investing significantly in an effortrequired to minimize these risks.

comply with our policies regarding information security and confidentiality.

To mitigate operational risks, we have a senior management Operational Risk Committee and a senior management Legal, Regulatory, and Compliance Committee. The responsibilities of these committees, among other duties, include establishing and maintaining management information systems to monitor material risks and to identify potential concerns, risks, or trends that may have a significant impact and ensuring that recommendations are developed to address the identified issues. In addition, we have a senior management Model Risk Oversight Committee that is responsible for policies and procedures describing how model risk is evaluated and managed and the application of the governance process to implement these practices throughout the enterprise. These committees report any significant findings and recommendations to the Risk Management Committee. Potential concerns may be escalated to our ROC, as appropriate.

The FirstMerit integration is inherently large and complex. Our objective for cyber securitymanaging execution risk is to recognize eventsminimize impacts to daily operations. We have an established Integration Management Office led by senior management. Responsibilities include central management, reporting, and respond beforeescalation of key integration deliverables. In addition, a board level Integration Governance Committee has been established to assist in the attacker hasoversight of the opportunity to planintegration of people, systems, and execute on their goals. To this end we employ strategies to make Huntington less attractive as a target, while investing in threat analytic capabilities for rapid detection and response. Potential concerns related to cyber security may be escalated to our Technology Committee, as appropriate.

processes of FirstMerit with Huntington.

The goal of this framework is to implement effective operational risk techniques and strategies,strategies; minimize operational, fraud, and fraud losses,legal losses; minimize the impact of inadequately designed models and enhance our overall performance.

Representation and Warranty Reserve

We primarily conduct our mortgage loan sale and securitization activity with FNMA and FHLMC. In connection with these and other securitization transactions, we make certain representations and warranties that the loans meet certain criteria, such as collateral type and underwriting standards. We may be required to repurchase individual loans and / or indemnify these organizations against losses due to a loan not meeting the established criteria. We have a reserve for such losses and exposure, which is included in accrued expenses and other liabilities. The reserves are estimated based on historical and expected repurchase activity, average loss rates, and current economic trends. The level of mortgage loan repurchase losses depends upon economic factors, investor demand strategies and other external conditions containing a level of uncertainty and risk that may change over the life of the underlying loans. We currently do not have sufficient information to estimate the range of reasonably possible loss related to representation and warranty exposure.

The tables below reflect activity in the representations and warranties reserve:

Table 29—Summary of Reserve for Representations and Warranties on Mortgage Loans Serviced for Others

    Year Ended December 31, 

(dollar amounts in thousands)

  2014  2013  2012  2011  2010 

Reserve for representations and warranties, beginning of year

  $22,027   $28,588   $23,218   $20,171   $5,916  

Assumed reserve for representations and warranties

   —      —      —      —      7,000  

Reserve charges

   (8,196  (12,513  (10,628  (8,711  (9,012

Provision for representations and warranties

   (1,154  5,952    15,998    11,758    16,267  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Reserve for representations and warranties, end of year

  $12,677   $22,027   $28,588   $23,218   $20,171  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Table 30—Mortgage Loan Repurchase Statistics

    Year Ended December 31, 

(dollar amounts in thousands)

  2014  2013  2012  2011 

Number of loans sold

   17,905    22,240    26,345    22,146  

Amount of loans sold (UPB)

  $2,354,653   $3,255,732   $4,105,243   $3,170,903  

Number of loans repurchased (1)

   159    159    219    128  

Amount of loans repurchased (UPB) (1)

  $18,482   $18,102   $29,123   $19,442  

Number of claims received

   149    780    666    445  

Successful dispute rate (2)

   34  46  46  50

Number of make whole payments (3)

   122    167    167    72  

Amount of make whole payments (3)

  $6,853   $11,445   $9,432   $5,553  
  

 

 

  

 

 

  

 

 

  

 

 

 

(1)

Loans repurchased are loans that fail to meet the purchaser’s terms.

(2)

Successful disputes are a percent of close out requests.

(3)

Make whole payments are payments to reimburse for losses on foreclosed properties.


Compliance Risk

Financial institutions are subject to many laws, rules, and regulations at both the federal and state levels. In September, for example, the Office of the Comptroller of the Currency issued its final rule formalizing its “heightened expectations” supervisory regime for the largest federally chartered depository institutions, including Huntington, to improve risk management and ensure boards can challenge decisions made by management. These broad-based laws, rules, and regulations include, but are not limited to, expectations relating to anti-money laundering, lending limits, client privacy, fair lending, prohibitions against unfair, deceptive or abusive acts or practices, protections for military members as they enter active duty, and community reinvestment. Additionally, the volume and complexity of recent regulatory changes have increased our overall compliance risk. As such, we utilize various resources to help ensure expectations are met, including a team of compliance experts dedicated to ensuring our conformance with all applicable laws, rules, and regulations. Our colleagues receive training for several broad-based laws and regulations including, but not limited to, anti-money laundering and customer privacy. Additionally, colleagues engaged in lending activities receive training for laws and regulations related to flood disaster protection, equal credit opportunity, fair lending, and / and/or other courses related to the extension of credit. We set a high standard of expectation for adherence to compliance management and seek to continuously enhance our performance.


Capital

(This section should be read in conjunction with the Regulatory Matters section included in Part 1, Item 1 and Note 1222 of the Notes to Consolidated Financial Statements.)

Both regulatory capital and shareholders’ equity are managed at the Bank and on a consolidated basis. We have an active program for managing capital and maintain a comprehensive process for assessing the Company’s overall capital adequacy. We believe our current levels of both regulatory capital and shareholders’ equity are adequate.

Regulatory Capital

We are subject to the Basel III capital requirements including the standardized approach for calculating risk-weighted assets in accordance with subpart D of the final capital rule. The following table presents risk-weighted assets and other financial data necessary to calculate certain financial ratios, including the Tier 1 common equity ratioCET1 on a Basel IIII basis, which we use to measure capital adequacy. We estimate the negative impact to Tier I common risk-based capital from the 2015 first quarter implementation of the Federal Reserve’s final Basel III capital rules will be approximately 40 bps on a fully phased-in basis.

Table 31—Capital Adequacy

    December 31, 

(dollar amounts in millions)

  2014  2013  2012  2011  2010 

Consolidated capital calculations:

      

Common shareholders’ equity

  $5,942   $5,704   $5,393   $5,030   $4,612  

Preferred shareholders’ equity

   386    386    386    386    363  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total shareholders’ equity

   6,328    6,090    5,779    5,416    4,975  

Goodwill

   (523  (444  (444  (444  (444

Other intangible assets

   (75  (93  (132  (175  (229

Other intangible asset deferred tax liability(1)

   26    33    46    61    80  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total tangible equity(2)

   5,756    5,586    5,249    4,858    4,382  

Preferred shareholders’ equity

   (386  (386  (386  (386  (363
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total tangible common equity(2)

  $5,370   $5,200   $4,863   $4,472   $4,019  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total assets

  $66,298   $59,467   $56,141   $54,449   $53,814  

Goodwill

   (523  (444  (444  (444  (444

Other intangible assets

   (75  (93  (132  (175  (229

Other intangible asset deferred tax liability(1)

   26    33    46    61    80  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total tangible assets(2)

  $65,726   $58,963   $55,611   $53,891   $53,221  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Tier 1 capital(3)

  $6,266   $6,100   $5,741   $5,557   $5,022  

Preferred shareholders’ equity

   (386  (386  (386  (386  (363

Trust-preferred securities

   (304  (299  (299  (532  (570

REIT-preferred stock

   —      —      (50  (50  (50
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Tier 1 common equity(2) (3)

  $5,576   $5,415   $5,006   $4,589   $4,039  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Risk-weighted assets (RWA)(3)

  $54,479   $49,690   $47,773   $45,891   $43,471  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Tier 1 common equity / RWA ratio(2) (3)

   10.23  10.90  10.48  10.00  9.29

Tangible equity / tangible asset ratio(2)

   8.76    9.47    9.44    9.01    8.23  

Tangible common equity / tangible asset ratio(2)

   8.17    8.82    8.74    8.30    7.55  

Tangible common equity / RWA ratio(2)

   9.86    10.46    10.18    9.74    9.25  


Table 32 - Capital Under Current Regulatory Standards (transitional Basel III basis) (Non-GAAP)
(dollar amounts in millions, except per share amounts)    
   At December 31,
  2016 2015
Common equity tier 1 risk-based capital ratio:    
Total shareholders’ equity $10,308
 $6,595
Regulatory capital adjustments:    
Shareholders’ preferred equity and related surplus (1,076) (386)
Accumulated other comprehensive loss (income) offset 401
 226
Goodwill and other intangibles, net of taxes (2,126) (695)
Deferred tax assets that arise from tax loss and credit carryforwards (21) (19)
Common equity tier 1 capital 7,486
 5,721
Additional tier 1 capital    
Shareholders’ preferred equity 1,076
 386
Qualifying capital instruments subject to phase-out 
 76
Other (15) (29)
Tier 1 capital 8,547
 6,154
LTD and other tier 2 qualifying instruments 932
 563
Qualifying allowance for loan and lease losses 736
 670
Tier 2 capital 1,668

1,233
Total risk-based capital $10,215
 $7,387
Risk-weighted assets (RWA) $78,263
 $58,420
Common equity tier 1 risk-based capital ratio 9.56% 9.79%
Other regulatory capital data:    
Tier 1 leverage ratio 8.70
 8.79
Tier 1 risk-based capital ratio 10.92
 10.53
Total risk-based capital ratio 13.05
 12.64
Tangible common equity / RWA ratio 8.92
 9.41


Table 33 - Capital Adequacy—Non-Regulatory (Non-GAAP)
(dollar amounts in millions)    
  
At December 31, 
 2016 2015 
Consolidated capital calculations:    
Common shareholders’ equity$9,237
 $6,209
 
Preferred shareholders’ equity1,071
 386
 
Total shareholders’ equity10,308
 6,595
 
Goodwill(1,993) (677) 
Other intangible assets(402) (55) 
Other intangible asset deferred tax liability (1)141
 19
 
Total tangible equity8,054
 5,882
 
Preferred shareholders’ equity(1,071) (386) 
Total tangible common equity$6,983
 $5,496
 
Total assets$99,714
 $71,018
 
Goodwill(1,993) (677) 
Other intangible assets(402) (55) 
Other intangible asset deferred tax liability (1)141
 19
 
Total tangible assets$97,460
 $70,305
 
Tangible equity / tangible asset ratio8.26% 8.37% 
Tangible common equity / tangible asset ratio7.16
 7.82
 

(1)IntangibleOther intangible assets are net of deferred tax liability, and calculated assuming a 35% tax rate.
(2)Tangible equity, Tier 1 common equity, tangible common equity, and tangible assets are non-GAAP financial measures. Additionally, any ratios utilizing these financial measures are also non-GAAP. These financial measures have been included as they are considered to be critical metrics with which to analyze and evaluate financial condition and capital strength. Other companies may calculate these financial measures differently.
(3)In accordance with applicable regulatory reporting guidance, we are not required to retrospectively update historical filings for newly adopted accounting principles. Therefore, Tier 1 capital, Tier 1 common equity, and risk-weighted assets have not been updated for the adoption of ASU 2014-01.



The following table presents certain regulatory capital data at both the consolidated and Bank levels for the past fivetwo years:

Table 32—Regulatory Capital Data (1)

        At December 31, 

(dollar amounts in millions)

      2014  2013  2012  2011  2010 

Total risk-weighted assets

   Consolidated    $54,479   $49,690   $47,773   $45,891   $43,471  
   Bank     54,387    49,609    47,676    45,651    43,281  

Tier 1 risk-based capital

   Consolidated     6,266    6,100    5,741    5,557    5,022  
   Bank     6,136    5,682    5,003    4,245    3,683  

Tier 2 risk-based capital

   Consolidated     1,122    1,139    1,187    1,221    1,263  
   Bank     820    838    1,091    1,508    1,866  

Total risk-based capital

   Consolidated     7,388    7,239    6,928    6,778    6,285  
   Bank     6,956    6,520    6,094    5,753    5,549  

Tier 1 leverage ratio

   Consolidated     9.74  10.67  10.36  10.28  9.41
   Bank     9.56    9.97    9.05    7.89    6.97  

Tier 1 risk-based capital ratio

   Consolidated     11.50    12.28    12.02    12.11    11.55  
   Bank     11.28    11.45    10.49    9.30    8.51  

Total risk-based capital ratio

   Consolidated     13.56    14.57    14.50    14.77    14.46  
   Bank     12.79    13.14    12.78    12.60    12.82  

(1)In accordance with applicable regulatory reporting guidance, we are not required to retrospectively update historical filings for newly adopted accounting principles. Therefore, regulatory capital data has not been updated for the adoption of ASU 2014-01.

The decreases in the capital ratios were due to balance sheet growth and share repurchases that were partially offset by retained earnings and the 8.7 million common shares issued in the Camco Financial acquisition. Specifically, all

Table 34 - Regulatory Capital Data (1)    
(dollar amounts in millions)    
  At December 31,
  
 Basel III
  2016 2015
Total risk-weighted assetsConsolidated$78,263
 $58,420
 Bank78,242
 58,351
Common equity tier 1 risk-based capitalConsolidated7,486
 5,721
 Bank8,153
 5,519
Tier 1 risk-based capitalConsolidated8,547
 6,154
 Bank9,086
 5,735
Tier 2 risk-based capitalConsolidated1,668
 1,233
 Bank1,732
 1,115
Total risk-based capitalConsolidated10,215
 7,387
 Bank10,818
 6,851
Tier 1 leverage ratioConsolidated8.70% 8.79%
 Bank9.29
 8.21
Common equity tier 1 risk-based capital ratioConsolidated9.56
 9.79
 Bank10.42
 9.46
Tier 1 risk-based capital ratioConsolidated10.92
 10.53
 Bank11.61
 9.83
Total risk-based capital ratioConsolidated13.05
 12.64
 Bank13.83
 11.74
All capital ratios were impacted by the $1.3 billion of goodwill created and the issuance of $2.8 billion of common stock as part of the FirstMerit acquisition. The regulatory Tier 1 risk-based and total risk-based capital ratios benefited from the issuance of $400 million and $200 million of Class D preferred equity during the 2016 first and second quarters, respectively, and the issuance of $100 million of Class C preferred equity during the 2016 third quarter in exchange for FirstMerit preferred equity in conjunction with the acquisition. The total risk-based capital ratio was impacted by the repurchase of 35.7$40 million common sharesof trust preferred securities during the 2016 fourth quarter and $20 million of trust preferred securities during the 2016 third quarter, both of which were executed under the de minimis clause of the Federal Reserve's CCAR rules. In addition, $5 million of trust preferred securities were acquired in 2014.

the FirstMerit acquisition and subsequently were redeemed.

Shareholders’ Equity

We generate shareholders’ equity primarily through the retention of earnings, net of dividends.dividends and share repurchases. Other potential sources of shareholders’ equity include issuances of common and preferred stock. Our objective is to maintain capital at an amount commensurate with our risk profile and risk tolerance objectives, to meet both regulatory and market expectations, and to provide the flexibility needed for future growth and business opportunities.
Shareholders’ equity totaled $6.3$10.3 billion at December 31, 2014, representing a $0.22016, an increase of $3.7 billion or 4%, increasewhen compared with December 31, 2013, primarily due2015. In connection with the FirstMerit merger, during the 2016 third quarter, we issued $2.8 billion of common stock and $0.1 billion of preferred stock. During the 2016 first and second quarter, we issued $400 million and $200 million of preferred stock, respectively. Costs of $15 million related to anthe issuances are reported as a direct deduction from the face amount of the stock.
On June 29, 2016, we announced that the Federal Reserve did not object to our proposed capital actions included in our capital plan submitted to the Federal Reserve in April 2016 as part of the 2016 Comprehensive Capital Analysis and Review (“CCAR”). These actions included a 14% increase in retained earnings offset bythe quarterly dividend per common share repurchases.

to $0.08, starting in the fourth quarter of 2016. Our capital plan also included the issuance of capital in connection with the acquisition of FirstMerit Corporation and continues the previously announced suspension of our share repurchase program.


Dividends

We consider disciplined capital management as a key objective, with dividends representing one component. Our strongcurrent capital ratios and expectations for continued earnings growth positions us to continue to actively explore additional capital management opportunities.

On January 22, 2015, our board of directors declared a quarterly cash dividend of $0.06 per common share, payable on April 1, 2015. Also, cash dividends of $0.06 per common share were declared on October 15, 2014, and $0.05 per common share were declared on July 16, 2014, April 16, 2014 and January 16, 2014. Our 2014 capital plan to the FRB included the continuation of our current common dividend through the 2015 first quarter.

On January 22, 2015, our board of directors also declared a quarterly cash dividend on our 8.50% Series A Non-Cumulative Perpetual Convertible Preferred Stock of $21.25 per share. The dividend is payable on April 15, 2015. Cash dividends of $21.25 per share were also declared on October 15, 2014, July 16, 2014, April 16, 2014 and January 16, 2014.

On January 22, 2015, our board of directors also declared a quarterly cash dividend on our Floating Rate Series B Non-Cumulative Perpetual Preferred Stock of $7.38 per share. The dividend is payable on April 15, 2015. Also, cash dividends of $7.33, $7.33, $7.32 and $7.35 per share were declared on October 15, 2014, July 16, 2014, April 16, 2014 and January 16, 2014, respectively.

Share Repurchases

From time to time the board of directors authorizes the Company to repurchase shares of our common stock. Although we announce when the board of directors authorizes share repurchases, we typically do not give any public notice before we repurchase our shares. Future stock repurchases may be private or open-market repurchases, including block transactions, accelerated or delayed block transactions, forward transactions, and similar transactions. Various factors determine the amount and timing of our share repurchases, including our capital requirements, the number of shares we expect to issue for employee benefit plans and acquisitions, market conditions (including the trading price of our stock), and regulatory and legal considerations, including the FRB’s response to our annual capital plan.

On March 26, 2014, Huntington announced that the Federal Reserve did not object to Huntington’s proposed capital actions included in Huntington’s Our capital plan submitted tocontinues the Federal Reserve in January 2014. These actions included a potential repurchasepreviously announced suspension of up to $250 million of common stock from the second quarter of 2014 through the first quarter of 2015. Huntington’s board of directors authorized aour share repurchase program consistent with Huntington’s capital plan. This repurchase authorization represents a $23 million, or 10%, increase from the priorprogram. There were no common stock repurchase authorization. During 2014, weshares repurchased 35.7 million shares, with a weighted average price of $9.37. Purchases of common stock may include open market purchases, privately negotiated transactions, and accelerated repurchase programs. We have approximately $51.7 million remaining under the current authorization.

during 2016.


BUSINESS SEGMENT DISCUSSION

Overview

Our business segments are based on our internally-aligned segment leadership structure, which is how we monitor results and assess performance. During the 2014 first quarter, we reorganized our business segments to drive our ongoing growth and leverage the knowledge of our highly experienced team. We now have five major business segments: RetailConsumer and Business Banking,

Commercial Banking, Automobile Finance and Commercial Real Estate (AFCRE)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. All periods presented have been reclassified to conform to the current period classification.

Business segment results are determined based upon our management reporting system, which assigns balance sheet and income statement items to each of the business segments. The process is designed around our organizational and management structure and, accordingly, the results derived are not necessarily comparable with similar information published by other financial institutions.

On August 16, 2016, we completed our acquisition of FirstMerit Corporation and segment results were impacted by the mid-quarter acquisition.
Revenue Sharing

Revenue is recorded in the business segment responsible for the related product or service. Fee sharing is recorded to allocate portions of such revenue to other business segments involved in selling to, or providing service to customers. Results of operations for the business segments reflect these fee sharing allocations.

Expense Allocation

The management accounting process that develops the business segment reporting utilizes various estimates and allocation methodologies to measure the performance of the business segments. Expenses are allocated to business segments using a two-phase approach. The first phase consists of measuring and assigning unit costs (activity-based costs) to activities related to product origination and servicing. These activity-based costs are then extended, based on volumes, with the resulting amount allocated to business segments that own the related products. The second phase consists of the allocation of overhead costs to all five business segments from Treasury / Other. We utilize a full-allocation methodology, where all Treasury / Other expenses, except reported Significant Items, and a small amount of other residual unallocated expenses, are allocated to the five business segments.

Funds Transfer Pricing (FTP)

We use an active and centralized FTP methodology to attribute appropriate income to the business segments. The intent of the FTP methodology is to transfer interest rate risk from the business segments by providing matched duration funding of assets and liabilities. The result is to centralize the financial impact, management, and reporting of interest rate risk in the Treasury / Other function where it can be centrally monitored and managed. The Treasury / Other function charges (credits) an internal cost of funds for assets held in (or pays for funding provided by) each business segment. The FTP rate is based on prevailing market interest rates for comparable duration assets (or liabilities).


Net Income by Business Segment

The segregation of net

Net income by business segment for the past three years is presented in the following table:

Table 35 - Net Income (Loss) by Business Segment
      
(dollar amounts in thousands)Year ended December 31,
 2016 2015 2014
Consumer and Business Banking$358,146
 $236,298
 $172,199
Commercial Banking197,375
 198,008
 152,653
CREVF203,029
 164,830
 196,377
RBHPCG68,504
 37,861
 22,010
Home Lending17,837
 (6,561) (19,727)
Treasury / Other(133,070) 62,521
 108,880
Net income$711,821
 $692,957
 $632,392
Table 33—Net Income by Business Segment

    Year ended December 31, 

(dollar amounts in thousands)

  2014   2013   2012 

Retail and Business Banking

  $172,199    $128,973    $139,016  

Commercial Banking

   152,653     129,962     155,197  

AFCRE

   196,377     220,433     205,928  

RBHPCG

   22,010     39,502     16,922  

Home Lending

   (19,727   2,670     45,285  

Treasury / Other

   108,880     119,742     68,942  
  

 

 

   

 

 

   

 

 

 

Net income

  $632,392    $641,282    $631,290  
  

 

 

   

 

 

   

 

 

 

Treasury / Other

The Treasury / Other function includes revenue and expense related to assets, liabilities, and equity not directly assigned or allocated to one of the five business segments. Other assets include investment securities and bank owned life insurance. The financial impact associated with our FTP methodology, as described above, is also included.

Net interest income includes

The net loss reported by the Treasury / Other function reflected a combination of factors:
The impact of administering our investment securities portfolios and the net impact of derivatives used to hedge interest rate sensitivity. Noninterest income includes miscellaneous fee income not allocated
$282 million of FirstMerit acquisition-related expense, $42 million reduction to other business segments, such as bank owned life insurance income and any investment security and trading asset gains or losses. Noninterest expense includeslitigation reserves, certain corporate administrative, merger, and other miscellaneous expenses not allocated to other business segments.
The provision for

income taxes for the business segments is calculated at a statutory 35% tax rate, though our overall effective tax rate is lower. As a result, Treasury / Other reflects a credit for income taxes representing the difference between the lower actual effective tax rate and the statutory tax rate used to allocate income taxes to the business segments.

Consumer and Business Banking         
          
Table 36 - Key Performance Indicators for Consumer and Business Banking
(dollar amounts in thousands unless otherwise noted)         
  Year ended December 31, Change from 2015  
 2016 2015 Amount Percent 2014
Net interest income$1,272,713
 $1,027,950
 $244,763
 24% $912,992
Provision for credit losses71,945
 42,777
 29,168
 68
 75,529
Noninterest income558,811
 478,142
 80,669
 17
 409,746
Noninterest expense1,208,585
 1,099,779
 108,806
 10
 982,288
Provision for income taxes192,848
 127,238
 65,610
 52
 92,722
Net income$358,146
 $236,298
 $121,848
 52% $172,199
Number of employees (average full-time equivalent)6,488
 5,776
 712
 12% 5,239
Total average assets (in millions)
$17,963
 $15,571
 $2,392
 15
 $14,861
Total average loans/leases (in millions)
15,187
 13,581
 1,606
 12
 13,034
Total average deposits (in millions)
36,442
 30,200
 6,242
 21
 29,023
Net interest margin3.58% 3.47% 0.11% 3
 3.19%
NCOs$70,139
 $62,729
 $7,410
 12
 $90,628
NCOs as a % of average loans and leases0.46% 0.46% % % 0.70%

Optimal Customer Relationship (OCR)

Our OCR strategy is focused on building and deepening relationships with our customers through superior interactions, product penetration, and quality of service. We will deliver high-quality customer and prospect interactions through a fully integrated sales culture which will include all partners necessary to deliver a total Huntington solution The quality of our relationships will lead to our ability to be the primary bank for our customers, yielding quality, annuitized revenue and profitable share of customers overall financial services revenue. We believe our relationship oriented approach will drive a competitive advantage through our local market delivery channels.

CONSUMER OCR PERFORMANCE

For consumer OCR performance there are three key performance metrics: (1) the number of checking account households, (2) the number of product penetration per consumer checking household, and (3) the revenue generated from the consumer households of all business segments.

The growth in consumer checking account number of households is a result of both new sales of checking accounts and improved retention of existing checking account households. The overall objective is to grow the number of households, along with an increase in product penetration.

We use the checking account since it typically represents the primary banking relationship product. We count additional services by type, not number of services. For example, a household that has one checking account and one mortgage, we count as having two services. A household with four checking accounts, we count as having one service. The household relationship utilizing four or more services is viewed to be more profitable and loyal. The overall objective, therefore, is to decrease the percentage of 1-3 services per consumer checking account household, while increasing the percentage of those with 4 or more services. Since we have made significant strides toward having the vast majority of our customers with 4+ services, during the 2013 second quarter, we changed our measurement to 6+ services. We are holding ourselves to a higher performance standard.

The following table presents consumer checking account household OCR metrics:

Table 34—Consumer Checking Household OCR Cross-sell Report

   Year ended December 31 
   2014  2013  2012 

Number of households (2) (3)

   1,454,402    1,324,971    1,228,812  

Product Penetration by Number of Services (1)

    

1 Service

   2.8  3.0  3.1

2-3 Services

   17.9    19.2    18.6  

4-5 Services

   29.9    30.2    31.1  

6+ Services

   49.4    47.6    47.2  

Total revenue(in millions)

  $1,017.0   $948.1   $983.4  
  

 

 

  

 

 

  

 

 

 

(1)The definitions and measurements used in our OCR process are periodically reviewed and updated prospectively.
(2)On March 1, 2014, Huntington acquired 9,904 Camco Financial households.
(3)On September 12, 2014, Huntington acquired 37,939 Bank of America households.

Our emphasis on cross-sell, coupled with customers being attracted by the benefits offered through our “Fair Play” banking philosophy with programs such as 24-Hour Grace® on overdrafts and Asterisk-Free Checking™, are having a positive effect. The percent of consumer households with 6 or more products services at the end of 2014 was 49.4%, up from 47.6% at the end of last year. For 2014, consumer checking account households grew 10%. Total consumer checking account household revenue in 2014 was $1,017.0 million, up $68.9 million, or 7%, from 2013.

COMMERCIAL OCR PERFORMANCE

For commercial OCR performance, there are three key performance metrics: (1) the number of commercial relationships, (2) the number of services penetration per commercial relationship, and (3) the revenue generated. Commercial relationships include relationships from all business segments.

The growth in the number of commercial relationships is a result of both new sales of checking accounts and improved retention of existing commercial accounts. The overall objective is to grow the number of relationships, along with an increase in product service distribution.

The commercial relationship is defined as a business banking or commercial banking customer with a checking account relationship. We use this metric because we believe that the checking account anchors a business relationship and creates the opportunity to increase our cross-sell. Multiple sales of the same type of service are counted as one service, the same as consumer.

The following table presents commercial relationship OCR metrics:

Table 35—Commercial Relationship OCR Cross-sell Report

   Year ended December 31, 
   2014  2013  2012 

Commercial Relationships (1)

   164,726    159,716    151,083  

Product Penetration by Number of Services (2)

    

1 Service

   15.7  21.1  24.6

2-3 Services

   42.4    41.4    40.4  

4+ Services

   41.9    37.5    35.0  

Total revenue(in millions)

  $851.0   $738.5   $724.4  

(1)Checking account required.
(2)The definitions and measurements used in our OCR process are periodically reviewed and updated prospectively.

By focusing on targeted relationships we are able to achieve higher product service penetration among our commercial relationships, and leverage these relationships to generate a deeper share of wallet. The percent of commercial relationships with 4 or more product services at the end of 2014 was 41.9%, up from 37.5% at the end of last year. Total commercial relationship revenue in 2014 was $851.0 million, up $112.5 million, or 15%, from 2013.

Retail and Business Banking

Table 36—Key Performance Indicators for Retail and Business Banking

      Change from 2013 

(dollar amounts in thousands unless otherwise noted)

  2014  2013  Amount  Percent  2012 

Net interest income

  $912,992   $902,526   $10,466    1 $941,844  

Provision for credit losses

   75,529    137,978    (62,449  (45  135,102  

Noninterest income

   409,746    398,065    11,681    3    380,820  

Noninterest expense

   982,288    964,193    18,095    2    973,691  

Provision for income taxes

   92,722    69,447    23,275    34    74,855  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net income

  $172,199   $128,973   $43,226    34 $139,016  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Number of employees (average full-time equivalent)

   5,239    5,212    27    1  5,075  

Total average assets (in millions)

  $14,861   $14,371   $490    3   $14,299  

Total average loans/leases (in millions)

   13,034    12,638    396    3    12,696  

Total average deposits(in millions)

   29,023    28,309    714    3    28,020  

Net interest margin

   3.19  3.22  (0.03)%   (1  3.37

NCOs

  $90,628   $131,377   $(40,749  (31 $176,213  

NCOs as a % of average loans and leases

   0.70  1.04  (0.34)%   (33  1.39

Return on average common equity

   12.6    9.0    3.6    40    9.8  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

20142016 vs. 20132015

Retail

Consumer and Business Banking reported net income of $172.2$358 million in 2014.2016. This was an increase of $43.2$122 million, or 34%52%, compared to the year-ago period. The increase in net income reflected a combination of factors described below.

The increase in net interest income from the year-ago period reflected:

$0.76.2 billion, or 3%21%, increase in total average deposits and a 10 basis point increase in deposit spreads, as a result of an increase in the FTP rates assigned to deposits.

$0.41.6 billion or 3%12%, increase in total average total loans.

Partially offset by:

3loans combined with an 18 basis point decreaseincrease in loan spreads, as a result of a reduction in the net interest margin, primarily dueFTP rates assigned to assigned fund transfer priceloans and improved effective rates.

The decreaseincrease in the provision for credit losses from the year-ago period reflected:

A $40.7The migration of the acquired portfolio to the originated portfolio, which required a reserve build, portfolio growth, and a $7 million, or 31%12%, decreaseincrease in NCOs, combined with improved credit metrics on business banking and consumer loans.

NCOs.

The increase in total average loans and leases from the year-ago period reflected:

$275 million,1.2 billion, or 3%13%, increase in consumer loans, primarily due to the acquisition and core growth in home equity lines of credit, credit cards,card, and residential mortgages, as well as the impact of the Camco Financial acquisition.

mortgages.

$121 million,0.4 billion, or 3%10%, increase in commercial loans, primarily due to C&I loan growth and the impact of the Camco Financial acquisition.

acquisition and core portfolio growth.

The increase in total average deposits from the year-ago period reflected:

$237 million deposit growth from our In-store branch network.

A continued focus on product mix in reducing the overall cost of deposits as evidenced by an6.2 billion, or 21%, increase in money market and noninterest bearing deposits, partially offset by a decrease in core certificates of deposit. In addition,due to the acquisition of Camco Financial and 24 Bank of America branches contributed to the deposit increase.

core household growth.

The increase in noninterest income from the year-ago period reflected:

$12.836 million, or 14%16%, increase in electronic bankingservice charges on deposits accounts cards, primarily due to new customer acquisition.

$35 million, or 29%, increase in cards and payment processing income, primarily due to strong consumer household growth combined with increased consumer card activity.

higher debit card-related transaction volumes and an increase in the number of households.

$3.612 million, or 15%51%, increase in other income, primarily due to various branch transaction based fees.

$2.9 million, or 19%, increase in gain on sale of loans, primarily due to the increased origination and sale of SBA loans.

Partially offset by:

$8.0 million, or 36%, decrease in mortgage banking fee share income.

The increase in noninterest expense from the year-ago period reflected:

$28.356 million, or 7%16%, increase in personnel costs, primarily due to the FirstMerit acquisition.

$22 million, or 4%, increase in other noninterest expense, primarily due to increasedreflecting an increase in allocated overhead expenses.

$5.214 million, or 14%18%, increase in outside data processing and other services expense, mainly the result of transaction costs associated with card activity.

$3.9 million, or 11%, increase in equipmentoccupancy expense, primarily due to technology investments.

Partially offset by:

$10.4 million, or 4%, decrease in personnel costs, primarily due to the pension plan curtailment in 2013, branch consolidations, and various efficiency improvement initiatives also contributed to the decrease in personnel costs.

FirstMerit acquisition.

$7.1 million, or 46%, reduction in deposit and other insurance.

$1.5 million, or 3%, reduction in marketing, primarily due to reduced direct mail advertising.

20132015 vs. 20122014

Retail

Consumer and Business Banking reported net income of $129.0$236 million in 2013,2015, compared with a net income of $139.0$172 million in 2012.2014. The $10.0$64 million decreaseincrease included a $39.3$33 million, or 4%43%, decrease in provision for credit losses, a $68 million, or 17%, increase noninterest income, and a $115 million, or 13%, increase in net interest income partially offset by a $17.2$35 million, or 5%37%, increase noninterestin provision for income taxes and a $9.5$117 million, or 1%12%, decreaseincrease in noninterest expense.


Commercial Banking         
          
Table 37 - Key Performance Indicators for Commercial Banking
(dollar amounts in thousands unless otherwise noted)         
  Year ended December 31, Change from 2015  
 2016 2015 Amount Percent 2014
Net interest income$512,995
 $379,409
 $133,586
 35 % $306,434
Provision for credit losses98,816
 49,534
 49,282
 99
 31,521
Noninterest income275,258
 258,778
 16,480
 6
 209,238
Noninterest expense385,783
 284,026
 101,757
 36
 249,300
Provision for income taxes106,279
 106,619
 (340) 
 82,198
Net income$197,375
 $198,008
 $(633)  % $152,653
Number of employees (average full-time equivalent)1,307
 1,208
 99
 8 % 1,026
Total average assets (in millions)
$20,373
 $16,123
 $4,250
 26
 $14,145
Total average loans/leases (in millions)
15,936
 12,844
 3,092
 24
 11,901
Total average deposits (in millions)
12,964
 11,410
 1,554
 14
 10,207
Net interest margin2.95% 2.77% 0.18% 6
 2.53%
NCOs$27,237
 $22,226
 $5,011
 23
 $7,852
NCOs as a % of average loans and leases0.17% 0.17% %  % 0.07%
Commercial Banking

Table 37—Key Performance Indicators for Commercial Banking

      Change from 2013 

(dollar amounts in thousands unless otherwise noted)

  2014  2013  Amount  Percent  2012 

Net interest income

  $306,434   $281,461   $24,973    9 $294,333  

Provision for credit losses

   31,521    27,464    4,057    15    4,602  

Noninterest income

   209,238    200,573    8,665    4    197,191  

Noninterest expense

   249,300    254,629    (5,329  (2  248,157  

Provision for income taxes

   82,198    69,979    12,219    17    83,568  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net income

  $152,653   $129,962   $22,691    17 $155,197  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Number of employees (average full-time equivalent)

   1,026    1,072    (46  (4)%   1,023  

Total average assets (in millions)

  $14,145   $11,821   $2,324    20   $10,986  

Total average loans/leases (in millions)

   11,901    10,804    1,097    10    9,913  

Total average deposits(in millions)

   10,207    9,429    778    8    9,033  

Net interest margin

   2.53  2.72  (0.19)%   (7  2.88

NCOs

  $7,852   $(196 $8,048    N.R   $30,497  

NCOs as a % of average loans and leases

   0.07  —    0.07  —      0.31

Return on average common equity

   10.6    11.1    (0.5  (5  16.7  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

N.R.—Not relevant, as denominator of calculation is a net recovery in prior period compared with net loss in current period.

20142016 vs. 20132015

Commercial Banking reported net income of $152.7$197 million in 2016. This was a decrease of $1 million, or less than one percent, compared to the year-ago period. The decrease in net income reflected a combination of factors described below.
The increase in net interest income from the year-ago period reflected:
$3.1 billion, or 24%, increase in average loans/leases.
$0.7 billion, or 41%, increase in average available-for-sale securities, primarily related to direct purchase municipal securities.
$1.6 billion, or 14%, increase in average total deposits.
18 basis point increase in the net interest margin due to a 13 basis point increase in the mix and yield on earning assets, of which 5 basis point increase in the net interest margin attributed to the mix in deposits stemming from a growth of $1.0 billion, or 18%, in average non-interest bearing demand deposits.
The increase in the provision for credit losses from the year-ago period reflected:
The migration of the acquired portfolio to the originated portfolio, which required a reserve build, portfolio growth, and a$5 million, or 23%, increase in NCOs.
The increase in total average assets from the year-ago period reflected:
The third quarter 2016 acquisition of FirstMerit.
$0.7 billion, or 19%, increase in the Equipment Finance loan and bond financing portfolio, which primarily reflected our focus on developing vertical strategies in Huntington Public Capital, business aircraft, rail industry, lender finance, and syndications, as well as the 2015 first quarter acquisition of Huntington Technology Finance.
$0.4 billion, or 15%, increase in the Corporate Banking loan portfolio due to establishing relationships with targeted prospects within our footprint.
The increase in total average deposits from the year-ago period reflected:
$1.6 billion, or 15%, increase in core deposits, which primarily reflected a $1.0 billion, or 18%, increase in noninterest-bearing demand deposits. Middle market accounts contributed $1.3 billion of the overall balance growth, while large corporate accounts declined $0.3 billion.

The increase in noninterest income from the year-ago period reflected:
$11 million, or 31%, increase in commitment and other loan related fees, such as syndication fees.
$10 million, or 17%, increase in service charges on deposit accounts and other treasury management related revenue, primarily due to growth in commercial card revenue, merchant services revenue, and cash management services.
$5 million, or 12%, increase in capital market fees, primarily due to growth in customer interest rate derivative contracts, foreign exchange, and commodities, partially offset by a decrease in underwriting fees.
Partially offset by:
$3 million, or 7%, decrease in equipment and technology finance related fee income, primarily reflecting reduced gains on the sale of loans/leases and income on terminated leases.
$3 million, or 5%, decrease in Insurance related fee income, primarily reflecting a decrease in property & casualty insurance, as well as an increase in fee sharing to other business segments.
$2 million, or 15%, decrease in International fee income, primarily reflecting a decrease in bankers' acceptances.
$1 million, or 6%, decrease in all other income, primarily reflecting a decrease in fee sharing from other business segments.
The increase in noninterest expense from the year-ago period reflected:
$58 million, or 189%, increase in allocated overhead expense.
$31 million, or 18%, increase in personnel expense, primarily reflecting the 2016 third quarter acquisition of FirstMerit. The increase also reflects additional cost from annual merit salary adjustments and incentives.
$5 million, or 63%, increase in FDIC insurance premiums, primarily reflecting the 2016 third quarter acquisition of FirstMerit.
$7 million, or 10%, increase in all other expense, primarily reflecting the 2016 third quarter acquisition of FirstMerit.
2015 vs. 2014
Commercial Banking reported net income of $198 million in 2015, compared with net income of $153 million in 2014. The $45 million increase included a $73 million, or 24%, increase in net interest income, a $50 million, or 24%, increase in noninterest income, and a $35 million, or 14%, increase in noninterest expense partially offset by $24 million, or 30%, increase in provision for income taxes and a $18 million, or 57%, increase in provision for credit losses.
Commercial Real Estate and Vehicle Finance         
          
Table 38 - Commercial Real Estate and Vehicle Finance
(dollar amounts in thousands unless otherwise noted)         
  Year ended December 31, Change from 2015  
 2016 2015 Amount Percent 2014
Net interest income$468,969
 $381,231
 $87,738
 23 % $379,363
Provision (reduction in allowance) for credit losses26,922
 4,890
 22,032
 451
 (52,843)
Noninterest income40,582
 29,254
 11,328
 39
 26,628
Noninterest expense170,276
 152,010
 18,266
 12
 156,715
Provision for income taxes109,324
 88,755
 20,569
 23
 105,742
Net income$203,029
 $164,830
 $38,199
 23 % $196,377
Number of employees (average full-time equivalent)346
 302
 44
 15 % 271
Total average assets (in millions)
$20,753
 $16,894
 $3,859
 23
 $14,591
Total average loans/leases (in millions)
19,386
 15,812
 3,574
 23
 14,224
Total average deposits (in millions)
1,719
 1,496
 223
 15
 1,204
Net interest margin2.33% 2.34 % (0.01)% 
 2.61%
NCOs$9,460
 $(8,027) $17,487
 N.R.
 $2,100
NCOs as a % of average loans and leases0.05% (0.05)% 0.10 % N.R.
 0.01%
N.R. - Not relevant.

2016 vs. 2015
CREVF reported net income of $203 million in 2016. This was an increase of $22.7$38 million, or 17%23%, compared to the year-ago period. The increase in net income reflected a combination of factors described below.

The increase in net interest income from the year-ago period reflected:

$1.11.8 billion, or 10%20%, increase in average loans/leases.

automobile loans, primarily due to continued strong origination volume, which has exceeded $1.0 billion for each of the last 8 quarters. This increase also reflected $0.6 billion of indirect automobile loans acquired from FirstMerit and the $0.8 billion automobile securitization and sale completed in 2015 second quarter.

$0.90.7 billion indirect recreational loans acquired from FirstMerit.

$1.1 billion, or 906%16%, increase in average available-for-sale securities,commercial loans primarily relateddue to direct purchase municipal securities.

$0.8 billion, or 8%,an increase in average total deposits.

automobile floor plan balances and commercial real estate loans acquired from FirstMerit.

Partially offset by:

19A 1 basis point decrease in the net interest margin primarily due to a 9 basis point compression in commercial loanas the impact of competitive pricing pressures was mostly offset by higher spreads driven by a 6 basis point compression stemming from growth inon the international portfolio with products such as bankers acceptances and foreign insured receivables, as well as compressed deposit margins resulting from declining rates and reduced FTP rates.

acquired FirstMerit portfolios.

The increase in the provision for credit losses from the year-ago period reflected:

An increase related to loan growth and an $8.0$17 million increase in NCOs. The increase in NCOs primarily reflects a net recovery inincurred with the prior year and the return to net charge-offs in 2014.

Mezzanine portfolio.

The increase in total average assets from the year-ago period reflected:

$0.9 billion increase in available-for-sale securities driven from the addition of direct purchase municipal instruments. These instruments had been classified as C&I loans until December 31, 2013.

$0.6 billion, or 472%, increase in the international loan portfolio, primarily bankers acceptances and foreign insured receivables.

$0.5 billion, or 100%, increase in the asset based lending portfolio average balance, which was transferred from the AFCRE segment retroactive to the beginning of 2014.

The increase in total average deposits from the year-ago period reflected:

$1.1 billion, or 13%, increase in core deposits. Middle market accounts, such as not-for-profit universities and healthcare, primarily contributed to the balance growth.

Partially offset by:

$0.3 billion, or 45%, decrease in brokered time deposits and negotiable CDs.

The increase in noninterest income from the year-ago period reflected:

$9.95 million, or 100%26%, increase in other income primarily related to fee sharing income associated with the asset based lending portfolio, which was transferred from the AFCRE segment retroactive to the beginning of 2014.

derivative product sales.

$4.22 million, or 9%46%, increase in service chargesgains on deposit accounts and other treasury managementsales of loans related revenue, primarily due to a new commercial card product implemented2016 fourth quarter balance sheet optimization strategies.

$3 million increase in 2013, as well as strong core cash management growth.

securities gains.

Partially offset by:

$5.6 million, or 16%, decrease in commitment and other loan related fees primarily reflecting a significant syndication fee in 2013.

The decreaseincrease in noninterest expense from the year-ago period reflected:

$6.67 million, or 15%21%, decreaseincrease in personnel costs due to a higher number of employees, resulting from higher production and business development activities as well as additional colleagues added from FirstMerit.

$6 million, or 6%, increase in other noninterest expense, primarily due to an increase in allocated overheadexpenses.
$5 million increase in allocated FDIC insurance expense.

$5.32015 vs. 2014

CREVF reported net income of $165 million in 2015, compared with a net income of $196 million in 2014. The $31 million decrease included a $58 million, or 42%109%, decreaseincrease in deposit and other insurance expense.

Partially offset by:

$6.6the provision for credit losses, $3 million, or 100%10%, increase in noninterest expense associated with the asset based lending portfolio, which was transferred from the AFCRE segment retroactive to the beginning of 2014.

2013 vs. 2012

Commercial Banking reported net income of $130.0 million in 2013, compared with net income of $155.2 million in 2012. The $25.2 million decrease includedpartially offset by a $22.9$2 million, or 497%,less than one percent, increase in provision for credit losses, a $12.9 million, or 4%, decrease in net interest income and a $6.5 million, or 3%, increase in noninterest expense partially offset by $13.6$17 million, or 16%, decrease in provision for income taxes, and a $3.4 million, or 2%, increase in noninterest income.

taxes.


Regional Banking and The Huntington Private Client Group      
          
Table 39 - Key Performance Indicators for Regional Banking and The Huntington Private Client Group
(dollar amounts in thousands unless otherwise noted)         
  Year ended December 31, Change from 2015  
 2016 2015 Amount Percent 2014
Net interest income$177,431
 $139,188
 $38,243
 27 % $101,839
Provision (reduction in allowance) for credit losses(3,467) 87
 (3,554) N.R.
 4,893
Noninterest income120,687
 114,814
 5,873
 5
 173,550
Noninterest expense196,194
 195,667
 527
 
 236,634
Provision for income taxes36,887
 20,387
 16,500
 81
 11,852
Net income$68,504
 $37,861
 $30,643
 81 % $22,010
Number of employees (average full-time equivalent)630
 651
 (21) (3)% 1,022
Total average assets (in millions)
$4,805
 $4,213
 $592
 14
 $3,812
Total average loans/leases (in millions)
4,187
 3,785
 402
 11
 2,894
Total average deposits (in millions)
8,076
 7,130
 946
 13
 6,029
Net interest margin2.26 % 1.97% 0.29 % 15
 1.75%
NCOs$(2,153) $4,808
 $(6,961) N.R.
 $8,143
NCOs as a % of average loans and leases(0.05)% 0.13% (0.18)% N.R.
 0.28%
Total assets under management (in billions)—eop
$16.9
 $16.3
 $0.6
 4
 $14.8
Total trust assets (in billions)—eop
94.7
 84.1
 10.6
 13
 81.5

N.R. - Not relevant.
eop—End of Period.
Automobile Finance and Commercial Real Estate

Table 38—Key Performance Indicators for Automobile Finance and Commercial Real Estate

      Change from 2013    

(dollar amounts in thousands unless otherwise noted)

  2014  2013  Amount  Percent  2012 

Net interest income

  $379,363   $366,508   $12,855    4 $369,376  

Provision (reduction in allowance) for credit losses

   (52,843  (82,269  29,426    (36  (16,557

Noninterest income

   26,628    46,819    (20,191  (43  91,314  

Noninterest expense

   156,715    156,469    246    —      160,434  

Provision for income taxes

   105,742    118,694    (12,952  (11  110,885  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net income

  $196,377   $220,433   $(24,056  (11)%  $205,928  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Number of employees (average full-time equivalent)

   271    285    (14  (5)%   287  

Total average assets(in millions)

  $14,591   $12,981   $1,610    12   $12,717  

Total average loans/leases (in millions)

   14,224    12,391    1,833    15    11,677  

Total average deposits (in millions)

   1,204    1,039    165    16    967  

Net interest margin

   2.61  2.82  (0.21)%   (7  2.87

NCOs

  $2,100   $29,137   $(27,037  (93 $83,043  

NCOs as a % of average loans and leases

   0.01  0.24  (0.23)%   (96  0.71

Return on average common equity

   32.4    36.9    (4.5  (12  32.5  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

20142016 vs. 20132015

AFCRE

RBHPCG reported net income of $196.4$69 million in 2014.2016. This was a decreasean increase of $24.1$31 million, or 11%81%, when compared to the year-ago period. The decreaseincrease in net income reflected a combination of factors described below.

The increase in net interest income from the year-ago period reflected:

$2.00.9 billion, or 35%13%, increase in automobileaverage total deposits combined with a $0.4 billion, or 11% increase in average total loans and leases, primarily due to continuedthe FirstMerit acquisition. In addition, the deposit balance increase reflected strong origination volume which totaled $5.2 billion for the year, up 24% from $4.2 billion a year ago.

Partially offset by:

21 basis point decreasegrowth in the netnew Private Client Account interest margin, primarily due to an 20 basis point reductionchecking product as well as commercial deposit balances, while the loan balance increase reflected strong growth in loan spreads. This decline primarily reflects the impact of competitive pricing pressures in all of our portfolios, partially offset by a $5.1 million, or 4 basis points, recovery in 2014 from the unexpected pay-off of an acquiredboth commercial real estate loan.

$0.3 billion, or 100%, decrease in asset based lendingloans and portfolio average balances which were transferred to the Commercial Banking segment retroactive to the beginning of 2014.

mortgage loans.

The decrease in the provision (reduction in allowance) for credit losses reflected from the year-ago period reflected:

Less improvement$7 million decrease in credit quality than what was experienced inNCOs incurred during the year-ago period, reflecting a 23 basis point decline in NPA/loans in the current period compared to a 51 basis point decline in the year-ago period, partially offset by lower NCOs.

year.

The decreaseincrease in noninterest income from the year-ago period reflected:

$18.04 million, or 44%4%, decreaseincrease in other noninterest income, primarilytrust services, due to a $8.6 million decreaseincreased revenue from the FirstMerit acquisition, partially offset by the reduction in fee income associated withrevenue resulting from the asset based lending portfolio which was transferred tosale of HASI and HAA in the Commercial Banking segment, as well as decreases in market related gains associated with certain loans and investments carried at fair value, operating lease related income and servicing income on securitized automobile loans.

2015 fourth quarter.

The increase in noninterest expense from the year-ago period reflected:

$9.33 million, or 10%66%, increase in other noninterest expense,amortization of intangible assets, primarily due to a $12.5 million increase in allocated expenses, generally reflecting higher levels of business activity.

the FirstMerit acquisition.

Partially offset by:

$4.22 million, or 33%, decrease in deposit and other insurance expense.

$2.8 million, or 9%, decrease in personnel costs, primarily due to staffing associated with the asset based lending portfolio which was transferred to the Commercial Banking segment retroactive to the beginning of 2014.

$1.5 million, or 29%47%, decrease in professional services primarily due to costs associated withrelated from the asset based lending portfolio in 2013.

2015 fourth quarter sale of HASI and HAA.

20132015 vs. 20122014

AFCRE

RBHPCG reported net income of $220.4$38 million in 2013,2015, compared with a net income of $205.9$22 million in 2012.2014. The $14.5$16 million increase included a $65.7$59 million, or 397%34%, increasedecrease in noninterest income, a $5 million decrease in the reduction in allowanceprovision for credit losses, a $4.0$41 million, or 2%,17% decrease in noninterest expense, partially offset by a $44.5$37 million, or 49%37%, decreaseincrease in noninterestnet interest income and a $2.9$9 million, or less than 1%, decrease in net interest income.

Regional Banking and The Huntington Private Client Group

Table 39—Key Performance Indicators for Regional Banking and The Huntington Private Client Group

      Change from 2013    

(dollar amounts in thousands unless otherwise noted)

  2014  2013  Amount  Percent  2012 

Net interest income

  $101,839   $105,862   $(4,023  (4)%  $104,329  

Provision (reduction in allowance) for credit losses

   4,893    (5,376  10,269    N.R.    6,044  

Noninterest income

   173,550    186,430    (12,880  (7  181,650  

Noninterest expense

   236,634    236,895    (261  —      253,901  

Provision for income taxes

   11,852    21,271    (9,419  (44  9,112  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net income

  $22,010   $39,502   $(17,492  (44)%  $16,922  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Number of employees (average full-time equivalent)

   1,022    1,065    (43  (4)%   1,101  

Total average assets(in millions)

  $3,812   $3,732   $80    2   $3,590  

Total average loans/leases(in millions)

   2,894    2,832    62    2    2,704  

Total average deposits (in millions)

   6,029    5,765    264    5    5,630  

Net interest margin

   1.75  1.90  (0.15)%   (8  1.89

NCOs

  $8,143   $11,094   $(2,951  (27 $19,898  

NCOs as a % of average loans and leases

   0.28  0.39  (0.11)%   (28  0.74

Return on average common equity

   4.4    7.9    (3.5  (44  3.3  

Total assets under management(in billions)—eop

  $14.8   $16.7   $(1.9  (11 $15.9  

Total trust assets (in billions)—eop

   81.5    80.9    0.6    1    73.9  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

N.R.—Not relevant, as denominator of calculation is a reduction in allowance in prior period compared with a provision72% increase in the current period.

eop—End of Period.

provision for income taxes.


Home Lending         
          
Table 40 - Key Performance Indicators for Home Lending
(dollar amounts in thousands unless otherwise noted)         
  Year ended December 31, Change from 2015  
 2016 2015 Amount Percent 2014
Net interest income$58,354
 $50,404
 $7,950
 16 % $58,015
Provision (reduction in allowance) for credit losses(3,412) 2,671
 (6,083) (228) 21,889
Noninterest income90,358
 87,021
 3,337
 4
 69,899
Noninterest expense124,683
 144,848
 (20,165) (14) 136,374
Provision for income taxes9,604
 (3,533) 13,137
 (372) (10,622)
Net income (loss)$17,837
 $(6,561) $24,398
 (372)% $(19,727)
Number of employees (average full-time equivalent)1,071
 952
 119
 13 % 971
Total average assets (in millions)
$3,303
 $3,145
 $158
 5
 $3,810
Total average loans/leases (in millions)
2,649
 2,551
 98
 4
 3,298
Total average deposits (in millions)
438
 350
 88
 25
 292
Net interest margin1.87% 1.71% 0.16 % 9
 1.61%
NCOs$4,213
 $5,758
 $(1,545) (27) $15,900
NCOs as a % of average loans and leases0.16% 0.23% (0.07)% (30) 0.48%
Mortgage banking origination volume (in millions)$5,822
 $4,705
 $1,117
 24
 $3,558
20142016 vs. 20132015

RBHPCG

Home Lending reported a net income of $22.0$18 million in 2014.2016. This was a decreasean improvement of $17.5$24 million, or 44%, when compared to the year-ago period. The decreaseincrease in net income reflected a combination of factors described below.

The decrease in net interest income from the year-ago period reflected:

15 basis point decrease in the net interest margin, primarily due to lower spreads on deposits.

Partially offset by:

$0.3 billion, or 5%, increase in average total deposits, primarily due to increased focus on deposit growth resulting from the alignment of private banking with the regional presidents.

The increase in provision for (reduction in allowance) credit losses reflected:

Less improvement in the underlying credit quality of the loan portfolio compared to year-ago period, partially offset by reduced level of NCOs.

The decrease in noninterest income from the year-ago period reflected:

$8.3 million, or 7%, decrease in trust services, primarily due to reduced proprietary mutual fund revenue related to a reduction in asset values and due to the sale of the fixed income funds.

$3.4 million, or 27%, decrease in other noninterest income, primarily due to a gain realized from LIHTC investment sales in the 2013.

$1.5 million, or 25%, decrease in service charges on deposit accounts.

The decrease in noninterest expense from the year-ago period reflected:

$2.7 million, or 4%, decrease in other noninterest expense, primarily due to a decrease in allocated expenses.

$1.5 million, or 41%, decrease in deposit and other insurance expense.

Partially offset by:

$2.5 million, or 66%, increase in professional services expense, primarily due to increased consulting fees.

2013 vs. 2012

RBHPCG reported net income of $39.5 million in 2013, compared with a net income of $16.9 million in 2012. The $22.6 million increase included a $17.0 million, or 7%, decrease in noninterest expense, a $11.4 million, improvement in provision (reduction in allowance) for credit losses, a $4.8 million, or 3%, increase in noninterest income, and a $1.5 million, or 1%, increase in net interest income. This was partially offset by a $12.2 million, or 133% increase in provision for income taxes.

Home Lending

Table 40—Key Performance Indicators for Home Lending

         Change from 2013    

(dollar amounts in thousands unless otherwise noted)

  2014  2013  Amount  Percent  2012 

Net interest income

  $58,015   $51,839   $6,176    12 $54,980  

Provision for credit losses

   21,889    12,249    9,640    79    18,198  

Noninterest income

   69,899    106,006    (36,107  (34  165,189  

Noninterest expense

   136,374    141,489    (5,115  (4  132,302  

Provision for income taxes

   (10,622  1,437    12,059    N.R.    24,384  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net income (loss)

  $(19,727 $2,670   $22,397    N.R. $45,285  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Number of employees (average full-time equivalent)

   971    1,080    (109  (10)%   987  

Total average assets (in millions)

  $3,810   $3,676   $134    4   $3,700  

Total average loans/leases (in millions)

   3,298    3,116    182    6    3,164  

Total average deposits(in millions)

   292    355    (63  (18  378  

Net interest margin

   1.61  1.50  0.11  7    1.55

NCOs

  $15,900   $17,266   $(1,366  (8 $32,931  

NCOs as a % of average loans and leases

   0.48  0.55  (0.07)%   (13  1.04

Return on average common equity

   (11.4  1.5    12.9    N.R.    22.7  

Mortgage banking origination volume (in millions)

  $3,558   $4,418   $(860  (19 $4,833  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

N.R.—Not relevant.

2014 vs. 2013

Home Lending reported a net loss of $19.7 million in 2014. This was a decrease of $22.4 million, when compared to the year-ago period. The decrease in net income reflected a combination of factors described below.

The increase in net interest income from the year-ago period reflected:

1116 basis point increase in the net interest margin, primarily due to a 19 basis pointan increase in loan spreads. This increase is primarilyspreads on consumer loans driven by lower funding costs on the loan portfolio.

$0.2 billion, or 6%,and a $98 million increase in average total loans.

loan balances.

Partially offset by:

$0.1 billion, or 18%, decrease in average total deposits, driven by lower escrow balances.

The increasedecrease in provision for credit losses from the year-ago period reflected:

$2 million, or 27%, decrease in NCOs and continued improvement in credit performance during the year.

The transfer of a $7.6 million loan portfolio to loans held-for-sale in 2014, partially offset by lower NCOs.

The decreaseincrease in noninterest income from the year-ago period reflected:

$32.92 million, or 33%2%, decreaseincrease in mortgage banking income, primarily due to a reduction inproduction revenue driven by higher origination volume and gain on sale relatedthe impact of the net MSR hedge results, partially offset by higher fee sharing sent to lower refinancing levels.

other business segments.

$2.7 million, or 52%, decrease in insurance income, primarily due to lower refinance volume related to title insurance referrals.

The decrease in noninterest expense from the year-ago period reflected:

$7.138 million, or 8%, decrease in personnel costs, primarily due to lower mortgage production volume and a reduction in staff.

$2.0 million, or 9%177%, decrease in other noninterest expense, primarily duerelated to lower mortgage repurchase expense and partiallyallocated expenses.

Partially offset by the $3.0 million goodwill impairment.

by:

$1.614 million, or 43%, decrease in deposit and other insurance expense.

Partially offset by:

$4.3 million, or 29%15%, increase in outside data processing and other services, primarilypersonnel costs due to spending on loan promotions.

incentive expense related to higher origination volume.

20132015 vs. 20122014

Home Lending reported a net incomeloss of $2.7$7 million in 2013,2015, compared withto net incomeloss of $45.3$20 million in 2012.2014. The $42.6$13 million decreaseimprovement included a $59.2$17 million, or 36%, decrease in noninterest income, a $9.2 million, or 7%24%, increase in noninterest expense,income and a $3.1$19 million, or 6%88%, decrease in reduction in allowance for credit losses partially offset by a $7 million increase in provision for income taxes, $8 million, or 13%, decrease in net interest income, partially offset by a $22.9and an $8 million, or 94%6%, decreaseincrease in provision for income taxes, and a $5.9, or 33%, decrease in provision for credit losses.

noninterest expense.

RESULTS FOR THE FOURTH QUARTER

Earnings Discussion

In the 20142016 fourth quarter, we reported net income of $163.6$239 million, an increase of $5.4$61 million, or 3%34%, from the 20132015 fourth quarter. Earnings per common share for the 20142016 fourth quarter were $0.19, an increase$0.20, a decrease of $0.01 from the year-ago quarter.

Table 41—Significant Items Influencing Earnings Performance Comparison

(dollar amounts in millions, except per share amounts)

   Impact(1) 
Three Months Ended:  Amount   EPS(2) 

December 31, 2014—GAAP net income

  $163.6    $0.19  

Net additions to litigation reserve

   (11.9   (0.01

Franchise repositioning related expense

   (8.6   (0.01

December 31, 2013—GAAP net income

  $158.2    $0.18  

Franchise repositioning related expense

   (6.7   (0.01


Table 41 - Significant Items Influencing Earnings Performance Comparison
(dollar amounts in millions, except per share amounts)   
    
Three Months Ended:Amount EPS (1)
December 31, 2016—Net income$239
  
Earnings per share, after-tax  $0.20
    
Mergers and acquisitions$(96)  
Tax impact33
  
Mergers and acquisitions, after-tax$(63) $(0.06)
    
Litigation reserves$42
  
Tax impact(15)  
Litigation reserves, after-tax$27
 $0.02
    
 Amount EPS (1)
December 31, 2015—Net income$178
  
Earnings per share, after-tax  $0.21
    
Franchise repositioning related expense$(8)  
Tax impact3
  
Franchise repositioning related expense, after-tax$(5) $(0.01)
(1)

Favorable (unfavorable) impact

(1)Based on GAAP earnings; pretax unless otherwise noted.

average outstanding diluted common shares.
(2)

After-tax. EPS is reflected on a fully diluted basis.

Net Interest Income / Average Balance Sheet


FTE net interest income for the 20142016 fourth quarter increased $41.9$242 million, or 10%48%, from the 20132015 fourth quarter. This reflected the benefit from the $7.0$26.5 billion, or 13%41%, increase in average earningsearning assets includingpartially coupled with a $4.016 basis point improvement in the FTE NIM to 3.25%. Average earning asset growth included a $16.6 billion, or 9%33%, increase in average loans and leases and a $3.0$7.9 billion, or 31%54%, increase in average securities. This earning asset growth was partially offset by the 10The NIM expansion reflected a 23 basis point decrease in the FTE NIM to 3.18%. The NIM contraction reflected a 17 basis point decreaseincrease related to the mix and yield of earning assets, and a 3 basis point reduction in benefit from the impact of noninterest-bearing funds, partially offset by the 10a 7 basis point reductionincrease in funding costs.

Table 42— FTE net interest income during the 2016 fourth quarter included $42 million, or approximately 18 basis points, of purchase accounting impact.



Table 42 - Average Earning Assets - 2016 Fourth Quarter vs. 2015 Fourth Quarter
(dollar amounts in thousands)       
 Fourth Quarter Change
 2016 2015 Amount Percent
Loans/Leases       
Commercial and industrial$27,727
 $20,186
 $7,541
 37%
Commercial real estate7,218
 5,266
 1,952
 37
Total commercial34,945
 25,452
 9,493
 37
Automobile10,866
 9,286
 1,580
 17
Home equity10,101
 8,463
 1,638
 19
Residential mortgage7,690
 6,079
 1,611
 27
RV and marine finance1,844
 
 1,844
 
Other consumer959
 547
 412
 75
Total consumer31,460
 24,375
 7,085
 29
Total loans/leases66,405
 49,827
 16,578
 33
Total securities22,441
 14,543
 7,898
 54
Loans held-for-sale and other earning assets2,617
 591
 2,026
 343
Total earning assets$91,463
 $64,961
 $26,502
 41%
Average Earning Assets—2014 Fourth Quarter vs. 2013 Fourth Quarter

   Fourth Quarter   Change 

(dollar amounts in millions)

  2014   2013   Amount   Percent 

Average Loans/Leases

        

Commercial and industrial

  $18,880    $17,671    $1,209     7

Commercial real estate

   5,084     4,904     180     4  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total commercial

   23,964     22,575     1,389     6  

Automobile

   8,512     6,502     2,010     31  

Home equity

   8,452     8,346     106     1  

Residential mortgage

   5,751     5,331     420     8  

Other consumer

   413     385     28     7  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total consumer

   23,128     20,564     2,564     12  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total loans/leases

   47,092     43,139     3,953     9  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total securities

   12,459     9,480     2,979     31  

Held-for-sale and other earning assets

   459     393     66     17  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total earning assets

  $60,010    $53,012    $6,998     13
  

 

 

   

 

 

   

 

 

   

 

 

 

earning assets for the 2016 fourth quarter increased $26.5 billion, or 41%, from the year-ago quarter. The increase in average total earning assets reflected:

was driven by:

$3.07.9 billion, or 31%54%, increase in average securities, primarily reflecting an increase of $1.5 billion ofthe FirstMerit acquisition, as well as the reinvestment in cash flows and additional investment in LCR Level 1 qualified securities and $1.4qualifying securities. The 2016 fourth quarter average balance included $2.9 billion of direct purchase municipal instruments. At the end ofinstruments in our Commercial Banking segment, up from $2.0 billion in the year-ago quarter $0.6 billion of direct-purchase municipal instruments were reclassified from C&I loans to securities.

quarter.

$2.07.5 billion, or 31%, increase in average automobile loans, as originations remained strong.

$1.2 billion, or 7%37%, increase in average C&I loans and leases, primarily reflecting growththe impact of the FirstMerit acquisition, the $0.6 billion increase in trade financeautomobile dealer floorplan loans, and the $0.4 billion increase in support of our middle market and corporate customers.

banking.

$0.42.0 billion, or 8%37%, increase in commercial real estate (CRE) loans, primarily reflecting the FirstMerit acquisition.
$1.8 billion increase in average Residential mortgageRV and marine finance loans, a new product offering for us as a result of the Camco Financial acquisitionFirstMerit acquisition.
$1.6 billion, or 17%, increase in average automobile loans, primarily reflecting the addition of the FirstMerit portfolio. The increase also reflects continued strength in new and a decreaseused automobile originations, while maintaining our underwriting consistency and discipline, partially offset by the impact of the $1.5 billion auto loan securitization.
$1.6 billion, or 19%, increase in average home equity loans and lines of credit, primarily reflecting the rateFirstMerit acquisition.
$1.6 billion, or 27%, increase in average residential mortgage loans, reflecting increased demand for residential mortgage loans across our footprint and the addition of payoffs due to lower levels of refinancing.

the FirstMerit portfolio.

Table 43—Average Interest-Bearing Liabilities—2014 Fourth Quarter vs. 2013 Fourth Quarter

   Fourth Quarter   Change 

(dollar amounts in millions)

  2014   2013   Amount   Percent 

Average Deposits

        

Demand deposits: noninterest-bearing

  $15,179    $13,337    $1,842     14

Demand deposits: interest-bearing

   5,948     5,755     193     3  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total demand deposits

   21,127     19,092     2,035     11  

Money market deposits

   18,401     16,827     1,574     9  

Savings and other domestic deposits

   5,052     4,912     140     3  

Core certificates of deposit

   3,058     3,916     (858   (22
  

 

 

   

 

 

   

 

 

   

 

 

 

Total core deposits

   47,638     44,747     2,891     6  

Other domestic deposits of $250,000 or more

   201     275     (74   (27

Brokered deposits and negotiable CDs

   2,434     1,398     1,036     74  

Deposits in foreign offices

   479     354     125     35  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total deposits

   50,752     46,774     3,978     9  
  

 

 

   

 

 

   

 

 

   

 

 

 

Short-term borrowings

   2,683     1,471     1,212     82  

Long-term debt

   3,956     2,253     1,703     76  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total interest-bearing liabilities

  $42,212    $37,161    $5,051     14
  

 

 

   

 

 

   

 

 

   

 

 

 


Table 43 - Average Interest-Bearing Liabilities - 2016 Fourth Quarter vs. 2015 Fourth Quarter
(dollar amounts in millions)       
 Fourth Quarter Change
 2016 2015 Amount Percent
Deposits       
Demand deposits: noninterest-bearing$23,250
 $17,174
 $6,076
 35 %
Demand deposits: interest-bearing15,294
 6,923
 8,371
 121
Total demand deposits38,544
 24,097
 14,447
 60
Money market deposits18,618
 19,843
 (1,225) (6)
Savings and other domestic deposits12,272
 5,215
 7,057
 135
Core certificates of deposit2,636
 2,430
 206
 9
Total core deposits72,070
 51,585
 20,485
 40
Other domestic deposits of $250,000 or more391
 426
 (35) (8)
Brokered deposits and negotiable CDs4,273
 2,929
 1,344
 46
Deposits in foreign offices152
 398
 (246) (62)
Total deposits76,886
 55,338
 21,548
 39
Short-term borrowings2,628
 524
 2,104
 402
Long-term debt8,594
 6,788
 1,806
 27
Total interest-bearing liabilities$64,858

$45,476
 $19,382
 43 %

Average total core deposits for the 20142016 fourth quarter increased $2.9$21.5 billion, or 6%39%, from the year-ago quarter, of which $1.1 billion were acquired deposits. Noninterest-bearing deposits increased $1.8including a $20.5 billion, or 14%.40%, increase in average total core deposits. The growth in average total core deposits more than fully funded the year-over-year increase in average total loans and leases. Average total interest-bearing liabilities increased $5.1$19.4 billion, or 14%43%, from the year-ago quarter. Including the impact of the FirstMerit acquisition, year-over-year changes in average total deposits and average total debt included:
$14.4 billion, or 60%, increase in average total demand deposits, including a $6.1 billion, or 35%, increase in average noninterest-bearing demand deposits and an $8.4 billion, or 121%, increase in average interest-bearing demand deposits. The increase in average total demand deposits was comprised of a $9.8 billion, or 62%, increase in average commercial demand deposits and a $4.6 billion, or 55%, increase in average consumer demand deposits.
$6.8 billion, or 158%, increase in average savings deposits, reflecting continued banker focus across all segments on obtaining our customers' full deposit relationship.
$3.9 billion, or 53%, increase in average total debt, reflecting a $2.1 billion, or 402%, increase in average short-term borrowings and a $1.8 billion, or 27%, increase in average long-term debt. The increase in average long-term debt reflected the issuance of $2.0 billion of holding company-level senior debt during 2016.
$1.3 billion, or 46%, increase in average brokered deposits and negotiable CDs, impacted by the FirstMerit acquisition.
Partially offset by:
$1.2 billion, or 6%, decrease in average money market deposits. During the 2016 third quarter, reflecting:

changes to commercial accounts resulted in the reclassification of $2.8 billion of deposits from money market into interest bearing demand deposits. This decrease was partially offset by the impact of the FirstMerit acquisition.

Provision for Credit Losses


The provision for credit losses increased to $75 million in the 2016 fourth quarter compared to $36 million in the 2015 fourth quarter.

Noninterest Income
Table 44 - Noninterest Income - 2016 Fourth Quarter vs. 2015 Fourth Quarter
(dollar amounts in thousands)       
 Fourth Quarter Change
 2016 2015 Amount Percent
Service charges on deposit accounts$91,577
 $72,854
 $18,723
 26 %
Cards and payment processing income49,113
 37,594
 11,519
 31
Mortgage banking income37,520
 31,418
 6,102
 19
Trust services34,016
 25,272
 8,744
 35
Insurance income16,486
 15,528
 958
 6
Brokerage income17,014
 14,462
 2,552
 18
Capital markets fees18,730
 13,778
 4,952
 36
Bank owned life insurance income17,067
 13,441
 3,626
 27
Gain on sale of loans24,987
 10,122
 14,865
 147
Securities gains (losses)(1,771) 474
 (2,245) N.R.
Other income29,598
 37,272
 (7,674) (21)
Total noninterest income$334,337
 $272,215
 $62,122
 23 %

N.R. - Not relevant.

Noninterest income for the 2016 fourth quarter increased $62 million, or 23%, from the year-ago quarter. The year-over-year increase primarily reflected:
$2.9 billion,19 million, or 26%, increase in service charges on deposit accounts, reflecting the benefit of continued new customer acquisition. Of the increase, $12 million was attributable to consumer deposit accounts, while $7 million was attributable to commercial deposit accounts.
$15 million, or 147%, increase in gain on sale of loans, reflecting a $6 million auto loan securitization gain and $5 million of gains on non-relationship C&I and CRE loan sales, both of which were related to the balance sheet optimization strategy completed in the 2016 fourth quarter.
$12 million, or 31%, increase in cards and payment processing income, due to higher card-related income and underlying customer growth.
$9 million, or 35%, increase in trust services, primarily related to the FirstMerit acquisition.
$6 million, or 19%, increase in mortgage banking income, reflecting a $7 million increase from net mortgage servicing rights (MSR) hedging-related activities.
Partially offset by:
$8 million, or 21%, decrease in other income, reflecting $8 million unfavorable impact related to ineffectiveness of derivatives used to hedge fixed-rate, long-term debt.

Noninterest Expense       
        
Table 45 - Noninterest Expense - 2016 Fourth Quarter vs. 2015 Fourth Quarter
(dollar amounts in thousands)       
 Fourth Quarter Change
 2016 2015 Amount Percent
Personnel costs$359,755
 $288,861
 $70,894
 25%
Outside data processing and other services88,695
 63,775
 24,920
 39
Equipment59,666
 31,711
 27,955
 88
Net occupancy49,450
 32,939
 16,511
 50
Professional services23,165
 13,010
 10,154
 78
Marketing21,478
 12,035
 9,443
 78
Deposit and other insurance expense15,772
 11,105
 4,667
 42
Amortization of intangibles14,099
 3,788
 10,311
 272
Other expense49,417
 41,542
 7,875
 19
Total noninterest expense$681,497
 $498,766
 $182,731
 37%
Number of employees (average full-time equivalent)15,993
 12,418
 3,575
 29%
Impacts of Significant Items:Fourth Quarter
(dollar amounts in thousands)2016 2015
Personnel costs$(5,385) $2,332
Outside data processing and other services15,420
 1,990
Equipment20,000
 4,587
Net occupancy7,146
 110
Professional services9,141
 1,153
Marketing4,340
 
Other expense2,742
 318
Total noninterest expense adjustments$53,404
 $10,490
Adjusted Noninterest Expense (Non-GAAP):       
(dollar amounts in thousands)Fourth Quarter Change
 2016 2015 Amount Percent
Personnel costs$365,140
 $286,529
 $78,611
 27%
Outside data processing and other services73,275
 61,785
 11,490
 19
Equipment39,666
 27,124
 12,542
 46
Net occupancy42,304
 32,829
 9,475
 29
Professional services14,024
 11,857
 2,167
 18
Marketing17,138
 12,035
 5,103
 42
Deposit and other insurance expense15,772
 11,105
 4,667
 42
Amortization of intangibles14,099
 3,788
 10,311
 272
Other expense46,675
 41,224
 5,451
 13
Total adjusted noninterest expense (Non-GAAP)$628,093
 $488,276
 $139,817
 29%
Reported noninterest expense for the 2016 fourth quarter increased $183 million, or 37%, from the year-ago quarter. Including the impact of the FirstMerit acquisition, changes in reported noninterest expense primarily reflect:
$71 million, or 25%, increase in personnel costs, reflecting an $84 million increase in salaries related to the May implementation of annual merit increases and a 29% increase in the number of average full-time equivalent employees, partially offset by a $13 million decrease in benefits expense related to an $18 million gain on the settlement of a portion of the FirstMerit pension plan liability during the 2016 fourth quarter.

$8 million, or 19%, increase in other expense, primarily reflecting a $42 million reduction to litigation reserves, which was mostly offset by a $40 million contribution in the 2016 fourth quarter to achieve the philanthropic plans related to FirstMerit.
$28 million, or 88%, increase in equipment expense, reflecting the impact of the FirstMerit acquisition.
$25 million, or 39%, increase in outside data processing and other services expense, primarily related to ongoing technology investments and the impact of the FirstMerit acquisition.
$17 million, or 50%, increase in net occupancy costs, reflecting the FirstMerit acquisition.
$10 million, or 272%, increase in amortization of intangibles reflecting the FirstMerit acquisition.
$10 million, or 78%, increase in short- and long-term borrowings,professional services, primarily reflecting a cost-effective methodrelated to $9 million of funding incremental LCR related securities growth.

acquisition-related Significant Items in the 2016 fourth quarter.

$1.6 billion,9 million, or 9%78%, increase in money market deposits, reflecting the strategic focus on customer growth and increased share-of-wallet among both consumer and commercial customers.

$1.0 billion, or 74%, increase in brokered deposits and negotiated CDs, which were used to efficiently finance balance sheet growth while continuing to manage the overall cost of funds.

Partially offset by:

$0.9 billion, or 22%, decrease in average core certificates of deposit duemarketing, related to the strategic focus on changing the funding sources to no-cost demand deposits and lower-cost money market deposits.

FirstMerit acquisition.

Provision for Credit Losses

Income Taxes

The provision for credit losses decreased $21.8income taxes in the 2016 fourth quarter was $74 million to $2.5and $56 million in the 20142015 fourth quarter. The effective tax rates for the 2016 fourth quarter reflecting the current quarter’s higher-than-expected leveland 2015 fourth quarter were 23.6% and 23.8%, respectively. At December 31, 2016, we had a net federal deferred tax asset of commercial recoveries$76 million and 34% decrease in NALs within the CRE portfolio.a net state deferred tax asset of $41 million.
Credit Quality
NCOs

Net charge-offs (NCOs) increased $22 million, or 99%, to $44 million. NCOs decreased to $23.0 million with less than $1.0 million of NCOs within the total commercial portfolio. NCOs equated torepresented an annualized 0.20%0.26% of average loans and leases in the current quarter, compared to 0.43%unchanged from the prior quarter but up from 0.18% in the year-ago quarter.

Noninterest Income

Table 44—Noninterest Income—2014 Fourth Quarter vs. 2013 Fourth Quarter

   Fourth Quarter   Change 

(dollar amounts in thousands)

  2014   2013   Amount   Percent 

Service charges on deposit accounts

  $67,408    $69,992    $(2,584   (4)% 

Trust services

   28,781     30,711     (1,930   (6

Electronic banking

   27,993     24,251     3,742     15  

Mortgage banking income

   14,030     24,327     (10,297   (42

Brokerage income

   16,050     15,151     899     6  

Insurance income

   16,252     15,556     696     4  

Bank owned life insurance income

   14,988     13,816     1,172     8  

Capital markets fees

   13,791     12,332     1,459     12  

Gain on sale of loans

   5,408     7,144     (1,736   (24

Securities gains (losses)

   (104   1,239     (1,343   (108

Other income

   28,681     35,373     (6,692   (19
  

 

 

   

 

 

   

 

 

   

 

 

 

Total noninterest income

  $233,278    $249,892    $(16,614   (7)% 
  

 

 

   

 

 

   

 

 

   

 

 

 

Noninterest income for Commercial charge-offs continued to be positively impacted by recoveries in the 2014 fourth quarter decreased $16.6 million, or 7%, fromCRE portfolio and broader continued successful workout strategies, while consumer charge-offs remained within our expected range.

NALs

Overall asset quality remains strong, with modest volatility. Overall consumer credit metrics, led by the year-ago quarter, primarily reflecting:

$10.3 million, or 42%, decrease in mortgage banking income primarily relatedHome Equity and Residential portfolios, continue to show an improving trend, while the Commercial portfolios continue to experience some quarter-to-quarter volatility based on the absolute low level of problem loans. The FirstMerit portfolio quality, composition, and geographic distribution was similar to the $5.8 million impact of net MSR hedging activity.

$6.7 million, or 19%, decrease in other income, primarily related to lower fees associated with commerciallegacy Huntington portfolio. The only new loan activity.

$2.6 million, or 4%, decrease in service charges on deposit accounts, reflectingclassification is the late July 2014 implementation of changes in consumer products that were partially offset by a 10% increase in consumer households and changing customer usage patterns.

RV/marine portfolio.

Partially offset by:

$3.7 million, or 15%, increase in electronic banking due to higher card related income and underlying customer growth.

Noninterest Expense

Table 45 —Noninterest Expense—2014 Fourth Quarter vs. 2013 Fourth Quarter

   Fourth Quarter   Change 

(dollar amounts in thousands)

  2014   2013   Amount   Percent 

Personnel costs

  $263,289    $249,554    $13,735     6

Outside data processing and other services

   53,685     51,071     2,614     5  

Net occupancy

   31,565     31,983     (418   (1

Equipment

   31,981     28,775     3,206     11  

Professional services

   15,665     11,567     4,098     35  

Marketing

   12,466     13,704     (1,238   (9

Deposit and other insurance expense

   13,099     10,056     3,043     30  

Amortization of intangibles

   10,653     10,320     333     3  

Other expense

   50,868     38,979     11,889     31  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total noninterest expense

  $483,271    $446,009    $37,262     8
  

 

 

   

 

 

   

 

 

   

 

 

 

Number of employees (average full-time equivalent)

   11,875     11,765     110     1

Impacts of Significant Items:  Fourth Quarter 

(dollar amounts in thousands)

  2014   2013 

Personnel costs

  $2,165    $52  

Outside data processing and other services

   306     880  

Net occupancy

   4,150     4,178  

Equipment

   2,003     846  

Marketing

   14     —    

Other expense

   11,644     953  
  

 

 

   

 

 

 

Total noninterest expense adjustments

  $20,282    $6,909  
  

 

 

   

 

 

 

   Fourth Quarter   Change 

(dollar amounts in thousands)

  2014   2013   Amount  Percent 

Personnel costs

  $261,124    $249,502    $11,622    5

Outside data processing and other services

   53,379     50,191     3,188    6  

Net occupancy

   27,415     27,805     (390  (1

Equipment

   29,978     27,929     2,049    7  

Professional services

   15,665     11,567     4,098    35  

Marketing

   12,452     13,704     (1,252  (9

Deposit and other insurance expense

   13,099     10,056     3,043    30  

Amortization of intangibles

   10,653     10,320     333    3  

Other expense

   39,224     38,026     1,198    3  
  

 

 

   

 

 

   

 

 

  

 

 

 

Total adjusted noninterest expense

  $462,989    $439,100    $23,889    5
  

 

 

   

 

 

   

 

 

  

 

 

 

Reported noninterest expense for the 2014 fourth quarter increased $37.3 million, or 8%, from the year-ago quarter, primarily reflecting:

$13.7 million, or 6%, increase in personnel costs. Excluding the impact of Significant Items, personnel costs increased $11.6 million, or 5%, primarily related to a $9.0 million increase in salaries reflecting 1% increase in the number of full-time equivalent employees and a $3.8 million increase in health insurance costs.

$11.9 million, or 31%, increase in other expense. Excluding the impact of Significant Items, other expenses increased $1.2 million, or 3%.

$4.1 million, or 35%, increase in professional services, reflecting an increase in outside consultant expenses and legal services.

$3.2 million, or 11%, increase in equipment. Excluding the impact of Significant Items, equipment expenses increased $2.0 million, or 7%, primarily reflecting higher depreciation expense.

Provision for Income Taxes

The provision for income taxes in the 2014 fourth quarter was $57.2 million and $52.0 million in the 2013 fourth quarter. The effective tax rates for the 2014 fourth quarter and 2013 fourth quarter were 25.9% and 24.8%, respectively. At December 31, 2014, we had a net federal deferred tax asset of $72.1 million and a net state deferred tax asset of $45.3 million. As of December 31, 2014 and December 31, 2013, there was no disallowed deferred tax asset for regulatory capital purposes.

Credit Quality

Credit quality performance in the 2014 fourth quarter reflected continued improvement in the overall loan portfolio relating to NCO activity, as well as in key credit quality metrics.

NCOs

Total NCOs for the 2014 fourth quarter were $23.0 million, or an annualized 0.20% of average totalNonaccrual loans and leases. NCOs in the year-ago quarter were $46.4leases (NALs) of $423 million or an annualized 0.43%. These declines reflected improvement in the overall credit quality of the portfolio.

NALs

NALs decreased $21.8 million, or 7%, compared to a year ago to $300.2 million, orrepresented 0.63% of total loans and leases. NPAs decreased $14.4leases, down from 0.74% a year ago. The decrease in the NAL ratio reflected a 14% year-over-year increase in NALs, more than offset by the impact of the 33% year-over-year increase in total loans. Nonperforming assets (NPAs) of $481 million or 4%, to $337.7 million, or 0.71%represented 0.72% of total loans and leases and OREO, and other NPAs.

down from 0.79% a year ago. The NAL ratio increased 2 basis points from the prior quarter, while the NPA ratio remained unchanged.

ACL

(This section should be read in conjunction with Note 34 of the Notes to Consolidated Financial Statements.)

ACL


The period-end allowance for credit losses (ACL) as a percentpercentage of total loans and leases at December 31, 2014, was 1.40%, downdecreased to 1.10% from 1.65% at December 31, 2013. We believe1.33% a year ago, while the ACL as a percentage of period-end total NALs decreased to 174% from 180%. The decline in the ratiocoverage ratios is appropriate givenprimarily a function of the continued improvement in the risk profile of our loan portfolio. Further, we believe that early identification of loanspurchase accounting impact associated with changes in credit metrics and aggressive action plans for these loans, combined with originating high quality new loans will contribute to maintaining our key credit quality metrics.

Table 46—Selected Quarterly Income Statement Data (1)

   2014 

(dollar amounts in thousands, except per share amounts)

  Fourth  Third  Second  First 

Interest income

  $507,625   $501,060   $495,322   $472,455  

Interest expense

   34,373    34,725    35,274    34,949  
  

 

 

  

 

 

  

 

 

  

 

 

 

Net interest income

   473,252    466,335    460,048    437,506  

Provision for credit losses

   2,494    24,480    29,385    24,630  
  

 

 

  

 

 

  

 

 

  

 

 

 

Net interest income after provision for credit losses

   470,758    441,855    430,663    412,876  

Total noninterest income

   233,278    247,349    250,067    248,485  

Total noninterest expense

   483,271    480,318    458,636    460,121  
  

 

 

  

 

 

  

 

 

  

 

 

 

Income before income taxes

   220,765    208,886    222,094    201,240  

Provision for income taxes

   57,151    53,870    57,475    52,097  
  

 

 

  

 

 

  

 

 

  

 

 

 

Net income

  $163,614   $155,016   $164,619   $149,143  

Dividends on preferred shares

   7,963    7,964    7,963    7,964  
  

 

 

  

 

 

  

 

 

  

 

 

 

Net income applicable to common shares

  $155,651   $147,052   $156,656   $141,179  
  

 

 

  

 

 

  

 

 

  

 

 

 

Common shares outstanding

     

Average—basic

   811,967    816,497    821,546    829,659  

Average—diluted(2)

   825,338    829,623    834,687    842,677  

Ending

   811,455    814,454    817,002    827,772  

Book value per common share

  $7.32   $7.24   $7.17   $6.99  

Tangible book value per common share(3)

   6.62    6.53    6.48    6.31  

Per common share

     

Net income—basic

  $0.19   $0.18   $0.19   $0.17  

Net income—diluted

   0.19    0.18    0.19    0.17  

Cash dividends declared

   0.06    0.05    0.05    0.05  

Common stock price, per share

     

High(4)

  $10.74   $10.30   $10.29   $10.01  

Low(4)

   8.80    9.29    8.89    8.72  

Close

   10.52    9.73    9.54    9.97  

Average closing price

   9.97    9.79    9.41    9.50  

Return on average total assets

   1.00  0.97  1.07  1.01

Return on average common shareholders’ equity

   10.3    9.9    10.8    9.9  

Return on average tangible common shareholders’ equity(5)

   11.9    11.4    12.4    11.4  

Efficiency ratio(6)

   66.2    65.3    62.7    66.4  

Effective tax rate

   25.9    25.8    25.9    25.9  

Margin analysis-as a % of average earning assets(7)

     

Interest income(7)

   3.41  3.44  3.53  3.53

Interest expense

   0.23    0.24    0.25    0.26  
  

 

 

  

 

 

  

 

 

  

 

 

 

Net interest margin(7)

   3.18  3.20  3.28  3.27
  

 

 

  

 

 

  

 

 

  

 

 

 

Revenue—FTE

     

Net interest income

  $473,252   $466,335   $460,048   $437,506  

FTE adjustment

   7,522    7,506    6,637    5,885  
  

 

 

  

 

 

  

 

 

  

 

 

 

Net interest income(7)

   480,774    473,841    466,685    443,391  

Noninterest income

   233,278    247,349    250,067    248,485  
  

 

 

  

 

 

  

 

 

  

 

 

 

Total revenue(7)

  $714,052   $721,190   $716,752   $691,876  
  

 

 

  

 

 

  

 

 

  

 

 

 

Continued

Table 47—Selected Quarterly Income Statement, Capital, and Other Data—Continued (1)

Capital adequacy

  2014 
   December 31,  September 30,  June 30,  March 31, 

Total risk-weighted assets(in millions)

  $54,479   $53,239   $53,035   $51,120  

Tier 1 leverage ratio(10)

   9.74  9.83  10.01  10.32

Tier 1 risk-based capital ratio(10)

   11.50    11.61    11.56    11.95  

Total risk-based capital ratio(10)

   13.56    13.72    13.67    14.13  

Tier 1 common risk-based capital ratio(11)

   10.23    10.31    10.26    10.60  

Tangible common equity / tangible asset ratio(8)

   8.17    8.35    8.38    8.63  

Tangible equity / tangible asset ratio(9)

   8.76    8.95    8.99    9.26  

Tangible common equity / risk-weighted assets ratio

   9.86    9.99    9.99    10.22  

Table 48—Selected Quarterly Income Statement Data (1)

   2013 

(dollar amounts in thousands, except per share amounts)

  Fourth  Third  Second  First 

Interest income

  $469,824   $462,912   $462,582   $465,319  

Interest expense

   39,175    38,060    37,645    41,149  
  

 

 

  

 

 

  

 

 

  

 

 

 

Net interest income

   430,649    424,852    424,937    424,170  

Provision for credit losses

   24,331    11,400    24,722    29,592  
  

 

 

  

 

 

  

 

 

  

 

 

 

Net interest income after provision for credit losses

   406,318    413,452    400,215    394,578  

Total noninterest income

   249,892    253,767    251,919    256,618  

Total noninterest expense

   446,009    423,336    445,865    442,793  
  

 

 

  

 

 

  

 

 

  

 

 

 

Income before income taxes

   210,201    243,883    206,269    208,403  

Provision for income taxes

   52,029    65,047    55,269    55,129  
  

 

 

  

 

 

  

 

 

  

 

 

 

Net income

  $158,172   $178,836   $151,000   $153,274  

Dividends on preferred shares

   7,965    7,967    7,967    7,970  
  

 

 

  

 

 

  

 

 

  

 

 

 

Net income applicable to common shares

  $150,207   $170,869   $143,033   $145,304  
  

 

 

  

 

 

  

 

 

  

 

 

 

Common shares outstanding

     

Average—basic

   830,590    830,398    834,730    841,103  

Average—diluted(2)

   842,324    841,025    843,840    848,708  

Ending

   830,963    830,145    829,675    838,758  

Book value per share

  $6.86   $6.70   $6.49   $6.52  

Tangible book value per share(3)

   6.26    6.09    5.87    5.90  

Per common share

     

Net income—basic

  $0.18   $0.21   $0.17   $0.17  

Net income —diluted

   0.18    0.20    0.17    0.17  

Cash dividends declared

   0.05    0.05    0.05    0.04  

Common stock price, per share

     

High(4)

  $9.73   $8.78   $7.96   $7.55  

Low(4)

   8.04    7.90    6.82    6.48  

Close

   9.65    8.26    7.87    7.37  

Average closing price

   8.98    8.45    7.46    7.07  

Return on average total assets

   1.09  1.27  1.08  1.12

Return on average common shareholders’ equity

   10.5    12.3    10.4    10.8  

Return on average tangible common shareholders’ equity(5)

   12.1    14.2    12.1    12.5  

Efficiency ratio(6)

   63.4    60.3    63.7    62.9  

Effective tax rate (benefit)

   24.8    26.7    26.8    26.5  

Margin analysis-as a % of average earning assets(7)

     

Interest income(7)

   3.58  3.64  3.68  3.75

Interest expense

   0.30    0.30    0.30    0.33  
  

 

 

  

 

 

  

 

 

  

 

 

 

Net interest margin(7)

   3.28  3.34  3.38  3.42
  

 

 

  

 

 

  

 

 

  

 

 

 

Revenue—FTE

     

Net interest income

  $430,649   $424,852   $424,937   $424,170  

FTE adjustment

   8,196    6,634    6,587    5,923  
  

 

 

  

 

 

  

 

 

  

 

 

 

Net interest income(7)

   438,845    431,486    431,524    430,093  

Noninterest income

   249,892    253,767    251,919    256,618  
  

 

 

  

 

 

  

 

 

  

 

 

 

Total revenue(7)

  $688,737   $685,253   $683,443   $686,711  
  

 

 

  

 

 

  

 

 

  

 

 

 

Continued

Table 49—Selected Quarterly Income Statement, Capital, and Other Data—Continued (1)

Capital adequacy

  2013 
   December 31,  September 30,  June 30,  March 31, 

Total risk-weighted assets(in millions)

  $49,690   $48,687   $48,080   $47,937  

Tier 1 leverage ratio(10)

   10.67  10.85  10.64  10.57

Tier 1 risk-based capital ratio(10)

   12.28    12.36    12.24    12.16  

Total risk-based capital ratio(10)

   14.57    14.67    14.57    14.55  

Tier 1 common risk-based capital ratio(11)

   10.90    10.85    10.71    10.62  

Tangible common equity / tangible asset ratio(8)

   8.82    9.00    8.76    8.91  

Tangible equity / tangible asset ratio(9)

   9.47    9.69    9.46    9.60  

Tangible common equity / risk-weighted assets ratio

   10.46    10.38    10.13    10.32  

FirstMerit.

Table 46 - Selected Quarterly Financial Information (1)
(dollar amounts in thousands, except per share amounts)       
 Three months ended
 December 31, September 30, June 30, March 31,
 2016 2016 2016 2016
Interest income$814,858
 $694,346
 $565,658
 $557,251
Interest expense79,877
 68,956
 59,777
 54,185
Net interest income734,981
 625,390
 505,881
 503,066
Provision for credit losses74,906
 63,805
 24,509
 27,582
Net interest income after provision for credit losses660,075
 561,585
 481,372
 475,484
Total noninterest income334,337
 302,415
 271,112
 241,867
Total noninterest expense681,497
 712,247
 523,661
 491,080
Income before income taxes312,915
 151,753
 228,823
 226,271
Provision for income taxes73,952
 24,749
 54,283
 54,957
Net income238,963
 127,004
 174,540
 171,314
Dividends on preferred shares18,865
 18,537
 19,874
 7,998
Net income applicable to common shares$220,098
 $108,467
 $154,666
 $163,316
Common shares outstanding       
Average—basic1,085,253
 938,578
 798,167
 795,755
Average—diluted(2)1,104,358
 952,081
 810,371
 808,349
Ending1,085,688
 1,084,783
 799,154
 796,689
Book value per common share$8.51
 $8.59
 $8.18
 $8.01
Tangible book value per common share(3)6.43
 6.48
 7.29
 7.12
Per common share       
Net income—basic$0.20
 $0.12
 $0.19
 $0.21
Net income—diluted0.20
 0.11
 0.19
 0.20
Cash dividends declared0.08
 0.07
 0.07
 0.07
Common stock price, per share       
High(4)$13.64
 $10.11
 $10.65
 $10.81
Low(4)9.57
 8.23
 8.05
 7.83
Close13.22
 9.86
 8.94
 9.54
Average closing price11.63
 9.52
 9.83
 9.22
Return on average total assets0.95% 0.58% 0.96% 0.96%
Return on average common shareholders’ equity9.4
 5.4
 9.6
 10.4
Return on average tangible common shareholders’ equity(5)12.9
 7.0
 11.0
 11.9
Efficiency ratio(6)61.6
 75.0
 66.1
 64.6
Effective tax rate23.6
 16.3
 23.7
 24.3
Margin analysis-as a % of average earning assets(7)       
Interest income(7)3.60% 3.52% 3.41% 3.44%
Interest expense0.35
 0.34
 0.35
 0.33
Net interest margin(7)3.25% 3.18% 3.06% 3.11%
Revenue—FTE       
Net interest income$734,981
 $625,390
 $505,881
 $503,066
FTE adjustment12,560
 10,598
 10,091
 9,159
Net interest income(7)747,541
 635,988
 515,972
 512,225
Noninterest income334,337
 302,415
 271,112
 241,867
Total revenue(7)$1,081,878
 $938,403
 $787,084
 $754,092

Table 47 - Selected Quarterly Capital Data (1)
        
 2016
Capital adequacyDecember 31, September 30, June 30, March 31,
Total risk-weighted assets(10)$78,263
 $80,513
 $60,721
 $59,798
Tier 1 leverage ratio (period end)(10)8.70% 9.89% 9.55% 9.29%
Common equity tier 1 risk-based capital ratio(10)9.56
 9.09
 9.80
 9.73
Tier 1 risk-based capital ratio (period end)(10)10.92
 10.40
 11.37
 10.99
Total risk-based capital ratio (period end)(10)13.05
 12.56
 13.49
 13.17
Tangible common equity / tangible asset ratio(8)7.16
 7.14
 7.96
 7.89
Tangible equity / tangible asset ratio(9)8.26
 8.23
 9.28
 8.96
Tangible common equity / risk-weighted assets ratio(10)8.92
 8.74
 9.60
 9.49

Table 48 - Selected Quarterly Financial Information (1)
(dollar amounts in thousands, except per share amounts)       
 Three months ended
 December 31, September 30, June 30, March 31,
 2015 2015 2015 2015
Interest income$544,153
 $538,477
 $529,795
 $502,096
Interest expense47,242
 43,022
 39,109
 34,411
Net interest income496,911
 495,455
 490,686
 467,685
Provision for credit losses36,468
 22,476
 20,419
 20,591
Net interest income after provision for credit losses460,443
 472,979
 470,267
 447,094
Total noninterest income272,215
 253,119
 281,773
 231,623
Total noninterest expense498,766
 526,508
 491,777
 458,857
Income before income taxes233,892
 199,590
 260,263
 219,860
Provision for income taxes55,583
 47,002
 64,057
 54,006
Net income178,309
 152,588
 196,206
 165,854
Dividends on preferred shares7,972
 7,968
 7,968
 7,965
Net income applicable to common shares$170,337
 $144,620
 $188,238
 $157,889
Common shares outstanding       
Average—basic796,095
 800,883
 806,891
 809,778
Average—diluted(2)810,143
 814,326
 820,238
 823,809
Ending794,929
 796,659
 803,066
 808,528
Book value per share$7.81
 $7.78
 $7.61
 $7.51
Tangible book value per share(3)6.91
 6.88
 6.71
 6.62
Per common share       
Net income—basic$0.21
 $0.18
 $0.23
 $0.19
Net income —diluted0.21
 0.18
 0.23
 0.19
Cash dividends declared0.07
 0.06
 0.06
 0.06
Common stock price, per share       
High(4)$11.87
 $11.90
 $11.72
 $11.30
Low(4)10.21
 10.00
 10.67
 9.63
Close11.06
 10.60
 11.31
 11.05
Average closing price11.18
 11.16
 11.19
 10.56
Return on average total assets1.00% 0.87% 1.16% 1.02%
Return on average common shareholders’ equity10.8
 9.3
 12.3
 10.6
Return on average tangible common shareholders’ equity(5)12.4
 10.7
 14.4
 12.2
Efficiency ratio(6)63.7
 69.1
 61.7
 63.5
Effective tax rate23.8
 23.5
 24.6
 24.6
Margin analysis-as a % of average earning assets(7)       
Interest income(7)3.37% 3.42% 3.45% 3.38%
Interest expense0.28
 0.26
 0.25
 0.23
Net interest margin(7)3.09% 3.16% 3.20% 3.15%
Revenue—FTE       
Net interest income$496,911
 $495,455
 $490,686
 $467,685
FTE adjustment8,425
 8,168
 7,962
 7,560
Net interest income(7)505,336
 503,623
 498,648
 475,245
Noninterest income272,215
 253,119
 281,773
 231,623
Total revenue(7)$777,551
 $756,742
 $780,421
 $706,868

Table 49 - Selected Quarterly Capital Data (1)
        
 2015
Capital adequacyDecember 31, September 30, June 30, March 31,
Total risk-weighted assets(11)$58,420
 $57,839
 $57,850
 $57,840
Tier 1 leverage ratio(11)8.79% 8.85% 8.98% 9.04%
Tier 1 risk-based capital ratio(11)9.79
 9.72
 9.65
 9.51
Total risk-based capital ratio(11)10.53
 10.49
 10.41
 10.22
Tier 1 common risk-based capital ratio(11)12.64
 12.70
 12.62
 12.48
Tangible common equity / tangible asset ratio(8)7.81
 7.89
 7.91
 7.95
Tangible equity / tangible asset ratio(9)8.36
 8.44
 8.48
 8.53
Tangible common equity / risk-weighted assets ratio(11)9.41
 9.48
 9.32
 9.25
(1)

(1)Comparisons for presented periods are impacted by a number of factors. Refer to the Significant Items section for additional discussion regarding these items.

(2)

(2)For all quarterly periods presented above, the impact of the convertible preferred stock issued in April of 2008 was excluded from the diluted share calculation because the result would have been higher than basic earnings per common share (anti-dilutive) for the periods.

(3)

(3)Deferred tax liability related to other intangible assets is calculated assuming a 35% tax rate.

(4)

(4)High and low stock prices are intra-day quotes obtained from NASDAQ.

Bloomberg.
(5)

(5)Net income applicable to common shares excluding expense for amortization of intangibles for the period divided by average tangible common shareholders’ equity. Average tangible common shareholders’ equity equals average total stockholders’common shareholders’ equity less average intangible assets and goodwill. Expense for amortization of intangibles and average intangible assets are net of deferred tax liability, and calculated assuming a 35% tax rate.

(6)

(6)Noninterest expense less amortization of intangibles and goodwill impairment divided by the sum of FTE net interest income and noninterest income excluding securities gains (losses) gains.

.
(7)

(7)Presented on a FTE basis assuming a 35% tax rate.

(8)

(8)Tangible common equity (total common equity less goodwill and other intangible assets) divided by tangible assets (total assets less goodwill and other intangible assets). Other intangible assets are net of deferred tax, and calculated assuming a 35% tax rate.

(9)

(9)Tangible equity (total equity less goodwill and other intangible assets) divided by tangible assets (total assets less goodwill and other intangible assets). Other intangible assets are net of deferred tax, and calculated assuming a 35% tax rate.

(10)

In

(10)On January 1, 2015, we became subject to the Basel III capital requirements and the standardized approach for calculating risk-weighted assets in accordance with applicable regulatory reporting guidance, we are not required to retrospectively update historical filings for newly adopted accounting principles. Therefore, regulatorysubpart D of the final capital data has not been updated for the adoption of ASU 2014-01.

rule.
(11)

In accordance with applicable regulatory reporting guidance, we

(11)Ratios are not required to retrospectively update historical filings for newly adopted accounting principles. Therefore, Tier 1 capital, Tier 1 common equity, and risk-weighted assets have not been updated forcalculated on the adoption of ASU 2014-01.

Basel I basis.


ADDITIONAL DISCLOSURES

Forward-Looking Statements


This report, including MD&A, contains certain forward-looking statements, including, but not limited to, certain plans, expectations, goals, projections, and statements, which are not historical facts and are subject to numerous assumptions, risks, and uncertainties. Statements that do not describe historical or current facts, including statements about beliefs and expectations, are forward-looking statements. Forward-looking statements may be identified by words such as expect, anticipate, believe, intend, estimate, plan, target, goal, or similar expressions, or future or conditional verbs such as will, may, might, should, would, could, or similar variations. The forward-looking statements are intended to be subject to the safe harbor provided by Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, and the Private Securities Litigation Reform Act of 1995.


While there is no assurance that any list of risks and uncertainties or risk factors is complete, below are certain factors which could cause actual results to differ materially from those contained or implied in the forward-looking statements: (1) worsening of credit quality performance due to a number of factors such as the underlying value of collateral that could prove less valuable than otherwise assumed and assumed cash flows may be worse than expected; (2) changes in general economic, political, or industry conditions; uncertainty in U.S. fiscal and monetary policy, including the interest rate policies of the Federal Reserve Board; volatility and disruptions in global capital and credit markets; (3) movements in interest rates; (4) competitive pressures on product pricing and services; (5) success, impact, and timing of our business strategies, including market acceptance of any new products or services implementing our “Fair Play” banking philosophy; (6) changes in accounting policies and principles and the accuracy of our

assumptions and estimates used to prepare our financial statements; (7) extended disruption of vital infrastructure; (8) the final outcome of significant litigation; (9) the nature, extent, timing, and results of governmental actions, examinations, reviews, reforms, regulations, and interpretations, including those related to the Dodd-Frank Wall Street


Reform and Consumer Protection Act and the Basel III regulatory capital reforms, as well as those involving the OCC, Federal Reserve, FDIC, and CFPB; the possibility that the anticipated benefits of the merger with FirstMerit Corporation are not realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of the two companies or as a result of the strength of the economy and (10) the outcome of judicial and regulatory decisions regarding practicescompetitive factors in the residential mortgage industry,areas where we do business; diversion of management’s attention from ongoing business operations and opportunities; potential adverse reactions or changes to business or employee relationships, including amongthose resulting from the completion of the merger with FirstMerit Corporation; our ability to complete the integration of FirstMerit Corporation successfully; and other things the processes followed for foreclosing residential mortgages.

factors that may affect our future results.


All forward-looking statements speak only as of the date they are made and are based on information available at that time. We do not assume noany obligation to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements were made or to reflect the occurrence of unanticipated events except as required by federal securities laws. As forward-looking statements involve significant risks and uncertainties, caution should be exercised against placing undue reliance on such statements.

Non-GAAP Financial Measures
This document contains GAAP financial measures and non-GAAP financial measures where management believes it to be helpful in understanding Huntington’s results of operations or financial position. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found herein.
Significant Items
From time-to-time, revenue, expenses, or taxes are impacted by items judged by us to be outside of ordinary banking activities and/or by items that, while they may be associated with ordinary banking activities, are so unusually large that their outsized impact is believed by us at that time to be infrequent or short-term in nature. We refer to such items as Significant Items. Most often, these Significant Items result from factors originating outside the Company; e.g., regulatory actions / assessments, windfall gains, changes in accounting principles, one-time tax assessments / refunds, litigation actions, etc. In other cases, they may result from our decisions associated with significant corporate actions outside of the ordinary course of business; e.g., merger / restructuring charges, recapitalization actions, goodwill impairment, etc.
Even though certain revenue and expense items are naturally subject to more volatility than others due to changes in market and economic environment conditions, as a general rule volatility alone does not define a Significant Item. For example, changes in the provision for credit losses, gains / losses from investment activities, asset valuation writedowns, etc., reflect ordinary banking activities and are, therefore, typically excluded from consideration as a Significant Item.
We believe the disclosure of Significant Items provides a better understanding of our performance and trends to ascertain which of such items, if any, to include or exclude from an analysis of our performance; i.e., within the context of determining how that performance differed from expectations, as well as how, if at all, to adjust estimates of future performance accordingly. To this end, we adopted a practice of listing Significant Items in our external disclosure documents; e.g., earnings press releases, investor presentations, Forms 10-Q and 10-K.
Significant Items for any particular period are not intended to be a complete list of items that may materially impact current or future period performance.

Fully-Taxable Equivalent Basis

Interest income, yields, and ratios on a FTE basis are considered non-GAAP financial measures.  Management believes net interest income on a FTE basis provides an insightful picture of the interest margin for comparison purposes.  The FTE basis also allows management to assess the comparability of revenue arising from both taxable and tax-exempt sources.  The FTE basis assumes a federal statutory tax rate of 35 percent. We encourage readers to consider the consolidated financial statements and other financial information contained in this Form 10-K in their entirety, and not to rely on any single financial measure.

Non-Regulatory Capital Ratios


In addition to capital ratios defined by banking regulators, the Company considers various other measures when evaluating capital utilization and adequacy, including:

Tangible common equity to tangible assets,

Tier 1 common equity to risk-weighted assets using Basel I and Basel III definitions, and

Tangible common equity to risk-weighted assets using Basel I definition.III definitions.


These non-regulatory capital ratios are viewed by management as useful additional methods of reflecting the level of capital available to withstand unexpected market conditions. Additionally, presentation of these ratios allows readers to compare the Company’s capitalization to other financial services companies. These ratios differ from capital ratios defined by banking regulators principally in that the numerator excludes preferred securities, the nature and extent of which varies among different financial services companies. These ratios are not defined in Generally Accepted Accounting Principles (“GAAP”) or federal banking regulations. As a result, these non-regulatory capital ratios disclosed by the Company are considered non-GAAP financial measures.

Because there are no standardized definitions for these non-regulatory capital ratios, the Company’s calculation methods may differ from those used by other financial services companies. Also, there may be limits in the usefulness of these measures to investors. As a result, the Company encourages readers to consider the consolidated financial statements and other financial information contained in this Form 10-K in their entirety, and not to rely on any single financial measure.

Risk Factors

More information on risk is set forth under the heading Risk Factors included in Item 1A and incorporated by reference into this MD&A. Additional information regarding risk factors can also be found in the Risk Management and Capital discussion, as well as the Regulatory Matters section included in Item 1 and incorporated by reference into the MD&A.

Critical Accounting Policies and Use of Significant Estimates

Our Consolidated Financial Statements are prepared in accordance with GAAP. The preparation of financial statements in conformity with GAAP requires us to establish accounting policies and make estimates that affect amounts reported in our Consolidated Financial Statements. Note 1 of the Notes to Consolidated Financial Statements, which is incorporated by reference into this MD&A, describes the significant accounting policies we use in our Consolidated Financial Statements.

An accounting estimate requires assumptions and judgments about uncertain matters that could have a material effect on the Consolidated Financial Statements. Estimates are made under facts and circumstances at a point in time, and changes in those facts and circumstances could produce results substantially different from those estimates. The most significant accounting policies and estimates and their related application are discussed below.

Allowance for Credit Losses

Our ACL of $0.7 billion at December 31, 2014,2016, represents our estimate of probable credit losses inherent in our loan and lease portfolio and our unfunded loan commitments and letters of credit. We regularly review our ACL for appropriateness by performing on-going evaluations of the loan and lease portfolio. In doing so, we consider factors such as the differing economic risk associated

with each loan category, the financial condition of specific borrowers, the level of delinquent loans, the value of any collateral and, where applicable, the existence of any guarantees or other documented support. We also evaluate the impact of changes in interest rates and overall economic conditions on the ability of borrowers to meet their financial obligations when quantifying our exposure to credit losses and assessing the appropriateness of our ACL at each reporting date. There is no certainty that our ACL will be appropriate over time to cover losses in the portfolio because of unanticipated adverse changes in the economy, market conditions, or events adversely affecting specific customers, industries, or markets. If the credit quality of our customer base materially deteriorates, the risk profile of a market, industry, or group of customers changes materially, or if the ACL is not appropriate, our net income and capital could be materially adversely affected which, in turn, could have a material adverse effect on our financial condition and results of operations.

In addition, bank regulators periodically review our ACL and may require us to increase our provision for loan and lease losses or loan charge-offs. Any increase in our ACL or loan charge-offs as required by these regulatory authorities could have a material adverse effect on our financial condition and results of operations.

Valuation of Financial Instruments

Assets and liabilities carried at fair value inherently result in a higher degree of financial statement volatility. Assets measured at fair value include mortgagecertain loans held for sale, loans held for investment, available-for-sale and trading securities, certain securitized automobile loans, MSRs, derivatives, and certain securitization trust notes payable.short-term borrowings. At December 31, 2014,2016, approximately $9.9$15.8 billion of our assets and $0.3$0.1 billion of our liabilities were recorded at fair value.value on a recurring basis. In addition to the above mentioned on-going fair value measurements, fair value is also the unit of measureused for recording business combinations and measuring other non-recurring financial assets and liabilities.

At the end of each quarter, we assess the valuation hierarchy for each asset or liability measured at fair value. As necessary, assets or liabilities may be transferred within fair value hierarchy levels due to changes in availability of observable market inputs to measure fair value at the measurement date.

Where available, we use quoted market prices to determine fair value. If quoted market prices are not available, fair value is determined, using either internally developed or independent third partythird-party valuation models, based on inputs that are either directly observable or derived from market data. These inputs include, but are not limited to, interest rate yield curves, option volatilities, or option adjusted spreads. Where neither quoted market prices nor observable market data are available, fair value is determined using valuation models that feature one or more significant unobservable inputs based on management’s expectation that market participants

would use in determining the fair value of the asset or liability. The determination of appropriate unobservable inputs requires exercise of managementsignificant judgment. A significant portion of our assets and liabilities that are reported at fair value are measured based on quoted market prices andor observable market ormarket/ independent inputs.

The following is a description of the significant estimates used in the valuation of financial assets and liabilities for which quoted market prices and observable market parameters are not available.

Mortgage-backed

Municipal and Asset-backedasset-backed securities

Our Alt-A, private label CMO and pooled-trust-preferred

The municipal securities portfolios areportion that is classified as Level 3 and as such useuses significant estimates to determine the fair value of these securities which results in greater subjectivity. The Alt-Afair value is determined by utilizing third-party valuation services. The third-party service provider reviews credit worthiness, prevailing market rates, analysis of similar securities, and projected cash flows. The third-party service provider also incorporates industry and general economic conditions into their analysis. Huntington evaluates the analysis provided for reasonableness.
Our CDO preferred securities portfolios are measured at fair value using a valuation methodology involving use of significant unobservable inputs and are thus, classified as Level 3 in the fair value hierarchy. The private label CMO securities portfolios areportfolio is subjected to a monthly review of the projected cash flows, while the cash flows of our pooled-trust-preferredCDO preferred securities portfolio areis reviewed quarterly. These reviews are supported with analysis from independent third parties, and are used as a basis for impairment analysis.

Alt-A mortgage-backed and private-label CMO securities are collateralized by first-lien residential mortgage loans. The securities valuation methodology incorporates values obtained from a third party pricing specialist using a discounted cash flow approach and a proprietary pricing model and includes assumptions management believes market participants would use to value the securities under current market conditions. The model uses inputs such as estimated prepayment speeds, losses, recoveries, default rates that are implied by the underlying performance of collateral in the structure or similar structures, house price depreciation / appreciation rates that are based upon macroeconomic forecasts and discount rates that are implied by market prices for similar securities with similar collateral structures.

Pooled-trust-preferred

CDO preferred securities are CDOs backed by a pool of debt securities issued by financial institutions. The collateral generally consists of trust-preferred securities and subordinated debt securities issued by banks, bank holding companies, and insurance companies. A full cash flow analysis is used to estimate fair values and assess impairment for each security within this portfolio. We engage a third-party pricing specialist with direct industry experience in pooled-trust-preferred securities valuations to provide assistance in estimating the fair value and expected cash flows for each security in this portfolio. The PD of each issuer and the market discount rate are the most significant inputs in determining fair value. Management evaluates the PD assumptions provided by the third-party pricing specialist by comparing the current PD to the assumptions used the previous quarter, actual

defaults and deferrals in the current period, and trend data on certain financial ratios of the issuers. Huntington also evaluates the assumptions related to discount rates. Relying on cash flows is necessary because there was a lack of observable transactions in the market and many of the original sponsors or dealers for these securities are no longer able to provide a fair value that is compliant with ASC 820.

Derivatives used for hedging purposes

Derivatives designated as qualified hedges are tested for hedge effectiveness on a quarterly basis. Assessments are made at the inception of the hedge and on a recurring basis to determine whether the derivative used in the hedging transaction has been and is expected to continue to be highly effective in offsetting changes in fair values or cash flows of the hedged item. A statistical regression analysis is performed to measure the effectiveness.

If, based on the assessment, a derivative is not expected to be a highly effective hedge or it has ceased to be a highly effective hedge, hedge accounting is discontinued as of the quarter the hedge is not highly effective. As the statistical regression analysis requires the use of estimates regarding the amount and timing of future cash flows which are sensitive to significant changes in future periods based on changes in market rates,rates; we consider this a critical accounting estimate.

Loans held for sale

Huntington has elected to apply the fair value option to certain residential mortgage loans that are classified as held for sale at origination. The fair value of such loans is estimated based on securitythe inputs that include prices of mortgage backed securities adjusted for similar product types.

other variables such as, interest rates, expected credit defaults and market discount rates. The adjusted value reflects the price we expect to receive from the sale of such loans.

Certain consumer and commercial loans are classified as held for sale and are accounted for at the lower of amortized cost or fair value. The determination of fair value for these consumer loans is based on securityobservable prices for similar product typesproducts or discounted expected cash flows, which takes into consideration factors such as future interest rates, prepayment speeds, default and loss curves, and market discount rates. The determination of fair value for commercial loans takes into account factors such as the location and appraised value of the related collateral, as well as the estimated cash flows from realization of the collateral.

Mortgage Servicing Rights

Retained rights to service mortgage loans are recognized as a separate and distinct asset at the time the loans are sold. Mortgage servicing rights (“MSRs”) are initially recorded at fair value at the time the related loans are sold and subsequently re-measured at each reporting date under either the fair value or amortization method. The election of the fair value or amortization method is made at the time each servicing asset is established. All newly created MSRs since 2009 are recorded using the amortization method. Any increase or decrease in fair value of MSRs accounted for under the fair value method, as well as any amortization and/or impairment of MSRs recorded under the amortization method, is reflected in earnings in the period that the changes occur. MSRs are subject to

interest rate risk in that their fair value will fluctuate as a result of changes in the interest rate environment. Fair value is determined based upon the application of an income approach valuation model. TheWe use an independent third-party valuation model, maintained by an independent third party,which incorporates assumptions in estimating future cash flows. These assumptions include time decay,prepayment speeds, payoffs, and changes in valuation inputs and assumptions. The reasonableness of these pricing models is validated on a minimum of a quarterly basis by at least one independent external service broker valuation. Because the fair values of MSRs are significantly impacted by the use of estimates, the use of different assumption estimatesassumptions can result in different estimated fair values of those MSRs.

Contingent Liabilities

We are partiesa party to various claims, litigation, and legal proceedings resulting from ordinary business activities relating to our current and/or former operations. We estimate and provide for potential losses that may arise out of litigation and regulatory proceedings to the extent that such losses are probable and can be reasonably estimated. Significant judgment is required in making these estimates and our final liabilities may ultimately be more or less than the current estimate. Our total estimated liability in respect of litigation and regulatory proceedings is determined on a case-by-case basis and represents an estimate of probable losses after considering, among other factors, the progress of each case or proceeding, our experience and the experience of others in similar cases or proceedings, and the opinions and views of legal counsel. Litigation exposure represents a key area of judgment and is subject to uncertainty and certain factors outside of our control.

Income Taxes

The calculation of our provision for income taxes is complex and requires the use of estimates and judgments. We have two accruals for income taxes: (1) our income tax payable represents the estimated net amount currently due to the federal, state, and local taxing jurisdictions, net of any reserve for potential audit issues and any tax refunds and the net receivable balance is reported as a component of accrued income and other assets in our consolidated balance sheet; (2) our deferred federal and state income tax and related valuation accounts, reported as a component of accrued income and other assets, represents the estimated impact of temporary differences between how we recognize our assets and liabilities under GAAP, and how such assets and liabilities are recognized under federal and state tax law.

In the ordinary course of business, we operate in various taxing jurisdictions and are subject to income and non-income taxes. The effective tax rate is based in part on our interpretation of the relevant current tax laws. We believe the aggregate liabilities related to taxes are appropriately reflected in the consolidated financial statements. We review the appropriate tax treatment of all transactions taking into consideration statutory, judicial, and regulatory guidance in the context of our tax positions. In addition, we rely on various tax opinions, recent tax audits, and historical experience.

From time-to-time, we engage in business transactions that may affect our tax liabilities. Where appropriate, we have obtainedobtain opinions of outside experts and have assessedassess the relative merits and risks of the appropriate tax treatment of business transactions taking into account statutory, judicial, and regulatory guidance in the context of the tax position. However, changes to our estimates of accrued taxes can occur due to changes in tax rates, implementation of new business strategies, resolution of issues with taxing authorities regarding previously taken tax positions, and newly enacted statutory, judicial, and regulatory guidance. Such changes could affect the amount of our accrued taxes and could be material to our financial position and / and/or results of operations.
(See Note 1517 of the Notes to Consolidated Financial Statements.)

Deferred Tax Assets

At December 31, 2014,2016, we had a net federal deferred tax asset of $72.1$76 million and a net state deferred tax asset of $45.3$41 million. A valuation allowance is provided when it is more-likely-than-not some portion of the deferred tax asset will not be realized. All available evidence, both positive and negative, was considered to determine whether, based on the weight of that evidence, impairment should be recognized. Our forecast process includes judgmental and quantitative elements that may be subject to significant change. If our forecast of taxable income within the carryforward periods available under applicable law is not sufficient to cover the amount of net deferred tax assets, such assets may be impaired. Based on our analysis of both positive and negative evidence and our ability to offset the net deferred tax assets against our forecasted future taxable income, there was no impairment of the net deferred tax assets at December 31, 2014,2016, other than a valuation allowance relating to state net operating loss carryovers.
Goodwill and Intangible Assets
The acquisition method of accounting requires that acquired assets and liabilities are recorded at their fair values as of the date of acquisition. This often involves estimates based on third party valuations or internal valuations based on discounted cash flow analyses or other valuation techniques, all of which are inherently subjective. Acquisitions typically result in goodwill, the amount by which the cost of net assets acquired in a business combination exceeds their fair value, which is subject to impairment testing at least annually. The amortization of identified intangible assets recognized in a business combination is based upon the estimated economic benefits to be received over their economic life, which is also subjective. Customer attrition rates that are based on historical

experience are used to determine the estimated economic life of certain intangibles assets, including but not limited to, customer deposit intangibles. Refer to Note 8 of the Notes to Consolidated Financial Statements for regulatory capital purposes.

further information regarding these items.

Recent Accounting Pronouncements and Developments

Note 2 to Consolidated Financial Statements discusses new accounting pronouncements adopted during 20142016 and the expected impact of accounting pronouncements recently issued but not yet required to be adopted. To the extent the adoption of new accounting standards materially affect financial condition, results of operations, or liquidity, the impacts are discussed in the applicable section of this MD&A and the Notes to Consolidated Financial Statements.

Item 7A: Quantitative and Qualitative Disclosures About Market Risk

Information required by this item is set forth under the heading of “Market Risk” in Item 7 (MD&A), which is incorporated by reference into this item.

Item 8: Financial Statements and Supplementary Data

Information required by this item is set forth in the ReportReports of Independent Registered Public Accounting Firm, Consolidated Financial Statements and Notes, and Selected QuarterlyAnnual Income Statements, which is incorporated by reference into this item.

Statements.


REPORT OF MANAGEMENT

MANAGEMENT'S EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

The Management of Huntington Bancshares Incorporated (Huntington or the Company) is responsible for the financial information and representations contained in the Consolidated Financial Statements and other sections of this report. The Consolidated Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States. In all material respects, they reflect the substance of transactions that should be included based on informed judgments, estimates, and currently available information. Management maintains a system of internal accounting controls, which includes the careful selection and training of qualified personnel, appropriate segregation of responsibilities, communication of written policies and procedures, and a broad program of internal audits. The costs of the controls are balanced against the expected benefits. During 2014,2016, the audit committee of the board of directors met regularly with Management, Huntington’s internal auditors, and the independent registered public accounting firm, Deloitte & TouchePricewaterhouseCoopers LLP, to review the scope of the audits and to discuss the evaluation of internal accounting controls and financial reporting matters. The independent registered public accounting firm and the internal auditors have free access to, and meet confidentially with, the audit committee to discuss appropriate matters. Also, Huntington maintains a disclosure review committee. This committee’s purpose is to design and maintain disclosure controls and procedures to ensure that material information relating to the financial and operating condition of Huntington is properly reported to its chief executive officer, chief financial officer, internal auditors, and the audit committee of the board of directors in connection with the preparation and filing of periodic reports and the certification of those reports by the chief executive officer and the chief financial officer.

REPORT OF MANAGEMENT’S ASSESSMENT OF INTERNAL CONTROL OVER FINANCIAL REPORTING

Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company, including accountingas such term is defined in Rules 13a-15(f) and other internal control systems that, in the opinion of Management, provide reasonable assurance that (1) transactions are properly authorized, (2) the assets are properly safeguarded, and (3) transactions are properly recorded and reported to permit the preparation15d-15(f) of the Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States.Securities Exchange Act of 1934, as amended. Huntington’s Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2014.2016. In making this assessment, Management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) inInternal Control—Integrated Framework (2013). Based on that assessment, Management believesconcluded that, as of December 31, 2014,2016, the Company’s internal control over financial reporting is effective based on those criteria. The Company’s internal control over financial reporting as of December 31, 20142016 has been audited by Deloitte & TouchePricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report appearing on the next page.


Stephen D. Steinour – Chairman, President, and Chief Executive Officer

Howell D. McCullough III – Senior Executive Vice President and Chief Financial Officer

February 13, 2015

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM22, 2017


Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of

Huntington Bancshares Incorporated

Columbus, Ohio



We have auditedIn our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, comprehensive income, changes in shareholders’ equity and cash flows present fairly, in all material respects, the financial position of Huntington Bancshares Incorporated and its subsidiaries at December 31, 2016 and 2015, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2016 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting of Huntington Bancshares Incorporated and subsidiaries (the “Company”) as of December 31, 2014,2016, based on criteria established inInternal Control—Control - Integrated Framework (2013)issued by the Committee of Sponsoring Organizations of the Treadway Commission.Commission (COSO). The Company’sCompany's management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report of Management’s Assessment of Internal Control over Financial Reporting. Our responsibility is to express an opinionopinions on these financial statements and on the Company’sCompany's internal control over financial reporting based on our audit.

integrated audits. We conducted our auditaudits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the auditaudits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, andrisk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit providesaudits provide a reasonable basis for our opinion.

opinions.


A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1)(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2)(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3)(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.


Because of theits inherent limitations, of internal control over financial reporting including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be preventedprevent or detected on a timely basis.detect misstatements. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014, based on the criteria established inInternal Control —Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 2014 of the Company and our report dated February 13, 2015 expressed an unqualified opinion on those financial statements.



Columbus, Ohio

February 13, 2015

22, 2017


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

Huntington Bancshares Incorporated

Columbus, Ohio


We have audited the accompanying consolidated balance sheets of Huntington Bancshares Incorporated and subsidiaries (the “Company”) as of December 31, 2014 and 2013, and the related consolidated statements of income, comprehensive income, changes in shareholders’ equity, and cash flows for each of the three years in the periodyear ended December 31, 2014.2014 of Huntington Bancshares Incorporated and subsidiaries (the “Company”). These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

audit.


We conducted our auditsaudit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provideaudit provides a reasonable basis for our opinion.


In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Huntington Bancshares Incorporated and subsidiaries as of December 31, 2014 and 2013, andpresent fairly, in all material respects, the results of their operations and their cash flows for each of the three years in the periodyear ended December 31, 2014, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2014, based on the criteria established inInternal ControlIntegrated Framework(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated



Columbus, Ohio
February 13, 2015 expressed an unqualified opinion on the Company’s internal control over financial reporting.

Columbus, Ohio

February 13, 2015



Huntington Bancshares Incorporated

Consolidated Balance Sheets

   December 31, 

(dollar amounts in thousands, except number of shares)

  2014  2013 

Assets

   

Cash and due from banks

  $1,220,565   $1,001,132  

Interest-bearing deposits in banks

   64,559    57,043  

Trading account securities

   42,191    35,573  

Loans held for sale

   416,327    326,212  

(includes $354,888 and $278,928 respectively, measured at fair value)(1)

   

Available-for-sale and other securities

   9,384,670    7,308,753  

Held-to-maturity securities

   3,379,905    3,836,667  

Loans and leases (includes $50,617 and $52,286 respectively, measured at fair value)(1)

   

Commercial and industrial loans and leases

   19,033,146    17,594,276  

Commercial real estate loans

   5,197,403    4,850,094  

Automobile loans

   8,689,902    6,638,713  

Home equity loans

   8,490,915    8,336,318  

Residential mortgage loans

   5,830,609    5,321,088  

Other consumer loans

   413,751    380,011  
  

 

 

  

 

 

 

Loans and leases

   47,655,726    43,120,500  

Allowance for loan and lease losses

   (605,196  (647,870
  

 

 

  

 

 

 

Net loans and leases

   47,050,530    42,472,630  
  

 

 

  

 

 

 

Bank owned life insurance

   1,718,436    1,647,170  

Premises and equipment

   616,407    634,657  

Goodwill

   522,541    444,268  

Other intangible assets

   74,671    93,193  

Accrued income and other assets

   1,807,208    1,609,876  
  

 

 

  

 

 

 

Total assets

  $66,298,010   $59,467,174  
  

 

 

  

 

 

 

Liabilities and shareholders’ equity

   

Liabilities

   

Deposits in domestic offices

   

Demand deposits—noninterest-bearing

  $15,393,226   $13,650,468  

Interest-bearing

   35,937,873    33,540,545  

Deposits in foreign offices

   401,052    315,705  
  

 

 

  

 

 

 

Deposits

   51,732,151    47,506,718  

Short-term borrowings

   2,397,101    2,352,143  

Long-term debt

   4,335,962    2,458,272  

Accrued expenses and other liabilities

   1,504,626    1,059,888  
  

 

 

  

 

 

 

Total liabilities

   59,969,840    53,377,021  
  

 

 

  

 

 

 

Shareholders’ equity

   

Preferred stock—authorized 6,617,808 shares;

   

Series A, 8.50% fixed rate, non-cumulative perpetual convertible preferred stock, par value of $0.01, and liquidation value per share of $1,000

   362,507    362,507  

Series B, floating rate, non-voting, non-cumulative perpetual preferred stock, par value of $0.01, and liquidation value per share of $1,000

   23,785    23,785  

Common stock

   8,131    8,322  

Capital surplus

   7,221,745    7,398,515  

Less treasury shares, at cost

   (13,382  (9,643

Accumulated other comprehensive loss

   (222,292  (214,009

Retained (deficit) earnings

   (1,052,324  (1,479,324
  

 

 

  

 

 

 

Total shareholders’ equity

   6,328,170    6,090,153  
  

 

 

  

 

 

 

Total liabilities and shareholders’ equity

  $66,298,010   $59,467,174  
  

 

 

  

 

 

 

Common shares authorized (par value of $0.01)

   1,500,000,000    1,500,000,000  

Common shares issued

   813,136,321    832,217,098  

Common shares outstanding

   811,454,676    830,963,427  

Treasury shares outstanding

   1,681,645    1,253,671  

Preferred shares issued

   1,967,071    1,967,071  

Preferred shares outstanding

   398,007    398,007  

 December 31,
(dollar amounts in thousands, except per share amounts)2016 2015
Assets   
Cash and due from banks$1,384,770
 $847,156
Interest-bearing deposits in banks58,267
 51,838
Trading account securities133,295
 36,997
Loans held for sale512,951
 474,621
(includes $438,224 and $337,577 respectively, measured at fair value)(1)   
Available-for-sale and other securities15,562,837
 8,775,441
Held-to-maturity securities7,806,939
 6,159,590
Loans and leases (includes $82,319 and $34,637 respectively, measured at fair value)(1)   
Commercial and industrial loans and leases28,058,712
 20,559,834
Commercial real estate loans7,300,901
 5,268,651
Automobile loans10,968,782
 9,480,678
Home equity loans10,105,774
 8,470,482
Residential mortgage loans7,724,961
 5,998,400
RV and marine finance loans1,846,447
 
Other consumer loans956,419
 563,054
Loans and leases66,961,996
 50,341,099
Allowance for loan and lease losses(638,413) (597,843)
Net loans and leases66,323,583
 49,743,256
Bank owned life insurance2,432,086
 1,757,668
Premises and equipment815,508
 620,540
Goodwill1,992,849
 676,869
Other intangible assets402,458
 54,978
Servicing rights225,578
 189,237
Accrued income and other assets2,062,976
 1,630,110
Total assets$99,714,097
 $71,018,301
Liabilities and shareholders’ equity   
Liabilities   
Deposits in domestic offices   
Demand deposits—noninterest-bearing$22,835,798
 $16,479,984
Interest-bearing52,771,919
 38,547,587
Deposits in foreign offices
 267,408
Deposits75,607,717
 55,294,979
Short-term borrowings3,692,654
 615,279
Long-term debt8,309,159
 7,041,364
Accrued expenses and other liabilities1,796,421
 1,472,073
Total liabilities89,405,951
 64,423,695
Commitments and contingencies (Note 21)
 
Shareholders’ equity   
Preferred stock1,071,227
 386,291
Common stock10,886
 7,970
Capital surplus9,881,277
 7,038,502
Less treasury shares, at cost(27,384) (17,932)
Accumulated other comprehensive loss(401,016) (226,158)
Retained (deficit) earnings(226,844) (594,067)
Total shareholders’ equity10,308,146
 6,594,606
Total liabilities and shareholders’ equity$99,714,097
 $71,018,301
Common shares authorized (par value of $0.01)1,500,000,000
 1,500,000,000
Common shares issued1,088,641,251
 796,969,694
Common shares outstanding1,085,688,538
 794,928,886
Treasury shares outstanding2,952,713
 2,040,808
Preferred stock, authorized shares6,617,808
 6,617,808
Preferred shares issued2,702,571
 1,967,071
Preferred shares outstanding1,098,006
 398,006
(1)

(1)Amounts represent loans for which Huntington has elected the fair value option. See Note 17.

18.

See Notes to Consolidated Financial Statements


Huntington Bancshares Incorporated

Consolidated Statements of Income

   Year Ended December 31, 

(dollar amounts in thousands, except per share amounts)

  2014   2013  2012 

Interest and fee income:

     

Loans and leases

  $1,674,563    $1,629,939   $1,675,295  

Available-for-sale and other securities

     

Taxable

   171,080     148,557    184,340  

Tax-exempt

   28,965     12,678    8,999  

Held-to-maturity securities

   88,724     50,214    24,088  

Other

   13,130     19,249    37,541  
  

 

 

   

 

 

  

 

 

 

Total interest income

   1,976,462     1,860,637    1,930,263  
  

 

 

   

 

 

  

 

 

 

Interest expense

     

Deposits

   86,453     116,241    162,167  

Short-term borrowings

   2,940     700    2,048  

Federal Home Loan Bank advances

   1,011     1,077    819  

Subordinated notes and other long-term debt

   48,917     38,011    54,705  
  

 

 

   

 

 

  

 

 

 

Total interest expense

   139,321     156,029    219,739  
  

 

 

   

 

 

  

 

 

 

Net interest income

   1,837,141     1,704,608    1,710,524  

Provision for credit losses

   80,989     90,045    147,388  
  

 

 

   

 

 

  

 

 

 

Net interest income after provision for credit losses

   1,756,152     1,614,563    1,563,136  
  

 

 

   

 

 

  

 

 

 

Service charges on deposit accounts

   273,741     271,802    262,179  

Trust services

   115,972     123,007    121,897  

Electronic banking

   105,401     92,591    82,290  

Mortgage banking income

   84,887     126,855    191,092  

Brokerage income

   68,277     69,624    72,684  

Insurance income

   65,473     69,264    71,319  

Bank owned life insurance income

   57,048     56,419    56,042  

Capital markets fees

   43,731     45,220    48,160  

Gain on sale of loans

   21,091     18,171    58,182  

Net gains on sales of securities

   17,554     2,220    6,388  

Impairment losses recognized in earnings on available-for-sale securities (a)

   —       (1,802  (1,619

Other income

   126,004     138,825    137,707  
  

 

 

   

 

 

  

 

 

 

Total noninterest income

   979,179     1,012,196    1,106,321  
  

 

 

   

 

 

  

 

 

 

Personnel costs

   1,048,775     1,001,637    988,193  

Outside data processing and other services

   212,586     199,547    190,255  

Net occupancy

   128,076     125,344    111,160  

Equipment

   119,663     106,793    102,947  

Professional services

   59,555     40,587    65,758  

Marketing

   50,560     51,185    64,263  

Deposit and other insurance expense

   49,044     50,161    68,330  

Amortization of intangibles

   39,277     41,364    46,549  

Gain on early extinguishment of debt

   —       —      (798

Other expense

   174,810     141,385    199,219  
  

 

 

   

 

 

  

 

 

 

Total noninterest expense

   1,882,346     1,758,003    1,835,876  
  

 

 

   

 

 

  

 

 

 

Income before income taxes

   852,985     868,756    833,581  

Provision for income taxes

   220,593     227,474    202,291  
  

 

 

   

 

 

  

 

 

 

Net income

   632,392     641,282    631,290  

Dividends on preferred shares

   31,854     31,869    31,989  
  

 

 

   

 

 

  

 

 

 

Net income applicable to common shares

  $600,538    $609,413   $599,301  
  

 

 

   

 

 

  

 

 

 

Average common shares—basic

   819,917     834,205    857,962  

Average common shares—diluted

   833,081     843,974    863,402  

Per common share:

     

Net income—basic

 ��$0.73    $0.73   $0.70  

Net income—diluted

   0.72     0.72    0.69  

Cash dividends declared

   0.21     0.19    0.16  

 Year Ended December 31,
(dollar amounts in thousands, except per share amounts)2016 2015 2014
Interest and fee income:     
Loans and leases$2,178,044
 $1,759,525
 $1,674,563
Available-for-sale and other securities     
Taxable221,782
 202,104
 171,080
Tax-exempt58,853
 42,014
 28,965
Held-to-maturity securities138,312
 86,614
 88,724
Other35,122
 24,264
 13,130
Total interest income2,632,113
 2,114,521
 1,976,462
Interest expense     
Deposits102,005
 82,175
 86,453
Short-term borrowings5,140
 1,584
 2,940
Federal Home Loan Bank advances274
 586
 1,011
Subordinated notes and other long-term debt155,376
 79,439
 48,917
Total interest expense262,795
 163,784
 139,321
Net interest income2,369,318
 1,950,737
 1,837,141
Provision for credit losses190,802
 99,954
 80,989
Net interest income after provision for credit losses2,178,516
 1,850,783
 1,756,152
Service charges on deposit accounts324,299
 280,349
 273,741
Cards and payment processing income169,064
 142,715
 105,401
Mortgage banking income128,257
 111,853
 84,887
Trust services108,274
 105,833
 115,972
Insurance income64,523
 65,264
 65,473
Brokerage income61,834
 60,205
 68,277
Capital markets fees59,527
 53,616
 43,731
Bank owned life insurance income57,567
 52,400
 57,048
Gain on sale of loans47,153
 33,037
 21,091
Net gains on sales of securities2,035
 3,184
 17,554
Impairment losses recognized in earnings on available-for-sale securities (a)(2,119) (2,440) 
Other income129,317
 132,714
 126,004
Total noninterest income1,149,731
 1,038,730
 979,179
Personnel costs1,349,124
 1,122,182
 1,048,775
Outside data processing and other services304,743
 231,353
 212,586
Equipment164,839
 124,957
 119,663
Net occupancy153,090
 121,881
 128,076
Professional services105,266
 50,291
 59,555
Marketing62,957
 52,213
 50,560
Deposit and other insurance expense54,107
 44,609
 49,044
Amortization of intangibles30,456
 27,867
 39,277
Other expense183,903
 200,555
 174,810
Total noninterest expense2,408,485
 1,975,908
 1,882,346
Income before income taxes919,762
 913,605
 852,985
Provision for income taxes207,941
 220,648
 220,593
Net income711,821
 692,957
 632,392
Dividends on preferred shares65,274
 31,873
 31,854
Net income applicable to common shares$646,547
 $661,084
 $600,538
Average common shares—basic904,438
 803,412
 819,917

Average common shares—diluted918,790
 817,129
 833,081
Per common share:     
Net income—basic$0.72
 $0.82
 $0.73
Net income—diluted0.70
 0.81
 0.72
Cash dividends declared0.29
 0.25
 0.21
(a)The following OTTI losses are included in securities losses for the periods presented:

Total OTTI losses

  $ —      $(1,870 $(1,886

Noncredit-related portion of loss recognized in OCI

   —       68    267  
  

 

 

   

 

 

  

 

 

 

Net impairment credit losses recognized in earnings

  $—      $(1,802 $(1,619
  

 

 

   

 

 

  

 

 

 

Total OTTI losses$(5,851) $(3,144) $
Noncredit-related portion of loss recognized in OCI3,732
 704
 
Net impairment credit losses recognized in earnings$(2,119) $(2,440) $
See Notes to Consolidated Financial Statements


Huntington Bancshares Incorporated

Consolidated Statements of Comprehensive Income

   Year Ended December 31, 

(dollar amounts in thousands)

  2014  2013  2012 

Net income

  $632,392   $641,282   $631,290  

Other comprehensive income, net of tax:

    

Unrealized gains on available-for-sale and other securities:

    

Non-credit-related impairment recoveries (losses) on debt securities not expected to be sold

   8,780    153    12,490  

Unrealized net gains (losses) on available-for-sale and other securities arising during the period, net of reclassification for net realized gains and losses

   45,783    (77,593  55,305  
  

 

 

  

 

 

  

 

 

 

Total unrealized gains (losses) on available-for-sale and other securities

   54,563    (77,440  67,795  

Unrealized gains (losses) on cash flow hedging derivatives, net of reclassifications to income

   6,611    (65,928  6,186  

Change in accumulated unrealized losses for pension and other post-retirement obligations

   (69,457  80,176    (51,035
  

 

 

  

 

 

  

 

 

 

Other comprehensive income (loss), net of tax

   (8,283  (63,192  22,946  
  

 

 

  

 

 

  

 

 

 

Comprehensive income

  $624,109   $578,090   $654,236  
  

 

 

  

 

 

  

 

 

 

 Year Ended December 31,
(dollar amounts in thousands)2016 2015 2014
Net income$711,821
 $692,957
 $632,392
Other comprehensive income, net of tax:     
Unrealized gains (losses) on available-for-sale and other securities:     
Non-credit-related impairment recoveries on debt securities not expected to be sold585
 12,673
 8,780
Unrealized net gains (losses) on available-for-sale and other securities arising during the period, net of reclassification for net realized gains and losses(201,599) (19,757) 45,783
Total unrealized gains (losses) on available-for-sale securities(201,014) (7,084) 54,563
Unrealized gains on cash flow hedging derivatives, net of reclassifications to income1,314
 8,285
 6,611
Change in accumulated unrealized gains (losses) for pension and other post-retirement obligations24,842
 (5,067) (69,457)
Other comprehensive loss, net of tax(174,858) (3,866) (8,283)
Comprehensive income$536,963
 $689,091
 $624,109
See Notes to Consolidated Financial Statements


Huntington Bancshares Incorporated

Consolidated Statements of Changes in Shareholders’ Equity

   Preferred Stock                  Accumulated       
   Series A   Series B                  Other  Retained    
(all amounts in thousands,          Floating Rate   Common Stock  Capital  Treasury Stock  Comprehensive  Earnings    

except for per share amounts)

  Shares   Amount   Shares   Amount   Shares  Amount  Surplus  Shares  Amount  Loss  (Deficit)  Total 

Year Ended December 31, 2014

                 

Balance, beginning of year

   363    $362,507     35    $23,785     832,217   $8,322   $7,398,515    (1,331 $(9,643 $(214,009 $(1,479,324 $6,090,153  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net income

                 632,392    632,392  

Other comprehensive income (loss)

                (8,283   (8,283

Repurchases of common stock

           (35,709  (357  (334,072      (334,429

Cash dividends declared:

                 

Common ($0.21 per share)

                 (171,692  (171,692

Preferred Series A ($85.00 per share)

                 (30,813  (30,813

Preferred Series B ($29.33 per share)

                 (1,041  (1,041

Shares issued pursuant to acquisition

           8,694    87    91,577        91,664  

Shares sold to HIP

           276    3    2,594        2,597  

Recognition of the fair value of share-based compensation

             43,666        43,666  

Other share-based compensation activity

           6,752    68    17,219       (1,774  15,513  

Other

           906    8    2,246    (351  (3,739   (72  (1,557
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance, end of year

   363    $362,507     35    $23,785     813,136   $8,131   $7,221,745    (1,682 $(13,382 $(222,292 $(1,052,324 $6,328,170  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

              Accumulated    
              Other Retained  
(dollar amounts in thousands, except per share amounts) Preferred Stock Common Stock Capital Treasury Stock Comprehensive Earnings  
 Amount Shares Amount Surplus Shares Amount Loss (Deficit) Total
Year Ended December 31, 2016                  
Balance, beginning of year $386,291
 796,970
 $7,970
 $7,038,502
 (2,041) $(17,932) $(226,158) $(594,067) $6,594,606
Net income               711,821
 711,821
Other comprehensive income (loss)             (174,858)   (174,858)
FirstMerit Acquisition:                  
Issuance of common stock   285,425
 2,854
 2,763,919
         2,766,773
Issuance of Series C preferred stock 100,000
     4,320
         104,320
Net proceeds from issuance of Series D preferred stock 584,936
               584,936
Cash dividends declared:                  
Common ($0.29 per share)               (274,780) (274,780)
Preferred Series A ($85.00 per share)               (30,813) (30,813)
Preferred Series B ($34.03 per share)               (1,208) (1,208)
Preferred Series C ($26.28 per share)               (2,628) (2,628)
Preferred Series D ($51.04 per share)               (30,625) (30,625)
Recognition of the fair value of share-based compensation       65,608
         65,608
Other share-based compensation activity   5,924
 59
 5,483
       (4,554) 988
Other   322
 3
 3,445
 (912) (9,452)   10
 (5,994)
Balance, end of year $1,071,227
 1,088,641
 $10,886
 $9,881,277
 (2,953) $(27,384) $(401,016) $(226,844) $10,308,146
See Notes to Consolidated Financial Statements


Huntington Bancshares Incorporated

Consolidated Statements of Changes in Shareholders’ Equity

   Preferred Stock                  Accumulated       
   Series A   Series B                  Other  Retained    
(all amounts in thousands,          Floating Rate   Common Stock  Capital  Treasury Stock  Comprehensive  Earnings    

except for per share amounts)

  Shares   Amount   Shares   Amount   Shares  Amount  Surplus  Shares  Amount  Loss  (Deficit)  Total 

Year Ended December 31, 2013

                 

Balance, beginning of year

   363    $362,507     35    $23,785     844,105   $8,441   $7,475,149    (1,292 $(10,921 $(150,817 $(1,929,644 $5,778,500  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net income

                 641,282    641,282  

Other comprehensive income (loss)

                (63,192   (63,192

Repurchase of common stock

           (16,708  (167  (124,828      (124,995

Cash dividends declared:

                 

Common ($0.19 per share)

                 (158,194  (158,194

Preferred Series A ($85.00 per share)

                 (30,813  (30,813

Preferred Series B ($33.14 per share)

                 (1,055  (1,055

Recognition of the fair value of share-based compensation

             37,007        37,007  

Other share-based compensation activity

           4,820    48    12,812       (873  11,987  

Other

             (1,625  (39  1,278     (27  (374
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance, end of year

   363    $362,507     35    $23,785     832,217   $8,322   $7,398,515    (1,331 $(9,643 $(214,009 $(1,479,324 $6,090,153  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

             Accumulated    
             Other Retained  
(dollar amounts in thousands, except per share amounts)Preferred Stock Common Stock Capital Treasury Stock Comprehensive Earnings  
Amount Shares Amount Surplus Shares Amount Loss (Deficit) Total
Year Ended December 31, 2015                 
Balance, beginning of year$386,292
 813,136
 $8,131
 $7,221,745
 (1,682) $(13,382) $(222,292) $(1,052,324) $6,328,170
Net income              692,957
 692,957
Other comprehensive income (loss)            (3,866)   (3,866)
Repurchase of common stock  (23,036) (230) (251,614)         (251,844)
Cash dividends declared:                 
Common ($0.25 per share)              (200,197) (200,197)
Preferred Series A ($85.00 per share)              (30,813) (30,813)
Preferred Series B ($29.84 per share)              (1,059) (1,059)
Preferred share conversion(1)     1
         
Recognition of the fair value of share-based compensation      51,415
         51,415
Other share-based compensation activity  6,784
 68
 16,068
       (2,644) 13,492
Other  86
 1
 887
 (359) (4,550)   13
 (3,649)
Balance, end of year$386,291
 796,970
 $7,970
 $7,038,502
 (2,041) $(17,932) $(226,158) $(594,067) $6,594,606
See Notes to Consolidated Financial Statements


Huntington Bancshares Incorporated

Consolidated Statements of Changes in Shareholders’ Equity

   Preferred Stock                  Accumulated       
   Series A   Series B                  Other  Retained    
(all amounts in thousands,          Floating Rate   Common Stock  Capital  Treasury Stock  Comprehensive  Earnings    

except for per share amounts)

  Shares   Amount   Shares   Amount   Shares  Amount  Surplus  Shares  Amount  Loss  (Deficit)  Total 

Year Ended December 31, 2012

                 

Balance, beginning of year

   363    $362,507     35    $23,785     865,585   $8,656   $7,596,809    (1,178 $(10,255 $(173,763 $(2,391,618 $5,416,121  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net income

                 631,290    631,290  

Other comprehensive income (loss)

                22,946     22,946  

Repurchase of common stock

           (23,328  (233  (148,648      (148,881

Cash dividends declared:

                 

Common ($0.16 per share)

                 (136,887  (136,887

Preferred Series A ($85.00 per share)

                 (30,813  (30,813

Preferred Series B ($33.14 per share)

                 (1,176  (1,176

Recognition of the fair value of share-based compensation

             27,873        27,873  

Other share-based compensation activity

           1,848    18    (795     (348  (1,125

Other

             (90  (114  (666   (92  (848
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance, end of year

   363    $362,507     35    $23,785     844,105   $8,441   $7,475,149    (1,292 $(10,921 $(150,817 $(1,929,644 $5,778,500  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

             Accumulated    
             Other Retained  
(dollar amounts in thousands, except per share amounts)Preferred Stock Common Stock Capital Treasury Stock Comprehensive Earnings  
Amount Shares Amount Surplus Shares Amount Loss (Deficit) Total
Year Ended December 31, 2014                 
Balance, beginning of year$386,292
 832,217
 $8,322
 $7,398,515
 (1,331) $(9,643) $(214,009) $(1,479,324) $6,090,153
Net income              632,392
 632,392
Other comprehensive income (loss)            (8,283)   (8,283)
Repurchase of common stock  (35,709) (357) (334,072)         (334,429)
Cash dividends declared:                 
Common ($0.21 per share)              (171,692) (171,692)
Preferred Series A ($85.00 per share)              (30,813) (30,813)
Preferred Series B ($29.33 per share)              (1,041) (1,041)
Shares issued pursuant to acquisition  8,694
 87
 91,577
         91,664
Recognition of the fair value of share-based compensation      43,666
         43,666
Other share-based compensation activity  6,752
 68
 17,219
       (1,774) 15,513
Other  1,182
 11
 4,840
 (351) (3,739)   (72) 1,040
Balance, end of year$386,292
 813,136
 $8,131
 $7,221,745
 (1,682) $(13,382) $(222,292) $(1,052,324) $6,328,170
See Notes to Consolidated Financial Statements


Huntington Bancshares Incorporated

Consolidated Statements of Cash Flows

   Year Ended December 31, 

(dollar amounts in thousands)

  2014  2013  2012 

Operating activities

    

Net income

  $632,392   $641,282   $631,290  

Adjustments to reconcile net income to net cash provided by (used for) operating activities:

    

Impairment of goodwill

   3,000    —      —    

Provision for credit losses

   80,989    90,045    147,388  

Depreciation and amortization

   332,832    281,545    274,572  

Share-based compensation expense

   43,666    37,007    27,873  

Change in deferred income taxes

   35,174    106,022    159,938  

Originations of loans held for sale

   (2,419,007  (2,845,275  (3,814,572

Principal payments on and proceeds from loans held for sale

   2,385,596    3,017,430    3,731,465  

Gain on sale of loans held for sale

   (25,392  (44,787  (60,251

Gain on early extinguishment of debt

   —      —      (798

Bargain purchase gain

   —      —      (11,217

Net gains on sales of securities

   (17,554  (2,220  (6,388

Impairment losses recognized in earnings on available-for-sale securities

   —      1,802    1,619  

Net Change in:

    

Trading account securities

   (6,618  55,632    (45,306

Accrued income and other assets

   (438,366  10,500    458,328  

Accrued expense and other liabilities

   282,074    (335,738  (491,811
  

 

 

  

 

 

  

 

 

 

Net cash provided by (used for) operating activities

   888,786    1,013,245    1,002,130  
  

 

 

  

 

 

  

 

 

 

Investing activities

    

Decrease (increase) in interest-bearing deposits in banks

   (7,516  146,584    70,980  

Net cash received in acquisitions

   691,637    —      40,258  

Proceeds from:

    

Maturities and calls of available-for-sale and other securities

   1,480,505    1,414,114    1,776,594  

Maturities of held-to-maturity securities

   452,785    278,136    113,576  

Sales of available-for-sale and other securities

   1,152,907    410,106    957,930  

Purchases of available-for-sale and other securities

   (4,553,857  (1,416,795  (2,384,824

Purchases of held-to-maturity securities

   —      (2,081,373  (941,119

Net proceeds from sales of loans

   353,811    459,006    3,092,643  

Net loan and lease activity, excluding sales

   (4,232,350  (3,386,753  (3,287,000

Proceeds from sale of operating lease assets

   17,591    10,227    30,322  

Purchases of premises and equipment

   (58,862  (102,208  (129,641

Proceeds from sales of other real estate

   38,479    40,448    56,762  

Purchases of loans and leases

   (345,039  (16,170  (484,157

Purchases of customer lists

   (946  —      —    

Other, net

   6,074    4,345    4,698  
  

 

 

  

 

 

  

 

 

 

Net cash provided by (used for) investing activities

   (5,004,781  (4,240,333  (1,082,978
  

 

 

  

 

 

  

 

 

 

Financing activities

    

Increase (decrease) in deposits

   2,923,928    1,258,038    2,262,213  

Increase (decrease) in short-term borrowings

   118,698    854,558    (939,979

Proceeds from issuance of long-term debt

   2,000,000    1,250,000    2,515,000  

Maturity/redemption of long-term debt

   (198,922  (102,086  (3,290,095

Dividends paid on preferred stock

   (31,854  (31,869  (31,719

Dividends paid on common stock

   (166,935  (150,608  (137,616

Repurchase of common stock

   (334,429  (124,995  (148,881

Proceeds from stock options exercised

   17,710    12,601    2,000  

Net proceeds from issuance of common stock

   2,597    —      —    

Other, net

   4,635    (225  (3,237
  

 

 

  

 

 

  

 

 

 

Net cash provided by (used for) financing activities

   4,335,428    2,965,414    227,686  
  

 

 

  

 

 

  

 

 

 

Increase (decrease) in cash and cash equivalents

   219,433    (261,674  146,838  

Cash and cash equivalents at beginning of period

   1,001,132    1,262,806    1,115,968  
  

 

 

  

 

 

  

 

 

 

Cash and cash equivalents at end of period

  $1,220,565   $1,001,132   $1,262,806  
  

 

 

  

 

 

  

 

 

 

Supplemental disclosures:

    

Interest paid

  $131,488   $155,832   $231,897  

Income taxes paid (refunded)

   139,918    109,432    6,389  

Non-cash activities:

    

Loans transferred to available-for-sale securities

   —      600,435    —    

Loans transferred to portfolio from held-for-sale

   45,240    307,303    —    

Transfer of loans to OREO

   39,066    34,372    56,762  

Transfer of securities to held-to-maturity from available-for-sale

   —      292,164    278,748  

Loans transferred to held-for-sale from portfolio

   96,643    53,360    306,261  

Dividends accrued, paid in subsequent quarter

   54,143    47,898    47,312  

 Year Ended December 31,
(dollar amounts in thousands)2016 2015 2014
Operating activities     
Net income$711,821
 $692,957
 $632,392
Adjustments to reconcile net income to net cash provided by (used for) operating activities:     
Impairment of goodwill
 
 3,000
Provision for credit losses190,802
 99,954
 80,989
Depreciation and amortization379,772
 341,281
 332,832
Share-based compensation expense65,608
 51,415
 43,666
Net gains on sales of securities(2,035) (3,184) (17,554)
Impairment losses recognized in earnings on available-for-sale securities2,119
 2,440
 
Net Change in:     
Trading account securities(96,298) 5,194
 (6,618)
Loans held for sale(123,047) 53,765
 (58,803)
Accrued income and other assets(95,758) (233,624) (438,366)
Deferred income taxes164,747
 68,776
 35,174
Accrued expense and other liabilities4,001
 (34,846) 282,074
Other, net13,570
 (10,766) 
Net cash provided by (used for) operating activities1,215,302
 1,033,362
 888,786
Investing activities     
Decrease (increase) in interest-bearing deposits in banks26,067
 12,721
 (7,516)
Net cash (paid) received in acquisitions(133,218) (457,836) 691,637
Proceeds from:     
Maturities and calls of available-for-sale securities2,113,383
 1,907,669
 1,480,505
Maturities of held-to-maturity securities1,212,179
 594,905
 452,785
Sales of available-for-sale securities6,154,326
 163,224
 1,152,907
Purchases of available-for-sale securities(10,887,582) (4,506,764) (4,553,857)
Purchases of held-to-maturity securities
 (379,351) 
Net proceeds from sales of loans2,981,184
 1,304,309
 353,811
Net loan and lease activity, excluding sales and purchases(3,950,901) (3,186,775) (4,232,350)
Proceeds from sale of operating lease assets
 2,227
 17,591
Purchases of premises and equipment(120,438) (93,097) (58,862)
Proceeds from sales of other real estate50,299
 36,038
 38,479
Purchases of loans and leases(410,625) (333,726) (345,039)
Net cash paid for branch divestiture(479,571) 
 
Purchases of customer lists
 
 (946)
Other, net(456) 7,802
 6,074
Net cash provided by (used for) investing activities(3,445,353) (4,928,654) (5,004,781)
Financing activities     
Increase (decrease) in deposits(292,259) 3,644,492
 2,923,928
Increase (decrease) in short-term borrowings1,899,561
 (1,818,947) 118,698
Sale of deposits
 (47,521) 
Proceeds from issuance of long-term debt2,127,750
 3,232,227
 2,000,000
Maturity/redemption of long-term debt(1,274,838) (1,036,717) (198,922)
Dividends paid on preferred stock(54,380) (31,872) (31,854)
Dividends paid on common stock(245,208) (192,518) (166,935)
Repurchase of common stock
 (251,844) (334,429)
Proceeds from stock options exercised16,981
 19,000
 17,710
Net proceeds from issuance of common stock
 
 2,597
Net proceeds from issuance of preferred stock584,936
 
 
Other, net5,122
 5,583
 4,635
Net cash provided by (used for) financing activities2,767,665
 3,521,883
 4,335,428
Increase (decrease) in cash and cash equivalents537,614
 (373,409) 219,433
Cash and cash equivalents at beginning of period847,156
 1,220,565
 1,001,132
Cash and cash equivalents at end of period$1,384,770
 $847,156
 $1,220,565
Supplemental disclosures:     
Interest paid$241,073
 $150,403
 $131,488
Income taxes paid4,979
 153,590
 139,918
Non-cash activities:     
Common stock issued to acquire FirstMerit2,766,773
 
 
Preferred stock issued to acquire FirstMerit104,320
 
 
Loans transferred to held-for-sale from portfolio3,436,692
 1,727,440
 96,643
Loans transferred to portfolio from held-for-sale481,516
 278,080
 45,240
Transfer of loans to OREO78,693
 24,625
 39,066
Transfer of securities to held-to-maturity from available-for-sale2,870,257
 3,000,180
 

Huntington Bancshares Incorporated

Notes to Consolidated Financial Statements

1. SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations — Huntington Bancshares Incorporated (Huntington or the Company) is a multi-state diversified regional bank holding company organized under Maryland law in 1966 and headquartered in Columbus, Ohio. Through its subsidiaries, including its bank subsidiary, The Huntington National Bank (the Bank), Huntington is engaged in providing full-service commercial, small business, consumer banking services, mortgage banking services, automobile financing, recreational vehicle and marine financing, equipment leasing, investment management, trust services, brokerage services, customized insurance programs, and other financial products and services. Huntington’s banking offices are located in Ohio, Illinois, Michigan, Pennsylvania, Indiana, West Virginia, Wisconsin and Kentucky. Select financial services and other activities are also conducted in various other states. International banking services are available through the headquarters office in Columbus, Ohio and a limited purpose office located in the Cayman Islands and another in Hong Kong.Ohio.

Basis of Presentation — The Consolidated Financial Statements include the accounts of Huntington and its majority-owned subsidiaries and are presented in accordance with GAAP. All intercompany transactions and balances have been eliminated in consolidation. Companies in which Huntington holds more than a 50% voting equity interest, or a controlling financial interest, or are a VIE in which Huntington has the power to direct the activities of an entity that most significantly impact the entity’s economic performance and has an obligation to absorb losses or the right to receive benefits from the VIE which could potentially be significant to the VIE are consolidated. VIEs are legal entities with insubstantial equity, whose equity investors lack the ability to make decisions about the entity’s activities, or whose equity investors do not have the obligation to absorb losses or the right to receive the residual returns of the entity if they occur. VIEs in which Huntington does not hold the power to direct the activities of the entity that most significantly impact the entity’s economic performance or does not have an obligation to absorb losses or the right to receive benefits from the VIE which could potentially be significant to the VIE are not consolidated. For consolidated entities where Huntington holds less than a 100% interest, Huntington recognizes non-controlling interest (included in shareholders’ equity) for the equity held by others and non-controlling profit or loss (included in noninterest expense) for the portion of the entity’s earnings attributable to other’s interests. Investments in companies that are not consolidated are accounted for using the equity method when Huntington has the ability to exert significant influence. Those investments in nonmarketable securities for which Huntington does not have the ability to exert significant influence are generally accounted for using the cost method. Investments in private investment partnerships that are accounted for under the equity method or the cost method are included in accruedAccrued income and other assets and Huntington’s proportional interest in the equity investments’ earnings are included in other noninterest income. Investment interests accounted for under the cost and equity methods are periodically evaluated for impairment.

The preparation of financial statements in conformity with GAAP requires Managementmanagement to make estimates and assumptions that significantly affect amounts reported in the Consolidated Financial Statements. Huntington utilizes processes that involve the use of significant estimates and the judgments of Managementmanagement in determining the amount of its allowance for credit losses, income taxes deferred tax assets, and contingent liabilities, as well as fair value measurements of investment securities, derivatives, goodwill, other intangible assets, pension assets and liabilities, short-term borrowings, mortgage servicing rights, and loans held for sale. As with any estimate, actual results could differ from those estimates.

For statements of cash flows purposes, cash and cash equivalents are defined as the sum of Cash and due from banks, which includes amounts on deposit with the Federal Reserve and Federal funds sold and securities purchased under resale agreements.
Certain prior period amounts have been reclassified to conform to the current year’s presentation.

Resale and Repurchase Agreements — Securities purchased under agreements to resell and securities sold under agreements to repurchase are treated as collateralized financing transactions and are recorded at the amounts at which the securities were acquired or sold plus accrued interest. The fair value of collateral either received from or provided to a third partythird-party is continually monitored and additional collateral is obtained or requested to be returned to Huntington in accordance with the agreement.

Securities — Securities purchased with the intention of recognizing short-term profits or which are actively bought and sold are classified as trading account securities and reported at fair value. The unrealized gains or losses on trading account securities are recorded in other noninterest income, except for gains and losses on trading account securities used to economically hedge the fair value of MSRs, which are included in mortgage banking income. Debt securities purchased in which Huntington has the positive intent and ability to hold to itstheir maturity are classified as held-to-maturity securities. Held-to-maturity securities are recorded at amortized cost. All other debt and equity securities are classified as available-for-sale and other securities. Unrealized gains or losses on available-for-sale and other securities are reported as a separate component of accumulated OCI in the Consolidated Statements of Changes in Shareholders’ Equity. Credit-related declines in the value of debt and marketable equity securities that are considered other-than-temporaryOTTI are recorded in noninterest income.

Huntington evaluates its investment securities portfolio on a quarterly basis for indicators of OTTI. Huntington assesses whether OTTI has occurred when the fair value of a debt security is less than the amortized cost basis at the balance sheet date. Management

reviews the amount of unrealized loss, the length of time the security has been in an unrealized loss position, the credit rating history, market trends of similar security classes, time remaining to maturity, and the source of both interest and principal payments to identify

securities which could potentially be impaired. OTTI is considered to have occurred (1) ifFor those debt securities that Huntington intends to sell the security; (2) if itor is more likely than not Huntington will be required to sell, before the security before recovery of itstheir amortized cost basis; or (3)bases, the presentdifference between fair value of expected cash flows are not sufficientand amortized cost is considered to recover all contractually required principalbe OTTI and interest payments.is recognized in noninterest income. For those debt securities that Huntington does not expectintend to sell or it is not more likely than not to be required to sell, prior to expected recovery of amortized cost bases, the credit portion of the OTTI is separated intorecognized in noninterest income while the noncredit portion is recognized on OCI. In determining the credit and noncredit components. Aportion, Huntington uses a discounted cash flow analysis, which includes evaluating the timing and amount of the expected cash flows, is completed for all debt securities subject to credit impairment. The measurement of the credit loss component is equal to the difference between the debt security’s cost basis and the present value of its expected future cash flows discounted at the security’s effective yield. The credit-related OTTI, represented by the expected loss in principal, is recognized in noninterest income. The remaining difference between the security’s fair value and the present value of future expected cash flows is due to factors that are not credit-related and, therefore, are recognized in OCI. Huntington believes that it will fully collect the carrying value of securities on which noncredit-related OTTI has been recognized in OCI. Noncredit-relatedflows. Non-credit-related OTTI results from other factors, including increased liquidity spreads and extension of the security. For securities which Huntington does expect to sell, or if it is more likely than not Huntington will be required to sell the security before recovery of its amortized cost basis, all OTTI is recognized in earnings.higher interest rates. Presentation of OTTI is made in the Consolidated Statements of Income on a gross basis with a reduction for the amount of OTTI recognized in OCI. Once an OTTI is recorded, when future cash flows can be reasonably estimated, future cash flows are re-allocated between interest and principal cash flows to provide for a level-yield on the security.

Securities transactions are recognized on the trade date (the date the order to buy or sell is executed). The carrying value plus any related accumulated OCI balance of sold securities is used to compute realized gains and losses. Interest and dividends on securities, including amortization of premiums and accretion of discounts using the effective interest method over the period to maturity, are included in interest income.

Nonmarketable equity securities include stock acquired for regulatory purposes, such as Federal Home Loan Bank stock and Federal Reserve Bank stock. These securities are accounted for at cost, evaluated for impairment, and included in available-for-sale and other securities.

Loans and Leases — Loans and direct financing leases for which Huntington has the intent and ability to hold for the foreseeable future, or until maturity or payoff, are classified in the Consolidated Balance Sheets as loans and leases. Except for loans for which are subject tothe fair value requirements,option has been elected, loans and leases are carried at the principal amount outstanding, net of unamortized deferred loan origination fees and costs and net of unearned income. Direct financing leases are reported at the aggregate of lease payments receivable and estimated residual values, net of unearned and deferred income. Interest income is accrued as earned using the interest method based on unpaid principal balances. Huntington defers the fees it receives from the origination of loans and leases, as well as the direct costs of those activities. Huntington also acquires loans at a premium and at a discount to their contractual values. Huntington amortizes loan discounts, premiums, and net loan origination fees and costs on a level-yield basis over the estimatedcontractual lives of the related loans, which would not include purchased credit impaired loans.

Troubled debt restructurings are loans for which the original contractual terms have been modified to provide a concession to a borrower experiencing financial difficulties. Loan modifications are considered TDRs when the concessions provided are not available to the borrower through either normal channels or other sources. However, not all loan modifications are TDRs. Modifications resulting in troubled debt restructurings may include changes to one or more terms of the loan, including but not limited to, a change in interest rate, an extension of the amortizationrepayment period, a reduction in payment amount, and partial forgiveness or deferment of principal or accrued interest.

Residual values on leased equipment are evaluated quarterly for impairment. Impairment of the residual values of direct financing leases determined to be other than temporary is recognized by writing the leases down to fair value with a charge to other noninterest expense. ResidualLeased equipment residual value lossesimpairment will arise if the expected fair value at the end of the lease term is less than the residual value recorded at the lease origination,carrying amount, net of estimated amounts reimbursable by the lessee. Future declines in the expected residual value of the leased equipment would result in expected losses of the leased equipment.

For leased equipment, the residual component of a direct financing lease represents the estimated fair value of the leased equipment at the end of the lease term. Huntington uses industry data, historical experience, and independent appraisals to establish these residual value estimates. Additional information regarding product life cycle, product upgrades, as well as insight into competing products are obtained through relationships with industry contacts and are factored into residual value estimates where applicable.

Loans Held for Sale — Loans and loan commitments in which Huntington does not have the intent and ability to hold for the foreseeable future are classified as loans held for sale. Loans held for sale (excluding loans originated or acquired with the intent to sell, which are carried at fair value) are carried at the lower of cost or fair value less cost to sell. The fair value option is generally elected for mortgage loans held for sale to facilitate hedging of the loans. FairThe fair value of such loans is determinedestimated based on collateralthe inputs that include prices of mortgage backed securities adjusted for other variables such as, interest rates, expected credit defaults and market discount rates. The adjusted value and prevailing market prices for loans with similar characteristics. Nonmortgage loans held forreflects the price we expect to receive from the sale are measured on an aggregate asset basis.of such loans.

Allowance for Credit Losses — Huntington maintains two reserves, both of which reflect Management’smanagement’s judgment regarding the appropriate level necessary to absorb credit losses inherent in our loan and lease portfolio: the ALLL and the AULC. Combined, these reserves comprise the total ACL. The determination of the ACL requires significant estimates, including the timing and amounts of expected future cash flows on impaired loans and leases, consideration of current economic conditions, and historical loss experience pertaining to pools of homogeneous loans and leases, all of which may be susceptible to change.


The appropriateness of the ACL is based on Management’smanagement’s current judgments about the credit quality of the loan portfolio. These judgments consider on-going evaluations of the loan and lease portfolio, including such factors as the differing economic risks associated with each loan category, the financial condition of specific borrowers, the level of delinquent loans, the value of any collateral and, where applicable, the existence of any guarantees or other documented support. Further, Managementmanagement evaluates the impact of changes in interest rates and overall economic conditions on the ability of borrowers to meet their financial obligations when quantifying our exposure to credit losses and assessing the appropriateness of our ACL at each reporting date. In addition to general economic conditions and the other factors described above, additional factors also considered include: the impact of increasing or decreasing residentialcommercial real estate values; the diversification of CRE loans;values and the development of new or expanded Commercial business segments such as healthcare, ABL, and energy, and the overall condition of the manufacturing industry.segments. Also, the ACL assessment includes the on-going assessment of credit quality metrics, and a comparison of certain ACL benchmarks to current performance. Management’s determinations regarding the appropriateness of the ACL are reviewed and approved by the Company’s Audit and Risk Oversight Committees.

The ALLL consists of two components: (1) the transaction reserve, which includes a loan level allocation, specific reserves related to loans considered to be impaired, and loans involved in troubled debt restructurings, and (2) the general reserve. The transaction reserve component includes both (1) an estimate of loss based on pools of commercial and consumer loans and leases with similar characteristics and (2) an estimate of loss based on an impairment review of each impaired C&I and CRE loan where obligor balance is greater than $1.0 million. For the C&I and CRE portfolios, the estimate of loss based on pools of loans and leases with similar characteristics is made by applying a PD factor and a LGD factor to each individual loan based on a regularly updated loan grade, using a standardized loan grading system. The PD factor and an LGD factor are determined for each loan grade using statistical models based on historical performance data. The PD factor considers on-going reviews of the financial performance of the specific borrower, including cash flow, debt-service coverage ratio, earnings power, debt level, and equity position, in conjunction with an assessment of the borrower’s industry and future prospects. The LGD factor considers analysis of the type of collateral and the relative LTV ratio. These reserve factors are developed based on credit migration models that track historical movements of loans between loan ratings over time and a combination of long-term average loss experience of our own portfolio and external industry data using a 24-month emergence period.

data.

In the case of more homogeneous portfolios, such as automobile loans, home equity loans, and residential mortgage loans, the determination of the transaction reserve also incorporates PD and LGD factors. The estimate of loss is based on pools of loans and leases with similar characteristics. The PD factor considers current credit scores unless the account is delinquent, in which case a higher PD factor is used. The credit score provides a basis for understanding the borrower’s past and current payment performance, and this information is used to estimate expected losses over the 12-month emergence period. The performance of first-lien loans ahead of our junior-lien loans is available to use as part of our updated score process. The LGD factor considers analysis of the type of collateral and the relative LTV ratio. Credit scores, models, analyses, and other factors used to determine both the PD and LGD factors are updated frequently to capture the recent behavioral characteristics of the subject portfolios, as well as any changes in loss mitigation or credit origination strategies, and adjustments to the reserve factors are made as required. Models utilized in the ALLL estimation process are subject to the Company’s model validation policies.

The general reserve consists of the economic reserve andvarious risk-profile reserve components. The economic reserve component considers the impact of changing market and economic conditions on portfolio performance. The risk-profile component considers items unique to our structure, policies, processes, and portfolio composition, as well as qualitative measurements and assessments of the loan portfolios including, but not limited to, management quality, concentrations, portfolio composition, industry comparisons, and internal review functions.

The estimate for the AULC is determined using the same procedures and methodologies as used for the ALLL. The loss factors used in the AULC are the same as the loss factors used in the ALLL while also considering a historical utilization of unused commitments. The AULC is recorded in accruedAccrued expenses and other liabilities in the Consolidated Balance Sheets.

Nonaccrual and Past Due Loans — Loans are considered past due when the contractual amounts due with respect to principal and interest are not received within 30 days of the contractual due date.

Any loan in any portfolio may be placed on nonaccrual status prior to the policies described below when collection of principal or interest is in doubt. When a borrower with debt is discharged in a Chapter 7 bankruptcy and not reaffirmed by the borrower, the loan is determined to be collateral dependent and placed on nonaccrual status, unless there is a co-borrower.

All classes within the C&I and CRE portfolios (except for purchased credit-impaired loans) are placed on nonaccrual status at 90-days past due. First-lien home equity loans are placed on nonaccrual status at 150-days past due. Junior-lien home equity loans are placed on nonaccrual status at the earlier of 120-days past due or when the related first-lien loan has been identified as nonaccrual. Automobile and other consumer loans are generally charged-off when the loan is 120-days past due. Residential mortgage loans are placed on nonaccrual status at 150-days past due, with the exception of residential mortgages guaranteed by government agencies which continue to accrue interest at the rate guaranteed by the government agency. We are reimbursed from the government agency for reasonable expenses incurred in servicing loans. The FHA reimburses us for 66% of expenses, and the VA reimburses us at a maximum percentage of guarantee which is established for each individual loan. We have not experienced either material losses in excess of guarantee caps or significant delays or rejected claims from the related government entity.

For all classes within all loan portfolios, when a loan is placed on nonaccrual status, any accrued interest income is reversed with current year accruals charged to interest income, and prior year amounts charged-off as a credit loss.


For all classes within all loan portfolios, cash receipts received on NALs are applied against principal until the loan or lease has been collected in full, including charged-off portion, after which time any additional cash receipts are recognized as interest income. However, for secured non-reaffirmed debt in a Chapter 7 bankruptcy, payments are applied to principal and interest when the borrower has demonstrated a capacity to continue payment of the debt and collection of the debt is reasonably assured. For unsecured non-reaffirmed debt in a Chapter 7 bankruptcy where the carrying value has been fully charged-off, payments are recorded as loan recoveries.

Regarding all classes within the C&I and CRE portfolios, the determination of a borrower’s ability to make the required principal and interest payments is based on an examination of the borrower’s current financial statements, industry, management capabilities, and other qualitative measures. For all classes within the consumer loan portfolio, the determination of a borrower’s ability to make the required principal and interest payments is based on multiple factors, including number of days past due and, in some instances, an evaluation of the borrower’s financial condition. When, in Management’smanagement’s judgment, the borrower’s ability to make required principal and interest payments resumes and collectability is no longer in doubt, supported by sustained repayment history, the loan is returned to accrual status. For these loans that have been returned to accrual status, cash receipts are applied according to the contractual terms of the loan.

Charge-off of Uncollectible Loans — Any loan in any portfolio may be charged-off prior to the policies described below if a loss confirming event has occurred. Loss confirming events include, but are not limited to, bankruptcy (unsecured), continued delinquency, foreclosure, or receipt of an asset valuation indicating a collateral deficiency and that asset is the sole source of repayment. Additionally, discharged, collateral dependent non-reaffirmed debt in Chapter 7 bankruptcy filings will result in a charge-off to estimated collateral value, less anticipated selling costs.

C&I and CRE loans are either charged-off or written down to net realizable value at 90-days past due. Automobile loans and other consumer loans are charged-off at 120-days past due. First-lien and junior-lien home equity loans are charged-off to the estimated fair value of the collateral, less anticipated selling costs, at 150-days past due and 120-days past due, respectively. Residential mortgages are charged-off to the estimated fair value of the collateral at 150-days past due.

Impaired Loans — For all classes within the C&I and CRE portfolios, all loans with an outstandingobligor balance of $1.0 million or greater are evaluated on a quarterly basis for impairment. Generally,Except for TDRs, consumer loans within any class are generally not individually evaluated on a regular basis for impairment. All TDRs, regardless of the outstanding balance amount, are also considered to be impaired. Loans acquired with evidence of deterioration in credit quality since origination for which it is probable at acquisition that all contractually required payments will not be collected are also considered to be impaired.

Once a loan has been identified for an assessment of impairment, the loan is considered impaired when, based on current information and events, it is probable that all amounts due according to the contractual terms of the loan agreement will not be collected. This determination requires significant judgment and use of estimates, and the eventual outcome may differ significantly from those estimates.

When a loan in any class has been determined to be impaired, the amount of the impairment is measured using the present value of expected future cash flows discounted at the loan’s effective interest rate or, as a practical expedient, the observable market price of the loan, or the fair value of the collateral, less anticipated selling costs, if the loan is collateral dependent. When the present value of expected future cash flows is used, the effective interest rate is the original contractual interest rate of the loan adjusted for any cost, fee, premium, or discount. When the contractual interest rate is variable, the effective interest rate of the loan changes over time. A specific reserve is established as a component of the ALLL when a loan has been determined to be impaired. Subsequent to the initial measurement of impairment, if there is a significant change to the impaired loan’s expected future cash flows, or if actual cash flows are significantly different from the cash flows previously estimated, Huntington recalculates the impairment and appropriately adjusts the specific reserve. Similarly, if Huntington measures impairment based on the observable market price of an impaired loan or the fair value of the collateral of an impaired collateral dependent loan, Huntington will adjust the specific reserve.

When a loan within any class is impaired, the accrual of interest income is discontinued unless the receipt of principal and interest is no longer in doubt. Interest income on TDRs is accrued when all principal and interest is expected to be collected under the post-

modificationpost-modification terms. Cash receipts received on nonaccruing impaired loans within any class are generally applied entirely against principal until the loan has been collected in full (including already charged-off portion), after which time any additional cash receipts are recognized as interest income. Cash receipts received on accruing impaired loans within any class are applied in the same manner as accruing loans that are not considered impaired.

Purchased Credit-Impaired Loans — Purchased loans with evidence of deterioration in credit quality since origination for which it is probable at acquisition that we will be unable to collect all contractually required payments are considered to be credit impaired. Purchased credit-impaired loans are initially recorded at fair value, which is estimated by discounting the cash flows expected to be collected at the acquisition date. Because the estimate of expected cash flows reflects an estimate of future credit losses expected to be incurred over the life of the loans, an allowance for credit losses is not recorded at the acquisition date. The excess of cash flows expected at acquisition over the estimated fair value, referred to as the accretable yield, is recognized in interest income

over the remaining life of the loan, or pool of loans, on a level-yield basis. The difference between the contractually required payments at acquisition and the cash flows expected to be collected at acquisition is referred to as the nonaccretable difference. A subsequent decrease in the estimate of cash flows expected to be received on purchased credit-impaired loans generally results in the recognition of an allowance for credit losses. Subsequent increases in cash flows result in reversal of any nonaccretable difference (or allowance for loan and lease losses to the extent any has been recorded) with a positive impact on interest income subsequently recognized. The measurement of cash flows involves assumptions and judgments for interest rates, prepayments, default rates, loss severity, and collateral values. All of these factors are inherently subjective and significant changes in the cash flow estimates over the life of the loan can result.

Transfers of Financial Assets and Securitizations — Transfers of financial assets in which we have surrendered control over the transferred assets are accounted for as sales. In assessing whether control has been surrendered, we consider whether the transferee would be a consolidated affiliate, the existence and extent of any continuing involvement in the transferred financial assets, and the impact of all arrangements or agreements made contemporaneously with, or in contemplation of, the transfer, even if they were not entered into at the time of transfer. Control is generally considered to have been surrendered when (i) the transferred assets have been

legally isolated from us or any of our consolidated affiliates, even in bankruptcy or other receivership, (ii) the transferee (or, if the transferee is an entity whose sole purpose is to engage in securitization or asset-backed financing that is constrained from pledging or exchanging the assets it receives, each third-party holder of its beneficial interests) has the right to pledge or exchange the assets (or beneficial interests) it received without any constraints that provide more than a trivial benefit to us, and (iii) neither we nor our consolidated affiliates and agents have (a) both the right and obligation under any agreement to repurchase or redeem the transferred assets before their maturity, (b) the unilateral ability to cause the holder to return specific financial assets that also provides us with a more-than-trivial benefit (other than through a cleanup call) or (c) an agreement that permits the transferee to require us to repurchase the transferred assets at a price so favorable that it is probable that it will require us to repurchase them.

If the sale criteria are met, the transferred financial assets are removed from our balance sheet and a gain or loss on sale is recognized. If the sale criteria are not met, the transfer is recorded as a secured borrowing in which the assets remain on our balance sheet and the proceeds from the transaction are recognized as a liability. For the majority of financial asset transfers, it is clear whether or not we have surrendered control. For other transfers, such as in connection with complex transactions or where we have continuing involvement, we generally obtain a legal opinion as to whether the transfer results in a true sale by law.

We have historically securitized

From time to time we securitize certain automobile receivables. Gains and losses on the loans and leases sold and servicing rights associated with loan and lease sales are determined when the related loans or leases are sold to either a securitization trust or third party.third-party. For loan or lease sales with servicing retained, a servicing asset is recorded at fair value for the right to service the loans sold.

Derivative Financial Instruments — A variety of derivative financial instruments, principally interest rate swaps, caps, floors, and collars, are used in asset and liability management activities to protect against the risk of adverse price or interest rate movements. These instruments provide flexibility in adjusting Huntington’s sensitivity to changes in interest rates without exposure to loss of principal and higher funding requirements.

Huntington also uses derivatives, principally loan sale commitments, in hedging its mortgage loan interest rate lock commitments and its mortgage loans held for sale. Mortgage loan sale commitments and the related interest rate lock commitments are carried at fair value on the Consolidated Balance Sheets with changes in fair value reflected in mortgage banking income. Huntington also uses certain derivative financial instruments to offset changes in value of its MSRs. These derivatives consist primarily of forward interest rate agreements and forward mortgage contracts. The derivative instruments used are not designated as qualifying hedges. Accordingly, such derivatives are recorded at fair value with changes in fair value reflected in mortgage banking income.

Derivative financial instruments are recorded in the Consolidated Balance Sheets as either an asset or a liability (in accrued income and other assets or accrued expenses and other liabilities, respectively) and measured at fair value. On the date a derivative contract is entered into, we designate it as either:

a qualifying hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment (fair value hedge);

a qualifying hedge of the variability of cash flows to be received or paid related to a recognized asset liability or forecasted transaction (cash flow hedge); or

a trading instrument or a non-qualifying (economic) hedge.

Changes in the fair value of a derivative that has been designated and qualifies as a fair value hedge, along with the changes in the fair value of the hedged asset or liability that is attributable to the hedged risk, are recorded in current period earnings. Changes in the fair value of a derivative that has been designated and qualifies as a cash flow hedge, to the extent effective as a hedge, are recorded in accumulated other comprehensive income, net of income taxes, and reclassified into earnings in the period during which

the hedged item affects earnings. Ineffectiveness in the hedging relationship is reflected in current period earnings. Changes in the fair value of derivatives held for trading purposes or which do not qualify for hedge accounting are reported in current period earnings.

For those derivatives to which hedge accounting is applied, Huntington formally documents the hedging relationship and the risk management objective and strategy for undertaking the hedge. This documentation identifies the hedging instrument, the hedged item or transaction, the nature of the risk being hedged, and, unless the hedge meets all of the criteria to assume there is no ineffectiveness, the method that will be used to assess the effectiveness of the hedging instrument and how ineffectiveness will be measured. The methods utilized to assess retrospective hedge effectiveness, as well as the frequency of testing, vary based on the type of item being hedged and the designated hedge period. For specifically designated fair value hedges of certain fixed-rate debt, Huntington utilizes the short-cut method when certain criteria are met. For other fair value hedges of fixed-rate debt, including certificates of deposit, Huntington utilizes the regression method to evaluate hedge effectiveness on a quarterly basis. For fair value hedges of portfolio loans, the regression method is used to evaluate effectiveness on a daily basis. For cash flow hedges, the regression method is applied on a quarterly basis.

Hedge accounting is discontinued prospectively when:

the derivative is no longer effective or expected to be effective in offsetting changes in the fair value or cash flows of a hedged item (including firm commitments or forecasted transactions);

the derivative expires or is sold, terminated, or exercised;

it is unlikely that a forecasted transaction will occur;

the hedged firm commitment no longer meets the definition of a firm commitment; or

the designation of the derivative as a hedging instrument is removed.

When hedge accounting is discontinued because it is determined that the derivative no longer qualifies as an effective fair value or cash flow hedge, the derivative will continue to be carried on the balance sheet at fair value.

In the case of a discontinued fair value hedge of a recognized asset or liability, as long as the hedged item continues to exist on the balance sheet, the hedged item will no longer be adjusted for changes in fair value. The basis adjustment that had previously been recorded to the hedged item during the period from the hedge designation date to the hedge discontinuation date is recognized as an adjustment to the yield of the hedged item over the remaining life of the hedged item.

In the case of a discontinued cash flow hedge of a recognized asset or liability, as long as the hedged item continues to exist on the balance sheet, the effective portion of the changes in fair value of the hedging derivative will no longer be recorded to other comprehensive income. The balance applicable to the discontinued hedging relationship will be recognized in earnings over the remaining life of the hedged item as an adjustment to yield. If the discontinued hedged item was a forecasted transaction that is not expected to occur, any amounts recorded on the balance sheet related to the hedged item, including any amounts recorded in accumulated other comprehensive income, are immediately reclassified to current period earnings.

In the case of either a fair value hedge or a cash flow hedge, if the previously hedged item is sold or extinguished, the basis adjustment to the underlying asset or liability or any remaining unamortized other comprehensive income balance will be reclassified to current period earnings.

In all other situations in which hedge accounting is discontinued, the derivative will be carried at fair value on the consolidated balance sheets, with changes in its fair value recognized in current period earnings unless re-designated as a qualifying hedge.

Like other financial instruments, derivatives contain an element of credit risk, which is the possibility that Huntington will incur a loss because the counterparty fails to meet its contractual obligations. Notional values of interest rate swaps and other off-balance sheet financial instruments significantly exceed the credit risk associated with these instruments and represent contractual balances on which calculations of amounts to be exchanged are based. Credit exposure is limited to the sum of the aggregate fair value of positions that have become favorable to Huntington, including any accrued interest receivable due from counterparties. Potential credit losses are mitigated through careful evaluation of counterparty credit standing, selection of counterparties from a limited group of high quality institutions, collateral agreements, and other contract provisions. Huntington considers the value of collateral held and collateral provided in determining the net carrying value of derivatives.

Huntington offsets the fair value amounts recognized for derivative instruments and the fair value for the right to reclaim cash collateral or the obligation to return cash collateral arising from derivative instrument(s) recognized at fair value executed with the same counterparty under a master netting arrangement.

Repossessed Collateral — Repossessed collateral, also referred to as other real estate owned (OREO),OREO, is comprised principally of commercial and residential real estate properties obtained in partial or total satisfaction of loan obligations, and is carried at the lower of cost or fair value. Collateral obtained in satisfaction of a loan is recorded at the estimated fair value less anticipated selling costs based upon the property’s

appraised value at the date of foreclosure, with any difference between the fair value of the property and the carrying value of the loan recorded as a charge-off. If the fair value is higher than the carrying amount of the loan the excess is recognized first as a recovery and then as noninterest income. Subsequent declines in value are reported as adjustments to the carrying amount and are recorded in noninterest expense. Gains or losses resulting from the sale of collateral are recognized in noninterest expense at the date of sale.

Collateral — We pledge assets as collateral as required for various transactions including security repurchase agreements, public deposits, loan notes, derivative financial instruments, short-term borrowings and long-term borrowings. Assets that have been pledged as collateral, including those that can be sold or repledged by the secured party, continue to be reported on our Consolidated Balance Sheets.

We also accept collateral, primarily as part of various transactions including derivative and security resale agreements. Collateral accepted by us, including collateral that we can sell or repledge, is excluded from our Consolidated Balance Sheets.

The market value of collateral we have accepted or pledged is regularly monitored and additional collateral is obtained or provided as necessary to ensure appropriate collateral coverage in these transactions.

Premises and Equipment — Premises and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation is computed principally by the straight-line method over the estimated useful lives of the related assets. Buildings and building improvements are depreciated over an average of 30 to 40 years and 10 to 30 years, respectively. Land improvements and furniture and fixtures are depreciated over an average of 5 to 20 years, while equipment is depreciated over a range of 3 to 10 years. Leasehold improvements are amortized over the lesser of the asset’s useful life or the lease term, including any renewal periods for which renewal is reasonably assured. Maintenance and repairs are charged to expense as incurred, while improvements that extend the useful life of an asset are capitalized and depreciated over the remaining useful life. Premises and equipment is evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.

Mortgage Servicing Rights — Huntington recognizes the rights to service mortgage loans as separate assets, which are included in accrued income and other assetsServicing Rights in the Consolidated Balance Sheets when purchased, or when servicing is contractually separated from the underlying mortgage loans by sale or securitization of the loans with servicing rights retained.

For loan sales with servicing retained, a servicing asset is recorded on the day of the sale at fair value for the right to service the loans sold. To determine the fair value of a MSR, Huntington uses an option adjusted spread cash flow analysis incorporating market implied forward interest rates to estimate the future direction of mortgage and market interest rates. The forward rates utilized are derived from the current yield curve for U.S. dollar interest rate swaps and are consistent with pricing of capital markets instruments. The current and projected mortgage interest rate influences the prepayment rate and, therefore, the timing and magnitude of the cash flows associated with the MSR. Servicing revenues on mortgage loans are included in mortgage banking income.

At the time of initial capitalization, MSRs may be grouped into servicing classes based on the availability of market inputs used in determining fair value and the method used for managing the risks of the servicing assets. MSR assets are recorded using the fair value method or the amortization method. The election of the fair value or amortization method is made at the time each servicing class is established. All newly created MSRs since 2009 were recorded using the amortization method. Any change in the fair value of MSRs carried under the fair value method, as well as amortization and impairment of MSRs under the amortization method, during the period is recorded in mortgage banking income, which is reflected in the Consolidated Statements of Income. Huntington economically hedges the value of certain MSRs using derivative instruments and trading securities. Changes in fair value of these derivatives and trading account securities are reported as a component of mortgage banking income.

Goodwill and Other Intangible Assets — Under the acquisition method of accounting, the net assets of entities acquired by

Huntington are recorded at their estimated fair value at the date of acquisition. The excess cost of the acquisition over the fair value of net assets acquired is recorded as goodwill. Other intangible assets with finite useful lives are amortized either on an accelerated or straight-line basis over their estimated useful lives. Goodwill is evaluated for impairment on an annual basis at October 1st of each year or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. OtherIndefinite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.

Pension and Other Postretirement Benefits — We recognize the funded status of the postretirement benefit plans on the Consolidated Balance Sheets. Net postretirement benefit cost charged to current earnings related to these plans is based on various actuarial assumptions regarding expected future experience.

Certain employees are participants in various defined contribution and other non-qualified supplemental retirement plans. Our contributions to thesedefined contribution plans are charged to current earnings.

In addition, we maintain a 401(k) plan covering substantially all employees. Employer contributions to the plan, which are charged to current earnings, are based on employee contributions.


Share-Based Compensation — We use the fair value based method of accounting for awards of HBAN stock granted to employees under various stock option and restricted share plans. Stock compensation costs are recognized prospectively for all new awards granted under these plans. Compensation expense relating to share options is calculated using a methodology that is based on the underlying assumptions of the Black-Scholes option pricing model and is charged to expense over the requisite service period (e.g. vesting period). Compensation expense relating to restricted stock awards is based upon the fair value of the awards on the date of grant and is charged to earnings over the requisite service period (e.g., vesting period) of the award.

Stock Repurchases — Acquisitions of Huntington stock are recorded at cost. The re-issuance of shares is recorded at weighted-average cost.

Income Taxes — Income taxes are accounted for under the asset and liability method. Accordingly, deferred tax assets and liabilities are recognized for the future book and tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are determined using enacted tax rates expected to apply in the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income at the time of enactment of such change in tax rates. Any interest or penalties due for payment of income taxes are included in the provision for income taxes. To the extent that we do not consider it more likely than not that a deferred tax asset will be recovered, a valuation allowance is recorded. All positive and negative evidence is reviewed when determining how much of a valuation allowance is recognized on a quarterly basis. In determining the requirements for a valuation allowance, sources of possible taxable income are evaluated including future reversals of existing taxable temporary differences, future taxable income exclusive of reversing temporary differences and carryforwards, taxable income in appropriate carryback years, and tax-planning strategies. Huntington applies a more likely than not recognition threshold for all tax uncertainties.

Bank Owned Life Insurance — Huntington’s bank owned life insurance policies are recorded at their cash surrender value. Huntington recognizes tax-exempt income from the periodic increases in the cash surrender value of these policies and from death benefits. A portion of the cash surrender value is supported by holdings in separate accounts. Book value protection for the separate accounts is provided by the insurance carriers and a highly rated major bank.

Fair Value Measurements — The Company records or discloses certain of its assets and liabilities at fair value. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Fair value measurements are classified within one of three levels in a valuation hierarchy based upon the transparencyobservability of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:

Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

Segment Results — Accounting policies for the business segments are the same as those used in the preparation of the Consolidated Financial Statements with respect to activities specifically attributable to each business segment. However, the preparation of business segment results requires Managementmanagement to establish methodologies to allocate funding costs and benefits, expenses, and other financial elements to each business segment. Changes are madesegment, which is described in these methodologies as appropriate.Note 24.

Statement of Cash Flows — Cash and cash equivalents are defined as cash and due from banks which includes amounts on deposit with the Federal Reserve and federal funds sold and securities purchased under resale agreements.

Transactions with Related Parties — In the normal course of business, we may enter into transactions with various related parties. These transactions occur at prevailing market rates and terms and include funding arrangements, transfers of financial assets, administrative and operational support, and other miscellaneous services.


2. ACCOUNTING STANDARDS UPDATE

ASU 2013-11— Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. The ASU requires that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. However, unrecognized tax benefits should be presented in the financial statements as a liability and should not be combined with deferred tax assets in circumstances where availability or legal requirement and intent to settle additional incomes taxes is not met. The amendments were applied prospectively and were effective for interim and annual reporting periods beginning January 1, 2014. The amendments did not have a material impact to Huntington’s Consolidated Financial Statements.

ASU 2014-01— Investments (Topic 323): Accounting for Investments in Qualified Affordable Housing Projects.

The amendments in ASU 2014-01 permit entities to make an accounting policy election to account for investments in qualified affordable housing projects using the proportional amortization method if certain conditions are met. Under the proportional amortization method, an entity recognizes the net investment performance in the income statement as a component of income tax expense (benefit). Huntington elected to early adopt the amended guidance during the first quarter of 2014. The guidance was applied retrospectively to all prior periods presented. The adoption resulted in an immaterial adjustment reducing retained earnings at the beginning of 2010. The impact to current period net income was not material. See discussion on Low Income Housing Tax Credit Partnerships in Note 19 for further information on this topic.

ASU 2014-04— Receivables (Topic 310): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure.The ASU clarifies that an in substance repossession or foreclosure occurs upon either the creditor obtaining legal title to the residential real estate property or the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. The amendments are effective for annual periods, and interim reporting periods within those annual periods, beginning after December 15, 2014. The amendments may be adopted using either a modified retrospective transition method or a prospective transition method. Management does not believe the amendments will have a material impact to Huntington’s Consolidated Financial Statements.

ASU 2014-09—Revenue from Contracts with Customers (Topic 606): The amendments in ASU 2014-09 supersede the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance. The general principle of the amendments require an entity to recognize revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance sets forth a five step approach to be utilized for revenue recognition. The amendments are effective for annual reporting periods beginning after December 15, 2016,2017, including interim periods within that reporting period. Management intends to adopt the new guidance on January 1, 2018 using the modified retrospective approach and is well into its outlined implementation plan. In this regard, management has completed a preliminary analysis that includes (a) identification of all revenue streams included in the financial statements; (b) determination of scope exclusions to identify ‘in-scope’ revenue streams; (c) determination of size, timing, and amount of revenue recognition for in-scope items; (d) determination of sample size of contracts for further analysis; and (e) completion of limited analysis on selected contracts to evaluate the potential impact of the new guidance. The key revenue streams identified include service charges, credit card and payment processing fees, trust services fees, insurance income, brokerage services, and mortgage banking income. The new guidance is not expected to have a significant impact on Huntington’s Consolidated Financial Statements.

ASU 2016-01 - Recognition and Measurement of Financial Assets and Financial Liabilities. The amendments in this Update make targeted improvements to GAAP including, but not limited to, requiring an entity to measure its equity investments with changes in the fair value recognized in the income statement; requiring an entity to present separately in OCI the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments (i.e., FVO liability); requiring public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; assessing deferred tax assets related to a net unrealized loss on AFS securities in combination with the entity’s other deferred tax assets; and eliminating some of the disclosures required by the existing GAAP while requiring entities to present and disclose some additional information. The new guidance is effective for the fiscal period beginning after December 15, 2017, including interim periods within those fiscal years. An entity should apply the amendments as a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The amendment is not expected to have a material impact on Huntington's Consolidated Financial Statements.
ASU 2016-02 - Leases. This Update sets forth a new lease accounting model for lessors and lessees. For lessees, virtually all leases will be required to be recognized on the balance sheet by recording a right-of-use asset and lease liability. Subsequent accounting for leases varies depending on whether the lease is an operating lease or a finance lease. The accounting applied by a lessor is largely unchanged from that applied under the existing guidance. The ASU requires additional qualitative and quantitative disclosures with the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The Update is effective for the fiscal period beginning after December 15, 2018, with early application permitted. Management is currently assessing the impact to Huntington’sof the new guidance on Huntington's Consolidated Financial Statements. Huntington expects to recognize a right-of-use asset and a lease liability for its operating lease commitments. Please refer to Note 21 for Huntington's commitments under operating lease obligations.

ASU 2014-11— Transfers and Servicing (Topic 860): Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures. The amendments2016-05 - Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships. This Update provides accounting clarification for changes in the ASUcounterparty to a derivative instrument that has been designated as a qualified hedging instrument. Specifically, changes in the derivative counterparty should not, in and of itself, require repurchase-to-maturity transactionsde-designation of that hedging relationship provided that all other hedge accounting criteria continue to be recorded and accounted for as secured borrowings. Amendments to Topic 860 also require separate accounting for a transfer of a financial asset executed contemporaneously with a repurchase agreement with the same counterparty (i.e., a repurchase financing), which will result in secured borrowing accounting for the repurchase agreement, as well as additional required disclosures. The accounting amendments and disclosures aremet. This Update is effective for interim and annual periodsfinancial statements issued for fiscal years beginning after December 15, 2014. The disclosures2016 and interim periods within those fiscal years. Early application is permitted. An entity has an option to apply the amendments in this Update on either a prospective basis or a modified retrospective basis. Management does not believe the new guidance will have a significant impact on Huntington's Consolidated Financial Statements.
ASU 2016-06 - Contingent Put and Call Options in Debt Instruments. This Update clarifies the requirements for repurchase agreements, securities lending transactions,assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and repurchase-to-maturity transactions accounted for as secured borrowings areclosely related to their debt instruments. An entity performing the assessment set forth in this Update will be required to assess embedded call (put) options solely in accordance with the four-step decision sequence. This Update is effective for financial statements issued for fiscal years beginning after December 15, 2016 and interim periods within those fiscal years. Early adoption is permitted. An entity should apply this Update on a modified retrospective basis to existing debt instruments as of the beginning of the fiscal year for which the amendments are effective. This Update is not expected to have a significant impact on Huntington's Consolidated Financial Statements.
ASU 2016-07 - Simplifying the Transition to the Equity Method of Accounting. This Update eliminates the requirement for the retrospective use of the equity method of accounting as a result of an increase in the level of ownership interest or degree of influence of an investor. The amendments require that the equity method investor add the cost of acquiring the additional interest in the investee to the current basis of the investor’s previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for the equity method accounting. This Update is effective for fiscal years, and interim periods within those fiscal

years, beginning after December 15, 2016. The amendments are not expected to have a significant impact on Huntington's Consolidated Financial Statements.
ASU 2016-09 - Improvements to Employee Share-Based Payment Accounting. This Update simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification in the statement of cash flows. The amendments, among other things, require all tax benefits and tax deficiencies related to share-based awards to be presentedrecognized in the income statement. Other changes include an election related to the accounting for forfeitures, changes to the cash flow statement presentation for excess tax benefits, as well as for cash paid by an employer when directly withholding shares for tax withholding purposes. The amendments are effective for annual periods beginning after December 15, 2014, and for interim periods beginning after March 15, 2015. Management is currently assessing the impact to Huntington’s Consolidated Financial Statements.

ASU 2014-12— Compensation—Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. The amendments require that a performance target that affects vesting, and that could be achieved after the requisite service period, be treated as a performance condition. Specifically, if the performance target becomes probable of being achieved before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service period. The amendments are effective for annual periods2016, and interim periods within those annual periodsperiods. Early adoption is permitted for any entity in any interim or annual period. This Update was adopted in the current reporting period with no significant impact recognized on Huntington’s Consolidated Financial Statements.

ASU 2016-13 - Financial Instruments - Credit Losses. The amendments in this Update eliminate the probable recognition threshold for credit losses on financial assets measured at amortized cost. The Update requires those financial assets to be presented at the net amount expected to be collected (i.e., net of expected credit losses). The measurement of expected credit losses should be based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectibility of the reported amount. The Update is effective for fiscal years beginning after December 15, 2015.2019, including interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2018. The amendments should be applied through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. Management currently intends to adopt the guidance on January 1, 2020 and is currently assessing the impact to Huntington’sof this Update on Huntington's Consolidated Financial Statements.

ASU 2014-13—Consolidation (Topic 810): Measuring Management has formed a working group comprising of teams from different disciplines including credit and finance. The working group is currently evaluating the Financial Assetsrequirements of the new standard and the Financial Liabilitiesimpact it will have on our processes. The early stages of this evaluation include a Consolidated Collateralized Financing Entityreview of existing credit models to identify areas where existing credit models used to comply with other regulatory requirements may be leveraged and areas where new impairment models may be required.

ASU 2016-15 - Classification of Certain Cash Receipts and Cash Payments. The amendments allow a reporting entity that consolidates a collateralized financing entity withinin this Update add or clarify guidance on the scopeclassification of certain cash receipts and payments in the statement of cash flows. Current guidance lacks consistent principles for evaluating the classification of cash payments and receipts in the statement of cash flows. This has led to electdiversity in practice and, in certain circumstances, financial statement restatements. Therefore, the FASB issued the ASU with the intent of reducing diversity in practice with respect to measure the financial assets and the financial liabilitiesseveral types of that collateralized financing entity using the measurement alternative. Under the measurement alternative, the reporting entity should measure both the financial assets and the financial liabilities of that collateralized financing entity in its consolidated financial statements using the more observable of the fair value of the financial assets and the fair value of the financial liabilities.cash flows. The amendments in this Update are effective using a retrospective transition approach for annual periods,fiscal years beginning after December 15, 2017, and interim periods within those annual periods,fiscal years. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. This Update is not expected to have a significant impact on Huntington's Consolidated Financial Statements.
ASU 2016-17 - Consolidation - Interests Held Through Related Parties that are Under Common Control. The Update amends the guidance included in ASU 2015-02, Consolidation: Amendments to Consolidation Analysis adopted by Huntington earlier this year. The Update makes a narrow amendment and requires that a single decision maker should consider indirect economic interests in the entity held through related parties that are under common control on a proportionate basis when determining whether it is the primary beneficiary of that VIE. Prior to this amendment, indirect interests held through related parties that are under common control were to be considered equivalent of single decision maker’s direct interests in their entirety. The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2015. Management does2016, including interim periods within those fiscal years. Early adoption is permitted. The adoption of the Update is not believe the amendments willexpected to have a materialsignificant impact toon Huntington’s Consolidated Financial Statements.

ASU 2014-14— Receivables—Troubled Debt Restructurings by Creditors (Subtopic 310-40): Classification3.ACQUISITION OF FIRSTMERIT CORPORATION

On August 16, 2016, Huntington completed its acquisition of Certain Government-Guaranteed Mortgage Loans upon Foreclosure.FirstMerit Corporation in a stock and cash transaction valued at approximately $3.7 billion. FirstMerit Corporation was a diversified financial services company headquartered in Akron, Ohio, with operations in Ohio, Michigan, Wisconsin, Illinois and Pennsylvania. Post merger, Huntington now operates across an eight-state Midwestern footprint. The amendments requiremerger resulted in a mortgagecombined company with a larger market presence and more diversified loan to be derecognizedportfolio, as well as a larger core deposit funding base and economies of scale associated with a separate receivable to be recognized upon foreclosure iflarger financial institution.

Under the loan has a government guarantee that is non-separable from the loan before foreclosure, the creditor has the ability and intent to convey the real estate property to the guarantor, and any amountterms of the claimagreement, shareholders of FirstMerit Corporation received 1.72 shares of Huntington common stock, and $5.00 in cash, for each share of FirstMerit Corporation common stock. The aggregate purchase price was $3.7 billion, including $0.8 billion of cash, $2.8 billion of common stock, and $0.1 billion of preferred stock. Huntington issued 285 million shares of common stock that is determined on the basis of thehad a total fair value of the real estate is fixed. Additionally, the separate other receivable should be measured$2.8 billion based on the closing market price of $9.68 per share on August 15, 2016.


The acquisition of FirstMerit constituted a business combination. The FirstMerit merger has been accounted for using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed, and consideration exchanged were recorded at estimated fair value on the acquisition date. The determination of estimated fair values required management to make certain estimates about discount rates, future expected cash flows, market conditions, and other future events that are highly subjective in nature and may require adjustments, which can be updated for up to a year following the acquisition. As of December 31, 2016, Management completed its review of information relating to events or circumstances existing at the acquisition date.

The following table reflects consideration paid for FirstMerit's net assets and the amounts of acquired identifiable assets and liabilities assumed as of the acquisition date:


  FirstMerit
(dollar amounts in thousands) UPB Fair Value
Assets acquired:    
Cash and due from banks   $703,661
Interest-bearing deposits in banks   32,496
Loans held for sale   150,576
Available for sale and other securities   7,369,967
Loans and leases:    
Commercial:    
Commercial and industrial $7,410,503
 7,252,692
Commercial real estate 1,898,875
 1,844,150
Total commercial 9,309,378
 9,096,842
Consumer:    
Automobile 1,610,007
 1,609,145
Home equity 1,579,832
 1,537,791
Residential mortgage 1,098,588
 1,092,050
RV and marine finance 1,823,312
 1,816,575
Other consumer 324,350
 323,512
Total consumer 6,436,089
 6,379,073
Total loans and leases $15,745,467
 15,475,915
Bank owned life insurance   633,612
Premises and equipment   228,635
Goodwill   1,320,818
Core deposit intangible   309,750
Other intangible assets   94,571
Servicing rights   15,317
Accrued income and other assets   506,578
Total assets acquired   26,841,896
Liabilities assumed:    
Deposits   21,157,172
Short-term borrowings   1,163,851
Long-term debt   519,971
Accrued expenses and other liabilities   292,930
Total liabilities assumed   23,133,924
Total consideration paid   $3,707,972
     
Consideration:    
Cash paid   $836,879
Fair value of common stock issued   2,766,773
Fair value of preferred stock exchange   104,320

Information regarding the allocation of goodwill recorded as a result of the acquisition to the Company’s reportable segments, as well as the carrying amounts and amortization of core deposit and other intangible assets, is provided in Note 8 of the Notes to Consolidated Financial Statements. The total amount of the loan balance (principal and interest)goodwill that is expected to be recovereddeductible for tax purposes is $339 million.


The following is a description of the methods used to determine the fair values of significant assets and liabilities presented above.

Cash and due from banks, interest-bearing deposits in banks, and loans held for sale: The carrying amount of these assets is a reasonable estimate of fair value based on the short-term nature of these assets.

Securities: Fair values for securities were based on quoted market prices, where available. If quoted market prices were not available, fair value estimates were based on observable inputs including quoted market prices for similar instruments, quoted market prices that were not in an active market or other inputs that were observable in the market. In the absence of observable inputs, fair value is estimated based on pricing models and/or discounted cash flow methodologies.

Loans and leases: Fair values for loans were based on a discounted cash flow methodology that considered factors including the type of loan and related collateral, classification status, fixed or variable interest rate, term of loan, amortization status and current discount rates. Loans were grouped together according to similar characteristics when applying various valuation techniques. The discount rates used for loans were based on current market rates for new originations of comparable loans and include adjustments for any liquidity concerns. The discount rate does not include a factor for credit losses as that has been included as a reduction to the estimated cash flows.

CDI: This intangible asset represents the value of the relationships with deposit customers. The fair value was estimated based on a discounted cash flow methodology that gave appropriate consideration to expected customer attrition rates, net maintenance cost of the deposit base, alternative cost of funds, and the interest costs associated with customer deposits. The CDI is being amortized over 10 years based upon the period over which estimated economic benefits were estimated to be received.

Deposits: The fair values used for the demand and savings deposits by definition equal the amount payable on demand at the acquisition date. The fair values for time deposits were estimated using a discounted cash flow calculation that applies interest rates currently being offered to the contractual interest rates on such time deposits.

Debt: The fair values of long-term debt instruments were estimated based on quoted market prices for the instrument if available, or for similar instruments if not available, or by using discounted cash flow analyses, based on current incremental borrowing rates for similar types of instruments.

The following table presents financial information regarding the former FirstMerit operations included in our Consolidated Statements of Income from the guarantor upon foreclosure.date of acquisition (August 16, 2016) through December 31, 2016 under the column “Actual from acquisition date”. The amendments are effectivefollowing table also presents unaudited pro forma information as if the entities were combined for annual periodsthe full years ended December 31, 2016 and interim periods within those annual periods beginning after December 15, 2014. Management2015, respectively under the “Unaudited Pro Forma” columns. The pro forma information does not believenecessarily reflect the amendments willresults of operations that would have a material impactoccurred had Huntington acquired FirstMerit on January 1, 2015. Furthermore, cost savings and other business synergies related to the acquisition are not reflected in the pro forma amounts.

 Actual from Unaudited Pro Forma for
 acquisition date through Year Ended December 31,
(dollar amounts in thousands)December 31, 2016 2016 2015
Net interest income$277,143
 $2,788,074
 $2,599,840
Noninterest income96,217
 1,311,490
 1,301,798
Net income82,083
 809,142
 842,069

This unaudited pro forma information combines the historical consolidated results of operations of Huntington and FirstMerit for the periods presented and gives effect to the following nonrecurring adjustments:

Fair value adjustments: Pro forma adjustment to decrease net interest income by $12 million and $18 million for the years ended December 31, 2016 and 2015, to record estimated amortization of premiums and accretion of discounts on acquired loans, securities, deposits, and long-term debt.  

FirstMerit accretion /amortization: Pro forma adjustment to decrease net interest income by $34 million and $79 million for the years ended December 31, 2016 and 2015, to eliminate FirstMerit amortization of premiums and accretion of discounts on previously acquired loans, securities, and deposits.


Amortization of acquired intangibles: Pro forma adjustment to increase noninterest expense by $28 million and $44 million for the years ended December 31, 2016 and 2015, to record estimated amortization of acquired intangible assets.

Huntington merger-related costs: Pro forma results include Huntington merger-related costs which primarily included, but were not limited to, severance costs, professional services, data processing fees, marketing and advertising expenses totaling $281 million for the year ended December 31, 2016.

Other adjustments: Pro forma results also include adjustments related to branch divestitures, incremental interest expense on the issuance on acquisition debt, elimination of FirstMerit's intangible amortization expense, FirstMerit merger-related costs, and related income-tax effects.

Branch divestiture: On December 5, 2016, Huntington completed the previously announced sale of 13 acquired branches and certain related assets and deposit liabilities to First Commonwealth Bank, the banking subsidiary of First Commonwealth Financial Corporation. The sale was in connection with an agreement reached with the U.S. Department of Justice in order to resolve its competitive concerns about Huntington’s Consolidated Financial Statements.acquisition of FirstMerit. Total deposits and loans transferred to First Commonwealth Bank in the transaction totaled $620 million and $106 million, respectively.

3.4. LOANS AND/ LEASES AND ALLOWANCE FOR CREDIT LOSSES

Loans and leases for which Huntington has the intent and ability to hold for the foreseeable future, or until maturity or payoff, are classified in the Consolidated Balance Sheets as loans and leases.

Except for loans which are accounted for at fair value, loans and leases are carried at the principal amount outstanding, net of unamortized premiums and discounts, deferred loan origination fees and costs and purchase accounting adjustments, which resulted in a net premium of unearned income. At$120 million and $262 million, at December 31, 20142016 and 2013,2015, respectively.
Loans and leases with a fair value of $15 billion were acquired by Huntington as part of the aggregate amountFirstMerit acquisition. The fair values of these net unamortized deferred loan origination feesthe loans were estimated using discounted cash flow analyses using interest rates currently being offered for loans with similar terms (Level 3). Of the total acquired loans and net unearnedleases, Huntington has elected the fair value option for $56 million of consumer loans. These loans will subsequently be measured at fair value with any changes in fair value recognized in noninterest income was $178.7 million and $192.9 million, respectively.

Loan and Lease Portfolio Composition

The table below summarizes the Company’s primary portfolios. For ACL purposes, these portfolios are further disaggregated into classes which are also summarized in the table below.

Portfolio

Class

Commercial and industrialOwner occupied
Purchased credit-impaired
Other commercial and industrial
Commercial real estateRetail properties
Multi family
Office
Industrial and warehouse
Purchased credit-impaired

Other commercial real estate
AutomobileNA (1)
Home equitySecured by first-lien
Secured by junior-lien
Residential mortgageResidential mortgage
Purchased credit-impaired
Other consumerOther consumer
Purchased credit-impaired

(1)Not applicable. The automobile loan portfolio is not further segregated into classes.

Consolidated Statements of Income.

Direct Financing Leases

Huntington’s loan and lease portfolio includes lease financing receivables consisting of direct financing leases on equipment, which are included in C&I loans. Net investments in lease financing receivables by category at December 31, 20142016 and 20132015 were as follows:

   At December 31, 

(dollar amounts in thousands)

  2014   2013 

Commercial and industrial:

    

Lease payments receivable

  $1,051,744    $1,426,928  

Estimated residual value of leased assets

   483,407     409,184  
  

 

 

   

 

 

 

Gross investment in commercial lease financing receivables

   1,535,151     1,836,112  

Net deferred origination costs

   2,557     3,105  

Unearned income

   (131,027   (165,052
  

 

 

   

 

 

 

Total net investment in commercial lease financing receivables

  $1,406,681    $1,674,165  
  

 

 

   

 

 

 

 At December 31,
(dollar amounts in thousands)2016 2015
Commercial and industrial:   
Lease payments receivable$1,881,596
 $1,551,885
Estimated residual value of leased assets797,611
 711,181
Gross investment in commercial lease financing receivables2,679,207
 2,263,066
Net deferred origination costs12,683
 7,068
Deferred fees(253,423) (208,669)
Total net investment in commercial lease financing receivables$2,438,467
 $2,061,465
The future lease rental payments due from customers on direct financing leases at December 31, 2014,2016, totaled $1.1$1.9 billion and therefore were as follows: $0.6 billion in 2017, $0.5 billion in 2018, $0.3 billion in 2015,2019, $0.2 billion in 2016, $0.2 billion in 2017,2020, $0.1 billion in 2018, $0.1 billion in 2019,2021, and $0.2 billion thereafter.

Fidelity Bank acquisition

On March 30, 2012, Huntington acquired the loans of Fidelity Bank located in Dearborn, Michigan from the FDIC. Under the agreement, loans with a fair value of $523.9 million were acquired by Huntington.

Camco Financial acquisition

On March 1, 2014, Huntington completed its acquisition of Camco Financial in a stock and cash transaction valued at $109.5 million. Loans with a fair value of $559.4 million were acquired by Huntington.

Purchased Credit-Impaired Loans

Purchased loans with evidence of deterioration in credit quality since origination for which it is probable at acquisition that we will be unable to collect all contractually required payments are considered to be credit impaired. Purchased credit-impaired loans are initially recorded at fair value, which is estimated by discounting the cash flows expected to be collected at the acquisition date. Because the estimate of expected cash flows reflects an estimate of future credit losses expected to be incurred over the life of the loans, an allowance for credit losses is not recorded at the acquisition date. The excess of cash flows expected at acquisition over the estimated fair value, referred to as the accretable yield, is recognized in interest income over the remaining life of the loan, or pool of loans, on a level-yield basis. The difference between the contractually required payments at acquisition and the cash flows expected to be collected at acquisition is referred to as the nonaccretable difference. A subsequent decrease in the estimate of cash flows expected to be received on purchased credit-impaired loans generally results in the recognition of an allowance for credit losses. Subsequent increases in cash flows result in reversal of any nonaccretable difference (or allowance for loan and lease losses to the extent any has been recorded) with a positive impact on interest income subsequently recognized. The measurement of cash flows involves assumptions and judgments for interest rates, prepayments, default rates, loss severity, and collateral values. All of these factors are inherently subjective and significant changes in the cash flow estimates over the life of the loan can result.

The following table reflects the contractually required payments receivable, cash flows expected to be collected, and fair value of the credit impaired Camco FinancialFirstMerit loans at acquisition date:

    March 1, 

(dollar amounts in thousands)

  2014 

Contractually required payments including interest

  $14,363  

Less: nonaccretable difference

   (11,234
  

 

 

 

Cash flows expected to be collected

   3,129  

Less: accretable yield

   (143
  

 

 

 

Fair value of credit impaired loans acquired

  $
2,986
  
  

 

 

 


(dollar amounts in thousands) August 16,
2016
Contractually required payments including interest $283,947
Less: nonaccretable difference (84,315)
Cash flows expected to be collected 199,632
Less: accretable yield (17,717)
Fair value of loans acquired $181,915
The following table presents a rollforward of the accretable yield by acquisitionfor purchased credit impaired FirstMerit loans for the year ended December 31, 2014 2016: and 2013:

(dollar amounts in thousands)

  2014   2013 

Fidelity Bank

    

Balance at January 1,

  $27,995    $23,251  

Accretion

   (13,485   (15,931

Reclassification from nonaccretable difference

   4,878     20,675  
  

 

 

   

 

 

 

Balance at December 31,

  $19,388    $27,995  
  

 

 

   

 

 

 

Camco Financial

    

Impact of acquisition on March 1, 2014

   143     —    

Accretion

   (5,597   —    

Reclassification from nonaccretable difference

   6,278     —    
  

 

 

   

 

 

 

Balance at December 31,

  $824    $—    
  

 

 

   

 

 

 

The allowance for loan losses recorded on the purchased credit-impaired loan portfolio at December 31, 2014 and 2013 was $4.1 million and $2.4 million, respectively. 2015:

(dollar amounts in thousands)2016
Balance, beginning of period$
Impact of acquisition/purchase on August 16, 201617,717
Accretion(5,401)
Reclassification (to) from nonaccretable difference24,353
Balance at December 31,$36,669
The following table reflects the ending and unpaid balances of all contractually required payments and carrying amounts of the acquiredFirstMerit purchased credit-impaired loans by acquisition at December 31, 2014 and December 31, 2013:

   December 31, 2014   December 31, 2013 

(in thousands)

  Ending
Balance
   Unpaid
Balance
   Ending
Balance
   Unpaid
Balance
 

Fidelity Bank

        

Commercial and industrial

  $22,405    $33,622    $35,526    $50,798  

Commercial real estate

   36,663     87,250     82,073     154,869  

Residential mortgage

   1,912     3,096     2,498     3,681  

Other consumer

   51     123     129     219  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $61,031    $124,091    $120,226    $209,567  
  

 

 

   

 

 

   

 

 

   

 

 

 

Camco Financial

        

Commercial and industrial

  $823    $1,685    $—      $—    

Commercial real estate

   1,708     3,826     —       —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $2,531    $5,511    $—      $—    
  

 

 

   

 

 

   

 

 

   

 

 

 

2016: 2015

 December 31, 2016
(dollar amounts in thousands)Ending
Balance
 Unpaid
Balance
Commercial and industrial$68,338
 $100,031
Commercial real estate34,042
 56,320
Total$102,380
 $156,351
Loan Purchases and Sales

The following table summarizes significant portfolio loan purchase and sale activity for the years ended December 31, 2014,2016 and 2013.2015. The table below excludes mortgage loans originated for sale.

   Commercial
and Industrial
   Commercial
Real Estate
   Automobile   Home
Equity
   Residential
Mortgage
   Other
Consumer
   Total 
(dollar amounts in thousands)                            

Portfolio loans purchased during the:

              

Year ended December 31, 2014

  $326,557    $—      $—      $—      $18,482    $—      $345,039  

Year ended December 31, 2013

   109,723     —       —       —       —       —       109,723  

Portfolio loans sold or transferred to loans held for sale during the:

              

Year ended December 31, 2014

   352,062     8,447     —       —       —       7,592     368,101  

Year ended December 31, 2013

   225,930     4,767     —       —       205,334     —       436,031  


(dollar amounts in thousands) 2016  2015 
Portfolio loans and leases purchased or transferred from held for sale:
Commercial and industrial $394,579
  $316,252
 
Commercial real estate 
  
 
Automobile 
  
 
Home equity 
  
 
Residential mortgage 16,045
  20,463
 
RV and marine finance 
  
 
Other consumer 
  
 
Total $410,624
  $336,715
 
       
Portfolio loans and leases sold or transferred to loans held for sale:
Commercial and industrial $1,293,711
(1) $380,713
 
Commercial real estate 76,965
(2) 
 
Automobile 1,544,642
  764,540
(3)
Home equity 
  96,786
 
Residential mortgage 
  
 
RV and marine finance 
  
 
Other consumer 
  
 
Total $2,915,318
  $1,242,039
 

(1) Reflects the transfer of approximately $1.0 billion of loans to loans held-for-sale in the 2016 third quarter, net of approximately $341 million of loans transferred back to loans held for investment in the 2016 fourth quarter.
(2) Reflects the transfer of approximately $124 million of loans to loans held-for-sale in the 2016 third quarter, net of approximately $47 million of loans transferred back to loans held for investment in the 2016 fourth quarter.
(3) Reflects the transfer of approximately $1.0 billion of loans to loans held-for-sale during the 2015 first quarter, net of approximately $262 million of loans transferred to loans and leases in the 2015 second quarter.
NALs and Past Due Loans

The following table presents NALs by loan class for the years endedat December 31, 20142016 and 2013:

   December 31, 

(dollar amounts in thousands)

  2014   2013 

Commercial and industrial:

    

Owner occupied

  $41,285    $38,321  

Other commercial and industrial

   30,689     18,294  
  

 

 

   

 

 

 

Total commercial and industrial

  $71,974    $56,615  

Commercial real estate:

    

Retail properties

  $21,385    $27,328  

Multi family

   9,743     9,289  

Office

   7,707     18,995  

Industrial and warehouse

   3,928     6,310  

Other commercial real estate

   5,760     11,495  
  

 

 

   

 

 

 

Total commercial real estate

  $48,523    $73,417  

Automobile

  $4,623    $6,303  

Home equity:

    

Secured by first-lien

  $46,938    $36,288  

Secured by junior-lien

   31,622     29,901  
  

 

 

   

 

 

 

Total home equity

  $78,560    $66,189  

Residential mortgage

  $96,564    $119,532  

Other consumer

  $—      $—    
  

 

 

   

 

 

 

Total nonaccrual loans

  $300,244    $322,056  
  

 

 

   

 

 

 

2015:

 December 31,
(dollar amounts in thousands)2016 2015
Commercial and industrial$234,184
 $175,195
Commercial real estate20,508
 28,984
Automobile5,766
 6,564
Home equity71,798
 66,278
Residential mortgage90,502
 94,560
RV and marine finance245
 
Other consumer
 
Total nonaccrual loans$423,003
 $371,581
The amount of interest that would have been recorded under the original terms for total NAL loans was $20.6$24 million, $23.4$20 million, and $40.4$21 million for 2014, 2013,2016, 2015, and 2012,2014, respectively. The total amount of interest recorded to interest income for these loans was $8.4$17 million, $5.0$10 million, and $4.8$8 million in 2016, 2015, and 2014, 2013, and 2012, respectively.


The following table presents an aging analysis of loans and leases, including past due loans and leases, by loan class for the years endedat December 31, 20142016 and 20132015 (1):

December 31, 2014

 
    Past Due       Total Loans
and Leases
   90 or more
days past due
and accruing
 

(dollar amounts in thousands)

  30-59 days   60-89 days   90 or more days   Total   Current     

Commercial and industrial:

              

Owner occupied

  $5,232    $2,981    $18,222    $26,435    $4,228,440    $4,254,875    $—    

Purchased credit-impaired

   846     —       4,937     5,783     17,445     23,228     4,937(2) 

Other commercial and industrial

   15,330     1,536     9,101     25,967     14,729,076     14,755,043     —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total commercial and industrial

  $21,408    $4,517    $32,260    $58,185    $18,974,961    $19,033,146    $4,937  

Commercial real estate:

              

Retail properties

  $7,866    $—      $4,021    $11,887    $1,345,859    $1,357,746    $—    

Multi family

   1,517     312     3,337     5,166     1,085,250     1,090,416     —    

Office

   464     1,167     4,415     6,046     974,257     980,303     —    

Industrial and warehouse

   688     —       2,649     3,337     510,064     513,401     —    

Purchased credit-impaired

   89     289     18,793     19,171     19,200     38,371     18,793(2) 

Other commercial real estate

   847     1,281     3,966     6,094     1,211,072     1,217,166     —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total commercial real estate

  $11,471    $3,049    $37,181    $51,701    $5,145,702    $5,197,403    $18,793  

Automobile

  $56,272    $10,427    $5,963    $72,662    $8,617,240    $8,689,902    $5,703  

Home equity:

              

Secured by first-lien

  $15,036    $8,085    $33,014    $56,135    $5,072,669    $5,128,804    $4,471  

Secured by junior-lien

   22,473     12,297     33,406     68,176     3,293,935     3,362,111     7,688  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total home equity

  $37,509    $20,382    $66,420    $124,311    $8,366,604    $8,490,915    $12,159  

Residential mortgage:

              

Residential mortgage

  $102,702    $42,009    $139,379    $284,090    $5,544,607    $5,828,697    $88,052(3) 

Purchased credit-impaired

   —       —       —       —       1,912     1,912     —  (2) 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total residential mortgage

  $102,702    $42,009    $139,379    $284,090    $5,546,519    $5,830,609    $88,052  

Other consumer:

              

Other consumer

  $5,491    $1,086    $837    $7,414    $406,286    $413,700    $837  

Purchased credit-impaired

   —       —       —       —       51     51     —  (2) 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other consumer

  $5,491    $1,086    $837    $7,414    $406,337    $413,751    $837  

Total loans and leases

  $234,853    $81,470    $282,040    $598,363    $47,057,363    $47,655,726    $130,481  

December 31, 2013

 
    Past Due       Total Loans
and Leases
   90 or more
days past due
and accruing
 
(dollar amounts in thousands)  30-59 days   60-89 days   90 or more days   Total   Current     

Commercial and industrial:

              

Owner occupied

  $5,935    $1,879    $25,658    $33,472    $4,314,400    $4,347,872    $—    

Purchased credit-impaired

   241     433     14,562     15,236     20,290     35,526     14,562(2) 

Other commercial and industrial

   10,342     3,075     11,210     24,627     13,186,251     13,210,878     —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total commercial and industrial

  $16,518    $5,387    $51,430    $73,335    $17,520,941    $17,594,276    $14,562  

Commercial real estate:

              

Retail properties

  $19,372    $1,228    $5,252    $25,852    $1,237,717    $1,263,569    $—    

Multi family

   2,425     943     6,726     10,094     1,015,497     1,025,591     —    

Office

   1,635     545     12,700     14,880     927,413     942,293     —    

Industrial and warehouse

   465     3,714     4,395     8,574     464,319     472,893     —    

Purchased credit-impaired

   1,311     —       39,142     40,453     41,620     82,073     39,142(2) 

Other commercial real estate

   5,922     1,134     7,192     14,248     1,049,427     1,063,675     —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total commercial real estate

  $31,130    $7,564    $75,407    $114,101    $4,735,993    $4,850,094    $39,142  

Automobile

  $45,174    $8,863    $5,140    $59,177    $6,579,536    $6,638,713    $5,055  

Home equity:

              

Secured by first-lien

  $20,551    $8,746    $28,472    $57,769    $4,784,375    $4,842,144    $6,338  

Secured by junior-lien

   28,965     13,071     31,392     73,428     3,420,746     3,494,174     7,645  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total home equity

   49,516    $21,817    $59,864    $131,197    $8,205,121    $8,336,318    $13,983  

Residential mortgage:

              

Residential mortgage

   101,584    $41,784    $158,956    $302,324    $5,016,266    $5,318,590    $90,115(4) 

Purchased credit-impaired

   194     —       339     533     1,965     2,498     339(2) 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total residential mortgage

  $101,778    $41,784    $159,295    $302,857    $5,018,231    $5,321,088    $90,454  

Other consumer:

              

Other consumer

   6,465    $1,276    $998    $8,739    $371,143    $379,882    $998  

Purchased credit-impaired

   69     —       —       69     60     129     —  (2) 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other consumer

  $6,534    $1,276    $998    $8,808    $371,203    $380,011    $998  

Total loans and leases

  $250,650    $86,691    $352,134    $689,475    $42,431,025    $43,120,500    $164,194  

 December 31, 2016
 Past Due      Loans Accounted for Under the Fair Value Option Total Loans
and Leases
 90 or
more days
past due
and accruing
 
(dollar amounts in thousands)30-59
Days
 60-89
 Days
 90 or 
more days
Total Current 
Purchased Credit
Impaired
    
Commercial and industrial$42,052
 $20,136
 $74,174
 $136,362
 $27,854,012
 $68,338
 $
 $28,058,712
 $18,148
(2)
Commercial real estate21,187
 3,202
 29,659
 54,048
 7,212,811
 34,042
 
 7,300,901
 17,215
 
Automobile loans and leases76,283
 17,188
 10,442
 103,913
 10,862,715
 
 2,154
 10,968,782
 10,182
 
Home equity38,899
 23,903
 53,002
 115,804
 9,986,697
 
 3,273
 10,105,774
 11,508
 
Residential mortgage122,469
 37,460
 116,682
 276,611
 7,373,414
 
 74,936
 7,724,961
 66,952
 
RV and marine finance10,009
 2,230
 1,566
 13,805
 1,831,123
 
 1,519
 1,846,447
 1,462
 
Other consumer9,442
 4,324
 3,894
 17,660
 938,322
 
 437
 956,419
 3,895
 
Total loans and leases$320,341
 $108,443
 $289,419
 $718,203
 $66,059,094
 $102,380
 $82,319
 $66,961,996
 $129,362
 

 December 31, 2015
 Past Due   Total Loans
and Leases
 90 or
more days
past due
and accruing
 
(dollar amounts in thousands)30-59
Days
 60-89
 Days
 90 or 
more days
Total Current   
Commercial and industrial$44,715
 $13,580
 $46,978
 $105,273
 $20,454,561
 $20,559,834
 $8,724
(2)
Commercial real estate9,232
 5,721
 21,666
 36,619
 5,232,032
 5,268,651
 9,549
 
Automobile loans and leases69,553
 14,965
 7,346
 91,864
 9,388,814
 9,480,678
 7,162
 
Home equity36,477
 16,905
 56,300
 109,682
 8,360,800
 8,470,482
 9,044
 
Residential mortgage102,773
 34,298
 119,354
 256,425
 5,741,975
 5,998,400
 69,917

RV and marine finance
 
 
 
 
 
 
 
Other consumer6,469
 1,852
 1,395
 9,716
 553,338
 563,054
 1,394
 
Total loans and leases$269,219
 $87,321
 $253,039
 $609,579
 $49,731,520
 $50,341,099
 $105,790
 

(1)NALs are included in this aging analysis based on the loan’s past due status.
(2)All amounts represent accruing purchased credit-impaired loans related to the Camco Financial and FDIC-assisted Fidelity Bank acquisition. Under the applicable accounting guidance (ASC-310-30), the loans were recorded at fair value upon acquisition and remain in accruing status.Amounts include Huntington Technology Finance administrative lease delinquencies.
(3)Includes $55,012 thousand guaranteed by the U.S. government.
(4)Includes $87,985 thousand guaranteed by the U.S. government.

Allowance for Credit Losses

The ACL is increased through a provision for credit losses that is charged to earnings, based on Management’sthe Company’s quarterly evaluation of the factors previously mentioned,disclosed in Note 1. Significant Accounting Policies and is reduced by charge-offs, net of recoveries, and the ACL associated with securitizedloans sold or sold loans. There were no material changes in assumptions or estimation techniques compared with prior periods that impacted the determination of the current period’s ALLL and AULC.

During a 2013 review of our consumer portfolios, we identified additional loans associated with borrowers who had filed Chapter 7 bankruptcy and had not reaffirmed their debt, thus meeting the definition of collateral dependent per OCC regulatory guidance. These loans were not identified in the 2012 third quarter implementation of the OCC’s regulatory guidance. The bankruptcy court’s discharge of the borrower’s debt is considered a concession when the discharged debt is not reaffirmed, and as such, the loan is placed on nonaccrual status, and written downtransferred to collateral value, less anticipated selling costs. As a result of the review of our existing consumer portfolios, additional NCOs of $22.8 million were recorded in 2013. The majority of the NCO impact was in the home equity portfolio and relates to junior-lien loans that meet the regulatory guidance.

held-for-sale.


The following table presents ALLL and AULC activity by portfolio segment for the years ended December 31, 2014, 2013,2016, 2015, and 2012:

(dollar amounts in thousands)

  Commercial
and Industrial
  Commercial
Real Estate
  Automobile  Home
Equity
  Residential
Mortgage
  Other
Consumer
  Total 

Year ended December 31, 2014:

        

ALLL balance, beginning of period

  $265,801   $162,557   $31,053   $111,131   $39,577   $37,751   $647,870  

Loan charge-offs

   (76,654  (24,704  (31,330  (54,473  (25,946  (33,494  (246,601

Recoveries of loans previously charged-off

   44,531    34,071    13,762    17,526    6,194    5,890    121,974  

Provision for loan and lease losses

   53,317    (69,085  19,981    22,229    27,386    29,254    83,082  

Allowance for loans sold or transferred to loans held for sale

   —      —      —      —      —      (1,129  (1,129
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

ALLL balance, end of period

  $286,995   $102,839   $33,466   $96,413   $47,211   $38,272   $605,196  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

AULC balance, beginning of period

  $49,596   $9,891   $—     $1,763   $9   $1,640   $62,899  

Provision for unfunded loan commitments and letters of credit

   (608  (3,850  —      161    (1  2,205    (2,093
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

AULC balance, end of period

  $48,988   $6,041   $—     $1,924   $8   $3,845   $60,806  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

ACL balance, end of period

  $335,983   $108,880   $33,466   $98,337   $47,219   $42,117   $666,002  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

(dollar amounts in thousands)                      

Year ended December 31, 2013:

        

ALLL balance, beginning of period

  $241,051   $285,369   $34,979   $118,764   $61,658   $27,254   $769,075  

Loan charge-offs

   (45,904  (69,512  (23,912  (98,184  (34,236  (34,568  (306,316

Recoveries of loans previouslycharged-off

   29,514    44,658    13,375    15,921    7,074    7,108    117,650  

Provision for loan and lease losses

   41,140    (97,958  6,611    74,630    5,417    37,957    67,797  

Allowance for loans sold or transferred to loans held for sale

   —      —      —      —      (336  —      (336
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

ALLL balance, end of period

  $265,801   $162,557   $31,053   $111,131   $39,577   $37,751   $647,870  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

AULC balance, beginning of period

  $33,868   $4,740   $—     $1,356   $3   $684   $40,651  

Provision for unfunded loan commitments and letters of credit

   15,728    5,151    —      407    6    956    22,248  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

AULC balance, end of period

  $49,596   $9,891   $—     $1,763   $9   $1,640   $62,899  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

ACL balance, end of period

  $315,397   $172,448   $31,053   $112,894   $39,586   $39,391   $710,769  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
(dollar amounts in thousands)                      

Year Ended December 31, 2012:

        

ALLL balance, beginning of period

  $275,367   $388,706   $38,282   $143,873   $87,194   $31,406   $964,828  

Loan charge-offs

   (101,475  (118,051  (26,070  (124,286  (52,228  (33,090  (455,200

Recoveries of loans previously charged-off

   37,227    39,622    16,628    7,907    4,305    7,049    112,738  

Provision for loan and lease losses

   29,932    (24,908  12,964    91,270    24,046    21,889    155,193  

Allowance for loans sold or transferred to loans held for sale

   —      —      (6,825  —      (1,659  —      (8,484
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

ALLL balance, end of period

  $241,051   $285,369   $34,979   $118,764   $61,658   $27,254   $769,075  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

AULC balance, beginning of period

  $39,658   $5,852   $—     $2,134   $1   $811   $48,456  

Provision for unfunded loan commitments and letters-of-credit

   (5,790  (1,112  —      (778  2    (127  (7,805
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

AULC balance, end of period

   33,868    4,740    —      1,356    3    684    40,651  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

ACL balance, end of period

  $274,919   $290,109   $34,979   $120,120   $61,661   $27,938   $809,726  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

2014:

(dollar amounts in thousands) Commercial Consumer Total
Year ended December 31, 2016:      
ALLL balance, beginning of period $398,753
 $199,090
 $597,843
Loan charge-offs (91,914) (135,400) (227,314)
Recoveries of loans previously charged-off 73,138
 45,280
 118,418
Provision (reduction in allowance) for loan and lease losses 84,381
 85,026
 169,407
Allowance for loans sold or transferred to loans held for sale (13,267) (6,674) (19,941)
ALLL balance, end of period $451,091
 $187,322
 $638,413
AULC balance, beginning of period $63,448
 $8,633
 $72,081
Provision (reduction in allowance) for unfunded loan commitments and letters of credit 18,692
 2,703
 21,395
AULC recorded at acquisition 4,403
 
 4,403
AULC balance, end of period $86,543
 $11,336
 $97,879
ACL balance, end of period $537,634
 $198,658
 $736,292
       
Year ended December 31, 2015:      
ALLL balance, beginning of period $389,834
 $215,362
 $605,196
Loan charge-offs (97,800) (120,081) (217,881)
Recoveries of loans previously charged-off 86,419
 43,669
 130,088
Provision (reduction in allowance) for loan and lease losses 20,300
 68,379
 88,679
Allowance for loans sold or transferred to loans held for sale 
 (8,239) (8,239)
ALLL balance, end of period $398,753
 $199,090
 $597,843
AULC balance, beginning of period $55,029
 $5,777
 $60,806
Provision (reduction in allowance) for unfunded loan commitments and letters of credit 8,419
 2,856
 11,275
AULC recorded at acquisition 
 
 
AULC balance, end of period $63,448
 $8,633
 $72,081
ACL balance, end of period $462,201
 $207,723
 $669,924
       
Year ended December 31, 2014:      
ALLL balance, beginning of period $428,358
 $219,512
 $647,870
Loan charge-offs (101,358) (145,243) (246,601)
Recoveries of loans previously charged-off 78,602
 43,372
 121,974
Provision (reduction in allowance) for loan and lease losses (15,768) 98,850
 83,082
Allowance for loans sold or transferred to loans held for sale 
 (1,129) (1,129)
ALLL balance, end of period $389,834
 $215,362
 $605,196
AULC balance, beginning of period $59,487
 $3,412
 $62,899
Provision (reduction in allowance) for unfunded loan commitments and letters of credit (4,458) 2,365
 (2,093)
AULC recorded at acquisition 
 
 
AULC balance, end of period $55,029
 $5,777
 $60,806
ACL balance, end of period $444,863
 $221,139
 $666,002

Credit Quality Indicators

To facilitate the monitoring of credit quality for C&I and CRE loans, and for purposes of determining an appropriate ACL level for these loans, Huntington utilizes the following internally defined categories of credit grades:

Pass - Higher quality loans that do not fit any of the other categories described below.

OLEM - The credit risk may be relatively minor yet represent a risk given certain specific circumstances. If the potential weaknesses are not monitored or mitigated, the loan may weaken or the collateral may be inadequate to protect Huntington’s position in the future. For these reasons, Huntington considers the loans to be potential problem loans.

Substandard - Inadequately protected loans by the borrower’s ability to repay, equity, and/or the collateral pledged to secure the loan. These loans have identified weaknesses that could hinder normal repayment or collection of the debt. It is likely Huntington will sustain some loss if any identified weaknesses are not mitigated.

Doubtful - Loans that have all of the weaknesses inherent in those loans classified as Substandard, with the added elements of the full collection of the loan is improbable and that the possibility of loss is high.

The categories above, which are derived from standard regulatory rating definitions, are assigned upon initial approval of the loan or lease and subsequently updated as appropriate.

Commercial loans categorized as OLEM, Substandard, or Doubtful are considered Criticized loans. Commercial loans categorized as Substandard or Doubtful are alsoboth considered Classified loans.

For all classes within all consumer loan portfolios, each loan is assigned a specific PD factor that is partially based on the borrower’s most recent credit bureau score, which we update quarterly. A credit bureau score is a credit score developed by Fair Isaac

Corporation based on data provided by the credit bureaus. The credit bureau score is widely accepted as the standard measure of consumer credit risk used by lenders, regulators, rating agencies, and consumers. The higher the credit bureau score, the higher likelihood of repayment and therefore, an indicator of higher credit quality.

Huntington assesses the risk in the loan portfolio by utilizing numerous risk characteristics. The classifications described above, and also presented in the table below, represent one of those characteristics that are closely monitored in the overall credit risk management processes.

The following table presents each loan and lease class by credit quality indicator for the years endedat December 31, 20142016 and 2013:

   December 31, 2014 
   Credit Risk Profile by UCS classification 
(dollar amounts in thousands)  Pass   OLEM   Substandard   Doubtful   Total 

Commercial and industrial:

          

Owner occupied

  $3,959,046    $117,637    $175,767    $2,425    $4,254,875  

Purchased impaired

   3,915     741     14,901     3,671     23,228  

Other commercial and industrial

   13,925,334     386,666     440,036     3,007     14,755,043  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total commercial and industrial

  $17,888,295    $505,044    $630,704    $9,103    $19,033,146  

Commercial real estate:

          

Retail properties

  $1,279,064    $10,204    $67,911    $567    $1,357,746  

Multi family

   1,044,521     12,608     32,322     965     1,090,416  

Office

   902,474     33,107     42,578     2,144     980,303  

Industrial and warehouse

   487,454     7,877     17,781     289     513,401  

Purchased impaired

   6,914     803     25,460     5,194     38,371  

Other commercial real estate

   1,166,293     9,635     40,019     1,219     1,217,166  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total commercial real estate

  $4,886,720    $74,234    $226,071    $10,378    $5,197,403  
   Credit Risk Profile by FICO score (1) 
   750+   650-749   <650   Other (2)   Total 

Automobile

  $4,165,811    $3,249,141    $1,028,381    $246,569    $8,689,902  

Home equity:

          

Secured by first-lien

  $3,255,088    $1,426,191    $283,152    $164,373    $5,128,804  

Secured by junior-lien

   1,832,663     1,095,332     348,825     85,291     3,362,111  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total home equity

  $5,087,751    $2,521,523    $631,977    $249,664    $8,490,915  

Residential mortgage:

          

Residential mortgage

  $3,285,310    $1,785,137    $666,562    $91,688    $5,828,697  

Purchased impaired

   594     1,135     183     —       1,912  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total residential mortgage

  $3,285,904    $1,786,272    $666,745    $91,688    $5,830,609  

Other consumer:

          

Other consumer

  $195,128    $187,781    $30,582    $209    $413,700  

Purchased impaired

   —       51     —       —       51  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other consumer loans

  $195,128    $187,832    $30,582    $209    $413,751  
   December 31, 2013 
   Credit Risk Profile by UCS classification 
(dollar amounts in thousands)  Pass   OLEM   Substandard   Doubtful   Total 

Commercial and industrial:

          

Owner occupied

  $4,052,579    $130,645    $155,994    $8,654    $4,347,872  

Purchased impaired

   5,015     661     27,693     2,157     35,526  

Other commercial and industrial

   12,630,512     211,860     364,343     4,163     13,210,878  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total commercial and industrial

  $16,688,106    $343,166    $548,030    $14,974    $17,594,276  

Commercial real estate:

          

Retail properties

  $1,153,747    $16,003    $93,819    $—      $1,263,569  

Multi family

   972,526     16,540     36,411     114     1,025,591  

Office

   847,411     4,866     87,722     2,294     942,293  

Industrial and warehouse

   431,057     14,138     27,698     —       472,893  

Purchased impaired

   13,127     3,586     62,577     2,783     82,073  

Other commercial real estate

   977,987     16,270     68,653     765     1,063,675  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total commercial real estate

  $4,395,855    $71,403    $376,880    $5,956    $4,850,094  
   Credit Risk Profile by FICO score (1) 
   750+   650-749   <650   Other (2)   Total 

Automobile

  $2,987,323    $2,517,756    $945,604    $188,030    $6,638,713  

Home equity:

          

Secured by first-lien

   3,018,784     1,412,445     299,681     111,234     4,842,144  

Secured by junior-lien

   1,811,102     1,213,024     413,695     56,353     3,494,174  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total home equity

  $4,829,886    $2,625,469    $713,376    $167,587    $8,336,318  

Residential mortgage:

          

Residential mortgage

   2,837,590     1,710,183     699,541     71,276     5,318,590  

Purchased impaired

   588     989     921     —       2,498  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total residential mortgage

   2,838,178    $1,711,172    $700,462    $71,276    $5,321,088  

Other consumer:

          

Other consumer

   161,858     157,675     45,370     14,979     379,882  

Purchased impaired

   —       60     69     —       129  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other consumer loans

   161,858    $157,735    $45,439    $14,979    $380,011  

2015:
 December 31, 2016
 Credit Risk Profile by UCS Classification
(dollar amounts in thousands)Pass OLEM Substandard Doubtful Total
Commercial and industrial$26,211,885
 $810,287
 $1,028,819
 $7,721
 $28,058,712
Commercial real estate7,042,304
 96,975
 159,098
 2,524
 7,300,901
 Credit Risk Profile by FICO Score (1), (2)
 750+ 650-749 <650 Other (3) Total
Automobile5,369,085
 4,043,611
 1,298,460
 255,472
 10,966,628
Home equity6,280,328
 2,891,330
 637,560
 293,283
 10,102,501
Residential mortgage4,662,777
 2,285,121
 615,067
 87,060
 7,650,025
RV and marine finance1,064,143
 644,039
 72,995
 63,751
 1,844,928
Other consumer346,867
 455,959
 133,243
 19,913
 955,982

 December 31, 2015
 Credit Risk Profile by UCS Classification
(dollar amounts in thousands)Pass OLEM Substandard Doubtful Total
Commercial and industrial$19,257,789
 $399,339
 $895,577
 $7,129
 $20,559,834
Commercial real estate5,066,054
 79,787
 121,167
 1,643
 5,268,651
 Credit Risk Profile by FICO Score (1), (2)
 750+ 650-749 <650 Other (3) Total
Automobile4,680,684
 3,454,585
 1,086,914
 258,495
 9,480,678
Home equity5,210,741
 2,466,425
 582,326
 210,990
 8,470,482
Residential mortgage3,564,064
 1,813,779
 567,984
 52,573
 5,998,400
RV and marine finance
 
 
 
 
Other consumer233,969
 269,746
 49,650
 9,689
 563,054

(1)Excludes loans accounted for under the fair value option.
(2)Reflects currently updatedmost recent customer credit scores.
(2)
(3)Reflects deferred fees and costs, loans in process, loans to legal entities, etc.

Impaired Loans

For all classes within the C&I and CRE portfolios, all loans with an outstandingobligor balance of $1.0$1 million or greater are considered for individual evaluation of impairmentevaluated on a quarterly basis.basis for impairment. Generally, consumer loans within any class are not individually evaluated on a regular basis for impairment. All TDRs, regardless of the outstanding balance amount, are also considered to be impaired. Loans acquired with evidence of deterioration of credit quality since origination for which it is probable at acquisition that all contractually required payments will not be collected are also considered to be impaired.

Once a loan has been identified for an assessment of impairment, the loan is considered impaired when, based on current information and events, it is probable that all amounts due according to the contractual terms of the loan agreement will not be collected. This determination requires significant judgment and use of estimates, and the eventual outcome may differ significantly from those estimates.

The following tables present the balance of the ALLL attributable to loans by portfolio segment individually and collectively evaluated for impairment and the related loan and lease balance for the years ended December 31, 2014,2016 and 2013 (1):

(dollar amounts in thousands)  Commercial and
Industrial
   Commercial
Real Estate
   Automobile   Home
Equity
   Residential
Mortgage
   Other
Consumer
   Total 

ALLL at December 31, 2014:

              

Portion of ALLL balance:

              

Attributable to purchased credit-impaired loans

  $3,846    $—      $—      $—      $8    $245    $4,099  

Attributable to loans individually evaluated for impairment

   11,049     18,887     1,531     26,027     16,535     214     74,243  

Attributable to loans collectively evaluated for impairment

   272,100     83,952     31,935     70,386     30,668     37,813     526,854  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total ALLL balance

  $286,995    $102,839    $33,466    $96,413    $47,211    $38,272    $605,196  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loans and Leases at December 31, 2014:

              

Portion of loan and lease ending balance:

              

Attributable to purchased credit-impaired loans

  $23,228    $38,371    $—      $—      $1,912    $51    $63,562  

Individually evaluated for impairment

   216,993     217,262     30,612     310,446     369,577     4,088     1,148,978  

Collectively evaluated for impairment

   18,792,925     4,941,770     8,659,290     8,180,469     5,459,120     409,612     46,443,186  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total loans evaluated for impairment

  $19,033,146    $5,197,403    $8,689,902    $8,490,915    $5,830,609    $413,751    $47,655,726  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Portion of ending balance of impaired loans:

              

With allowance assigned to the loan and lease balances

  $202,376    $144,162    $30,612    $310,446    $371,489    $4,139    $1,063,224  

With no allowance assigned to the loan and lease balances

   37,845     111,471     —       —       —       —       149,316  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $240,221    $255,633    $30,612    $310,446    $371,489    $4,139    $1,212,540  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average balance of impaired loans

  $174,316    $511,590    $34,637    $258,881    $384,026    $2,879    $1,366,329  

ALLL on impaired loans

   14,895     18,887     1,531     26,027     16,543     459     78,342  
(dollar amounts in thousands)  Commercial
and
Industrial
   Commercial
Real Estate
   Automobile   Home Equity   Residential
Mortgage
   Other
Consumer
   Total 

ALLL at December 31, 2013:

              

Portion of ending balance:

              

Attributable to purchased credit-impaired loans

  $2,404    $—      $—      

$

—  

  

  $36    $—      $2,440  

Attributable to loans individually evaluated for impairment

   6,129     34,935     682     8,003     10,555     136     60,440  

Attributable to loans collectively evaluated for impairment

   257,268     127,622     30,371     103,128     28,986     37,615     584,990  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total ALLL balance

  $265,801    $162,557    $31,053    $111,131    $39,577    $37,751    $647,870  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loans and Leases at December 31, 2013:

              

Portion of ending balance of impaired loans:

              

Attributable to purchased credit-impaired loans

  $35,526    $82,073    $—      $—      $2,498    $129    $120,226  

Individually evaluated for impairment

   108,316     268,362     37,084     208,981     387,937     1,041     1,011,721  

Collectively evaluated for impairment

   17,450,434     4,499,659     6,601,629     8,127,337     4,930,653     378,841     41,988,553  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total loans evaluated for impairment

  $17,594,276    $4,850,094    $6,638,713    $8,336,318    $5,321,088    $380,011    $43,120,500  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Portion of ending balance:

              

With allowance assigned to the loan and lease balances

  $126,626    $187,836    $37,084    $208,981    $390,435    $1,041    $952,003  

With no allowance assigned to the loan and lease balances

   17,216     162,599     —       —       —       129     179,944  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $143,842    $350,435    $37,084    $208,981    $390,435    $1,170    $1,131,947  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average balance of impaired loans

  $166,173    $365,053    $39,861    $162,170    $379,815    $2,248    $1,115,320  

ALLL on impaired loans

   8,533     34,935     682     8,003     10,591     136     62,880  

2015:

(dollar amounts in thousands) Commercial Consumer Total
ALLL at December 31, 2016:      
Portion of ALLL balance:      
Attributable to loans individually evaluated for impairment $10,525
 $11,021
 $21,546
Attributable to loans collectively evaluated for impairment 440,566
 176,301
 616,867
Total ALLL balance $451,091
 $187,322
 $638,413
Loan and Lease Ending Balances at December 31, 2016: (1)      
Portion of loan and lease ending balance:      
Attributable to purchased credit-impaired loans $102,380
 $
 $102,380
Individually evaluated for impairment 415,624
 457,890
 873,514
Collectively evaluated for impairment 34,841,609
 31,062,174
 65,903,783
Total loans and leases evaluated for impairment $35,359,613
 $31,520,064
 $66,879,677

(1)Excludes loans accounted for under the fair value option.


(dollar amounts in thousands) Commercial Consumer Total
ALLL at December 31, 2015:      
Portion of ALLL balance:      
Attributable to purchased credit-impaired loans $2,602
 $127
 $2,729
Attributable to loans individually evaluated for impairment 27,428
 35,008
 62,436
Attributable to loans collectively evaluated for impairment 368,723
 163,955
 532,678
Total ALLL balance: $398,753
 $199,090
 $597,843
Loan and Lease Ending Balances at December 31, 2015: (1)      
Portion of loan and lease ending balances:      
Attributable to purchased credit-impaired loans $34,775
 $1,506
 $36,281
Individually evaluated for impairment 626,010
 651,778
 1,277,788
Collectively evaluated for impairment 25,167,700
 23,859,330
 49,027,030
Total loans and leases evaluated for impairment $25,828,485
 $24,512,614
 $50,341,099

(1)Excludes loans accounted for under the fair value option.


The following tables present by class the ending, unpaid principal balance, and the related ALLL, along with the average balance and interest income recognized only for impaired loans and leases individually evaluated for impairment and purchased credit-impaired loans for the years ended December 31, 20142016 and 20132015 (1), (2):

   December 31, 2014   Year Ended
December 31, 2014
 

(dollar amounts in thousands)

  Ending
Balance
   Unpaid
Principal
Balance (5)
   Related
Allowance
   Average
Balance
   Interest
Income
Recognized
 

With no related allowance recorded:

          

Commercial and industrial:

          

Owner occupied

  $13,536    $13,536    $—      $5,740    $205  

Purchased credit-impaired

   —       —       —       —       —    

Other commercial and industrial

   24,309     26,858     —       7,536     375  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total commercial and industrial

  $37,845    $40,394    $—      $13,276    $580  

Commercial real estate:

          

Retail properties

  $61,915    $91,627    $—      $53,121    $2,454  

Multi family

   —       —       —       —       —    

Office

   1,130     3,574     —       3,709     311  

Industrial and warehouse

   3,447     3,506     —       5,012     248  

Purchased credit-impaired

   38,371     91,075     —       59,424     11,519  

Other commercial real estate

   6,608     6,815     —       6,598     286  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total commercial real estate

  $111,471    $196,597    $—      $127,864    $14,818  

Automobile

  $—      $—      $—      $—      $—    

Home equity:

          

Secured by first-lien

  $—      $—      $—      $—      $—    

Secured by junior-lien

   —       —       —       —       —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total home equity

  $—      $—      $—      $—      $—    

Residential mortgage:

          

Residential mortgage

  $—      $—      $—      $—      $—    

Purchased credit-impaired

   —       —       —       —       —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total residential mortgage

  $—      $—      $—      $—      $—    

Other consumer:

          

Other consumer

  $—      $—      $—      $—      $—    

Purchased credit-impaired

   —       —       —       —       —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other consumer

  $—      $—      $—      $—      $—    

With an allowance recorded:

          

Commercial and industrial: (3)

          

Owner occupied

  $44,869    $53,639    $4,220    $40,192    $1,557  

Purchased credit-impaired

   23,228     35,307     3,846     32,253     6,973  

Other commercial and industrial

   134,279     162,908     6,829     88,595     2,686  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total commercial and industrial

  $202,376    $251,854    $14,895    $161,040    $11,216  

Commercial real estate: (4)

          

Retail properties

  $37,081    $38,397    $3,536    $63,393    $1,983  

Multi family

   17,277     23,725     2,339     16,897     659  

Office

   52,953     56,268     8,399     52,831     2,381  

Industrial and warehouse

   8,888     10,396     720     9,092     274  

Purchased credit-impaired

   —       —       —       —       —    

Other commercial real estate

   27,963     33,472     3,893     241,513     1,831  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total commercial real estate

  $144,162    $162,258    $18,887    $383,726    $7,128  

Automobile

  $30,612    $32,483    $1,531    $34,637    $2,637  

Home equity:

          

Secured by first-lien

  $145,566    $157,978    $8,296    $126,602    $5,496  

Secured by junior-lien

   164,880     208,118     17,731     132,279     6,379  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total home equity

  $310,446    $366,096    $26,027    $258,881    $11,875  

Residential mortgage: (6)

          

Residential mortgage

  $369,577    $415,280    $16,535    $381,745    $11,594  

Purchased credit-impaired

   1,912     3,096     8     2,281     574  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total residential mortgage

  $371,489    $418,376    $16,543    $384,026    $12,168  

Other consumer:

          

Other consumer

  $4,088    $4,209    $214    $2,796    $202  

Purchased credit-impaired

   51     123     245     83     15  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other consumer

  $4,139    $4,332    $459    $2,879    $217  
   December 31, 2013   Year Ended
December 31, 2013
 
(dollar amounts in thousands)  Ending
Balance
   Unpaid
Principal
Balance (5)
   Related
Allowance
   Average
Balance
   Interest
Income
Recognized
 

With no related allowance recorded:

          

Commercial and Industrial:

          

Owner occupied

  $5,332    $5,373    $—      $4,473    $172  

Purchased credit-impaired

   —       —       —       —       —    

Other commercial and industrial

   11,884     15,031     —       13,117     640  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total commercial and industrial

  $17,216    $20,404    $—      $17,590    $812  

Commercial real estate:

          

Retail properties

  $55,773    $64,780    $—      $46,764    $2,450  

Multi family

   —       —       —       3,627     220  

Office

   9,069     13,721     —       12,151     1,161  

Industrial and warehouse

   9,682     10,803     —       10,586     595  

Purchased credit-impaired

   82,073     154,869     —       104,513     10,875  

Other commercial real estate

   6,002     6,924     —       7,954     434  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total commercial real estate

  $162,599    $251,097    $—      $185,595    $15,735  

Automobile

  $—      $—      $—      $—      $—    

Home equity:

          

Secured by first-lien

  $—      $—      $—      $—      $—    

Secured by junior-lien

   —       —       —       —       —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total home equity

  $—      $—      $—      $—      $—    

Residential mortgage:

          

Residential mortgage

  $—      $—      $—      $—      $—    

Purchased credit-impaired

   —       —       —       —       —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total residential mortgage

  $—      $—      $—      $—      $—    

Other consumer:

          

Other consumer

  $—      $—      $—      $—      $—    

Purchased credit-impaired

   129     219     —       137     17  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other consumer

  $129    $219    $—      $137    $17  

With an allowance recorded:

          

Commercial and Industrial: (3)

          

Owner occupied

  $40,271    $52,810    $3,421    $41,469    $1,390  

Purchased credit-impaired

   35,526     50,798     2,404     47,442     4,708  

Other commercial and industrial

   50,829     64,497     2,708     59,672     3,242  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total commercial and industrial

  $126,626    $168,105    $8,533    $148,583    $9,340  

Commercial real estate: (4)

          

Retail properties

  $72,339    $93,395    $5,984    $64,414    $1,936  

Multi family

   13,484     15,408     1,944     14,922     651  

Office

   50,307     54,921     9,927     48,113     1,808  

Industrial and warehouse

   9,162     10,561     808     15,322     541  

Purchased credit-impaired

   —       —       —       —       —    

Other commercial real estate

   42,544     50,960     16,272     36,687     1,547  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total commercial real estate

  $187,836    $225,245    $34,935    $179,458    $6,483  

Automobile

  $37,084    $38,758    $682    $39,861    $2,955  

Home equity:

          

Secured by first-lien

  $110,024    $116,846    $2,396    $96,184    $4,116  

Secured by junior-lien

   98,957     143,967     5,607     65,986     3,379  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total home equity

  $208,981    $260,813    $8,003    $162,170    $7,495  

Residential mortgage:

          

Residential mortgage

  $387,937    $427,924    $10,555    $377,530    $11,752  

Purchased credit-impaired

   2,498     3,681     36     2,285     331  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total residential mortgage

  $390,435    $431,605    $10,591    $379,815    $12,083  

Other consumer:

          

Other consumer

  $1,041    $1,041    $136    $2,111    $116  

Purchased credit-impaired

   —       —       —       —       —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other consumer

  $1,041    $1,041    $136    $2,111    $116  


       Year Ended
 December 31, 2016 December 31, 2016
(dollar amounts in thousands)
Ending
Balance
 
Unpaid
Principal
Balance (4)
 
Related
Allowance
 
Average
Balance
 
Interest
Income
Recognized
With no related allowance recorded:         
Commercial and industrial$299,606
 $358,712
 $
 $292,567
 $9,401
Commercial real estate88,817
 126,152
 
 73,040
 4,191
Automobile
 
 
 
 
Home equity
 
 
 
 
Residential mortgage
 
 
 
 
RV and marine finance
 
 
 
 
Other consumer
 
 
 
 
          
With an allowance recorded:         
Commercial and industrial (2)406,243
 448,121
 22,259
 301,598
 8,124
Commercial real estate (3)97,238
 107,512
 3,434
 68,865
 2,978
Automobile30,961
 31,298
 1,850
 31,722
 2,162
Home equity319,404
 352,722
 15,032
 277,692
 13,410
Residential mortgage (5)327,753
 363,099
 12,849
 348,158
 11,945
RV and marine finance
 
 
 
 
Other consumer3,897
 3,897
 260
 4,481
 233
          
Total         
Commercial and industrial705,849
 806,833
 22,259
 594,165
 17,525
Commercial real estate186,055
 233,664
 3,434
 141,905
 7,169
Automobile30,961
 31,298
 1,850
 31,722
 2,162
Home equity319,404
 352,722
 15,032
 277,692
 13,410
Residential mortgage327,753
 363,099
 12,849
 348,158
 11,945
RV and marine finance
 
 
 
 
Other consumer3,897
 3,897
 260
 4,481
 233

       Year Ended
 December 31, 2015 December 31, 2015
(dollar amounts in thousands)
Ending
Balance
 
Unpaid
Principal
Balance (4)
 
Related
Allowance
 
Average
Balance
 
Interest
Income
Recognized
With no related allowance recorded:         
Commercial and industrial$255,801
 $279,551
 $
 $114,389
 $2,584
Commercial real estate68,260
 125,814
 
 88,173
 7,199
Automobile
 
 
 
 
Home equity
 
 
 
 
Residential mortgage
 
 
 
 
RV and marine finance
 
 
 
 
Other consumer52
 101
 
 51
 17
          
With an allowance recorded:         
Commercial and industrial (2)246,249
 274,203
 21,916
 267,662
 15,110
Commercial real estate (3)90,475
 104,930
 8,114
 114,019
 4,833
Automobile31,304
 31,878
 1,779
 30,163
 2,224
Home equity248,839
 284,957
 16,242
 292,014
 13,092
Residential mortgage (5)368,449
 411,114
 16,938
 373,573
 12,889
RV and marine finance
 
 
 
 
Other consumer4,640
 4,649
 176
 4,675
 254
          
Total         
Commercial and industrial502,050
 553,754
 21,916
 382,051
 17,694
Commercial real estate158,735
 230,744
 8,114
 202,192
 12,032
Automobile31,304
 31,878
 1,779
 30,163
 2,224
Home equity248,839
 284,957
 16,242
 292,014
 13,092
Residential mortgage368,449
 411,114
 16,938
 373,573
 12,889
RV and marine finance
 
 
 
 
Other consumer4,692
 4,750
 176
 4,726
 271

(1)These tables do not include loans fully charged-off.
(2)(1)All automobile, home equity, residential mortgage, and other consumer impaired loans included in these tables are considered impaired due to their status as a TDR.
(3)
(2)At December 31, 2014, $62,737 thousand2016, $293 million of the $202,376 thousand$406 million C&I loans with an allowance recorded were considered impaired due to their status as a TDR. At December 31, 2013, $43,805 thousand2015, $91 million of the $126,626 thousand$246 million C&I loans with an allowance recorded were considered impaired due to their status as a TDR.
(4)
(3)At December 31, 2014, $27,423 thousand2016, $81 million of the $144,162 thousand$97 million CRE loans with an allowance recorded were considered impaired due to their status as a TDR. At December 31, 2013, $24,805 thousand2015, $35 million of the $187,836 thousand$90 million CRE loans with an allowance recorded were considered impaired due to their status as a TDR.
(5)
(4)The differences between the ending balance and unpaid principal balance amounts represent partial charge-offs.
(6)
(5)At December 31, 2014, $24,470 thousand2016, $29 million of the $371,489 thousand$328 million residential mortgage loans with an allowance recorded were guaranteed by the U.S. government. At December 31, 2013, $49,225 thousand2015, $29 million of the $390,435 thousand$368 million residential mortgage loans with an allowance recorded were guaranteed by the U.S. government.

TDR Loans

TDRs are modified loans where a concession was provided to a borrower experiencing financial difficulties. Loan modifications are considered TDRs when the concessions provided are not available to the borrower through either normal channels or other sources. However, not all loan modifications are TDRs.

The amount of interest that would have been recorded under the original terms for total accruing TDR loans was $45.0$49 million, $43.9$46 million, and $41.2$45 million for 2014, 2013,2016, 2015, and 2012,2014, respectively. The total amount of actual interest recorded to interest income for these loans was $38.6$40 million, $35.7$41 million, and $32.2$39 million for 2016, 2015, and 2014, 2013, and 2012, respectively.

TDR Concession Types


The Company’s standards relating to loan modifications consider, among other factors, minimum verified income requirements, cash flow analysis,analyses, and collateral valuations. Each potential loan modification is reviewed individually and the terms of the loan are modified to meet a borrower’s specific circumstances at a point in time. All commercial TDRs are reviewed and approved by our SAD. The types of concessions provided to borrowers include:

Interest rate reduction: A reduction of the stated interest rate to a nonmarket rate for the remaining original life of the debt.

Amortization or maturity date change beyond what the collateral supports, including any of the following:

(1)Lengthens the amortization period of the amortized principal beyond market terms. This concession reduces the minimum monthly payment and increases the amount of the balloon payment at the end of the term of the loan. Principal is generally not forgiven.

(2)Reduces the amount of loan principal to be amortized and increases the amount of the balloon payment at the end of the term of the loan. This concession also reduces the minimum monthly payment. Principal is generally not forgiven.

(3)Extends the maturity date or dates of the debt beyond what the collateral supports. This concession generally applies to loans without a balloon payment at the end of the term of the loan.

Lengthens the amortization period of the amortized principal beyond market terms. This concession reduces the minimum monthly payment and could increase the amount of the balloon payment at the end of the term of the loan. Principal is generally not forgiven.

Reduces the amount of loan principal to be amortized and increases the amount of the balloon payment at the end of the term of the loan. This concession also reduces the minimum monthly payment. Principal is generally not forgiven.
Extends the maturity date or dates of the debt beyond what the collateral supports. This concession generally applies to loans without a balloon payment at the end of the term of the loan.
Chapter 7 bankruptcy: A bankruptcy court’s discharge of a borrower’s debt is considered a concession when the borrower does not reaffirm the discharged debt.

Other: A concession that is not categorized as one of the concessions described above. These concessions include, but are not limited to: principal forgiveness, collateral concessions, covenant concessions, and reduction of accrued interest. Principal forgiveness may result from any TDR modification of any concession type. However, the aggregate amount of principal forgiven as a result of loans modified as TDRs during the years ended December 31, 20142016 and 2013,2015, was not significant.

Following is a description of TDRs by the different loan types:

Commercial loan TDRs – Commercial accruing TDRs often result from loans receiving a concession with terms that are not considered a market transaction to Huntington. The TDR remains in accruing status as long as the customer is less than 90-days past due on payments per the restructured loan terms and no loss is expected.

Commercial nonaccrual TDRs result from either: (1) an accruing commercial TDR being placed on nonaccrual status, or (2) a workout where an existing commercial NAL is restructured and a concession wasis given. At times, these workouts restructure the NAL so that two or more new notes are created. The primary note is underwritten based upon our normal underwriting standards and is sized so projected cash flows are sufficient to repay contractual principal and interest. The terms on the secondary note(s) vary by situation, and may include notes that defer principal and interest payments until after the primary note is repaid. Creating two or more notes often allows the borrower to continue a project or weather a temporary economic downturn and allows Huntington to right-size a loan based upon the current expectations for a borrower’s or project’s performance.

Our strategy involving TDR borrowers includes working with these borrowers to allow them to refinance elsewhere, as well as allow them time to improve their financial position and remain oura Huntington customer through refinancing their notes according to market terms and conditions in the future. A subsequent refinancing or modification of a loan may occur when either the loan

matures according to the terms of the TDR-modified agreement or the borrower requests a change to the loan agreements. At that time, the loan is evaluated to determine if itthe borrower is creditworthy. It is subjected to the normal underwriting standards and processes for other similar credit extensions, both new and existing. The refinanced note is evaluated to determine if it is considered a new loan or a continuation of the prior loan. A new loan is considered for removal of the TDR designation, whereas a continuation of the prior note requires a continuation of the TDR designation. In order for a TDR designation to be removed, the borrower must no longer be experiencing financial difficulties and the terms of the refinanced loan must not represent a concession.

Residential MortgageConsumer loan TDRs – Residential mortgage TDRs represent loan modifications associated with traditional first-lien mortgage loans in which a concession has been provided to the borrower. The primary concessions given to residential mortgage borrowers are amortization or maturity date changes and interest rate reductions. Residential mortgages identified as TDRs involve borrowers unable to refinance their mortgages through the Company’s normal mortgage origination channels or through other independent sources. Some, but not all, of the loans may be delinquent.

Automobile, Home Equity, and Other Consumer loan TDRs The Company may make similar interest rate, term, and principal concessions as with residential mortgagefor Automobile, Home Equity, RV and Marine Finance and Other Consumer loan TDRs.

TDR Impact on Credit Quality

Huntington’s ALLL is largely determined by updated risk ratings assigned to commercial loans, updated borrower credit scores on consumer loans, and borrower delinquency history in both the commercial and consumer portfolios. These updated risk ratings and credit scores consider the default history of the borrower, including payment redefaults. As such, the provision for credit losses is impacted primarily by changes in borrower payment performance rather than the TDR classification. TDRs can be classified as either accrual or nonaccrual loans. Nonaccrual TDRs are included in NALs whereas accruing TDRs are excluded from NALs as it is probable that all contractual principal and interest due under the restructured terms will be collected.

Our


The Company's TDRs may include multiple concessions and the disclosure classifications are presented based on the primary concession provided to the borrower. The majority of ourthe concessions for the C&I and CRE portfolios are the extension of the maturity date, coupled withbut could also include an increase in the interest rate. In these instances, the primary concession is the maturity date extension.

TDR concessions may also result in the reduction of the ALLL within the C&I and CRE portfolios. This reduction is derived from payments and the resulting application of the reserve calculation within the ALLL. The transaction reserve for non-TDR C&I and CRE loans is calculated based upon several estimated probability factors, such as PD and LGD, both of which were previously discussed.LGD. Upon the occurrence of a TDR in our C&I and CRE portfolios, the reserve is measured based on discounted expected cash flows or collateral value, less anticipated selling costs, of the modified loan in accordance with ASC 310-10. The resulting TDR ALLL calculation often results in a lower ALLL amount because (1) the discounted expected cash flows or collateral value, less anticipated selling costs, indicate a lower estimated loss, (2) if the modification includes a rate increase, the discounting of the cash flows on the modified loan, using the pre-modification interest rate, exceeds the carrying value of the loan, or (3) payments may occur as part of the modification. The ALLL for C&I and CRE loans may increase as a result of the modification, as the discounted cash flow analysis may indicate additional reserves are required.

TDR concessions on consumer loans may increase the ALLL. The concessions made to these borrowers often include interest rate reductions, and therefore, the TDR ALLL calculation results in a greater ALLL compared with the non-TDR calculation as the reserve is measured based on the estimation of the discounted expected cash flows or collateral value, less anticipated selling costs, on the modified loan in accordance with ASC 310-10. The resulting TDR ALLL calculation often results in a higher ALLL amount because (1) the discounted expected cash flows or collateral value, less anticipated selling costs, indicate a higher estimated loss or, (2) due to the rate decrease, the discounting of the cash flows on the modified loan, using the pre-modification interest rate, indicates a reduction in the present value of expected cash flows or collateral value, less anticipated selling costs. InHowever, in certain instances, the ALLL may decrease as a result of payments made in connection with the modification.

Commercial loan TDRs – In instances where the bank substantiates that it will collect its outstanding balance in full, the note is considered for return to accrual status upon the borrower sustaining sufficient cash flowsshowing a sustained period of repayment performance for a six-month period of time. This six-month period could extend before or after the restructure date. If a charge-off was taken as part of the restructuring, any interest or principal payments received on that note are applied to first reduce the bank’s outstanding book balance and then to recoveries of charged-off principal, unpaid interest, and/or fee expenses while the TDR is in nonaccrual status.

Residential Mortgage, Automobile, Home Equity, and Other Consumer loan TDRs – Modified consumer loans identified as TDRs are aggregated into pools for analysis. Cash flows and weighted average interest rates are used to calculate impairment at the pooled-loan level. Once the loans are aggregated into the pool, they continue to be classified as TDRs until contractually repaid or charged-off.

Residential mortgage loans not guaranteed by a U.S. government agency such as the FHA, VA, and the USDA, including TDR loans, are reported as accrual or nonaccrual based upon delinquency status. Nonaccrual TDRs are those that are greater than 150-days contractually past due. Loans guaranteed by U.S. government organizations continue to accrue interest on guaranteed rates upon delinquency.

The following table presents by class and by the reason for the modification the number of contracts, post-modification outstanding balance, and the financial effects of the modification for the years ended December 31, 20142016 and 2013:

   New Troubled Debt Restructurings During The Year Ended(1) 
   December 31, 2014  December 31, 2013 
(dollar amounts in thousands)  Number of
Contracts
   Post-modification
Outstanding

Ending
Balance
   Financial effects
of modification(2)
  Number of
Contracts
   Post-modification
Outstanding

Balance
   Financial effects
of modification(2)
 

C&I—Owner occupied:(3)

           

Interest rate reduction

   19    $2,484    $20    22    $6,601    $(466

Amortization or maturity date change

   97     32,145     336    64     15,662     (12

Other

   7     2,051     (36  16     7,367     337  
  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

   

 

 

 

Total C&I—Owner occupied

   123    $36,680    $320    102    $29,630    $(141

C&I—Other commercial and industrial:(3)

           

Interest rate reduction

   25    $50,534    $(1,982  26    $75,447    $(1,040

Amortization or maturity date change

   285     149,339     (2,407  120     53,340     1,295  

Other

   21     7,613     (7  35     18,290     (1,163
  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

   

 

 

 

Total C&I—Other commercial and industrial

   331    $207,486    $(4,396  181    $147,077    $(908

CRE—Retail properties:(3)

           

Interest rate reduction

   5    $11,381    $420    4    $1,116    $(8

Amortization or maturity date change

   24     27,415     (267  21     27,550     4,159  

Other

   9     13,765     (35  12     19,842     (558
  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

   

 

 

 

Total CRE—Retail properties

   38    $52,561    $118    37    $48,508    $3,593  

CRE—Multi family:(3)

           

Interest rate reduction

   20    $3,484    $(75  10    $4,444    $7  

Amortization or maturity date change

   40     9,791     197    16     2,345     415  

Other

   8     5,016     57    5     8,085     (2
  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

   

 

 

 

Total CRE—Multi family

   68    $18,291    $179    31    $14,874    $420  

CRE—Office:(3)

           

Interest rate reduction

   2    $120    $(1  7    $6,504    $1,656  

Amortization or maturity date change

   22     18,157     (424  16     12,388     91  

Other

   5     35,476     (3,153  6     7,044     655  
  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

   

 

 

 

Total CRE—Office

   29    $53,753    $(3,578  29    $25,936    $2,402  

CRE—Industrial and warehouse:(3)

           

Interest rate reduction

   2    $4,046    $—      1    $2,682    $(476

Amortization or maturity date change

   17     9,187     164    9     4,069     (185

Other

   1     977     —      1     5,867     —    

Total CRE—Industrial and Warehouse

   20    $14,210    $164    11    $12,618    $(661

CRE—Other commercial real estate:(3)

           

Interest rate reduction

   8    $5,224    $146    19    $10,996    $96  

Amortization or maturity date change

   55     76,353     (2,789  21     17,851     4,923  

Other

   4     1,809     (127  13     9,735     (101
  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

   

 

 

 

Total CRE—Other commercial real estate

   67    $83,386    $(2,770  53    $38,582    $4,918  

Automobile:(3)

           

Interest rate reduction

   92    $758    $15    14    $106    $—    

Amortization or maturity date change

   1,880     12,120     151    1,659     9,420     (76

Chapter 7 bankruptcy

   625     4,938     66    1,313     7,748     301  

Other

   —       —       —      —       —       —    
  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

   

 

 

 

Total Automobile

   2,597    $17,816    $232    2,986    $17,274    $225  

Residential mortgage:(3)

           

Interest rate reduction

   27    $3,692    $19    65    $11,662    $3  

Amortization or maturity date change

   333     44,027     552    442     58,344     384  

Chapter 7 bankruptcy

   182     18,635     715    458     39,813     1,345  

Other

   5     526     5    17     1,837     39  
  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

   

 

 

 

Total Residential mortgage

   547    $66,880    $1,291    982    $111,656    $1,771  

First-lien home equity:(3)

           

Interest rate reduction

   193    $15,172    $764    134    $12,244    $1,149  

Amortization or maturity date change

   289     23,272     (1,051  279     19,280     (1,084

Chapter 7 bankruptcy

   105     7,296     727    257     14,987     748  

Other

   —       —       —      —       —       —    
  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

   

 

 

 

Total First-lien home equity

   587    $45,740    $440    670    $46,511    $813  

Junior-lien home equity:(3)

           

Interest rate reduction

   187    $6,960    $296    25    $1,179    $190  

Amortization or maturity date change

   1,467     58,129     (6,955  1,491     55,389     (5,431

Chapter 7 bankruptcy

   201     3,014     3,141    1,564     15,303     33,623  

Other

   —       —       —      —       —       —    
  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

   

 

 

 

Total Junior-lien home equity

   1,855    $68,103    $(3,518  3,080    $71,871    $28,382  

Other consumer:(3)

           

Interest rate reduction

   7    $123    $3    5    $306    $48  

Amortization or maturity date change

   48     1,803     12    11     117     5  

Chapter 7 bankruptcy

   25     483     (50  36     565     29  

Other

   —       —       —      —       —       —    

Total Other consumer

   80    $2,409    $(35  52    $988    $82  
  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

   

 

 

 

Total new troubled debt restructurings

   6,342    $667,315    $(11,553  8,214    $565,525    $40,896  
  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

   

 

 

 

2015:

 New Troubled Debt Restructurings During The Year Ended (1)
 December 31, 2016 December 31, 2015
(dollar amounts in thousands)
Number of
Contracts
 
Post-modification
Outstanding
Balance (2)
 
Financial effects
of modification (3)
 
Number of
Contracts
 
Post-modification
Outstanding
Balance (2)
 
Financial effects
of modification (3)
Commercial and industrial:           
Interest rate reduction4
 161
 5
 13
 8,243
 (1,042)
Amortization or maturity date change872
 490,488
 (8,751) 765
 524,356
 (5,853)
Other20
 1,951
 (13.996) 16
 29,842
 (449)
Total Commercial and industrial896
 492,600
 (8,760) 794
 562,441
 (7,344)
Commercial real estate:           
Interest rate reduction2
 223
 
 4
 2,249
 (4)
Amortization or maturity date change111
 69,192
 (1,868) 143
 141,238
 (1,249)
Other4
 315
 16
 11
 480
 (30)
Total commercial real estate:117
 69,730
 (1,852) 158
 143,967
 (1,283)
Automobile:           
Interest rate reduction17
 212
 12
 41
 121
 5
Amortization or maturity date change1,593
 14,542
 1,065
 1,591
 12,268
 533
Chapter 7 bankruptcy1,059
 8,418
 400
 926
 7,390
 423
Other
 
 
 
 
 
Total Automobile2,669
 23,172
 1,477
 2,558
 19,779
 961
Home equity:           
Interest rate reduction55
 2,928
 110
 55
 4,399
 161
Amortization or maturity date change578
 32,006
 (3,709) 1,591
 79,023
 (10,639)
Chapter 7 bankruptcy282
 10,035
 2,819
 330
 9,855
 4,271
Other
 
 
 
 
 
Total Home equity915
 44,969
 (780) 1,976
 93,277
 (6,207)
Residential mortgage:           
Interest rate reduction13
 1,287
 (18) 15
 1,565
 (61)
Amortization or maturity date change363
 39,170
 (1,650) 518
 57,859
 (455)
Chapter 7 bankruptcy62
 5,715
 (86) 139
 14,183
 (164)
Other4
 424
 
 11
 1,266
 
Total Residential mortgage442
 46,596
 (1,754) 683
 74,873
 (680)
RV and marine finance:           
Interest rate reduction
 
 
 
 
 
Amortization or maturity date change
 
 
 
 
 
Chapter 7 bankruptcy
 
 
 
 
 
Other
 
 
 
 
 
Total RV and marine finance
 
 
 
 
 
Other consumer:           
Interest rate reduction
 
 
 1
 96
 3
Amortization or maturity date change6
 575
 24
 10
 198
 8
Chapter 7 bankruptcy8
 72
 7
 11
 69
 9
Other
 
 
 
 
 
Total Other consumer14
 647
 31
 22
 363
 20
Total new troubled debt restructurings5,053
 $677,714
 $(11,638) 6,191
 $894,700
 $(14,533)

(1)TDRs may include multiple concessions and the disclosure classifications are based on the primary concession provided to the borrower.
borrower.
(2)Post-modification balances approximate pre-modification balances. The aggregate amount of charge-offs as a result of a restructuring are not significant.

(2)
(3)Amounts represent the financial impact via provision (recovery) for loan and lease losses as a result of the modification.

(3)
Post-modification balances approximate pre-modification balances. The aggregate amount of charge-offs as a result of a restructuring are not significant.

Any loan within any portfolio or class is considered as payment redefaulted at 90-days past due.

The following table presents TDRs that have redefaulted within one year of modification during the years ended December 31, 2014 and 2013:

   Troubled Debt Restructurings That Have Redefaulted 
   Within One Year of Modification During The Year Ended 
   December 31, 2014(1)   December 31, 2013(1) 
(dollar amounts in thousands)  Number of
Contracts
   Ending
Balance
   Number of
Contracts
   Ending
Balance
 

C&I—Owner occupied:

        

Interest rate reduction

   —      $—       —      $—    

Amortization or maturity date change

   6     946     10     1,144  

Other

   1     230     7     1,221  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total C&I—Owner occupied

   7    $1,176     17    $2,365  

C&I—Other commercial and industrial:

        

Interest rate reduction

   1    $30     —      $—    

Amortization or maturity date change

   14     1,555     17     476  

Other

   3     37     —       —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Total C&I—Other commercial and industrial

   18    $1,622     17    $476  

CRE—Retail Properties:

        

Interest rate reduction

   —      $—       1    $302  

Amortization or maturity date change

   1     483     4     993  

Other

   —       —       1     186  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total CRE—Retail properties

   1    $483     6    $1,481  

CRE—Multi family:

        

Interest rate reduction

   —      $—       —      $—    

Amortization or maturity date change

   4     2,827     2     225  

Other

   1     176     —       —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Total CRE—Multi family

   5    $3,003     2    $225  

CRE—Office:

        

Interest rate reduction

   —      $—       —      $—    

Amortization or maturity date change

   3     1,738     2     1,131  

Other

   —       —       —       —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Total CRE—Office

   3    $1,738     2    $1,131  

CRE—Industrial and Warehouse:

        

Interest rate reduction

   1    $1,339     —      $—    

Amortization or maturity date change

   1     756     1     361  

Other

   —       —       1     726  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total CRE—Industrial and Warehouse

   2    $2,095     2    $1,087  

CRE—Other commercial real estate:

        

Interest rate reduction

   1    $169     —      $—    

Amortization or maturity date change

   2     758     4     774  

Other

   —       —       1     5  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total CRE—Other commercial real estate

   3    $927     5    $779  

Automobile:

        

Interest rate reduction

   —      $—       1    $112  

Amortization or maturity date change

   40     328     37     380  

Chapter 7 bankruptcy

   53     374     137     617  

Other

   —       —       —       —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Automobile

   93    $702     175    $1,109  

Residential mortgage:

        

Interest rate reduction

   11    $1,516     4    $424  

Amortization or maturity date change

   82     8,974     78     11,263  

Chapter 7 bankruptcy

   37     3,187     71     6,647  

Other

   —       —       2     418  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Residential mortgage

   130    $13,677     155    $18,752  

First-lien home equity:

        

Interest rate reduction

   5    $335     1    $87  

Amortization or maturity date change

   16     2,109     6     629  

Chapter 7 bankruptcy

   16     1,005     16     1,235  

Other

   —       —       —       —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Total First-lien home equity

   37    $3,449     23    $1,951  

Junior-lien home equity:

        

Interest rate reduction

   1    $11     1    $—    

Amortization or maturity date change

   31     1,841     9     478  

Chapter 7 bankruptcy

   39     620     40     718  

Other

   —       —       —       —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Junior-lien home equity

   71    $2,472     50    $1,196  

Other consumer:

        

Interest rate reduction

   —      $—       —      $—    

Amortization or maturity date change

   —       —       —       —    

Chapter 7 bankruptcy

   —       —       3     96  

Other

   —       —       —       —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Other consumer

   —      $—       3    $96  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total troubled debt restructurings with subsequent redefault

   370    $31,344     457    $30,648  
  

 

 

   

 

 

   

 

 

   

 

 

 

(1)Subsequent redefault is defined as a payment redefault within 12 months of the restructuring date. Payment redefault is defined as 90-days past due for any loan in any portfolio or class. Any loan in any portfolio may be considered to be in payment redefault prior to the guidelines noted above when collection of principal or interest is in doubt.

Pledged Loans and Leases

The Bank has access to the Federal Reserve’s discount window and advances from the FHLB – Cincinnati. AtAs of December 31, 2014,2016 and 2015, these borrowings and advances are secured by $18.0$19.7 billion and $17.5 billion, respectively of loans.

4.loans and securities.

On March 31, 2015, Huntington completed its acquisition of Macquarie Equipment Finance, which was re-branded Huntington Technology Finance. Huntington assumed debt associated with two securitizations. As of December 31, 2016, the debt is secured by $70 million of on balance sheet leases held by the trusts.
5. AVAILABLE-FOR-SALE AND OTHER SECURITIES

Contractual maturities of available-for-sale and other securities as of December 31, 20142016 and 20132015 were:

    2014   2013 

(dollar amounts in thousands)

  Amortized
Cost
   Fair
Value
   Amortized
Cost
   Fair
Value
 

Under 1 year

  $355,486    $355,465    $263,366    $262,752  

1—5 years

   1,047,492     1,066,041     1,665,644     1,697,234  

6—10 years

   1,517,974     1,527,195     1,440,056     1,433,303  

Over 10 years

   6,090,688     6,086,980     3,662,328     3,577,502  

Other securities:

        

Nonmarketable equity securities

   331,559     331,559     320,991     320,991  

Marketable equity securities

   16,687     17,430     16,522     16,971  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total available-for-sale and other securities

  $9,359,886    $9,384,670    $7,368,907    $7,308,753  
  

 

 

   

 

 

   

 

 

   

 

 

 

 2016 2015
(dollar amounts in thousands)
Amortized
Cost
 
Fair
Value
 
Amortized
Cost
 
Fair
Value
Under 1 year$223,789
 $221,495
 $333,891
 $332,980
After 1 year through 5 years1,147,510
 1,149,460
 1,184,454
 1,189,455
After 5 years through 10 years1,956,893
 1,962,345
 1,648,808
 1,645,759
After 10 years11,884,812
 11,665,245
 5,259,855
 5,263,063
Other securities:       
Nonmarketable equity securities547,704
 547,704
 332,786
 332,786
Mutual funds15,286
 15,286
 10,604
 10,604
Marketable equity securities861
 1,302
 525
 794
Total available-for-sale and other securities$15,776,855
 $15,562,837
 $8,770,923
 $8,775,441
Other securities at December 31, 20142016 and 20132015 include nonmarketable equity securities of $157.0$249 million and $165.6$157 million of stock issued by the FHLB of Cincinnati, and $174.5$299 million and $155.4$176 million of Federal Reserve Bank stock, respectively. Nonmarketable equity securities are recorded at amortized cost. Other securities also include mutual funds and marketable equity securities.

The following tables provide amortized cost, fair value, and gross unrealized gains and losses recognized in OCI by investment category at December 31, 20142016 and 2013:

       Unrealized     
   Amortized   Gross   Gross   Fair 

(dollar amounts in thousands)

  Cost   Gains   Losses   Value 

December 31, 2014

        

U.S. Treasury

  $5,435    $17    $—      $5,452  

Federal agencies:

        

Mortgage-backed securities

   5,273,899     63,906     (15,104   5,322,701  

Other agencies

   349,715     2,871     (1,043   351,543  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total U.S. Treasury and Federal agency securities

   5,629,049     66,794     (16,147   5,679,696  

Municipal securities

   1,841,311     37,398     (10,140   1,868,569  

Private-label CMO

   43,730     1,116     (2,920   41,926  

Asset-backed securities

   1,014,999     2,061     (61,062   955,998  

Corporate debt securities

   479,151     9,442     (2,417   486,176  

Other securities

   351,646     743     (84   352,305  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total available-for-sale and other securities

  $9,359,886    $117,554    $(92,770  $9,384,670  
  

 

 

   

 

 

   

 

 

   

 

 

 

       Unrealized     
   Amortized   Gross   Gross   Fair 

(dollar amounts in thousands)

  Cost   Gains   Losses   Value 

December 31, 2013

        

U.S. Treasury

  $51,301    $303    $—      $51,604  

Federal agencies:

        

Mortgage-backed securities

   3,562,444     42,319     (38,542   3,566,221  

Other agencies

   313,877     6,105     (94   319,888  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total U.S. Treasury and Federal agency securities

   3,927,622     48,727     (38,636   3,937,713  

Municipal securities (1)

   1,140,263     18,825     (13,096   1,145,992  

Private-label CMO

   51,238     1,188     (3,322   49,104  

Asset-backed securities

   1,172,284     6,771     (88,015   1,091,040  

Covered bonds

   280,595     5,279     —       285,874  

Corporate debt securities

   455,493     11,241     (9,494   457,240  

Other securities

   341,412     511     (133   341,790  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total available-for-sale and other securities

  $7,368,907    $92,542    $(152,696  $7,308,753  
  

 

 

   

 

 

   

 

 

   

 

 

 

(1)Effective December 31, 2013 approximately $600.4 million of direct purchase municipal instruments were reclassified from C&I loans to available-for-sale securities.

2015:

   Unrealized  
(dollar amounts in thousands)
Amortized
Cost
 
Gross
Gains
 
Gross
Losses
 Fair Value
December 31, 2016       
U.S. Treasury$5,480
 $17
 $
 $5,497
Federal agencies:       
Mortgage-backed securities10,851,461
 12,548
 (190,667) 10,673,342
Other agencies73,012
 536
 (6) 73,542
Total U.S. Treasury, Federal agency securities10,929,953
 13,101
 (190,673) 10,752,381
Municipal securities3,260,428
 28,431
 (38,802) 3,250,057
Asset-backed securities824,124
 1,492
 (32,135) 793,481
Corporate debt194,537
 4,161
 (15) 198,683
Other securities567,813
 441
 (19) 568,235
Total available-for-sale and other securities$15,776,855
 $47,626
 $(261,644) $15,562,837

   Unrealized  
(dollar amounts in thousands)Amortized
Cost
 Gross
Gains
 Gross
Losses
 Fair Value
December 31, 2015       
U.S. Treasury$5,457
 $15
 $
 $5,472
Federal agencies:       
Mortgage-backed securities4,505,318
 30,078
 (13,708) 4,521,688
Other agencies115,076
 888
 (51) 115,913
Total U.S. Treasury, Federal agency securities4,625,851
 30,981
 (13,759) 4,643,073
Municipal securities2,431,943
 51,558
 (27,105) 2,456,396
Asset-backed securities901,059
 535
 (40,181) 861,413
Corporate debt464,207
 4,824
 (2,554) 466,477
Other securities347,863
 271
 (52) 348,082
Total available-for-sale and other securities$8,770,923
 $88,169
 $(83,651) $8,775,441
The following tables provide detail on investment securities with unrealized losses aggregated by investment category and the length of time the individual securities have been in a continuous loss position at December 31, 20142016 and 2013:

  Less than 12 Months  Over 12 Months  Total 
  Fair   Unrealized  Fair   Unrealized  Fair   Unrealized 

(dollar amounts in thousands )

 Value   Losses  Value   Losses  Value   Losses 

December 31, 2014

         

Federal Agencies:

         

Mortgage-backed securities

 $501,858    $(1,909 $527,280    $(13,195 $1,029,138    $(15,104

Other agencies

  159,708     (1,020  1,281     (23  160,989     (1,043
 

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

 

Total Federal agency securities

  661,566     (2,929  528,561     (13,218  1,190,127     (16,147

Municipal securities

  568,619     (9,127  96,426     (1,013  665,045     (10,140

Private label CMO

  —       —      22,650     (2,920  22,650     (2,920

Asset-backed securities

  157,613     (641  325,691     (60,421  483,304     (61,062

Corporate debt securities

  49,562     (252  88,398     (2,165  137,960     (2,417

Other securities

  —       —      1,416     (84  1,416     (84
 

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

 

Total temporarily impaired securities

 $1,437,360    $(12,949 $1,063,142    $(79,821 $2,500,502    $(92,770
 

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

 

   Less than 12 Months  Over 12 Months  Total 
   Fair   Unrealized  Fair   Unrealized  Fair   Unrealized 

(dollar amounts in thousands )

  Value   Losses  Value   Losses  Value   Losses 

December 31, 2013

          

Federal Agencies

          

Mortgage-backed securities

  $1,628,454    $(37,174 $12,682    $(1,368 $1,641,136    $(38,542

Other agencies

   2,069     (94  —       —      2,069     (94
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

 

Total Federal agency securities

   1,630,523     (37,268  12,682     (1,368  1,643,205     (38,636

Municipal securities

   551,114     (12,395  7,531     (701  558,645     (13,096

Private label CMO

   —       —      22,639     (3,322  22,639     (3,322

Asset-backed securities

   391,665     (9,720  107,419     (78,295  499,084     (88,015

Corporate debt securities

   146,308     (7,729  26,155     (1,765  172,463     (9,494

Other securities

   3,078     (72  2,530     (61  5,608     (133
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

 

Total temporarily impaired securities

  $2,722,688    $(67,184 $178,956    $(85,512 $2,901,644    $(152,696
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

 

2015:

 Less than 12 Months Over 12 Months Total
(dollar amounts in thousands)Fair Value 
Unrealized
Losses
 Fair Value 
Unrealized
Losses
 Fair Value 
Unrealized
Losses
December 31, 2016           
Federal agencies:           
Mortgage-backed securities$8,908,470
 $(189,318) $41,706
 $(1,349) $8,950,176
 $(190,667)
Other agencies924
 (6) 
 
 924
 (6)
Total Federal agency securities8,909,394
 (189,324) 41,706
 (1,349) 8,951,100
 (190,673)
Municipal securities1,412,152
 (29,175) 272,292
 (9,627) 1,684,444
 (38,802)
Asset-backed securities361,185
 (3,043) 178,924
 (29,092) 540,109
 (32,135)
Corporate debt3,567
 (15) 200
 
 3,767
 (15)
Other securities790
 (11) 1,492
 (8) 2,282
 (19)
Total temporarily impaired securities$10,687,088
 $(221,568) $494,614
 $(40,076) $11,181,702
 $(261,644)
 Less than 12 Months Over 12 Months Total
(dollar amounts in thousands)Fair Value 
Unrealized
Losses
 Fair Value 
Unrealized
Losses
 Fair Value 
Unrealized
Losses
December 31, 2015           
Federal agencies:           
Mortgage-backed securities$1,658,516
 $(11,341) $84,147
 $(2,367) $1,742,663
 $(13,708)
Other agencies37,982
 (51) 
 
 37,982
 (51)
Total Federal agency securities1,696,498
 (11,392) 84,147
 (2,367) 1,780,645
 (13,759)
Municipal securities570,916
 (15,992) 248,204
 (11,113) 819,120
 (27,105)
Asset-backed securities552,275
 (5,791) 207,639
 (34,390) 759,914
 (40,181)
Corporate debt167,144
 (1,673) 21,965
 (881) 189,109
 (2,554)
Other securities772
 (28) 1,476
 (24) 2,248
 (52)
Total temporarily impaired securities$2,987,605
 $(34,876) $563,431
 $(48,775) $3,551,036
 $(83,651)
At December 31, 2014,2016, the carrying value of investment securities pledged to secure public and trust deposits, trading account liabilities, U.S. Treasury demand notes, and security repurchase agreements totaled $3.6$5.0 billion. There were no securities of a single issuer, which are not governmental or government-sponsored, that exceeded 10% of shareholders’ equity at December 31, 2014.

2016.

The following table is a summary of realized securities gains and losses for the years ended December 31, 2014, 2013,2016, 2015, and 2012:

(dollar amounts in thousands)

  2014   2013   2012 

Gross gains on sales of securities

  $17,729    $2,932    $8,612  

Gross (losses) on sales of securities

   (175   (712   (2,224
  

 

 

   

 

 

   

 

 

 

Net gain (loss) on sales of securities

  $17,554    $2,220    $6,388  
  

 

 

   

 

 

   

 

 

 

Collateralized Debt Obligations and Private-Label CMO Securities

Our highest risk segments of our investment2014:


 Year ended December 31,
(dollar amounts in thousands)2016 2015 2014
Gross gains on sales of securities$23,095
 $6,730
 $17,729
Gross (losses) on sales of securities(21,060) (3,546) (175)
Net gain (loss) on sales of securities$2,035
 $3,184
 $17,554
Security Impairment
Huntington evaluates the available-for-sale securities portfolio areon a quarterly basis for impairment. The Company conducts a comprehensive security-level assessment on all available-for-sale securities. Huntington does not intend to sell, nor does it believe it will be required to sell these securities until the CDO and 2003-2006 vintage private-label CMO portfolios. Ofamortized cost is recovered, which may be maturity. Impairment would exist when the $41.9 million private-label CMO securities reported at fairpresent value at December 31, 2014, approximately $20.3 million are rated below investment grade. The CDOs are in the asset-backed securities portfolio. These segments are in run-off, and we have not purchased these types of securities since 2008. The performance of the underlying securities in each ofexpected cash flows are not sufficient to recover the entire amortized cost basis at the balance sheet date. Under these segments reflects the deterioration of CDO issuers and 2003 to 2006 non-agency mortgages. Each of these securities in these two segments is subjected to a rigorous review of its projected cash flows. These reviews are supported with analysis from independent third parties.

The following table presents thecircumstances, any credit ratings for our CDO and private label CMO securities as of December 31, 2014 and 2013:

Credit Ratings of Selected Investment Securities

         Average Credit Rating of Fair Value Amount (1) 
(dollar amounts in thousands)  Amortized
Cost
   Fair Value   AAA   AA +/-   A +/-   BBB +/-   <BBB- 

Private-label CMO securities

  $43,730    $41,926    $11,461    $—      $—      $10,161    $20,304  

Collateralized debt obligations

   139,194     82,738     —       —       —       —       82,738  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total at December 31, 2014

  $182,924    $124,664    $11,461    $—      $—      $10,161    $103,042  

Total at December 31, 2013

  $212,968    $133,240    $16,964    $—      $17,855    $11,785    $86,636  

(1)Credit ratings reflect the lowest current rating assigned by a nationally recognized credit rating agency.

Beginning January 1, 2015, the credit ratings of our private label CMO and CDO securities will no longer be used to determine risk weighting for regulatory capital purposes. Private label CMO and CDO securities will be subject to the Simplified Supervisory Formula Approach (SSFA) for risk weighting under BASEL III.

The fair values of the private label CMO and CDO assets have been impacted by various market conditions. The unrealized losses were primarily the result of wider liquidity spreads on asset-backed securities and increased market volatility on non-agency mortgage and asset-backed securities that are collateralized by certain mortgage loans. In addition, the expected average lives of the asset-backed securities backed by trust-preferred securities have been extended, due to changes in the expectations of when the underlying securitiesimpairment would be repaid.recognized in earnings. The contractual terms and / and/or cash flows of the investments do not permit the issuer to settle the securities at a price less than the amortized cost. Huntington does not intend to sell, nor does it believe it will be required to sell these securities until the fair value is recovered, which may be maturity,

OTTI totaling $2 million was recorded on two direct purchase municipal instruments during 2016. Direct purchase municipal instruments are underwritten and therefore, does not consider them to be other-than-temporarily impaired atmanaged by Huntington. At December 31, 2014.

2016, $2.8 billion of direct purchase municipal instruments were managed by Huntington.

The following table summarizeshighest risk segment in our investment portfolio is the relevant characteristics of ourtrust preferred CDO securities portfolio, which are included in asset-backed securities, at December 31, 2014 and 2013. Each security is part of a pool of issuers and supports a more senior tranche of securities except for the MM Comm III securities which are in the most senior class.

Collateralized Debt Obligation Securities Data

(dollar amountsasset-backed securities portfolio. This portfolio is in thousands)

Deal Name

  Par Value   Amortized
Cost
   Fair
Value
   Unrealized
Loss (2)
  Lowest
Credit
Rating (3)
   # of Issuers
Currently
Performing/
Remaining (4)
   Actual
Deferrals
and
Defaults
as a % of
Original
Collateral
  Expected
Defaults as
a % of
Remaining
Performing
Collateral
  Excess
Subordination (5)
 

Alesco II (1)

  $41,646    $28,834    $16,758    $(12,076  C     30/33     8  7  —  

ICONS

   19,837     19,837     15,786     (4,051  BB     19/21     7    15    57  

MM Comm III

   5,584     5,335     4,418     (917  BB     5/9     5    9    31  

Pre TSL IX

   5,000     3,955     2,403     (1,552  C     28/40     19    9    4  

Pre TSL XI (1)

   25,000     20,632     12,248     (8,384  C     43/56     16    9    8  

Pre TSL XIII (1)

   27,530     20,252     13,302     (6,950  C     44/58     16    16    13  

Reg Diversified (1)

   25,500     6,908     1,142     (5,766  D     23/41     38    9    —    

Soloso (1)

   12,500     2,440     368     (2,072  C     38/61     29    18    —    

Tropic III

   31,000     31,001     16,313     (14,688  CCC+     28/40     21    8    37  
  

 

 

   

 

 

   

 

 

   

 

 

        

Total at
December 31,
2014

  $193,597    $139,194    $82,738    $(56,456       
  

 

 

   

 

 

   

 

 

   

 

 

        

Total at December 31, 2013

  $214,419    $161,730    $84,136    $(77,594       
  

 

 

   

 

 

   

 

 

   

 

 

        

(1)Security was determined to have OTTI. As such, the book value is net of recorded credit impairment.
(2)The majority of securities have been in a continuous loss position for 12 months or longer.
(3)For purposes of comparability, the lowest credit rating expressed is equivalent to Fitch ratings even where the lowest rating is based on another nationally recognized credit rating agency.
(4)Includes both banks and/or insurance companies.
(5)Excess subordination percentage represents the additional defaults in excess of both currentrun off, and projected defaults that the CDO can absorb before the bond experiences credit impairment. Excess subordinated percentage is calculated by (a) determining what percentage of defaults a deal can experience before the bond has credit impairment, and (b) subtracting from this default breakage percentage both total current and expected future default percentages.

Security Impairment

Huntington evaluated OTTI on the debt securityCompany has not purchased these types listed below.

Alt-A mortgage-backed and private-label CMOof securities are collateralized since 2005. The fair values of the CDO assets have been impacted by first-lien residential mortgage loans. The securities valuation methodology incorporates values obtained from a third party pricing specialist using a discounted cash flow approach and a proprietary pricing model and includes assumptions management believes market participants would use to value the securities under currentvarious market conditions. The model uses inputs such as estimated prepayment speeds,unrealized losses recoveries, default

rates that are implied byprimarily the result of wider liquidity spreads on asset-backed securities and the longer expected average lives of the trust-preferred CDO securities, due to changes in the expectations of when the underlying performance of collateral in the structure or similar structures, house price depreciation / appreciation rates that are based upon macroeconomic forecasts and discount rates that are implied by market prices for similar securities with similar collateral structures. The remaining Alt-A mortgage backed securities were sold during the third quarter 2014.

will be repaid.

Collateralized Debt Obligations are CDOs backed by a pool of debt securities issued by financial institutions. The collateral generally consists of trust-preferred securities and subordinated debt securities issued by banks, bank holding companies, and insurance companies. Many collateral issuers have the option of deferring interest payments on their debt for up to five years. A full cash flow analysis is used to estimate fair values and assess impairment for each security within this portfolio. A third-party pricing specialist with direct industry experience in pooled-trust-preferred security evaluations is engaged to provide assistance estimating the fair value and expected cash flows on this portfolio. The full cash flow analysis is completed by evaluating the relevant credit and structural aspects of each pooled-trust-preferred security in the portfolio, including collateral performance projections for each piece of collateral in the security and terms of the security’s structure. The credit review includes an analysis of profitability, credit quality, operating efficiency, leverage, and liquidity using available financial and regulatory information for each underlying collateral issuer. The analysis also includes a review of historical industry default data, current/current / near term operating conditions, and the impact of macroeconomic and regulatory changes. Using the results of ourthe analysis, we estimatethe Company estimates appropriate default and recovery probabilities for each piece of collateral then estimateestimates the expected cash flows for each security. The cumulative probability of default ranges from a low of 2% to 100%.

Many collateral issuers have the option of deferring interest payments on their debt for up to five years. For issuers who are deferring interest, assumptions are made regarding the issuers ability to resume interest payments and make the required principal payment at maturity; the cumulative probability of default for these issuers currently ranges from 30% to 100%, and a 10% recovery assumption. The fair value of each security is obtained by discounting the expected cash flows at a market discount rate, ranging from LIBOR plus 4.3% to LIBOR plus 13.3% as of December 31, 2014.rate. The market discount rate is determined by reference to yields observed in the market for similarly rated collateralized debt obligations, specifically high-yield collateralized loan obligations. The relatively high market discount rate is reflective of the uncertainty of the cash flows and illiquid nature of these securities. The large differential between the fair value and amortized cost of some of the securities reflects the high market discount rate and the expectation that the majority of the cash flows will not be received until near the final maturity of the security (the final maturities range from 2032 to 2035).

On December 10, 2013,

The following table summarizes the Federal Reserve, the OCC, the FDIC, the CFTC and the SEC issued final rules to implement the Volcker Rule contained in section 619relevant characteristics of the Dodd-Frank Act, generally to become effective on July 21, 2015. The Volcker Rule prohibits an insured depository institution and its affiliates (referred to as “banking entities”) from: (i) engaging in “proprietary trading” and (ii) investing in or sponsoring certain types of funds (“covered funds”) subject to certain limited exceptions. These prohibitions impact the ability of U.S. banking entities to provide investment management products and services that are competitive with nonbanking firms generally and with non-U.S. banking organizations in overseas markets. The rule also effectively prohibits short-term trading strategies by any U.S. banking entity if those strategies involve instruments other than those specifically permitted for trading.

On January 14, 2014, the five federal agencies approved an interim final rule to permit banking entities to retain interests in certain collateralized debt obligations backed primarily by trust preferredCompany's CDO securities from the investment prohibitions of section 619 of the Volcker Rule. Under the interim final rule, the agencies permit the retention of an interest in or sponsorship of covered funds by banking entities if certain qualifications are met. In addition, the agencies released a non-exclusive list of issuers that meet the requirements of the interim final rule. At December 31, 2014, we had investments in nine different pools of trust preferred securities. Eight of our poolsportfolio, which are included in asset-backed securities, at December 31, 2016 and 2015. Each security is part of a pool of issuers and supports a more senior tranche of securities except for the list of non-exclusive issuers. We have analyzedMM Comm III securities which are the ICONS pool that was not included on the list and believe that it is more likely than not that we will be able to hold the ICONS security to recovery under the final Volcker Rule regulations.

most senior class.


Collateralized Debt Obligation Securities
(dollar amounts in thousands)
Deal NamePar Value 
Amortized
Cost
 
Fair
Value
 
Unrealized
Loss (2)
Lowest
Credit
Rating (3)
# of Issuers
Currently
Performing/
Remaining (4)
 
Actual
Deferrals
and
Defaults
as a % of
Original
Collateral
 
Expected
Defaults as
a % of
Remaining
Performing
Collateral
 
Excess
Subordination (5)
ICONS18,594
 18,594
 15,307
 (3,287) BB 19/21 7 13 54
MM Comm III4,573
 4,369
 3,618
 (751) BB 5/8 5 6 38
Pre TSL IX (1)5,000
 3,955
 3,253
 (702) C 27/37 16 9 8
Pre TSL XI (1)25,000
 19,576
 15,767
 (3,809) C 43/53 14 8 14
Pre TSL XIII (1)27,530
 19,106
 17,146
 (1,960) C 45/54 9 11 29
Reg Diversified (1)25,500
 4,610
 1,752
 (2,858) D 20/37 35 8 
Tropic III31,000
 31,000
 19,160
 (11,840) BB 28/37 16 7 42
Total at December 31, 2016$137,197
 $101,210
 $76,003
 $(25,207)          
Total at December 31, 2015$179,574
 $131,991
 $100,338
 $(31,654)          
(1)Security was determined to have OTTI. As such, the amortized cost is net of recorded credit impairment.
(2)The majority of securities have been in a continuous loss position for 12 months or longer.
(3)For purposes of comparability, the lowest credit rating expressed is equivalent to Fitch ratings even where the lowest rating is based on another nationally recognized credit rating agency.
(4)Includes both banks and/or insurance companies.
(5)Excess subordination percentage represents the additional defaults in excess of both current and projected defaults that the CDO can absorb before the bond experiences credit impairment. Excess subordinated percentage is calculated by (a) determining what percentage of defaults a deal can experience before the bond has credit impairment, and (b) subtracting from this default breakage percentage both total current and expected future default percentages.
For the periods ended December 31, 2014, 20132016, 2015, and 2012,2014, the following table summarizes by security type, the total OTTI losses recognized in the Consolidated Statements of Income for securities evaluated for impairment as described above:

   Year ended December 31, 

(dollar amounts in thousands)

  2014   2013   2012 

Available-for-sale and other securities:

      

Collateralized Debt Obligations

   —       (1,466   —    

Private label CMO

   —       (336   (1,614
  

 

 

   

 

 

   

 

 

 

Total debt securities

   —       (1,802   (1,614
  

 

 

   

 

 

   

 

 

 

Equity securities

   —       —       (5
  

 

 

   

 

 

   

 

 

 

Total available-for-sale and other securities

  $—      $(1,802  $(1,619
  

 

 

   

 

 

   

 

 

 

 Year ended December 31,
(dollar amounts in thousands)2016 2015 2014
Available-for-sale and other securities:     
Collateralized Debt Obligations$
 $(2,440) $
Municipal Securities(2,119) 
 
Total available-for-sale and other securities$(2,119) $(2,440) $
The following table rolls forward the OTTI recognized in earnings on debt securities held by Huntington for the years ended December 31, 20142016, and 20132015 as follows:

   Year Ended December 31, 

(dollar amounts in thousands)

  2014   2013 

Balance, beginning of year

  $30,869    $49,433  

Reductions from sales

   —       (20,366

Credit losses not previously recognized

   —       —    

Additional credit losses

   —       1,802  
  

 

 

   

 

 

 

Balance, end of year

  $30,869    $30,869  
  

 

 

   

 

 

 

As

 Year Ended December 31,
(dollar amounts in thousands)2016 2015
Balance, beginning of year$18,368
 $30,869
Reductions from sales(8,690) (14,941)
Credit losses not previously recognized2,119
 
Additional credit losses
 2,440
Balance, end of year$11,797
 $18,368
To reduce asset risk weighting and credit risk in the investment portfolio, the remainder of December 31, 2014, Management has evaluated other available-for-sale and other securities, including those with unrealized losses and all nonmarketable equity securities for impairment and concluded nothe private-label CMO portfolio was sold in the 2015 third quarter.  Huntington recognized OTTI is required.

5.on this portfolio in prior periods.



6. HELD-TO-MATURITY SECURITIES

These are debt securities that Huntington has the intent and ability to hold until maturity. The debt securities are carried at amortized cost and adjusted for amortization of premiums and accretion of discounts using the interest method.


During 2013,2016 and 2015, Huntington transferred $292.2 million of federal agencies, mortgage-backed securities and other agency securities totaling $2.9 billion and $3.0 billion, respectively from the available-for-sale securities portfolio to the held-to-maturity securities portfolio. At the time of the transfer, no$58 million of unrealized net losses and $6 million of unrealized net gains were recognized in OCI.

OCI, respectively. The amounts in OCI will be recognized in earnings over the remaining life of the securities as an offset to the adjustment of yield in a manner consistent with the amortization of the premium on the same transferred securities, resulting in an immaterial impact on net income.

Listed below are the contractual maturities (under 1 year, 1-5 years, 6-10 years, and over 10 years) of held-to-maturity securities at December 31, 20142016 and 2013:

   December 31, 2014   December 31, 2013 
(dollar amounts in thousands)  Amortized
Cost
   Fair Value   Amortized
Cost
   Fair Value 

Federal agencies: mortgage-backed securities:

        

Under 1 year

  $—      $—      $—      $—    

1-5 years

   —       —       —       —    

6-10 years

   24,901     24,263     24,901     22,549  

Over 10 years

   3,136,460     3,140,194     3,574,156     3,506,018  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Federal agencies: mortgage-backed securities

   3,161,361     3,164,457     3,599,057     3,528,567  
  

 

 

   

 

 

   

 

 

   

 

 

 

Other agencies:

        

Under 1 year

   —       —       —       —    

1-5 years

   —       —       —       —    

6-10 years

   54,010     54,843     38,588     39,075  

Over 10 years

   156,553     155,821     189,999     185,097  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other agencies

   210,563     210,664     228,587     224,172  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total U.S. Government backed agencies

   3,371,924     3,375,121     3,827,644     3,752,739  
  

 

 

   

 

 

   

 

 

   

 

 

 

Municipal securities:

        

Under 1 year

   —       —       —       —    

1-5 years

   —       —       —       —    

6-10 years

   —       —       —       —    

Over 10 years

   7,981     7,594     9,023     8,159  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total municipal securities

   7,981     7,594     9,023     8,159  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total held-to-maturity securities

  $3,379,905    $3,382,715    $3,836,667    $3,760,898  
  

 

 

   

 

 

   

 

 

   

 

 

 

December 31, 2015:

 December 31, 2016 December 31, 2015
(dollar amounts in thousands)
Amortized
Cost
 
Fair
Value
 
Amortized
Cost
 
Fair
Value
Federal agencies:       
Mortgage-backed securities:       
1 year or less$
 $
 $
 $
After 1 year through 5 years
 
 
 
After 5 years through 10 years41,261
 40,791
 25,909
 25,227
After 10 years7,157,083
 7,139,943
 5,506,592
 5,484,407
Total mortgage-backed securities7,198,344
 7,180,734
 5,532,501
 5,509,634
Other agencies:       
1 year or less
 
 
 
After 1 year through 5 years
 
 
 
After 5 years through 10 years398,341
 399,452
 283,960
 284,907
After 10 years204,083
 201,180
 336,092
 334,004
Total other agencies602,424
 600,632
 620,052
 618,911
Total U.S. Government backed agencies7,800,768
 7,781,366
 6,152,553
 6,128,545
Municipal securities:       
1 year or less
 
 
 
After 1 year through 5 years
 
 
 
After 5 years through 10 years
 
 
 
After 10 years6,171
 5,902
 7,037
 6,913
Total municipal securities6,171
 5,902
 7,037
 6,913
Total held-to-maturity securities$7,806,939
 $7,787,268
 $6,159,590
 $6,135,458

The following table provides amortized cost, gross unrealized gains and losses, and fair value by investment category at December 31, 20142016 and 2013:

       Unrealized     
   Amortized   Gross   Gross   Fair 

(dollar amounts in thousands)

  Cost   Gains   Losses   Value 

December 31, 2014

        

Federal Agencies:

        

Mortgage-backed securities

  $3,161,361    $24,832    $(21,736  $3,164,457  

Other agencies

   210,563     1,251     (1,150   210,664  

Total U.S. Government

  

 

 

   

 

 

   

 

 

   

 

 

 

backed securities

   3,371,924     26,083     (22,886   3,375,121  

Municipal securities

   7,981     —       (387   7,594  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total held-to-maturity securities

  $3,379,905    $26,083    $(23,273  $3,382,715  
  

 

 

   

 

 

   

 

 

   

 

 

 

       Unrealized     
   Amortized   Gross   Gross   Fair 

(dollar amounts in thousands)

  Cost   Gains   Losses   Value 

December 31, 2013

        

Federal Agencies:

        

Mortgage-backed securities

  $3,599,057    $5,573    $(76,063  $3,528,567  

Other agencies

   228,587     776     (5,191   224,172  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total U.S. Government backed securities

   3,827,644     6,349     (81,254   3,752,739  

Municipal securities

   9,023     —       (864   8,159  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total held-to-maturity securities

  $3,836,667    $6,349    $(82,118  $3,760,898  
  

 

 

   

 

 

   

 

 

   

 

 

 

2015:

   Unrealized  
(dollar amounts in thousands)
Amortized
Cost
 
Gross
Gains
 
Gross
Losses
 Fair Value
December 31, 2016       
Federal agencies:       
Mortgage-backed securities$7,198,344
 $20,883
 $(38,493) $7,180,734
Other agencies602,424
 1,690
 (3,482) 600,632
Total U.S. Government backed agencies7,800,768
 22,573
 (41,975) 7,781,366
Municipal securities6,171
 
 (269) 5,902
Total held-to-maturity securities$7,806,939
 $22,573
 $(42,244) $7,787,268

   Unrealized  
(dollar amounts in thousands)Amortized
Cost
 Gross
Gains
 Gross
Losses
 Fair Value
December 31, 2015       
Federal agencies:       
Mortgage-backed securities$5,532,501
 $14,637
 $(37,504) $5,509,634
Other agencies620,052
 1,645
 (2,786) 618,911
Total U.S. Government backed agencies6,152,553
 16,282
 (40,290) 6,128,545
Municipal securities7,037
 
 (124) 6,913
Total held-to-maturity securities$6,159,590
 $16,282
 $(40,414) $6,135,458

The following tables provide detail on HTM securities with unrealized losses aggregated by investment category and the length of time the individual securities have been in a continuous loss position at December 31, 20142016 and 2013:

   Less than 12 Months  Over 12 Months  Total 
   Fair   Unrealized  Fair   Unrealized  Fair   Unrealized 

(dollar amounts in thousands )

  Value   Losses  Value   Losses  Value   Losses 

December 31, 2014

          

Federal Agencies:

          

Mortgage-backed securities

  $707,934    $(5,550 $622,026    $(16,186 $1,329,960    $(21,736

Other agencies

   36,956     (198  71,731     (952  108,687     (1,150
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

 

Total U.S. Government backed securities

   744,890     (5,748  693,757     (17,138  1,438,647     (22,886

Municipal securities

   7,594     (387  —       —      7,594     (387
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

 

Total temporarily impaired securities

  $752,484    $(6,135 $693,757    $(17,138 $1,446,241    $(23,273
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

 
   Less than 12 Months  Over 12 Months  Total 
   Fair   Unrealized  Fair   Unrealized  Fair   Unrealized 

(dollar amounts in thousands )

  Value   Losses  Value   Losses  Value   Losses 

December 31, 2013

          

Federal Agencies:

          

Mortgage-backed securities

  $2,849,198    $(73,711 $22,548    $(2,352 $2,871,746    $(76,063

Other agencies

   144,417     (5,191  —       —      144,417     (5,191
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

 

Total U.S. Government backed securities

   2,993,615     (78,902  22,548     (2,352  3,016,163     (81,254

Municipal securities

   8,159     (864  —       —      8,159     (864
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

 

Total temporarily impaired securities

  $3,001,774    $(79,766 $22,548    $(2,352 $3,024,322    $(82,118
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

 

2015:

 Less than 12 Months Over 12 Months Total
(dollar amounts in thousands)Fair
Value
 Unrealized
Losses
 Fair
Value
 Unrealized
Losses
 Fair
Value
 Unrealized
Losses
December 31, 2016           
Federal agencies:           
Mortgage-backed securities$2,855,360
 $(31,470) $186,226
 $(7,023) $3,041,586
 $(38,493)
Other agencies413,207
 (3,482) 
 
 413,207
 (3,482)
Total U.S. Government backed securities3,268,567
 (34,952) 186,226
 (7,023) 3,454,793
 (41,975)
Municipal securities5,902
 (269) 
 
 5,902
 (269)
Total temporarily impaired securities$3,274,469
 $(35,221) $186,226
 $(7,023) $3,460,695
 $(42,244)
 Less than 12 Months Over 12 Months Total
(dollar amounts in thousands)
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
December 31, 2015           
Federal agencies:           
Mortgage-backed securities$3,692,890
 $(25,418) $519,872
 $(12,086) $4,212,762
 $(37,504)
Other agencies425,410
 (2,689) 6,647
 (97) 432,057
 (2,786)
Total U.S. Government backed securities4,118,300
 (28,107) 526,519
 (12,183) 4,644,819
 (40,290)
Municipal securities
 
 6,913
 (124) 6,913
 (124)
Total temporarily impaired securities$4,118,300
 $(28,107) $533,432
 $(12,307) $4,651,732
 $(40,414)
Security Impairment

Huntington evaluates the held-to-maturity securities portfolio on a quarterly basis for impairment. Impairment would exist when the present value of the expected cash flows is not sufficient to recover the entire amortized cost basis at the balance sheet date. Under these circumstances, any impairment would be recognized in earnings. As of December 31, 2014, Management has2016 and 2015, The Company evaluated held-to-maturity securities with unrealized losses for impairment and concluded no OTTI is required.

6.

7. LOAN SALES AND SECURITIZATIONS

Residential Mortgage Portfolio

The following table summarizes activity relating to residential mortgage loans sold with servicing retained for the years ended December 31, 2014, 2013,2016, 2015, and 2012:

    Year Ended December 31, 

(dollar amounts in thousands)

  2014   2013   2012 

Residential mortgage loans sold with servicing retained

  $2,330,060    $3,221,239    $3,954,762  

Pretax gains resulting from above loan sales (1)

   57,590     102,935     128,408  

2014:
  
Year Ended December 31,
(dollar amounts in thousands)2016 2015 2014
Residential mortgage loans sold with servicing retained$3,632,024
 $3,322,723
 $2,330,060
Pretax gains resulting from above loan sales (1)96,585
 83,148
 57,590

(1)Recorded in mortgage banking income.

The following tables summarize the changes in MSRs recorded using either the fair value method or the amortization method for the years ended December 31, 20142016 and 2013:

2015:

Fair Value Method

(dollar amounts in thousands)

  2014   2013 

Fair value, beginning of year

  $34,236    $35,202  

Change in fair value during the period due to:

    

Time decay (1)

   (2,232   (2,648

Payoffs (2)

   (5,814   (11,851

Changes in valuation inputs or assumptions (3)

   (3,404   13,533  
  

 

 

   

 

 

 

Fair value, end of year

  $22,786    $34,236  
  

 

 

   

 

 

 

Weighted-average life (years)

   4.6     4.2  
  

 

 

   

 

 

 

(dollar amounts in thousands)2016 2015
Fair value, beginning of year$17,585
 $22,786
Change in fair value during the period due to:   
Time decay (1)(950) (1,295)
Payoffs (2)(1,827) (3,031)
Changes in valuation inputs or assumptions (3)(1,061) (875)
Fair value, end of year$13,747
 $17,585
Weighted-average life (years)5.7
 4.6
(1)Represents decrease in value due to passage of time, including the impact from both regularly scheduled loan principal payments and partial loan paydowns.
(2)Represents decrease in value associated with loans that paid off during the period.
(3)Represents change in value resulting primarily from market-driven changes in interest rates and prepayment speeds.

Amortization Method

(dollar amounts in thousands)

  2014   2013 

Carrying value, beginning of year

  $128,064    $85,545  

New servicing assets created

   24,629     34,743  

Servicing assets acquired

   3,505     —    

Impairment recovery (charge)

   (7,330   22,023  

Amortization and other

   (16,056   (14,247
  

 

 

   

 

 

 

Carrying value, end of year

  $132,812    $128,064  
  

 

 

   

 

 

 

Fair value, end of year

  $133,049    $143,304  
  

 

 

   

 

 

 

Weighted-average life (years)

   5.9     6.8  
  

 

 

   

 

 

 

(dollar amounts in thousands)2016 2015
Carrying value, beginning of year$143,133
 $132,812
New servicing assets created37,813
 35,407
Servicing assets acquired15,317
 
Impairment recovery (charge)1,918
 (2,732)
Amortization and other(25,715) (22,354)
Carrying value, end of year$172,466
 $143,133
Fair value, end of year$172,779
 $143,435
Weighted-average life (years)7.2
 5.9
MSRs do not trade in an active, open market with readily observable prices. While sales of MSRs occur, the precise terms and conditions are typically not readily available. Therefore, the fair value of MSRs is estimated using a discounted future cash flow model. The model considers portfolio characteristics, contractually specified servicing fees and assumptions related to prepayments, delinquency rates, late charges, other ancillary revenues, costs to service, and other economic factors. Changes in the assumptions used may have a significant impact on the valuation of MSRs.

MSR values are very sensitive to movements in interest rates as expected future net servicing income depends on the projected outstanding principal balances of the underlying loans, which can be greatly impacted by the level of prepayments. Huntington economically hedges the value of certain MSRs against changes in value attributable to changes in interest rates using a combination of derivative instruments and trading securities.

For MSRs under the fair value method, a summary of key assumptions and the sensitivity of the MSR value to changes in these assumptions at December 31, 2014,2016, and 20132015 follows:

   December 31, 2014  December 31, 2013 
      Decline in fair value due to     Decline in fair value due to 
      10%  20%     10%  20% 
      adverse  adverse     adverse  adverse 

(dollar amounts in thousands)

  Actual  change  change  Actual  change  change 

Constant prepayment rate(annualized)

   15.60 $(1,176 $(2,248  11.90 $(1,935 $(3,816

Spread over forward interest rate swap rates

   546 bps    (699  (1,355  1,069 bps    (1,376  (2,753

 December 31, 2016 December 31, 2015
   Decline in fair value due to   Decline in fair value due to
(dollar amounts in thousands)Actual 
10%
adverse
change
 
20%
adverse
change
 Actual 
10%
adverse
change
 
20%
adverse
change
Constant prepayment rate (annualized)
10.90% $(501) $(970) 14.70% $(864) $(1,653)
Spread over forward interest rate swap rates536 bps
 (454) (879) 539 bps
 (559) (1,083)

For MSRs under the amortization method, a summary of key assumptions and the sensitivity of the MSR value to changes in these assumptions at December 31, 20142016, and 20132015 follows:

   December 31, 2014  December 31, 2013 
      Declinein fair value due to     Decline in fair value due to 
      10%  20%     10%  20% 
      adverse  adverse     adverse  adverse 

(dollar amounts in thousands)

  Actual  change  change  Actual  change  change 

Constant prepayment rate (annualized)

   11.40 $(5,289 $(10,164  6.70 $(6,813 $(12,977

Spread over forward interest rate swap rates

   856 bps    (4,343  (8,403  940 bps    (6,027  (12,054

 December 31, 2016 December 31, 2015
   Decline in fair value due to   Decline in fair value due to
(dollar amounts in thousands)Actual 
10%
adverse
change
 
20%
adverse
change
 Actual 
10%
adverse
change
 
20%
adverse
change
Constant prepayment rate (annualized)
7.80% $(4,510) $(8,763) 11.10% $(5,543) $(10,648)
Spread over forward interest rate swap rates1,173 bps
 (5,259) (10,195) 875 bps
 (4,662) (9,017)
Total servicing, late and other ancillary fees included in mortgage banking income was $44.3$50 million, $43.8$47 million, and $46.2$44 million infor the years ended December 31, 2016, 2015, and 2014, 2013, and 2012, respectively. The unpaid principal balance of residential mortgage loans serviced for third parties was $15.6$18.9 billion, $15.2$16.2 billion, and $15.6 billion at December 31, 2016, 2015, and 2014, 2013, and 2012, respectively.

Automobile Loans and Leases

The following table summarizes activity relating to automobile loans sold and/or securitized with servicing retained for the years ended December 31, 2014, 2013,2016, 2015, and 2012:

   Year Ended December 31, 

(dollar amounts in thousands)

  2014 (1)   2013 (1)   2012 

Automobile loans sold with servicing retained

  $—      $—      $169,324  

Automobile loans securitized with servicing retained

   —       —       2,300,018  

Pretax gains (2)

   —       —       42,251  

2014:
 Year Ended December 31,
(dollar amounts in thousands)2016 2015 2014 (1)
UPB of automobile loans securitized with servicing retained$1,500,000
 750,000
 
Net proceeds received in loan securitizations1,551,679
 780,117
 
Servicing asset recognized in loan securitizations (2)15,670
 11,180
 
Pretax gains resulting from above loan securitizations (3)5,632
 5,333
 
(1)Huntington did not sell or securitize any automobile loans in 2014 or 2013.2014.
(2)Recorded in noninterest incomeservicing rights.

(3)Recorded in gain on sale of loans.

Huntington has retained servicing responsibilities on sold automobile loans and receives annual servicing fees and other ancillary fees on the outstanding loan balances. Automobile loan servicing rights are accounted for using the amortization method. A servicing asset is established at fair value at the time of the sale using a discounted future cash flow model. The model considers assumptions related to actual servicing income, adequate compensation for servicing, and other ancillary fees.sale. The servicing asset is then amortized against servicing income. Impairment, if any, is recognized when carrying value exceeds the fair value as determined by calculating the present value of expected net future cash flows. The primary risk characteristic for measuring servicing assets is payoff rates of the underlying loan pools. Valuation calculations rely on the predicted payoff assumption and, if actual payoff is quicker than expected, then future value would be impaired.

Changes in the carrying value of automobile loan servicing rights for the years ended December 31, 20142016, and 2013,2015, and the fair value at the end of each period were as follows:

(dollar amounts in thousands)

  2014   2013 

Carrying value, beginning of year

  $17,672    $35,606  

New servicing assets created

   —       —    

Amortization and other

   (10,774   (17,934
  

 

 

   

 

 

 

Carrying value, end of year

  $6,898    $17,672  
  

 

 

   

 

 

 

Fair value, end of year

  $6,948    $18,193  
  

 

 

   

 

 

 

Weighted-average life (years)

   2.6     3.6  
  

 

 

   

 

 

 

(dollar amounts in thousands)2016 2015
Carrying value, beginning of year$8,771
 $6,898
New servicing assets created15,670
 11,180
Amortization and other(6,156) (9,307)
Carrying value, end of year$18,285
 $8,771
Fair value, end of year$18,388
 $9,127
Weighted-average life (years)4.2
 3.2
A summary of key assumptions and the sensitivity of the automobile loan servicing rights value to changes in these assumptions at December 31, 20142016, and 20132015 follows:

   December 31, 2014  December 31, 2013 
      Decline in fair value due to     Decline in fair value due to 
      10%  20%     10%  20% 
      adverse  adverse     adverse  adverse 

(dollar amounts in thousands)

  Actual  change  change  Actual  change  change 

Constant prepayment rate(annualized)

   14.62 $(305 $(496  14.65 $(584 $(1,183

Spread over forward interest rate swap rates

   500 bps    (2  (4  500 bps    (7  (15


 December 31, 2016 December 31, 2015
   Decline in fair value due to   Decline in fair value due to
(dollar amounts in thousands)Actual 
10%
adverse
change
 
20%
adverse
change
 Actual 
10%
adverse
change
 
20%
adverse
change
Constant prepayment rate (annualized)
19.98% $(1,047) $(2,026) 18.36% $(500) $(895)
Spread over forward interest rate swap rates500 bps
 (26) (53) 500 bps
 (10) (19)
Servicing income net of amortization of capitalized servicing assets was $7.7$9 million, $10.3$5 million, and $8.7$8 million for the years ended December 31, 2014, 2013,2016, 2015, and 2012,2014, respectively. The unpaid principal balance of automobile loans serviced for third parties was $0.8$1.7 billion, $1.6$0.9 billion, and $2.5$0.8 billion at December 31, 2016, 2015, and 2014, 2013, and 2012, respectively.

Small Business Association (SBA) Portfolio

The following table summarizes activity relating to SBA loans sold with servicing retained for the years ended December 31, 2014, 2013,2016, 2015, and 2012:

   Year Ended December 31, 

(dollar amounts in thousands)

  2014   2013   2012 

SBA loans sold with servicing retained

  $214,760    $178,874    $209,540  

Pretax gains resulting from above loan sales (1)

   24,579     19,556     22,916  

2014:
 Year Ended December 31,
(dollar amounts in thousands)2016 2015 2014
SBA loans sold with servicing retained$269,923
 $232,848
 $214,760
Pretax gains resulting from above loan sales (1)20,516
 18,626
 24,579
(1)Recorded in noninterest incomegain on sale of loans.

Huntington has retained servicing responsibilities on sold SBA loans and receives annual servicing fees on the outstanding loan balances. SBA loan servicing rights are accounted for using the amortization method. A servicing asset is established at fair value at the time of the sale using a discounted future cash flow model. The servicing asset is then amortized against servicing income. Impairment, if any, is recognized when carrying value exceeds the fair value as determined by calculating the present value of expected net future cash flows.

The following tables summarize the changes in the carrying value of the servicing asset for the years ended December 31, 20142016, and 2013:

(dollar amounts in thousands)

  2014   2013 

Carrying value, beginning of year

  $16,865    $15,147  

New servicing assets created

   7,269     6,105  

Amortization and other

   (5,598   (4,387
  

 

 

   

 

 

 

Carrying value, end of year

  $18,536    $16,865  

Fair value, end of year

  $20,495    $16,865  
  

 

 

   

 

 

 

Weighted-average life (years)

   3.5     3.5  
  

 

 

   

 

 

 

2015:

(dollar amounts in thousands)2016 2015
Carrying value, beginning of year$19,747
 $18,536
New servicing assets created8,705
 8,012
Amortization and other(7,372) (6,801)
Carrying value, end of year$21,080
 $19,747
Fair value, end of year$24,270
 $22,649
Weighted-average life (years)3.3
 3.3
A summary of key assumptions and the sensitivity of the SBA loan servicing rights value to changes in these assumptions at December 31, 20142016, and 20132015 follows:

   December 31, 2014  December 31, 2013 
      Decline in fair value due to     Decline in fair value due to 
      10%  20%     10%  20% 
      adverse  adverse     adverse  adverse 

(dollar amounts in thousands)

  Actual  change  change  Actual  change  change 

Constant prepayment rate (annualized)

   5.60 $(211 $(419  5.90 $(221 $(438

Discount rate

   1,500 bps    (563  (1,102  1,500 bps    (446  (873

 December 31, 2016 December 31, 2015
   Decline in fair value due to   Decline in fair value due to
(dollar amounts in thousands)Actual 
10%
adverse
change
 
20%
adverse
change
 Actual 
10%
adverse
change
 
20%
adverse
change
Constant prepayment rate (annualized)
7.40% $(324) $(644) 7.60% $(313) $(622)
Discount rate15.00
 (1,270) (1,870) 15.00
 (610) (1,194)
Servicing income net of amortization of capitalized servicing assets was $7.4$9 million, $6.3$8 million, and $5.7$7 million infor the years ended December 31, 2016, 2015, and 2014, 2013, and 2012, respectively. The unpaid principal balance of SBA loans serviced for third parties was $898.0 million, $885.4 million$1.1 billion, $1.0 billion and $758.3 million$0.9 billion at December 31, 2016, 2015, and 2014, 2013 and 2012, respectively.

7.

8. GOODWILL AND OTHER INTANGIBLE ASSETS

Business segments are based on segment leadership structure, which reflects how segment performance is monitored and assessed. During the 2014 first quarter, we realigned our business segments to drive our ongoing growth and leverage the knowledge of our highly experienced team. We now have five major business segments: RetailConsumer and Business Banking, Commercial Banking, Automobile Finance and Commercial Real Estate (AFCRE)

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. All periods presented have been reclassified to conform to the current period classification. Amounts relating to the realignment are disclosed in the table below.

A rollforward of goodwill by business segment for the years ended December 31, 20142016 and 2013,2015, is presented in the table below:

   Retail &                   
   Business   Commercial          Home  Treasury/  Huntington 

(dollar amounts in thousands)

  Banking   Banking   AFCRE   RBHPCG  Lending  Other  Consolidated 

Balance, January 1, 2013

  $286,824    $22,108    $—      $93,012   $—     $42,324   $444,268  

Adjustments / Reallocation

   —       —       —       —      —      —      —    
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Balance, December 31, 2013

   286,824     22,108     —       93,012    —      42,324    444,268  

Goodwill acquired during the period

   81,273     —       —       —      —      —      81,273  

Adjustments / Reallocation

   —       37,486     —       (3,000  3,000    (37,486  —    

Impairment

   —       —       —       —      (3,000  —      (3,000
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Balance, December 31, 2014

  $368,097    $59,594    $—      $90,012   $—     $4,838   $522,541  
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

In 2014,

 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, 2015368,097
 215,422
 
 88,512
 
 4,838
 676,869
Goodwill acquired during the period1,030,046
 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 anits acquisition of 24 BankFirstMerit in a stock and cash transaction valued at approximately $3.7 billion. In connection with the acquisition, the Company recorded $1.3 billion of America branches in Michigangoodwill, $310 million core deposit intangible asset and recorded $17.1$95 million of goodwill.other intangible assets. Huntington allocated goodwill recognized in the acquisition of FirstMerit to its existing operating segments. The remaining $64.2 millionallocation was performed using the ‘with and without’ approach, where an entity calculates the fair value of goodwilleach segment before and after the acquisition, with the difference attributable to the fair value acquired during 2014 wasvia the resultacquisition. This method is most appropriate when multiple segments are expected to benefit from synergies realized in an acquisition. The results of the Camco Financial acquisition, which was also completedallocation are presented in 2014.the table above. For additional information on the acquisitions,acquisition, see Business Combinations footnote.

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 asat October 1 of October 1st each year or whenever events or changes in circumstances indicate that 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 $3.0$3 million was recorded in the Home Lending reporting segment. No impairment was recorded in 20132016 or 2012.

During the 2014 third quarter, we moved our insurance brokerage business from Treasury / Other to Commercial Banking to align with a change in management responsibilities. Amounts relating to the realignment are disclosed in the table above.

2015.

At December 31, 20142016 and 2013,2015, Huntington’s other intangible assets consisted of the following:

   Gross       Net 
   Carrying   Accumulated   Carrying 

(dollar amounts in thousands)

  Amount   Amortization   Value 

December 31, 2014

      

Core deposit intangible

  $400,058    $(366,907  $33,151  

Customer relationship

   107,920     (66,534   41,386  

Other

   25,164     (25,030   134  
  

 

 

   

 

 

   

 

 

 

Total other intangible assets

  $533,142    $(458,471  $74,671  
  

 

 

   

 

 

   

 

 

 

December 31, 2013

      

Core deposit intangible

  $380,249    $(335,552  $44,697  

Customer relationship

   106,974     (58,675   48,299  

Other

   25,164     (24,967   197  
  

 

 

   

 

 

   

 

 

 

Total other intangible assets

  $512,387    $(419,194  $93,193  
  

 

 

   

 

 

   

 

 

 

(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 relationship194,956
(1) (90,383) 104,573
Other150
  (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 relationship116,094
  (76,656) 39,438
Other25,164
  (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
 

2015

  $26,329  

2016

   12,485  

2017

   11,371  

2018

   9,890  

2019

   8,873  

8.

(dollar amounts in thousands)
Amortization
Expense
2017$56,333
201853,161
201950,446
202042,291
202139,783

9. PREMISES AND EQUIPMENT

Premises and equipment were comprised of the following at December 31, 20142016 and 2013:

   At December 31, 

(dollar amounts in thousands)

  2014   2013 

Land and land improvements

  $137,702    $129,543  

Buildings

   367,225     356,555  

Leasehold improvements

   235,279     227,764  

Equipment

   627,307     669,482  
  

 

 

   

 

 

 

Total premises and equipment

   1,367,513     1,383,344  

Less accumulated depreciation and amortization

   (751,106   (748,687
  

 

 

   

 

 

 

Net premises and equipment

  $616,407    $634,657  
  

 

 

   

 

 

 

2015:

 At December 31,
(dollar amounts in thousands)2016 2015
Land and land improvements$199,193
 $140,414
Buildings523,181
 366,963
Leasehold improvements265,384
 246,222
Equipment721,014
 647,769
Total premises and equipment1,708,772
 1,401,368
Less accumulated depreciation and amortization(893,264) (780,828)
Net premises and equipment$815,508
 $620,540
Depreciation and amortization charged to expense and rental income credited to net occupancy expense for the three years ended December 31, 2016, 2015, and 2014 2013, and 2012 were:

(dollar amounts in thousands)

  2014   2013   2012 

Total depreciation and amortization of premises and equipment

  $82,296    $78,601    $76,170  

Rental income credited to occupancy expense

   11,556     12,542     11,519  

9.

(dollar amounts in thousands)2016 2015 2014
Total depreciation and amortization of premises and equipment$125,856
 $85,805
 $82,296
Rental income credited to occupancy expense12,512
 12,563
 11,556
10. SHORT-TERM BORROWINGS

Short-term borrowings at December 31, 2014

Borrowings with original maturities of one year or less are classified as short-term and 2013 were comprised of the following:

   At December 31, 

(dollar amounts in thousands)

  2014   2013 

Federal funds purchased and securities sold under agreements to repurchase

  $1,058,096    $548,605  

Federal Home Loan Bank advances

   1,325,000     1,800,000  

Other borrowings

   14,005     3,538  
  

 

 

   

 

 

 

Total short-term borrowings

  $2,397,101    $2,352,143  
  

 

 

   

 

 

 

following at December 31, 2016 and 2015:

 At December 31,
(dollar amounts in thousands)2016 2015
Federal funds purchased and securities sold under agreements to repurchase$1,248,089
 $601,272
Federal Home Loan Bank advances2,425,000
 
Other borrowings19,565
 14,007
Total short-term borrowings$3,692,654
 $615,279
Other borrowings consist of borrowings from the Treasury and other notes payable.

For each of the three years ended December 31, 2014, 2013, and 2012, weighted average interest rate at year-end, the maximum balance for the year, the average balance for the year, and weighted average interest rate for the year by category of short-term borrowings were as follows:

(dollar amounts in thousands)

  2014  2013  2012 

Weighted average interest rate at year-end

  

  

Federal Funds purchased and securities sold under agreements to repurchase

   0.08  0.06  0.15

Federal Home Loan Bank advances

   0.14    0.02    0.03  

Other short-term borrowings

   1.11    2.59    1.98  

Maximum amount outstanding at month-end during the year

  

  

Federal Funds purchased and securities sold under agreements to repurchase

  $1,491,350   $787,127   $1,590,082  

Federal Home Loan Bank advances

   2,375,000    1,800,000    1,000,000  

Other short-term borrowings

   56,124    19,497    26,071  

Average amount outstanding during the year

  

  

Federal Funds purchased and securities sold under agreements to repurchase

  $987,156   $692,481   $1,293,348  

Federal Home Loan Bank advances

   1,753,045    702,262    286,530  

Other short-term borrowings

   20,797    7,815    16,983  

Weighted average interest rate during the year

  

  

Federal Funds purchased and securities sold under agreements to repurchase

   0.07  0.08  0.14

Federal Home Loan Bank advances

   0.06    0.04    0.17  

Other short-term borrowings

   1.63    1.79    1.36  

10.


11. LONG-TERM DEBT

Huntington’s long-term debt consisted of the following:

   At December 31, 

(dollar amounts in thousands)

  2014   2013 
The Parent Company:    
Senior Notes:    

2.64% Huntington Bancshares Incorporated senior note due 2018

  $398,924    $397,306  
Subordinated Notes:    

Fixed 7.00% subordinated notes due 2020

   330,105     323,856  

Huntington Capital I Trust Preferred 0.93% junior subordinated debentures due 2027 (1)

   111,816     111,816  

Huntington Capital II Trust Preferred 0.87% junior subordinated debentures due 2028 (2)

   54,593     54,593  

Sky Financial Capital Trust III 1.66% junior subordinated debentures due 2036 (3)

   72,165     72,165  

Sky Financial Capital Trust IV 1.64% junior subordinated debentures due 2036 (3)

   74,320     74,320  

Camco Statutory Trust I 2.71% due 2037 (4)

   4,181     —    
  

 

 

   

 

 

 

Total notes issued by the parent

   1,046,104     1,034,056  
  

 

 

   

 

 

 
The Bank:    
Senior Notes:    

1.31% Huntington National Bank senior note due 2016

   497,477     497,317  

1.40% Huntington National Bank senior note due 2016

   349,499     349,858  

5.04% Huntington National Bank medium-term notes due 2018

   38,541     39,497  

1.43% Huntington National Bank senior note due 2019

   499,760     —    

2.23% Huntington National Bank senior note due 2017

   499,759     —    

0.66% Huntington National Bank senior note due 2017 (5)

   250,000     —    
Subordinated Notes:    

5.00% subordinated notes due 2014

   —       125,109  

5.59% subordinated notes due 2016

   105,731     108,038  

6.67% subordinated notes due 2018

   140,115     143,749  

5.45% subordinated notes due 2019

   85,783     87,214  
  

 

 

   

 

 

 

Total notes issued by the bank

   2,466,665     1,350,782  
  

 

 

   

 

 

 
FHLB Advances:    

0.21% weighted average rate, varying maturities greater than one year

   758,052     8,293  
Other:    

Other

   65,141     65,141  
  

 

 

   

 

 

 

Total long-term debt

  $4,335,962    $2,458,272  
  

 

 

   

 

 

 

 At December 31,
(dollar amounts in thousands)2016 2015
The Parent Company:   
Senior Notes:   
3.19% Huntington Bancshares Incorporated medium-term notes due 2021$972,625
 $
2.33% Huntington Bancshares Incorporated senior note due 2022953,674
 
2.64% Huntington Bancshares Incorporated senior note due 2018399,278
 399,169
Subordinated Notes:   
7.00% Huntington Bancshares Incorporated subordinated notes due 2020319,857
 326,379
3.55% Huntington Bancshares Incorporated subordinated notes due 2023248,156
 
Sky Financial Capital Trust IV 2.40% junior subordinated debentures due 2036 (1)74,320
 74,320
Sky Financial Capital Trust III 2.40% junior subordinated debentures due 2036 (1)72,165
 72,165
Huntington Capital I Trust Preferred 1.70% junior subordinated debentures due 2027 (2)68,720
 110,706
Huntington Capital II Trust Preferred 1.06% junior subordinated debentures due 2028 (3)31,576
 54,030
Camco Statutory Trust I 2.30% due 2037 (4)4,244
 4,212
Total notes issued by the parent3,144,615
 1,040,981
The Bank:   
Senior Notes:   
2.24% Huntington National Bank senior notes due 2018843,568
 841,313
2.10% Huntington National Bank senior notes due 2018747,170
 745,894
1.75% Huntington National Bank senior notes due 2018499,732
 501,006
1.43% Huntington National Bank senior note due 2019499,686
 498,678
2.23% Huntington National Bank senior note due 2017499,445
 500,416
2.43% Huntington National Bank senior notes due 2020498,448
 498,185
2.97% Huntington National Bank senior notes due 2020495,088
 495,998
1.42% Huntington National Bank senior notes due 2017 (5)250,000
 250,000
5.04% Huntington National Bank medium-term notes due 201836,351
 37,469
1.31% Huntington National Bank senior note due 2016
 498,360
1.40% Huntington National Bank senior note due 2016
 349,399
Subordinated Notes:   
3.86% Huntington National Bank subordinated notes due 2026239,293
 
6.67% Huntington National Bank subordinated notes due 2018131,910
 136,227
5.45% Huntington National Bank subordinated notes due 201981,155
 83,833
5.59% Huntington National Bank subordinated notes due 2016
 103,357
Total notes issued by the bank4,821,846
 5,540,135
FHLB Advances:   
3.47% weighted average rate, varying maturities greater than one year7,540
 7,800
Other:   
Huntington Technology Finance nonrecourse debt, 3.43% effective interest rate, varying maturities277,523
 301,577
Huntington Technology Finance ABS Trust 2014 1.70% due 202057,494
 123,577
Huntington Technology Finance ABS Trust 2012 1.79% due 2017
 27,153
Other141
 141
Total other335,158
 452,448
    
Total long-term debt$8,309,159
 $7,041,364
(1)Variable effective rate at December 31, 2014,2016, based on three monththree-month LIBOR + 0.70%.+1.400%

(2)Variable effective rate at December 31, 2014,2016, based on three monththree-month LIBOR + 0.625%.+0.70%
(3)Variable effective rate at December 31, 2014,2016, based on three monththree-month LIBOR + 1.40%.+0.625%
(4)Variable effective rate at December 31, 2014,2016, based on three monththree-month LIBOR + 1.33%+1.33%.
(5)Variable effective rate at December 31, 2014,2016, based on three monththree-month LIBOR + 0.425%+0.425%.

Amounts above are net of unamortized discounts and adjustments related to hedging with derivative financial instruments. The derivative instruments, principally interest rate swaps, are used to hedge the fair values of certain fixed-rate debt by converting the debt to a variable rate. See Note 18 for more information regarding such financial instruments.

In April 2014,August 2016, Parent Company and Bank subordinated debt with a fair value totaling $520 million was acquired by Huntington as part of the BankFirstMerit acquisition. See Note 3 Acquisition of FirstMerit Corporation for additional information on the method used to determine fair value.
In August 2016, Huntington issued $500.0 million$1.0 billion of senior notes at 99.842%99.849% of face value. The senior note issuancesnotes mature on April 24, 2017January 14, 2022 and have a fixed coupon rate of 1.375%2.3%. At December 31, 2016, debt issuance costs of $5 million related to the note are reported on the balance sheet as a direct deduction from the face amount of the note.
In April 2014,March 2016, Huntington issued $1.0 billion of senior notes at 99.803% of face value. The senior notes mature on March 14, 2021 and have a fixed coupon rate of 3.15%. At December 31, 2016, debt issuance costs of $5 million related to the note are reported on the balance sheet as a direct deduction from the face amount of the note.
In November 2015, the Bank also issued $250.0$850 million of senior notes at 100%99.88% of face value. The senior bank note issuances mature on April 24, 2017November 6, 2018 and have a variablefixed coupon rate equal to the three-month LIBOR plus 0.425%of 2.20%. BothThe senior note issuancesnotes may be redeemed one month prior to their maturity date at 100% of principal plus accrued and unpaid interest.

In February 2014,August 2015, the Bank issued $500.0$500 million of senior notes at 99.842%99.58% of face value. The senior bank note issuances mature on August 20, 2020 and have a fixed coupon rate of 2.88%.
In June 2015, the Bank issued $750 million of senior notes at 99.71% of face value. The senior bank note issuances mature on June 30, 2018 and have a fixed coupon rate of 2.00%.
On March 31, 2015, Huntington completed its acquisition of Huntington Technology Finance. As part of the acquisition, Huntington assumed $293 million of non-recourse debt with various financial institutions and maturity dates. The effective interest rate on the non-recourse debt is 3.20%. Huntington also assumed $255 million of debt associated with two securitizations. The securitization debt has various classes and associated maturity dates and has an effective interest rate of 1.70%.
In February 2015, the Bank issued $500 million of senior notes at 99.86% of face value. The senior bank note issuances mature on February 26, 2018 and have a fixed coupon rate of 1.70%. Also, in February 2015, the Bank issued $500 million of senior notes at 99.87% of face value. The senior bank note issuances mature on April 1, 20192020 and have a fixed coupon rate of 2.20%2.40%. TheBoth senior note issuanceissuances may be redeemed one month prior to the maturity date at 100% of principal plus accrued and unpaid interest.

In November 2013, the Bank issued $500.0 million of senior notes at 99.979% of face value. The senior bank note issuances mature on November 20, 2016 and have a fixed coupon rate of 1.30%. The senior note issuance may be redeemed one month prior to the maturity date at 100% of principal plus accrued and unpaid interest.

In August 2013, the parent company issued $400.0 million of senior notes at 99.80% of face value. The senior note issuances mature on August 2, 2018 and have a fixed coupon rate of 2.60%. In August 2013, the Bank issued $350.0 million of senior notes at 99.865% of face value. The senior bank note issuances mature on August 2, 2016 and have a fixed coupon rate of 1.35%. Both senior note issuances may be redeemed one month prior to their maturity date at 100% of principal plus accrued and unpaid interest.

On July 2, 2013, the Federal Reserve Board voted to adopt final capital rules to implement Basel III requirements for U.S. Banking organizations. The final rules establish an integrated regulatory capital framework that will implement, in the United States, the Basel III regulatory capital reforms from the Basel Committee on Banking Supervision and certain changes required by the Dodd-Frank Act. Based on our review of the final rules and an opinion of outside counsel, dated November 6, 2013, we have determined that there is a significant risk that our Huntington Preferred Capital, Inc. 7.88% Class C preferred securities will no longer constitute Tier 1 capital for the Bank for purposes of the capital adequacy guidelines or policies of the OCC, when Basel III becomes effective for Huntington Bancshares Incorporated and its affiliates. As a result, a regulatory capital event has occurred. On November 7, 2013, the board of directors approved the redemption of Class C preferred securities and on December 31, 2013 (the Redemption Date), Huntington Preferred Capital, Inc. redeemed all of the Class C Preferred Securities at the redemption price of $25.00 per share.

Long-term debt maturities for the next five years and thereafter are as follows:

dollar amounts in thousands

  2015   2016   2017   2018   2019   Thereafter   Total 
The Parent Company:              

Senior notes

  $—      $—      $—      $400,000    $—      $—      $400,000  

Subordinated notes

   —       —       —       —       —       618,049     618,049  
The Bank:              

Senior notes

   —       850,000     750,000     —       500,000     35,000     2,135,000  

Subordinated notes

   —       103,009     —       125,539     75,716     —       304,264  

FHLB Advances

   —       750,000     100     1,205     369     6,596     758,270  

Other

   141     —       —       —       —       65,000     65,141  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $141    $1,703,009    $750,100    $526,744    $576,085    $724,645    $4,280,724  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

(dollar amounts in thousands)2017 2018 2019 2020 2021 Thereafter Total
The Parent Company:             
Senior notes$
 $400,000
 $
 $
 $1,000,000
 $1,000,000
 $2,400,000
Subordinated notes
 
 
 300,000
 
 503,463
 803,463
The Bank:             
Senior notes750,000
 2,135,000
 500,000
 1,000,000
 
 
 4,385,000
Subordinated notes
 125,539
 75,716
 
 
 250,000
 451,255
FHLB Advances100
 1,115
 325
 2,368
 
 3,769
 7,677
Other64,288
 84,357
 62,048
 81,551
 42,187
 726
 335,157
Total$814,388
 $2,746,011
 $638,089
 $1,383,919
 $1,042,187
 $1,757,958
 $8,382,552
These maturities are based upon the par values of the long-term debt.

The terms of the other long-term debt obligations contain various restrictive covenants including limitations on the acquisition of additional debt in excess of specified levels, dividend payments, and the disposition of subsidiaries. As of December 31, 2014,2016, Huntington was in compliance with all such covenants.

11.



12. OTHER COMPREHENSIVE INCOME

The components of Huntington’s OCI in the three years ended December 31, 2014, 2013,2016, 2015, and 2012,2014, were as follows:

   2014 
       Tax (expense)     

(dollar amounts in thousands)

  Pretax   Benefit   After-tax 

Noncredit-related impairment recoveries (losses) on debt securities not expected to be sold

  $13,583    $(4,803  $8,780  

Unrealized holding gains (losses) on available-for-sale debt securities arising during the period

   86,618     (30,914   55,704  

Less: Reclassification adjustment for net gains (losses) included in net income

   (15,559   5,446     (10,113
  

 

 

   

 

 

   

 

 

 

Net change in unrealized holding gains (losses) on available-for-sale debt securities

   84,642     (30,271   54,371  
  

 

 

   

 

 

   

 

 

 

Net change in unrealized holding gains (losses) on available-for-sale equity securities

   295     (103   192  

Unrealized gains and losses on derivatives used in cash flow hedging relationships arising during the period

   14,141     (4,949   9,192  

Less: Reclassification adjustment for net losses (gains) included in net income

   (3,971   1,390     (2,581
  

 

 

   

 

 

   

 

 

 

Net change in unrealized gains (losses) on derivatives used in cash flow hedging relationships

   10,170     (3,559   6,611  
  

 

 

   

 

 

   

 

 

 

Change in pension and post-retirement obligations

   (106,857   37,400     (69,457
  

 

 

   

 

 

   

 

 

 

Total other comprehensive income (loss)

  $(11,750  $3,467    $(8,283
  

 

 

   

 

 

   

 

 

 
   2013 
       Tax (expense)     

(dollar amounts in thousands)

  Pretax   Benefit   After-tax 

Noncredit-related impairment recoveries (losses) on debt securities not expected to be sold

  $235    $(82  $153  

Unrealized holding gains (losses) on available-for-sale debt securities arising during the period

   (125,919   44,191     (81,728

Less: Reclassification adjustment for net gains (losses) included in net income

   6,211     (2,174   4,037  
  

 

 

   

 

 

   

 

 

 

Net change in unrealized holding gains (losses) on available-for-sale debt securities

   (119,473   41,935     (77,538
  

 

 

   

 

 

   

 

 

 

Net change in unrealized holding gains (losses) on available-for-sale equity securities

   151     (53   98  

Unrealized gains and losses on derivatives used in cash flow hedging relationships arising during the period

   (86,240   30,184     (56,056

Less: Reclassification adjustment for net (gains) losses included in net income

   (15,188   5,316     (9,872
  

 

 

   

 

 

   

 

 

 

Net change in unrealized (losses) gains on derivatives used in cash flow hedging relationships

   (101,428   35,500     (65,928
  

 

 

   

 

 

   

 

 

 

Re-measurement obligation

   136,452     (47,758   88,694  

Defined benefit pension items

   (13,106   4,588     (8,518
  

 

 

   

 

 

   

 

 

 

Net change in pension and post-retirement obligations

   123,346     (43,170   80,176  
  

 

 

   

 

 

   

 

 

 

Total other comprehensive income (loss)

  $(97,404  $34,212    $(63,192
  

 

 

   

 

 

   

 

 

 
   2012 
       Tax (expense)     

(dollar amounts in thousands)

  Pretax   Benefit   After-tax 

Noncredit-related impairment recoveries (losses) on debt securities not expected to be sold

  $19,215    $(6,725  $12,490  

Unrealized holding gains (losses) on available-for-sale debt securities arising during the period

   90,318     (32,137   58,181  

Less: Reclassification adjustment for net gains (losses) included in net income

   (4,769   1,669     (3,100
  

 

 

   

 

 

   

 

 

 

Net change in unrealized holding gains (losses) on available-for-sale debt securities

   104,764     (37,193   67,571  
  

 

 

   

 

 

   

 

 

 

Net change in unrealized holding gains (losses) on available-for-sale equity securities

   344     (120   224  

Unrealized gains and losses on derivatives used in cash flow hedging relationships arising during the period

   (5,476   1,907     (3,569

Less: Reclassification adjustment for net losses (gains) losses included in net income

   14,992     (5,237   9,755  
  

 

 

   

 

 

   

 

 

 

Net change in unrealized gains (losses) on derivatives used in cash flow hedging relationships

   9,516     (3,330   6,186  
  

 

 

   

 

 

   

 

 

 

Net actuarial gains (losses) arising during the year

   (105,527   36,934     (68,593

Amortization of net actuarial loss and prior service cost included in income

   27,013     (9,455   17,558  
  

 

 

   

 

 

   

 

 

 

Net change in pension and post-retirement obligations

   (78,514   27,479     (51,035
  

 

 

   

 

 

   

 

 

 

Total other comprehensive income (loss)

  $36,110    $(13,164  $22,946  
  

 

 

   

 

 

   

 

 

 

 2016
 Tax (expense)
(dollar amounts in thousands)Pretax Benefit After-tax
Noncredit-related impairment recoveries (losses) on debt securities not expected to be sold$905
 $(320) $585
Unrealized holding gains (losses) on available-for-sale debt securities arising during the period(203,048) 70,599
 (132,449)
Less: Reclassification adjustment for net losses (gains) included in net income(107,145) 37,884
 (69,261)
Net change in unrealized holding gains (losses) on available-for-sale debt securities(309,288) 108,163
 (201,125)
Net change in unrealized holding gains (losses) on available-for-sale equity securities171
 (60) 111
Unrealized gains (losses) on derivatives used in cash flow hedging relationships arising during the period2,381
 (833) 1,548
Less: Reclassification adjustment for net (gains) losses included in net income(360) 126
 (234)
Net change in unrealized gains (losses) on derivatives used in cash flow hedging relationships2,021
 (707) 1,314
Net change in pension and other post-retirement obligations38,218
 (13,376) 24,842
Total other comprehensive income (loss)$(268,878) $94,020
 $(174,858)
 2015
   Tax (expense)  
(dollar amounts in thousands)Pretax Benefit After-tax
Noncredit-related impairment recoveries (losses) on debt securities not expected to be sold$19,606
 $(6,933) $12,673
Unrealized holding gains (losses) on available-for-sale debt securities arising during the period(26,021) 9,108
 (16,913)
Less: Reclassification adjustment for net losses (gains) included in net income(3,901) 1,365
 (2,536)
Net change in unrealized holding gains (losses) on available-for-sale debt securities(10,316) 3,540
 (6,776)
Net change in unrealized holding gains (losses) on available-for-sale equity securities(474) 166
 (308)
Unrealized gains (losses) on derivatives used in cash flow hedging relationships arising during the period12,966
 (4,538) 8,428
Less: Reclassification adjustment for net (gains) losses included in net income(220) 77
 (143)
Net change in unrealized gains (losses) on derivatives used in cash flow hedging relationships12,746
 (4,461) 8,285
Net change in pension and other post-retirement obligations(7,795) 2,728
 (5,067)
Total other comprehensive income (loss)$(5,839) $1,973
 $(3,866)
 2014
   Tax (expense)  
(dollar amounts in thousands)Pretax Benefit After-tax
Noncredit-related impairment recoveries (losses) on debt securities not expected to be sold$13,583
 $(4,803) $8,780
Unrealized holding gains (losses) on available-for-sale debt securities arising during the period86,618
 (30,914) 55,704
Less: Reclassification adjustment for net gains (losses) included in net income(15,559) 5,446
 (10,113)
Net change in unrealized holding gains (losses) on available-for-sale debt securities84,642
 (30,271) 54,371
Net change in unrealized holding gains (losses) on available-for-sale equity securities295
 (103) 192
Unrealized gains and losses on derivatives used in cash flow hedging relationships arising during the period14,141
 (4,949) 9,192
Less: Reclassification adjustment for net losses (gains) losses included in net income(3,971) 1,390
 (2,581)
Net change in unrealized gains (losses) on derivatives used in cash flow hedging relationships10,170
 (3,559) 6,611
Net change in pension and post-retirement obligations(106,857) 37,400
 (69,457)
Total other comprehensive income (loss)$(11,750) $3,467
 $(8,283)

Activity in accumulated OCI for the threetwo years ended December 31, were as follows:

(dollar amounts in thousands)

  Unrealized
gains and
(losses) on
debt
securities (1)
  Unrealized
gains and
(losses) on
equity
securities
   Unrealized
gains and
(losses) on
cash flow
hedging
derivatives
  Unrealized
gains
(losses) for
pension and
other post-
retirement
obligations
  Total 

Balance, December 31, 2012

   38,304    194     47,084    (236,399  (150,817
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 

Other comprehensive income before reclassifications

   (81,575  98     (56,056  88,694    (48,839

Amounts reclassified from accumulated OCI to earnings

   4,037 ��  —       (9,872  (8,518  (14,353
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 

Period change

   (77,538  98     (65,928  80,176    (63,192
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 

Balance, December 31, 2013

   (39,234  292     (18,844  (156,223  (214,009
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 

Other comprehensive income before reclassifications

   64,484    192     9,192    —      73,868  

Amounts reclassified from accumulated OCI to earnings

   (10,113  —       (2,581  (69,457  (82,151
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 

Period change

   54,371    192     6,611    (69,457  (8,283
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 

Balance, December 31, 2014

  $15,137   $484    $(12,233 $(225,680 $(222,292
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 


(dollar amounts in thousands)
Unrealized
gains and
(losses) on
debt
securities (1)
 
Unrealized
gains and
(losses) on
equity
securities
 
Unrealized
gains and
(losses) on
cash flow
hedging
derivatives
 
Unrealized
gains
(losses) for
pension and
other post-
retirement
obligations
 Total
December 31, 2014$15,137
 $484
 $(12,233) $(225,680) $(222,292)
Other comprehensive income before reclassifications(4,240) (308) 8,428
 
 3,880
Amounts reclassified from accumulated OCI to earnings(2,536) 
 (143) (5,067) (7,746)
Period change(6,776) (308) 8,285
 (5,067) (3,866)
December 31, 20158,361
 176
 (3,948) (230,747) (226,158)
Other comprehensive income before reclassifications(131,864) 111
 1,548
 
 (130,205)
Amounts reclassified from accumulated OCI to earnings(69,261) 
 (234) 24,842
 (44,653)
Period change(201,125) 111
 1,314
 24,842
 (174,858)
December 31, 2016$(192,764) $287
 $(2,634) $(205,905) $(401,016)
(1)Amount at December 31, 20142016 includes $0.8$(82) million of net unrealized gainslosses on securities transferred from the available-for-sale securities portfolio to the held-to-maturity securities portfolio in prior years.portfolio. The net unrealized gainslosses will be recognized in earnings over the remaining life of the security using the effective interest method.

The following table presents the reclassification adjustments out of accumulated OCI included in net income and the impacted line items as listed on the Consolidated Statements of Income for the yearyears ended December 31, 2014:

2016 and 2015:


 Reclassifications out of accumulated OCI
Accumulated OCI components
Amounts reclassified
from accumulated OCI
 
Location of net gain (loss)
reclassified from accumulated OCI into earnings
(dollar amounts in thousands)2016 2015  
Gains (losses) on debt securities:     
Amortization of unrealized gains (losses)$91,058
 $(144) Interest income—held-to-maturity securities—taxable
Realized gain (loss) on sale of securities18,206
 6,485
 Noninterest income—net gains (losses) on sale of securities
OTTI recorded(2,119) (2,440) Noninterest income—net gains (losses) on sale of securities
Total before tax107,145
 3,901
  
Tax (expense) benefit(37,884) (1,365)  
Net of tax$69,261
 $2,536
  
Gains (losses) on cash flow hedging relationships:     
Interest rate contracts$361
 $210
 Interest and fee income—loans and leases
Interest rate contracts(1) 10
 Noninterest expense—other income
Total before tax360
 220
  
Tax (expense) benefit(126) (77)  
Net of tax$234
 $143
  
Amortization of defined benefit pension and post-retirement items:     
Actuarial gains (losses)$(40,186) $5,827
 Noninterest expense—personnel costs
Net periodic benefit costs1,968
 1,968
 Noninterest expense—personnel costs
Total before tax(38,218) 7,795
  
Tax (expense) benefit13,376
 (2,728)  
Net of tax$(24,842) $5,067
  

13. SHAREHOLDERS’ EQUITY
Reclassifications outThe following is a summary of accumulated OCIHuntington's non-cumulative perpetual preferred stock outstanding as of

Accumulated OCI components

  Amounts reclassed
from accumulated OCI
  

Location of net gain (loss)

reclassified from accumulated OCI into earnings

(dollar amounts in thousands)

  2014  2013   

Gains (losses) on debt securities:

    

Amortization of unrealized gains (losses)

  $597   $482   Interest income—held-to-maturity securities—taxable

Realized gain (loss) on sale of securities

   14,962    (4,891 Noninterest income—net gains (losses) on sale of securities

OTTI recorded

   —      (1,802 Noninterest income—net gains (losses) on sale of securities
  

 

 

  

 

 

  
   15,559    (6,211 Total before tax
   (5,446  2,174   Tax (expense) benefit
  

 

 

  

 

 

  
  $10,113   $(4,037 Net of tax
  

 

 

  

 

 

  

Gains (losses) on cash flow hedging relationships:

    

Interest rate contracts

  $4,064   $14,979   Interest and fee income—loans and leases

Interest rate contracts

   —      209   Interest and fee income—investment securities

Interest rate contracts

   (93  —     Noninterest expense—other income
  

 

 

  

 

 

  
   3,971    15,188   Total before tax
   (1,390  (5,316 Tax (expense) benefit
  

 

 

  

 

 

  
  $2,581   $9,872   Net of tax
  

 

 

  

 

 

  

Amortization of defined benefit pension and post-retirement items:

    

Actuarial gains (losses)

  $106,857   $(22,293 Noninterest expense—personnel costs

Prior service costs

   —      3,454   Noninterest expense—personnel costs

Other

   —      (919 Noninterest expense—personnel costs

Curtailment

   —      32,864   Noninterest expense—personnel costs
  

 

 

  

 

 

  
   106,857    13,106   Total before tax
   (37,400  (4,588 Tax (expense) benefit
  

 

 

  

 

 

  
  $69,457   $8,518   Net of tax
  

 

 

  

 

 

  

12. SHAREHOLDERS’ EQUITYDecember 31, 2016

Preferred Stock issued.

(dollar amounts in thousands, except per share amounts)      
Series Issuance Date Total Shares Outstanding Carrying Amount Dividend Rate Earliest Redemption Date
Series A 11/14/2008 362,506
 362,506
 8.50% N/A
Series B 12/28/2011 35,500
 23,785
 3-mo. LIBOR + 270 bps 1/15/2017
Series D 3/21/2016 400,000
 386,348
 6.25% 7/15/2021
Series D 5/5/2016 200,000
 198,588
 6.25% 7/15/2021
Series C 8/16/2016 100,000
 100,000
 5.875% 1/15/2022
Total   1,098,006
 $1,071,227
    

Each series of preferred stock has a liquidation value and outstanding

In 2008, Huntington issued 569,000 sharesredemption price per share of 8.50%$1,000, plus any declared and unpaid dividends. All preferred stock, with the exception of Series A, Non-Cumulative Perpetual Convertible Preferred Stock (Series A Preferred Stock) with a liquidation preferencehas no stated maturity and redemption is solely at the option of $1,000 per share. the Company. Under current rules, any redemption of the preferred stock is subject to prior approval of the FRB.

Each share of the Series A Preferred Stock is non-voting and may be converted at any time, at the option of the holder, into 83.668 shares of common stock of Huntington, which represents an approximate initial conversion price of $11.95 per share of common stock. Since April 15, 2013, at the option of Huntington, the Series A Preferred Stock is subject to mandatory conversion into Huntington’s common stock at the prevailing conversion rate if the closing price of Huntington’s common stock exceeds 130% of the conversion price for 20 trading days during any 30 consecutive trading-day period.

At the option of the holder, one share was converted to common stock during the fourth quarter of 2015.

Preferred Series C Stock issued and outstanding
In 2011,connection with the FirstMerit acquisition, during the 2016 third quarter, Huntington issued $35.5$100 million par value Floating Rateof preferred stock. As part of this transaction, Huntington issued 4,000,000 depositary shares, each representing a 1/40th ownership interest in a share of 5.875% Series BC Non-Cumulative Perpetual Preferred Stock (Preferred C Stock), par value $0.01 per share, with a liquidation preference of $1,000 per share (the Series B Preferred Stock) and, in certain cases, an additional amount of cash consideration, in exchange for $35.5 million of (1) Huntington Capital I Floating Rate Capital Securities, (2) Huntington Capital II Floating Rate Capital Securities, (3) Sky Financial Capital Trust III Floating Rate Capital Securities and (4) Sky Financial Capital Trust IV Floating Rate Capital Securities.

As part of the exchange offer, Huntington issued(equivalent to $25 per depositary shares. Each depositary share represents a 1/40th ownership interest in a share of the Series B Preferred Stock.share). Each holder of a depositary share, will be entitled in proportion to the applicable fraction of a share of Series B Preferred Stock and all the relatedproportional rights and preferences.preferences of the Preferred C Stock (including dividend, voting, redemption, and liquidation rights).

Dividends on the Preferred C Stock will be non-cumulative and payable quarterly in arrears, when, as and if authorized by the Company's board of directors or a duly authorized committee of the board and declared by the Company, at an annual rate of 5.875% per year on the liquidation preference of $1,000 per share, equivalent to $25 per depositary share. The dividend payment dates will be the fifteenth day of each January, April, July and October, commencing on October 15, 2016, or the next business day if any such day is not a business day.
The Preferred C Stock is perpetual and has no maturity date. Huntington will paymay redeem the Preferred C Stock at its option, (i) in whole or in part, from time to time, on any dividend payment date on or after October 15, 2021 or (ii) in whole but not in part, within 90 days following a regulatory capital treatment event, in each case, at a redemption price equal to $1,000 per share (equivalent to $25 per depositary share), plus any declared and unpaid dividends, without regard to any undeclared dividends, on the Series BC Preferred Stock atprior to the date fixed for redemption. If Huntington redeems the Preferred C Stock, the depositary will redeem a floating rate equalproportional number of depositary shares. Neither the holders of Preferred C Stock nor holders of depositary shares will have the right to three-month LIBOR plus a spreadrequire the redemption or repurchase of 2.70%. Thethe Preferred C Stock or the depositary shares. Any redemption of the Preferred C Stock is subject to Huntington's receipt of any required prior approval by the Board of Governors of the Federal Reserve System.
Preferred Series D Stock issued and outstanding
During the 2016 first and second quarter, Huntington issued $400 million and $200 million of preferred stock, was recorded atrespectively. As part of these transactions, Huntington issued 24,000,000 depositary shares, each representing a 1/40th ownership interest in a share of 6.250% Series D Non-Cumulative Perpetual Preferred Stock (Preferred D Stock), par value $0.01 per share, with a liquidation preference of $1,000 per share (equivalent to $25 per depositary share). Each holder of a depositary share, will be entitled to all proportional rights and preferences of the par amountPreferred D Stock (including dividend, voting, redemption, and liquidation rights). Costs of $35.5$15 million withrelated to the difference between parissuance of the Preferred D Stock are reported as a direct deduction from the face amount of the stock.
Dividends on the Preferred D Stock will be non-cumulative and payable quarterly in arrears, when, as and if authorized by the Company's board of directors or a duly authorized committee of the board and declared by the Company, at an annual rate of 6.25% per year on the liquidation preference of $1,000 per share, equivalent to $25 per depositary share. The dividend payment dates will be

the fifteenth day of each January, April, July and October, commencing on July 15, 2016, or the next business day if any such day is not a business day.
The Preferred D Stock is perpetual and has no maturity date. Huntington may redeem the Preferred D Stock at its option, (i) in whole or in part, from time to time, on any dividend payment date on or after April 15, 2021 or (ii) in whole but not in part, within 90 days following a regulatory capital treatment event, in each case, at a redemption price equal to $1,000 per share (equivalent to $25 per depositary share), plus any declared and unpaid dividends and, in the case of a redemption following a regulatory capital treatment event, the prorated portion of dividends, whether or not declared, for the dividend period in which such redemption occurs. Notwithstanding the foregoing, pursuant to a commitment Huntington made to the Federal Reserve, for at least five years after the date of the issuance of depositary shares offered by the prospectus supplement, Huntington will not redeem or repurchase the Preferred D Stock, whether issued on March 21, 2016 or on the date of the issuance of the depositary shares offered by the prospectus supplement. If Huntington redeems the Preferred D Stock, the depositary will redeem a proportional number of depositary shares. Neither the holders of Preferred D Stock nor holders of depositary shares will have the right to require the redemption or repurchase of the Preferred D Stock or the depositary shares. Any redemption of the Preferred D Stock is subject to Huntington's receipt of any required prior approval by the Board of Governors of the Federal Reserve System.
2016 Comprehensive Capital Analysis and their fair value of $23.8 million recorded as a discount.

Share Repurchase Program

Review (CCAR)

On March 26, 2014,June 29, 2016, Huntington announced that the Federal Reserve did not object to Huntington’sthe proposed capital actions included in Huntington’sHuntington's capital plan submitted to the Federal Reserve in January 2014.April 2016 as part of the 2016 CCAR. These actions included a potential repurchase of upan increase in the quarterly dividend per common share to $250 million of common stock through$0.08, starting in the firstfourth quarter of 2015. This repurchase authorization represented a $23 million, or 10%, increase from2016. Huntington’s capital plan also included the prior common stock repurchase authorization. Purchasesissuance of common stock may include open market purchases, privately negotiated transactions,capital in connection with the acquisition of FirstMerit Corporation and accelerated repurchase programs. Huntington’s boardcontinues the previously announced suspension of directors authorized athe Company’s 2015 share repurchase program consistent with Huntington’s capital plan. program.
2015 Share Repurchase Program
During 2014,2015, Huntington repurchased a total of 35.723.0 million shares of common stock at a weighted average share price of $9.37. During 2013, Huntington repurchased a total of 16.7 million shares of common stock, at a weighted average share price of $7.46.

On April 29, 2014, Huntington repurchased approximately 2.2 million shares of common stock from a third-party under an accelerated share repurchase program. The accelerated share repurchase program enabled Huntington to purchase 1.9 million shares immediately, while the third party could have purchased shares in the market up through June 24, 2014 (the Repurchase Term). In connection with the repurchase of these shares, Huntington entered into a variable share forward sale agreement, which provides for a settlement, reflecting a price differential based on the adjusted volume-weighted average price as defined in the agreement with the third party. The variable share forward agreement was settled in shares, resulting in approximately 0.3 million shares being delivered to Huntington on June 27, 2014. Based on the adjusted volume-weighted average prices through June 24, 2014, the settlement of the variable share forward agreement did not have a material impact to Huntington.

Huntington has the ability to repurchase up to $51.7 million of additional shares of common stock through the first quarter of 2015. We intend to continue disciplined repurchase activity consistent with our annual capital plan, our capital return objectives, and market conditions.

13.$10.93.


14. EARNINGS PER SHARE

Basic earnings per share is the amount of earnings (adjusted for dividends declared on preferred stock) available to each share of common stock outstanding during the reporting period. Diluted earnings per share is the amount of earnings available to each share of common stock outstanding during the reporting period adjusted to include the effect of potentially dilutive common shares. Potentially dilutive common shares include incremental shares issued for stock options, restricted stock units and awards, distributions from deferred compensation plans, and the conversion of the Company’s convertible preferred stock (See Note 12)13). Potentially dilutive common shares are excluded from the computation of diluted earnings per share in periods in which the effect would be antidilutive. For diluted earnings per share, net income available to common shares can be affected by the conversion of the Company’s convertible preferred stock. Where the effect of this conversion would be dilutive, net income available to common shareholders is adjusted by the associated preferred dividends and deemed dividend. The calculation of basic and diluted earnings per share for each of the three years ended December 31 was as follows:

   Year ended December 31, 

(dollar amounts in thousands, except per share amounts)

  2014   2013   2012 

Basic earnings per common share:

      

Net income

  $632,392    $641,282    $631,290  

Preferred stock dividends, deemed dividends and accretion of discount

   (31,854   (31,869   (31,989
  

 

 

   

 

 

   

 

 

 

Net income available to common shareholders

  $600,538    $609,413    $599,301  

Average common shares issued and outstanding

   819,917     834,205     857,962  

Basic earnings per common share

  $0.73    $0.73    $0.70  

Diluted earnings per common share

      

Net income available to common shareholders

  $600,538    $609,413    $599,301  

Effect of assumed preferred stock conversion

   —       —       —    
  

 

 

   

 

 

   

 

 

 

Net income applicable to diluted earnings per share

  $600,538    $609,413    $599,301  

Average common shares issued and outstanding

   819,917     834,205     857,962  

Dilutive potential common shares:

      

Stock options and restricted stock units and awards

   11,421     8,418     4,202  

Shares held in deferred compensation plans

   1,420     1,351     1,238  

Other

   323     —       —    
  

 

 

   

 

 

   

 

 

 

Dilutive potential common shares:

   13,164     9,769     5,440  
  

 

 

   

 

 

   

 

 

 

Total diluted average common shares issued and outstanding

   833,081     843,974     863,402  

Diluted earnings per common share

  $0.72    $0.72    $0.69  


 Year ended December 31,
(dollar amounts in thousands, except per share amounts)2016 2015 2014
Basic earnings per common share:     
Net income$711,821
 $692,957
 $632,392
Preferred stock dividends(65,274) (31,873) (31,854)
Net income available to common shareholders$646,547
 $661,084
 $600,538
Average common shares issued and outstanding904,438
 803,412
 819,917
Basic earnings per common share:$0.72
 $0.82
 $0.73
Diluted earnings per common share     
Net income available to common shareholders$646,547
 $661,084
 $600,538
Effect of assumed preferred stock conversion
 
 
Net income applicable to diluted earnings per share$646,547
 $661,084
 $600,538
Average common shares issued and outstanding904,438
 803,412
 819,917
Dilutive potential common shares:     
Stock options and restricted stock units and awards11,728
 11,633
 11,421
Shares held in deferred compensation plans2,486
 1,912
 1,420
Other138
 172
 323
Dilutive potential common shares:14,352
 13,717
 13,164
Total diluted average common shares issued and outstanding918,790
 817,129
 833,081
Diluted earnings per common share$0.70
 $0.81
 $0.72
Approximately 2.63.1 million, 6.61.6 million, and 24.42.6 million options to purchase shares of common stock outstanding at the end of 2014, 2013,December 31, 2016, 2015, and 2012,2014, respectively, were not included in the computation of diluted earnings per share because the effect would be antidilutive.

14.15. SHARE-BASED COMPENSATION

Huntington sponsors nonqualified and incentive share based compensation plans. These plans provide for the granting of stock options and other awards to officers, directors, and other employees. Compensation costs are included in personnel costs on the Consolidated Statements of Income. Stock options are granted at the closing market price on the date of the grant. Options granted typically vest ratably over four years or when other conditions are met. Stock options, which represented a portion of ourthe grant values, have no intrinsic value until the stock price increases. Options granted prior toon or after May 20041, 2015 have a contractual term of ten years. All options granted after May 2004on or before April 30, 2015 have a contractual term of seven years.

2015 Long-Term Incentive Plan
In 2012,2015, shareholders approved the Huntington Bancshares Incorporated 20122015 Long-Term Incentive Plan (the 2015 Plan) which. Shares remaining under the 2012 Plan have been incorporated into the 2015 Plan and reduced the full number of shares covered by all awards. Accordingly, the total number of shares authorized 51.0 million shares for future grants. Theawards under the 2015 Plan is the only active plan under which Huntington is currently granting share based options and awards.30 million shares. At December 31, 2014, 15.32016, 16 million shares from the Plan were available for future grants. Huntington issues shares to fulfill stock option exercises and restricted stock unit and award vesting from available authorized common shares. At December 31, 2014, the Company2016, Huntington believes there are adequate authorized common shares to satisfy anticipated stock option exercises and restricted stock unit and award vesting in 2015.

2017.

Huntington uses the Black-Scholes option pricing model to value options in determining ourthe share-based compensation expense. Forfeitures are estimated at the date of grant based on historical rates, and updated as necessary, and reduce the compensation expense recognized. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the date of grant. The expected dividend yield is based on the dividend rate and stock price at the date of the grant. Expected volatility is based on the estimated volatility of Huntington’s stock over the expected term of the option.

The following table illustratespresents the weighted average assumptions used in the option-pricing model at the grant date for options granted in the three years ended December 31, 2014, 2013,2016, 2015, and 2012:

   2014  2013  2012 

Assumptions

    

Risk-free interest rate

   1.69  0.79  1.10

Expected dividend yield

   2.61    2.83    2.38  

Expected volatility of Huntington’s common stock

   32.3    35.0    34.9  

Expected option term (years)

   5.0    5.5    6.0  

Weighted-average grant date fair value per share

  $2.13   $1.71   $1.78  

2014:


 2016 2015 2014
Assumptions     
Risk-free interest rate1.63% 2.13% 1.69%
Expected dividend yield3.18
 2.57
 2.61
Expected volatility of Huntington’s common stock30.0
 29.0
 32.3
Expected option term (years)6.5
 6.5
 5
Weighted-average grant date fair value per share$2.17
 $2.57
 $2.13
The following table illustratespresents total share-based compensation expense and related tax benefit for the three years ended December 31, 2014, 2013,2016, 2015, and 2012:

(dollar amounts in thousands)

  2014   2013   2012 

Share-based compensation expense

  $43,666    $37,007    $27,873  

Tax benefit

   14,779     12,472     9,298  

2014:

(dollar amounts in thousands)2016 2015 2014
Share-based compensation expense$65,608
 $51,415
 $43,666
Tax benefit22,496
 17,618
 14,779
Huntington’s stock option activity and related information for the year ended December 31, 2014,2016, was as follows:

          Weighted-     
      Weighted-   Average     
      Average   Remaining   Aggregate 
      Exercise   Contractual   Intrinsic 

(amounts in thousands, except years and per share amounts)

  Options  Price   Life (Years)   Value 

Outstanding at January 1, 2014

   23,300   $7.61      

Granted

   1,807    9.22      

Assumed

   214       

Exercised

   (3,528  6.02      

Forfeited/expired

   (2,174  17.20      
  

 

 

  

 

 

     

Outstanding at December 31, 2014

   19,619   $6.99     3.9    $75,794  
  

 

 

  

 

 

   

 

 

   

 

 

 

Expected to vest at December 31, 2014 (1)

   4,950   $7.64     5.4    $14,272  
  

 

 

  

 

 

   

 

 

   

 

 

 

Exercisable at December 31, 2014

   14,193   $6.73     3.3    $60,311  
  

 

 

  

 

 

   

 

 

   

 

 

 

(amounts in thousands, except years and per share amounts)Options Weighted-
Average
Exercise Price
 Weighted-
Average
Remaining
Contractual Life (Years)
 Aggregate
Intrinsic Value
Outstanding at January 1, 201616,121
 $7.25
    
Granted1,596
 10.06
    
Exercised(2,372) 5.90
    
Forfeited/expired(471) 15.73
    
Outstanding at December 31, 201614,874
 $7.50
 3.6 $85,159
Expected to vest (1)3,656
 $9.59
 7.1 $13,267
Exercisable at December 31, 201610,985
 $6.75
 2.4 $71,114
(1)The number of options expected to vest includes an estimate of 476233 thousand shares expected to be forfeited.

The aggregate intrinsic value represents the amount by which the fair value of underlying stock exceeds the “in-the-money” option exercise price. For the years ended December 31, 2014, 2013,2016, 2015, and 2012,2014, cash received for the exercises of stock options was $21.2$14 million, $14.4$26 million and $2.3$21 million, respectively. The tax benefit realized for the tax deductions from option exercises totaled $3.5$3 million, $1.8$7 million and $0.3$4 million in 2016, 2015, and 2014, 2013, and 2012, respectively.

The weighted-average grant date fair value of nonvested shares granted for the years ended December 31, 2014, 2013 and 2012 were $9.09, $7.12, and $6.69, respectively. The total fair value of awards vested during the years ended December 31, 2014, 2013, and 2012 was $25.7 million, $13.7 million, and $9.10 million, respectively. As of December 31, 2014, the total unrecognized compensation cost related to nonvested awards was $61.1 million with a weighted-average expense recognition period of 2.5 years.

The following table presents additional information regarding options outstanding as of December 31, 2014:

(amounts in thousands, except years and per share amounts)

  Options Outstanding       Exercisable Options 

Weighted-

Range of

Exercise Prices

  Shares   Weighted-
Average
Remaining
Contractual
Life (Years)
   Weighted-
Average
Exercise
Price
   Shares   Weighted-
Average
Exercise
Price
 

$0 to $5.63

   1,843     1.6    $4.64     1,836    $4.64  

$5.64 to $6.02

   7,110     3.6     6.02     7,078     6.02  

$6.03 to $15.95

   10,087     4.7     7.26     4,700     6.78  

$15.96 to $22.73

   579     0.7     21.74     579     21.74  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   19,619     3.9    $6.99     14,193    $6.73  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Huntington also grants restricted stock, restricted stock units, performance share awards, and other stock-based awards. Restricted stock units and awards are issued at no cost to the recipient, and can be settled only in shares at the end of the vesting period. Restricted stock awards provide the holder with full voting rights and cash dividends during the vesting period. Restricted stock units do not provide the holder with voting rights or cash dividends during the vesting period, but do accrue a dividend equivalent that is paid upon vesting, and are subject to certain service restrictions. Performance share awards are payable contingent upon Huntington achieving certain predefined performance objectives over the three-year measurement period. The fair value of these awards is the closing market price of Huntington’s common stock on the grant date.


The following table summarizes the status of Huntington’s restricted stock units and performance share awards as of December 31, 2014,2016, and activity for the year ended December 31, 2014:

(amounts in thousands, except per share amounts)

  Restricted
Stock
Awards
  Weighted-
Average
Grant Date
Fair Value
Per Share
   Restricted
Stock
Units
  Weighted-
Average
Grant Date
Fair Value
Per Share
   Performance
Share
Awards
  Weighted-
Average
Grant Date
Fair Value
Per Share
 

Nonvested at January 1, 2014

   —     $—       12,064   $6.80     1,646   $6.95  

Granted

   —      —       4,600    9.12     1,076    8.96  

Assumed

   27    —       —      —       —      —    

Vested

   (14  9.53     (4,003  6.39     —      —    

Forfeited

   (1  9.53     (757  7.54     (143  7.26  
  

 

 

  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

 

Nonvested at December 31, 2014

   12    9.53     11,904   $7.79     2,579   $7.76  
  

 

 

  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

 

15. INCOME TAXES

2016:

 Restricted Stock Awards Restricted Stock Units Performance Share Awards
(amounts in thousands, except per share amounts)Quantity 
Weighted-
Average
Grant Date
Fair Value
Per Share
 Quantity 
Weighted-
Average
Grant Date
Fair Value
Per Share
 Quantity 
Weighted-
Average
Grant Date
Fair Value
Per Share
Nonvested at January 1, 20167
 $9.53
 12,170
 $9.11
 2,893
 $8.99
Granted
 
 6,526
 9.69
 981
 9.04
Assumed916
 9.68
 
 
 807
 9.68
Vested(241) 9.68
 (3,142) 7.91
 (1,307) 8.05
Forfeited(26) 9.68
 (821) 9.52
 (67) 9.78
Nonvested at December 31, 2016656
 $9.68
 14,733
 $9.61
 3,307
 $9.63
The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state, city, and foreign jurisdictions. Federal income tax audits have been completed through 2009. In the first quarterweighted-average grant date fair value of 2013, the IRS began an examination of our 2010 and 2011 consolidated federal income tax returns. Certain proposed adjustments resulting from the IRS Examination of our 2005 through 2009 tax returns have been settled with the IRS Appeals Office, subject to final approval by the Joint Committee on Taxation of the U.S. Congress. Various state and other jurisdictions remain open to examination, including Ohio, Kentucky, Indiana, Michigan, Pennsylvania, West Virginia and Illinois.

Huntington accounts for uncertainties in income taxes in accordance with ASC 740, Income Taxes. At December 31, 2014, Huntington had gross unrecognized tax benefits of $1.2 million in income tax liability related to tax positions. Due to the complexities of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the current estimate of the tax liabilities. Huntington does not anticipate the total amount of gross unrecognized tax benefits to significantly change within the next 12 months.

The following table provides a reconciliation of the beginning and ending amounts of gross unrecognized tax benefits:

(dollar amounts in thousands)

  2014   2013 

Unrecognized tax benefits at beginning of year

  $704    $6,246  

Gross increases for tax positions taken during prior years

   468     —    

Gross decreases for tax positions taken during prior years

   —       (5,048

Settlements with taxing authorities

   —       (494
  

 

 

   

 

 

 

Unrecognized tax benefits at end of year

  $1,172    $704  
  

 

 

   

 

 

 
  

 

 

   

 

 

 

Any interest and penalties on income tax assessments or income tax refunds are recognized in the Consolidated Statements of Income as a component of provision for income taxes. Huntington recognized, $0.1 million of interest expense, $0.2 million of interest benefit, and $0.1 million of interest benefitnonvested shares granted for the years ended December 31, 2016, 2015, and 2014 2013were $9.59, $10.86, and 2012,$9.09, respectively. Total interest accruedThe total fair value of awards vested during the years ended December 31, 2016, 2015, and 2014 was $0.2$31 million, $30 million, and $0.1$26 million, atrespectively. As of December 31, 2014 and 2013, respectively. All of2016, the grosstotal unrecognized tax benefits would impact the Company’s effective tax rate if recognized.

The following is a summary of the provision (benefit) for income taxes:

   Year Ended December 31, 

(dollar amounts in thousands)

  2014   2013   2012 

Current tax provision (benefit)

      

Federal

  $186,436    $117,174    $35,387  

State

   (1,017   4,278     6,966  
  

 

 

   

 

 

   

 

 

 

Total current tax provision (benefit)

   185,419     121,452     42,353  
  

 

 

   

 

 

   

 

 

 

Deferred tax provision (benefit)

      

Federal

   41,167     112,681     193,211  

State

   (5,993   (6,659   (33,273
  

 

 

   

 

 

   

 

 

 

Total deferred tax provision (benefit)

   35,174     106,022     159,938  
  

 

 

   

 

 

   

 

 

 

Provision for income taxes

  $220,593    $227,474    $202,291  
  

 

 

   

 

 

   

 

 

 

The following is a reconcilement of provision for income taxes:

   Year Ended December 31, 

(dollar amounts in thousands)

  2014   2013   2012 

Provision for income taxes computed at the statutory rate

  $298,545    $304,065    $291,753  

Increases (decreases):

      

Tax-exempt income

   (17,971   (34,378   (15,752

Tax-exempt bank owned life insurance income

   (19,967   (19,747   (19,151

General business credits

   (46,047   (39,868   (49,654

State deferred tax asset valuation allowance adjustment, net

   (7,430   (6,020   (21,251

Capital loss

   (26,948   (961   (18,659

Affordable housing investment amortization, net of tax benefits

   33,752     16,851     28,855  

State income taxes, net

   2,873     4,472     4,152  

Other

   3,786     3,060     1,998  
  

 

 

   

 

 

   

 

 

 

Provision for income taxes

  $220,593    $227,474    $202,291  
  

 

 

   

 

 

   

 

 

 

The significant components of deferred tax assets and liabilities at December 31, were as follows:

   At December 31, 

(dollar amounts in thousands)

  2014   2013 

Deferred tax assets:

    

Allowances for credit losses

  $233,656    $244,684  

Net operating and other loss carryforward

   161,548     153,826  

Fair value adjustments

   119,512     115,874  

Accrued expense/prepaid

   48,656     39,636  

Tax credit carryforward

   30,825     50,137  

Partnership investments

   24,123     13,552  

Purchase accounting adjustments

   13,839     14,096  

Market discount

   12,215     20,671  

Other

   9,477     10,437  
  

 

 

   

 

 

 

Total deferred tax assets

   653,851     662,913  
  

 

 

   

 

 

 

Deferred tax liabilities:

    

Lease financing

   202,298     146,814  

Loan origination costs

   103,025     82,345  

Operating assets

   50,266     46,524  

Mortgage servicing rights

   47,748     48,007  

Securities adjustments

   27,856     33,719  

Purchase accounting adjustments

   17,299     39,578  

Pension and other employee benefits

   9,677     12,608  

Other

   5,178     11,313  
  

 

 

   

 

 

 

Total deferred tax liabilities

   463,347     420,908  
  

 

 

   

 

 

 

Net deferred tax asset before valuation allowance

   190,504     242,005  

Valuation allowance

   (73,057   (111,435
  

 

 

   

 

 

 

Net deferred tax asset

  $117,447    $130,570  
  

 

 

   

 

 

 

At December 31, 2014, Huntington’s net deferred tax assetcompensation cost related to loss and other carryforwardsnonvested awards was $192.4 million. This was comprised$81 million with a weighted-average expense recognition period of federal net operating loss carryforwards of $35.9 million, which will begin expiring in 2023, $48.6 million of state net operating loss carryforward, which will begin expiring in 2015, an alternative minimum tax credit carryforward of $28.5 million, which may be carried forward indefinitely, a general business credit carryforward of $2.3 million, which will begin expiring in 2025, and a capital loss carryforward of $77.1 million, which expires in 2018.

In prior periods, Huntington established a valuation allowance against deferred tax assets for federal capital loss carryforwards, state deferred tax assets, and state net operating loss carryforwards. The federal valuation allowance was based on the uncertainty of forecasted federal taxable income expected of the required character in order to utilize the capital loss carryforward. The state valuation allowance was based on the uncertainty of forecasted state taxable income expected in applicable jurisdictions in order to utilize the state deferred tax assets and state net operating loss carryforwards. Based on current analysis of both positive and negative evidence and projected forecasted taxable income of the appropriate character and/or within applicable jurisdictions, the Company believes that it is more likely than not portions of the federal capital loss carryforward, the state deferred tax assets, and state net operating loss carryforwards will be realized. As a result of this analysis, the federal valuation allowance was reduced to $69.4 million compared to $96.3 million at December 31, 2013, for the portion of the capital loss carryforwards the Company expects to realize and the state valuation allowance was reduced to $3.7 million compared to $15.1 million in at December 31, 2013, for the portion of the state deferred tax assets and state net operating loss carryforwards the Company expects to realize.

At December 31, 2014 retained earnings included approximately $12.1 million of base year reserves of acquired thrift institutions, for which no deferred federal income tax liability has been recognized. Under current law, if these bad debt reserves are used for purposes other than to absorb bad debt losses, they will be subject to federal income tax at the current corporate rate. The amount of unrecognized deferred tax liability relating to the cumulative bad debt deduction was approximately $4.1 million at December 31, 2014.

2.3 years.


16. Benefit PlansBENEFIT PLANS

Huntington sponsors the Plan, a non-contributory defined benefit pension plan covering substantially all employees hired or rehired prior to January 1, 2010. The Plan, which was modified in 2013 and no longer accrues service benefits to participants, provides benefits based upon length of service and compensation levels. The funding policy of Huntington is to contribute an annual amount that is at least equal to the minimum funding requirements but not more than the amount deductible under the Internal Revenue Code. There were noAlthough not required, minimum contributions during 2014. DuringHuntington made a $150 million contribution to the 2013Plan in the third quarter the board of directors approved, and management communicated, a curtailment of the Company’s pension plan effective December 31, 2013.

2016.

In addition, Huntington has an unfunded defined benefit post-retirement plan that provides certain healthcare and life insurance benefits to retired employees who have attained the age of 55 and have at least 10 years of vesting service under this plan. For any employee retiring on or after January 1, 1993, post-retirement healthcare benefits are based upon the employee’s number of months of service and are limited to the actual cost of coverage. Life insurance benefits are a percentage of the employee’s base salary at the time of retirement, with a maximum of $50,000 of coverage. The employer paid portion of the post-retirement health and life insurance plan was eliminated for employees retiring on and after March 1, 2010. Eligible employees retiring on and after March 1, 2010, who elect retiree medical coverage, will pay the full cost of this coverage. Huntington will not provide any employer paid life insurance to employees retiring on and after March 1, 2010. Eligible employees will be able to convert or port their existing life insurance at their own expense under the same terms that are available to all terminated employees.

On January 1, 2015, Huntington terminated the company sponsored retiree health care plan for Medicare eligible retirees and their dependents. Instead, Huntington will partner with a third partythird-party to assist the retirees and their dependents in selecting individual policies from a variety of carriers on a private exchange. This plan amendment resulted in a measurement of the liability at the approval date. The result of the measurement was a $5.2$5 million reduction of the liability and increase in accumulated other comprehensive income. It will also result in a reduction of expense over the estimated life of plan participants.

The following table shows the weighted-average assumptions used to determine the benefit obligation at December 31, 20142016 and 2013,2015, and the net periodic benefit cost for the years then ended:

   Pension
Benefits
  Post-Retirement
Benefits
 
   2014  2013  2014  2013 

Weighted-average assumptions used to determine benefit obligations

     

Discount rate

   4.12  4.89  3.72  4.27

Rate of compensation increase

   N/A    N/A    N/A    N/A  

Weighted-average assumptions used to determine net periodic benefit cost

��    

Discount rate (1) (2)

   4.89    4.15    4.11    3.28  

Expected return on plan assets

   7.25    7.63    N/A    N/A  

Rate of compensation increase

   N/A    4.50    N/A    N/A  

N/A—Not Applicable

     


 Pension
Benefits
 Post-Retirement
Benefits
 2016 2015 2016 2015
Weighted-average assumptions used to determine benefit obligations       
Discount rate4.38% 4.54% 3.64% 3.81%
Rate of compensation increaseN/A
 N/A
 N/A
 N/A
Weighted-average assumptions used to determine net periodic benefit cost       
Discount rate (1)4.54
 4.12
 3.81
 3.73
Expected return on plan assets6.75
 7.00
 N/A
 N/A
Rate of compensation increaseN/A
 N/A
 N/A
 N/A
N/A—Not Applicable       
(1)The 2013 pension benefit expense was remeasured as of July 1, 2013. The discount rate was 3.83% from January 1, 2013 to July 1, 2013, and was changed to 4.47% for the period from July 1, 2013 to December 31, 2013.
(2)The 20142015 post-retirement benefit expense was remeasured as of July 31, 2014.September 30, 2015, for the purchase of life insurance contracts for participants due a death benefit. The discount rate was 4.27%3.72% from January 1, 20142015 to July 31, 2014,September 30, 2015, and was changed to 3.89%3.77% for the period from July 31, 2014September 30, 2015 to December 31, 2014.2015.

The expected long-term rate of return on plan assets is an assumption reflecting the average rate of earnings expected on the funds invested or to be invested to provide for the benefits included in the projected benefit obligation. The expected long-term rate of return is established at the beginning of the plan year based upon historical returns and projected returns on the underlying mix of invested assets.

The following table reconciles the beginning and ending balances of the benefit obligation of the Plan and the post-retirement benefit plan with the amounts recognized in the consolidated balance sheets at December 31:

   Pension
Benefits
   Post-Retirement
Benefits
 

(dollar amounts in thousands)

  2014   2013   2014   2013 

Projected benefit obligation at beginning of measurement year

  $684,999    $783,778    $25,669    $27,787  

Changes due to:

        

Service cost

   1,740     25,122     —       —    

Interest cost

   32,398     30,112     856     862  

Benefits paid

   (16,221   (14,886   (3,401   (3,170

Settlements

   (27,045   (19,363   —       —    

Plan amendments

   —       (13,559   (8,782   —    

Plan curtailments

   —       (7,875   —       —    

Medicare subsidies

   —       —       462     564  

Actuarial assumptions and gains and losses (1)

   123,723     (98,330   1,159     (374

Total changes

   114,595     (98,779   (9,706   (2,118
  

 

 

   

 

 

   

 

 

   

 

 

 

Projected benefit obligation at end of measurement year

  $799,594    $684,999    $15,963    $25,669  
  

 

 

   

 

 

   

 

 

   

 

 

 

(1)The 2014 actuarial assumptions include revised mortality tables.

Benefits paid for post-retirement are net of retiree contributions collected by Huntington. The actual contributions received in 2014 by Huntington for the retiree medical program were $2.6 million.

 
Pension
Benefits
 
Post-Retirement
Benefits
(dollar amounts in thousands)2016 2015 2016 2015
Projected benefit obligation at beginning of measurement year$754,714
 $799,594
 $8,025
 $15,963
Changes due to:       
Service cost4,100
 1,830
 
 
Interest cost26,992
 31,937
 219
 506
Benefits paid(18,306) (17,246) (1,915) (2,211)
Settlements(21,684) (27,976) 
 (6,993)
Medicare subsidies
 
 
 117
Actuarial assumptions and gains and losses(9,470) (33,425) 963
 643
Total changes(18,368) (44,880) (733) (7,938)
Projected benefit obligation at end of measurement year$736,346
 $754,714
 $7,292
 $8,025
The following table reconciles the beginning and ending balances of the fair value of Plan assets at the December 31, 20142016 and 20132015 measurement dates:

   Pension
Benefits
 

(dollar amounts in thousands)

  2014   2013 

Fair value of plan assets at beginning of measurement year

  $649,020    $633,617  

Changes due to:

    

Actual return on plan assets

   44,312     49,652  

Settlements

   (24,098   (19,363

Benefits paid

   (16,221   (14,886
  

 

 

   

 

 

 

Total changes

   3,993     15,403  
  

 

 

   

 

 

 

Fair value of plan assets at end of measurement year

  $653,013    $649,020  
  

 

 

   

 

 

 

 
Pension
Benefits
(dollar amounts in thousands)2016 2015
Fair value of plan assets at beginning of measurement year$594,217
 $653,013
Changes due to:   
Actual return on plan assets39,895
 (16,122)
Employer Contributions150,000
 
Settlements(20,081) (25,428)
Benefits paid(18,306) (17,246)
Total changes151,508
 (58,796)
Fair value of plan assets at end of measurement year$745,725
 $594,217

Huntington’s accumulated benefit obligation under the Plan was $799.6$736 million and $685.0$755 million at December 31, 20142016 and 2013.2015. As of December 31, 2014,2016, the difference between the accumulated benefit obligation exceededand the fair value of Huntington’sHuntington's plan assets by $146.6was $9 million and is recorded in accrued expenses and othernoncurrent liabilities. The projected benefit obligation exceeded the fair value of Huntington’s plan assets by $146.6 million.

The following table shows the components of net periodic benefit costs recognized in the three years ended December 31, 2014:

   Pension Benefits  Post-Retirement Benefits 

(dollar amounts in thousands)

  2014  2013  2012  2014  2013  2012 

Service cost

  $1,740   $25,122   $24,869   $—     $—     $—    

Interest cost

   32,398    30,112    29,215    856    862    1,350  

Expected return on plan assets

   (45,783  (47,716  (45,730  —      —      —    

Amortization of transition asset

   —      —      (4  —      —      —    

Amortization of prior service cost

   —      (2,883  (5,767  (1,609  (1,353  (1,353

Amortization of loss

   5,767    23,044    26,956    (571  (600  (332

Curtailment

   —      (34,613  —      —      —      —    

Settlements

   11,200    8,116    5,405    —      —      —    
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Benefit costs

  $5,322   $1,182   $34,944   $(1,324 $(1,091 $(335
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

2016:

 Pension Benefits Post-Retirement Benefits
(dollar amounts in thousands)2016 2015 2014 2016 2015 2014
Service cost$4,100
 $1,830
 $1,740
 $
 $
 $
Interest cost26,992
 31,937
 32,398
 219
 506
 856
Expected return on plan assets(40,895) (44,175) (45,783) 
 
 
Amortization of prior service credit
 
 
 (1,968) (1,968) (1,609)
Amortization of (gain) / loss7,459
 7,934
 5,767
 (288) (401) (571)
Settlements9,495
 12,645
 11,200
 
 (3,090) 
Benefit costs$7,151
 $10,171
 $5,322
 $(2,037) $(4,953) $(1,324)
Included in benefit costs are $1.8$2 million, $1.7$4 million, and $1.1$2 million of plan expenses that were recognized in the three years ended December 31, 2014, 2013,2016, 2015, and 2012.2014. It is Huntington’s policy to recognize settlement gains and losses as incurred. Assuming no cash contributions are made to the Plan during 2015,2017, Management expects net periodic pension benefit, excluding any expense of settlements, to approximate $2.5$14 million for 2015.2017. The postretirementpost-retirement medical and life subsidy was eliminated for anyone who retires on or after March 1, 2010. As such, there were no incremental net periodic post-retirement benefits costs associated with this plan.

The estimated transition obligation, prior service credit, and net actuarial loss for the plans that will be amortized from OCI into net periodic benefit cost over the next fiscal year is zero, $2.0$2 million, and a $8.4$7 million benefit, respectively.

At December 31, 20142016 and 2013,2015, The Huntington National Bank, as trustee, held all Plan assets. The Plan assets consisted of investments in a variety of corporate and government fixed income investments, Huntingtonmoney market funds, and mutual funds and Huntington common stock as follows:

   Fair Value 

(dollar amounts in thousands)

  2014  2013 

Cash equivalents:

       

Huntington funds—money market

  $16,136     2 $803     

Fixed income:

       

Huntington funds—fixed income funds

   —       —      74,048     11  

Corporate obligations

   218,077     33    180,757     28  

U.S. Government Obligations

   62,627     10    51,932     8  

Mutual funds—fixed income

   34,761     5    —       —    

U.S. Government Agencies

   7,445     1    6,146     1  

Equities:

       

Mutual funds—equities

   147,191     23    —       —    

Other common stock

   118,970     18    —       —    

Huntington common stock

   —       —      20,324     3  

Huntington funds

   37,920     6    289,379     45  

Exchange Traded Funds

   6,840     1    24,705     4  

Limited Partnerships

   3,046     1    926     —    
  

 

 

   

 

 

  

 

 

   

 

 

 

Fair value of plan assets

  $653,013     100 $649,020     100
  

 

 

   

 

 

  

 

 

   

 

 

 

 Fair Value
(dollar amounts in thousands)2016 2015
Cash equivalents:       
Federated-money market$16,087
 2% $15,590
 3%
Fixed income:      

Corporate obligations212,967
 28
 205,081
 34
U.S. Government Obligations157,764
 21
 64,456
 11
Mutual funds-fixed income27,851
 4
 32,874
 6
U.S. Government Agencies7,201
 1
 6,979
 1
Equities:  

   

Mutual funds-equities134,832
 18
 136,026
 23
Common stock144,754
 19
 120,046
 20
Preferred stock4,778
 1
 
 
Exchange Traded Funds28,101
 4
 6,530
 1
Limited Partnerships11,390
 2
 6,635
 1
Fair value of plan assets$745,725
 100% $594,217
 100%

Investments of the Plan are accounted for at cost on the trade date and are reported at fair value. AllThe valuation methodologies used to measure the fair value of pension plan assets vary depending on the type of asset. For an explanation of the Plan’s investments atfair value hierarchy, refer to Note 1 “Significant Accounting Policies” under the heading “Fair Value Measurements”. At December 31, 2014,2016, equities and money market funds are classified as Level 1 within the fair value hierarchy, except for1; mutual funds-fixed income, corporate obligations, U.S. government obligations, and U.S. government agencies which are classified as Level 2,2; and limited partnerships which are classified as Level 3.

In general, investments of the Plan are exposed to various risks such as interest rate risk, credit risk, and overall market volatility. Due to the level of risk associated with certain investments, it is reasonably possible changes in the values of investments will occur in the near term and such changes could materially affect the amounts reported in the Plan assets.

The investment objective of the Plan is to maximize the return on Plan assets over a long timelong-time period, while meeting the Plan obligations. At December 31, 2014,2016, Plan assets were invested 2% in cash and cash equivalents, 49%44% in equity investments, and 49%54% in bonds, with an average duration of 12.414.2 years on bond investments. The estimated life of benefit obligations was 12.812.7 years. Although it may fluctuate with market conditions, Management has targeted a long-term allocation of Plan assets of 20% to 50% in equity investments and 80% to 50% in bond investments. The allocation of Plan assets between equity investments and fixed income investments will change from time to time with the allocation to fixed income investments increasing as the funding level increases.

The following table shows the number of shares and dividends received on shares of Huntington stock held by the Plan:

   December 31, 

(dollar amounts in thousands, except share amounts)

  2014   2013 

Shares in Huntington common stock(1)

   —       2,095,304  

Dividends received on shares of Huntington stock

  $267    $992  

(1)

The Plan has acquired and held Huntington common stock in compliance at all times with Section 407 of the Employee Retirement Income Security Act of 1978.

At December 31, 2014,2016, the following table shows when benefit payments were expected to be paid:

(dollar amounts in thousands)

  Pension
Benefits
   Post-
Retirement
Benefits
 

2015

  $48,851    $1,419  

2016

   48,416     1,329  

2017

   45,378     1,235  

2018

   43,332     1,154  

2019

   43,238     1,098  

2020 through 2024

   209,153     4,997  

(dollar amounts in thousands)
Pension
Benefits
 
Post-
Retirement
Benefits
2017$46,199
 $923
201845,077
 761
201943,720
 684
202041,827
 640
202141,528
 606
2022 through 2026205,278
 2,482
Although not required, Huntington may choose to make a cash contribution can be made to the Plan up to the maximum deductible limit in the 2014 plan year. Anticipated contributions for 20152017 to the post-retirement benefit plan are $1.4 million.

zero.

The assumed2017 healthcare cost trend rate has an effect on the amounts reported. A one percentage point increase would increase the accumulated post-retirement benefit obligation by $7.6 thousand and would increase interest costs by $3.5 thousand. A one percentage point decrease would decrease the accumulated post-retirement benefit obligation by $7.1 thousand and would decrease interest costs by $2.9 thousand.

The 2015 and 2014 healthcare cost trend rate wasis projected to be 7.3%6.8% for participants. This rate is assumed to decrease gradually until it reaches 4.5% in the year 2028 and remain at that level thereafter. Huntington updated the immediate healthcare cost trend rate assumption based on current market data and Huntington’s claims experience. This trend rate is expected to decline over time to a trend level consistent with medical inflation and long-term economic assumptions.

Huntington also sponsors other nonqualified retirement plans, the most significant being the SERP and the SRIP. The SERP provides certain former officers and directors, and the SRIP provides certain current and former officers and directors of Huntington and its subsidiaries with defined pension benefits in excess of limits imposed by federal tax law. At December 31, 20142016 and 2013,2015, Huntington has an accrued pension liability of $35.0$33 million and $29.2$34 million, respectively, associated with these plans. Pension expense for the plans was $1.0$1 million, $4.2$1 million, and $2.5$1 million in 2016, 2015, and 2014, 2013, and 2012, respectively. During the 2013 third quarter, the board of directors approved, and management communicated, a curtailment of the Company’s SRIP plan effective December 31, 2013.

The following table presents the amounts recognized in the Consolidated Balance Sheets at December 31, 20142016 and 20132015, for all of Huntington defined benefit plans:

(dollar amounts in thousands)

  2014   2013 

Accrued expenses and other liabilities

  $198,947    $90,842  

(dollar amounts in thousands)2016 2015
Noncurrent liabilities169,657
 192,734
The following tables present the amounts recognized in OCI as of December 31, 2014, 2013,2016, 2015, and 2012,2014, and the changes in accumulated OCI for the years ended December 31, 2014, 2013,2016, 2015, and 2012:

(dollar amounts in thousands)

  2014   2013   2012 

Net actuarial loss

  $(240,197  $(166,078  $(262,187

Prior service cost

   14,517     9,855     25,788  
  

 

 

   

 

 

   

 

 

 

Defined benefit pension plans

  $(225,680  $(156,223  $(236,399
  

 

 

   

 

 

   

 

 

 

   2014 

(dollar amounts in thousands)

  Pretax   Benefit   After-tax 

Balance, beginning of year

  $(240,345  $84,122    $(156,223

Net actuarial (loss) gain:

      

Amounts arising during the year

   (133,085   46,580     (86,505

Amortization included in net periodic benefit costs

   19,056     (6,670   12,386  

Prior service cost:

      

Amounts arising during the year

   8,781     (3,073   5,708  

Amortization included in net periodic benefit costs

   (1,609   563     (1,046

Transition obligation:

      

Amortization included in net periodic benefit costs

   —       —       —    
  

 

 

   

 

 

   

 

 

 

Balance, end of year

  $(347,202  $121,522    $(225,680
  

 

 

   

 

 

   

 

 

 
   2013 

(dollar amounts in thousands)

  Pretax   Benefit   After-tax 

Balance, beginning of year

  $(363,691  $127,292    $(236,399

Net actuarial (loss) gain:

      

Amounts arising during the year

   118,666     (41,532   77,134  

Amortization included in net periodic benefit costs

   29,194     (10,218   18,976  

Prior service cost:

      

Amounts arising during the year

   —       —       —    

Amortization included in net periodic benefit costs

   (24,514   8,580     (15,934

Transition obligation:

      

Amortization included in net periodic benefit costs

   —       —       —    
  

 

 

   

 

 

   

 

 

 

Balance, end of year

  $(240,345  $84,122    $(156,223
  

 

 

   

 

 

   

 

 

 
   2012 

(dollar amounts in thousands)

  Pretax   Benefit   After-tax 

Balance, beginning of year

  $(285,177  $99,813    $(185,364

Net actuarial (loss) gain:

      

Amounts arising during the year

   (105,527   36,934     (68,593

Amortization included in net periodic benefit costs

   33,880     (11,858   22,022  

Prior service cost:

      

Amounts arising during the year

   —       —       —    

Amortization included in net periodic benefit costs

   (6,865   2,403     (4,462

Transition obligation:

      

Amortization included in net periodic benefit costs

   (2   —       (2
  

 

 

   

 

 

   

 

 

 

Balance, end of year

  $(363,691  $127,292    $(236,399
  

 

 

   

 

 

   

 

 

 

2014:

(dollar amounts in thousands)2016 2015 2014
Net actuarial loss$(217,863) $(243,984) $(240,197)
Prior service cost11,958
 13,237
 14,517
Defined benefit pension plans$(205,905) $(230,747) $(225,680)

 2016
(dollar amounts in thousands)Pretax Tax (expense) Benefit After-tax
Balance, beginning of year$(354,997) $124,250
 $(230,747)
Net actuarial (loss) gain:     
Amounts arising during the year37,818
 (13,236) 24,582
Amortization included in net periodic benefit costs2,368
 (829) 1,539
Prior service cost:     
Amounts arising during the year
 
 
Amortization included in net periodic benefit costs(1,968) 689
 (1,279)
Balance, end of year$(316,779) $110,874
 $(205,905)
 2015
(dollar amounts in thousands)Pretax Tax (expense) Benefit After-tax
Balance, beginning of year$(347,202) $121,522
 $(225,680)
Net actuarial (loss) gain:     
Amounts arising during the year(25,520) 8,931
 (16,589)
Amortization included in net periodic benefit costs19,693
 (6,892) 12,801
Prior service cost:     
Amounts arising during the year
 
 
Amortization included in net periodic benefit costs(1,968) 689
 (1,279)
Balance, end of year$(354,997) $124,250
 $(230,747)
 2014
(dollar amounts in thousands)Pretax Tax (expense) Benefit After-tax
Balance, beginning of year$(240,345) $84,122
 $(156,223)
Net actuarial (loss) gain:     
Amounts arising during the year(133,085) 46,580
 (86,505)
Amortization included in net periodic benefit costs19,056
 (6,670) 12,386
Prior service cost:     
Amounts arising during the year8,781
 (3,073) 5,708
Amortization included in net periodic benefit costs(1,609) 563
 (1,046)
Balance, end of year$(347,202) $121,522
 $(225,680)

Huntington has a defined contribution plan that is available to eligible employees. Through December 31, 2012, Huntington matched participant contributions, up to the first 3% of base pay contributed to the Plan. Half of the employee contribution was matched on the 4th and 5th percent of base pay contributed to the Plan. Starting January 1, 2013, Huntington matchedmatches participant contributions, up to the first 4% of base pay contributed to the Plan. For 2014,2015 and 2016, a discretionary profit-sharing contribution equal to1%to 1% of eligible participants’ 2014annual base pay was awarded.

The following table shows the costs of providing the defined contribution plan as of December 31:

   Year ended December 31, 

(dollar amounts in thousands)

  2014   2013   2012 

Defined contribution plan

  $  31,110    $  18,238    $  16,926  

plan:

 Year ended December 31,
(dollar amounts in thousands)2016 2015 2014
Defined contribution plan$36,107
 $31,896
 $31,110
The following table shows the number of shares, market value, and dividends received on shares of Huntington stock held by the defined contribution plan:

   December 31, 

(dollar amounts in thousands, except share amounts)

  2014   2013 

Shares in Huntington common stock

   12,883,333     13,624,429  

Market value of Huntington common stock

  $135,533    $131,476  

Dividends received on shares of Huntington stock

   2,694     2,567  

 December 31,
(dollar amounts in thousands, except share amounts)2016 2015
Shares in Huntington common stock11,748,379
 13,076,164
Market value of Huntington common stock$162,245
 $144,622
Dividends received on shares of Huntington stock3,692
 3,076

FirstMerit Benefit Plans
As part of the FirstMerit acquisition, Huntington agreed to assume and honor all FirstMerit benefit plans. The FirstMerit Pension Plan was frozen for nonvested employees and closed to new entrants after December 31, 2006. Effective December 31, 2012, the FirstMerit Pension Plan was frozen for vested employees. At the time of acquisition, the benefit obligation was $330 million and the fair value of assets was $280 million. In addition, FirstMerit had a post retirement benefit plan which provided medical and life insurance for retired employees. At the time of acquisition, the benefit obligation was $7 million.
The following table shows the weighted-average assumptions used to determine the benefit obligation at December 31, 2016, and the net periodic benefit cost for the year then ended:
 Pension Benefits Post-Retirement Benefits
 2016 2016
Weighted-average assumptions used to determine benefit obligations   
Discount rate4.49% 4.16%
Rate of compensation increaseN/A
 N/A
Weighted-average assumptions used to determine net periodic benefit cost   
Discount rate4.12% 3.57%
Expected return on plan assets6.00
 N/A
Rate of compensation increaseN/A
 N/A
N/A—Not Applicable   

The following table reconciles the beginning and ending balances of the benefit obligation of FirstMerit's pension and post-retirement benefit plan with the amounts recognized in the consolidated balance sheet at the December 31, 2016:
 Pension Benefits Post-Retirement Benefits
(dollar amounts in thousands)2016 2016
Projected benefit obligation at beginning of measurement year (1)$329,679
 $7,196
Changes due to:   
Service cost954
 49
Interest cost3,218
 70
Benefits paid(2,463) (250)
Settlements(180,885) 
Actuarial assumptions and gains and losses(35,840) (703)
Total changes(215,016) (834)
Projected benefit obligation at end of measurement year$114,663
 $6,362
(1)The beginning measurement period started August 15, 2016.

During the 2016 fourth quarter, Huntington completed two settlements of the FirstMerit pension benefit obligation totaling $181 million. The settlements triggered settlement accounting, requiring a remeasurement of the plan as of November 30, 2016, and the recognition in the income statement of previously deferred amounts in OCI. The result was a gain of approximately $18 million and is reflected in personnel costs.

The following table reconciles the beginning and ending balances of the fair value of FirstMerit's plan assets at the December 31, 2016 measurement date:

 
Pension
Benefits
(dollar amounts in thousands)2016
Fair value of plan assets at beginning of measurement year (1)$280,217
Changes due to: 
Actual return on plan assets(3,068)
Settlements(179,114)
Benefits paid(2,463)
Total changes(184,645)
Fair value of plan assets at end of measurement year$95,572
(1)The beginning measurement period started August 15, 2016.

FirstMerit’s accumulated benefit obligation under the pension plan was $115 million at December 31, 2016. As of December 31, 2016, the difference between the accumulated benefit obligation and the fair value was $19 million and is recorded in noncurrent liabilities.
The following table shows the components of FirstMerit's net periodic benefit costs recognized in the year ended December 31, 2016:
 Pension Benefits Post-Retirement Benefits
(dollar amounts in thousands)2016 2016
Service cost$954
 $49
Interest cost3,218
 70
Expected return on plan assets(4,893) 
Amortization of (gain) / loss(20) 
Settlements(17,605) 
Benefit costs$(18,346) $119

Included in FirstMerit's benefit costs is $1 million of plan expenses that were recognized in the year ended December 31, 2016. It is Huntington’s policy to recognize settlement gains and losses as incurred. Assuming no cash contributions are made to the Plan during 2017, Management expects net periodic pension benefit, excluding any expense of settlements, to approximate $1 million in 2017.
At December 31, 2016 the fair value of FirstMerit plan assets are as follows:
 Fair Value
(dollar amounts in thousands)2016
Cash equivalents:   
Federated-money market$5,431
 6%
Fixed income:   
Corporate obligations5,375
 6
U.S. Government Obligations6,466
 7
Mutual funds-fixed income23,317
 24
U.S. Government Agencies2,801
 3
Equities:   
Mutual funds-equities15,395
 16
Common stock36,787
 38
Fair value of plan assets$95,572
 100%
At December 31, 2016, the following table shows when benefit payments were expected to be paid:

(dollar amounts in thousands)
Pension
Benefits
 
Post-
Retirement
Benefits
2017$8,673
 $904
20184,471
 841
20194,811
 220
20204,926
 221
20214,945
 222
2022 through 202626,853
 1,150

17. INCOME TAXES
The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state, city, and foreign jurisdictions. Federal income tax audits have been completed through 2009. The IRS is currently examining our 2010 and 2011 consolidated federal income tax returns. Various state and other jurisdictions remain open to examination, including Ohio, Kentucky, Indiana, Michigan, Pennsylvania, West Virginia, Wisconsin, and Illinois.
Huntington accounts for uncertainties in income taxes in accordance with ASC 740, Income Taxes. At December 31, 2016, Huntington had gross unrecognized tax benefits of $24 million in income tax liability related to uncertain tax positions. Due to the complexities of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the current estimate of the tax liabilities. Huntington does not anticipate the total amount of gross unrecognized tax benefits to significantly change within the next 12 months.
The following table provides a reconciliation of the beginning and ending amounts of gross unrecognized tax benefits:
(dollar amounts in thousands)2016 2015
Unrecognized tax benefits at beginning of year$23,104
 $1,172
Gross increases for tax positions taken during current period657
 23,104
Gross increases for tax positions taken during prior years
 
Gross decreases for tax positions taken during prior years
 (1,172)
Unrecognized tax benefits at end of year$23,761
 $23,104
Any interest and penalties on income tax assessments or income tax refunds are recognized in the Consolidated Statements of Income as a component of provision for income taxes. Huntington recognized, no interest expense, $0.1 million of interest benefit, and $0.1 million of interest expense for the years ended December 31, 2016, 2015 and 2014, respectively. Total interest accrued was $0.1 million and $0.1 million at December 31, 2016 and 2015, respectively. All of the gross unrecognized tax benefits would impact the Company’s effective tax rate if recognized.
The following is a summary of the provision (benefit) for income taxes:
 Year Ended December 31,
(dollar amounts in thousands)2016 2015 2014
Current tax provision (benefit)     
Federal$39,738
 $146,195
 $186,436
State3,456
 5,677
 (1,017)
Total current tax provision (benefit)43,194
 151,872
 185,419
Deferred tax provision (benefit)     
Federal160,610
 66,823
 41,167
State4,137
 1,953
 (5,993)
Total deferred tax provision (benefit)164,747
 68,776
 35,174
Provision for income taxes$207,941
 $220,648
 $220,593
The following is a reconciliation for provision for income taxes:

 Year Ended December 31,
(dollar amounts in thousands)2016 2015 2014
Provision for income taxes computed at the statutory rate$321,925
 $319,762
 $298,545
Increases (decreases):     
Tax-exempt income(27,453) (20,839) (17,971)
Tax-exempt bank owned life insurance income(20,149) (18,340) (19,967)
General business credits(64,151) (47,894) (46,047)
State deferred tax asset valuation allowance adjustment, net
 
 (7,430)
Capital loss(45,500) (46,288) (26,948)
Affordable housing investment amortization, net of tax benefits36,848
 31,741
 33,752
State income taxes, net4,936
 4,960
 2,873
Other1,485
 (2,454) 3,786
Provision for income taxes$207,941
 $220,648
 $220,593
The significant components of deferred tax assets and liabilities at December 31, were as follows:
 At December 31,
(dollar amounts in thousands)2016 2015
Deferred tax assets:   
Allowances for credit losses$254,977
 $238,415
Fair value adjustments216,768
 121,642
Net operating and other loss carryforward140,842
 61,492
Tax credit carryforward76,328
 1,823
Accrued expense/prepaid64,380
 44,733
Pension and other employee benefits34,921
 2,405
Partnership investments22,514
 21,614
Market discount8,295
 11,781
Purchase accounting adjustments
 41,917
Other10,506
 11,645
Total deferred tax assets829,531
 557,467
Deferred tax liabilities:   
Lease financing325,091
 261,078
Loan origination costs137,577
 114,488
Purchase accounting adjustments74,371
 6,944
Securities adjustments55,786
 19,952
Operating assets54,372
 46,685
Mortgage servicing rights51,440
 48,514
Pension and other employee benefits
 
Other8,796
 5,463
Total deferred tax liabilities707,433
 503,124
Net deferred tax asset before valuation allowance122,098
 54,343
Valuation allowance(5,003) (3,620)
Net deferred tax asset$117,095
 $50,723
At December 31, 2016, Huntington’s net deferred tax asset related to loss and other carryforwards was $217 million. This was comprised of federal net operating loss carryforwards of $97 million, which will begin expiring in 2023, $44 million of state net operating loss carryforwards, which will begin expiring in 2017, an alternative minimum tax credit carryforward of $73 million, which may be carried forward indefinitely, and a general business credit carryforward of $3 million, which will begin expiring in 2030.
In prior periods, Huntington established a valuation allowance against deferred tax assets for state deferred tax assets, and state net operating loss carryforwards. The state valuation allowance was based on the uncertainty of forecasted state taxable income

expected in applicable jurisdictions in order to utilize the state deferred tax assets and state net operating loss carryforwards. Based on current analysis of both positive and negative evidence and projected forecasted taxable income within applicable jurisdictions, the Company believes that it is more likely than not, portions of the state deferred tax assets and state net operating loss carryforwards will be realized. As a result of this analysis, the state valuation allowance was $5 million at December 31, 2016 compared to $4 million at December 31, 2015.
At December 31, 2016 retained earnings included approximately $12 million of base year reserves of acquired thrift institutions, for which no deferred federal income tax liability has been recognized. Under current law, if these bad debt reserves are used for purposes other than to absorb bad debt losses, they will be subject to federal income tax at the current corporate rate. The amount of unrecognized deferred tax liability relating to the cumulative bad debt deduction was approximately $4 million at December 31, 2016.
18. FAIR VALUES OF ASSETS AND LIABILITIES

Following is a description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy.

Mortgage loans

Loans held for sale

Huntington has elected to apply the fair value option for mortgage loans originated with the intent to sell which are included in loans held for sale. Mortgage loans held for sale are classified as Level 2 and are estimated using security prices for similar product types.

Loans held for investment
Certain mortgage loans originated with the intent to sell have been reclassified to mortgage loans held for investment. These loans continue to be measured at fair value. The fair value is determined using fair value of similar mortgage-backed securities adjusted for loan specific variables.
Huntington elected the fair value option for consumer loans with deteriorated credit quality acquired from FirstMerit in accordance with ASC 825. Management decided to elect the fair value option on these consumer loans to allow for operational efficiencies not normally associated with purchased credit impaired loans. The consumer loans are classified as Level 3. The key assumption used to determine the fair value of the consumer loans is discounted cash flows.
Available-for-sale securities and trading account securities

Securities accounted for at fair value include both the available-for-sale and trading portfolios. Huntington uses prices obtained from third partythird-party pricing services and recent trades to determine the fair value of securities. AFS and trading securities are classified as Level 1 using quoted market prices (unadjusted) in active markets for identical securities that Huntington has the ability to access at the measurement date. Less than 1% of the positions in these portfolios are Level 1, and consist of U.S. Treasury securities and money market mutual funds. When quoted market prices are not available, fair values are classified as Level 2 using quoted prices for similar assets in active markets, quoted prices of identical or similar assets in markets that are not active, and inputs that are observable for the asset, either directly or indirectly, for substantially the full term of the financial instrument. 83%81% of the positions in these portfolios are Level 2, and consist of U.S. Government and agency debt securities, agency mortgage backed securities, asset-backed securities other than the CDO-preferred securities portfolio, certain municipal securities and other securities. For both Level 1 and Level 2 securities management uses various methods and techniques to corroborate prices obtained from the pricing service, including referencereferences to dealer or other market quotes, and by reviewing valuations of comparable instruments. If relevant market prices are limited or unavailable, valuations may require significant management judgment or estimation to determine fair value, in which case the fair values are classified as Level 3. 17%19% of our positions are Level 3, and consist of non-agency Alt-A asset-backed securities, private-label CMO securities, CDO-preferred securities and municipal securities. A significant change in the unobservable inputs for these securities may result in a significant change in the ending fair value measurement of these securities.

The Alt-A, private label CMOmunicipal securities portion that is classified as Level 3 uses significant estimates to determine the fair value of these securities which results in greater subjectivity. The fair value is determined by utilizing third-party valuation services. The third-party service provider reviews credit worthiness, prevailing market rates, analysis of similar securities, and projected cash flows. The third-party service provider also incorporates industry and general economic conditions into their analysis. Huntington evaluates the analysis provided for reasonableness.
The CDO-preferred securities portfolios are classified as Level 3 and as such use significant estimates to determine the fair value of these securities which results in greater subjectivity. The Alt-A and private label CMOCDO-preferred securities portfoliosportfolio are subjected to a monthlyquarterly review of the projected cash flows, while the cash flows of the CDO-preferred securities portfolio are reviewed quarterly.flows. These reviews are supported with analysis from independent third parties, and are used as a basis for impairment analysis.

Alt-A mortgage-backed and private-label CMO securities are collateralized by first-lien residential mortgage loans. The securities valuation methodology incorporates values obtained from a third-party pricing specialist using a discounted cash flow approach and a proprietary pricing model and includes assumptions management believes market participants would use to value the securities under

current market conditions. The model uses inputs such as estimated prepayment speeds, losses, recoveries, default rates that are implied by the underlying performance of collateral in the structure or similar structures, house price depreciation / appreciation rates that are based upon macroeconomic forecasts and discount rates that are implied by market prices for similar securities with similar collateral structures. The remaining Alt-A mortgage-backed securities were sold during the third quarter of 2014.


CDO-preferred securities are CDOs backed by a pool of debt securities issued by financial institutions. The collateral generally consists of trust-preferred securities and subordinated debt securities issued by banks, bank holding companies, and insurance companies. A full cash flow analysis is used to estimate fair values and assess impairment for each security within this portfolio. We engage a third-party pricing specialist with direct industry experience in CDO-preferred securities valuations to provide assistance in estimating the fair value and expected cash flows for each security in this portfolio. The PD of each issuer and the market discount rate are the most significant inputs in determining fair value. ManagementThe Company evaluates the PD assumptions provided by the third-party pricing specialist by comparing the current PD to the assumptions used the previous quarter, actual defaults and deferrals in the current period, and trend data on certain financial ratios of the issuers. Huntington also evaluates the assumptions related to discount rates. Relying on cash flows is necessary because there was a lack of observable transactions in the market and many of the original sponsors or dealers for these securities are no longer able to provide a fair value.

Huntington utilizes the same processes to determine the fair value of investment securities classified as held-to-maturity for impairment evaluation purposes.

Automobile loans

Effective January 1, 2010, Huntington consolidated an automobile loan securitization that previously had been accounted for as an off-balance sheet transaction. As a result, Huntington elected to account for these automobile loan receivables at fair value per guidance supplied in ASC 825. The automobile loan receivables are classified as Level 3. The key assumptions used to determine the fair value of the automobile loan receivables included projections of expected losses and prepayment of the underlying loans in the portfolio and a market assumption of interest rate spreads. Certain interest rates are available from similarly traded securities while other interest rates are developed internally based on similar asset-backed security transactions in the market. During the first quarter of 2014 Huntington cancelled the 2009 and 2006 Automobile Trust. Huntington continues to report the associated automobile loan receivables at fair value due to its 2010 election.

MSRs

MSRs do not trade in an active market with readily observable prices. Accordingly, the fair value of these assets is classified as Level 3. Huntington determines the fair value of MSRs using an income approach model based upon ourthe month-end interest rate curve and prepayment assumptions. The model utilizes assumptions to estimate future net servicing income cash flows, including estimates of time decay, payoffs, and changes in valuation inputs and assumptions. Servicing brokers and other sources of information (e.g. discussion with other mortgage servicers and industry surveys) are used to obtain information on market practice and assumptions. On at least a quarterly basis, third partythird-party marks are obtained from at least one serviceservicing broker. Huntington reviews the valuation assumptions against this market data for reasonableness and adjusts the assumptions if deemed appropriate. Any recommended change in assumptions and / and/or inputs are presented for review to the Mortgage Price Risk Subcommittee for final approval.

Derivatives

Derivative assets and liabilities
Derivatives classified as Level 2 consist of foreign exchange and commodity contracts, which are valued using exchange traded swaps and futures market data. In addition, Level 2 includes interest rate contracts, which are valued using a discounted cash flow method that incorporates current market interest rates. Level 2 also includes exchange traded options and forward commitments to deliver mortgage-backed securities, which are valued using quoted prices.

Derivatives classified as Level 3 consist primarily of interest rate lock agreements related to mortgage loan commitments. The determination of fair value includes assumptions related to the likelihood that a commitment will ultimately result in a closed loan, which is a significant unobservable assumption. A significant increase or decrease in the external market price would result in a significantly higher or lower fair value measurement.

Short-term borrowings
Short-term borrowings classified as Level 2 consist primarily of U.S. Treasury bond securities sold under agreement to repurchase. These securities are borrowed from other institutions and must be repaid by purchasing the securities in the open market.

Assets and Liabilities measured at fair value on a recurring basis

Assets and liabilities measured at fair value on a recurring basis at December 31, 20142016 and 20132015 are summarized below:

    Fair Value Measurements at Reporting Date Using   Netting   Balance at 

(dollar amounts in thousands)

  Level 1   Level 2   Level 3   Adjustments (1)   December 31, 2014 

Assets

          

Loans held for sale

  $—      $354,888    $—      $—      $354,888  

Loans held for investment

   —       40,027     —       —       40,027  

Trading account securities:

          

Federal agencies: Mortgage-backed

   —       —       —       —      —    

Federal agencies: Other agencies

   —       2,857     —       —      2,857  

Municipal securities

   —       5,098     —       —      5,098  

Other securities

   33,121     1,115     —       —      34,236  
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

 
   33,121     9,070     —       —      42,191  

Available-for-sale and other securities:

         

U.S. Treasury securities

   5,452     —       —       —      5,452  

Federal agencies: Mortgage-backed

   —       5,322,701     —       —      5,322,701  

Federal agencies: Other agencies

   —       351,543     —       —      351,543  

Municipal securities

   —       450,976     1,417,593     —      1,868,569  

Private-label CMO

   —       11,462     30,464     —      41,926  

Asset-backed securities

   —       873,260     82,738     —      955,998  

Corporate debt

   —       486,176     —       —      486,176  

Other securities

   17,430     3,316     —       —      20,746  
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

 
   22,882     7,499,434     1,530,795     —      9,053,111  

Automobile loans

   —       —       10,590     —      10,590  

MSRs

   —       —       22,786     —      22,786  

Derivative assets

   —       449,775     4,064     (101,197  352,642  

Liabilities

         

Derivative liabilities

   —       335,524     704     (51,973  284,255  

Short-term borrowings

   —       2,295     —       —      2,295  
    Fair Value Measurements at Reporting Date Using   Netting  Balance at 

(dollar amounts in thousands)

  Level 1   Level 2   Level 3   Adjustments (1)  December 31, 2013 
         

Assets

         

Mortgage loans held for sale

  $—      $278,928    $—      $—     $278,928  

Trading account securities:

         

Federal agencies: Mortgage-backed

   —       —       —       —      —    

Federal agencies: Other agencies

   —       834     —       —      834  

Municipal securities

   —       2,180     —       —      2,180  

Other securities

   32,081     478     —       —      32,559  
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

 
   32,081     3,492     —       —      35,573  

Available-for-sale and other securities:

         

U.S. Treasury securities

   51,604     —       —       —      51,604  

Federal agencies: Mortgage-backed (2)

   —       3,566,221     —       —      3,566,221  

Federal agencies: Other agencies

   —       319,888     —       —      319,888  

Municipal securities

   —       491,455     654,537     —      1,145,992  

Private-label CMO

   —       16,964     32,140     —      49,104  

Asset-backed securities

   —       983,621     107,419     —      1,091,040  

Covered bonds

   —       285,874     —       —      285,874  

Corporate debt

   —       457,240     —       —      457,240  

Other securities

   16,971     3,828     —       —      20,799  
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

 
   68,575     6,125,091     794,096     —      6,987,762  

Automobile loans

   —       —       52,286     —      52,286  

MSRs

   —       —       34,236     —      34,236  

Derivative assets

   36,774     219,045     3,066     (58,856  200,029  

Liabilities

         

Derivative liabilities

   22,787     124,123     676     (18,312  129,274  

Short-term borrowings

   —       1,089     —       —      1,089  


 Fair Value Measurements at Reporting Date Using Netting Adjustments (1) December 31, 2016
(dollar amounts in thousands)Level 1 Level 2 Level 3  
Assets         
Loans held for sale$
 $438,224
 $
 $
 $438,224
Loans held for investment
 34,439
 47,880
 
 82,319
Trading account securities:         
Municipal securities
 1,148
 
 
 1,148
Other securities132,147
 
 
 
 132,147
 132,147
 1,148
 
 
 133,295
Available-for-sale and other securities:         
U.S. Treasury securities5,497
 
 
 
 5,497
Federal agencies: Mortgage-backed
 10,673,342
 
 
 10,673,342
Federal agencies: Other agencies
 73,542
 
 
 73,542
Municipal securities
 452,013
 2,798,044
 
 3,250,057
Asset-backed securities
 717,478
 76,003
 
 793,481
Corporate debt
 198,683
 
 
 198,683
Other securities16,588
 3,943
 
 
 20,531
 22,085
 12,119,001
 2,874,047
 
 15,015,133
MSRs
 
 13,747
 
 13,747
Derivative assets
 414,412
 5,747
 (181,940) 238,219
Liabilities         
Derivative liabilities
 362,777
 7,870
 (272,361) 98,286
Short-term borrowings474
 
 
 
 474

 Fair Value Measurements at Reporting Date Using Netting Adjustments (1) December 31, 2015
(dollar amounts in thousands)Level 1 Level 2 Level 3  
Assets         
Loans held for sale$
 $337,577
 $
 $
 $337,577
Loans held for investment
 32,889
 1,748
 
 34,637
Trading account securities:         
Municipal securities
 4,159
 
 
 4,159
Other securities32,475
 363
 
 
 32,838
 32,475
 4,522
 
 
 36,997
Available-for-sale and other securities:         
U.S. Treasury securities5,472
 
 
 
 5,472
Federal agencies: Mortgage-backed
 4,521,688
 
 
 4,521,688
Federal agencies: Other agencies
 115,913
 
 
 115,913
Municipal securities
 360,845
 2,095,551
 
 2,456,396
Asset-backed securities
 761,076
 100,337
 
 861,413
Corporate debt
 466,477
 
 
 466,477
Other securities11,397
 3,899
 
 
 15,296
 16,869
 6,229,898
 2,195,888
 
 8,442,655
MSRs
 
 17,585
 
 17,585
Derivative assets
 429,448
 6,721
 (161,297) 274,872
Liabilities         
Derivative liabilities
 287,994
 665
 (144,309) 144,350
Short-term borrowings
 1,770
 
 
 1,770
(1)Amounts represent the impact of legally enforceable master netting agreements that allow the Company to settle positive and negative positions and cash collateral held or placed with the same counterparties.
(2)During 2013, Huntington transferred $292.2 million of federal agencies: mortgage-backed securities from the available-for-sale securities portfolio to the held-to-maturity securities portfolio. These securities are valued at amortized cost and no longer classified within the fair value hierarchy. All securities were previously classified as Level 2 in the fair value hierarchy.

The tables below present a rollforward of the balance sheet amounts for the years ended December 31, 2014, 2013,2016, 2015, and 20122014 for financial instruments measured on a recurring basis and classified as Level 3. The classification of an item as Level 3 is based on the significance of the unobservable inputs to the overall fair value measurement. However, Level 3 measurements may also include observable components of value that can be validated externally. Accordingly, the gains and losses in the table below include changes in fair value due in part to observable factors that are part of the valuation methodology:

   Level 3 Fair Value Measurements
Year ended December 31, 2014
 
         Available-for-sale securities    

(dollar amounts in thousands)

  MSRs  Derivative
instruments
  Municipal
securities
  Private-
label CMO
  Asset-
backed
securities
  Automobile
loans
 

Balance, beginning of year

  $34,236   $2,390   $654,537   $32,140   $107,419   $52,286  

Total gains / losses:

       

Included in earnings

   (11,450  3,047    —      36    226    (918

Included in OCI

   —      —      14,776    452    21,839    —    

Purchases

   —      —      1,038,348    —      —      —    

Sales

   —      —      —      —      (22,870  —    

Repayments

   —      —      —      —      —      (40,778

Settlements

   —      (2,077  (290,068  (2,164  (23,876  —    
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance, end of year

  $22,786   $3,360   $1,417,593   $30,464   $82,738   $10,590  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Change in unrealized gains or losses for the period included in earnings (or changes in net assets) for assets held at end of the reporting date

  $(11,450 $3,047   $14,776   $452   $21,137   $(1,624
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
   Level 3 Fair Value Measurements
Year ended December 31, 2013
 
         Available-for-sale securities    

(dollar amounts in thousands)

  MSRs  Derivative
instruments
  Municipal
securities
  Private
label CMO
  Asset-
backed
securities
  Automobile
loans
 

Balance, beginning of year

  $35,202   $12,702   $61,228   $48,775   $110,037   $142,762  

Total gains / losses:

       

Included in earnings

   (966  (5,944  2,129    (180  (2,244  (358

Included in OCI

   —      —      9,075    1,703    35,139    —    

Other (1)

   —      —      600,435    —      —      —    

Sales

   —      —      —      (10,254  (16,711  —    

Repayments

   —      —      —      —      —      (90,118

Settlements

   —      (4,368  (18,330  (7,904  (18,802  —    
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance, end of year

  $34,236   $2,390   $654,537   $32,140   $107,419   $52,286  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Change in unrealized gains or losses for the period included in earnings (or changes in net assets) for assets held at end of the reporting date

  $(966 $(5,944 $9,075   $1,703   $35,139   $(358
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

   Level 3 Fair Value Measurements 
   Year ended December 31, 2012 
         Available-for-sale securities    

(dollar amounts in thousands)

  MSRs  Derivative
instruments
  Municipal
securities
  Private
label CMO
  Asset-
backed
securities
  Automobile
loans
 

Balance, beginning of year

  $65,001   $(169 $95,092   $72,364   $121,698   $296,250  

Total gains / losses:

       

Included in earnings

   (29,799  10,617    —      (796  (59  (1,230

Included in OCI

   —      —      (1,637  8,245    23,138    —    

Sales

   —      —      (3,040  (15,183  (20,852  —    

Repayments

   —      —      —      —      —      (152,258

Settlements

   —      2,254    (29,187  (15,855  (13,888  —    
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance, end of year

  $35,202   $12,702   $61,228   $48,775   $110,037   $142,762  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Change in unrealized gains or losses for the period included in earnings (or changes in net assets) for assets held at end of the reporting date

  $(29,799 $5,818   $(1,637 $8,245   $23,138   $(1,230
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

(1)Effective December 31, 2013 approximately $600.4 million of direct purchase municipal instruments were reclassified from C&I loans to available-for-sale securities.

methodology.


 Level 3 Fair Value Measurements
Year ended December 31, 2016
     Available-for-sale securities  
(dollar amounts in thousands)MSRs 
Derivative
instruments
 
Municipal
securities
 
Asset-
backed
securities
 Loans held for investment
Opening balance$17,585
 $6,056
 $2,095,551
 $100,337
 $1,748
Transfers into Level 3
 
 
 
 
Transfers out of Level 3 (1)
 (7,251) 
 
 
Total gains/losses for the period:         
Included in earnings(3,838) (928) 7,049
 (2,593) (2,353)
Included in OCI
 
 (28,270) 6,448
 
Purchases/originations
 
 1,399,394
 
 56,469
Sales
 
 (37,444) (25,196) 
Repayments
 
 
 
 (7,984)
Settlements
 
 (638,236) (2,993) 
Closing balance$13,747
 $(2,123) $2,798,044
 $76,003
 $47,880
Change in unrealized gains or losses for the period included in earnings (or changes in net assets) for assets held at end of the reporting date$(3,838) $(928) $(33,415) $3,722
 $
(1) Transfers out of Level 3 represent the settlement value of the derivative instruments (i.e. interest rate lock agreements) that is transferred to loans held for sale, which is classified as Level 2.
 Level 3 Fair Value Measurements
Year ended December 31, 2015
     Available-for-sale securities  
(dollar amounts in thousands)MSRs 
Derivative
instruments
 
Municipal
securities
 
Private-
label
CMO
 
Asset-
backed
securities
 Loans held for investment
Opening balance$22,786
 $3,360
 $1,417,593
 $30,464
 $82,738
 $10,590
Transfers into Level 3
 
 
 
 
 
Transfers out of Level 3
 (2,793) 
 
 
 
Total gains/losses for the period:           
Included in earnings(5,201) 5,489
 149
 47
 (2,400) (497)
Included in OCI
 
 (3,652) 1,832
 24,802
 
Purchases/originations
 
 1,002,153
 
 
 
Sales
 
 (9,656) (30,077) 
 
Repayments
 
 
 
 
 (8,345)
Settlements
 
 (311,036) (2,266) (4,803) 
Closing balance$17,585
 $6,056
 $2,095,551
 $
 $100,337
 $1,748
Change in unrealized gains or losses for the period included in earnings (or changes in net assets) for assets held at end of the reporting date$(5,201) $5,489
 $
 $
 $(2,440) $(497)


 Level 3 Fair Value Measurements
Year Ended December 31, 2014
     Available-for-sale securities  
(dollar amounts in thousands)MSRs 
Derivative
instruments
 
Municipal
securities
 
Private
label CMO
 
Asset-
backed
securities
 Loans held for investment
Balance, beginning of year$34,236
 $2,390
 $654,537
 $32,140
 $107,419
 $52,286
Transfers into Level 3
 
 
 
 
 
Transfers out of Level 3
 
 
 
 
 
Total gains/losses for the period:           
Included in earnings(11,450) 3,047
 
 36
 226
 (918)
Included in OCI
 
 14,776
 452
 21,839
 
Purchases/originations
 
 1,038,348
 
 
 
Sales
 
 
 
 (22,870) 
Repayments
 
 
 
 
 (40,778)
Settlements
 (2,077) (290,068) (2,164) (23,876) 
Balance, end of year$22,786
 $3,360
 $1,417,593
 $30,464
 $82,738
 $10,590
Change in unrealized gains or losses for the period included in earnings (or changes in net assets) for assets held at end of the reporting date$(11,450) $3,047
 $14,776
 $452
 $21,137
 $(1,624)
The tables below summarize the classification of gains and losses due to changes in fair value, recorded in earnings for Level 3 assets and liabilities for the years ended December 31, 2014, 2013,2016, 2015, and 2012:

   Level 3 Fair Value Measurements 
   Year ended December 31, 2014 
         Available-for-sale securities    

(dollar amounts in thousands)

  MSRs  Derivative
instruments
  Municipal
securities
   Private
label CMO
  Asset-
backed
securities
  Automobile
loans
 

Classification of gains and losses in earnings:

        

Mortgage banking income (loss)

  $(11,450 $3,047   $—      $—     $—     $—    

Securities gains (losses)

   —      —      —       —      170    —    

Interest and fee income

   —      —      —       36    56    (1,032

Noninterest income

   —      —      —       —      —      114  
  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 

Total

  $(11,450 $3,047   $—      $36   $226   $(918
  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 
   Level 3 Fair Value Measurements 
   Year ended December 31, 2013 
         Available-for-sale securities    

(dollar amounts in thousands)

  MSRs  Derivative
instruments
  Municipal
securities
   Private
label CMO
  Asset-
backed
securities
  Automobile
loans
 

Classification of gains and losses in earnings:

        

Mortgage banking income (loss)

  $(966 $(5,944 $—      $—     $—     $—    

Securities gains (losses)

   —      —      —       (336  (1,466  —    

Interest and fee income

   —      —      2,129     156    (778  (3,569

Noninterest income

   —      —      —       —      —      3,211  
  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 

Total

  $(966 $(5,944 $2,129    $(180 $(2,244 $(358
  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 

   Level 3 Fair Value Measurements 
   Year ended December 31, 2012 
          Available-for-sale securities    

(dollar amounts in thousands)

  MSRs  Derivative
instruments
   Municipal
securities
   Private
label
CMO
  Asset-
backed
securities
  Automobile
loans
 

Classification of gains and losses in earnings:

         

Mortgage banking income (loss)

  $(29,799 $10,617    $—      $—     $—     $—    

Securities gains (losses)

   —      —       —       (1,614  —      —    

Interest and fee income

   —      —       —       818    (59  (6,950

Noninterest income

   —      —       —       —      —      5,720  
  

 

 

  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Total

  $(29,799 $10,617    $—      $(796 $(59 $(1,230
  

 

 

  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

2014:

 Level 3 Fair Value Measurements
Year ended December 31, 2016
     Available-for-sale securities  
(dollar amounts in thousands)MSRs 
Derivative
instruments
 
Municipal
securities
 
Asset-
backed
securities
 Loans held for investment
Classification of gains and losses in earnings:         
Mortgage banking income$(3,838) $(928) $
 $
 $
Securities gains (losses)
 
 788
 (2,598) 
Interest and fee income
 
 
 
 
Noninterest income
 
 6,261
 5
 (2,353)
Total$(3,838) $(928) $7,049
 $(2,593) $(2,353)
 Level 3 Fair Value Measurements
Year ended December 31, 2015
     Available-for-sale securities  
(dollar amounts in thousands)MSRs 
Derivative
instruments
 
Municipal
securities
 
Private-
label CMO
 
Asset-
backed
securities
 Loans held for investment
Classification of gains and losses in earnings:           
Mortgage banking income$(5,201) $5,489
 $
 $
 $
 $
Securities gains (losses)
 
 149
 
 (2,440) 
Interest and fee income
 
 
 47
 40
 (497)
Noninterest income
 
 
 
 
 
Total$(5,201) $5,489
 $149
 $47
 $(2,400) $(497)


 Level 3 Fair Value Measurements
Year Ended December 31, 2014
     Available-for-sale securities  
(dollar amounts in thousands)MSRs 
Derivative
instruments
 
Municipal
securities
 
Private
label
CMO
 
Asset-
backed
securities
 Loans held for investment
Classification of gains and losses in earnings:           
Mortgage banking income (loss)$(11,450) $3,047
 $
 $
 $
 $
Securities gains (losses)
 
 
 
 170
 
Interest and fee income
 
 
 36
 56
 (1,032)
Noninterest income
 
 
 
 
 114
Total$(11,450) $3,047
 $
 $36
 $226
 $(918)
Assets and liabilities under the fair value option

The following table presents the fair value and aggregate principal balance of certain assets and liabilities under the fair value option:

   December 31, 2014  December 31, 2013 

(dollar amounts in thousands)

  Fair value
carrying
amount
   Aggregate
unpaid
principal
   Difference  Fair value
carrying
amount
   Aggregate
unpaid
principal
   Difference 

Assets

           

Loans held for sale

  $354,888    $340,070    $14,818   $278,928    $276,945    $1,983  

Loans held for investment

   40,027     40,938     (911  —       —       —    

Automobile loans

   10,590     10,022     568    52,286     50,800     1,486  

 December 31, 2016
 Total Loans Loans that are 90 or more days past due
(dollar amounts in thousands)Fair value
carrying
amount
 Aggregate
unpaid
principal
 Difference Fair value
carrying
amount
 Aggregate
unpaid
principal
 Difference
Assets           
Loans held for sale$438,224
 $433,760
 $4,464
 $
 $
 $
Loans held for investment82,319
 91,998
 (9,679) 8,408
 11,082
 (2,674)
 December 31, 2015
 Total Loans Loans that are 90 or more days past due
(dollar amounts in thousands)Fair value
carrying
amount
 Aggregate
unpaid
principal
 Difference Fair value
carrying
amount
 Aggregate
unpaid
principal
 Difference
Assets           
Loans held for sale$337,577
 $326,802
 $10,775
 $1,268
 $1,294
 $(26)
Loans held for investment34,637
 35,385
 $(748) 428
 497
 $(69)
The following tables present the net gains (losses) from fair value changes, including net gains (losses) associated with instrument specific credit risk for the years ended December 31, 2014, 20132016, 2015, and 2012:

   Net gains (losses) from fair value
changes Year ended December 31,
 

(dollar amounts in thousands)

  2014   2013   2012 

Assets

      

Mortgage loans held for sale

  $(1,978  $(12,711  $4,284  

Automobile loans

   (918   (360   (1,231

Liabilities

      

Securitization trust notes payable

   —       —       (2,023

   Gains (losses) included in fair value changes
associated with instrument specific credit  risk
 
   Year ended December 31, 

(dollar amounts in thousands)

  2014   2013   2012 

Assets

      

Automobile loans

  $911    $2,207    $2,749  

2014:

 
Net gains (losses) from fair value
changes Year ended December 31,
(dollar amounts in thousands)2016 2015 2014
Assets     
Loans held for sale$6,741
 $(2,342) $(1,978)
Loans held for investment
 (568) (918)
 
Gains (losses) included in fair value changes
associated with instrument specific credit  risk
Year ended December 31,
(dollar amounts in thousands)2016 2015 2014
Assets     
Loans held for investment$436
 $199
 $911

Assets and Liabilities measured at fair value on a nonrecurring basis

Certain assets and liabilities may be required to be measured at fair value on a nonrecurring basis in periods subsequent to their initial recognition. These assets and liabilities are not measured at fair value on an ongoing basis; however, they are subject to fair value adjustments in certain circumstances, such as when there is evidence of impairment. For the year ended December 31, 2014,2016, assets measured at fair value on a nonrecurring basis were as follows:

       Fair Value Measurements Using 

(dollar amounts in thousands)

  Fair Value at
December 31,
   Quoted Prices
In Active
Markets for
Identical Assets
(Level 1)
   Significant
Other
Observable
Inputs
(Level 2)
   Significant
Other
Unobservable
Inputs
(Level 3)
   Total
Gains/(Losses)
For the

Year Ended
December 31,
 

2014

          

Impaired loans

  $52,911    $—      $—      $52,911    $(53,660

Other real estate owned

   35,039     —       —       35,039    $(4,021

   Fair Value Measurements Using  
(dollar amounts in thousands)Fair Value 
Quoted Prices
In Active
Markets for
Identical Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Other
Unobservable
Inputs
(Level 3)
 Total
Gains/(Losses)
Year ended
December 31, 2016
MSRs$171,309
 $
 $
 $171,309
 $1,918
Impaired loans53,818
 
 
 53,818
 11,412
Other real estate owned50,930
 
 
 50,930
 (620)
MSRs accounted for under the amortization method are subject to nonrecurring fair value measurement when the fair value is lower than the carrying amount.
Periodically, Huntington records nonrecurring adjustments of collateral-dependent loans measured for impairment when establishing the ACL. Such amounts are generally based on the fair value of the underlying collateral supporting the loan. Appraisals are generally obtained to support the fair value of the collateral and incorporate measures such as recent sales prices for comparable properties and cost of construction. In cases where the carrying value exceeds the fair value of the collateral less cost to sell, an impairment charge is recognized. Appraisals are reviewed and approved by Huntington.

Other real estate owned properties are included in accrued income and other assets and valued based on appraisals and third partythird-party price opinions, less estimated selling costs.

The appraisals supporting the fair value of the collateral to recognize loan impairment or unrealized loss on other real estate owned properties may not have been obtained as of December 31, 2016.
Significant unobservable inputs for assets and liabilities measured at fair value on a recurring and nonrecurring basis

The table below presents quantitative information about the significant unobservable inputs for assets and liabilities measured at fair value on a recurring and nonrecurring basis at December 31, 2014:

Quantitative Information about Level 3 Fair Value Measurements
   Fair Value at   Valuation   Significant  Range

(dollar amounts in thousands)

  December 31, 2014   Technique   

Unobservable Input

  

(Weighted Average)

MSRs

  $22,786     Discounted cash flow    Constant prepayment rate (CPR)  7%  –  26%(16%)
      Spread over forward interest rate swap rates  228  –  900(546)
      Net costs to service  $21  –  $79($40)
  

 

 

   

 

 

   

 

  

 

Derivative assets

   4,064     Consensus Pricing    Net market price  -5.09%  –  17.46%(1.7%)

Derivative liabilities

   704      Estimated Pull thru %  38%  –   91%(75%)
  

 

 

   

 

 

   

 

  

 

Municipal securities

   1,417,593     Discounted cash flow    Discount rate  0.5%  –  4.9%(2.5%)
  

 

 

   

 

 

   

 

  

 

Private-label CMO

   30,464     Discounted cash flow    Discount rate  2.7%  –  7.2%(6.0%)
      Constant prepayment rate (CPR)  13.6%  –  32.6%(20.7%)
      Probability of default  0.1%  –  4.0%(0.7%)
      Loss Severity  0.0%  –  64.0%(33.9%)
  

 

 

   

 

 

   

 

  

 

Asset-backed securities

   82,738     Discounted cash flow    Discount rate  4.3%  –  13.3%(7.3%)
      Cumulative prepayment rate  0.0%  –  100%(10.1%)
      Cumulative default  1.9%  –  100%(15.9%)
      Loss given default  20%  –  100%(94.4%)
      Cure given deferral  0.0%  –  75%(32.6%)
  

 

 

   

 

 

   

 

  

 

Automobile loans

   10,590     Discounted cash flow    Constant prepayment rate (CPR)  154.2%
      Discount rate  0.2%  –  5.0%(2.3%)
      Life of pool cumulative losses  2.1%
  

 

 

   

 

 

   

 

  

 

Impaired loans

   52,911     Appraisal value    NA  NA
  

 

 

   

 

 

   

 

  

 

Other real estate owned

   35,039     Appraisal value    NA  NA
  

 

 

   

 

 

   

 

  

 

2016:


 Quantitative Information about Level 3 Fair Value Measurements at December 31, 2016
(dollar amounts in thousands)Fair Value Valuation Technique Significant Unobservable Input Range (Weighted Average)
Measured at fair value on a recurring basis:    
MSRs$13,747
 Discounted cash flow Constant prepayment rate 5.63% - 34.4% (10.9%)
     Spread over forward interest rate
swap rates
 3.0% - 9.2% (5.4%)
Derivative assets5,747
 Consensus Pricing Net market price -7.1% - 25.4% (1.1%)
Derivative liabilities7,870
   Estimated Pull through % 8.1% - 99.8% (76.9%)
Municipal securities2,798,044
 Discounted cash flow Discount rate 0.0% - 10.0% (3.6%)
     Cumulative default 0.3% - 37.8% (4.0%)
     Loss given default 5.0% - 80.0% (24.1%)
Asset-backed securities76,003
 Discounted cash flow Discount rate 5.0% - 12.0% (6.3%)
     Cumulative prepayment rate 0.0% - 73% (6.5%)
     Cumulative default 1.1% - 100% (11.2%)
     Loss given default 85% - 100% (96.3%)
     Cure given deferral 0.0% - 75.0% (36.2%)
Loans held for investment47,880
 Discounted cash flow Discount rate 5.4% - 16.2% (5.6%)
Measured at fair value on a nonrecurring basis:    
MSRs171,309
 Discounted cash flow Constant prepayment rate 5.57% - 30.4% (7.8%)
     Spread over forward interest rate
swap rates
 4.2% - 20.0% (11.7%)
Impaired loans53,818
 Appraisal value NA NA
Other real estate owned50,930
 Appraisal value NA NA
The following provides a general description of the impact of a change in an unobservable input on the fair value measurement and the interrelationship between unobservable inputs, where relevant/significant. Interrelationships may also exist between observable and unobservable inputs. Such relationships have not been included in the discussion below.

A significant change in the unobservable inputs may result in a significant change in the ending fair value measurement of Level 3 instruments. In general, prepayment rates increase when market interest rates decline and decrease when market interest rates rise and higher prepayment rates generally result in lower fair values for MSR assets, Private-label CMO securities, Asset-backed securities, and Automobile loans.

Credit loss estimates, such as probability of default, constant default, cumulative default, loss given default, cure given deferral, and loss severity, are driven by the ability of the borrowers to pay their loans and the value of the underlying collateral and are

impacted by changes in macroeconomic conditions, typically increasing when economic conditions worsen and decreasing when conditions improve. An increase in the estimated prepayment rate typically results in a decrease in estimated credit losses and vice versa. Higher credit loss estimates generally result in lower fair values. Credit spreads generally increase when liquidity risks and market volatility increase and decrease when liquidity conditions and market volatility improve.

Discount rates and spread over forward interest rate swap rates typically increase when market interest rates increase and/or credit and liquidity risks increase and decrease when market interest rates decline and/or credit and liquidity conditions improve. Higher discount rates and credit spreads generally result in lower fair market values.

Net market price and pull through percentages generally increase when market interest rates increase and decline when market interest rates decline. Higher net market price and pull through percentages generally result in higher fair values.

Fair values of financial instruments

The following table provides the carrying amounts and estimated fair values of Huntington’s financial instruments that are carried either at fair value or cost at December 31, 20142016 and December 31, 2013:

   December 31, 2014   December 31, 2013 
   Carrying   Fair   Carrying   Fair 

(dollar amounts in thousands)

  Amount   Value   Amount   Value 

Financial Assets:

        

Cash and short-term assets

  $1,285,124    $1,285,124    $1,058,175    $1,058,175  

Trading account securities

   42,191     42,191     35,573     35,573  

Loans held for sale

   416,327     416,327     326,212     326,212  

Available-for-sale and other securities

   9,384,670     9,384,670     7,308,753     7,308,753  

Held-to-maturity securities

   3,379,905     3,382,715     3,836,667     3,760,898  

Net loans and direct financing leases

   47,050,530     45,110,406     42,472,630     40,976,014  

Derivatives

   352,642     352,642     200,029     200,029  

Financial Liabilities:

        

Deposits

   51,732,151     52,454,804     47,506,718     48,132,550  

Short-term borrowings

   2,397,101     2,397,101     2,352,143     2,343,552  

Long term debt

   4,335,962     4,286,304     2,458,272     2,424,564  

Derivatives

   284,255     284,255     129,274     129,274  

2015:


 December 31, 2016 December 31, 2015
 Carrying Fair Carrying Fair
(dollar amounts in thousands)Amount Value Amount Value
Financial Assets:       
Cash and short-term assets$1,443,037
 $1,443,037
 $898,994
 $898,994
Trading account securities133,295
 133,295
 36,997
 36,997
Loans held for sale512,951
 515,640
 474,621
 484,511
Available-for-sale and other securities15,562,837
 15,562,837
 8,775,441
 8,775,441
Held-to-maturity securities7,806,939
 7,787,268
 6,159,590
 6,135,458
Net loans and direct financing leases66,323,583
 66,294,639
 49,743,256
 48,024,998
Derivatives238,219
 238,219
 274,872
 274,872
Financial Liabilities:       
Deposits75,607,717
 76,161,091
 55,294,979
 55,299,435
Short-term borrowings3,692,654
 3,692,654
 615,279
 615,279
Long-term debt8,309,159
 8,387,444
 7,041,364
 7,016,789
Derivatives98,286
 98,286
 144,350
 144,350
The following table presents the level in the fair value hierarchy for the estimated fair values of only Huntington’s financial instruments that are not already on the Consolidated Balance Sheets at fair value at December 31, 20142016 and December 31, 2013:

   Estimated Fair Value Measurements at Reporting Date Using   Balance at 

(dollar amounts in thousands)

  Level 1   Level 2   Level 3   December 31, 2014 

Financial Assets

        

Held-to-maturity securities

  $—      $3,382,715    $—      $3,382,715  

Net loans and direct financing leases

   —       —       45,110,406     45,110,406  

Financial liabilities

        

Deposits

   —       48,183,798     4,271,006     52,454,804  

Short-term borrowings

   —       —       2,397,101     2,397,101  

Long-term debt

   —       —       4,286,304     4,286,304  
   Estimated Fair Value Measurements at Reporting Date Using   Balance at 

(dollar amounts in thousands)

  Level 1   Level 2   Level 3   December 31, 2013 

Financial Assets

        

Held-to-maturity securities

  $—      $3,760,898    $—      $3,760,898  

Net loans and direct financing leases

   —       —       40,976,014     40,976,014  

Financial liabilities

        

Deposits

   —       42,279,542     5,853,008     48,132,550  

Short-term borrowings

   —       —       2,343,552     2,343,552  

Long-term debt

   —       —       2,424,564     2,424,564  

2015:

 Estimated Fair Value Measurements at Reporting Date Using December 31, 2016
(dollar amounts in thousands)Level 1 Level 2 Level 3 
Financial Assets       
Held-to-maturity securities$
 $7,787,268
 $
 $7,787,268
Net loans and direct financing leases
 
 66,294,639
 66,294,639
Financial Liabilities       
Deposits
 72,319,328
 3,841,763
 76,161,091
Short-term borrowings474
 
 3,692,180
 3,692,654
Long-term debt
 7,980,176
 407,268
 8,387,444
 Estimated Fair Value Measurements at Reporting Date Using December 31, 2015
(dollar amounts in thousands)Level 1 Level 2 Level 3 
Financial Assets       
Held-to-maturity securities$
 $6,135,458
 $
 $6,135,458
Net loans and direct financing leases
 
 48,024,998
 48,024,998
Financial Liabilities       
Deposits
 51,869,105
 3,430,330
 55,299,435
Short-term borrowings
 1,770
 613,509
 615,279
Long-term debt
 
 7,016,789
 7,016,789
The short-term nature of certain assets and liabilities result in their carrying value approximating fair value. These include trading account securities, customers’ acceptance liabilities, short-term borrowings, bank acceptances outstanding, FHLB advances, and cash and short-term assets, which include cash and due from banks, interest-bearing deposits in banks, and federal funds sold and securities purchased under resale agreements. Loan commitments and letters of creditletters-of-credit generally have short-term, variable-rate features and contain clauses that limit Huntington’s exposure to changes in customer credit quality. Accordingly, their carrying values, which are immaterial at the respective balance sheet dates, are reasonable estimates of fair value. Not all the financial instruments listed in the table above are subject to the disclosure provisions of ASC Topic 820.

Certain assets, the most significant being operating lease assets, bank owned life insurance, and premises and equipment, do not meet the definition of a financial instrument and are excluded from this disclosure. Similarly, mortgage and nonmortgage servicing rights, deposit base, and other customer relationship intangibles are not considered financial instruments and are not included above. Accordingly, this fair value information is not intended to, and does not, represent Huntington’s underlying value. Many of the assets and liabilities subject to the disclosure requirements are not actively traded, requiring fair values to be estimated

by Management. These estimations necessarily involve the use of judgment about a wide variety of factors, including but not limited to, relevancy of market prices of comparable instruments, expected future cash flows, and appropriate discount rates.

The following methods and assumptions were used by Huntington to estimate the fair value of the remaining classes of financial instruments:

Held-to-maturity securities

Fair values are determined by using models that are based on security-specific details, as well as relevant industry and economic factors. The most significant of these inputs are quoted market prices, and interest rate spreads on relevant benchmark securities.

Loans and Direct Financing Leases

Variable-rate loans that reprice frequently are based on carrying amounts, as adjusted for estimated credit losses. The fair values for other loans and leases are estimated using discounted cash flow analyses and employ interest rates currently being offered for loans and leases with similar terms. The rates take into account the position of the yield curve, as well as an adjustment for prepayment risk, operating costs, and profit. This value is also reduced by an estimate of expected losses and the credit risk associated in the loan and lease portfolio. The valuation of the loan portfolio reflected discounts that Huntington believed are consistent with transactions occurring in the market place.

marketplace.

Deposits

Demand deposits, savings accounts, and money market deposits are, by definition, equal to the amount payable on demand. The fair values of fixed-rate time deposits are estimated by discounting cash flows using interest rates currently being offered on certificates with similar maturities.

Debt

Fixed-rate, long-term

Long-term debt is based upon quoted market prices, which are inclusive of Huntington’s credit risk. In the absence of quoted market prices, discounted cash flows using market rates for similar debt with the same maturities are used in the determination of fair value.

18.

19. DERIVATIVE FINANCIAL INSTRUMENTS

Derivative financial instruments are recorded in the Consolidated Balance Sheets as either an asset or a liability (in accrued income and other assets or accrued expenses and other liabilities, respectively) and measured at fair value.

Derivative financial instruments can be designated as accounting hedges under GAAP. Designating a derivative as an accounting hedge allows Huntington to recognize gains and losses, less any ineffectiveness, in the income statement within the same period that the hedged item affects earnings. Gains and losses on derivatives that are not designated to an effective hedge relationship under GAAP immediately impact earnings within the period they occur.
Derivatives used in Asset and Liability Management Activities

Huntington engages in balance sheet hedging activity, principally for asset liability management purposes, to convert fixed rate assets or liabilities into floating rate or vice versa. Balance sheet hedging activity is arranged to receive hedge accounting treatment and is classified as either fair value or cash flow hedges. Fair value hedges are purchased to convert deposits and subordinated and other long-term debt from fixed-rate obligations to floating rate. Cash flow hedges are also used to convert floating rate loans made to customers into fixed rate loans.

The following table presents the gross notional values of derivatives used in Huntington’s asset and liability management activities at December 31, 2014,2016, identified by the underlying interest rate-sensitive instruments:

   Fair Value   Cash Flow     

(dollar amounts in thousands)

  Hedges   Hedges   Total 

Instruments associated with:

      

Loans

  $—      $9,300,000    $9,300,000  

Deposits

   69,100     —       69,100  

Subordinated notes

   475,000     —       475,000  

Long-term debt

   2,285,000     —       2,285,000  
  

 

 

   

 

 

   

 

 

 

Total notional value at December 31, 2014

  $2,829,100    $9,300,000    $12,129,100  
  

 

 

   

 

 

   

 

 

 


(dollar amounts in thousands)Fair Value Hedges Cash Flow Hedges Total
Instruments associated with:     
Loans$
 $3,325,000
 $3,325,000
Deposits
 
 
Subordinated notes950,000
 
 950,000
Long-term debt6,525,000
 
 6,525,000
Total notional value at December 31, 2016$7,475,000
 $3,325,000
 $10,800,000
The following table presents additional information about the interest rate swaps used in Huntington’s asset and liability management activities at December 31, 2014:

       Average      Weighted-Average 
   Notional   Maturity   Fair  Rate 

(dollar amounts in thousands )

  Value   (years)   Value  Receive  Pay 

Asset conversion swaps

        

Receive fixed—generic

  $9,300,000     2.0    $(17,078  0.80  0.24

Liability conversion swaps

        

Receive fixed—generic

   2,829,100     3.1     57,544    1.73    0.25  
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Total swap portfolio

  $12,129,100     2.2    $40,466    1.02  0.25
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

2016:

       Weighted-Average
Rate
(dollar amounts in thousands)Notional Value Average Maturity (years) Fair Value Receive Pay
Asset conversion swaps         
Receive fixed—generic$3,325,000
 0.6 $(2,060) 1.04% 0.91%
Liability conversion swaps         
Receive fixed—generic7,475,000
 3.1 (51,496) 1.49
 0.88
Total swap portfolio at December 31, 2016$10,800,000
 2.3 $(53,556) 1.35% 0.89%
These derivative financial instruments were entered into for the purpose of managing the interest rate risk of assets and liabilities. Consequently, net amounts receivable or payable on contracts hedging either interest earning assets or interest bearing liabilities were accrued as an adjustment to either interest income or interest expense. The net amounts resulted in an increase to net interest income of $97.6$72 million, $95.4$108 million, and $107.5$98 million for the years ended December 31, 2016, 2015, and 2014, 2013, and 2012, respectively.

In connection with the sale of Huntington’s Class B Visa® shares, Huntington entered into a swap agreement with the purchaser of the shares. The swap agreement adjusts for dilution in the conversion ratio of Class B shares resulting from the Visa® litigation. At December 31, 2014,2016, the fair value of the swap liability of $0.4$6 million is an estimate of the exposure liability based upon Huntington’s assessment of the potential Visa® litigation losses.

The following table presents the fair values at December 31, 20142016 and 20132015 of Huntington’s derivatives that are designated and not designated as hedging instruments. Amounts in the table below are presented gross without the impact of any net collateral arrangements:

Asset derivatives included in accrued income and other assets

   December 31, 

(dollar amounts in thousands)

  2014   2013 

Interest rate contracts designated as hedging instruments

  $53,114    $49,998  

Interest rate contracts not designated as hedging instruments

   183,610     169,047  

Foreign exchange contracts not designated as hedging instruments

   32,798     28,499  

Commodity contracts not designated as hedging instruments

   180,218     4,278  
  

 

 

   

 

 

 

Total contracts

  $449,740    $251,822  
  

 

 

   

 

 

 

assets:

(dollar amounts in thousands)December 31, 2016 December 31, 2015
Interest rate contracts designated as hedging instruments$46,440
 $80,513
Interest rate contracts not designated as hedging instruments213,587
 190,846
Foreign exchange contracts not designated as hedging instruments23,265
 37,727
Commodity contracts not designated as hedging instruments108,026
 117,894
Equity contracts not designated as hedging instruments9,775
 
Total contracts$401,093
 $426,980
Liability derivatives included in accrued expenses and other liabilities

   December 31, 

(dollar amounts in thousands)

  2014   2013 

Interest rate contracts designated as hedging instruments

  $12,648    $25,321  

Interest rate contracts not designated as hedging instruments

   110,627     99,247  

Foreign exchange contracts not designated as hedging instruments

   29,754     18,909  

Commodity contracts not designated as hedging instruments

   179,180     3,838  
  

 

 

   

 

 

 

Total contracts

  $332,209    $147,315  
  

 

 

   

 

 

 

liabilities:

(dollar amounts in thousands)December 31, 2016 December 31, 2015
Interest rate contracts designated as hedging instruments$99,996
 $15,215
Interest rate contracts not designated as hedging instruments143,976
 121,815
Foreign exchange contracts not designated as hedging instruments19,576
 35,283
Commodity contracts not designated as hedging instruments104,328
 114,887
Equity contracts not designated as hedging instruments
 
Total contracts$367,876
 $287,200

The changes in fair value of the fair value hedges are, to the extent that the hedging relationship is effective, recorded through earnings and offset against changes in the fair value of the hedged item.

The following table presents the change in fair value for derivatives designated as fair value hedges as well as the offsetting change in fair value on the hedged item:

   Year ended December 31, 

(dollar amounts in thousands)

  2014   2013   2012 

Interest rate contracts

      

Change in fair value of interest rate swaps hedging deposits (1)

  $(1,045  $(4,006  $(2,526

Change in fair value of hedged deposits (1)

   1,025     4,003     2,601  

Change in fair value of interest rate swaps hedging subordinated notes (2)

   476     (44,699   1,432  

Change in fair value of hedged subordinated notes (2)

   (476   44,699     (1,432

Change in fair value of interest rate swaps hedging other long-term debt (2)

   1,990     (5,716   114  

Change in fair value of hedged other long-term debt (2)

   828     6,843     (114

 Year ended December 31,
(dollar amounts in thousands)2016 2015 2014
Interest rate contracts     
Change in fair value of interest rate swaps hedging deposits (1)$(82) $(996) $(1,045)
Change in fair value of hedged deposits (1)72
 992
 1,025
Change in fair value of interest rate swaps hedging subordinated notes (2)(47,852) (8,237) 476
Change in fair value of hedged subordinated notes (2)45,019
 8,237
 (476)
Change in fair value of interest rate swaps hedging long-term debt (2)(74,481) 3,903
 1,990
Change in fair value of hedged other long-term debt (2)67,389
 (3,602) 828
(1)Effective portion of the hedging relationship is recognized in Interest expense—deposits in the Consolidated Statements of Income. Any resulting ineffective portion of the hedging relationship is recognized in noninterest income in the Consolidated Statements of Income.
(2)Effective portion of the hedging relationship is recognized in Interest expense—subordinated notes and other-long-termother long-term debt in the Consolidated Statements of Income. Any resulting ineffective portion of the hedging relationship is recognized in noninterest income in the Consolidated Statements of Income.

The following table presents the gains and (losses) recognized in OCI and the location in the Consolidated Statements of Income of gains and (losses) reclassified from OCI into earnings for derivatives designated as effective cash flow hedges:
Derivatives in cash
flow hedging
relationships
Amount of gain or (loss)
recognized in OCI on
derivatives (effective portion)
 
Location of gain or (loss)
reclassified from accumulated OCI
into earnings (effective portion)
 
Amount of (gain) or loss
reclassified from accumulated OCI
into earnings (effective portion)
(pre-tax)
(dollar amounts in thousands)2016 2015 2014   2016 2015 2014
Interest rate contracts             
Loans$1,548
 $8,428
 $9,192
 Interest and fee income—loans and leases $(361) $(210) $(4,064)
Investment securities
 
 
 Noninterest income - other income 1
 (10) 93
Total$1,548
 $8,428
 $9,192
   $(360) $(220) $(3,971)
Reclassified gains and losses on swaps related to loans and investment securities and swaps related to subordinated debt are recorded within interest income and interest expense, respectively. During the next twelve months, Huntington expects to reclassify to earnings approximately $(2) million after-tax, of unrealized gains (losses) on cash flow hedging derivatives currently in OCI.
To the extent these derivatives are effective in offsetting the variability of the hedged cash flows, changes in the derivatives’ fair value will not be included in current earnings but are reported as a component of OCI in the Consolidated Statements of Changes in Shareholders’ Equity. These changes in fair value will be included in earnings of future periods when earnings are also affected by the changes in the hedged cash flows. To the extent these derivatives are not effective, changes in their fair values are immediately included in noninterest income.

The following table presents the gains and (losses) recognized in OCI and the location in the Consolidated Statements of Income of gains and (losses) reclassified from OCI into earnings for derivatives designated as effective cash flow hedges:

Derivatives in cash

flow hedging

relationships

  Amount of gain or (loss)
recognized in OCI on

derivatives (effective portion)
  

Location of gain or (loss)

reclassified from accumulated OCI
into earnings (effective portion)

  Amount of (gain) or loss
reclassified from accumulated OCI
into earnings (effective portion)
(pre-tax)
 

(dollar amounts in thousands)

  2014   2013  2012     2014  2013  2012 

Interest rate contracts

          

Loans

  $9,192    $(56,056 $(2,866 Interest and fee income—loans and leases  $(4,064 $(14,979 $14,849  

Investment securities

   —       —      (703 Interest and fee income—investment securities   93    (209  —    

Subordinated notes

   —       —      —     Interest expense—subordinated notes and other long-term debt   —      —      143  
  

 

 

   

 

 

  

 

 

    

 

 

  

 

 

  

 

 

 

Total

  $9,192    $(56,056 $(3,569   $(3,971 $(15,188 $14,992  
  

 

 

   

 

 

  

 

 

    

 

 

  

 

 

  

 

 

 

Reclassified gains and losses on swaps related to loans and investment securities and swaps related to subordinated debt are recorded within interest income and interest expense, respectively. During the next twelve months, Huntington expects to reclassify to earnings $21.1 million after-tax, of unrealized gains on cash flow hedging derivatives currently in OCI.

The following table presents the gains and (losses) recognized in noninterest income for the ineffective portion of interest rate contracts for derivatives designated as cash flow hedges for the years ending December 31, 2016, 2015, and 2014:
 December 31,
(dollar amounts in thousands)2016 2015 2014
Derivatives in cash flow hedging relationships     
Interest rate contracts:     
Loans$(317) $(763) $74
Derivatives used in mortgage banking activities
Mortgage loan origination hedging activity
Huntington’s mortgage origination hedging activity is related to the hedging of the mortgage pricing commitments to customers and the secondary sale to third parties. The value of a newly originated mortgage is not firm until the interest rate is committed or locked. The interest rate lock commitments are derivative positions offset by forward commitments to sell loans.

Huntington uses two types of mortgage-backed securities in its forward commitments to sell loans. The first type of forward commitment is a “To Be Announced” (or TBA), the second is a “Specified Pool” mortgage-backed security. Huntington uses these derivatives to hedge the value of mortgage-backed securities until they are sold.
The following table summarizes the derivative assets and liabilities used in mortgage banking activities:
(dollar amounts in thousands)December 31, 2016 December 31, 2015
Derivative assets:   
Interest rate lock agreements$5,747
 $6,721
Forward trades and options13,319
 2,468
Total derivative assets19,066
 9,189
Derivative liabilities:   
Interest rate lock agreements(1,598) (220)
Forward trades and options(1,173) (1,239)
Total derivative liabilities(2,771) (1,459)
Net derivative asset$16,295
 $7,730
MSR hedging activity
Huntington’s MSR economic hedging activity uses securities and derivatives to manage the value of the MSR asset and to mitigate the various types of risk inherent in the MSR asset, including risks related to duration, basis, convexity, volatility, and yield curve. The hedging instruments include forward commitments, interest rate swaps, and options on interest rate swaps.
The total notional value of these derivative financial instruments at December 31, 2016 and 2015, was $0.3 billion and $0.5 billion, respectively. The total notional amount at December 31, 2016 corresponds to trading assets with a fair value of $1 million and trading liabilities with a fair value of $3 million. Net trading gains (losses) related to MSR hedging for the years ended December 31, 2016, 2015, and 2014, 2013,were $(1) million, $(2) million, and 2012:

   December 31, 

(dollar amounts in thousands)

  2014   2013   2012 

Derivatives in cash flow hedging relationships

      

Interest rate contracts:

      

Loans

  $74    $878    $(179

$7 million, respectively. These amounts are included in mortgage banking income in the Consolidated Statements of Income.

Derivatives used in trading activities

Various derivative financial instruments are offered to enable customers to meet their financing and investing objectives and for their risk management purposes. Derivative financial instruments used in trading activities consisted of commodity, interest rate, and foreign exchange contracts. The derivative contracts grant the option holder the right to buy or sell an underlying financial instrument for a predetermined price before the contract expires. Huntington may enter into offsetting third-party contracts with approved, reputable counterparties with substantially matching terms and currencies in order to economically hedge significant exposure related to derivatives used in trading activities.

Commodity derivatives help the customer hedge risk and reduce exposure to price changes in commodities. Activity related to commodity derivatives is concentrated in large corporate, middle market, and energy sectors. Commodities markets trade and include oil, refined products, natural gas, coal, as well as industrial and precious metals. The energy sector focuses on oil, gas, and coal. Based on policy limits and the relatively small notional amounts of commodity activity, we do not anticipate any meaningful price risk for our commodity derivatives. Interest rate options grant the option holder the right to buy or sell an underlying financial instrument for a predetermined price before the contract expires. Interest rate futures are commitments to either purchase or sell a financial instrument at a future date for a specified price or yield and may be settled in cash or through delivery of the underlying financial instrument. Interest rate caps and floors are option-based contracts that entitle the buyer to receive cash payments based on the difference between a designated reference rate and a strike price, applied to a notional amount. Written options, primarily caps, expose Huntington to market risk but not credit risk. Purchased options contain both credit and market risk.

The interest rate risk of these customer derivatives is mitigated by entering into similar derivatives having offsetting terms with other counterparties. The credit risk to these customers is evaluated and included in the calculation of fair value. Foreign currency derivatives help the customer hedge risk and reduce exposure to fluctuations in exchange rates. Transactions are primarily in liquid currencies with Canadian dollars and Euros comprising a majority of all transactions.

The net fair values of these derivative financial instruments, used in trading activities, for which the gross amounts are included in accrued income and other assets or accrued expenses and other liabilities at December 31, 20142016 and 2013,December 31, 2015, were $74.4$80 million and $80.5$76 million, respectively. The total notional values of derivative financial instruments used by Huntington on behalf of customers, including offsetting derivatives, were $14.4$20.6 billion and $14.3$14.6 billion at December 31, 20142016 and 2013,December 31, 2015, respectively. Huntington’s credit risks from derivativesinterest rate swaps used for trading purposes were $219.3$196 million and $160.4$224 million at the same dates, respectively.

Share Swap Economic Hedge
Huntington acquires and holds shares of Huntington common stock in a Rabbi Trust for the Executive Deferred Compensation Plan. Huntington common stock held in the Rabbi Trust is recorded at cost and the corresponding deferred compensation liability is recorded at fair value using Huntington's share price as a significant input.
During the second quarter of 2016, Huntington entered into an economic hedge with a $20 million notional amount to hedge deferred compensation expense related to the Executive Deferred Compensation Plan. The economic hedge is recorded at fair value within other assets or liabilities. Changes in the fair value are recorded directly through other noninterest expense in the Consolidated Statements of Income. At December 31, 2016, the fair value of the share swap was $10 million.
Risk Participation Agreements

Huntington periodically enters into risk participation agreements in order to manage credit risk of its derivative positions. These agreements transfer counterparty credit risk related to interest rate swaps to and from other financial institutions. Huntington can mitigate exposure to certain counterparties or take on exposure to generate additional income. Huntington’s notional exposure for interest rate swaps originated by other financial institutions was $582 million and $344 million at December 31, 2016 and December 31, 2015, respectively. Huntington will make payments under these agreements if a customer defaults on its obligation to perform under the terms of the underlying interest rate derivative contract. The amount Huntington would have to pay if all counterparties defaulted on their swap contracts is the fair value of these risk participations, which was a positive value (receivable) of $3 million at December 31, 2016 and a negative value (payable) of $6 million at December 31, 2015. These contracts mature between 2017 and 2043 and are deemed investment grade.
Financial assets and liabilities that are offset in the Consolidated Balance Sheets

Huntington records derivatives at fair value as further described in Note 17.18. Huntington records these derivatives net of any master netting arrangement in the Consolidated Balance Sheets. Collateral agreements are regularly entered into as part of the underlying derivative agreements with Huntington’s counterparties to mitigate counterparty credit risk.

All derivatives are carried on the Consolidated Balance Sheets at fair value. Derivative balances are presented on a net basis taking into consideration the effects of legally enforceable master netting agreements. Cash collateral exchanged with counterparties is also netted against the applicable derivative fair values. Huntington enters into derivative transactions with two primary groups: broker-dealers and banks, and Huntington’s customers. Different methods are utilized for managing counterparty credit exposure and credit risk for each of these groups.

Huntington enters into transactions with broker-dealers and banks for various risk management purposes. These types of transactions generally are high dollar volume. Huntington enters into bilateral collateral and master netting agreements with these counterparties, and routinely exchange cash and high quality securities collateral with these counterparties. Huntington enters into transactions with customers to meet their financing, investing, payment and risk management needs. These types of transactions generally are low dollar volume. Huntington generally enters into master netting agreements with customer counterparties, however collateral is generally not exchanged with customer counterparties.

At December 31, 20142016 and December 31, 2013,2015, aggregate credit risk associated with these derivatives, net of collateral that has been pledged by the counterparty, was $19.5$26 million and $15.2$15 million, respectively. The credit risk associated with interest rate swaps is calculated after considering master netting agreements with broker-dealers and banks.

At December 31, 2014,2016, Huntington pledged $130.9$172 million of investment securities and cash collateral to counterparties, while other counterparties pledged $130.0$90 million of investment securities and cash collateral to Huntington to satisfy collateral netting agreements. In the event of credit downgrades, Huntington would not be required to provide additional collateral.

The following tables present the gross amounts of these assets and liabilities with any offsets to arrive at the net amounts recognized in the Consolidated Balance Sheets at December 31, 20142016 and December 31, 2013:

Offsetting of Financial Assets and Derivative Assets  
              Gross amounts not offset in
the consolidated balance

sheets
    

(dollar amounts in thousands)

  Gross amounts
of recognized
assets
   Gross amounts
offset in the
consolidated
balance sheets
  Net amounts of
assets
presented in
the
consolidated
balance sheets
   Financial
instruments
  Cash collateral
received
  Net amount 

Offsetting of Financial Assets and Derivative Assets

         

December 31, 2014         Derivatives

  $480,803    $(128,161 $352,642    $(27,744 $(1,095 $323,803  

December 31, 2013         Derivatives

   300,903     (111,458  189,445     (35,205  (360  153,880  

Offsetting of Financial Liabilities and Derivative Liabilities

 

  

              Gross amounts not offset in
the consolidated balance

sheets
    

(dollar amounts in thousands)

  Gross amounts
of recognized
liabilities
   Gross amounts
offset in the
consolidated
balance sheets
  Net amounts of
assets
presented in
the
consolidated
balance sheets
   Financial
instruments
  Cash collateral
delivered
  Net amount 

Offsetting of Financial Liabilities and Derivative Liabilities

         

December 31, 2014         Derivatives

  $363,192    $(78,937 $284,255    $(78,654 $(111 $205,490  

December 31, 2013         Derivatives

   196,397     (76,539  119,858     (86,204  290    33,944  

Derivatives used in mortgage banking activities

Huntington also uses certain derivative financial instruments to offset changes in value of its residential MSRs. These derivatives consist primarily of forward interest rate agreements and forward commitments to deliver mortgage-backed securities. The derivative instruments used are not designated as hedges. Accordingly, such derivatives are recorded at fair value with changes in fair value reflected in mortgage banking income. The following table summarizes the derivative assets and liabilities used in mortgage banking activities:

   At December 31, 

(dollar amounts in thousands)

  2014   2013 

Derivative assets:

    

Interest rate lock agreements

  $4,064    $3,066  

Forward trades and options

   35     3,997  
  

 

 

   

 

 

 

Total derivative assets

   4,099     7,063  
  

 

 

   

 

 

 

Derivative liabilities:

    

Interest rate lock agreements

   (259   (231

Forward trades and options

   (3,760   (40
  

 

 

   

 

 

 

Total derivative liabilities

   (4,019   (271
  

 

 

   

 

 

 

Net derivative asset (liability)

  $80    $6,792  
  

 

 

   

 

 

 

The total notional value of these derivative financial instruments at December 31, 2014 and 2013, was $0.6 billion and $0.5 billion, respectively. The total notional amount at December 31, 2014 corresponds to trading assets with a fair value of $3.0 million and no trading liabilities. Net trading gains (losses) related to MSR hedging for the years ended December 31, 2014, 2013, and 2012, were $7.1 million, $(25.0) million, and $31.3 million, respectively. These amounts are included in mortgage banking income in the Consolidated Statements of Income.

19.2015:

Offsetting of Financial Assets and Derivative Assets
        
Gross amounts not offset in
the consolidated balance
sheets
  
(dollar amounts in thousands) 
Gross amounts
of recognized
assets
 
Gross amounts
offset in the
consolidated
balance sheets
 
Net amounts of
assets
presented in
the
consolidated
balance sheets
 
Financial
instruments
 
Cash collateral
received
 Net amount
Offsetting of Financial Assets and Derivative Assets            
December 31, 2016Derivatives$420,159
 $(181,940) $238,219
 $(34,328) $(5,428) $198,463
December 31, 2015Derivatives436,169
 (161,297) 274,872
 (39,305) (3,462) 232,105

Offsetting of Financial Liabilities and Derivative Liabilities
        
Gross amounts not offset in
the consolidated balance
sheets
  
(dollar amounts in thousands) 
Gross amounts
of recognized
liabilities
 
Gross amounts
offset in the
consolidated
balance sheets
 
Net amounts of
assets
presented in
the
consolidated
balance sheets
 
Financial
instruments
 
Cash collateral
delivered
 Net amount
Offsetting of Financial Liabilities and Derivative Liabilities            
December 31, 2016Derivatives$370,647
 $(272,361) $98,286
 $(7,550) $(23,943) $66,793
December 31, 2015Derivatives288,659
 (144,309) 144,350
 (62,460) (20) 81,870

20. VIEs

Consolidated VIEs

Consolidated VIEs at December 31, 20142016, consisted of automobilecertain loan and lease securitization trusts formed in 2009 and 2006.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 20142015 first quarter, Huntington cancelledacquired two securitization trusts with its acquisition of Huntington Technology Finance. During the 2009 and 2006 Automobile Trusts.2016 first quarter, Huntington canceled the Series 2012A Trust. As a result, any remaining assets at the time of the cancellation arewere no longer part of the trusts.

trust.

The following tables present the carrying amount and classification of the consolidated trusts’ assets and liabilities that were included in the Consolidated Balance Sheets at December 31, 20142016 and 2013:

   2009   2006  Other     
   Automobile   Automobile  Consolidated     
   Trust   Trust  Trusts   Total 
(dollar amounts in thousands)  December 31, 2014 

Assets:

       

Cash

  $—      $—     $—      $—    

Loans and leases

   —       —      —       —    

Allowance for loan and lease losses

   —       —      —       —    
    

 

 

  

 

 

   

 

 

 

Net loans and leases

   —       —      —       —    

Accrued income and other assets

   —       —      243     243  
    

 

 

  

 

 

   

 

 

 

Total assets

  $—      $—     $243    $243  
    

 

 

  

 

 

   

 

 

 

Liabilities:

       

Other long-term debt

  $—      $—     $—      $—    

Accrued interest and other liabilities

   —       —      243     243  
    

 

 

  

 

 

   

 

 

 

Total liabilities

  $—      $—     $243    $243  
    

 

 

  

 

 

   

 

 

 
   2009   2006  Other     
   Automobile   Automobile  Consolidated     
   Trust   Trust  Trusts   Total 

(dollar amounts in thousands)

  December 31, 2013 

Assets:

       

Cash

  $8,580    $79,153   $—      $87,733  

Loans and leases

   52,286     151,171    —       203,457  

Allowance for loan and lease losses

   —       (711  —       (711
  

 

 

   

 

 

  

 

 

   

 

 

 

Net loans and leases

   52,286     150,460    —       202,746  

Accrued income and other assets

   235     485    262     982  
  

 

 

   

 

 

  

 

 

   

 

 

 

Total assets

  $61,101    $230,098   $262    $291,461  
  

 

 

   

 

 

  

 

 

   

 

 

 

Liabilities:

       

Other long-term debt

  $—      $—     $—      $—    

Accrued interest and other liabilities

   —       —      262     262  
  

 

 

   

 

 

  

 

 

   

 

 

 

Total liabilities

  $—      $—     $262    $262  
  

 

 

   

 

 

  

 

 

   

 

 

 

2015:

 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


 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
Net loans and leases32,180
 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 liabilities27,153
 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 automobile 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. All securitized notes were repaid prior to December 21, 2013. 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, 20142016, and 2013.

   December 31, 2014 

(dollar amounts in thousands)

  Total Assets   Total Liabilities   Maximum Exposure to Loss 

2012-1 Automobile Trust

  $2,136    $—      $2,136  

2012-2 Automobile Trust

   3,220     —       3,220  

2011 Automobile Trust

   944     —       944  

Tower Hill Securities, Inc.

   55,611     65,000     55,611  

Trust Preferred Securities

   13,919     317,075     —    

Low Income Housing Tax Credit Partnerships

   368,283     154,861     368,283  

Other Investments

   83,400     20,760     83,400  
  

 

 

   

 

 

   

 

 

 

Total

  $527,513    $557,696    $513,594  

   December 31, 2013 

(dollar amounts in thousands)

  Total Assets   Total Liabilities   Maximum Exposure to Loss 

2012-1 Automobile Trust

  $5,975    $—      $5,975  

2012-2 Automobile Trust

   7,396     —       7,396  

2011 Automobile Trust

   3,040     —       3,040  

Tower Hill Securities, Inc.

   66,702     65,000     66,702  

Trust Preferred Securities

   13,764     312,894     —    

Low Income Housing Tax Credit Partnerships

   317,226     134,604     317,226  

Other Investments

   90,278     9,772     90,278  
  

 

 

   

 

 

   

 

 

 

Total

  $504,381    $522,270    $490,617  

2012-1 2015:


 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 Trust2,227
 
 2,227
2012-1 Automobile Trust
 
 
2012-2 Automobile Trust
 
 
Trust Preferred Securities13,919
 252,552
 
Low Income Housing Tax Credit Partnerships576,880
 292,721
 576,880
Other Investments79,195
 42,316
 79,195
Total$686,991
 $587,589
 $673,072

 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 Trust94
 
 94
2012-2 Automobile Trust771
 
 771
Trust Preferred Securities13,919
 317,106
 
Low Income Housing Tax Credit Partnerships425,500
 196,001
 425,500
Other Investments68,746
 25,762
 68,746
Total$516,725
 $538,869
 $502,806
AUTOMOBILE TRUST 2012-2 AUTOMOBILE TRUST, and 2011 AUTOMOBILE TRUST

During the 2012 first and fourth quarters, and 2011 third quarter, we transferredSECURITIZATIONS


The following table provides a summary of automobile loans totaling $1.3 billion, $1.0 billion, and $1.0 billion, respectivelytransfers 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
2012-1 Automobile Trust 2012 1,300
2012-2 Automobile Trust 2012 1,000
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.

TOWER HILL SECURITIES, INC.

In 2010, we transferred approximately $92.1 million of municipal securities, $86.0 million in See Note 7 for more information.

During the 2016 first quarter, Huntington Preferred Capital, Inc. (Real Estate Investment Trust) Class E Preferred Stock and cash of $6.1 million to Tower Hill Securities, Inc. in exchange for $184.1 million of Common and Preferred Stock of Tower Hill Securities, Inc. The municipal securities andcanceled the REIT Shares will be used to satisfy $65.0 million of mandatorily redeemable securities issued by Tower Hill Securities, Inc. and are not available to satisfy2012-1 Automobile Trust. As a result, any remaining assets at the general debts and obligations of Huntington or any consolidated affiliates. The transfer was recorded as a secured financing. Interests held by Huntington consist of municipal securities within available for sale and other securities and Series B preferred securities within long term debt of Huntington’s Consolidated Balance Sheets. The maximum exposure to loss is equal to the carrying valuetime of the municipal securities.

cancellation were no longer part of the trust. During the 2016 third quarter, Huntington canceled the 2012-2 Automobile Trust. As a result, any remaining assets at the time of the cancellation were no longer 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 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, 20142016 follows:

      Principal amount of   Investment in 
      subordinated note/   unconsolidated 

(dollar amounts in thousands)

  Rate  debenture issued to trust (1)   subsidiary 

Huntington Capital I

   0.93%(2)  $111,816    $6,186  

Huntington Capital II

   0.87%(3)   54,593     3,093  

Sky Financial Capital Trust III

   1.66%(4)   72,165     2,165  

Sky Financial Capital Trust IV

   1.63%(4)   74,320     2,320  

Camco Financial Trust

   1.57%(5)   4,181     155  
   

 

 

   

 

 

 

Total

  

 $317,075    $13,919  
   

 

 

   

 

 

 


(dollar amounts in thousands)Rate 
Principal amount of
subordinated note/
debenture issued to trust (1)
 
Investment in
unconsolidated
subsidiary
Huntington Capital I1.59%(2)$69,730
 $6,186
Huntington Capital II1.59
(3)32,093
 3,093
Sky Financial Capital Trust III2.40
(4)72,165
 2,165
Sky Financial Capital Trust IV2.25
(4)74,320
 2,320
Camco Financial Trust3.43
(5)4,244
 155
Total  $252,552
 $13,919

(1)Represents the principal amount of debentures issued to each trust, including unamortized original issue discount.
(2)Variable effective rate at December 31, 2014,2016, based on three monththree-month LIBOR + 0.70.
(3)Variable effective rate at December 31, 2014,2016, based on three monththree-month LIBOR + 0.625.62.5.
(4)Variable effective rate at December 31, 2014,2016, based on three monththree-month LIBOR + 1.40.
(5)Variable effective rate (including impact of purchase accounting accretion) at December 31, 2014,2016, 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 is a limited partner in each Low Income Housing Tax Credit Partnership. A separate unrelated third party is the general partner. Each limited partnership is managed by the general partner, who exercises full and exclusive control over the affairs of the limited partnership. The general partner has all the rights, powers and authority granted or permitted to be granted to a general partner of a limited partnership under the Ohio Revised Uniform Limited Partnership Act. Duties entrusted to the general partner of each limited partnership include, but are not limited to: investment in operating companies, company expenditures, investment of excess funds, borrowing funds, employment of agents, disposition of fund property, prepayment and refinancing of liabilities, votes and consents, contract authority, disbursement of funds, accounting methods, tax elections, bank accounts, insurance, litigation, cash reserve, and use of working capital reserve funds. Except for limited rights granted to consent to certain transactions, the limited partner(s) may not participate in the operation, management, or control of the limited partnership’s business, transact any business in the limited partnership’s name or have any power to sign documents for or otherwise bind the limited partnership. In addition, the general partner may only be removed by the limited partner(s) in the event the general partner fails to comply with the terms of the agreement and/or is negligent in performing its duties.

Huntington believes the general partner of each limited partnership has the power to direct the activities which most significantly affect the performance of each partnership, therefore, Huntington has determined that it is not the primary beneficiary of any LIHTC partnership.

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 non-interest-incomenoninterest income in the Condensed Consolidated Statements of Income.

During the 2014 first quarter, Huntington early adopted ASU 2014-01 (see Note 2). The amendments are required to be applied retrospectively to all periods presented. As a result of these changes, Huntington recorded a cumulative-effect adjustment to beginning retained earnings.

The following table presents the balances of Huntington’s affordable housing tax credit investments and related unfunded commitments at December 31, 20142016 and 2013.

   December 31,   December 31, 

(dollar amounts in thousands)

  2014   2013 

Affordable housing tax credit investments

  $576,381    $484,799  

Less: amortization

   (208,098   (167,573
  

 

 

   

 

 

 

Net affordable housing tax credit investments

  $368,283    $317,226  
  

 

 

   

 

 

 

Unfunded commitments

  $154,861    $134,604  

2015.

(dollar amounts in thousands)December 31,
2016
 December 31,
2015
Affordable housing tax credit investments$877,237
 $674,157
Less: amortization(300,357) (248,657)
Net affordable housing tax credit investments$576,880
 $425,500
Unfunded commitments$292,721
 $196,001
The following table presents other information relating to Huntington’s affordable housing tax credit investments for the years ended December 31, 20142016, 2015, and 2013.

    Year Ended December 31, 

(dollar amounts in thousands)

  2014   2013   2012 

Tax credits and other tax benefits recognized

  $51,317    $55,819    $55,558  

Proportional amortization method

      

Tax credit amortization expense included in provision for income taxes

   39,021     32,789     32,337  

Equity method

      

Tax credit investment losses included in non-interest income

   434     1,176     676  

2014:

  
Year Ended December 31,
(dollar amounts in thousands)2016 2015 2014
Tax credits and other tax benefits recognized$79,696
 $59,614
 $51,317
Proportional amortization method     
Tax credit amortization expense included in provision for income taxes52,713
 42,951
 39,021
Equity method     
Tax credit investment losses included in noninterest income637
 355
 434
There were no sales of LIHTC investments in 2016, 2015 or 2014. During the years ended December 31, 2013 and 2012, Huntington sold LIHTC investments resulting in gains of $8.7 million and $5.4 million, respectively. The gains were recorded in noninterest income in the Consolidated Statements of Income.

Huntington recognized immaterial impairment losses for the years ended December 31, 2014, 20132016, 2015 and 2012.2014. 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.

20.

21. COMMITMENTS AND CONTINGENT LIABILITIES

Commitments to extend credit

In the ordinary course of business, Huntington makes various commitments to extend credit that are not reflected in the Consolidated Financial Statements. The contract amounts of these financial agreements at December 31, 2014,2016, and December 31, 2013,2015 were as follows:

   At December 31, 

(dollar amounts in thousands)

  2014   2013 

Contract amount represents credit risk

    

Commitments to extend credit:

    

Commercial

  $11,181,522    $10,198,327  

Consumer

   7,579,632     6,544,606  

Commercial real estate

   908,112     765,982  

Standby letters of credit

   497,457     439,834  


 At December 31,
(dollar amounts in thousands)2016 2015
Contract amount represents credit risk   
Commitments to extend credit:   
Commercial$15,190,056
 $11,448,927
Consumer12,235,943
 8,574,093
Commercial real estate1,697,671
 813,271
Standby letters of credit637,182
 511,706
Commercial letters-of-credit4,610
 56,119
Commitments to extend credit generally have fixed expiration dates, are variable-rate, and contain clauses that permit Huntington to terminate or otherwise renegotiate the contracts in the event of a significant deterioration in the customer’s credit quality. These arrangements normally require the payment of a fee by the customer, the pricing of which is based on prevailing market conditions, credit quality, probability of funding, and other relevant factors. Since many of these commitments are expected to expire without being drawn upon, the contract amounts are not necessarily indicative of future cash requirements. The interest rate risk arising from these financial instruments is insignificant as a result of their predominantly short-term, variable-rate nature.

Standby letters-of-credit are conditional commitments issued to guarantee the performance of a customer to a third party.third-party. These guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing, and similar transactions. Most of these arrangements mature within two years. The carrying amount of deferred revenue associated with these guarantees was $4.4$8 million and $2.1$7 million at December 31, 20142016 and 2013, respectively.

Through the Company’s credit process, Huntington monitors the credit risks of outstanding standby letters-of-credit. When it is probable that a standby letter-of-credit will be drawn and not repaid in full, losses are recognized in the provision for credit losses. At December 31, 2014, Huntington had $497 million of standby letters-of-credit outstanding, of which 80% were collateralized. Included in this $497 million total are letters-of-credit issued by the Bank that support securities that were issued by customers and remarketed by The Huntington Investment Company, the Company’s broker-dealer subsidiary.

Huntington uses an internal grading system to assess an estimate of loss on its loan and lease portfolio. This same loan grading system is used to monitor credit risk associated with standby letters-of-credit. Under this risk rating system as of December 31, 2014, approximately $137 million of the standby letters-of-credit were rated strong with sufficient asset quality, liquidity, and good debt capacity and coverage, approximately $360 million were rated average with acceptable asset quality, liquidity, and modest debt capacity; and none were rated substandard with negative financial trends, structural weaknesses, operating difficulties, and higher leverage.

2015, respectively.

Commercial letters-of-credit represent short-term, self-liquidating instruments that facilitate customer trade transactions and generally have maturities of no longer than 90 days. The goods or cargo being traded normally secures these instruments.

Commitments to sell loans

Activity related to our mortgage origination activity supports the hedging of the mortgage pricing commitments to customers and the secondary sale to third parties. At December 31, 20142016 and 2013,2015, Huntington had commitments to sell residential real estate loans of $545.0$819 million and $452.6$659 million, respectively. These contracts mature in less than one year.

Litigation

The nature of Huntington’s business ordinarily results in a certain amount of pending as well as threatened claims, litigation, investigations, regulatory and legal and administrative cases, matters and proceedings, all of which are considered incidental to the normal conduct of business. When the Company determines it has meritorious defenses to the claims asserted, it vigorously defends itself. The Company considers settlement of cases when, in Management’smanagement’s judgment, it is in the best interests of both the Company and its shareholders to do so.

On at least a quarterly basis, Huntington assesses its liabilities and contingencies in connection with threatened and outstanding regulatory legal and administrative cases, matters and proceedings, utilizing the latest information available. For cases, matters and proceedings where it is both probable the Company will incur a loss and the amount can be reasonably estimated, Huntington establishes an accrual for the loss. Once established, the accrual is adjusted as appropriate to reflect any relevant developments. For cases, matters or proceedings where a loss is not probable or the amount of the loss cannot be estimated, no accrual is established.

In certain cases, matters and proceedings, exposure to loss exists in excess of the accrual to the extent such loss is reasonably possible, but not probable. Management believes an estimate of the aggregate range of reasonably possible losses, in excess of amounts accrued, for current legal proceedings is from $0up to approximately $130.0$65 million at December 31, 2014.2016. For certain other cases, matters and proceedings,matters, Management cannot reasonably estimate the possible loss at this time. Any estimate involves significant judgment, given the varying stages of the proceedings (including the fact that many of them are currently in preliminary stages), the existence of multiple defendants in several of the current proceedings whose share of liability has yet to be determined, the numerous unresolved issues in many of the proceedings, and the inherent uncertainty of the various potential outcomes of such proceedings. Accordingly, Management’s estimate will change from time-to-time, and actual losses may be more or less than the current estimate.

While the final outcome of legal cases, matters, and proceedings is inherently uncertain, based on information currently available, advice of counsel, and available insurance coverage, Management believes that the amount it has already accrued is adequate and any incremental liability arising from the Company’s legal cases, matters, or proceedings will not have a material negative adverse effect on the Company’s consolidated financial position as a whole. However, in the event of unexpected future developments, it is possible that the ultimate resolution of these cases, matters, and proceedings, if unfavorable, may be material to the Company’s consolidated financial position in a particular period.


Meoli v. The Huntington National Bank (Cyberco Litigation). The Bank has been named a defendant in two lawsuitsa lawsuit arising from the Bank’s commercial lending, depository, and equipment leasing relationships with Cyberco Holdings, Inc. (Cyberco), based in Grand Rapids, Michigan. In November 2004, the Federal Bureau of Investigation and the Internal Revenue Service raided Cyberco’s facilities and Cyberco’s operations ceased. Anan equipment leasing fraud was uncovered, whereby Cyberco sought financing from equipment lessors and financial institutions, including the

Bank,Huntington, allegedly to purchase computer equipment from Teleservices Group, Inc. (Teleservices). Cyberco created fraudulent documentation to close the financing transactions when, in fact, no computer equipment was ever purchased or leased from Teleservices, which later proved to be a shell corporation.

Bankruptcy proceedings for both Cyberco filed a Chapter 7 bankruptcy petition on December 9, 2004, and Teleservices then filed its Chapter 7later ensued.

On September 28, 2015, adopting the bankruptcy petition on January 21, 2005. In an adversary proceeding commenced againstcourt's recommendation, the Bank on December 8, 2006, the Cyberco bankruptcy trustee sought recovery of over $70.0 million he alleged was transferred to the Bank. The Cyberco bankruptcy trustee also alleged preferential transfers were made to the Bank in the amount of approximately $1.2 million. The Bank moved to dismiss the complaint and all but the preference claims were dismissed on January 29, 2008. The Bankruptcy Court ordered the case to be tried in July 2012, and entered an order governing all pretrial conduct. The Bank filed a motion for summary judgment on the basis that the Cyberco trustee sought recovery of the same alleged transfers as the Teleservices trustee in a separate case described below. The Bankruptcy Court granted the motion in principal part and the parties stipulated to a full dismissal which was entered on June 19, 2012.

The Teleservices bankruptcy trustee filed a separate adversary proceeding against the Bank on January 19, 2007, seeking to avoid and recover alleged transfers that occurred in two ways: (1) checks made payable to the Bank for application to Cyberco’s indebtedness to the Bank, and (2) deposits into Cyberco’s bank accounts with the Bank. A trial was held as to only the Bank’s defenses. Subsequently, the trustee filed a summary judgment motion on her affirmative case, alleging the fraudulent transfers to the Bank totaled approximately $73.0 million and seeking judgment in that amount (which includes the $1.2 million alleged to be preferential transfers by the Cyberco bankruptcy trustee). On March 17, 2011, the Bankruptcy Court issued an Opinion determining that the alleged transfers made to the Bank during the period from April 30, 2004 through November 2004 were not received in good faith and that the Bank failed to show a lack of knowledge of the avoidability of the alleged transfers made from September 2003 through April 30, 2004. The trustee then filed an amended motion for summary judgment in her affirmative case and a hearing was held on July 1, 2011.

On March 30, 2012, the Bankruptcy Court issued an Opinion on the Teleservices trustee’s motion determining the Bank was the initial transferee of the checks made payable to it and was a subsequent transferee of all deposits into Cyberco’s accounts. The Bankruptcy Court ruled Cyberco’s deposits were themselves transfers to the Bank under the Bankruptcy Code, and the Bank was liable for both the checks and the deposits, totaling approximately $ 73.0 million. The Bankruptcy Court ruled the Bank may be entitled to a credit of approximately $ 4.0 million for the Cyberco trustee’s recoveries in preference actions filed against third parties that received payments from Cyberco within 90 days preceding Cyberco’s bankruptcy. Lastly, the Bankruptcy Court ruled that the Teleservices trustee was entitled to an award of prejudgment interest at a rate to be determined. A trial was held on these remaining issues on April 30, 2012, and the Court issued a bench opinion on July 23, 2012. In that opinion, the Court denied the Bank the $ 4.0 million credit, but ruled approximately $ 0.9 million in deposits were either double-counted or were outside the timeframe in which the Teleservices trustee could recover. Therefore, the Bankruptcy Court’s recommended award was reduced by $ 0.9 million. Further, the Bankruptcy Court ruled the interest rate specified in the federal statute governing post-judgment interest, which is based on U.S. Treasury bill rates, would be the rate of interest used to determine prejudgment interest. The Bankruptcy Court’s March 2011 and March 2012 opinions, as well as its July 23, 2012 bench opinion, were not reduced to final judgment by the Bankruptcy Court. Rather, the Bankruptcy Court delivered its report and recommendation to the District Court for the Western District of Michigan recommending that the District Court enterentered a final judgment against the Bank in the principal amount of $ 71.8 million, plus interest through July 27, 2012,Huntington in the amount of $ 8.8 million. The parties filed their respective objections$72 million plus costs and responsespre- and post-judgment interest. Huntington increased its legal reserve by approximately $38 million to fully accrue for the Bankruptcy Court’s report and recommendation. Oral argument on the parties’ objections and responses to the report and recommendation was held by the District Court on September 22, 2014. Each party then submitted a rebuttal brief to the District Court on October 6, 2014. The District Court is conducting ade novo reviewamount of the fact findings and legal conclusionsjudgment in the Bankruptcy Court’s report and recommendation and has not issued a ruling to date.

Duringthird quarter of 2015 while appealing the pendency of the adversary proceedings commenced by the Cyberco and Teleservices trustees, the Bank moved to substantively consolidate the two bankruptcy estates, principally on the ground that Teleservices was the alter ego and a mere instrumentality of Cyberco at all times. On July 2, 2010, the Bankruptcy Court issued an Opinion and Order denying the Bank’s motion for substantive consolidation of the two bankruptcy estates. The Bank appealed that decision to the Bankruptcy Appellate Panel (BAP) for theU.S. Sixth Circuit which ruled thatCourt of Appeals. On February 8, 2017, the order denying substantive consolidation would not be a final order untilappellate court reversed the Bankruptcy Court issueddistrict court decision in part and remanded the case to the district court for further proceedings. Consistent with its reading of the appellate court opinion, on the Bank’s defensesHuntington decreased its legal reserve by approximately $42 million in the Teleservices adversary proceeding, and dismissed the appeal. The Bank appealed the BAP’s decision to the Sixth Circuit. When the Bankruptcy Court issued its March 17, 2011, opinion in the Teleservices adversary proceeding, the Bank again appealed the order denying substantive consolidation to the BAP, which appeal was held in abeyance pending decision by the Sixth Circuit on the appealfourth quarter of the BAP’s 2010 order. On August 30, 2013, the Sixth Circuit affirmed the BAP’s 2010 decision dismissing the original appeal. The Bank filed a status report with the BAP on the second appeal and the trustees then moved to dismiss the second appeal on the ground that the Bankruptcy Court’s orders denying substantive consolidation were still not final orders. The BAP granted the trustees’ motion in an Order dated December 23, 2013.

The Bank2016.

Powell v. Huntington National Bank.  Huntington is a defendant in an action filed on January 17, 2012 against MERSCORP, Inc. and numerous other financial institutions that participate in the mortgage electronic registration system (MERS). The putative class action was filed on behalf of all 88 counties in Ohio. The plaintiffs allege that the recording of mortgages and assignments thereof is mandatory under Ohio law and

seek a declaratory judgment that the defendants are required to record every mortgage and assignment on real property located in Ohio and pay the attendant statutory recording fees. The complaint also seeks damages, attorney’s fees and costs. Huntington filed a motion to dismiss the complaint, which has been fully briefed, but no ruling has been issued by the Geauga County, Ohio Court of Common Pleas. Similar litigation has been initiated against MERSCORP, Inc. and other financial institutions in other jurisdictions throughout the country, however, the Bank has not been named a defendant in those other cases.

The Bank is also a defendant in a putative class action filed on October 15, 2013. The plaintiffs filed the action in West Virginia state court on behalf of themselves and other West Virginia mortgage loan borrowers who allege they were2013 alleging Huntington charged late fees on mortgage loans in violation ofa method that violated West Virginia law and the loan documents. Plaintiffs seek statutory civil penalties, compensatory damages and attorney’s fees. The Bank removed the case to federal court, answered the complaint, and, on January 17, 2014,Huntington filed a motion for summary judgment on the pleadings, asserting that West Virginia law is preemptedplaintiffs’ claims, which was granted by federal law and therefore does not applythe U.S. District Court on December 28, 2016.  Plaintiffs have filed a notice of appeal to the Bank. Following further briefing by the parties, the Court denied the Bank’s motion for judgment on the pleadings on September 26, 2014. On October 7, 2014, the Bank filed a motion to certify the District Court’s decision for interlocutory review by theU.S. Fourth Circuit Court of Appeals.

FirstMerit Merger Shareholder Litigation. Huntington is a defendant in five lawsuits filed in February and March of 2016 in state and federal courts in Ohio relating to the FirstMerit merger. The plaintiffs in each case are FirstMerit shareholders and have opposedfiled class action and derivative claims seeking to enjoin the Bank’s motion. No ruling has yet been issuedmerger. The parties in the federal court cases have entered into a tentative settlement. The defendants made agreed supplemental disclosures in advance of the shareholder vote in exchange for which plaintiffs agreed to withdraw their preliminary injunction motion and agreed to a release of all claims in the federal and state actions. The parties jointly moved for approval of the settlement by the Court.

federal court, which was granted on February 1, 2017. The plaintiffs in the state court cases did not join in the settlement, but their claims will be released in the federal court settlement.


FirstMerit Overdraft Litigation. Commencing in December 2010, two separate lawsuits were filed in the Summit County Court of Common Pleas and the Lake County Court of Common Pleas against FirstMerit. The complaints were brought as class actions on behalf of Ohio residents who maintained a checking account at FirstMerit and who incurred one or more overdraft fees as a result of the alleged re-sequencing of debit transactions. The parties have reached a global settlement for approximately $9 million cash to a common fund plus an additional $7 million in debt forgiveness. Attorneys' fees will be paid from the fund, with any remaining funds going to charity. FirstMerit’s insurer has agreed to reimburse Huntington 49% of the approximately $9 million, which totals approximately $4.4 million. The court preliminarily approved the settlement on December 5, 2016 and the cash portion of the settlement was funded on December 12, 2016. The final approval hearing is scheduled for June 2, 2017.
Commitments Under Operating Lease Obligations

At December 31, 2014,2016, Huntington and its subsidiaries were obligated under noncancelable leases for land, buildings, and equipment. Many of these leases contain renewal options and certain leases provide options to purchase the leased property during or at the expiration of the lease period at specified prices. Some leases contain escalation clauses calling for rentals to be adjusted for increased real estate taxes and other operating expenses or proportionately adjusted for increases in the consumer or other price indices.

The future minimum rental payments required under operating leases that have initial or remaining noncancelable lease terms in excess of one year as of December 31, 2014,2016, were as follows: $50.9 million in 2015, $47.7 million in 2016, $44.4$59 million in 2017, $41.2$54 million in 2018, $37.9$48 million in 2019, $46 million in 2020, $30 million in 2021, and $237.1$152 million thereafter. At December 31, 2014,2016, total minimum lease payments have not been reduced by minimum sublease rentals of $8.4$8 million due in the future under noncancelable subleases. At December 31, 2014,2016, the future minimum sublease rental payments that Huntington expects to receive were as follows: $4.0 million in 2015, $2.0 million in 2016, $1.0$3 million in 2017, $0.6$2 million in 2018, $0.3$2 million in 2019, $1 million in 2020, $0 million in 2021, and $0.5$0 million thereafter. The rental expense for all operating leases was $57.2$65 million, $55.3$58 million, and $54.7$57 million for 2014, 2013,2016, 2015, and 2012,2014, respectively. Huntington had no material obligations under capital leases.

21.22. OTHER REGULATORY MATTERS

Huntington and its bank subsidiary, The Huntington National Bank (the Bank), are subject to various regulatory capital requirements administered by federal and state banking agencies.regulators. These requirements involve qualitative judgments and quantitative measures of assets, liabilities, capital amounts, and certain off-balance sheet items as calculated under regulatory accounting practices. Failure to meet minimum capital requirements can initiate certain actions by regulators that, if undertaken, could have a material adverse effect on Huntington’s and the Bank’s financial statements. Applicable

Beginning in 2015, Huntington and the Bank became subject to the Basel III capital adequacy guidelines require minimum ratiosrequirements including the standardized approach for calculating risk-weighted assets in accordance with subpart D of 4.00%the final capital rule. The Basel III capital requirements emphasize CET1 capital, the most loss-absorbing form of capital, and implement strict eligibility criteria for regulatory capital instruments. CET1 capital primarily includes common shareholders’ equity less certain deductions for goodwill and other intangibles net of related taxes, and deferred tax assets that arise from tax loss and credit carryforwards. Tier 1 risk-based Capital, 8.00% for total risk-based Capital,capital is primarily comprised of CET1 capital, perpetual preferred stock and 4.00% forcertain qualifying capital instruments (TRUPS) that are subject to eventual phase-out from tier 1 capital in 2017. Tier 1 leverage capital. To be considered well-capitalized under2 capital primarily includes qualifying subordinated debt and qualifying ALLL. We are also subject to CCAR and must submit annual capital plans to our banking regulators. We may pay dividends and repurchase stock up to the regulatory framework for prompt corrective action,levels submitted in our 2016 CCAR capital plan submission to which the ratios must be at least 6.00%, 10.00%, and 5.00%, respectively.

FRB did not object.

As of December 31, 2014,2016, Huntington and the Bank met all capital adequacy requirements and had regulatory capital ratios in excess of the levels established for well-capitalized institutions. The period-end capital amounts and capital ratios of Huntington and the Bank are as follows:

   Tier 1 risk-based capital (1)  Total risk-based capital (1)  Tier 1 leverage capital (1) 

(dollar amounts in thousands)

  2014  2013  2014  2013  2014  2013 

Huntington Bancshares Incorporated

       

Amount

  $6,265,900   $6,099,629   $7,388,336   $7,239,035   $6,265,900   $6,099,629  

Ratio

   11.50  12.28  13.56  14.57  9.74  10.67

The Huntington National Bank

       

Amount

  $6,136,190   $5,682,067   $6,956,242   $6,520,190   $6,136,190   $5,682,067  

Ratio

   11.28  11.45  12.79  13.14  9.56  9.97

(1)In accordance with applicable regulatory reporting guidance, we are not required to retrospectively update historical filings for newly adopted accounting principles. Therefore, regulatory capital data has not been updated for the adoption of ASU 2014-01.

Tierfollows, including the CET1 ratio on a Basel III basis. The implementation of the Basel III capital requirements is transitional and phases-in from January 1, risk-based capital consists2015 through the end of total equity plus qualifying capital securities and minority interest, excluding unrealized gains and losses accumulated in OCI, and non-qualifying intangible and servicing assets. Total risk-based capital is the sum of Tier 1 risk-based capital and qualifying subordinated notes and allowable allowances for credit losses (limited to 1.25% of total risk-weighted assets). Tier 1 leverage capital is equal to Tier 1 capital. Both Tier 1 capital and total risk-based capital ratios are derived by dividing the respective capital amounts by net risk-weighted assets, which are calculated as prescribed by regulatory agencies. The Tier 1 leverage capital ratio is calculated by dividing the Tier 1 capital amount by average total assets for the fourth quarter of 2014 and 2013, less non-qualifying intangibles and other adjustments.

2018.

  Well-   December 31,
  capitalized Minimum 2016 2015
  Capital Capital Basel III
(dollar amounts in thousands) Ratios Ratios Ratio Amount Ratio Amount
Common equity tier 1 risk-based capitalConsolidatedN.A.
 4.50% 9.56% $7,485,816
 9.79% $5,721,028
 Bank6.50% 4.50
 10.42
 8,153,091
 9.46
 5,518,748
Tier 1 risk-based capitalConsolidated6.00
 6.00
 10.92
 8,547,154
 10.53
 6,154,000
 Bank8.00
 6.00
 11.61
 9,085,921
 9.83
 5,735,274
Total risk-based capitalConsolidated10.00
 8.00
 13.05
 10,215,627
 12.64
 7,386,936
 Bank10.00
 8.00
 13.83
 10,817,597
 11.74
 6,850,596
Tier 1 leverage capitalConsolidatedN.A.
 4.00
 8.70
 8,547,154
 8.79
 6,154,000
 Bank5.00
 4.00
 9.29
 9,085,921
 8.21
 5,735,274
Huntington has the ability to provide additional capital to the Bank to maintain the Bank’s risk-based capital ratios at levels at which would be considered well-capitalized.

On July 2, 2013, the Federal Reserve voted to adopt final capital rules implementing Basel III requirements for U.S. Banking organizations. The final rules establish an integrated regulatory capital framework and will implement in the United States the Basel III regulatory capital reforms from the Basel Committee on Banking Supervision and certain changes required by the Dodd-Frank Act. Under the final rule, minimum requirements will increase for both the quantity and quality of capital held by banking organizations. Consistent with the international Basel framework, the final rule includes a new minimum ratio of common equity tier 1 capital (Tier 1 Common) to risk-weighted assets and a Tier 1 Common capital conservation buffer of 2.5% of risk-weighted assets that will apply to all supervised financial institutions. The rule also raises the minimum ratio of tier 1 capital to risk-weighted assets and includes a minimum leverage ratio of 4% for all banking organizations. These new minimum capital ratios were effective for us on January 1, 2015, and will be fully phased-in on January 1, 2019.

Huntington and its subsidiaries are also subject to various regulatory requirements that impose restrictions on cash, debt, and dividends. The Bank is required to maintain cash reserves based on the level of certain of its deposits. This reserve requirement may be met by holding cash in banking offices or on deposit at the Federal Reserve Bank. During 20142016 and 2013,2015, the average balances of these deposits were $0.2$0.3 billion and $0.3$0.5 billion, respectively.

Under current Federal Reserve regulations, the Bank is limited as to the amount and type of loans it may make to the parent company and nonbank subsidiaries. At December 31, 2014,2016, the Bank could lend $695.6 million$1.1 billion to a single affiliate, subject to the qualifying collateral requirements defined in the regulations.

Dividends from the Bank are one of the major sources of funds for the Company. These funds aid the Company in the payment of dividends to shareholders, expenses, and other obligations. Payment of dividends and/or return of capital to the parent company is subject to various legal and regulatory limitations. During 2014,2016, the Bank paid dividends and returned capital of $224$638.2 million to the holding company. Also, there are statutory and regulatory limitations on the ability of national banks to pay dividends or make other capital distributions. The amount available for dividend payments to the parent company by Huntington National Bank without prior regulatory approval was approximately $339 million at December 31, 2014.


22. PARENT COMPANY23. PARENT-ONLY FINANCIAL STATEMENTS

The parent companyparent-only financial statements, which include transactions with subsidiaries, are as follows:

Balance Sheets

  December 31, 

(dollar amounts in thousands)

  2014   2013 

Assets

    

Cash and cash equivalents

  $662,768    $966,065  

Due from The Huntington National Bank

   276,851     246,841  

Due from non-bank subsidiaries

   51,129     57,747  

Investment in The Huntington National Bank

   6,073,408     5,537,582  

Investment in non-bank subsidiaries

   509,114     587,388  

Accrued interest receivable and other assets

   279,366     286,036  
  

 

 

   

 

 

 

Total assets

  $7,852,636    $7,681,659  
  

 

 

   

 

 

 

Liabilities and shareholders’ equity

    

Long-term borrowings

  $1,046,105    $1,034,266  

Dividends payable, accrued expenses, and other liabilities

   478,361     557,240  

Total liabilities

   1,524,466     1,591,506  

Shareholders’ equity (1)

   6,328,170     6,090,153  
  

 

 

   

 

 

 

Total liabilities and shareholders’ equity

  $7,852,636    $7,681,659  
  

 

 

   

 

 

 

Balance SheetsDecember 31,
(dollar amounts in thousands)2016 2015
Assets   
Cash and due from banks$1,752,889
 $917,368
Due from The Huntington National Bank730,004
 406,253
Due from non-bank subsidiaries45,193
 48,151
Investment in The Huntington National Bank10,668,303
 5,966,783
Investment in non-bank subsidiaries499,611
 489,205
Accrued interest receivable and other assets320,666
 192,444
Total assets$14,016,666
 $8,020,204
Liabilities and shareholders’ equity   
Long-term borrowings$3,144,615
 $1,040,981
Dividends payable, accrued expenses, and other liabilities563,905
 384,617
Total liabilities3,708,520
 1,425,598
Shareholders’ equity (1)10,308,146
 6,594,606
Total liabilities and shareholders’ equity$14,016,666
 $8,020,204
(1)See Consolidated Statements of Changes in Shareholders’ Equity.

Statements of Income

  Year Ended December 31, 

(dollar amounts in thousands)

  2014   2013   2012 

Income

      

Dividends from

      

The Huntington National Bank

  $244,000    $—      $—    

Non-bank subsidiaries

   27,773     55,473     36,450  

Interest from

      

The Huntington National Bank

   3,906     6,598     38,617  

Non-bank subsidiaries

   2,613     3,129     5,420  

Other

   2,994     2,148     1,409  
  

 

 

   

 

 

   

 

 

 

Total income

   281,286     67,348     81,896  
  

 

 

   

 

 

   

 

 

 

Expense

      

Personnel costs

   53,359     52,846     42,745  

Interest on borrowings

   17,031     20,739     28,926  

Other

   52,662     36,728     35,415  
  

 

 

   

 

 

   

 

 

 

Total expense

   123,052     110,313     107,086  
  

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes and equity in undistributed net income of subsidiaries

   158,234     (42,965   (25,190

Provision (benefit) for income taxes

   (62,897   (22,298   (12,565
  

 

 

   

 

 

   

 

 

 

Income (loss) before equity in undistributed net income of subsidiaries

   221,131     (20,667   (12,625

Increase (decrease) in undistributed net income (loss) of:

      

The Huntington National Bank

   414,049     692,392     653,615  

Non-bank subsidiaries

   (2,788   (30,443   (9,700
  

 

 

   

 

 

   

 

 

 

Net income

  $632,392    $641,282    $631,290  
  

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss) (1)

   (8,283   (63,192   22,946  
  

 

 

   

 

 

   

 

 

 

Comprehensive income

  $624,109    $578,090    $654,236  
  

 

 

   

 

 

   

 

 

 

Statements of IncomeYear Ended December 31,
(dollar amounts in thousands)2016 2015 2014
Income     
Dividends from     
The Huntington National Bank$188,200
 $822,000
 $244,000
Non-bank subsidiaries11,378
 38,883
 27,773
Interest from     
The Huntington National Bank13,892
 5,954
 3,906
Non-bank subsidiaries2,221
 2,317
 2,613
Other
 4,529
 2,994
Total income215,691
 873,683
 281,286
Expense     
Personnel costs11,960
 4,770
 53,359
Interest on borrowings59,027
 17,428
 17,031
Other122,869
 92,735
 52,662
Total expense193,856
 114,933
 123,052
Income (loss) before income taxes and equity in undistributed net income of subsidiaries21,835
 758,750
 158,234
Provision (benefit) for income taxes(56,255) (109,867) (62,897)
Income (loss) before equity in undistributed net income of subsidiaries78,090
 868,617
 221,131
Increase (decrease) in undistributed net income (loss) of:     
The Huntington National Bank629,220
 (160,567) 414,049
Non-bank subsidiaries4,511
 (15,093) (2,788)
Net income$711,821
 $692,957
 $632,392
Other comprehensive income (loss) (1)(174,858) (3,866) (8,283)
Comprehensive income$536,963
 $689,091
 $624,109
(1)See Consolidated Statements of Comprehensive Income for other comprehensive income (loss) detail.

Statements of Cash Flows

  Year Ended December 31, 

(dollar amounts in thousands)

  2014   2013   2012 

Operating activities

      

Net income

  $632,392    $641,282    $631,290  

Adjustments to reconcile net income to net cash provided by operating activities:

      

Equity in undistributed net income of subsidiaries

   (411,261   (718,144   (688,149

Depreciation and amortization

   548     513     265  

Other, net

   26,685     15,965     60,446  
  

 

 

   

 

 

   

 

 

 

Net cash (used for) provided by operating activities

   248,364     (60,384   3,852  
  

 

 

   

 

 

   

 

 

 

Investing activities

      

Repayments from subsidiaries

   9,250     285,792     591,923  

Advances to subsidiaries

   (32,350   (249,050   (36,126

Cash paid for acquisitions, net of cash received

   (13,452   —       —    
  

 

 

   

 

 

   

 

 

 

Net cash (used for) provided by investing activities

   (36,552   36,742     555,797  
  

 

 

   

 

 

   

 

 

 

Financing activities

      

Proceeds from issuance of long-term borrowings

   —       400,000     —    

Payment of borrowings

   —       (50,000   (236,885

Dividends paid on stock

   (198,789   (182,476   (169,335

Net proceeds from issuance of common stock

   2,597     —       —    

Repurchases of common stock

   (334,429   (124,995   (148,881

Other, net

   15,512     25,707     (1,031
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used for) financing activities

   (515,109   68,236     (556,132
  

 

 

   

 

 

   

 

 

 

Change in cash and cash equivalents

   (303,297   44,594     3,517  

Cash and cash equivalents at beginning of year

   966,065     921,471     917,954  
  

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at end of year

  $662,768    $966,065    $921,471  
  

 

 

   

 

 

   

 

 

 

Supplemental disclosure:

      

Interest paid

  $21,321    $20,739    $28,926  

23. BUSINESS COMBINATIONS

BANK OF AMERICA BRANCH ACQUISITION

On September 12, 2014, Huntington completed its acquisition and conversion of 24 Bank of America branches, furthering our presence in Michigan. Under the terms of the agreement, Huntington acquired approximately $745.2 million of deposits. The deposits were recorded at fair value. The fair values of deposits were estimated by discounting cash flows using interest rates currently being offered on deposits with similar maturities (Level 3). As part of the acquisition, Huntington recorded $17.1 million of goodwill.

Pro forma results have not been disclosed, as those amounts are not significant to the audited consolidated financial statements.

CAMCO FINANCIAL

On March 1, 2014, Huntington completed its acquisition of Camco Financial in a stock and cash transaction valued at $109.5 million. Camco Financial operated 22 banking offices and served communities in Southeast Ohio. The acquisition provides Huntington the opportunity to enhance our presence in several areas within our existing footprint and to expand into a few new markets.

Under the terms of the merger agreement, Camco Financial shareholders received 0.7264 shares of Huntington common stock, on a tax-free basis, or a taxable cash payment of $6.00 for each share of Camco Financial common stock. The aggregate purchase price was $109.5 million, including $17.8 million of cash and $91.7 million of common stock and options to purchase common stock. The value of the 8.7 million shares issued in connection with the merger was determined based on the closing price of Huntington’s common stock on February 28, 2014.

Under the agreement, Huntington acquired approximately $559.4 million of loans and $557.4 million of deposits. Assets acquired and liabilities assumed were recorded at fair value. The fair values for loans were estimated using discounted cash flow analyses using interest rates currently being offered for loans with similar terms (Level 3). This value was reduced by an estimate of probable losses and the credit risk associated with the loans. The fair values of deposits were estimated by discounting cash flows using interest rates currently being offered on deposits with similar maturities (Level 3). As part of the acquisition, Huntington recorded $64.2 million of goodwill, all of which is nondeductible for tax purposes.

Pro forma results have not been disclosed, as those amounts are not significant to the audited consolidated financial statements.


Statements of Cash FlowsYear Ended December 31,
(dollar amounts in thousands)2016 2015 2014
Operating activities     
Net income$711,821
 $692,957
 $632,392
Adjustments to reconcile net income to net cash provided by operating activities:     
Equity in undistributed net income of subsidiaries(633,730) 175,660
 (411,261)
Depreciation and amortization(1,390) 609
 548
Loss on sales of securities available-for-sale
 540
 
Other, net(23,600) (44,197) 26,685
Net cash (used for) provided by operating activities53,101
 825,569
 248,364
Investing activities     
Repayments from subsidiaries464,284
 494,905
 9,250
Advances to subsidiaries(1,758,745) (612,610) (32,350)
Proceeds from sale of securities available-for-sale(1,589) 449
 
Cash paid for acquisitions, net of cash received(133,218) 
 (13,452)
Proceeds from business divestitures
 9,029
 
Net cash (used for) provided by investing activities(1,429,268) (108,227) (36,552)
Financing activities     
Proceeds from issuance of long-term borrowings1,989,938
 
 
Payment of borrowings(64,586) 
 
Dividends paid on stock(299,588) (224,390) (198,789)
Net proceeds from issuance of common stock
 
 2,597
Net proceeds from issuance of preferred stock584,936
 
 
Repurchases of common stock
 (251,844) (334,429)
Other, net988
 13,492
 15,512
Net cash provided by (used for) financing activities2,211,688
 (462,742) (515,109)
Increase (decrease) in cash and due from banks835,521
 254,600
 (303,297)
Cash and due from banks at beginning of year917,368
 662,768
 966,065
Cash and due from banks at end of year$1,752,889
 $917,368
 $662,768
Supplemental disclosure:     
Interest paid$36,068
 $17,384
 $21,321
24. SEGMENT REPORTING

Our business segments are based on our internally-aligned segment leadership structure, which is how we monitor results and assess performance. During the 2014 first quarter, we reorganized our business segments to drive our ongoing growth and leverage the knowledge of our highly experienced team. We now have five major business segments: RetailConsumer and Business Banking, Commercial Banking, Automobile Finance and Commercial Real Estate (AFCRE)and Vehicle Finance (CREVF), Regional Banking and The Huntington Private Client Group (RBHPCG), and Home Lending. The Treasury / Other function includes our technology and operations, other unallocated assets, liabilities, revenue, and expense. All periods
Business segment results are determined based upon our management reporting system, which assigns balance sheet and income statement items to each of the business segments. The process is designed around our organizational and management structure and, accordingly, the results derived are not necessarily comparable with similar information published by other financial institutions. Additionally, because of the interrelationships of the various segments, the information presented is not indicative of how the segments would perform if they operated as independent entities
Revenue is recorded in the business segment responsible for the related product or service. Fee sharing is recorded to allocate portions of such revenue to other business segments involved in selling to, or providing service to customers. Results of operations for the business segments reflect these fee sharing allocations.
The management accounting process that develops the business segment reporting utilizes various estimates and allocation methodologies to measure the performance of the business segments. Expenses are allocated to business segments using a two-phase approach. The first phase consists of measuring and assigning unit costs (activity-based costs) to activities related to product

origination and servicing. These activity-based costs are then extended, based on volumes, with the resulting amount allocated to business segments that own the related products. The second phase consists of the allocation of overhead costs to all five business segments from Treasury / Other. We utilize a full-allocation methodology, where all Treasury / Other expenses, except reported Significant Items, and a small amount of other residual unallocated expenses, are allocated to the five business segments.
The management accounting policies and processes utilized in compiling segment financial information are highly subjective and, unlike financial accounting, are not based on authoritative guidance similar to GAAP. As a result, reported segment results are not necessarily comparable with similar information reported by other financial institutions. Furthermore, changes in management structure or allocation methodologies and procedures result in changes in reported segment financial data. Accordingly, certain amounts have been reclassified to conform to the current period classification.

presentation.

We use an active and centralized FTP methodology to attribute appropriate income to the business segments. The intent of the FTP methodology is to transfer interest rate risk from the business segments by providing matched duration funding of assets and liabilities. The result is to centralize the financial impact, management, and reporting of interest rate risk in the Treasury / Other function where it can be centrally monitored and managed. The Treasury / Other function charges (credits) an internal cost of funds for assets held in (or pays for funding provided by) each business segment. The FTP rate is based on prevailing market interest rates for comparable duration assets (or liabilities).
RetailConsumer and Business Banking: - The RetailConsumer and Business Banking segment provides a wide array of financial products and services to consumer and small business customers including but not limited to checking accounts, savings accounts, money market accounts, certificates of deposit, investments, consumer loans, credit cards, and small business loans. Other financial services available to consumer and small business customers include investments,mortgages, insurance, interest rate risk protection, foreign exchange, hedging, and treasury management. Huntington serves customers primarily through our network of branches in Ohio, Michigan, Pennsylvania, Indiana, West Virginia, and Kentucky. In addition to our extensive branch network, customers can access Huntington through online banking, mobile banking, telephone banking, and ATMs.

Huntington has established a “Fair Play” banking philosophy and built a reputation for meeting the banking needs of consumers in a manner which makes them feel supported and appreciated. Huntington believes customers are recognizing this and other efforts as key differentiators and it is earning us more customers, deeper relationships and the J.D. Power retail service excellence award for 2013 and 2014.

Business Banking is a dynamic and growing part of our business and we are committed to being the bank of choice for small businesses in our markets. Business Banking is defined as serving companies with revenues underup to $20 million and consists of approximately 160,000 businesses. Huntington continues to develop products and services that are designed specifically to meet the needs of small business. Huntington continues to look for ways to help companies find solutions to their financing needs and is the number one SBA lender in the country. We have also won the J.D. Power award for small business service excellence in 2012 and 2014.

254,000 businesses

Commercial Banking: - Through a relationship banking model, this segment provides a wide array of products and services to the middle market, large corporate, and government public sector customers located primarily within our geographic footprint. The segment is divided into seven business units: middle market, large corporate, specialty banking, asset finance, capital markets, treasury management, and insurance. During the 2014 third quarter, we moved our insurance brokerage business from Treasury / Other to Commercial Banking to align with a change in management responsibilities. During the 2014 fourth quarter, we moved the Asset Based Lending group back into the commercial division, and combined management with equipment finance and public capital to form the Asset Finance division.

Middle Market Banking primarily focuses on providing banking solutions to companies with annual revenues of $20 million to $250 million. Through a relationship management approach, various products, capabilities and solutions are seamlessly orchestrated in a client centric way.

Corporate Banking works with larger, often more complex companies with revenues greater than $250 million. These entities, many of which are publically traded, require a different and customized approach to their banking needs.

Specialty Banking offers tailored products and services to select industries that have a foothold in the Midwest. Each banking team is comprised of industry experts with a dynamic understanding of the market and industry. Many of these industries are experiencing tremendous change, which creates opportunities for Huntington to leverage our expertise and help clients navigate, adapt and succeed.

Asset Finance division is a combination of our Equipment Finance, Public Capital, Asset Based Lending, and Lender Finance divisions that focus on providing financing solutions against these respective asset classes.

Capital Markets has two distinct product capabilities: corporate risk management services and institutional sales, trading & underwriting. The Capital Markets Group offers a full suite of risk management tools including commodities, foreign exchange and interest rate hedging services. The Institutional Sales, Trading & Underwriting team provides access to capital and investment solutions for both municipal and corporate institutions.

Treasury Management teams help businesses manage their working capital programs and reduce expenses. Our liquidity solutions help customers save and invest wisely, while our payables and receivables capabilities help them manage purchases and the receipt of payments for good and services. All of this is provided while helping customers take a sophisticated approach to managing their overhead, inventory, equipment and labor.

Insurance brokerage business specializes in commercial property and casualty, employee benefits, personal lines, life and disability and specialty lines of insurance. We also provide brokerage and agency services for residential and commercial title insurance and excess and surplus product lines of insurance. As an agent and broker we do not assume underwriting risks; instead we provide our customers with quality, noninvestment insurance contracts.

Automobile Finance and Commercial Real Estate: and Vehicle Finance - This segment provides lending and other banking products and services to customers outside of our traditional retail and commercial banking segments. Our products and services include providing financing for the purchase of automobiles, light-duty trucks, recreational vehicles by customersand marine craft at franchised automotive dealerships, financing the acquisition of new and used vehicle inventory of franchised automotive dealerships, and financing for land, buildings, and other commercial real estate owned or constructed by real estate developers, automobile dealerships, or other customers with real estate project financing needs. Products and services are delivered through highly specialized relationship-focused bankers and product partners. Huntington creates well-defined relationship plans which identify needs where solutions are developed and customer commitments are obtained.

The Automotive Finance team services automobile dealerships, its owners, and consumers buying automobiles through these franchised dealerships. Huntington has provided new and used automobile financing and dealer services throughout the Midwest since the early 1950s. This consistency in the market and our focus on working with strong dealerships, has allowed us to expand into selected markets outside of the Midwest and to actively deepen relationships while building a strong reputation.

The Commercial Real Estate team serves real estate developers, REITs, and other customers with lending needs that are secured by commercial properties. Most of these customers are located within our footprint.

Regional Banking and The Huntington Private Client Group:The RBHPCG business segment was created as the result of an organizational and management realignment that occurred in January 2014. Regional Banking and The Huntington Private Client Group is well positioned competitively as we have closely aligned with our eleven regional banking markets. A fundamental point - The core business of differentiation is our commitment to be actively engaged within our local markets—building connections with community and business leaders and offering a uniquely personal experience delivered by colleagues working within those markets.

The Huntington Private Client Group is organized into units consisting of The Huntington Private Bank, The Huntington Trust, The Huntingtonwhich consists of Private Banking, Wealth & Investment Company, Huntington Community Development, Huntington Asset Advisors,Management, and Huntington Asset Services. Our private banking, trust, investment and community development functions focus their efforts in our Midwest footprint and Florida; while our proprietary funds and ETFs, fund administration, custody and settlements functions target a national client base.

Retirement plan services. The Huntington Private Bank provides high net-worth customers with deposit, lending (including specialized lending options), and banking services.

The Huntington TrustPrivate Bank also serves high net-worth customers and delivers wealth management and legacy planning through investment and portfolio management, fiduciary administration, trust services and trust operations.services. This group also provides retirement plan services andto corporate businesses. The Huntington Private Client Group also provides corporate trust to businessesservices and municipalities.

The Huntington Investment Company, a dually registered broker-dealerinstitutional and registered investment adviser, employs representatives who work with our Retail and Private Bank to provide investment solutions for our customers. This team offers a wide range of products andmutual fund custody services including brokerage, annuities, advisory and other investment products.

Huntington Community Development focuses on improving the quality of life for our communities and the residents of low-to moderate-income neighborhoods by developing and delivering innovative products and services to support affordable housing and neighborhood stabilization.

Huntington Asset Advisors provides investment management services solely advising the Huntington Funds, our proprietary family of mutual funds and Huntington Strategy Shares, our Exchange Trade Funds.

Huntington Asset Services has a national clientele and offers administrative and operational support to fund complexes, including fund accounting, transfer agency, administration, custody, and distribution services. This group also includes National Settlements which works with law firms and the court system to provide custody and settlement distribution services.

Home Lending: - Home Lending originates and services consumer loans and mortgages for customers who are generally located in our primary banking markets. Consumer and mortgage lending products are primarily distributed through the RetailConsumer and Business Banking segment,and Regional Banking and the Private Client Group segments, as well as through commissioned loan originators. Home lending earns interest onportfolio loans held in the warehouse and portfolio,loans held-for-sale, earns fee income from the origination and servicing of mortgage loans, and recognizes gains or losses from the sale of mortgage loans. Home Lending supports the origination and servicing of mortgage loans across all segments.


Listed below is certain financial information reconciled to Huntington’s December 31, 2014,2016, December 31, 2013,2015, and December 31, 2012,2014, reported results by business segment:

Income Statements

(dollar amounts in thousands)

  Business
Banking
   Retail &
Commercial
Banking
   AFCRE  RBHPCG  Home
Lending
  Treasury /
Other
  Huntington
Consolidated
 

2014

          

Net interest income

  $912,992     306,434    $379,363   $101,839   $58,015   $78,498   $1,837,141  

Provision for credit losses

   75,529     31,521     (52,843  4,893    21,889    —      80,989  

Noninterest income

   409,746     209,238     26,628    173,550    69,899    90,118    979,179  

Noninterest expense

   982,288     249,300     156,715    236,634    136,374    121,035    1,882,346  

Provision (benefit) for income taxes

   92,722     82,198     105,742    11,852    (10,622  (61,299  220,593  
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net income (loss)

  $172,199    $152,653    $196,377   $22,010   $(19,727 $108,880   $632,392  
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

2013

          

Net interest income

  $902,526    $281,461    $366,508   $105,862   $51,839   $(3,588 $1,704,608  

Provision for credit losses

   137,978     27,464     (82,269  (5,376  12,249    (1  90,045  

Noninterest income

   398,065     200,573     46,819    186,430    106,006    74,303    1,012,196  

Noninterest expense

   964,193     254,629     156,469    236,895    141,489    4,328    1,758,003  

Provision (benefit) for income taxes

   69,447     69,979     118,694    21,271    1,437    (53,354  227,474  
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net income

  $128,973    $129,962    $220,433   $39,502   $2,670   $119,742   $641,282  
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

2012

          

Net interest income

  $941,844    $294,333    $369,376   $104,329   $54,980   $(54,338 $1,710,524  

Provision for credit losses

   135,102     4,602     (16,557  6,044    18,198    (1  147,388  

Noninterest income

   380,820     197,191     91,314    181,650    165,189    90,157    1,106,321  

Noninterest expense

   973,691     248,157     160,434    253,901    132,302    67,391    1,835,876  

Provision (benefit) for income taxes

   74,855     83,568     110,885    9,112    24,384    (100,513  202,291  
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net income

  $139,016    $155,197    $205,928   $16,922   $45,285   $68,942   $631,290  
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

   Assets at
December 31,
   Deposits at
December 31,
 

(dollar amounts in thousands)

  2014   2013   2014   2013 

Retail & Business Banking

  $15,146,857    $14,440,869    $29,350,255    $28,293,993  

Commercial Banking

   15,043,477     12,410,339     11,184,566     10,187,891  

AFCRE

   16,027,910     14,081,112     1,377,921     1,170,518  

RBHPCG

   3,871,020     3,736,790     6,727,892     6,094,135  

Home Lending

   3,949,247     3,742,527     326,841     329,511  

Treasury / Other

   12,259,499     11,055,537     2,764,676     1,430,670  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $66,298,010    $59,467,174    $51,732,151    $47,506,718  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income Statements
(dollar amounts in thousands)
Consumer & Business Banking Commercial Banking CREVF RBHPCG Home Lending Treasury / Other 
Huntington
Consolidated
2016             
Net interest income$1,272,713
 $512,995
 $468,969
 $177,431
 $58,354
 $(121,144) $2,369,318
Provision (benefit) for credit losses71,945
 98,816
 26,922
 (3,467) (3,412) (2) 190,802
Noninterest income558,811
 275,258
 40,582
 120,687
 90,358
 64,035
 1,149,731
Noninterest expense1,208,585
 385,783
 170,276
 196,194
 124,683
 322,964
 2,408,485
Provision (benefit) for income taxes192,848
 106,279
 109,324
 36,887
 9,604
 (247,001) 207,941
Net income (loss)$358,146

$197,375

$203,029

$68,504

$17,837

$(133,070)
$711,821
2015             
Net interest income$1,027,950
 $379,409
 $381,231
 $139,188
 $50,404
 $(27,445) $1,950,737
Provision (benefit) for credit losses42,777
 49,534
 4,890
 87
 2,671
 (5) 99,954
Noninterest income478,142
 258,778
 29,254
 114,814
 87,021
 70,721
 1,038,730
Noninterest expense1,099,779
 284,026
 152,010
 195,667
 144,848
 99,578
 1,975,908
Provision (benefit) for income taxes127,238
 106,619
 88,755
 20,387
 (3,533) (118,818) 220,648
Net income (loss)$236,298

$198,008

$164,830

$37,861

$(6,561)
$62,521

$692,957
2014             
Net interest income$912,992
 $306,434
 $379,363
 $101,839
 $58,015
 $78,498
 $1,837,141
Provision (benefit) for credit losses75,529
 31,521
 (52,843) 4,893
 21,889
 
 80,989
Noninterest income409,746
 209,238
 26,628
 173,550
 69,899
 90,118
 979,179
Noninterest expense982,288
 249,300
 156,715
 236,634
 136,374
 121,035
 1,882,346
Provision (benefit) for income taxes92,722
 82,198
 105,742
 11,852
 (10,622) (61,299) 220,593
Net income (loss)$172,199

$152,653

$196,377

$22,010

$(19,727)
$108,880

$632,392
 
Assets at
December 31,
 
Deposits at
December 31,
(dollar amounts in thousands)2016 2015 2016 2015
Consumer & Business Banking$21,796,887
 $15,759,561
 $44,860,515
 $30,964,241
Commercial Banking23,918,429
 17,022,387
 15,616,241
 11,498,883
CREVF23,580,331
 17,856,358
 1,886,626
 1,649,301
RBHPCG5,553,012
 4,277,970
 8,521,401
 7,530,241
Home Lending3,502,304
 3,080,690
 639,418
 361,881
Treasury / Other21,363,134
 13,021,335
 4,083,516
 3,290,432
Total$99,714,097
 $71,018,301
 $75,607,717
 $55,294,979


25. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The following is a summary of the quarterly results of operations, for the years ended December 31, 20142016 and 2013:

   2014 

(dollar amounts in thousands, except per share data)

  Fourth   Third   Second   First 

Interest income

  $507,625    $501,060    $495,322    $472,455  

Interest expense

   34,373     34,725     35,274     34,949  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income

   473,252     466,335     460,048     437,506  
  

 

 

   

 

 

   

 

 

   

 

 

 

Provision for credit losses

   2,494     24,480     29,385     24,630  

Noninterest income

   233,278     247,349     250,067     248,485  

Noninterest expense

   483,271     480,318     458,636     460,121  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

   220,765     208,886     222,094     201,240  

Provision for income taxes

   57,151     53,870     57,475     52,097  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   163,614     155,016     164,619     149,143  

Dividends on preferred shares

   7,963     7,964     7,963     7,964  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income applicable to common shares

  $155,651    $147,052    $156,656    $141,179  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income per common share — Basic

  $0.19    $0.18    $0.19    $0.17  

Net income per common share — Diluted

   0.19     0.18     0.19     0.17  

   2013 

(dollar amounts in thousands, except per share data)

  Fourth   Third   Second   First 

Interest income

  $469,824    $462,912    $462,582    $465,319  

Interest expense

   39,175     38,060     37,645     41,149  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income

   430,649     424,852     424,937     424,170  
  

 

 

   

 

 

   

 

 

   

 

 

 

Provision for credit losses

   24,331     11,400     24,722     29,592  

Noninterest income

   249,892     253,767     251,919     256,618  

Noninterest expense

   446,009     423,336     445,865     442,793  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

   210,201     243,883     206,269     208,403  

Provision for income taxes

   52,029     65,047     55,269     55,129  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   158,172     178,836     151,000     153,274  

Dividends on preferred shares

   7,965     7,967     7,967     7,970  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income applicable to common shares

  $150,207    $170,869    $143,033    $145,304  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income per common share — Basic

  $0.18    $0.21    $0.17    $0.17  

Net income per common share — Diluted

   0.18     0.20     0.17     0.17  

2015:

        
 Three months ended
 December 31, September 30, June 30, March 31,
(dollar amounts in thousands, except per share data)2016 2016 2016 2016
Interest income$814,858
 $694,346
 $565,658
 $557,251
Interest expense79,877
 68,956
 59,777
 54,185
Net interest income734,981
 625,390
 505,881
 503,066
Provision for credit losses74,906
 63,805
 24,509
 27,582
Noninterest income334,337
 302,415
 271,112
 241,867
Noninterest expense681,497
 712,247
 523,661
 491,080
Income before income taxes312,915
 151,753
 228,823
 226,271
Provision for income taxes73,952
 24,749
 54,283
 54,957
Net income238,963
 127,004
 174,540
 171,314
Dividends on preferred shares18,865
 18,537
 19,874
 7,998
Net income applicable to common shares$220,098
 $108,467
 $154,666
 $163,316
Net income per common share — Basic$0.20
 $0.12
 $0.19
 $0.21
Net income per common share — Diluted0.20
 0.11
 0.19
 0.20
        
 Three months ended
 December 31, September 30, June 30, March 31,
(dollar amounts in thousands, except per share data)2015 2015 2015 2015
Interest income$544,153
 $538,477
 $529,795
 $502,096
Interest expense47,242
 43,022
 39,109
 34,411
Net interest income496,911
 495,455
 490,686
 467,685
Provision for credit losses36,468
 22,476
 20,419
 20,591
Noninterest income272,215
 253,119
 281,773
 231,623
Noninterest expense498,766
 526,508
 491,777
 458,857
Income before income taxes233,892
 199,590
 260,263
 219,860
Provision for income taxes55,583
 47,002
 64,057
 54,006
Net income178,309
 152,588
 196,206
 165,854
Dividends on preferred shares7,972
 7,968
 7,968
 7,965
Net income applicable to common shares$170,337
 $144,620
 $188,238
 $157,889
Net income per common share — Basic$0.21
 $0.18
 $0.23
 $0.19
Net income per common share — Diluted0.21
 0.18
 0.23
 0.19


Item 9: Changes In and Disagreements With Accountants on Accounting and Financial Disclosure

Information required by this item is set forth under the caption Ratification of the Appointment of the Independent Registered Public Accounting Firm in our 2015 Proxy Statement, which is incorporated by reference into this item.

None.
Item 9A: Controls and Procedures

Disclosure Controls and Procedures

Huntington maintains disclosure controls and procedures designed to ensure that the information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934, as amended (the Exchange Act), are recorded, processed, summarized, and reported within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its

principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Huntington’s Management, with the participation of its Chief Executive Officer and the Chief Financial Officer, evaluated the effectiveness of Huntington’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report.December 31, 2016. Based upon such evaluation, Huntington’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period,December 31, 2016, Huntington’s disclosure controls and procedures were effective.


Internal Control Over Financial Reporting

Information required by this item is set forth in the Report of ManagementManagement's Assessment of Internal Control over Financial Reporting and the Report of Independent Registered Public Accounting Firm which is incorporated by reference into this item.

Firm.

Changes in Internal Control Over Financial Reporting

There have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended December 31, 2014, to which this report relates,2016, that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting.

Item 9B: Other Information

Not applicable.

PART III

We refer in Part III of this report to relevant sections of our 20152017 Proxy Statement for the 20152017 annual meeting of shareholders, which will be filed with the SEC pursuant to Regulation 14A within 120 days of the close of our 20142016 fiscal year. Portions of our 20152017 Proxy Statement, including the sections we refer to in this report, are incorporated by reference into this report.

Item 10: Directors, Executive Officers and Corporate Governance

Information required by this item is set forth under the captions Election of Directors, Corporate Governance, Our Executive Officers, Board Meetings and Committee Information, Report of the Audit Committee, and Section 16(a) Beneficial Ownership Reporting Compliance of our 20152017 Proxy Statement, which is incorporated by reference into this item.

Item 11: Executive Compensation

Information required by this item is set forth under the captions Compensation of Executive Officers of our 20152017 Proxy Statement, which is incorporated by reference into this item.


Item 12: Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Information

The following table sets forth information about Huntington common stock authorized for issuance under Huntington’s existing equity compensation plans as of December 31, 2016.
Plan Category (1) 
Number of
securities to be
issued upon
exercise of
outstanding
options, warrants,
and rights (2)
(a)
 
Weighted-average
exercise price of
outstanding
options, warrants,
and rights (3)
(b)
 
Number of
securities
remaining available
for future issuance
under equity
compensation
plans (excluding
securities reflected
in column (a)) (4)
(c)
Equity compensation plans approved by security holders 33,552,345
 $3.32
 15,979,699
Equity compensation plans not approved by security holders 18,263
 12.86
 
Total 33,570,608
 $3.32
 15,979,699

(1)All equity compensation plan authorizations for shares of common stock provide for the number of shares to be adjusted for stock splits, stock dividends, and other changes in capitalization. The Huntington Investment and Tax Savings Plan, a broad-based plan qualified under Code Section 401(a) which includes Huntington common stock as one of a number of investment options available to participants, is excluded from the table.
(2)The numbers in this column (a) reflect shares of common stock to be issued upon exercise of outstanding stock options and the vesting of outstanding awards of RSUs, RSAs and PSUs and the release of DSUs. The shares of common stock to be

issued upon exercise or vesting under equity compensation plans not approved by shareholders include an inducement grant issued outside of the Company’s stock plans, and awards granted under the following plans which are no longer active and for which Huntington has not reserved the right to make subsequent grants or awards: employee and director stock plans of Unizan Financial Corp. and Camco Financial Corporation assumed in the acquisitions of these companies.
(3)The weighted-average exercise prices in this column are based on outstanding options and do not take into account unvested awards of RSUs, RSAs and PSUs and unreleased DSUs as these awards do not have an exercise price.
(4)The number of shares in this column (c) reflects the number of shares remaining available for future issuance under Huntington’s 2015 Plan, excluding shares reflected in column (a). The number of shares in this column (c) does not include shares of common stock to be issued under the following compensation plans: the Executive Deferred Compensation Plan, which provides senior officers designated by the Compensation Committee the opportunity to defer up to 90% of base salary, annual bonus compensation and certain equity awards, and up to 90% of long-term incentive awards; the Supplemental Plan under which voluntary participant contributions made by payroll deduction are used to purchase shares; the Deferred Compensation for Huntington Bancshares Incorporated Directors under which directors may defer their director compensation and such amounts may be invested in shares of common stock; and the Deferred Compensation Plan for directors (now inactive) under which directors of selected subsidiaries may defer their director compensation and such amounts may be invested in shares of Huntington common stock. These plans do not contain a limit on the number of shares that may be issued under them.
Additional information required by this item is set forth under the captions CompensationOwnership of Executive OfficersVoting Stock of our 20152017 Proxy Statement, which is incorporated by reference into this item.


Item 13: Certain Relationships and Related Transactions, and Director Independence

Information required by this item is set forth under the captions Indebtedness of Management and Certain other Transactions of our 20152017 Proxy Statement, which is incorporated by reference into this item.

Item 14: Principal Accountant Fees and Services

Information required by this item is set forth under the caption Proposal to Ratify the Appointment of Independent Registered Public Accounting Firm of our 20152017 Proxy Statement which is incorporated by reference into this item.

PART IV

Item 15: Exhibits and Financial Statement Schedules

(a)The following documents are filed as part of this report:

(1)The report of independent registered public accounting firm and consolidated financial statements appearing in Item 8.

(2)Huntington is not filing separate financial statement schedules, because of the absence of conditions under which they are required or because the required information is included in the Consolidated Financial Statements or the notes thereto.

(3)The exhibits required by this item are listed in the Exhibit Index of this Form 10-K. The management contracts and compensation plans or arrangements required to be filed as exhibits to this Form 10-K are listed as Exhibits 10.1 through 10.27 in the Exhibit Index.

(b)The exhibits to this Form 10-K begin on page 195 of this report.

(c)See Item 15(a)(2) above.


Financial Statements and Financial Statement Schedules

Our consolidated financial statements required in response to this Item are incorporated by reference from Item 8 of this Report.

Exhibits

Our exhibits listed on the Exhibit Index of this Form 10-K are filed with this Report or are incorporated herein by reference.

Item 16: 10-K Summary
Not applicable.

Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 13th22nd day of February, 2015.

2017.

HUNTINGTON BANCSHARES INCORPORATED

(Registrant)

By: 

/s/ Stephen D. Steinour

 By: 

/s/ Howell D. McCullough III

 Stephen D. Steinour  Howell D. McCullough III
 Chairman, President, Chief Executive  Chief Financial Officer
 Officer, and Director (Principal Executive  (Principal Financial Officer)
 Officer)  
  By: 

/s/ David S. Anderson

Nancy E. Maloney
   David S. AndersonNancy E. Maloney
   Executive Vice President, Controller
   (Principal Accounting Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on the 13th22nd day of February, 2015.

2017
.

Don M. Casto IIILizabeth Ardisana *

 
Lizabeth Ardisana 

Jonathan A. Levy *

Don M. Casto IIIJonathan A. Levy
Director 
 Director

Ann B. Crane *

 

Eddie R. Munson *

Ann B. Crane 
Director 
Eddie R. Munson
Robert S. Cubbin *
Robert S. Cubbin
Director 
 Director

Steven G. Elliott *

 

Richard W. Neu *

Steven G. Elliott Richard W. Neu
Director 
 Director

Michael J. Endres *

 

David L. Porteous *

Michael J. Endres 
Director 
David L. Porteous
Gina D. France *
Gina D. France
Director 
 Director

John B. Gerlach, Jr. *

 

Kathleen H. Ransier *

John B. Gerlach, Jr. 
Director 
Kathleen H. Ransier
J. Michael Hochschwender *
J. Michael Hochschwender
Director 
 
DirectorJohn C. Inglis *
John C. Inglis

Director

Peter J. Kight *

 
Peter J. Kight 
Director 
Jonathan A. Levy *
Jonathan A. Levy
Director 
 
Eddie R. Munson *
Eddie R. Munson

Director

Richard W. Neu *
Richard W. Neu
Director
David L. Porteous *
David L. Porteous
Director
Kathleen H. Ransier *
Kathleen H. Ransier
Director
*/s/ Richard A. Cheap

 
Richard A. Cheap 
Attorney-in-fact for each of the persons indicated 


Exhibit Index

This report incorporates by reference the documents listed below that we have previously filed with the SEC. The SEC allows us to incorporate by reference information in this document. The information incorporated by reference is considered to be a part of this document, except for any information that is superseded by information that is included directly in this document.

This information may be read and copied at the Public Reference Room of the SEC at 100 F Street, N.E., Washington, D.C. 20549. The SEC also maintains an Internet web site that contains reports, proxy statements, and other information about issuers, like us, who file electronically with the SEC. The address of the site ishttp://www.sec.gov. The reports and other information filed by us with the SEC are also available free of charge at our Internet web site. The address of the site ishttp://www.huntington.com. Except as specifically incorporated by reference into this Annual Report on Form 10-K, information on those web sites is not part of this report. You also should be able to inspect reports, proxy statements, and other information about us at the offices of the NASDAQ National Market at 33 Whitehall Street, New York, New York.

Exhibit
Number
  Document Description  Report or Registration Statement  SEC File or
Registration
Number
   Exhibit
Reference
 
3.1  Articles of Restatement of Charter.  Annual Report on Form 10-K for the year ended December 31, 1993.   000-02525     3(i)  
3.2  Articles of Amendment to Articles of Restatement of Charter.  Current Report on Form 8-K dated May 31, 2007   000-02525     3.1  
3.3  Articles of Amendment to Articles of Restatement of Charter  Current Report on Form 8-K dated May 7, 2008   000-02525     3.1  
3.4  Articles of Amendment to Articles of Restatement of Charter  Current Report on Form 8-K dated April 27, 2010   001-34073     3.1  
3.5  Articles Supplementary of Huntington Bancshares Incorporated, as of April 22, 2008.  Current Report on Form 8-K dated April 22, 2008   000-02525     3.1  
3.6  Articles Supplementary of Huntington Bancshares Incorporated, as of April 22. 2008.  Current Report on Form 8-K dated April 22, 2008   000-02525     3.2  
3.7  Articles Supplementary of Huntington Bancshares Incorporated, as of November 12, 2008.  Current Report on Form 8-K dated November 12, 2008   001-34073     3.1  
3.8  Articles Supplementary of Huntington Bancshares Incorporated, as of December 31, 2006.  Annual Report on Form 10-K for the year ended December 31, 2006   000-02525     3.4  
3.9  Articles Supplementary of Huntington Bancshares Incorporated, as of December 28, 2011  Current Report on Form 8-K dated December 28, 2011   001-34073     3.1  
3.10  Bylaws of Huntington Bancshares Incorporated, as amended and restated, as of July 16, 2014.  Current Report on Form 8-K dated July 17, 2014.   001-34073     3.1  
4.1  Instruments defining the Rights of Security Holders — reference is made to Articles Fifth, Eighth, and Tenth of Articles of Restatement of Charter, as amended and supplemented. Instruments defining the rights of holders of long-term debt will be furnished to the Securities and Exchange Commission upon request.      
10.1  * Form of Executive Agreement for certain executive officers.      
10.2  * Management Incentive Plan for Covered Officers as amended and restated effective for plan years beginning on or after January 1, 2011.  Definitive Proxy Statement for the 2011 Annual Meeting of Shareholders   001-34073     A  
10.3  * Huntington Supplemental Retirement Income Plan, amended and restated, effective December 31, 2013.  Annual Report on Form 10-K for the year ended December 31, 2013.   001-34073     10.3  
10.4  * Deferred Compensation Plan and Trust for Directors  Post-Effective Amendment No. 2 to Registration Statement on Form S-8 filed on January 28, 1991.   33-10546     4(a)  
10.5  * Deferred Compensation Plan and Trust for Huntington Bancshares Incorporated Directors  Registration Statement on Form S-8 filed on July 19, 1991.   33-41774     4(a)  
10.6  * First Amendment to Huntington Bancshares Incorporated Deferred Compensation Plan and Trust for Huntington Bancshares Incorporated Directors  Quarterly Report 10-Q for the quarter ended March 31, 2001   000-02525     10(q)  
10.7  * Executive Deferred Compensation Plan, as amended and restated on January 1, 2012.  Annual Report of Form 10-K for the year ended December 31, 2012   001-34073     10.8  
10.8  * The Huntington Supplemental Stock Purchase and Tax Savings Plan and Trust, amended and restated, effective January 1,2014  Annual Report on Form 10-K for the year ended December 31, 2013.   001-34073     10.8  
10.9  * Form of Employment Agreement between Stephen D. Steinour and Huntington Bancshares Incorporated effective December 1, 2012.  Current Report on Form 8-K dated November 28, 2012.   001-34073     10.1  

 10.10    * Form of Executive Agreement between Stephen D. Steinour and Huntington Bancshares Incorporated effective December 1, 2012.  Current Report on Form 8-K dated November 28, 2012.   001-34073     10.2  
 10.11    * Restricted Stock Unit Grant Notice with three year vesting  

Current Report on Form 8-K dated

July 24, 2006

   000-02525     99.1  
 10.12    * Restricted Stock Unit Grant Notice with six month vesting  

Current Report on Form 8-K dated

July 24, 2006

   000-02525     99.2  
 10.13    * Restricted Stock Unit Deferral Agreement  

Current Report on Form 8-K dated

July 24, 2006

   000-02525     99.3  
 10.14    * Director Deferred Stock Award Notice  

Current Report on Form 8-K dated

July 24, 2006

   000-02525     99.4  
 10.15    * Huntington Bancshares Incorporated 2007 Stock and Long-Term Incentive Plan  Definitive Proxy Statement for the 2007 Annual Meeting of Stockholders   000-02525     G  
 10.16    * First Amendment to the 2007 Stock and Long-Term Incentive Plan  Quarterly report on Form 10-Q for the quarter ended September 30, 2007   000-02525     10.7  
 10.17    * Second Amendment to the 2007 Stock and Long-Term Incentive Plan  Definitive Proxy Statement for the 2010 Annual Meeting of Shareholders   001-34073     A  
 10.18    * 2009 Stock Option Grant Notice to Stephen D. Steinour.  Quarterly Report on Form 10-Q for the quarter ended March 31, 2009.   001-34073     10.1  
 10.19    * Form of Consolidated 2012 Stock Grant Agreement for Executive Officers Pursuant to Huntington’s 2012 Long-Term Incentive Plan.  Quarterly Report on Form 10-Q for the quarter ended June 30, 2012.   001-34073     10.2  
 10.20    * Form of 2014 Restricted Stock Unit Grant Agreement for Executive Officers  Quarterly Report on Form 10-Q dated July 30, 2014   001-34073     10.1  
 10.21    * Form of 2014 Stock Option Grant Agreement for Executive Officers  Quarterly Report on Form 10-Q dated July 30, 2014   001-34073     10.2  
 10.22    * Form of 2014 Performance Stock Unit Grant Agreement for Executive Officers  Quarterly Report on Form 10-Q dated July 30, 2014   001-34073     10.3  
 10.23    * Form of 2014 Restricted Stock Unit Grant Agreement for Executive Officers Version II  Quarterly Report on Form 10-Q dated July 30, 2014   001-34073     10.4  
 10.24    * Form of 2014 Stock Option Grant Agreement for Executive Officers Version II  Quarterly Report on Form 10-Q dated July 30, 2014   001-34073     10.5  
 10.25    * Form of 2014 Performance Stock Unit Grant Agreement for Executive Officers Version II  Quarterly Report on Form 10-Q dated July 30, 2014   001-34073     10.6  
 12.1    Ratio of Earnings to Fixed Charges.      
 12.2    Ratio of Earnings to Fixed Charges and Preferred Dividends.      
 14.1    Code of Business Conduct and Ethics dated January 14, 2003 and revised on January 15, 2013 and Financial Code of Ethics for Chief Executive Officer and Senior Financial Officers, adopted January 18, 2003 and revised on October 15, 2014, are available on our website at https://www.huntington.com/us/corp_governance.htm      
 21.1    Subsidiaries of the Registrant      
 23.1    Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm.      
 24.1    Power of Attorney      
 31.1    Rule 13a-14(a) Certification – Chief Executive Officer.      
 31.2    Rule 13a-14(a) Certification – Chief Financial Officer.      
 32.1    Section 1350 Certification – Chief Executive Officer.      
 32.2    Section 1350 Certification – Chief Financial Officer.      
 101    The following material from Huntington’s Form 10-K Report for the year ended December 31, 2014, formatted in XBRL: (1) Consolidated Balance Sheets, (2) Consolidated Statements of Income, (3), Consolidated Statements of Comprehensive Income, (4) Consolidated Statements of Changes in Shareholders’ Equity, (5) Consolidated Statements of Cash Flows, and (6) the Notes to the Consolidated Financial Statements.      
  * Denotes management contract or compensatory plan or arrangement.      
        

182

Exhibit
Number
Document DescriptionReport or Registration Statement
SEC File or
Registration
Number
Exhibit
Reference
2.1Agreement and Plan of Merger, dated as of January 25, 2016, by and among Huntington Bancshares Incorporated, FirstMerit Corporation, and West Subsidiary Corporation.Current Report on Form 8-K dated January 28, 2016.001-340732.1
3.1Articles of Restatement of Charter.Annual Report on Form 10-K for the year ended December 31, 1993.000-025253(i)
3.2Articles of Amendment to Articles of Restatement of Charter.Current Report on Form 8-K dated May 31, 2007000-025253.1
3.3Articles of Amendment to Articles of Restatement of CharterCurrent Report on Form 8-K dated May 7, 2008000-025253.1
3.4Articles of Amendment to Articles of Restatement of CharterCurrent Report on Form 8-K dated April 27, 2010001-340733.1
3.5Articles Supplementary of Huntington Bancshares Incorporated, as of April 22, 2008.Current Report on Form 8-K dated April 22, 2008000-025253.1
3.6Articles Supplementary of Huntington Bancshares Incorporated, as of April 22, 2008.Current Report on Form 8-K dated April 22, 2008000-025253.2
3.7Articles Supplementary of Huntington Bancshares Incorporated, as of November 12, 2008.Current Report on Form 8-K dated November 12, 2008001-340733.1
3.8Articles Supplementary of Huntington Bancshares Incorporated, as of December 31, 2006.Annual Report on Form 10-K for the year ended December 31, 2006000-025253.4
3.9Articles Supplementary of Huntington Bancshares Incorporated, as of December 28, 2011Current Report on Form 8-K dated December 28, 2011001-340733.1
3.10Bylaws of Huntington Bancshares Incorporated, as amended and restated, as of July 16, 2014.Current Report on Form 8-K dated July 17, 2014.001-340733.1
4.1Instruments defining the Rights of Security Holders — reference is made to Articles Fifth, Eighth, and Tenth of Articles of Restatement of Charter, as amended and supplemented. Instruments defining the rights of holders of long-term debt will be furnished to the Securities and Exchange Commission upon request.   
10.1* Form of Executive Agreement for certain executive officers.Current Report on Form 8-K, dated November 28, 2012001-3407310.3
10.2* Management Incentive Plan for Covered Officers as amended and restated effective for plan years beginning on or after January 1, 2011.Definitive Proxy Statement for the 2011 Annual Meeting of Shareholders001-34073A
10.3* Huntington Supplemental Retirement Income Plan, amended and restated, effective December 31, 2013.Annual Report on Form 10-K for the year ended December 31, 2013.001-3407310.3
10.4* Deferred Compensation Plan and Trust for DirectorsPost-Effective Amendment No. 2 to Registration Statement on Form S-8 filed on January 28, 1991.33-105464(a)
10.5* Deferred Compensation Plan and Trust for Huntington Bancshares Incorporated DirectorsRegistration Statement on Form S-8 filed on July 19, 1991.33-417744(a)
10.6* First Amendment to Huntington Bancshares Incorporated Deferred Compensation Plan and Trust for Huntington Bancshares Incorporated DirectorsQuarterly Report on Form 10-Q for the quarter ended March 31, 2001000-0252510(q)
10.7* Executive Deferred Compensation Plan, as amended and restated on January 1, 2012.Annual Report on Form 10-K for the year ended December 31, 2012001-3407310.7
10.8* The Huntington Supplemental Stock Purchase and Tax Savings Plan and Trust, amended and restated, effective January 1, 2014Annual Report on Form 10-K for the year ended December 31, 2013.001-3407310.8
10.9* Form of Employment Agreement between Stephen D. Steinour and Huntington Bancshares Incorporated effective December 1, 2012.Current Report on Form 8-K dated November 28, 2012.001-3407310.1
10.10* Form of Executive Agreement between Stephen D. Steinour and Huntington Bancshares Incorporated effective December 1, 2012.Current Report on Form 8-K dated November 28, 2012.001-3407310.2

10.11* Restricted Stock Unit Grant Notice with three year vesting
Current Report on Form 8-K dated
July 24, 2006
000-0252599.1
10.12* Restricted Stock Unit Grant Notice with six month vesting
Current Report on Form 8-K dated
July 24, 2006
000-0252599.2
10.13* Restricted Stock Unit Deferral Agreement
Current Report on Form 8-K dated
July 24, 2006
000-0252599.3
10.14* Director Deferred Stock Award Notice
Current Report on Form 8-K dated
July 24, 2006
000-0252599.4
10.15* Huntington Bancshares Incorporated 2007 Stock and Long-Term Incentive PlanDefinitive Proxy Statement for the 2007 Annual Meeting of Stockholders000-02525G
10.16* First Amendment to the 2007 Stock and Long-Term Incentive PlanQuarterly Report on Form 10-Q for the quarter ended September 30, 2007000-0252510.7
10.17* Second Amendment to the 2007 Stock and Long-Term Incentive PlanDefinitive Proxy Statement for the 2010 Annual Meeting of Shareholders001-34073A
10.18* 2009 Stock Option Grant Notice to Stephen D. Steinour.Quarterly Report on Form 10-Q for the quarter ended March 31, 2009.001-3407310.1
10.19* Form of Consolidated 2012 Stock Grant Agreement for Executive Officers Pursuant to Huntington’s 2012 Long-Term Incentive Plan.Quarterly Report on Form 10-Q for the quarter ended June 30, 2012.001-3407310.2
10.20* Form of 2014 Restricted Stock Unit Grant Agreement for Executive OfficersQuarterly Report on Form 10-Q dated July 30, 2014001-3407310.1
10.21* Form of 2014 Stock Option Grant Agreement for Executive OfficersQuarterly Report on Form 10-Q for the quarter ended June 30, 2014001-3407310.2
10.22* Form of 2014 Performance Stock Unit Grant Agreement for Executive OfficersQuarterly Report on Form 10-Q for the quarter ended June 30, 2014001-3407310.3
10.23* Form of 2014 Restricted Stock Unit Grant Agreement for Executive Officers Version IIQuarterly Report on Form 10-Q for the quarter ended June 30, 2014001-3407310.4
10.24* Form of 2014 Stock Option Grant Agreement for Executive Officers Version IIQuarterly Report on Form 10-Q for the quarter ended June 30, 2014001-3407310.5
10.25*Form of 2014 Performance Stock Unit Grant Agreement for Executive Officers Version IIQuarterly Report on Form 10-Q for the quarter ended June 30, 2014001-3407310.6
10.26*Huntington Bancshares Incorporated 2012 Long-Term Incentive Plan. Definitive Proxy Statement for the 2012 Annual Meeting of Shareholders.Definitive Proxy Statement for the 2012 Annual Meeting of Shareholders.001-34073A
10.27*Huntington Bancshares Incorporated 2015 Long-Term Incentive Plan. Definitive Proxy Statement for the 2015 Annual Meeting of ShareholdersDefinitive Proxy Statement for the 2015 Annual Meeting of Shareholders001-34073A
10.28*Form of 2015 Stock Option Grant AgreementQuarterly Report on Form 10-Q for the quarter ended June 30, 2015.001-3407310.2
10.29*Form of 2015 Restricted Stock Unit Grant Agreement.Quarterly Report on Form 10-Q for the quarter ended June 30, 2015.001-3407310.3
10.30*Form of 2015 Performance Share Unit Grant Agreement.Quarterly Report on Form 10-Q for the quarter ended June 30, 2015.001-3407310.4
10.31*Huntington Bancshares Incorporated Restricted Stock Unit Grant Agreement.Quarterly Report on Form 10-Q for the quarter ended June 30, 2015.001-3407310.1
12.1Ratio of Earnings to Fixed Charges.   
12.2Ratio of Earnings to Fixed Charges and Preferred Dividends.   
14.1Code of Business Conduct and Ethics dated January 14, 2003 and revised on January 15, 2013 and Financial Code of Ethics for Chief Executive Officer and Senior Financial Officers, adopted January 18, 2003 and revised on October 15, 2014, are available on our website at https://www.huntington.com/us/corp_governance.htm   
21.1Subsidiaries of the Registrant   
23.1Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm.   
23.2Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm.   
24.1Power of Attorney   
31.1Rule 13a-14(a) Certification – Chief Executive Officer.   
31.2Rule 13a-14(a) Certification – Chief Financial Officer.   
32.1Section 1350 Certification – Chief Executive Officer.   
32.2Section 1350 Certification – Chief Financial Officer.   
101The following material from Huntington’s Form 10-K Report for the year ended December 31, 2016, formatted in XBRL: (1) Consolidated Balance Sheets, (2) Consolidated Statements of Income, (3), Consolidated Statements of Comprehensive Income, (4) Consolidated Statements of Changes in Shareholders’ Equity, (5) Consolidated Statements of Cash Flows, and (6) the Notes to the Consolidated Financial Statements.   
 * Denotes management contract or compensatory plan or arrangement.   


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