Huntington National Bank 2014 Annual Report Download - page 145

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The following table presents the credit ratings for our CDO and private label CMO securities as of December 31, 2014 and 2013:
Credit Ratings of Selected Investment Securities
(dollar amounts in thousands) Average Credit Rating of Fair Value Amount (1)
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 securities would be repaid. The contractual terms 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, and therefore, does not consider them to be other-than-
temporarily impaired at December 31, 2014.
The following table summarizes the relevant characteristics of our 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 the most senior class.
Collateralized Debt Obligation Securities Data
(dollar amounts in thousands) Actual
Deferrals Expected
and Defaults
# of Issuers Defaults as a % of
Lowest Currently as a % of Remaining
Amortized Fair Unrealized Credit Performing/ Original Performing Excess
Deal Name Par Value Cost Value Loss (2) Rating (3) Remaining (4) Collateral Collateral 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 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.