Huntington National Bank 2014 Annual Report Download - page 188

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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
(1) Represents the principal amount of debentures issued to each trust, including unamortized original issue discount.
(2) Variable effective rate at December 31, 2014, based on three month LIBOR + 0.70.
(3) Variable effective rate at December 31, 2014, based on three month LIBOR + 0.625.
(4) Variable effective rate at December 31, 2014, based on three month LIBOR + 1.40.
(5) Variable effective rate (including impact of purchase accounting accretion) at December 31, 2014, 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-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.