Huntington National Bank 2015 Annual Report Download - page 153

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December 31, 2015 December 31, 2014
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) 11.10 % $ (5,543)$
(10,648) 11.40 % $ (5,289) $ (10,164)
Spread over forward interest rate swap rates 875 bps (4,662)(9,017) 856 bps (4,343) (8,403)
Total servicing, late and other ancillary fees included in mortgage banking income was $47 million, $44 million, and $44 million
for the years ended December 31, 2015, 2014, and 2013, respectively. Total amortization and impairment of capitalized servicing
assets included in mortgage banking income was $27 million, $24 million, and $29 million for the years ended December 31, 2015,
2014, and 2013, respectively. The unpaid principal balance of residential mortgage loans serviced for third parties was $16.2 billion,
$15.6 billion, and $15.2 billion at December 31, 2015, 2014, and 2013, 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, 2015, 2014, and 2013:
Year Ended December 31,
(dollar amounts in thousands) 2015 2014 (1) 2013 (1)
Automobile loans securitized with servicing retained $ 750,000 — —
Pretax gains resulting from above loan sales (2) 5,333 — —
(1) Huntington did not sell or securitize any automobile loans in 2014 or 2013.
(2) Recorded in gain on sale of loans
In the 2015 second quarter, the UPB of automobile loans totaling $750 million were transferred to a trust in a securitization
transaction in exchange for $780 million of net proceeds. The securitization and resulting sale of all underlying securities qualified for
sale accounting. As a result of this transaction, Huntington recognized a $5 million gain which is reflected in gain on sale of loans on
the Consolidated Statements of Income and recorded an $11 million servicing asset which is reflected in accrued income and other
assets on the Consolidated Balance Sheets.
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. 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, 2015, and 2014, and the
fair value at the end of each period were as follows:
(dollar amounts in thousands) 2015 2014
Carrying value, beginning of year $ 6,898 $ 17,672
New servicing assets created 11,180 —
Amortization and other (9,307) (10,774)
Carrying value, end of year $ 8,771 $ 6,898
Fair value, end of year $ 9,127 $ 6,948
Weighted-average contractual life (years) 3.2 2.6
A summary of key assumptions and the sensitivity of the automobile loan servicing rights value to changes in these assumptions
at December 31, 2015, and 2014 follows: