Huntington National Bank 2011 Annual Report Download - page 211

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.
The net fair values of these derivative financial instruments, for which the gross amounts are included in
accrued income and other assets or accrued expenses and other liabilities at December 31, 2011 and 2010, were
$53.2 million and $46.3 million, respectively. The total notional values of derivative financial instruments used
by Huntington on behalf of customers, including offsetting derivatives, were $10.6 billion and $9.8 billion at
December 31, 2011 and 2010, respectively. Huntington’s credit risks from interest rate swaps used for trading
purposes were $309.5 million and $263.0 million at the same dates, respectively.
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 mortgage 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,
2011 2010
(dollar amounts in thousands)
Derivative assets:
Interest rate lock agreements ....................................... $ 6,770 $ 2,817
Forward trades and options ........................................ 120,669
Total derivative assets ............................................. 6,771 23,486
Derivative liabilities:
Interest rate lock agreements ....................................... (109) (1,445)
Forward trades and options ........................................ (7,927) (883)
Total derivative liabilities .......................................... (8,036) (2,328)
Net derivative asset (liability) ....................................... $(1,265) $21,158
The total notional value of these derivative financial instruments at December 31, 2011 and 2010, was $1.7
billion and $2.6 billion, respectively. The total notional amount at December 31, 2011 corresponds to trading
assets with a fair value of $10.5 million. Total MSR hedging gains and (losses) for the years ended December 31,
2011, 2010, and 2009, were $42.1 million, $55.0 million, and $(37.8) million, respectively. Included in total
MSR hedging gains and losses for the years ended December 31, 2011, 2010, and 2009 were gains and (losses)
related to derivatives instruments of $42.2 million, $64.6 million, and $(41.2) million, respectively. These
amounts are included in mortgage banking income in the Consolidated Statements of Income.
21. VIEs
Consolidated VIEs
Consolidated VIEs at December 31, 2011 consisted of the Franklin 2009 Trust and certain loan
securitization trusts. Loan securitizations include automobile loan and lease securitization trusts formed in 2009,
2008, and 2006. 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.
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