Huntington National Bank 2012 Annual Report Download - page 187

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In connection with securitization activities, Huntington purchased interest rate caps with a notional value totaling $0.6 billion.
These purchased caps were assigned to the securitization trust for the benefit of the security holders. Interest rate caps were also sold
totaling $0.6 billion outside the securitization structure. Both the purchased and sold caps are marked to market through income.
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 2012, the fair value of the swap liability of $0.4 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, 2012 and 2011 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) 2012 2011
Interest rate contracts designated as hedging instruments $ 169,222 $ 175,932
Interest rate contracts not designated as hedging instruments 296,295 309,496
Foreign exchange contracts not designated as hedging instruments 5,605 4,885
Total contracts $ 471,122 $ 490,313
Liability derivatives included in accrued expenses and other liabilities
December 31,
(dollar amounts in thousands) 2012 2011
Interest rate contracts designated as hedging instruments $ --- $ ---
Interest rate contracts not designated as hedging instruments 228,757 252,962
Foreign exchange contracts not designated as hedging instruments 4,655 4,318
Total contracts $ 233,412 $ 257,280
Fair value hedges are purchased to convert deposits and subordinated and other long-term debt from fixed-rate obligations to
floating rate. The changes in fair value of the derivative 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) 2012 2011 2010
Interest rate contracts
Change in fair value of interest rate swaps hedging deposits (1) $ (2,526) $ 801 $ 6,108
Change in fair value of hedged deposits (1) 2,601 (1,050) (6,744)
Change in fair value of interest rate swaps hedging subordinated notes (2) 1,432 45,480 19,319
Change in fair value of hedged subordinated notes (2) (1,432) (45,480) (19,319)
Change in fair value of interest rate swaps hedging other long-term debt (2) 114 2,493 1,847
Change in fair value of hedged other long-term debt (2) (114) (2,493) (1,847)
(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-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.