Huntington National Bank 2007 Annual Report Download - page 109

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The following table presents additional information about the interest rate swaps used in Huntington’s Asset and Liability
Management activities at December 31, 2007:
(in thousands )
Notional
Value
Average
Maturity
(years)
Fair
Value Receive Pay
Weighted-Average Rate
Liability conversion swaps
Receive fixed — generic $ 820,000 8.5 $16,881 5.28% 5.24%
Receive fixed — callable 540,000 5.8 (4,604) 4.80 4.91
Pay fixed — generic 840,000 1.5 (9,050) 5.14 4.98
Total liability conversion swaps $2,200,000 5.2 $ 3,227 5.11% 5.06%
Interest rate caps used in Huntington’s Asset and Liability Management activities at December 31, 2007, are shown in the table
below:
(in thousands )
Notional
Value
Average
Maturity
(years)
Fair
Value
Weighted-Average
Strike Rate
Interest rate caps — purchased $500,000 1.1 $57 5.5%
These derivative financial instruments were entered into for the purpose of altering the interest rate risk of assets and liabilities.
Consequently, net amounts receivable or payable on contracts hedging either interest earning assets or interest bearing liabilities
were accrued as an adjustment to either interest income or interest expense. The net amount resulted in a decrease to net interest
income of ($3.0 million) in 2007, ($3.1 million) in 2006 and an increase of $23.6 million in 2005.
The amounts recognized in connection with the ineffective portion of Huntington’s fair value hedging in 2007 was ($1.1 million),
and in 2006 was $1.4 million. The amounts recognized in 2005 were insignificant. During 2007, 2006, and 2005, an insignificant
net loss was recognized in connection with the ineffective portion of its cash flow hedging instruments. No amounts were excluded
from the assessment of effectiveness during 2007, 2006, and 2005 for derivatives designated as either fair value or cash flow hedges.
At December 31, 2006, the fair value of the swap portfolio used for asset and liability management was a liability of $9.6 million.
These values must be viewed in the context of the overall financial structure of Huntington, including the aggregate net position of
all on- and off-balance sheet financial instruments. Collateral agreements are regularly entered into as part of the underlying
derivative agreements with Huntington’s counterparties to mitigate the credit risk associated with derivatives. At December 31,
2007 and 2006, aggregate credit risk associated with these derivatives, net of collateral that has been pledged by the counterparty,
was $31.4 million and $42.6 million, respectively. The credit risk associated with interest rate swaps is calculated after considering
master netting agreements.
During 2006, Huntington terminated certain interest rate swaps used to hedge the future expected cash flows of certain FHLB
advances and deferred these gains in accumulated other comprehensive income. The deferred swap gains were being amortized
into interest expense over the remaining terms of the outstanding advances. During the second quarter of 2007, Huntington
prepaid the FHLB advances, and recognized a gain of $4.1 million, which represented the remaining unamortized portion of the
terminated swap gains.
During the 2007 third quarter, Huntington recognized a gain of $0.4 million on the remaining portion of unamortized interest
rate swaps used to hedge the future expected cash flows relating to certain trust preferred debt that was redeemed during the
quarter.
A total of $4.4 million of the unrealized net losses on cash flow hedges is expected to be recognized in 2008.
107
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS HUNTINGTON BANCSHARES INCORPORATED