Huntington National Bank 2013 Annual Report Download - page 179

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20. DERIVATIVE FINANCIAL INSTRUMENTS
Derivative financial instruments are recorded in the Consolidated Balance Sheets as either an asset or a liability (in accrued
income and other assets or accrued expenses and other liabilities, respectively) and measured at fair value.
Derivatives used in Asset and Liability Management Activities
Huntington engages in balance sheet hedging activity, principally for asset liability management purposes, to convert fixed
rate assets or liabilities into floating rate or vice versa. Balance sheet hedging activity is arranged to receive hedge accounting
treatment and is classified as either fair value or cash flow hedges. Fair value hedges are purchased to convert deposits and
subordinated and other long-term debt from fixed-rate obligations to floating rate. Cash flow hedges are used to convert floating rate
loans made to customers into fixed rate loans.
The following table presents the gross notional values of derivatives used in Huntington’s asset and liability management
activities at December 31, 2013, identified by the underlying interest rate-sensitive instruments:
Fair Value Cash Flow
(dollar amounts in thousands) Hedges Hedges Total
Instruments associated with:
Loans $ --- $ 8,548,000 $ 8,548,000
Deposits 96,300 --- 96,300
Subordinated notes 598,000 --- 598,000
Other long-term debt 1,285,000 --- 1,285,000
Total notional value at December 31, 2013 $ 1,979,300 $ 8,548,000 $ 10,527,300
The following table presents additional information about the interest rate swaps and caps used in Huntington’s asset and liability
management activities at December 31, 2013:
Average Weighted-Average
Notional Maturity Fair Rate
(dollar amounts in thousands ) Value (years) Value Receive Pay
Asset conversion swaps
Receive fixed - generic $ 8,548,000 2.8 $ (31,446) 0.93 % 0.40 %
Liability conversion swaps
Receive fixed - generic 1,979,300 3.7 56,123 2.14 0.27
Total swap portfolio $ 10,527,300 3.0 $ 24,677 1.16 % 0.37 %
These derivative financial instruments were entered into for the purpose of managing 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 amounts resulted in an increase to net interest income
of $95.4 million, $107.5 million, and $113.9 million for the years ended December 31, 2013, 2012, and 2011, respectively.
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, 2013, 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, 2013 and 2012 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: