Huntington National Bank 2013 Annual Report Download - page 181

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175
The following table presents the gains and (losses) recognized in OCI and the location in the Consolidated Statements of Income
of gains and (losses) reclassified from OCI into earnings for derivatives designated as effective cash flow hedges:
Derivatives in cash
flow hedging
relationships
Amount of gain or (loss)
recognized in OCI on
derivatives (effective portion)
Location of gain or (loss)
reclassified from accumulated
OCI into earnings (effective
portion)
Amount of (gain) or loss
reclassified from accumulated
OCI into earnings (effective
portion) (pre-tax)
(dollar amounts in thousands) 2013 2012 2011 2013 2012 2011
Interest rate contracts
Loans $ (56,056) $ (2,866) $ 2,469
Interest and fee income - loans and
leases $ (14,979) $ 14,849 $ 3,080
Investment securities --- (703) 703
Interest and fee income -
investment securities (209) --- ---
Subordinated notes --- --- ---
Interest expense - subordinated
notes and other long-term debt --- 143 27
Total $ (56,056) $ (3,569) $ 3,172 $ (15,188) $ 14,992 $ 3,107
Reclassified gains and losses on swaps related to loans and investment securities and swaps related to subordinated debt are
recorded within interest income and interest expense, respectively. During the next twelve months, Huntington expects to reclassify to
earnings $26.4 million after-tax, of unrealized gains on cash flow hedging derivatives currently in OCI.
The following table presents the gains and (losses) recognized in noninterest income for the ineffective portion of interest rate
contracts for derivatives designated as cash flow hedges for the years ending December 31, 2013, 2012, and 2011:
December 31,
(dollar amounts in thousands) 2013 2012 2011
Derivatives in cash flow hedging relationships
Interest rate contracts
Loans $ 878 $ (179) $ 98
Derivatives used in trading activities
Various derivative financial instruments are offered to enable customers to meet their financing and investing objectives and for
their risk management purposes. Derivative financial instruments used in trading activities consisted predominantly of interest rate
swaps, but also included interest rate caps, floors, and futures, as well as foreign exchange options and commodity contracts. Interest
rate options grant the option holder the right to buy or sell an underlying financial instrument for a predetermined price before the
contract expires. Interest rate futures are commitments to either purchase or sell a financial instrument at a future date for a specified
price or yield and may be settled in cash or through delivery of the underlying financial instrument. Interest rate caps and floors are
option-based contracts that entitle the buyer to receive cash payments based on the difference between a designated reference rate and
a strike price, applied to a notional amount. Written options, primarily caps, expose 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, 2013 and 2012, were $80.5 million and $63.4 million,
respectively. The total notional values of derivative financial instruments used by Huntington on behalf of customers, including
offsetting derivatives, were $14.3 billion and $12.0 billion at December 31, 2013 and 2012, respectively. Huntington’s credit risks
from interest rate swaps used for trading purposes were $160.4 million and $296.1 million at the same dates, respectively.
Financial assets and liabilities that are offset in the Consolidated Balance Sheets
Huntington records derivatives at fair value as further described in Note 19. Huntington records these derivatives net of any
master netting arrangement in the Consolidated Balance Sheets. Collateral agreements are regularly entered into as part of the
underlying derivative agreements with Huntington’s counterparties to mitigate counterparty credit risk.