Huntington Bancshares Incorporated Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Variable Interest Entities

Variable Interest Entities

3 Months Ended

Mar. 31, 2012

Variable Interest Entities [Abstract]

VARIABLE INTEREST ENTITIES

15. VIEs

Consolidated VIEs

Consolidated VIEs at March 31, 2012, consisted of 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.

The following tables present the carrying amount and classification of the consolidated trusts' assets and liabilities that were included in the Unaudited Condensed Consolidated Balance Sheets at March 31, 2012, December 31, 2011, and March 31, 2011:

		March 31, 2012
			2009		2008		2006		Other
			Automobile		Automobile		Automobile		Consolidated
(dollar amounts in thousands)			Trust		Trust		Trust		Trusts		Total
Assets:
	Cash	$	19,178	$	12,854	$	54,521	$	---	$	86,553
	Loans and leases		250,774		101,367		601,736		---		953,877
	Allowance for loan and lease losses		---		(770)		(4,573)		---		(5,343)
	Net loans and leases		250,774		100,597		597,163		---		948,534
	Accrued income and other assets		1,014		427		2,334		338		4,113
Total assets		$	270,966	$	113,878	$	654,018	$	338	$	1,039,200

Liabilities:
	Other long-term debt	$	76,691	$	---	$	225,236	$	---	$	301,927
	Accrued interest and other liabilities		194		---		56		338		588
Total liabilities		$	76,885	$	---	$	225,292	$	338	$	302,515

		December 31, 2011
			2009		2008		2006		Other
			Automobile		Automobile		Automobile		Consolidated
(dollar amounts in thousands)			Trust		Trust		Trust		Trusts		Total
Assets:
	Cash	$	18,212	$	12,722	$	52,325	$	---	$	83,259
	Loans and leases		296,250		131,563		704,345		---		1,132,158
	Allowance for loan and lease losses		---		(1,118)		(5,987)		---		(7,105)
	Net loans and leases		296,250		130,445		698,358		---		1,125,053
	Accrued income and other assets		1,692		610		2,959		1,117		6,378
Total assets		$	316,154	$	143,777	$	753,642	$	1,117	$	1,214,690

Liabilities:
	Other long-term debt	$	123,039	$	18,230	$	333,644	$	---	$	474,913
	Accrued interest and other liabilities		298		40		88		419		845
Total liabilities		$	123,337	$	18,270	$	333,732	$	419	$	475,758

		March 31, 2011
			2009		2008		2006		Other
			Automobile		Automobile		Automobile		Consolidated
(dollar amounts in thousands)			Trust		Trust		Trust		Trusts		Total
Assets:
	Cash	$	26,724	$	20,876	$	69,902	$	---	$	117,502
	Loans and leases		458,851		245,332		1,057,647		---		1,761,830
	Allowance for loan and lease losses		---		(2,134)		(9,202)		---		(11,336)
	Net loans and leases		458,851		243,198		1,048,445		---		1,750,494
	Accrued income and other assets		2,087		1,041		4,297		5,971		13,396
Total assets		$	487,662	$	265,115	$	1,122,644	$	5,971	$	1,881,392

Liabilities:
	Other long-term debt	$	294,905	$	103,002	$	746,421	$	---	$	1,144,328
	Accrued interest and other liabilities		590		214		173		5,100		6,077
Total liabilities		$	295,495	$	103,216	$	746,594	$	5,100	$	1,150,405

The automobile loans and leases were designated to repay the securitized notes. Huntington services the loans and leases and uses the proceeds from principal and interest payments to pay the securitized notes during the amortization period. Huntington has not provided financial or other support that was not previously contractually required.

Unconsolidated VIEs

The following tables provide a summary of the assets and liabilities included in Huntington's Unaudited Condensed Consolidated Financial Statements, as well as the maximum exposure to losses, associated with its' interests related to unconsolidated VIEs for which Huntington holds an interest, but is not the primary beneficiary, to the VIE at March 31, 2012, December 31, 2011, and March 31, 2011:

	March 31, 2012
(dollar amounts in thousands)		Total Assets		Total Liabilities		Maximum Exposure to Loss

2012 Automobile Trust	$	19,202	$	---	$	19,202
2011 Automobile Trust		11,578		---		11,578
Tower Hill Securities, Inc.		89,528		65,000		89,528
Trust-Preferred Securities		17,364		554,417		---
Low Income Housing Tax Credit Partnerships		376,231		152,711		376,231
Total	$	513,903	$	772,128	$	496,539

	December 31, 2011
(dollar amounts in thousands)		Total Assets		Total Liabilities		Maximum Exposure to Loss

2011 Automobile Trust	$	13,377	$	---	$	13,377
Tower Hill Securities, Inc.		90,514		65,000		90,514
Trust-Preferred Securities		17,364		554,496		---
Low Income Housing Tax Credit Partnerships		376,098		157,754		376,098
Total	$	497,353	$	777,250	$	479,989

	March 31, 2011
(dollar amounts in thousands)		Total Assets		Total Liabilities		Maximum Exposure to Loss

Tower Hill Securities, Inc.	$	89,256	$	65,000	$	89,256
Trust-Preferred Securities		17,519		592,542		---
Low Income Housing Tax Credit Partnerships		313,736		141,287		313,736
Total	$	420,511	$	798,829	$	402,992

2012 AUTOMOBILE TRUST and 2011 AUTOMOBILE TRUST

During the 2012 first quarter and 2011 third quarter, we transferred automobile loans totaling $1.3 billion and $1.0 billion, respectively, to trusts in securitization transactions. The securitizations and the resulting sale of all underlying securities qualified for sale accounting. Huntington has concluded that it is not the primary beneficiary of these trusts because it has neither the obligation to absorb losses of the entities that could potentially be significant to the VIEs nor the right to receive benefits from the entities that could potentially be significant to the VIEs. Huntington is not required and does not currently intend to provide any additional financial support to the trusts. Investors and creditors only have recourse to the assets held by the trusts. The interest Huntington holds in the VIEs relates to servicing rights which are included within accrued income and other assets of Huntington's Unaudited Condensed Consolidated Balance Sheets. The maximum exposure to loss is equal to the carrying value of the servicing asset.

TOWER HILL SECURITIES, INC.

In 2010, we transferred approximately $92.1 million of municipal securities, $86.0 million in Huntington Preferred Capital, Inc. (Real Estate Investment Trust) Class E Preferred Stock and cash of $6.1 million to Tower Hill Securities, Inc. in exchange for $184.1 million of Common and Preferred Stock of Tower Hill Securities, Inc. The municipal securities and the REIT Shares will be used to satisfy $65.0 million of mandatorily redeemable securities issued by Tower Hill Securities, Inc. and are not available to satisfy the general debts and obligations of Huntington or any consolidated affiliates. The transfer was recorded as a secured financing. Interests held by Huntington consist of municipal securities within available for sale and other securities and Series B preferred securities within other long term debt of Huntington's Unaudited Condensed Consolidated Balance Sheets. The maximum exposure to loss is equal to the carrying value of the municipal securities.

TRUST-PREFERRED SECURITIES

Huntington has certain wholly-owned trusts whose assets, liabilities, equity, income, and expenses are not included within Huntington's Unaudited Condensed Consolidated Financial Statements. These trusts have been formed for the sole purpose of issuing trust-preferred securities, from which the proceeds are then invested in Huntington junior subordinated debentures, which are reflected in Huntington's Unaudited Condensed Consolidated Balance Sheet as subordinated notes. The trust securities are the obligations of the trusts, and as such, are not consolidated within Huntington's Unaudited Condensed Consolidated Financial Statements. A list of trust-preferred securities outstanding at March 31, 2012, follows:

					Principal amount of			Investment in
					subordinated note/			unconsolidated
(dollar amounts in thousands)		Rate			debenture issued to trust (1)			subsidiary
Huntington Capital I		1.25	%	(2)		$	111,816		$	6,186
Huntington Capital II		1.10		(3)			54,593			3,093
Huntington Capital III		6.69					114,109			10
BancFirst Ohio Trust Preferred		8.54					23,177			619
Sky Financial Capital Trust I		8.56					64,122			1,856
Sky Financial Capital Trust II		3.51		(4)			30,929			929
Sky Financial Capital Trust III		1.98		(5)			72,165			2,165
Sky Financial Capital Trust IV		1.98		(5)			77,320			2,320
Prospect Trust I		3.82		(6)			6,186			186
Total						$	554,417		$	17,364

(1)	Represents the principal amount of debentures issued to each trust, including unamortized original issue discount.
(2)	Variable effective rate at March 31, 2012, based on three month LIBOR + 0.70.
(3)	Variable effective rate at March 31, 2012, based on three month LIBOR + 0.625.
(4)	Variable effective rate at March 31, 2012, based on three month LIBOR + 2.95.
(5)	Variable effective rate at March 31, 2012, based on three month LIBOR + 1.40.
(6)	Variable effective rate at March 31, 2012, based on three month LIBOR + 3.25.

Each issue of the junior subordinated debentures has an interest rate equal to the corresponding trust securities distribution rate. Huntington has the right to defer payment of interest on the debentures at any time, or from time-to-time for a period not exceeding five years, provided that no extension period may extend beyond the stated maturity of the related debentures. During any such extension period, distributions to the trust securities will also be deferred and Huntington's ability to pay dividends on its common stock will be restricted. Periodic cash payments and payments upon liquidation or redemption with respect to trust securities are guaranteed by Huntington to the extent of funds held by the trusts. The guarantee ranks subordinate and junior in right of payment to all indebtedness of the Company to the same extent as the junior subordinated debt. The guarantee does not place a limitation on the amount of additional indebtedness that may be incurred by Huntington.

LOW INCOME HOUSING TAX CREDIT PARTNERSHIPS

Huntington makes certain equity investments in various limited partnerships that sponsor affordable housing projects utilizing the Low Income Housing Tax Credit (LIHTC) pursuant to Section 42 of the Internal Revenue Code. The purpose of these investments is to achieve a satisfactory return on capital, to facilitate the sale of additional affordable housing product offerings, and to assist in achieving goals associated with the Community Reinvestment Act. The primary activities of the limited partnerships include the identification, development, and operation of multi family housing that is leased to qualifying residential tenants. Generally, these types of investments are funded through a combination of debt and equity.

Huntington is a limited partner in each Low Income Housing Tax Credit Partnership. A separate unrelated third party is the general partner. Each limited partnership is managed by the general partner, who exercises full and exclusive control over the affairs of the limited partnership. The general partner has all the rights, powers and authority granted or permitted to be granted to a general partner of a limited partnership under the Ohio Revised Uniform Limited Partnership Act. Duties entrusted to the general partner of each limited partnership include, but are not limited to: investment in operating companies, company expenditures, investment of excess funds, borrowing funds, employment of agents, disposition of fund property, prepayment and refinancing of liabilities, votes and consents, contract authority, disbursement of funds, accounting methods, tax elections, bank accounts, insurance, litigation, cash reserve, and use of working capital reserve funds. Except for limited rights granted to consent to certain transactions, the limited partner(s) may not participate in the operation, management, or control of the limited partnership's business, transact any business in the limited partnership's name or have any power to sign documents for or otherwise bind the limited partnership. In addition, the general partner may only be removed by the limited partner(s) in the event the general partner fails to comply with the terms of the agreement and/or is negligent in performing its duties.

Huntington believes the general partner of each limited partnership has the power to direct the activities which most significantly affect the performance of each partnership, therefore, Huntington has determined that it is not the primary beneficiary of any LIHTC partnership. Huntington uses the equity or effective yield method to account for its investments in these entities. These investments are included in accrued income and other assets. At March 31, 2012, December 31, 2011, and March 31, 2011, Huntington had net investment commitments of $376.2 million, $376.1 million, and $313.7 million, respectively, of which $334.9 million, $322.5 million, and $259.1 million, respectively, were funded. The unfunded portion is included in accrued expenses and other liabilities.

- Definition

Note disclosure of the significant judgments and assumptions made in determining whether a variable interest (as defined) held by the entity requires the variable interest entity (VIE) (as defined) to be consolidated and (or) disclose information about its involvement with the VIE, individually or in aggregate (as applicable); the nature of restrictions, if any, on the consolidated VIE's assets and on the settlement of its liabilities reported by an entity in its statement of financial position, including the carrying amounts of such assets and liabilities; the nature of, and changes in, the risks associated with involvement in the VIE; how involvement with the VIE affects the entity's financial position, financial performance, and cash flows; the lack of recourse if creditors (or beneficial interest holders) of the consolidated VIE have no recourse to the general credit of the primary beneficiary (if applicable); the terms of arrangements, giving consideration to both explicit arrangements and implicit variable interests, if any, that could require the entity to provide financial support to the VIE, including events or circumstances that could expose the entity to a loss; the methodology used by the entity for determining whether or not it is the primary beneficiary of the variable interest entity; the significant factors considered and judgments made in determining that the power to direct the activities of a VIE that most significantly impact the VIE's economic performance are shared (as defined); the carrying amounts and classification of assets and liabilities of the VIE included in the statement of financial position; the entity's maximum exposure to loss, if any, as a result of its involvement with the VIE, including how the maximum exposure is determined and significant sources of the entity's exposure to the VIE; a comparison of the carrying amounts of the assets and liabilities and the entity's maximum exposure to loss; information about any liquidity arrangements, guarantees, and (or) other commitments by third parties that may affect the fair value or risk of the entity's variable interest in the VIE; whether or not the entity has provided financial support or other support (explicitly or implicitly) to the VIE that it was not previously contractually required to provide or whether the entity intends to provide that support, including the type and amount of the support and the primary reasons for providing the support; and supplemental information the entity determines necessary to provide.

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