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

9 Months Ended

Sep. 30, 2011

Variable Interest Entities [Abstract]

VARIABLE INTEREST ENTITIES

15. VIEs

Consolidated VIEs

Consolidated VIEs at September 30, 2011, consisted of the Franklin 2009 Trust and 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 carrying amount and classification of the trusts' assets and liabilities that are included in the Unaudited Condensed Consolidated Balance Sheet are as follows:

			September 30, 2011
			Franklin
(dollar amounts in thousands)			2009 Trust		2009 Trust		2008 Trust		2006 Trust		Total
Assets:
	Cash	$	---	$	20,095	$	14,551	$	56,132	$	90,778
	Loans and leases		---		344,535		164,095		810,666		1,319,296
	Allowance for loan and lease losses		---		---		(1,444)		(7,134)		(8,578)
	Net loans and leases		---		344,535		162,651		803,532		1,310,718
	Accrued income and other assets		1,753		1,607		667		3,145		7,172
Total assets		$	1,753	$	366,237	$	177,869	$	862,809	$	1,408,668

Liabilities:
	Other long-term debt	$	---	$	173,000	$	40,887	$	450,365	$	664,252
	Accrued interest and other liabilities		988		388		65		102		1,543
Total liabilities		$	988	$	173,388	$	40,952	$	450,467	$	665,795

Unconsolidated VIEs

At September 30, 2011, unconsolidated VIEs consisted of an automobile loan and lease securitization trust formed in 2011. Huntington has concluded that it is not the primary beneficiary of this trust because it has neither the obligation to absorb losses of the entity that could potentially be significant to the VIE nor the right to receive benefits from the entity that could potentially be significant to the VIE. Huntington is not required, and does not currently intend, to provide any additional financial support to this trust. Investors and creditors only have recourse to the assets held by the trust.

The carrying amount and classification of the trust's assets and liabilities that are not included in the Unaudited Condensed Consolidated Balance Sheet were as follows:

		September 30, 2011

(dollar amounts in thousands)			2011 Trust
Assets:
	Cash	$	34,629
	Loans and leases		994,052
	Allowance for loan and lease losses		---
	Net loans and leases		994,052
	Accrued income and other assets		2,190
Total assets		$	1,030,871

Liabilities:
	Other long-term debt	$	1,000,000
	Accrued interest and other liabilities		792
Total liabilities		$	1,000,792

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 September 30, 2011, follows:

					Principal amount of			Investment in
					subordinated note/			unconsolidated
(dollar amounts in thousands)		Rate			debenture issued to trust (1)			subsidiary (2)
Huntington Capital I		0.95	%	(3)		$	138,816		$	6,186
Huntington Capital II		0.97		(4)			55,093			3,093
Huntington Capital III		6.69					114,094			10
BancFirst Ohio Trust Preferred		8.54					23,206			619
Sky Financial Capital Trust I		8.56					64,264			1,856
Sky Financial Capital Trust II		3.19		(5)			30,929			929
Sky Financial Capital Trust III		1.71		(6)			77,320			2,320
Sky Financial Capital Trust IV		1.64		(6)			77,320			2,320
Prospect Trust I		3.50		(7)			6,186			186
Total						$	587,228		$	17,519

(1)	Represents the principal amount of debentures issued to each trust, including unamortized original issue discount.
(2)	Huntington’s investment in the unconsolidated trusts represents the only risk of loss.
(3)	Variable effective rate at September 30, 2011, based on three month LIBOR + 0.70.
(4)	Variable effective rate at September 30, 2011, based on three month LIBOR + 0.625.
(5)	Variable effective rate at September 30, 2011, based on three month LIBOR + 2.95.
(6)	Variable effective rate at September 30, 2011, based on three month LIBOR + 1.40.
(7)	Variable effective rate at September 30, 2011, 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 does not have the power to direct the activities of these VIEs that most significantly affect their economic performance and is not the primary beneficiary. Huntington uses the equity method to account for the majority of its investments in these entities. These investments are included in accrued income and other assets. At September 30, 2011, December 31, 2010, and September 30, 2010, Huntington had commitments of $345.8 million, $316.0 million, and $269.4 million, respectively, of which $304.1 million, $260.1 million, and $238.9 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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