Huntington National Bank 2005 Annual Report Download - page 105

NOTES TOCONSOLIDATED FINANCIAL STATEMENTS HUNTINGTON BANCSHARES INCORPORATED
1. SIGNIFICANT ACCOUNTING POLICIES
–N ATURE OF O PERATIONS — Huntington Bancshares Incorporated (Huntington) is a multi-state diversified financial holding
company organized under Maryland law in 1966 and headquartered in Columbus, Ohio. Through its subsidiaries, Huntington
is engaged in providing full-service commercial and consumer banking services, mortgage banking services, automobile
financing, equipment leasing, investment management, trust services, and discount brokerage services, as well as reinsuring
private mortgage, credit life and disability insurance, and selling other insurance and financial products and services.
Huntington’s banking offices are located in Ohio, Michigan, West Virginia, Indiana, and Kentucky. Certain activities are also
conducted in other states including Arizona, Florida, Georgia, Maryland, Nevada, New Jersey, North Carolina, Pennsylvania,
South Carolina, and Tennessee. Huntington has foreign offices in the Cayman Islands and in Hong Kong.
–B ASIS OF P RESENTATION — The consolidated financial statements include the accounts of Huntington and its majority-owned
subsidiaries and are presented in accordance with accounting principles generally accepted in the United States (GAAP). All
significant intercompany transactions and balances have been eliminated in consolidation. Companies in which Huntington
holds more than a 50% voting equity interest or are a variable interest entity (VIE) in which Huntington absorbs the majority
of expected losses are consolidated. VIEs in which Huntington does not absorb the majority of expected losses are not
consolidated. For consolidated entities where Huntington holds less than a 100% interest, Huntington recognizes a minority
interest liability (included in accrued expenses and other liabilities) for the equity held by others and minority interest expense
(included in other non-interest expenses) for the portion of the entity’s earnings attributable to minority interests. Investments
in companies that are not consolidated are accounted for using the equity method when Huntington has the ability to exert
significant influence. Those investments in non-marketable securities for which Huntington does not have the ability to exert
significant influence are generally accounted for using the cost method and are periodically evaluated for impairment.
Investments in private investment partnerships are carried at fair value. Investments in private investment partnerships and
investments that are accounted for under the equity method or the cost method are included in accrued income and other
assets and Huntington’s proportional interest in the investments’ earnings are included in other non-interest income.
Huntington evaluates VIEs in which it holds a beneficial interest for consolidation. VIEs, as defined by the Financial
Accounting Standards Board (FASB) Interpretation (FIN) No. 46 (Revised 2003), Consolidation of Variable Interest Entities, are
legal entities with insubstantial equity, whose equity investors lack the ability to make decisions about the entity’s activities, or
whose equity investors do not have the right to receive the residual returns of the entity if they occur. Huntington adopted
FIN 46 (Revised 2003) on July 1, 2003 and, therefore, consolidates these VIEs when it holds a majority of VIEs’ beneficial
interests. The effect of adopting FIN 46 (Revised 2003) in 2003 resulted in a cumulative effect of change in accounting of
$13.3 million.
The preparation of financial statements in conformity with GAAP requires Management to make estimates and assumptions
that affect amounts reported in the financial statements. Actual results could differ from those estimates. Certain prior period
amounts have been reclassified to conform to the current year’s presentation.
–S ECURITIES — Securities purchased with the intention of recognizing short-term profits are classified as trading account
securities and reported at fair value. The unrealized gains or losses on trading account securities are recorded in other non-
interest income. All other securities are designated as investment securities. Investment securities include securities designated
as available for sale, non-marketable equity securities, and, prior to 2005, securities held to maturity. Unrealized gains or losses
on investment securities designated as available for sale are reported as a separate component of accumulated other
comprehensive income/loss in shareholders’ equity. Declines in the value of debt and marketable equity securities that are
considered other-than-temporary are recorded in non-interest income as a securities loss.
Securities transactions are recognized on the trade date (the date the order to buy or sell is executed). The amortized cost of
specific securities sold is used to compute realized gains and losses. Interest and dividends on securities, including amortization
of premiums and accretion of discounts using the effective interest method over the period to maturity, are included in interest
income.
Non-marketable equity securities include stock acquired for regulatory purposes, such as Federal Home Loan Bank stock and
Federal Reserve Bank stock. These securities are generally accounted for at cost and are included in investment securities.
Statement of Financial Accounting Standards (Statement) No. 115, Accounting for Certain Investments in Debt and Equity
Securities, Securities and Exchange Commission (SEC) Staff Accounting Bulletin (SAB) 59, Accounting for Noncurrent
Marketable Equity Securities, FASB Staff Position (FSP) FAS 115-1 and FAS 124-1, The Meaning of Other-Than-Temporary
Impairment and Its Application to Certain Investments, and EITF Issue No. 99-20, Recognition of Interest Income and Impairment
on Purchased and Retained Beneficial Interests in Securitized Financial Assets, provide guidance on determining when an
investment is other-than-temporarily impaired. Investments are reviewed quarterly for indicators of other-than-temporary
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