Huntington National Bank 2011 Annual Report Download - page 140

debt and equity securities are classified as available-for-sale and other securities. Unrealized gains or losses on
available-for-sale and other securities are reported as a separate component of accumulated OCI in the
Consolidated Statements of Changes in Shareholders’ Equity. Declines in the value of debt and marketable
equity securities that are considered other-than-temporary are recorded in noninterest income as securities losses.
Huntington evaluates its investment securities portfolio on a quarterly basis for indicators of
OTTI. Huntington assesses whether OTTI has occurred when the fair value of a debt security is less than the
amortized cost basis at the balance sheet date. Management reviews the amount of unrealized loss, the length of
time the security has been in an unrealized loss position, the credit rating history, market trends of similar
security classes, time remaining to maturity, and the source of both interest and principal payments to identify
securities which could potentially be impaired. OTTI is considered to have occurred (1) if Huntington intends to
sell the security; (2) if it is more likely than not Huntington will be required to sell the security before recovery of
its amortized cost basis; or (3) the present value of expected cash flows are not sufficient to recover all
contractually required principal and interest payments. For securities that Huntington does not expect to sell, or it
is not more likely than not to be required to sell, the OTTI is separated into credit and noncredit components. A
discounted cash flow analysis, which includes evaluating the timing of the expected cash flows, is completed for
all debt securities subject to credit impairment. The measurement of the credit loss component is equal to the
difference between the debt security’s cost basis and the present value of its expected future cash flows
discounted at the security’s effective yield. The credit-related OTTI, represented by the expected loss in
principal, is recognized in noninterest income. The remaining difference between the security’s fair value and the
present value of future expected cash flows is due to factors that are not credit-related and, therefore, are
recognized in OCI. Huntington believes that it will fully collect the carrying value of securities on which
noncredit-related impairment has been recognized in OCI. Noncredit-related OTTI results from other factors,
including increased liquidity spreads and extension of the security. For securities which Huntington does expect
to sell, or if it is more likely than not Huntington will be required to sell the security before recovery of its
amortized cost basis, all OTTI is recognized in earnings. Presentation of OTTI is made in the Consolidated
Statements of Income on a gross basis with a reduction for the amount of OTTI recognized in OCI. Once an
OTTI is recorded, when future cash flows can be reasonably estimated, future cash flows are re-allocated
between interest and principal cash flows to provide for a level-yield on the security.
Securities transactions are recognized on the trade date (the date the order to buy or sell is executed). The
carrying value plus any related OCI balance of sold securities 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.
Nonmarketable equity securities include stock acquired for regulatory purposes, such as Federal Home Loan
Bank stock and Federal Reserve Bank stock. These securities are accounted for at cost, evaluated for impairment,
and included in available-for-sale and other securities.
Loans and Leases — Loans and direct financing leases for which Huntington has the intent and ability to
hold for the foreseeable future (at least 12 months), or until maturity or payoff, are classified in the Consolidated
Balance Sheets as loans and leases. Except for loans which are subject to fair value requirements, loans and
leases are carried at the principal amount outstanding, net of unamortized deferred loan origination fees and costs
and net of unearned income. Direct financing leases are reported at the aggregate of lease payments receivable
and estimated residual values, net of unearned and deferred income. Interest income is accrued as earned using
the interest method based on unpaid principal balances. Huntington defers the fees it receives from the
origination of loans and leases, as well as the direct costs of those activities. Huntington also acquires loans at a
premium and at a discount to their contractual values. Huntington amortizes loan discounts, loan premiums, and
net loan origination fees and costs on a level-yield basis over the estimated lives of the related loans.
Loans that Huntington has the intent to sell or securitize are classified as loans held for sale. Loans held for
sale (excluding loans originated or acquired with the intent to sell, which are carried at fair value) are carried at
the lower of cost or fair value less cost to sell. The fair value option was elected for mortgage loans held for sale
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