Huntington National Bank 2012 Annual Report Download - page 184

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The following provides a general description of the impact of a change in an unobservable input on the fair value measurement
and the interrelationship between unobservable inputs, where relevant/significant. Interrelationships may also exist between
observable and unobservable inputs. Such relationships have not been included in the discussion below.
A significant change in the unobservable inputs may result in a significant change in the ending fair value measurement of Level
3 instruments. In general, prepayment rates increase when market interest rates decline and decrease when market interest rates rise
and higher prepayment rates generally result in lower fair values for MSR assets, Private-label CMO securities, Asset-backed
securities, and automobile loans.
Credit loss estimates, such as probability of default, constant default, cumulative default, loss given default, cure given deferral,
and loss severity, are driven by the ability of the borrowers to pay their loans and the value of the underlying collateral and are
impacted by changes in macroeconomic conditions, typically increasing when economic conditions worsen and decreasing when
conditions improve. An increase in the estimated prepayment rate typically results in a decrease in estimated credit losses and vice
versa. Higher credit loss estimates generally result in lower fair values. Credit spreads generally increase when liquidity risks and
market volatility increase and decrease when liquidity conditions and market volatility improve.
Discount rates and spread over forward interest rate swap rates typically increase when market interest rates increase and/or credit
and liquidity risks increase and decrease when market interest rates decline and/or credit and liquidity conditions improve. Higher
discount rates and credit spreads generally result in lower fair market values.
Net market price and pull through percentages generally increase when market interest rates increase and decline when market
interest rates decline. Higher net market price and pull through percentages generally result in higher fair values.
Fair values of financial instruments
The following table provides the carrying amounts and estimated fair values of Huntington’s financial instruments that are carried
either at fair value or cost at December 31, 2012 and December 31, 2011:
December 31, 2012 December 31, 2011
Carrying Fair Carrying Fair
(dollar amounts in thousands) Amount Value Amount Value
Financial Assets:
Cash and short-term assets $ 1,333,727 $ 1,333,727 $ 1,206,911 $ 1,206,911
Trading account securities 91,205 91,205 45,899 45,899
Loans held for sale 764,309 773,013 1,618,391 1,638,276
Available-for-sale and other securities 7,566,175 7,566,175 8,078,014 8,078,014
Held-to-maturity securities 1,743,876 1,794,105 640,551 660,186
N
et loans and direct financing leases 39,959,350 38,401,965 37,958,955 36,669,829
Derivatives 385,697 385,697 403,002 403,002
Financial Liabilities:
Deposits 46,252,683 46,330,715 43,279,625 43,406,125
Short-term borrowings 589,814 584,671 1,441,092 1,429,717
Federal Home Loan Bank advances 1,008,959 1,008,959 362,972 362,972
Other long term debt 158,784 156,719 1,231,517 1,232,975
Subordinated notes 1,197,091 1,183,827 1,503,368 1,410,392
Derivatives 152,188 152,188 265,316 265,316