Huntington National Bank 2012 Annual Report Download - page 185

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The following table presents the level in the fair value hierarchy for the estimated fair values of only Huntington’s financial
instruments that are not already on the Consolidated Balance Sheets at fair value at December 31, 2012 and December 31, 2011:
Estimated Fair Value Measurements at Reporting Date Using Balance at
(dollar amounts in thousands) Level 1 Level 2 Level 3 December 31, 2012
Financial Assets
Loans held for sale $ --- $ --- $ 316,007 $ 316,007
Held-to-maturity securities --- 1,794,105 --- 1,794,105
N
et loans and direct financing leases --- --- 38,259,203 38,259,203
Financial liabilities
Deposits --- 39,136,127 7,194,588 46,330,715
Short-term borrowings --- --- 584,671 584,671
Other long-term debt --- 2,124 154,595 156,719
Subordinated notes --- --- 1,183,827 1,183,827
Estimated Fair Value Measurements at Reporting Date Using Balance at
(dollar amounts in thousands) Level 1 Level 2 Level 3 December 31, 2011
Financial Assets
Loans held for sale $ --- $ --- $ 1,291,755 $ 1,291,755
Held-to-maturity securities --- 660,186 --- 660,186
N
et loans and direct financing leases --- --- 36,373,579 36,373,579
Financial liabilities
Deposits --- 35,049,194 8,356,931 43,406,125
Short-term borrowings --- --- 1,429,717 1,429,717
Other long-term debt --- 937,959 171,977 1,109,936
Subordinated notes --- --- 1,410,392 1,410,392
The short-term nature of certain assets and liabilities result in their carrying value approximating fair value. These include trading
account securities, customers’ acceptance liabilities, short-term borrowings, bank acceptances outstanding, FHLB advances, and cash
and short-term assets, which include cash and due from banks, interest-bearing deposits in banks, and federal funds sold and securities
purchased under resale agreements. Loan commitments and letters of credit generally have short-term, variable-rate features and
contain clauses that limit Huntington’s exposure to changes in customer credit quality. Accordingly, their carrying values, which are
immaterial at the respective balance sheet dates, are reasonable estimates of fair value. Not all the financial instruments listed in the
table above are subject to the disclosure provisions of ASC Topic 820.
Certain assets, the most significant being operating lease assets, bank owned life insurance, and premises and equipment, do not
meet the definition of a financial instrument and are excluded from this disclosure. Similarly, mortgage and nonmortgage servicing
rights, deposit base, and other customer relationship intangibles are not considered financial instruments and are not included above.
Accordingly, this fair value information is not intended to, and does not, represent Huntington’s underlying value. Many of the assets
and liabilities subject to the disclosure requirements are not actively traded, requiring fair values to be estimated by Management.
These estimations necessarily involve the use of judgment about a wide variety of factors, including but not limited to, relevancy of
market prices of comparable instruments, expected future cash flows, and appropriate discount rates.
The following methods and assumptions were used by Huntington to estimate the fair value of the remaining classes of financial
instruments:
Loans and Direct Financing Leases
Variable-rate loans that reprice frequently are based on carrying amounts, as adjusted for estimated credit losses. The fair values for
other loans and leases are estimated using discounted cash flow analyses and employ interest rates currently being offered for loans
and leases with similar terms. The rates take into account the position of the yield curve, as well as an adjustment for prepayment risk,
operating costs, and profit. This value is also reduced by an estimate of expected losses and the credit risk associated in the loan and
lease portfolio. The valuation of the loan portfolio reflected discounts that Huntington believed are consistent with transactions
occurring in the market place.
Deposits
Demand deposits, savings accounts, and money market deposits are, by definition, equal to the amount payable on demand. The fair
values of fixed-rate time deposits are estimated by discounting cash flows using interest rates currently being offered on certificates
with similar maturities.