Huntington National Bank 2003 Annual Report Download - page 104

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Significant Accounting Policies
Nature of Operations: 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 underwriting 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. Selected financial services are also conducted in other states including Arizona, Florida, Georgia,
Maryland, New Jersey, Pennsylvania, and Tennessee. Huntington has a foreign office in the Cayman Islands and a foreign office in
Hong Kong.
Basis of Presentation: 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 are consolidated. For consolidated entities where Huntington holds less than a 100% interest, Huntington
recognizes a minority interest liability (included in “Other liabilities”) for the voting equity held by others and minority interest
expense (included in “Other non-interest expenses”) for the portion of the entity’s earning 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, generally defined as a 20% or greater voting interest. Those investments 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 “Other assets” in Huntington’s
statement of financial condition and Huntington’s proportional interest in the investment’s earnings is included in “Other non-
interest income.” Huntington evaluates variable interest entities (VIEs) in which it holds a beneficial interest for consolidation. VIEs, as
defined by FASB Interpretation (FIN) No. 46, 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 consolidates these VIEs when it holds a majority of VIEs’ beneficial
interests.
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.
Securities: 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 securities are recorded in other non-interest income. Debt securities
that Huntington has both the positive intent and ability to hold to maturity are classified as investment securities and are reported at
amortized cost. Securities not classified as trading or investments are designated available for sale and reported at fair value. Unrealized
gains or losses on securities available for sale are reported as a separate component of accumulated other comprehensive income 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 loss on securities available for sale.
Nonmarketable 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 securities available for sale.
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.
Loans and Leases: Loans are stated 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 based on unpaid principal balances. Huntington
defers the fees it receives from the origination of loans and leases, as well as the costs of those activities, and amortizes these fees and
costs on a level-yield basis over the estimated lives of the related loans.
102 HUNTINGTON BANCSHARES INCORPORATED