Huntington National Bank 2003 Annual Report Download - page 133

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
At December 31, 2003, Huntington’s deferred tax asset related to loss and credit carry-forwards amounted to $8.7 million. This is
comprised of net operating loss carry-forwards for United States federal income tax purposes, which will begin expiring in 2022.
During 2003, the net deferred tax liability was decreased by $25.1 million for the tax effect of unrealized gains on securities available for
sale.
25. Commitments and Contingent Liabilities
In the ordinary course of business, Huntington makes various commitments to extend credit that are not reflected in the financial
statements. The contract amount of these financial agreements at December 31 were:
(in millions of dollars) 2003 2002
Contract amount represents credit risk
Commitments to extend credit
Commercial $5,712 $4,435
Consumer 3,652 3,607
Commercial real estate 952 577
Standby letters of credit 983 880
Commercial letters of credit 166 71
C
OMMITMENTS TO
E
XTEND
C
REDIT
Commitments to extend credit generally have short-term, fixed expiration dates, are variable-rate, and contain clauses that permit
Huntington to terminate or otherwise renegotiate the contracts in the event of a significant deterioration in the customer’s credit
quality. These arrangements normally require the payment of a fee by the customer, the pricing of which is based on prevailing market
conditions, credit quality, probability of funding, and other relevant factors. Since many of these commitments are expected to expire
without being drawn upon, the contract amounts are not necessarily indicative of future cash requirements. The interest rate risk
arising from these financial instruments is insignificant as a result of their predominantly short-term, variable-rate nature.
The recognition requirements of FIN 45 were adopted prospectively January 1, 2003, which for Huntington apply generally to its
standby letters of credit. Standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a
third party. These guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper,
bond financing, and similar transactions. Most of these arrangements mature within two years. Approximately 54% of standby letters
of credit are collateralized and nearly 97% are expected to expire without being drawn upon. The carrying amount of deferred revenue
at December 31, 2003, was $3.8 million.
Commercial letters of credit represent short-term, self-liquidating instruments that facilitate customer trade transactions and have
maturities of no longer than 90 days. The merchandise or cargo being traded normally secures these instruments.
L
ITIGATION
In the ordinary course of business, there are various legal proceedings pending against Huntington and its subsidiaries. In the opinion
of management, the aggregate liabilities, if any, arising from such proceedings are not expected to have a material adverse effect on
Huntington’s consolidated financial position.
C
OMMITMENTS
U
NDER
C
APITAL AND
O
PERATING
L
EASE
O
BLIGATIONS
At December 31, 2003, Huntington and its subsidiaries were obligated under noncancelable leases for land, buildings, and equipment.
Many of these leases contain renewal options and certain leases provide options to purchase the leased property during or at the
expiration of the lease period at specified prices. Some leases contain escalation clauses calling for rentals to be adjusted for increased
real estate taxes and other operating expenses or proportionately adjusted for increases in the consumer or other price indices.
The future minimum rental payments required under operating leases that have initial or remaining noncancelable lease terms in
excess of one year as of December 31, 2003, were $32.9 million in 2004, $30.4 million in 2005, $28.3 million in 2006, $26.9 million in
2007, $24.9 million in 2008, and $192.5 million thereafter. Total minimum lease payments have not been reduced by minimum
sublease rentals of $93.6 million due in the future under noncancelable subleases. The rental expense for all operating leases was $36.1
million, $38.7 million, and $47.5 million for 2003, 2002, and 2001, respectively. Huntington had no material obligations under capital
leases.
HUNTINGTON BANCSHARES INCORPORATED 131