Huntington National Bank 2003 Annual Report Download - page 134

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
26. Securities and Exchange Commission Investigation
On June 26, 2003, Huntington announced that the Securities and Exchange Commission (SEC) staff is conducting a formal
investigation. The SEC investigation began following Huntington’s announcement on April 16, 2003, that it intended to restate its
financial statements in order to reclassify its accounting for automobile leases from the direct financing lease method to the operating
lease method and following allegations by a former Huntington employee regarding certain aspects of Huntington’s accounting and
financial reporting practices, including the recognition of automobile loan and lease origination fees and costs, as well as certain year-
end reserves. The investigation is ongoing and Huntington continues to cooperate fully with the SEC. To the best of its knowledge,
management believes that the actions it has taken to date have addressed all known accounting issues.
27. Fair Value of Financial Instruments
The carrying amounts and estimated fair values of Huntington’s financial instruments, including the fair values of derivatives used to
hedge related fair values or cash flows, at December 31 are presented in the following table:
2003 2002
(in thousands of dollars)
Carrying
Amount Fair Value
Carrying
Amount Fair Value
Financial Assets:
Cash and short-term assets $ 1,030,130 $ 1,030,130 $ 1,056,063 $ 1,056,063
Trading account securities 7,589 7,589 241 241
Mortgages held for sale 226,729 226,729 528,379 528,379
Securities 4,929,060 4,981,060 3,410,915 3,411,201
Net loans and direct financing leases 20,739,864 21,220,864 18,250,755 18,995,327
Customers’ acceptance liability 9,553 9,553 16,745 16,745
Financial Liabilities:
Deposits (18,487,395) (17,903,395) (17,499,326) (17,653,972)
Short-term borrowings (1,452,304) (1,452,304) (2,141,016) (2,141,016)
Bank acceptances outstanding (9,553) (9,553) (16,745) (16,745)
Federal Home Loan Bank advances (1,273,000) (1,273,000) (1,013,000) (1,021,959)
Subordinated notes (990,470) (990,470) (738,678) (738,678)
Other long-term debt (4,544,509) (4,613,509) (2,495,123) (2,563,171)
Capital securities — — (300,000) (310,392)
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, 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.
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 non-mortgage servicing rights,
deposit base, and other customer relationship intangibles are not considered financial instruments and are not discussed below.
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.
132 HUNTINGTON BANCSHARES INCORPORATED