Huntington National Bank 2004 Annual Report Download - page 102

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS HUNTINGTON BANCSHARES INCORPORATED
1. SIGNIFICANT ACCOUNTING POLICIES
–N ATURE OF O PERATIONS — 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 reinsuring 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. Certain activities are also conducted in other states including Arizona,
Florida, Georgia, Maryland, Nevada, New Jersey, Pennsylvania, and Tennessee. Huntington has a foreign office in the Cayman
Islands and a foreign office in Hong Kong.
–B ASIS OF P RESENTATION — 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 earnings 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 balance sheet 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 the Financial Accounting Standards Board (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
adopted FIN 46 on July 1, 2003 and therefore, 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.
–S ECURITIES — 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. All other
securities are designated as investment securities. Investment securities include securities designated as available for sale,
non-marketable equity securities, and securities held to maturity. Unrealized gains or losses on investment securities 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
investment securities.
Securities transactions are recognized on the trade date (the date the order to buy or sell is executed).
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 investment securities.
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.
Statement of Financial Accounting Standards (SFAS) 115, Accounting for Certain Investments in Debt and Equity Securities, and
Securities and Exchange Commission (SEC) Staff Accounting Bulletin (SAB) 59, Accounting for Noncurrent Marketable Equity
Securities, and Emerging issues Task Force (EITF) No. 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application
to Certain Investments provide guidance on determining when an investment is other-than-temporarily impaired. Investments are
reviewed quarterly for indicators of other-than-temporary impairment. This determination requires significant judgment. In
making this judgment, we evaluate, among other factors, the duration and extent to which the fair value of an investment is less
than its cost and our intent and ability to hold the investment. Investments with an indicator are further evaluated to determine the
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