Huntington National Bank 2007 Annual Report Download - page 111

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21. COMMITMENTS AND CONTINGENT LIABILITIES
COMMITMENTS TO EXTEND CREDIT
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, representing the credit risk, at December 31 were:
(in millions) 2007 2006
At December 31,
Contract amount represents credit risk
Commitments to extend credit
Commercial $6,756 $4,416
Consumer 4,680 3,374
Commercial real estate 2,565 1,645
Standby letters of credit 1,549 1,156
Commitments to extend credit generally have 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.
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. At December 31, 2007, approximately
38% of standby letters of credit are collateralized and most are expected to expire without being drawn upon. The carrying amount
of deferred revenue associated with these guarantees was $4.6 million and $4.3 million at December 31, 2007, and 2006,
respectively.
COMMITMENTS TO SELL LOANS
Huntington enters into forward contracts relating to its mortgage banking business. At December 31, 2007 and 2006, Huntington
had commitments to sell residential real estate loans of $555.9 million and $319.9 million, respectively. These contracts mature in
less than one year.
LITIGATION
Between December 19, 2007 and February 1, 2008, two putative class actions were filed in the United States District Court for the
Southern District of Ohio, Eastern Division, against the Company and certain of its current or former officers and directors
purportedly on behalf of purchasers of the Company’s securities during the periods July 20, 2007 to November 16, 2007 or July 20,
2007 to January 10, 2008. These complaints seek to allege that the defendants violated Section 10(b) of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”), and Rule 10b-5 promulgated there under, and Section 20(a) of the Exchange Act by
issuing a series of allegedly false and/or misleading statements concerning the Company’s financial results, prospects, and condition,
relating, in particular, to the Company’s transactions with Franklin Credit Management (“Franklin”). It is expected that both cases
will be consolidated into a single action. At this early stage of these lawsuits, it is not possible for management to assess the
probability of an adverse outcome, or reasonably estimate the amount of any potential loss.
On January 16, 2008, a shareholder derivative action was filed in the Court of Common Pleas of Delaware County, Ohio, against
certain of the Company’s current or former officers and directors seeking to allege breach of fiduciary duty, waste of corporate
assets, and unjust enrichment, all in connection with the Company’s acquisition of Sky Financial Group, Inc., certain transactions
between the Company and Franklin Credit Management, and the financial disclosures relating to such transactions. The Company
is named as a nominal defendant in this action. At this early stage of the lawsuit, it is not possible for management to assess the
probability of an adverse outcome, or reasonably estimate the amount of any potential loss.
On February 20, 2008, a putative class action lawsuit was filed in the United States District Court for the Southern District of
Ohio against the Company, the Huntington Bancshares Incorporated Pension Review Committee, the Huntington Investment and
Tax Savings Plan (the Plan) Administrative Committee, and certain of the Company’s officers and directors purportedly on behalf
of participants in or beneficiaries of the Plan between July 20, 2007 and the present. The complaint seeks to allege breaches of
109
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS HUNTINGTON BANCSHARES INCORPORATED