Huntington National Bank 2007 Annual Report Download - page 80

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS HUNTINGTON BANCSHARES INCORPORATED
1. SIGNIFICANT ACCOUNTING POLICIES
–NATURE OF OPERATIONS — Huntington Bancshares Incorporated (Huntington or The Company) 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 private mortgage, credit life and disability insurance, and other insurance and financial products and services.
Huntington’s banking offices are located in Ohio, Michigan, West Virginia, Indiana, Kentucky and Pennsylvania. Certain
activities are also conducted in other states including Arizona, Florida, Georgia, Maryland, Nevada, New Jersey, North Carolina,
South Carolina, Tennessee, and Vermont. Huntington also has a limited purpose foreign office in the Cayman Islands and
another 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 or are a variable interest entity (VIE) in which Huntington absorbs the majority of
expected losses are consolidated. VIEs in which Huntington does not absorb the majority of expected losses are not consolidated.
For consolidated entities where Huntington holds less than a 100% interest, Huntington recognizes a minority interest liability
(included in accrued expenses and other liabilities) for the equity held by others and minority interest expense (included in
other long-term debt) 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.
Those investments in non-marketable securities 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 accrued income and other assets and Huntington’s proportional
interest in the investments’ earnings are included in other non-interest income.
Huntington evaluates VIEs in which it holds a beneficial interest for consolidation. VIEs, as defined by the Financial Accounting
Standards Board (FASB) Interpretation (FIN) No. 46 (Revised 2003), Consolidation of Variable Interest Entities (FIN 46R), 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.
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. Significant estimates are
further discussed in the critical accounting policies included in Management’s Discussion and Analysis of Financial Condition
and Results of Operations. 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 or which are actively bought and sold are
classified as trading account securities and reported at fair value. The unrealized gains or losses on trading account securities are
recorded in other non-interest income, except for gains and losses on trading account securities used to hedge the fair value of
mortgage servicing rights, which are included in mortgage banking income. All other securities are classified as investment
securities. Investment securities include securities designated as available for sale and non-marketable equity securities.
Unrealized gains or losses on investment securities designated as available for sale are reported as a separate component of
accumulated other comprehensive loss in the consolidated statement of 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 securities losses.
Securities transactions are recognized on the trade date (the date the order to buy or sell is executed). The amortized cost of
sold securities 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.
Non-marketable equity securities include holdings of VISA, Inc. Class B common stock and 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.
Investments are reviewed quarterly for indicators of other-than-temporary impairment. This determination requires significant
judgment. In making this judgment, Management evaluates, among other factors, the expected cash flows of the security, the
duration and extent to which the fair value of an investment is less than its cost, the historical and implicit volatility of the
security and intent and ability to hold the investment until recovery, which may be maturity. Investments with an indicator of
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