Huntington National Bank 2008 Annual Report Download - page 89

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, including its bank subsidiary, The Huntington National Bank (the Bank), Huntington is engaged in providing full-
service commercial and consumer banking services, mortgage banking services, automobile financing, equipment leasing,
investment management, trust services, brokerage services, customized insurance service programs, and other financial products
and services. Huntington’s banking offices are located in Ohio, Michigan, Pennsylvania, Indiana, West Virginia, and Kentucky.
Selected financial service activities are also conducted in other states including: Auto Finance and Dealer Services offices in
Arizona, Florida, Nevada, New Jersey, New York, Tennessee, and Texas; Private Financial and Capital Markets Group offices in
Florida; and Mortgage Banking offices in Maryland and New Jersey. Huntington Insurance offers retail and commercial
insurance agency services in Ohio, Pennsylvania, Michigan, Indiana, and West Virginia. International banking services are
available through the headquarters office in Columbus and a limited purpose office located in both the Cayman Islands and
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
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. 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. 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.
The preparation of financial statements in conformity with GAAP requires Management to make estimates and assumptions that
significantly affect amounts reported in the financial statements. Huntington uses significant estimates and employs the
judgments of management in determining the amount of its allowance for credit losses and income tax accruals and deferrals, in
its fair value measurements of investment securities, derivatives, mortgage loans held for sale, mortgage servicing rights and in
the evaluation of impairment of loans, goodwill, investment securities, and fixed assets. As with any estimate, 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 changes 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 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.
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