Huntington National Bank 2009 Annual Report Download - page 33

disclosures identif
y
and address ke
y
variables and other qualitative and quantitative factors necessar
y
for a
n
understandin
g
and evaluation of our compan
y
, financial position, results of operations, and cash flows
.
An accountin
g
estimate requires assumptions about uncertain matters that could have a material effect o
n
the financial statements if a different amount within a ran
g
e of estimates were used or if estimates chan
g
e
d
from period to period. Estimates are made under facts and circumstances at a point in time, and chan
g
es i
n
t
h
ose
f
acts an
d
c
i
rcumstances cou
ld p
ro
d
uce resu
l
ts t
h
at
diff
er
f
rom w
h
en t
h
ose est
i
mates were ma
d
e. T
he
most s
ig
n
ifi
cant account
i
n
g
est
i
mates an
d
t
h
e
i
rre
l
ate
d
app
li
cat
i
on are
di
scusse
db
e
l
ow. T
hi
s ana
ly
s
i
s
is
included to emphasize that estimates are used in connection with the critical and other accountin
g
policies and
to illustrate the
p
otential effect on the financial statements if the actual amount were different from th
e
est
i
mate
d
amount
.
Tota
l
A
ll
owances
f
or Cre
d
it Losses
Th
eACL
i
st
h
e sum o
f
t
h
e ALLL an
d
t
h
ea
ll
owance
f
or un
f
un
d
e
dl
oan comm
i
tments an
dl
etters o
f
cre
di
t
(AULC), and re
p
resents the estimate of the level of reserves a
pp
ro
p
riate to absorb inherent credit losses. The
amount of the ACL was determined b
yj
ud
g
ments re
g
ardin
g
the qualit
y
of each individual loan portfolio and
l
oan comm
i
tments. A
ll k
nown re
l
evant
i
nterna
l
an
d
externa
lf
actors t
h
at a
ff
ecte
dl
oan co
ll
ect
ibili
t
y
wer
e
cons
id
ere
d
,
i
nc
l
u
di
n
g
ana
ly
s
i
so
fhi
stor
i
ca
l
c
h
ar
g
e-o
ff
exper
i
ence, m
ig
rat
i
on patterns, c
h
an
g
es
i
n econom
ic
conditions, and chan
g
es in loan collateral values. Such factors are sub
j
ect to re
g
ular review and ma
y
chan
g
et
o
re
fl
ect up
d
ate
d
per
f
ormance tren
d
san
d
expectat
i
ons, part
i
cu
l
ar
ly i
nt
i
mes o
f
severe stress suc
h
as
h
ave
b
een
exper
i
ence
d
t
h
rou
gh
out 2009. We
b
e
li
eve t
h
e process
f
or
d
eterm
i
n
i
n
g
t
h
e ACL cons
id
ers a
ll
o
f
t
h
e potent
i
a
l
f
actors t
h
at cou
ld
resu
l
t
i
n cre
di
t
l
osses. However, t
h
e process
i
nc
l
u
d
es
j
u
dg
menta
l
an
d
quant
i
tat
i
ve e
l
ement
s
that ma
y
be sub
j
ect to si
g
nificant chan
g
e. There is no certaint
y
that the ACL will be adequate over time t
o
cover cre
di
t
l
osses
i
nt
h
e port
f
o
li
o
b
ecause o
f
cont
i
nue
d
a
d
verse c
h
an
g
es
i
nt
h
e econom
y
, mar
k
et con
di
t
i
ons
,
or events a
d
verse
ly
a
ff
ect
i
n
g
spec
ifi
c customers,
i
n
d
ustr
i
es or mar
k
ets. To t
h
e extent actua
l
outcomes
diff
e
r
from our estimates, the credit qualit
y
of our customer base materiall
y
decreases, the risk profile of a market
,
i
n
d
ustr
y
,or
g
roup o
f
customers c
h
an
g
es mater
i
a
lly
,or
if
t
h
eACL
i
s
d
eterm
i
ne
d
to not
b
ea
d
equate, a
ddi
t
i
ona
l
prov
i
s
i
on
f
or cre
di
t
l
osses cou
ld b
e requ
i
re
d
,w
hi
c
h
cou
ld
a
d
verse
ly
a
ff
ect our
b
us
i
ness,
fi
nanc
i
a
l
con
di
t
i
on
,
liquidit
y
, capital, and results of operations in future periods.
At December 31
,
2009
,
the ACL was
$
1
,
531.4 million
,
or 4.16% of total loans and leases. To illustrate
the
p
otential effect on the financial statements of our estimates of the ACL, a 10 basis
p
oint increase would
have required
$
36.8 million in additional reserves (funded b
y
additional provision for credit losses), whic
h
would have ne
g
ativel
y
impacted 2009 net loss b
y
approximatel
y$
23.9 million, or
$
0.04 per common share.
Additionall
y
, in 2007, we established a specific reserve of
$
115.3 million associated with our loans t
o
Fran
kli
n Cre
di
t Mana
g
ement Corporat
i
on (Fran
kli
n). At Decem
b
er 31, 2008, our spec
ifi
c ALLL
f
or Fran
klin
loans increased to $130.0 million. In 2009, as a result of our restructurin
g
of the Franklin relationship, th
e
s
pec
ifi
c ALLL
f
or Fran
kli
n
l
oans was e
li
m
i
nate
d.
Re
f
er to t
h
e“Fran
kl
in re
l
ations
h
ip” section
l
ocate
d
wit
h
i
n
t
h
e “Ris
k
Management an
d
Capita
l
” section
f
or a
dd
itiona
ld
iscussion regar
d
ing t
h
e restructuring o
f
t
he
Fran
kl
in re
l
ations
h
i
p.
F
air
V
a
l
ue Measurements
T
he fair
v
alue of a financial instrument is defined as the amount at
w
hich the instrument could b
e
exc
h
an
g
e
di
n a current transact
i
on
b
etween w
illi
n
g
part
i
es, ot
h
er t
h
an
i
na
f
orce
d
or
li
qu
id
at
i
on sa
l
e. We
est
i
mate t
h
e
f
a
i
rva
l
ue o
f
a
fi
nanc
i
a
li
nstrument us
i
n
g
avar
i
et
y
o
f
va
l
uat
i
on met
h
o
d
s. W
h
ere
fi
nanc
i
a
l
instruments are activel
y
traded and have quoted market prices, quoted market prices are used for fair value
.
We c
h
aracter
i
ze act
i
ve mar
k
ets as t
h
ose w
h
ere transact
i
on vo
l
umes are su
ffi
c
i
ent to prov
id
eo
bj
ect
i
ve pr
i
c
i
n
g
i
n
f
ormat
i
on, w
i
t
h
reasona
bly
narrow
bid
/as
k
sprea
d
s, an
d
w
h
ere rece
i
ve
d
quote
d
pr
i
ces
d
o not var
y
w
id
e
ly.
When the financial instruments are not activel
y
traded, other observable market inputs, such as quoted price
s
of securities with similar characteristics, ma
y
be used, if available, to determine fair value. Inactive market
s
are c
h
aracter
i
ze
dbyl
ow transact
i
on vo
l
umes, pr
i
ce quotat
i
ons t
h
at var
y
su
b
stant
i
a
lly
amon
g
mar
k
et
part
i
c
i
pants, or
i
nw
hi
c
h
m
i
n
i
ma
li
n
f
ormat
i
on
i
sre
l
ease
d
pu
bli
c
ly
.W
h
en o
b
serva
bl
e mar
k
et pr
i
ces
d
o not ex
i
st
,
25