Huntington National Bank 2009 Annual Report Download - page 36

with anal
y
sis from independent third parties, and are used as a basis for impairment anal
y
sis. These thre
e
se
g
ments, and the results of our impairment anal
y
sis for each se
g
ment, are discussed in further detail below:
Al
t-A mort
g
a
g
e-
b
ac
k
e
d
/ Private-
l
a
b
e
l
co
ll
atera
l
ize
d
mort
g
a
g
eo
bl
i
g
ation (CMO) securitie
s
,re
p
resen
t
secur
i
t
i
es co
ll
atera
li
ze
dbyfi
rst-
li
en res
id
ent
i
a
l
mort
g
a
g
e
l
oans. As t
h
e
l
owest
l
eve
li
nput t
h
at
i
ss
ig
n
ifi
cant t
o
the fair value measurement of these securities in its entiret
y
was a Level 3 input, we classified all securitie
s
w
i
t
hi
nt
h
ese port
f
o
li
os as Leve
l
3
i
nt
h
e
f
a
i
rva
l
ue
hi
erarc
hy
.T
h
e secur
i
t
i
es were pr
i
ce
d
w
i
t
h
t
h
e ass
i
stance o
f
an outs
id
et
hi
r
d
-part
y
spec
i
a
li
st us
i
n
g
a
di
scounte
d
cas
hfl
ow approac
h
an
d
t
h
e
i
n
d
epen
d
ent t
hi
r
d
-part
y
’
s
proprietar
y
pricin
g
model. The model used inputs such as estimated prepa
y
ment speeds, losses, recoveries
,
default rates that were implied b
y
the underl
y
in
g
performance of collateral in the structure or similar
structures,
di
scount rates t
h
at were
i
mp
li
e
dby
mar
k
et pr
i
ces
f
or s
i
m
il
ar secur
i
t
i
es, co
ll
atera
l
structure t
y
pes
,
an
dh
ouse
p
r
i
ce
d
e
p
rec
i
at
i
on/a
pp
rec
i
at
i
on rates t
h
at were
b
ase
d
u
p
on macroeconom
i
c
f
orecasts.
We anal
y
zed both our Alt-A mort
g
a
g
e-backed and private-label CMO securities portfolios to determine if
t
h
e secur
i
t
i
es
i
nt
h
ese port
f
o
li
os were ot
h
er-t
h
an-temporar
ily i
mpa
i
re
d
. We use
d
t
h
e ana
ly
s
i
sto
d
eterm
i
n
e
w
h
et
h
er we
b
e
li
eve
di
t
i
s
p
ro
b
a
bl
et
h
at a
ll
contractua
l
cas
hfl
ows wou
ld
not
b
eco
ll
ecte
d
.A
ll
secur
i
t
i
es
i
n
these
p
ortfolios remained current with res
p
ect to interest and
p
rinci
p
al at December 31, 2009
.
Our anal
y
sis indicated, as of December 31, 2009, a total of
5
Alt-A mort
g
a
g
e-backed securities and 8
p
rivate-label CMO securities could ex
p
erience a loss of
p
rinci
p
al in the future. The future ex
p
ected losses o
f
principal on these other-than-temporaril
y
impaired securities ran
g
ed from 0.44% to 86.37% of their par value.
T
h
ese
l
osses were pro
j
ecte
d
to occur
b
e
gi
nn
i
n
g
an
y
w
h
ere
f
rom 7 mont
h
s to as man
y
as 8
y
ears
i
nt
h
e
f
uture.
We measure
d
t
h
e amount o
f
cre
di
t
i
mpa
i
rment on t
h
ese secur
i
t
i
es us
i
n
g
t
h
e cas
hfl
ows
di
scounte
d
at eac
h
securit
y
’s effective rate. As a result, durin
g
the 2009 fourth quarter, we recorded $2.6 million of credit other
-
than-temporar
y
impairment (OTTI) in our Alt-A mort
g
a
g
e-backed securities portfolio and
$
3.0 million o
f
credit OTTI in our
p
rivate-label CMO securities
p
ortfolio. In 2009, a total of
$
12.2 million of credit OTTI was
recorded in our Alt-A mort
g
a
g
e-backed securities portfolio, and
$
6.0 million of credit OTTI was recorded i
n
our private label-CMO securities portfolio. These OTTI ad
j
ustments ne
g
ativel
y
impacted our earnin
g
s
.
Pooled-trust-pre
f
erred securitie
s
, represent collateralized debt obli
g
ations (CDOs) backed b
y
a pool o
f
debt securities issued b
y
financial institutions. As the lowest level input that is si
g
nificant to the fair valu
e
measurement o
f
t
h
ese secur
i
t
i
es
i
n
i
ts ent
i
ret
y
was a Leve
l
3
i
nput, we c
l
ass
ifi
e
d
a
ll
secur
i
t
i
es w
i
t
hi
nt
hi
s
port
f
o
li
oasLeve
l
3
i
nt
h
e
f
a
i
rva
l
ue
hi
erarc
hy
.T
h
eco
ll
atera
lg
enera
lly
cons
i
ste
d
o
f
trust-pre
f
erre
d
secur
i
t
i
e
s
and subordinated debt securities issued b
y
banks, bank holdin
g
companies, and insurance companies. A ful
l
cas
hfl
ow ana
ly
s
i
s was use
d
to est
i
mate
f
a
i
rva
l
ues an
d
assess
i
mpa
i
rment
f
or eac
h
secur
i
t
y
w
i
t
hi
nt
his
port
f
o
li
o. Impa
i
rment was ca
l
cu
l
ate
d
as t
h
e
diff
erence
b
etween t
h
e carr
yi
n
g
amount an
d
t
h
e amount o
f
cas
h
flows discounted at each securit
y
’s effective rate. We en
g
a
g
ed a third part
y
specialist with direct industr
y
experience in pooled-trust-preferred securities valuations to provide assistance in estimatin
g
the fair value an
d
expecte
d
cas
hfl
ows
f
or eac
h
secur
i
t
yi
nt
hi
s port
f
o
li
o. Re
lyi
n
g
on cas
hfl
ows was necessar
yb
ecause t
h
ere wa
s
a
l
ac
k
o
f
o
b
serva
bl
e transact
i
ons
i
nt
h
e mar
k
et an
d
man
y
o
f
t
h
eor
igi
na
l
sponsors or
d
ea
l
ers
f
or t
h
ese secur
i
t
i
es
were no lon
g
er able to provide a fair value that was compliant with ASC 820, “Fair Value Measurements and
D
i
sc
l
osures”
.
T
h
e ana
ly
s
i
s was comp
l
ete
dby
eva
l
uat
i
n
g
t
h
ere
l
evant cre
di
tan
d
structura
l
aspects o
f
eac
h
poo
l
e
d
-trust
-
preferred securit
y
in the portfolio, includin
g
collateral performance pro
j
ections for each piece of collateral i
n
eac
h
secur
i
t
y
an
d
terms o
f
eac
h
secur
i
t
y
’s structure. T
h
e cre
di
trev
i
ew
i
nc
l
u
d
e
d
ana
ly
s
i
so
f
pro
fi
ta
bili
t
y
, cre
dit
qua
li
t
y
, operat
i
n
g
e
ffi
c
i
enc
y
,
l
evera
g
e, an
dli
qu
idi
t
y
us
i
n
g
t
h
e most recent
ly
ava
il
a
bl
e
fi
nanc
i
a
l
an
d
re
g
u
l
ator
y
information for each underl
y
in
g
collateral issuer. We also reviewed historical industr
y
default data and current
/
near term operat
i
n
g
con
di
t
i
ons. Us
i
n
g
t
h
e resu
l
ts o
f
our ana
ly
s
i
s, we est
i
mate
d
appropr
i
ate
d
e
f
au
l
tan
d
recover
y
pro
b
a
bili
t
i
es
f
or eac
h
p
i
ece o
f
co
ll
atera
l
an
d
t
h
en est
i
mate
d
t
h
e expecte
d
cas
hfl
ows
f
or eac
h
secur
i
t
y.
No recover
i
es were assume
d
on
i
ssuers w
h
o are
i
n
d
e
f
au
l
t. T
h
e recover
y
assumpt
i
ons on
i
ssuers w
h
o are
deferrin
g
interest ran
g
ed from 10% to 55% with a cure assumed after the maximum deferral period. As
a
resu
l
to
f
t
hi
s test
i
n
g
,we
b
e
li
eve we w
ill
exper
i
ence a
l
oss o
f
pr
i
nc
i
pa
l
or
i
nterest on 12 secur
i
t
i
es; an
d
as suc
h,
recorded credit OTTI of
$
11.4 million for one newl
y
impaired and 11 previousl
y
impaired pooled-trust
-
28