Huntington National Bank 2009 Annual Report Download - page 37

p
referred securities in the 2009 fourth
q
uarter. In 2009,
$
40.8 million of total OTTI was recorded fo
r
i
mpa
i
rment o
f
t
h
e poo
l
e
d
-trust-pre
f
erre
d
secur
i
t
i
es. T
h
ese OTTI a
dj
ustments ne
g
at
i
ve
ly i
mpacte
d
our earn
i
n
g
s.
Please refer to the “Investment Securities Portfolio” discussion and Note 1 and Note
6
of the Notes to th
e
C
onsolidated Financial Statements for additional information re
g
ardin
g
OTTI
.
Certa
i
not
h
er assets an
dli
a
bili
t
i
es w
hi
c
h
are not
fi
nanc
i
a
li
nstruments a
l
so
i
nvo
l
ve
f
a
i
rva
l
ue measure
-
ments. A description of these assets and liabilities, and the methodolo
g
ies utilized to determine fair value ar
e
discussed belo
w:
GOO
DWILL
Goo
d
w
ill i
s teste
df
or
i
mpa
i
rment annua
lly
,aso
f
Octo
b
er 1, us
i
n
g
a two-step process t
h
at
b
e
gi
ns w
i
t
h
a
n
est
i
mat
i
on o
f
t
h
e
f
a
i
rva
l
ue o
f
a report
i
n
g
un
i
t. Goo
d
w
ill i
mpa
i
rment ex
i
sts w
h
en a report
i
n
g
un
i
t’s carr
yi
n
g
value of
g
oodwill exceeds its implied fair value. Goodwill is also tested for impairment on an interim basis,
usin
g
the same two-step process as the annual testin
g
, if an event occurs or circumstances chan
g
e between
annua
l
tests t
h
at wou
ld
more
lik
e
ly
t
h
an not re
d
uce t
h
e
f
a
i
rva
l
ue o
f
t
h
e report
i
n
g
un
i
t
b
e
l
ow
i
ts carr
yi
n
g
amount. For 2009, we performed interim evaluations of our
g
oodwill balances at each quarter end, as well as
our annual
g
oodwill impairment assessment as of October 1
.
Durin
g
the 2009 first quarter, our stock price declined 78%, from
$
7.66 per common share at
December 31, 2008, to $1.66 per common share at March 31, 2009. Man
y
peer banks also experienced simila
r
s
ig
n
ifi
cant
d
ec
li
nes
i
n mar
k
et cap
i
ta
li
zat
i
on. T
hi
s
d
ec
li
ne pr
i
mar
ily
re
fl
ecte
d
t
h
e cont
i
nu
i
n
g
econom
ic
s
l
ow
d
own an
di
ncrease
d
mar
k
et concern surroun
di
n
gfi
nanc
i
a
li
nst
i
tut
i
ons’ cre
di
tr
i
s
k
san
d
cap
i
ta
l
pos
i
t
i
ons, a
s
well as uncertaint
y
related to increased re
g
ulator
y
supervision and intervention. We determined that thes
e
c
h
an
g
es wou
ld
more-
lik
e
ly
-t
h
an-not re
d
uce t
h
e
f
a
i
rva
l
ue o
f
certa
i
n report
i
n
g
un
i
ts
b
e
l
ow t
h
e
i
r carr
yi
n
g
amounts. T
h
ere
f
ore, we per
f
orme
d
an
i
nter
i
m
g
oo
d
w
ill i
mpa
i
rment test
d
ur
i
n
g
t
h
e 2009
fi
rst quarter. A
n
independent third part
y
was en
g
a
g
ed to assist with the impairment assessment
.
S
ig
n
ifi
cant
j
u
dg
ment
i
s app
li
e
d
w
h
en
g
oo
d
w
ill i
s assesse
df
or
i
mpa
i
rment. T
hi
s
j
u
dg
ment
i
nc
l
u
d
es
developin
g
cash flow pro
j
ections, selectin
g
appropriate discount rates, identif
y
in
g
relevant market comparables
,
i
ncorporat
i
n
gg
enera
l
econom
i
can
d
mar
k
et con
di
t
i
ons, an
d
se
l
ect
i
n
g
an appropr
i
ate contro
l
prem
i
um. T
h
e
se
l
ect
i
on an
d
we
igh
t
i
n
g
o
f
t
h
evar
i
ous
f
a
i
rva
l
ue tec
h
n
i
ques ma
y
resu
l
t
i
na
high
er or
l
ower
f
a
i
rva
l
ue
.
Jud
g
ment is applied in determinin
g
the wei
g
htin
g
s that are most representative of fair value. The assumption
s
used in the
g
oodwill impairment assessment and the application of these estimates and assumptions ar
e
di
scusse
db
e
l
o
w.
2009 First Quarter Impairment Testin
g
T
h
e
fi
rst step (Step 1) o
fi
mpa
i
rment test
i
n
g
requ
i
res a compar
i
son o
f
eac
h
report
i
n
g
un
i
t’s
f
a
i
rva
l
ue t
o
carr
y
in
g
value to identif
y
potential impairment. For our impairment testin
g
conducted durin
g
the 2009 firs
t
quarter, we
id
ent
ifi
e
df
our report
i
n
g
un
i
ts: Re
gi
ona
l
Ban
ki
n
g
, PFG, Insurance, an
d
Auto F
i
nance an
d
Dea
l
e
r
Serv
i
ces
(
AFDS
).
•A
l
t
h
ou
gh
Insurance
i
s
i
nc
l
u
d
e
d
w
i
t
hi
n PFG
f
or
b
us
i
ness se
g
ment report
i
n
g
,
i
t was eva
l
uate
d
as
a
separate report
i
n
g
un
i
t
f
or
g
oo
d
w
ill i
mpa
i
rment test
i
n
gb
ecause
i
t
h
as
i
ts own separate
ly
a
ll
ocate
d
g
oodwill resultin
g
from prior acquisitions. The fair value of PFG (determined usin
g
the market
approac
h
as
d
escr
ib
e
db
e
l
ow), exc
l
u
di
n
g
Insurance, excee
d
e
di
ts carr
yi
n
g
va
l
ue, an
dg
oo
d
w
ill
wa
s
d
eterm
i
ne
d
to not
b
e
i
mpa
i
re
df
or t
hi
s report
i
n
g
un
i
t
.
•T
h
ere was no
g
oo
d
w
ill
assoc
i
ate
d
w
i
t
h
AFDS an
d
,t
h
ere
f
ore,
i
t was not su
bj
ect to
i
mpa
i
rment test
i
n
g.
For Re
gi
ona
l
Ban
ki
n
g
,weut
ili
ze
db
ot
h
t
h
e
i
ncome an
d
mar
k
et approac
h
es to
d
eterm
i
ne
f
a
i
rva
l
ue. T
he
i
ncome a
pp
roac
h
was
b
ase
d
on
di
scounte
d
cas
hfl
ows
d
er
i
ve
df
rom assum
p
t
i
ons o
fb
a
l
ance s
h
eet an
di
ncom
e
statement activit
y
. An internal forecast was developed b
y
considerin
g
several lon
g
-term ke
y
business drivers
such as anticipated loan and deposit
g
rowth. The lon
g
-term
g
rowth rate used in determinin
g
the terminal valu
e
was estimated at 2.
5
%. The discount rate of 14% was estimated based on the Capital Asset Pricin
g
Model,
29