Huntington National Bank 2010 Annual Report Download - page 127

infrastructure; and (8) the nature, extent, and timing of governmental actions and reforms, including the Dodd-
Frank Act, as well as future regulations which will be adopted by the relevant regulatory agencies, including
the newly created CFPB, to implement the Dodd-Frank Act’s provisions.
All forward-looking statements speak only as of the date they are made and are based on information
available at that time. We assume no obligation to update forward-looking statements to reflect circumstances
or events that occur after the date the forward-looking statements were made or to reflect the occurrence of
unanticipated events except as required by federal securities laws. As forward-looking statements involve
significant risks and uncertainties, caution should be exercised against placing undue reliance on such
statements.
Risk Factors
More information on risk is set forth under the heading Risk Factors included in Item 1A and
incorporated by reference into this MD&A. Additional information regarding risk factors can also be found in
the Risk Management and Capital discussion.
Critical Accounting Policies and Use of Significant Estimates
Our Consolidated Financial Statements are prepared in accordance with GAAP. The preparation of
financial statements in conformity with GAAP requires us to establish accounting policies and make estimates
that affect amounts reported in our Consolidated Financial Statements. Note 1 of the Notes to Consolidated
Financial Statements, which is incorporated by reference into this MD&A, describes the significant accounting
policies we use in our Consolidated Financial Statements.
An accounting estimate requires assumptions and judgments about uncertain matters that could have a
material effect on the Consolidated Financial Statements. Estimates are made under facts and circumstances at
a point in time, and changes in those facts and circumstances could produce results substantially different from
those estimates. The most significant accounting policies and estimates and their related application are
discussed below.
Total Allowance for Credit Losses
Our ACL of $1.3 billion at December 31, 2010, represents our estimate of probable losses inherent in our
loan and lease portfolio and our unfunded loan commitments and letters of credit. We periodically review our
ACL for adequacy. In doing so, we consider economic conditions and trends, collateral values, and credit
quality indicators, such as past NCO experience, levels of past due loans, and NPAs. There is no certainty that
our ACL will be adequate over time to cover losses in the portfolio because of unanticipated adverse changes
in the economy, market conditions, or events adversely affecting specific customers, industries, or markets. If
the credit quality of our customer base materially deteriorates, the risk profile of a market, industry, or group
of customers changes materially, or if the ACL is not adequate, our net income and capital could be materially
adversely affected which, in turn, could have a material negative adverse affect on our financial condition and
results of operations.
In addition, bank regulators periodically review our ACL and may require us to increase our provision for
loan and lease losses or loan charge-offs. Any increase in our ACL or loan charge-offs as required by these
regulatory authorities could have a material adverse affect on our financial condition and results of operations.
Fair Value Measurements
(This section should be read in conjunction with Note 19 of the Notes to Consolidated Financial Statements)
The fair value of a financial instrument is defined as the amount at which the instrument could be
exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. We
estimate the fair value of a financial instrument using a variety of valuation methods. Where financial
instruments are actively traded and have quoted market prices, quoted market prices are used for fair value.
We characterize active markets as those where transaction volumes are sufficient to provide objective pricing
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