Huntington National Bank 2010 Annual Report Download - page 129

The table below provides a description and the valuation methodologies used for financial instruments
measured at fair value, as well as the general classification of such instruments pursuant to the valuation
hierarchy. The fair values measured at each level of the fair value hierarchy, as well as additional discussion
regarding fair value measurements, can be found in Note 19 of the Notes to the Consolidated Financial
Statements.
Financial Instrument(1) Hierarchy Valuation methodology
Mortgage loans held for sale Level 2 Huntington elected to apply the fair value option for mortgage
loans originated with the intent to sell which are included in
loans held for sale. Mortgage loans held for sale are estimated
using security prices for similar product types. At December 31,
2010, mortgage loans held for sale had an aggregate fair value
of $754.1 million and an aggregate outstanding principal
balance of $750.0 million. Interest income on these loans is
recorded in interest and fee income - loans and leases.
Included in mortgage banking income were net gains resulting
from origination and sale of these loans, including net realized
gains of $109.2 million, $90.6 million, and $32.2 million for
the years ended December 31, 2010, 2009, and 2008,
respectively. Of such gains, the change in fair value while held
as loans were $(5.6) million, $(6.3) million and $6.6 million for
the years ended December 31, 2010, 2009, and 2008,
respectively.
Available-for-sale Securities &
Trading Account
Securities(2)
Level 1 Consist primarily of U.S. Treasury and money market mutual
funds, which generally have quoted prices.
Level 2 Consist of U.S. Government and agency mortgage-backed and
other federal agency securities, municipal securities, and other
securities for which an active market is not available. Third
party pricing services provide a fair value estimate based upon
trades of similar financial instruments.
Level 3 Consist of certain asset-backed securities, pooled-trust-preferred
securities, private-label CMOs, and municipal securities for
which fair value is estimated. Assumptions used to determine
the fair value of these securities have greater subjectivity due to
the lack of observable market transactions. Generally, there are
only limited trades of similar instruments and a discounted cash
flow approach is used to determine fair value.
Automobile loans(3) Level 3 Consists of automobile loan receivables measured at fair value.
The key assumptions used to determine the fair value of the
automobile loan receivables included projections of expected
losses and prepayment of the underlying loans in the portfolio
and a market assumption of interest rate spreads. The net gains
and losses, before tax, from fair value changes reflected in
earnings for the year ended December 31, 2010 was a net loss
of $2.3 million which is net of a $3.4 million net gain
associated with instrument specific credit risk. Instrument
specific credit risk was determined based on estimated credit
losses inherent in the January 1, 2010 fair value calculation as
compared to actual credit losses incurred in 2010 plus estimated
credit losses inherent in the December 31, 2010 fair value
calculation.
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