Huntington National Bank 2010 Annual Report Download - page 151

When a loan within any class is impaired, interest income is recognized unless the receipt of principal
and interest is in doubt when contractually due. If receipt of principal and interest is in doubt when
contractually due, interest income is not recognized. Cash receipts received on nonaccruing impaired loans
within any class are generally applied entirely against principal until the loan or lease has been collected in
full, after which time any additional cash receipts are recognized as interest income. Cash receipts received on
accruing impaired loans within any class are applied in the same manner as accruing loans that are not
considered impaired.
OREO — OREO is comprised principally of commercial and residential real estate properties obtained in
partial or total satisfaction of loan obligations, and is carried at the lower of cost or fair value. OREO obtained
in satisfaction of a loan is recorded at the estimated fair value less anticipated selling costs based upon the
property’s appraised value at the date of foreclosure, with any difference between the fair value of the property
and the carrying value of the loan recorded as a charge-off. Subsequent declines in value are reported as
adjustments to the carrying amount and are recorded in noninterest expense. Gains or losses resulting from the
sale of OREO are recognized in noninterest expense at the date of sale.
Resell and Repurchase Agreements — Securities purchased under agreements to resell and securities sold
under agreements to repurchase are treated as collateralized financing transactions and are recorded at the
amounts at which the securities were acquired or sold plus accrued interest. The fair value of collateral either
received from or provided to a third party is continually monitored and additional collateral is obtained or is
requested to be returned to Huntington as in accordance with the agreement.
Goodwill and Other Intangible Assets — Under the acquisition method of accounting, the net assets of
entities acquired by Huntington are recorded at their estimated fair value at the date of acquisition. The excess
cost of the acquisition over the fair value of net assets acquired is recorded as goodwill. Other intangible
assets are amortized either on an accelerated or straight-line basis over their estimated useful lives. Goodwill
is evaluated for impairment on an annual basis at October 1st of each year or whenever events or changes in
circumstances indicate that the carrying value may not be recoverable. Other intangible assets are reviewed for
impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may
not be recoverable.
Premises and Equipment — Premises and equipment are stated at cost, less accumulated depreciation and
amortization. Depreciation is computed principally by the straight-line method over the estimated useful lives
of the related assets. Buildings and building improvements are depreciated over an average of 30 to 40 years
and 10 to 20 years, respectively. Land improvements and furniture and fixtures are depreciated over 10 years,
while equipment is depreciated over a range of three to seven years. Leasehold improvements are amortized
over the lesser of the asset’s useful life or the lease term, including any renewal periods for which renewal is
reasonably assured. Maintenance and repairs are charged to expense as incurred, while improvements that
extend the useful life of an asset are capitalized and depreciated over the remaining useful life. Premises and
equipment is evaluated for impairment whenever events or changes in circumstances indicate that the carrying
amount of the asset may not be recoverable.
Bank Owned Life Insurance — Huntington’s bank owned life insurance policies are carried at their cash
surrender value. Huntington recognizes tax-exempt income from the periodic increases in the cash surrender
value of these policies and from death benefits. A portion of cash surrender value is supported by holdings in
separate accounts. Huntington has also purchased insurance for these policies to provide protection of the
value of the holdings within these separate accounts. The value of the underlying holdings in the separate
accounts covered by these insurance policies exceeds the cash surrender value of the policies by approximately
$0.5 million at December 31, 2010.
Derivative Financial Instruments — A variety of derivative financial instruments, principally interest rate
swaps, caps, floors, and collars, are used in asset and liability management activities to protect against the risk
of adverse price or interest rate movements. These instruments provide flexibility in adjusting Huntington’s
sensitivity to changes in interest rates without exposure to loss of principal and higher funding requirements.
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