Huntington National Bank 2010 Annual Report Download - page 95

Table 37 — Economic Value of Equity at Risk
Economic Value of Equity at Risk (%)
Basis point change scenario ........................... ⫺200 ⫺100 +100 +200
Board policy limits .................................. ⫺12.0% ⫺5.0% ⫺5.0% ⫺12.0%
December 31, 2010 ................................. ⫺0.5 1.3 ⫺4.0 ⫺8.9
December 31, 2009.................................. 0.8 2.7 ⫺3.7 ⫺9.1
The EVE at risk reported as of December 31, 2010 for the +200 basis points scenario shows a change to
a slightly lower long-term liability sensitive position compared with December 31, 2009. The primary factors
contributing to the change are the decline in market interest rates over the course of 2010 along with growth
in deposits and net free funds, offset by increases in fixed-rate loans, securities, and interest rate swaps used
for asset-liability management purposes.
The following table shows the economic value sensitivity of select portfolios to changes in market interest
rates. The change in economic value for each portfolio is measured as the percent change from the base
economic value for that portfolio. For the +200 basis points scenario, total net tangible assets decreased in
value 3.4% to changes in market interest rates, while total net tangible liabilities increased in value 2.5% to
changes in market interest rates. EVE at risk for the +200 basis points scenario is liability sensitive because of
the decrease in economic value of total net tangible assets, which reduces the EVE, and the increase in
economic value of total net tangible liabilities, which also reduces the EVE.
Table 38 — Economic Value Sensitivity
Percent of
Total Net
Tangible
Assets(1)
Percent Change in Economic Value for
a Given Change in Interest Rates
Over / (Under) Base Case Parallel
Shocks
Basis point change scenario ........................... ⫺200 ⫺100 +100 +200
Total loans . . ..................................... 71% 1.4% 1.0% ⫺1.4% ⫺2.9%
Total investments and other earning assets ................ 20 3.7 2.4 ⫺2.9 ⫺5.8
Total net tangible assets(2) ............................ 1.8 1.2 ⫺1.7 ⫺3.4
Total deposits ..................................... 78 ⫺2.2 ⫺1.3 1.3 2.6
Total borrowings ................................... 11 ⫺2.0 ⫺1.1 1.0 1.9
Total net tangible liabilities(3) ......................... ⫺2.2 ⫺1.2 1.3 2.5
(1) At December 31, 2010.
(2) Tangible assets excluding ALLL.
(3) Tangible liabilities excluding AULC.
MSR
(This section should be read in conjunction with Note 5 of the Notes to the Consolidated Financial
Statements.)
At December 31, 2010, we had a total of $196.2 million of capitalized MSRs representing the right to
service $15.9 billion in mortgage loans. Of this $196.2 million, $125.7 million was recorded using the fair
value method, and $70.5 million was recorded using the amortization method. If we actively engage in
hedging, the MSR asset is carried at fair value.
MSR fair values are very sensitive to movements in interest rates as expected future net servicing income
depends on the projected outstanding principal balances of the underlying loans, which can be greatly reduced
by prepayments. Prepayments usually increase when mortgage interest rates decline and decrease when
mortgage interest rates rise. We have employed strategies to reduce the risk of MSR fair value changes or
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