Huntington National Bank 2011 Annual Report Download - page 206

Fair values of financial instruments
The carrying amounts and estimated fair values of Huntington’s financial instruments at December 31, 2011
and 2010 are presented in the following table:
December 31, 2011 December 31, 2010
Carrying
Amount Fair Value
Carrying
Amount Fair Value
(dollar amounts in thousands)
Financial Assets:
Cash and short-term assets ................. $ 1,206,911 $ 1,206,911 $ 982,926 $ 982,926
Trading account securities ................. 45,899 45,899 185,404 185,404
Loans held for sale ....................... 1,618,391 1,638,276 793,285 793,285
Available-for-sale and other securities ....... 8,078,014 8,078,014 9,895,244 9,895,244
Held-to-maturity securities ................ 640,551 660,186 ——
Net loans and direct financing leases ......... 37,958,955 36,669,829 36,857,499 35,403,910
Derivatives ............................. 403,002 403,002 346,133 346,133
Financial Liabilities:
Deposits ............................... (43,279,625) (43,406,125) (41,853,898) (41,993,567)
Short-term borrowings .................... (1,441,092) (1,429,717) (2,040,732) (1,982,545)
Federal Home Loan Bank advances ......... (362,972) (362,972) (172,519) (172,519)
Other long term debt ..................... (1,231,517) (1,232,975) (2,144,092) (2,157,358)
Subordinated notes ....................... (1,503,368) (1,410,392) (1,497,216) (1,377,851)
Derivatives ............................. (265,316) (265,316) (239,240) (239,240)
The short-term nature of certain assets and liabilities result in their carrying value approximating fair value.
These include trading account securities, customers’ acceptance liabilities, short-term borrowings, bank
acceptances outstanding, FHLB advances, and cash and short-term assets, which include cash and due from
banks, interest-bearing deposits in banks, and federal funds sold and securities purchased under resale
agreements. Loan commitments and letters of credit generally have short-term, variable-rate features and contain
clauses that limit Huntington’s exposure to changes in customer credit quality. Accordingly, their carrying
values, which are immaterial at the respective balance sheet dates, are reasonable estimates of fair value. Not all
the financial instruments listed in the table above are subject to the disclosure provisions of ASC Topic 820.
Certain assets, the most significant being operating lease assets, bank owned life insurance, and premises
and equipment, do not meet the definition of a financial instrument and are excluded from this disclosure.
Similarly, mortgage and nonmortgage servicing rights, deposit base, and other customer relationship intangibles
are not considered financial instruments and are not included above. Accordingly, this fair value information is
not intended to, and does not, represent Huntington’s underlying value. Many of the assets and liabilities subject
to the disclosure requirements are not actively traded, requiring fair values to be estimated by Management.
These estimations necessarily involve the use of judgment about a wide variety of factors, including but not
limited to, relevancy of market prices of comparable instruments, expected future cash flows, and appropriate
discount rates.
The following methods and assumptions were used by Huntington to estimate the fair value of the
remaining classes of financial instruments:
Loans and Direct Financing Leases
Variable-rate loans that reprice frequently are based on carrying amounts, as adjusted for estimated credit
losses. The fair values for other loans and leases are estimated using discounted cash flow analyses and employ
interest rates currently being offered for loans and leases with similar terms. The rates take into account the
position of the yield curve, as well as an adjustment for prepayment risk, operating costs, and profit. This value is
192