Huntington National Bank 2013 Annual Report Download - page 177

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Credit loss estimates, such as probability of default, constant default, cumulative default, loss given default, cure given deferral,
and loss severity, are driven by the ability of the borrowers to pay their loans and the value of the underlying collateral and are
impacted by changes in macroeconomic conditions, typically increasing when economic conditions worsen and decreasing when
conditions improve. An increase in the estimated prepayment rate typically results in a decrease in estimated credit losses and vice
versa. Higher credit loss estimates generally result in lower fair values. Credit spreads generally increase when liquidity risks and
market volatility increase and decrease when liquidity conditions and market volatility improve.
Discount rates and spread over forward interest rate swap rates typically increase when market interest rates increase and/or credit
and liquidity risks increase and decrease when market interest rates decline and/or credit and liquidity conditions improve. Higher
discount rates and credit spreads generally result in lower fair market values.
Net market price and pull through percentages generally increase when market interest rates increase and decline when market
interest rates decline. Higher net market price and pull through percentages generally result in higher fair values.
Fair values of financial instruments
The following table provides the carrying amounts and estimated fair values of Huntington’s financial instruments that are carried
either at fair value or cost at December 31, 2013 and December 31, 2012:
December 31, 2013 December 31, 2012
Carrying Fair Carrying Fair
(dollar amounts in thousands) Amount Value Amount Value
Financial Assets:
Cash and short-term assets $ 1,058,175 $ 1,058,175 $ 1,333,727 $ 1,333,727
Trading account securities 35,573 35,573 91,205 91,205
Loans held for sale 326,212 326,212 764,309 773,013
Available-for-sale and other securities 7,308,753 7,308,753 7,566,175 7,566,175
Held-to-maturity securities 3,836,667 3,760,898 1,743,876 1,794,105
N
et loans and direct financing leases 42,472,630 40,976,014 39,959,350 38,401,965
Derivatives 200,029 200,029 385,697 385,697
Financial Liabilities:
Deposits 47,506,718 48,132,550 46,252,683 46,330,715
Short-term borrowings 552,143 543,552 589,814 584,671
Federal Home Loan Bank advances 1,808,293 1,808,558 1,008,959 1,008,959
Other long term debt 1,349,119 1,342,890 158,784 156,719
Subordinated notes 1,100,860 1,073,116 1,197,091 1,183,827
Derivatives 129,274 129,274 152,188 152,188
The following table presents the level in the fair value hierarchy for the estimated fair values of only Huntington’s financial
instruments that are not already on the Consolidated Balance Sheets at fair value at December 31, 2013 and December 31, 2012:
Estimated Fair Value Measurements at Reporting Date Using Balance at
(dollar amounts in thousands) Level 1 Level 2 Level 3 December 31, 2013
Financial Assets
Loans held for sale $ --- $ --- $ --- $ ---
Held-to-maturity securities --- 3,760,898 --- 3,760,898
N
et loans and direct financing leases --- --- 40,976,014 40,976,014
Financial liabilities
Deposits --- 42,279,542 5,853,008 48,132,550
Short-term borrowings --- --- 543,552 543,552
Federal Home Loan Bank advances --- --- 1,808,558 1,808,558
Other long-term debt --- --- 1,342,890 1,342,890
Subordinated notes --- --- 1,073,116 1,073,116