Huntington National Bank 2015 Annual Report Download - page 181

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A significant change in the unobservable inputs may result in a significant change in the ending fair value measurement of
Level 3 instruments. In general, prepayment rates increase when market interest rates decline and decrease when market interest
rates rise and higher prepayment rates generally result in lower fair values for MSR assets, Private-label CMO securities, Asset-
backed securities, and Automobile loans.
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, 2015 and December 31, 2014:
December 31, 2015 December 31, 2014
Carrying Fair Carrying Fair
(dollar amounts in thousands) Amount Value Amount Value
Financial Assets:
Cash and short-term assets $ 898,994 $ 898,994 $ 1,285,124 $ 1,285,124
Trading account securities 36,997 36,997 42,191 42,191
Loans held for sale 474,621 484,511 416,327 416,327
Available-for-sale and other securities 8,775,441 8,775,441 9,384,670 9,384,670
Held-to-maturity securities 6,159,590 6,135,458 3,379,905 3,382,715
Net loans and direct financing leases 49,743,256 48,024,998 47,050,530 45,110,406
Derivatives 274,872 274,872 352,642 352,642
Financial Liabilities:
Deposits 55,294,979 55,299,435 51,732,151 52,454,804
Short-term borrowings 615,279 615,279 2,397,101 2,397,101
Long-term debt 7,067,614 7,043,014 4,335,962 4,286,304
Derivatives 144,350 144,350 284,255 284,255
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, 2015 and December 31, 2014:
Estimated Fair Value Measurements at Reporting Date Using
December 31, 2015(dollar amounts in thousands) Level 1 Level 2 Level 3
Financial Assets
Held-to-maturity securities $ — $ 6,135,458 $ — $ 6,135,458
Net loans and direct financing leases — — 48,024,998 48,024,998
Financial Liabilities
Deposits — 51,869,105 3,430,330 55,299,435
Short-term borrowings — 1,770 613,509 615,279
Long-term debt — — 7,043,014 7,043,014