Huntington National Bank 2012 Annual Report Download - page 67

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Table 22 - Interest Income/Expense Sensitivity
Percent of Percent Change in Interest Income/Expense
Total Earning For a Given Change in Interest Rates
Assets (1) Over / (Under) Base Case Parallel Ramp
Basis point change scenario -25 +100 +200
Total loans 80 % -9.7 %38.1 % 39.2 %
Total investments and other earning assets 20 -6.6 32.5 28.9
Total interest-sensitive income -9.0 36.3 36.5
Total interest-bearing deposits 66 -6.9 35.5 37.0
Total borrowings 6 -11.8 57.4 60.2
Total interest-sensitive expense -7.3 37.4 39.0
(1) At December 31, 2012
Under EVE analysis, the economic value of financial assets, liabilities and off-balance sheet instruments, is derived through the
discounting of cash flows based on actual rates at the end of the period. The economic value of equity is calculated as the difference
between the estimated market value of assets and liabilities, net of the impact of off-balance sheet instruments.
The EVE analysis used in the following table reflects the analysis used monthly by management. It models immediate -25, +100
and +200 basis point parallel shifts in market interest rates. Due to the current low level of interest rates, the analysis reflects a
declining interest rate scenario of 25 basis points, the point at which many assets and liabilities reach zero percent.
Huntington is within Board policy limits for the +100 and +200 basis point scenarios. There is no policy limit for the -25 basis
point scenario. The table below shows the results of the scenario as of December 31, 2012:
Table 23 - Economic Value of Equity at Risk
Economic Value of Equity at Risk (%)
Basis point change scenario -25 +100 +200
Board policy limits --- -5.0 %-12.0 %
December 31, 2012 0.7 -3.8 -8.8
The EVE at risk reported at December 31, 2012, shows that as interest rates increase (decrease) immediately, the economic value
of equity position will decrease (increase), since the amount and duration of the assets are longer than the amount and duration of
liabilities. When interest rates rise, fixed rate assets generally lose economic value; the longer the duration, the greater the value lost.
The opposite is true when interest rates fall.
The following table details the economic value sensitivity to changes in market interest rates at December 31, 2012 for loans,
investments, deposits, and borrowings. The change in economic value for each portfolio is measured as the percent change from the
base economic value for that portfolio. The analysis reflects that, in a sharply higher rate scenario, total tangible assets are more
sensitive than total tangible liabilities. Investments and other earning assets contribute to this sensitivity, largely due to fixed rate
securities investments.