Huntington National Bank 2003 Annual Report Download - page 120

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As a result of a formal Securities and Exchange Commission investigation, which is more fully described in Note 26, one rating agency
placed Huntington’s debt rating on “Credit Watch Negative” pending completion of the investigation. As a result of this action by the
credit agency, one investor reduced its unsecured line of credit available to Huntington. As of December 31, 2003, there were no
borrowings against the unsecured line of credit.
14. Federal Home Loan Bank Advances
Huntington’s long-term advances from the Federal Home Loan Bank had weighted average interest rates of 1.23% and 1.62% at
December 31, 2003 and 2002, respectively. These advances, which had a combination of fixed and variable interest rates, were
collateralized by qualifying real estate loans and securities. As of December 31, 2003 and 2002, Huntington’s maximum borrowing
capacity was $1.4 billion and $1.3 billion, respectively. The advances of $1.3 billion mature over the next five years as follows: $3
million in 2004; $100 million in 2005; none in 2006; $900 million in 2007; and $270 million in 2008. The terms of advances include
various restrictive covenants including limitations on the acquisition of additional debt in excess of specified levels, dividend payments,
and the disposition of subsidiaries. As of December 31, 2003, Huntington was in compliance with all such covenants.
15. Subordinated Notes
At December 31, Huntington’s subordinated notes consisted of the following:
(in thousands of dollars) 2003 2002
Parent Company:
2.40% junior subordinated debentures due 2027(1) $206,186 $ —
2.33% junior subordinated debentures due 2028(2) 103,093 —
The Huntington National Bank:
Floating rate subordinated notes due 2008 100,000 100,000
8.00% subordinated notes due 2010 162,769 164,812
4.90% subordinated notes due 2014 198,431 —
6.60% subordinated notes due 2018 219,991 220,824
7.62% subordinated notes due 2003 — 150,572
6.75% subordinated notes due 2003 — 102,470
Total Subordinated Notes $990,470 $738,678
(1) Variable effective rate at December 31, 2003, based on three month LIBOR + 0.70%.
(2) Variable effective rate at December 31, 2003, based on three month LIBOR + 0.625%.
Amounts above are reported net of unamortized discounts and include values related to hedging with derivative financial instruments.
The derivative instruments, principally interest rate swaps, are used to match the funding rates on certain assets by hedging the cash
flow variability associated with certain variable-rate debt by converting the debt to fixed-rate and hedging the fair values of certain
fixed-rate debt by converting the debt to a variable rate. See Note 28 for more information regarding such financial instruments.
The weighted-average interest rate for subordinated notes was 6.36% at December 31, 2003, and 6.47% at the end of 2002. The
Huntington National Bank’s floating rate subordinated notes were issued in 1998 and are based on three-month LIBOR. At December
31, 2003, these notes carried an interest rate of 1.62%.
At December 31, 2002, Huntington reported $300 million of company obligated mandatorily redeemable preferred capital securities of
subsidiary trusts holding solely the junior subordinated debentures of the parent company (Capital Securities). One subsidiary trust
held $200 million of Capital Securities, bearing interest at three-month LIBOR plus 0.70% and due February 1, 2027. The other
subsidiary trust held $100 million of Capital Securities, bearing interest at three-month LIBOR plus 0.625% and due June 15, 2028.
With the adoption of FIN 46, these two subsidiary trusts are no longer consolidated. As a result, the Capital Securities are no longer
reported as obligations of Huntington. Also, the junior subordinated debentures of the parent company are no longer eliminated in
consolidation as an inter-company item and are therefore reported as obligations of Huntington. At December 31, 2003, the parent
company had an equity investment in both of the business trusts of $9.3 million.
118 HUNTINGTON BANCSHARES INCORPORATED