Huntington National Bank 2003 Annual Report Download - page 121

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. Other Long-Term Debt
At December 31, Huntington’s other long-term debt consisted of the following:
(in thousands of dollars) 2003 2002
The Huntington National Bank $4,394,509 $2,305,123
Parent company (maturing in 2005 and interest rate of 2.57%)(1) 100,000 140,000
Class C preferred securities of REIT subsidiary (no maturity and interest rate of 7.88%) 50,000 50,000
Total Other Long-Term Debt $4,544,509 $2,495,123
(1) Variable effective rate at December 31, 2003, based on three month LIBOR + 1.40%.
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 other long-term debt at December 31, 2003 and 2002, was 1.67% and 1.56%, respectively. The
parent company issued $100 million of long-term notes in 2002 that mature in 2004. The parent company long-term notes issued in
2001 matured in the first quarter of 2003. At December 31, 2003, Huntington’s other long term debt included $500 million of secured
borrowings, which had variable rates based on the five-year and ten-year constant maturity indices. At December 31, 2003, these
secured borrowings had a remaining average maturity of 1.5 years and a weighted average cost of 1.70%.
The terms of the other long-term debt obligations contain 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.
Other long-term debt maturities for the next five years are as follows: $1.2 billion in 2004; $1.8 billion in 2005; $0.4 billion in 2006;
none in 2007; $0.2 billion in 2008; and $0.9 billion in 2009 and thereafter. In the fourth quarter of 2003, Huntington extinguished $250
million of secured, long-term debt and recognized, in other expense, a loss of $15.3 million. The weighted-average rate on the secured,
long-term debt that was extinguished was 4.98%.
17. Segment Reporting
Huntington has three distinct lines of business: Regional Banking, Dealer Sales, and the Private Financial Group (PFG). A fourth
segment includes Huntington’s Treasury function and other unallocated assets, liabilities, revenue, and expense. Line of business
results are determined based upon Huntington’s management reporting system, which assigns balance sheet and income statement
items to each of the business segments. The process is designed around Huntington’s organizational and management structure and,
accordingly, the results below are not necessarily comparable with similar information published by other financial institutions.
During 2002, the previously reported segments, Retail Banking and Corporate Banking, were combined and renamed Regional
Banking. Since this segment is managed through seven geographically defined regions where each region’s management has
responsibility for both retail and corporate banking business development, combining these two previously separate segments better
reflects the management accountability and decision making structure. In addition, changes were made to the methodologies utilized
for certain balance sheet and income statement allocations from Huntington’s management reporting system. The prior periods have
not been restated for these methodology changes.
Management relies on “operating earnings” for review of performance and for critical decision making purposes. Operating earnings
exclude the impact of the significant items listed in the reconciliation table below. See Note 21 to the consolidated financial statements
for further discussions regarding Restructuring and Note 22 regarding the sale of Huntington’s Florida banking and insurance
operations. The financial information that follows is inclusive of the above adjustments on an after-tax basis to reflect the
reconciliation to reported net income.
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