Huntington National Bank 2003 Annual Report Download - page 64

MANAGEMENT’S DISCUSSION AND ANALYSIS
triggers that could increase funding needs if a negative rating change occurs. Letter of credit commitments for marketable securities,
interest rate swap collateral agreements, and certain asset securitization transactions contain credit rating provisions.
As a result of a formal SEC investigation announced June 26, 2003, Standard and Poor’s rating agency placed the company’s debt
ratings on “CreditWatch Negative” pending completion of the investigation. As a precautionary measure, Management increased the
volume of long-term wholesale borrowings, while reducing overnight Federal Funds borrowings. The cost of short-term borrowings
has not been materially affected by the downgrade, although at least one investor has reduced exposure limits as a result of this action
by a rating agency. This action had no adverse impact on rating triggers inherent in financial contracts. Management believes that
sufficient liquidity exists to meet the funding needs of the Bank and the parent company. Credit ratings as of December 31, 2003 for
the parent company and the Bank were:
Huntington Bancshares Incorporated
Senior
Unsecured
Notes
Subordinated
Notes
Short
Term Outlook
Moody’s Investor Service A2 A3 P1 Negative
Standard & Poor’s Corporation A- BBB+ A2 CreditWatch Negative
Fitch Ratings A A- F1 Stable
The Huntington National Bank
Moody’s Investor Service A1 A2 P1 Negative
Standard & Poor’s Corporation A A- A1 CreditWatch Negative
Fitch Ratings A A- F1 Stable
B ANK L IQUIDITY
The company manages liquidity at the Bank level to ensure that adequate funding sources are available to meet ongoing business
activities, including providing loans and leases for customers, repaying obligations as they become due, and supporting operating costs.
Selected information regarding the Bank’s short-term borrowings and the maturity of obligations, including payments due under
operating lease obligations, is reflected in Table 15.
The primary source of funding for the Bank are core deposits from its retail and commercial customers. As of December 31, 2003,
these core deposits, 96% of which are provided by the Regional Banking line of business, funded 51% of total assets. Core deposits
include non-interest bearing and interest bearing demand deposits, savings accounts, and other domestic deposits, including
certificates of deposit under $100,000 and IRAs. The types and sources of deposits by business segment at December 31, 2003, are
detailed in Table 16. At December 31, 2003, total core deposits represented 84% of total deposits, down from 87% at the end of the
prior year. This decline reflected the run-off of relatively expensive retail CDs, which were replaced by lower cost brokered and
negotiable CDs. The decline in assets funded by core deposits at the end of 2001 compared with 2002 reflected the sale of $4.8 billion of
Florida banking deposits.
Domestic time deposits of $100,000 or more, adjusted to include brokered time deposits and negotiable certificates of deposit and IRAs
included in other domestic time deposits, totaled $3.2 billion at December 31, 2003. These time deposits mature as follows:
$0.8 million within three months, $0.3 million within six but more than three months, $0.3 million within one year but more than six
months, and $1.7 million maturing beyond one year. At December 31, 2003, loans and leases were 121% of total deposits compared
with 119% at December 31, 2002.
62 HUNTINGTON BANCSHARES INCORPORATED