Huntington National Bank 2004 Annual Report Download - page 60

MANAGEMENT’S DISCUSSION AND ANALYSIS HUNTINGTON BANCSHARES INCORPORATED
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 the formal SEC investigation and pending banking regulatory supervisory agreements announced on November 3, 2004,
the following rating agency actions were taken (1) Moody’s reaffirmed their Negative outlook and placed all the ratings on review for
possible downgrade, (2) Standard and Poor’s lowered their outlook from Stable to Negative, and (3) Fitch lowered their outlook from
Stable to Negative. 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 was not materially affected by these actions,
although at least one investor has reduced exposure limits as a result of this action by a rating agency.
On February 8, 2005, Moody’s announced the following rating actions:
From To
Huntington Bancshares Incorporated
Senior Unsecured Notes A2 A3
Subordinated Notes A3 Baa1
Short Term P-1 P-2
Outlook Negative Stable
The Huntington National Bank
Senior Unsecured Notes A1 A2
Subordinated Notes A2 A3
Short Term (reaffirmed) P-1 P-1
Outlook Negative Stable
To date, these rating agency actions have 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 February 8,
2005, for the parent company and the Bank were:
Table 17 — Credit Rating Agency Ratings
Senior Unsecured Subordinated
Notes Notes Short-Term Outlook
Huntington Bancshares Incorporated
Moody’s Investor Service A3 Baal P-2 Stable
Standard and Poor’s A– BBB+ A-2 Negative
Fitch Ratings A A– F1 Negative
The Huntington National Bank
Moody’s Investor Service A2 A3 P-1 Stable
Standard and Poor’s A A– A-1 Negative
Fitch Ratings A A– F1 Negative
Credit ratings by the three major credit rating agencies are an important component of the Company’s liquidity profile. Adverse
changes in credit ratings may negatively impact not only the ability to raise funds in the capital markets, but also the cost of these
funds. (See the Liquidity Risks section in Part 1 of the 2004 Annual Report on Form 10-K for additional discussion.)
The primary source of funding is core deposits from retail and commercial customers. As of December 31, 2004, these core deposits,
of which 94% were provided by the Regional Banking line of business, funded 53% of total assets. The types and sources of deposits
by business segment at December 31, 2004, are detailed in Table 18. At December 31, 2004, total core deposits represented 83% of
total deposits, down slightly from 84% at the end of the prior year.
Core deposits are comprised of interest-bearing and noninterest-bearing demand deposits, savings deposits, retail certificates of
deposit, and other domestic time deposits. Other domestic time deposits are comprised primarily of IRA deposits. Brokered time
deposits represent funds obtained by or through a deposit broker. At December 31, 2004, $772 million of brokered deposits were
issued in denominations of $100,000 or more and, in turn, participated by the broker to their customers in denominations of
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