Huntington National Bank 2007 Annual Report Download - page 53

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Conditions in the capital markets were volatile during 2007. As a result, there were significant disruptions in a variety of funding
arrangements typically used by many banks, including the availability of liquid markets for the sale of mortgage loan production
not conforming to secondary market standards required by Federal National Mortgage Association (FNMA) and Federal Home
Loan Mortgage Corporation (FHLMC). In addition, many banks relying on short term funding structures such as commercial
paper and alternative collateral repurchase agreements have had limited access to these markets. We have maintained a diversified
wholesale funding structure with an emphasis on reducing the risk from maturing borrowings resulting in minimal reliance on the
short term funding markets. We do not have an active commercial paper funding program and, while historically active in the
securitization markets (primarily indirect auto loans and leases), we do not rely heavily on these sources of funding. In addition,
we do not provide liquidity facilities for conduits, structured investment vehicles, or other off-balance sheet financing structures.
Indicative credit spreads have widened in the secondary market for our debt. We expect these spreads to remain wider than in
prior periods for the foreseeable future.
SOURCES OF LIQUIDITY
Our primary source of funding for the Bank is retail and commercial core deposits. As of December 31, 2007, these core deposits,
of which our Regional Banking line of business provided 95%, funded 58% of total assets. The types and sources of deposits by
business segment at December 31, 2007, are detailed in Table 27. At December 31, 2007, total core deposits represented 84% of
total deposits, an increase from 79% at the prior year-end.
Core deposits are comprised of interest bearing and non-interest bearing demand deposits, money market deposits, savings and
other domestic time deposits, consumer certificates of deposit both over and under $100,000, and non-consumer certificates of
deposit less than $100,000. Non-core deposits consists of: (1) other domestic time deposits of $100,000 or more, comprised
primarily of public fund certificates of deposit greater than $100,000, (2) brokered time deposits, representing funds obtained by or
through a deposit broker that were issued in denominations of $100,000 or more and, in turn, participated by the broker to its
customers in denominations of $100,000 or less, (3) negotiable certificates of deposit, representing large denomination certificates
of deposit (generally $1 million or more) that can be sold but cannot be cashed in before maturity, and (4) foreign deposits that
are interest bearing and mature in one year or less.
Core deposits can also increase our need for liquidity as certificates of deposit mature or are withdrawn early and as non-maturity
deposits, such as checking and savings account balances, are withdrawn.
Domestic time deposits of $100,000 or more, and brokered deposits and negotiable CDs totaled $5.4 billion at the end of 2007 and
$4.5 billion at the end of 2006. The contractual maturities of these deposits at December 31, 2007 were: $2.2 billion in three
months or less, $1.0 billion in three months through six months, $0.6 billion in six months through twelve months, and $1.6 billion
after twelve months.
Demand deposit overdrafts that have been reclassified as loan balances were $23.4 million and $12.5 million at December 31, 2007
and 2006, respectively.
Sources of wholesale funding include other domestic time deposits of $100,000 or more, brokered deposits and negotiable CDs,
deposits in foreign offices, short-term borrowings, Federal Home Loan Bank (FHLB) advances, other long-term debt and
subordinated notes. At December 31, 2007, total wholesale funding was $15.3 billion, an increase from $11.5 billion at December 31,
2006. The $15.3 billion portfolio at December 31, 2007, had a weighted average maturity of 4.4 years. We are a member of the
FHLB of Cincinnati, which provides funding to members through advances. These advances carry maturities from one month to
20 years. At December 31, 2007, our wholesale funding included a maximum borrowing capacity of $4.8 billion, of which
$3.1 billion of advances were drawn. All FHLB borrowings are collateralized with mortgage-related assets such as residential
mortgage loans and home equity loans. To provide further liquidity, we have a $6.0 billion domestic bank note program with
$2.8 billion available for future issuance under this program as of December 31, 2007, that enables us to issue notes with maturities
from one month to 30 years.
51
MANAGEMENT’S DISCUSSION AND ANALYSIS HUNTINGTON BANCSHARES INCORPORATED