Huntington National Bank 2007 Annual Report Download - page 57

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PARENT COMPANY LIQUIDITY
The parent company’s funding requirements consist primarily of dividends to shareholders, income taxes, funding of non-bank
subsidiaries, repurchases of our stock, debt service, acquisitions, and operating expenses. The parent company obtains funding to
meet obligations from dividends received from direct subsidiaries, net taxes collected from subsidiaries included in the federal
consolidated tax return, fees for services provided to subsidiaries, and the issuance of debt securities.
At December 31, 2007, the parent company had $153.5 million in cash or cash equivalents. This declined significantly compared
with the prior year-end reflecting a cash payment in 2007 of $357.0 million to the former shareholders of Sky Financial as part of
the purchase price. On October 16, 2007, Huntington declared a quarterly cash dividend on its common stock of $0.265 per
common share, payable January 2, 2008, to shareholders of record on December 14, 2007. Also, on January 16, 2008, Huntington
declared a quarterly cash dividend on its common stock of $0.265 per common share, payable April 1, 2008, to shareholders of
record on March 14, 2007. Based on the regulatory dividend limitation, the Bank could not have declared and paid a dividend to
the parent company at December 31, 2007, without regulatory approval. We do not anticipate that the parent company will receive
dividends from the Bank until the second half of 2008. To help meet any additional liquidity needs, we have an open-ended,
automatic shelf registration statement filed and effective with the SEC, which permits us to issue an unspecified amount of debt or
equity securities.
Considering anticipated earnings and planned issuances of debt, we believe the parent company has sufficient liquidity to meet its
cash flow obligations.
CREDIT RATINGS
Credit ratings by the three major credit rating agencies are an important component of our liquidity profile. Among other factors,
the credit ratings are based on financial strength, credit quality and concentrations in the loan portfolio, the level and volatility of
earnings, capital adequacy, the quality of management, the liquidity of the balance sheet, the availability of a significant base of
core retail and commercial deposits, and our ability to access a broad array of wholesale funding sources. Adverse changes in these
factors could result in a negative change in credit ratings and impact not only the ability to raise funds in the capital markets, but
also the cost of these funds. In addition, certain financial on- and off-balance sheet arrangements contain credit rating 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. (See the “Liquidity
Risks” section in Part 1 of the 2007 Annual Report on Form 10-K for additional discussion.)
As a result of credit deterioration due to our lending relationship with Franklin, and its related 2007 fourth quarter restructuring,
the following rating agency changes were made on November 16, 2007: (1) the three credit rating agencies, presented in the table
below, reduced the outlook from Stable to Negative for all ratings, (2) Moody’s Investor Service placed all ratings on review for
possible downgrade, and (3) Fitch Ratings downgraded the rating on senior unsecured notes and subordinated notes by one grade.
On February 22, 2008, Moody’s Investor Service confirmed the ratings of Huntington and the Bank. The ratings outlook remains
negative. To date, the rating agency actions have not had an adverse impact on ratings triggers inherent in financial contracts. We
believe that sufficient liquidity exists to meet the funding needs of the Bank and the parent company.
These developments are reflected in the following table presenting the credit ratings as of December 31, 2007, for the parent
company and the Bank:
Table 31 — Credit Ratings
Senior Unsecured
Notes
Subordinated
Notes Short-Term Outlook
December 31, 2007
Huntington Bancshares Incorporated
Moody’s Investor Service A3 Baal P-2 Negative
Standard and Poor’s BBB+ BBB A-2 Negative
Fitch Ratings A– BBB+ F1 Negative
The Huntington National Bank
Moody’s Investor Service A2 A3 P-1 Negative
Standard and Poor’s A– BBB+ A-2 Negative
Fitch Ratings A– BBB+ F1 Negative
55
MANAGEMENT’S DISCUSSION AND ANALYSIS HUNTINGTON BANCSHARES INCORPORATED