Huntington National Bank 2008 Annual Report Download - page 65

Also during 2008, we received $1.4 billion of equity capital by issuing to the U.S. Department of Treasury 1.4 million shares of
Series B Preferred Stock as a result of our participation in the TARP voluntary CPP. The Series B Preferred Stock will pay
cumulative dividends at a rate of 5% per year for the first five years and 9% per year thereafter, resulting in quarterly cash
demands of $17.5 million through 2012, and $31.5 million thereafter. (See Note 15 of the Notes to the Consolidated Financial
Statements for additional information regarding the Series B Preferred Stock issuance.)
Based on a regulatory dividend limitation, the Bank could not have declared and paid a dividend to the parent company at
December 31, 2008, without regulatory approval. We do not anticipate the resumption of cash bank dividends to the parent
company for the foreseeable future as we continue to build Bank regulatory capital above our already “well-capitalized” level. 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.
With the exception of the common and preferred dividends previously discussed, the parent company does not have any significant
cash demands. There are no debt maturities until 2013, when a debt maturity of $50 million is payable.
Considering our participation in the TARP voluntary CPP (see “Risk Factors” included in Item 1A of our 2008 Form 10-K for the
year ended December 31, 2008), anticipated earnings, capital raised from the 2008 second quarter preferred-stock issuance, other
factors discussed above, and other analyses that we have performed, we believe the parent company has sufficient liquidity to meet
its cash flow obligations for the foreseeable future.
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 “Risk Factors”
included in Item 1A of our 2008 Form 10-K for the year ended December 31, 2008)
The most recent credit ratings for the parent company and the Bank are as follows:
Table 40 — Credit Ratings
Senior Unsecured
Notes
Subordinated
Notes Short-term Outlook
February 13, 2009
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 Stable
The Huntington National Bank
Moody’s Investor Service A2 A3 P-1 Negative
Standard and Poor’s BBB+ BBB A-2 Negative
Fitch Ratings A- BBB+ F1 Stable
A security rating is not a recommendation to buy, sell, or hold securities, is subject to revision or withdrawal at any time by the
assigning rating organization, and should be evaluated independently of any other rating.
OFF-BALANCE SHEET ARRANGEMENTS
In the normal course of business, we enter into various off-balance sheet arrangements. These arrangements include financial
guarantees contained in standby letters of credit issued by the Bank and commitments by the Bank to sell mortgage loans.
Standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. These
guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond
financing, and similar transactions. Most of these arrangements mature within two years, and are expected to expire without being
drawn upon. Standby letters of credit are included in the determination of the amount of risk-based capital that the parent
company, and the Bank, are required to hold.
Through our credit process, we monitor the credit risks of outstanding standby letters of credit. When it is probable that a standby
letter of credit will be drawn and not repaid in full, losses are recognized in the provision for credit losses. At December 31, 2008,
we had $1.3 billion of standby letters of credit outstanding, of which 49% were collateralized. Included in this $1.3 billion total are
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Management’s Discussion and Analysis Huntington Bancshares Incorporated