Huntington National Bank 2010 Annual Report Download - page 97

in other financial agreements. To compensate for the effect of these assumed liquidity pressures, we consider
alternative sources of liquidity over different time periods to project how funding needs would be managed.
The specific alternatives for enhancing liquidity include generating client deposits, securitizing or selling loans,
selling or maturing of securities, and extending the level or maturity of wholesale borrowings.
Most credit markets in which we participate and rely upon as sources of funding were significantly
disrupted in mid-2007 through 2009 with an improving trend during 2010. Throughout 2008 and 2009, we
strengthened our liquidity position by significantly reducing noncore funds and wholesale borrowings,
increasing liquid assets, and shifting from a net purchaser of overnight federal funds to holding an excess
reserve position at the Federal Reserve Bank. The percentage of assets funded with noncore or wholesale
funding declined to 16% by the end of 2010 from 25% at 2008 year-end. During 2010, the economy continued
to stabilize and financial credit spreads tightened, resulting in a more liquid secondary market for our debt. In
addition, all three major rating agencies upgraded both the Bank’s and the parent company’s credit ratings and
/or outlook resulting in a significantly lower rate on the $300.0 million of subordinated debt issued in
December of 2010.
Bank Liquidity and Sources of Liquidity
Our primary sources of funding for the Bank are retail and commercial core deposits. As of December 31,
2010, these core deposits funded 73% of total assets. At December 31, 2010, total core deposits represented
93% of total deposits, an increase from 92% at the prior year-end.
Core deposits are comprised of interest-bearing and noninterest-bearing demand deposits, money market
deposits, savings and other domestic deposits, consumer certificates of deposit both over and under $250,000,
and nonconsumer certificates of deposit less than $250,000. Noncore deposits consist of brokered money
market deposits and certificates of deposit, foreign time deposits, and other domestic deposits of $250,000 or
more comprised primarily of public fund certificates of deposit more than $250,000.
Core deposits may increase our need for liquidity as certificates of deposit mature or are withdrawn
before maturity and as nonmaturity deposits, such as checking and savings account balances, are withdrawn.
We voluntarily began participating in the FDIC’s TAGP in October of 2008. Under this program, all
noninterest-bearing and interest-bearing transaction accounts with a rate of less than 0.50% were fully
guaranteed by the FDIC for a customer’s entire account balance.
In April of 2010, the FDIC adopted an interim rule extending the TAGP through December 31, 2010, for
financial institutions that desired to continue participating in the TAGP. On April 30, 2010, we notified the
FDIC of our decision to opt-out of the TAGP extension effective July 1, 2010.
Demand deposit overdrafts that have been reclassified as loan balances were $13.1 million and
$40.4 million at December 31, 2010 and 2009, respectively.
Other domestic time deposits of $250,000 or more and brokered deposits and negotiable CDs totaled
$2.2 billion at the end of 2010 and $2.7 billion at the end of 2009. The contractual maturities of these deposits
at December 31, 2010, were as follows: $0.8 billion in three months or less, $0.3 billion in three months
through six months, $0.5 billion in six months through twelve months, and $0.6 billion after twelve months.
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