Huntington National Bank 2015 Annual Report Download - page 30

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2. Industry competition may have an adverse effect on our success.
Our profitability depends on our ability to compete successfully. We operate in a highly competitive environment, and we expect
competition to intensify due in part to the sustained low interest rate and ongoing low-growth economic environment. Certain of our
competitors are larger and have more resources than we do, enabling them to be more aggressive than us in competing for loans and
deposits. In our market areas, we face competition from other banks and financial service companies that offer similar services. Some
of our non-bank competitors are not subject to the same extensive regulations we are and, therefore, may have greater flexibility in
competing for business. Our ability to compete successfully depends on a number of factors, including customer convenience, quality
of service by investing in new products and services, personal contacts, pricing, and range of products. If we are unable to successfully
compete for new customers and retain our current customers, our business, financial condition, or results of operations may be
adversely affected. In particular, if we experience an outflow of deposits as a result of our customers seeking investments with higher
yields or greater financial stability, or a desire to do business with our competitors, we may be forced to rely more heavily on
borrowings and other sources of funding to operate our business and meet withdrawal demands, thereby adversely affecting our net
interest margin. For more information, refer to “Competition” section of Item 1: Business.
Liquidity Risks:
1. Changes in either Huntington’s financial condition or in the general banking industry could result in a loss of depositor
confidence.
Liquidity is the ability to meet cash flow needs on a timely basis at a reasonable cost. The Bank uses its liquidity to extend credit
and to repay liabilities as they become due or as demanded by customers. The board of directors establishes liquidity policies and
limits and management establishes operating guidelines for liquidity.
Our primary source of liquidity is our large supply of deposits from consumer and commercial customers. The continued
availability of this supply depends on customer willingness to maintain deposit balances with banks in general and us in
particular. The availability of deposits can also be impacted by regulatory changes (e.g. changes in FDIC insurance, the Liquidity
Coverage Ratio, etc.), and other events which can impact the perceived safety or economic benefits of bank deposits. While we make
significant efforts to consider and plan for hypothetical disruptions in our deposit funding, market related, geopolitical, or other events
could impact the liquidity derived from deposits.
2. If we lose access to capital markets, we may not be able to meet the cash flow requirements of our depositors, creditors, and
borrowers, or have the operating cash needed to fund corporate expansion and other corporate activities.
Wholesale funding sources include securitization, federal funds purchased, securities sold under repurchase agreements, non-
core deposits, and long-term debt. The Bank is also a member of the Federal Home Loan Bank of Cincinnati, which provides members
access to funding through advances collateralized with mortgage-related assets. We maintain a portfolio of highly-rated, marketable
securities that is available as a source of liquidity.
Capital markets disruptions can directly impact the liquidity of the Bank and Corporation. The inability to access capital markets
funding sources as needed could adversely impact our financial condition, results of operations, cash flows, and level of regulatory-
qualifying capital. We may, from time-to-time, consider using our existing liquidity position to opportunistically retire outstanding
securities in privately negotiated or open market transactions.
Operational and Legal Risks:
1. We face security risks, including denial of service attacks, hacking, social engineering attacks targeting our colleagues and
customers, malware intrusion or data corruption attempts, and identity theft that could result in the disclosure of confidential
information, adversely affect our business or reputation, and create significant legal and financial exposure.
Our computer systems and network infrastructure are subject to security risks and could be susceptible to cyber-attacks, such as
denial of service attacks, hacking, terrorist activities or identity theft. Financial services institutions and companies engaged in data
processing have reported breaches in the security of their websites or other systems, some of which have involved sophisticated and
targeted attacks intended to obtain unauthorized access to confidential information, destroy data, disable or degrade service, or
sabotage systems, often through the introduction of computer viruses or malware, cyber-attacks and other means. Denial of service
attacks have been launched against a number of large financial services institutions, including us. None of these events against us
resulted in a breach of our client data or account information; however, the performance of our website, www.huntington.com, was
adversely affected, and in some instances customers were prevented from accessing our website. We expect to be subject to similar
attacks in the future. While events to date primarily resulted in inconvenience, future cyber-attacks could be more disruptive and
damaging. Hacking and identity theft risks, in particular, could cause serious reputational harm. Cyber threats are rapidly evolving and
we may not be able to anticipate or prevent all such attacks and could be held liable for any security breach or loss.