Updates on the U.S. Economy,
Investment Markets, and Financing
Strategies
Prepared for:
Bill Kielczewski
SVP - Managing Director
Institutional Investments
Huntington Capital Markets
William.j.kielczewski@huntington.com
616-233-3603
Dan VandenBosch
VP - Director
Public Finance
Huntington Capital Markets
Dan.vandenbosch@huntington.com
616-242-4507
March 6, 2014
Introduction and Overview
Global Economic Growth – slow recovery continues
The IMF projects World Output to grow at 3.7% for 2014, up from 3.0% in 2013.
“The basic reason behind the stronger recovery is that the brakes to the recovery are progressively
being loosened,” said Olivier Blanchard, the IMF’s chief economist and director of its Research
Department. “The drag from fiscal consolidation is diminishing. The financial system is slowly healing”.
World Output
2012
2013
2014
2015
Advanced Economies
1.4%
1.3%
2.2%
2.3%
•
•
•
•
2.8%
-0.7%
1.4%
0.3%
1.9%
-0.4%
1.7%
1.7%
2.8%
1.0%
1.7%
2.4%
3.0%
1.4%
1.0%
2.2%
Emerging and Developing Countries 4.9%
4.7%
5.1%
5.4%
•
•
•
•
7.7%
4.4%
2.6%
2.4%
7.5%
5.4%
3.0%
3.3%
7.3%
6.4%
3.3%
4.8%
United States
Euro Zone
Japan
United Kingdom
China
India
Latin America and Caribbean
Middle East and North Africa
7.7%
3.2%
3.0%
4.1%
Source: IMF website
3
Global Economic Growth – Interest rates, FX, and global Q.E.
All 4 of the worlds major central banks have implemented some form of
quantitative easing in an attempt to increase their domestic growth rate.
Globally, interest rates have increased year over year. With growth projected at 3.7% and
inflation rates near or below growth rates, how much higher can they go?
Source: IMF website
Country
Credit
Ratings
Debt %
GDP
10 Year
IR
10 Year IR
change YoY
CPI
YoY
Currency % change
Unemployment Rate
YoY (USD)
United States
AA Aaa
70%
2.68%
0.73%
1.50%
6.60%
0.00%
United
Kingdom
AAA Aa1
89%
2.71%
0.62%
2.00%
7.10%
4.79%
Germany
AAA Aaa
81%
1.66%
0.05%
1.30%
6.80%
1.59%
Italy
BBB Baa2
127%
3.68%
-0.86%
0.70%
12.70%
1.59%
Japan
AA- Aa
219%
0.61%
-0.15%
1.60%
3.70%
8.64%
Australia
AAA Aaa
32%
4.14%
0.67%
2.70%
5.80%
-12.78%
China
AA- Aa3
32%
5.50%
0.88%
2.50%
-
-2.77%
India
BBB- Baa
52%
7.50%
0.89%
9.13%
-
15.00%
Brazil
BBB Baa2
59%
4.75%
1.91%
5.59%
-
20.90%
4
U.S. Economy – can we reach our projected 3.0% GDP growth
The Federal Reserve projects U.S. GDP growth of 3.0% for 2014.
Federal Reserve Bank of Philadelphia President Charles Plosser, who votes on policy this year, said he expects
the economy to expand 3 percent in 2014 as the jobless rate falls to 6.2 percent by year-end, warranting a quicker
tapering to bond purchases by the central bank.
Policy makers made the first two cuts to asset purchases in December and January, slowing to $65 billion a
month from $85 billion.
“My preference is to scale back our purchase program at a faster pace to reflect the strengthening economy,” he
said in a speech in Rochester, New York. “We must begin to back away from increasing the degree of policy
accommodation in a manner commensurate with an improving economy,”
Source: Bloomberg
5
U.S. Economy – Is this the best we can do
Leading Economic Indicators in February was 0.3% versus survey expectations
of 0.3%. The 40 year average for the U.S. is 0.1%. 1974-2014
Source: Bloomberg
6
U.S. Economy – Is this the best we can do
LEI Leading Credit Indicators Index shows credit expansion slowing.
Average rate of the LCI index over past 25 years is 0.1%. The current
reading is -1.90%. 1990-2014
Source: Bloomberg
7
U.S. Economy – Is this the best we can do
Durable Goods Orders are negative for both readings thus far in 2014.
The current reading is -1.0%; last months number was revised down to
-5.30%. Both are well below our 0.8% historical average. 1994-2014
Source: Bloomberg
8
U.S. Economy – Is this the best we can do
Construction Spending shows signs of stabilization. The bottom looks to have
been formed in 2009 and we are trending back to our historical average. The
current reading is 0.1% vs. historical average of 0.5%. 1993-2014
Source: Bloomberg
9
U.S. Economy – Home Prices Rebound
Home Prices in the U.S. have bounced back from their 15 year lows during the
credit crisis. Will this trend continue without the Fed’s Q.E. support?
S&P/Case-Shiller Home Price Index 1994-2014
Source: Bloomberg
10
U.S. Economy – How are Homes Sales
Home sales in the U.S. have slowed to -9.10%. Is there a correlation between
buying a home and Government intervention in the market place? See below:
Stimulus Package 1st Time Home Buyer Tax Credit / QE’s 1-3 / Fed Tapering
U.S. Pending Home Sales Index YoY. 2002-2014
QE 1 starts in 11/08
Fed announced
“Tapering”
QE2
1st Time Home Buyer
Tax Credit added to
Stimulus Package.
2/09
QE 2 11/10
QE2
QE 3 9/12
Source: Bloomberg
11
U.S. Economy – Is Corporate America hiring
U.S. job openings are picking up after the “great recession” and we have
made our way back to 2004-2008 hiring levels. Are there enough “qualified”
employees in our underemployment bucket to fill these new positions?
2000-2014
Source: Bloomberg
12
U.S. Economy – Unemployment Rate at 6.60%
We are very close to the Federal Reserves 6.50% desired rate which they
state will allow them to slow their accommodative policy. Will they follow
through with an end to QE and look to raise the overnight rate anytime soon,
or, change their playbook with the recent weakening economic data?
Source: Bloomberg
13
U.S. Economy – Underemployment rate at 12.70%.
Do we have a “structural” employment problem within the U.S.?
We are well off the high rate of 17.20%, but, we are also 5 years out from the start of
the “great recession”. Why can’t these folks in the underemployment index match up
with all the new hiring opportunities presented in the JOLT Index?
38% of business owners surveyed in the January 2014 NFIB say they can not find
“qualified workers” in the U.S. work force. 1994-2014
Source: Bloomberg
14
Investment Strategies
Investing in the Current Market
Quantitative Easing and Federal Funds Rate Discussion
The Federal Reserve has held the U.S. overnight rate near zero for the last 4.5
years. In their most recent meetings they started to “taper” Government Bond
purchases by $10 Billion dollars. Most economists expect the Fed to continue with
tapering and end their bond purchasing program (Q.E.) by the end of 2014.
The Federal Reserve has also said that they will hold the target interest rate for
Federal Funds Rate at 0 to 0.25 at least as long as unemployment remains above
6.5% and inflation remains below their accepted level of 2.0 – 2.50%.
The Unemployment rate fell to 6.6%, but, the participation rate within that survey
fell to 63%, near the lowest level since 1978. Inflation data for the U.S. in March
showed the Fed’s favorite gauge, PCE core YOY, was at 1.10%.
The market has started to adjusted to “tapering”, economic data, and the Federal
Reserves forward guidance on rates by extending the dates at which it anticipates
the overnight rate to increase. Please see the Chicago Board of Trades Fed
Funds Futures Contracts on the next slide for expected date and rate changes.
16
Investing in the Current Market
Fed Funds Futures Contracts
Source: Bloomberg
17
Bond Strategies; Portfolio Ladders and Barbells
Barbell Strategy
Staggers maturities of bonds in a portfolio and
sets a schedule for reinvestment of proceeds
Utilizes only short-term investments and longer
term bonds
• Periodic maturities allow you to control liquidity based
upon anticipated needs
• Interest rate volatility is reduced as portfolio is spread
across different maturities and coupons
• Proceeds from the maturing investment can be used
for the scheduled draw, or reinvested in another
investment if it is not needed.
Benefits:
Portfolio
Maturity
Portfolio
Maturity
Benefits:
Total Portfolio
Total Portfolio
Ladder Strategy / Asset-Liability Match
• Longer-term bonds provide higher interest rates, while shorterterm bonds provide liquidity
• Can help to mitigate risk of owning longer-term bonds in a
rising (or anticipated to rise) interest rate environment by
allocating just a portion of investments to longer-dated
securities
• Maturities of shorter-term bonds can be reinvested in different
types of bonds or other securities should market conditions
change
18
Investing in the Current Market –
“Roll down” the yield curve and use it’s “steepness” to your advantage.
Changes in the U.S. Yield Curve 2010 / 2012 / 2014
Source: Bloomberg
19
Fixed Income Options for MI Government Entities:
Overview
Time Horizon
Relative Risk
Risk-Free
Low
Short-Term
(12 months and < )
Intermediate / Long Term
(> 12 months)
• Treasury Bills
• Agency Discount Notes
• Government MMKT
• Treasury Notes/Bonds
• Agency Notes/Bonds
• Bank Deposit / MMKT Accounts
• Bank Certificates of Deposit
• Commercial Paper (IG A1/P1)
• Agency MBS
• Callable Agency Bonds
• MI Municipal Notes/Bonds
Moderate
20
Financing Outlook and
Strategies
Municipal Yields (Last 5 Years)
One
Three
One Year Five Years
Current Month Ago Months Ago
Ago
Ago
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
•
0.15
0.17
0.18
0.20
0.48
0.25
0.34
0.35
0.33
1.22
0.41
0.49
0.62
0.46
1.32
0.66
0.80
0.93
0.59
1.53
0.96
1.14
1.31
0.74
1.75
1.37
1.57
1.65
0.88
1.97
1.71
1.94
1.97
1.09
2.16
2.01
2.24
2.26
1.30
2.37
2.22
2.46
2.45
1.50
2.59
2.35
2.62
2.62
1.68
2.82
2.49
2.76
2.79
1.78
3.10
2.62
2.89
2.95
1.86
3.37
2.75
3.03
3.11
1.94
3.55
2.86
3.15
3.26
2.01
3.72
2.97
3.25
3.39
2.08
3.89
3.07
3.35
3.52
2.14
4.01
3.16
3.44
3.64
2.20
4.12
3.24
3.53
3.72
2.26
4.23
3.31
3.60
3.80
2.32
4.34
3.36
3.66
3.86
2.38
4.42
3.41
3.72
3.93
2.44
4.51
3.46
3.77
3.99
2.50
4.56
3.5
3.82
4.05
2.56
4.61
3.54
3.85
4.10
2.62
4.66
3.58
3.88
4.14
2.66
4.69
3.61
3.91
4.17
2.68
4.70
3.63
3.94
4.19
2.69
4.71
3.65
3.96
4.21
2.70
4.72
3.66
3.97
4.22
2.71
4.73
3.67
3.98
4.23
2.72
4.74
5
5 Years Ago
4.5
3 Months Ago
1 Month Ago
4
Today
3.5
3
(%)
1 Year Ago
2.5
2
1.5
1
0.5
0
1
3
5
7
9
11
13
15
17
19
21
23
25
27
29
(Years)
The MMD "AAA" curve is written daily to represent a fair value offer-side of the highest-grade AAA
rated state GO's, as determined by the MMD analyst team.
10 year Michigan Municipal Bonds are currently trading at a 0.65% spread to “AAA” MMD 10
year Bonds. (Illinois Muni Bonds are trading at a 1.20% spread)
22
Source: Thomson Reuters. As of March 3, 2014.
Municipal Bond Funds Suffered in 2013 but Investors are
Starting to Come Back
MUNICIPAL BOND FUND FLOWS – 2009 - PRESENT
Municipal Bond Fund Flows ($Bil)
15,000
10,000
5,000
0
-5,000
-10,000
-15,000
-20,000
Feb-09
Aug-09
Feb-10
Aug-10
Feb-11
Aug-11
Feb-12
Aug-12
Feb-13
Aug-13
Feb-14
23
Source: ICI Institute..
Emergence of the Taxable Market
TAXABLE ISSUANCE VOLUME
$38,364
($ mil)
$32,832
40,000
35,000
30,000
Source: Bond Buyer
25,000
Taxable municipal issuance increased 17% in 2013
 Approximately 40% of taxable proceeds were
used for the refunding of outstanding
indebtedness
The receptiveness from “cross-over” buyers in municipal
offerings shows the trend of an emerging market that
started out of the Build America Bond Program
The added buyer universe continues to add depth and
liquidity to the municipal market
20,000
15,000
10,000
5,000
2012
Refunding
2013
New Money
Combined
24
Source: Bond Buyer, Offering Documents
With a Sharp Decline in Refunding's, New Bond Issues Fell
12.5% in 2013
MUNICIPAL MARKET ISSUANCE - 2004 – 2013
$000
$450,000
$433,269
$429,894
$409,689
$408,283
$389,632
$388,838
$400,000
$379,519
$359,748
$329,807
$350,000
$287,718
$300,000
$250,000
$200,000
$150,000
$100,000
$50,000
$0
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
25
Source: Bond Buyer
Michigan Municipal Market Issuance
Michigan Municipal Issuance
Michigan Community College Issuance
2011 - $14,320,000 (1 Bond Issue)
2012 - $92,065,000 (7)
2013 - $44,465,000 (6)
26
Source: Michigan Municipal Advisory Council
But How Much Are We Missing As Borrowers Utilize Direct Bank
Placements?
UNITED STATES FINANCIAL INSTITUTIONS – MUNICIPAL HOLDINGS
$ mil
300,000
274,336
263,196
250,000
213,190
200,000
175,939
158,726
147,443
145,013
138,877
150,000
126,178
100,000
89,467 90,601
82,413
77,624 76,259 76,819 78,996
1993
1994
94,897
115,859
114,029
106,457
99,160
50,000
0
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
27
Source: Bond Buyer
Rating Changes
Rating Changes
On 1/15/14 Moody’s Investor Services released a new rating
methodology
29
Pension Adjustment Steps
• Allocates cost-sharing plan liabilities
• Discounts accrued liabilities using a market discount rate
• Determines the value of plan assets
• Calculates adjusted net pension liability
• Amortizes adjusted net pension liability
• Applies to calculation versus full value and to revenue
30
Refunding Opportunities
Refunding
What is a Refunding?
• Issuance of new debt at lower interest rates to replace debt which is currently
outstanding at higher rates
• A refunding of debt can also entail the issuance of new debt at either lower or
higher interest rates to restructure the payments on existing debt.
•
•
Budget relief
Creates debt service capacity for new money
• Factors that make a refunding work:
•
•
Lower Interest Rates
Time
• Savings Target: 3% in minimum present value savings
32
Refunding - Continued
• Current – refunding completed within 90 days of the call date on the bonds being
refunded
Bond holders are notified and bonds are paid off
• Advance – refunding completed more than 90 days before the call date on the
bonds being refunded
• Long Escrow period – escrow reinvestment rate is critical
• Only one advance refunding of a new money bond issue is permitted by the
IRS
• Proceeds are “Escrowed” until call date then bond holders are paid off
33
Refunding - Continued
• Typically, 10 Years after the original borrowing, a 20 year bond interest rate
can be replaced with a 10 year bond interest rate
• Today’s market allows issuers to capture:
1) Rolling down the Yield Curve
2) Historically Low Rates
3) Steep Yield Curve
34
Example – Tax Exempt Refunding
Dated Date
Arbitrage yield
Escrow yield
Value of Negative Arbitrage
Bond Par Amount
True Interest Cost
Net Interest Cost
Average Coupon
Average Life
5/1/2014
2.08625%
0.10028%
$55,835
$4,890,000
2.17280%
2.22529%
2.65407%
6.1232106
Par amount of refunded bonds
Average coupon of refunded bonds
Average life of refunded bonds
$4,750,000
4.86854%
6.4549123
PV of prior debt to 05/01/2014 @ 2.086251%
Net PV Savings
Percentage savings of refunded bonds
Percentage savings of refunding bonds
$5,624,848
$582,614
12.26555%
11.91439%
Sources
Bond Proceeds
Par Amount
Premium
Uses
Refunding Escrow Deposits Cash Deposit
SLGS Purchases
Delivery Date Expenses
Cost of Issuance
Other Uses of Funds
Additional Proceeds
$4,890,000
$152,836
$5,042,836
$0.92
$4,968,883
$73,350
$602
$5,042,836
35
Example – Tax Exempt Refunding
Date
12/1/2014
12/1/2015
12/1/2016
12/1/2017
12/1/2018
12/1/2019
12/1/2020
12/1/2021
12/1/2022
12/1/2023
12/1/2024
Total
Prior Debt
Service
$221,735
$611,735
$612,695
$612,710
$611,750
$610,000
$612,250
$608,250
$613,250
$611,750
$609,000
$6,335,125
Savings Summary
Refunding Debt
Present Value
Service
Savings
Savings
$185,844
$35,891
$36,602
$551,675
$60,060
$58,674
$552,275
$60,420
$57,762
$550,600
$62,110
$58,104
$548,850
$62,900
$57,586
$549,750
$60,250
$53,984
$550,450
$61,800
$54,166
$546,200
$62,050
$53,223
$551,650
$61,600
$51,708
$551,500
$60,250
$49,491
$545,900
$63,100
$50,711
$5,684,694
$650,431
$582,012
36
Taxable Refunding
• Advance refunding rules only apply to tax-exempt debt
• Issuers are permitted to refund an issue more than 90 days prior to
the call date even if the issue has been advance refunded once if it
uses taxable debt
• For the first half of 2013 spreads between taxable and tax-exempt
rates were very narrow making it a very good tool to use
• Spreads have widened out and with the expectation that rates will
remain low through 2014 it may make sense to wait to be able to use
tax-exempt rates if an issue is callable 11/1/14 and becomes an
current refunding as of 8/1/14
37
Build America Bonds
Build America Bond’s
•
Build America Bonds are a taxable municipal bond program enacted by congress in 2009 and
extended through December 31, 2010.
•
The taxable bonds receive an interest subsidy(originally 35%) and at the time a comparable if
not a lower cost option to tax-exempt bonds.
•
On March 1, 2013, approximately $85 billion of federal budget cuts went into effect, meaning
all subsidy payments for direct-pay municipal bonds, including BABs, to be paid between that
date and Sept. 30 would be reduced by 8.7% through 9/30/13 and 7.2% from 10/1/13 to
9/30/14.
•
With the subsidy cut, issuers started to look to redeem Build America Bonds at par plus
accrued interest because they believe the cuts in their federal subsidy payments under
sequestration has triggered the extraordinary redemption provisions in their bond documents.
•
The bond documents said an “extraordinary event” would occur and trigger a call if there was
a change to the federal tax code, pursuant to which the federal subsidy payment is reduced or
eliminated.”
39
Build America Bond Structure
Period
Ending
Total Debt
Service
Subsidy
Net Debt
Service
12/1/2013
1,654,412.50
-527,729.52
1,126,682.98
12/1/2014
1,684,142.50
-527,643.14
1,156,499.36
12/1/2015
1,757,252.50
-527,038.44
1,230,214.06
12/1/2016
1,646,312.50
-525,137.94
1,121,174.56
12/1/2017
1,646,042.50
-525,051.54
1,120,990.96
12/1/2018
1,690,772.50
-524,965.16
1,165,807.34
12/1/2019
1,903,072.50
-524,101.30
1,378,971.20
12/1/2020
1,888,762.50
-519,522.82
1,369,239.68
12/1/2021
1,971,868.76
-514,117.66
1,457,751.10
12/1/2022
1,973,600.00
-506,672.82
1,466,927.18
12/1/2023
1,923,737.50
-498,718.06
1,425,019.44
12/1/2024
1,995,468.76
-491,273.22
1,504,195.54
12/1/2025
2,361,143.76
-481,890.70
1,879,253.06
12/1/2026
2,292,362.50
-463,083.64
1,829,278.86
12/1/2027
2,474,268.76
-444,496.54
2,029,772.22
12/1/2028
2,474,675.00
-420,630.26
2,054,044.74
12/1/2029
2,474,925.00
-395,114.26
2,079,810.74
12/1/2030
2,559,675.00
-367,838.52
2,191,836.48
12/1/2031
2,524,500.00
-337,387.28
2,187,112.72
12/1/2032
2,514,250.00
-302,112.78
2,212,137.22
12/1/2033
2,796,500.00
-264,438.68
2,532,061.32
12/1/2034
2,898,750.00
-217,166.06
2,681,583.94
12/1/2035
2,867,250.00
-163,894.38
2,703,355.62
12/1/2036
2,675,625.00
-107,383.22
2,568,241.78
12/1/2037
2,295,125.00
-51,232.00
2,243,893.00
Subsidy shown is original 35%
54,944,495.04 -10,228,639.94 44,715,855.10
40
Types of Call Features
Extraordinary Redemption Provision (ERP)
Percentage of Par Amount of bonds
Make-Whole Provision
41
Make- Whole Call Calculation
42
Build America Bond Refunding
43
Bank Qualified Issues
Bank Qualified
•
Banks are large buyers of municipal bonds.
•
However, Banks may not deduct the carrying cost (the interest expense incurred to purchase or
carry an inventory of securities) of tax-exempt municipal bonds. For banks, this provision has the
effect of eliminating the tax-exempt benefit of municipal bonds. An exception is included in the
Code that allows banks to deduct 80% of the carrying cost of a "qualified tax-exempt obligation." In
order for bonds to be qualified tax-exempt obligations the bonds must be (i) issued by a "qualified
small issuer," (ii) issued for public purposes, and (iii) designated as qualified tax-exempt
obligations. A "qualified small issuer" is (with respect to bonds issued during any calendar year) an
issuer that issues no more than $10 million of tax-exempt bonds during the calendar year. Qualified
tax-exempt obligations are commonly referred to as "bank qualified bonds."
•
Effectively two types of municipal bonds were created under the Act; bank qualified (sometimes
referred to as "BQ") and non-bank qualified. Although banks may purchase non-bank qualified
bonds they seldom do so. The rate they would require in order for the investment to be profitable
would approach the rate of taxable bonds. As a result, issuers obtain lower rates by selling bonds
to investors that realize the tax-exempt benefit. In contrast, banks have a strong appetite for bank
qualified bonds that are in limited supply. As a result, bank qualified bonds carry a lower rate than
non-bank qualified bonds
45
Bank Qualified - Continued
Any issuer that is planning to issue less than $10 million of tax-exempt
securities in a calendar year should consider designating the issue as bank
qualified in order to obtain the associated interest cost savings. Issuers
requiring more than $10,000,000 may be able to take advantage of bank
qualification by issuing two series of bonds. For example, for a $20,000,000
financing, a $10,000,000 issue could be sold this year and one could be sold
next year to obtain 2 bank qualified issues. Similarly, for a $25,000,000
financing, $10,000,000 could be sold as bank qualified bonds this year and a
non-bank qualified $15,000,000 issue could be sold next year.
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Bank Qualified Spreads
Year
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
BQ
0.45
0.54
0.71
0.92
1.32
1.65
2.06
2.35
2.59
2.76
2.88
3.00
3.12
3.25
3.34
3.44
3.54
3.64
3.74
3.84
NON-BQ
0.50
0.65
0.83
1.08
1.49
1.87
2.31
2.65
2.93
3.14
3.32
3.49
3.65
3.81
3.94
4.09
4.22
4.32
4.42
4.52
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Appendix C:
Disclaimer and Additional
Considerations
Disclaimer
This report has been prepared for informational purposes only, and does not constitute an offer,
recommendation or solicitation to buy or sell any securities. The content of this report is based
upon information generally available to the public from sources believed to be reliable. No
representation is made that the information is accurate or complete or that any returns indicated
will be achieved. Past performance is not indicative of future results. Price and availability are
subject to change without notice. The Huntington Investment Company (HIC), or persons
involved in the preparation or issuance of this material, may from time to time, have long or short
positions in, and buy or sell, the securities, futures or options identical with those mentioned
herein. HIC is a wholly owned subsidiary of Huntington Bancshares Incorporated (HBI) and is
registered as a Broker Dealer with the NASD, and a member of SIPC. Investments are Not
FDIC Insured, May Lose Value, and are Not Bank Guaranteed.
49
Additional Considerations

Huntington does not offer or provide accounting, tax or legal advice to its clients. Each client should seek his or her own, and
Huntington advises you to seek your own, advisors for tax, accounting and legal issues in light of your own circumstances.

Although the statements of fact in this presentation have been obtained from and are based upon sources that Huntington
believes are reliable, we do not guarantee their accuracy, and any such information may be incomplete or condensed. All
opinions, estimates and examples constitute Huntington’s judgment as of the date of this presentation and are subject to
change without notice.

This presentation is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or
sale of any security or derivative product or a recommendation for you to utilize any product. This presentation also does not
attempt to forecast future movements of market prices.

The information in this presentation provides a general overview of each of the topics addressed, and may include general
information regarding certain of the U.S. legal, tax and accounting considerations that may affect the transactions described
herein. The descriptions of such matters are necessarily general, do not address the situation of a particular client and do not
purport to be complete.

The statements contained in this presentation to you are intended for your sole use. It may not and should not be relied upon or
utilized by any other party without the express prior written consent of Huntington.

This presentation does not constitute an assessment of the creditworthiness or financial strength or weakness of the client or
any dealer.

® and Huntington® are federally registered service marks of Huntington Bancshares Incorporated.

© 2012 Huntington National Bank.
50