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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [Fee Required]
For the fiscal year ended December 31, 1994
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required]
Commission file Number 0-2525
Huntington Bancshares Incorporated
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(Exact name of registrant as specified in its charter)
Maryland 31-0724920
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Huntington Center, 41 S. High Street, Columbus, OH 43287
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (614) 480-8300
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock - Without Par Value
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(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of voting stock held by non-affiliates of the
registrant as of January 31, 1995, was $2,075,982,176. As of January 31, 1995,
130,377,186 shares of common stock without par value were outstanding.
Documents Incorporated By Reference
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Parts I and II of this Form 10-K incorporate by reference certain
information from the registrant's 1994 Annual Report to Shareholders. Part III
of this Form 10-K incorporates by reference certain information from the
registrant's definitive Proxy Statement for the 1995 Annual Shareholders'
Meeting.
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Huntington Bancshares Incorporated
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Part I
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ITEM 1: BUSINESS
Huntington Bancshares Incorporated (Huntington), incorporated in
Maryland in 1966, is a multi-state bank holding company headquartered in
Columbus, Ohio. Its subsidiaries conduct a full-service commercial and
consumer banking business, engage in mortgage banking, lease financing, trust
services, discount brokerage services, underwriting credit life and disability
insurance, and issuing commercial paper guaranteed by Huntington, and provide
other financial products and services. At December 31, 1994, Huntington's
subsidiaries had 185 banking offices in Ohio, 18 banking offices in Northern
Kentucky, 25 banking offices in Indiana, 40 banking offices in Michigan, 61
banking offices in West Virginia, 5 banking offices in Western Pennsylvania,
and 1 foreign office in the Cayman Islands. In addition, Huntington's
subsidiaries had 8 thrift offices in Florida and 2 thrift offices in Illinois.
The Huntington Mortgage Company (a wholly-owned subsidiary) has loan
origination offices throughout the Midwest and the East Coast. Foreign banking
activities, in total or with any individual country, are not significant to the
operations of Huntington. At December 31, 1994, Huntington and its
subsidiaries had 8,152 full-time equivalent employees.
Competition in the form of price and service from other banks and
financial companies such as savings and loans, credit unions, finance
companies, and brokerage firms is intense in most of the markets served by
Huntington and its subsidiaries. Mergers between and the expansion of
financial institutions both within and outside Ohio have provided significant
competitive pressure in major markets. The passage of reciprocal interstate
banking legislation in Ohio in 1985 has resulted in increased competitive
pressure. This legislation opened Ohio to nationwide reciprocal interstate
banking in October 1988.
In December 1994, Huntington completed the acquisition of FirstFed
Northern Kentucky Bancorp, Inc. (Covington, Kentucky), a $226 million savings
and loan holding company. Also, Huntington has signed definitive agreements to
acquire Security National Corporation, a one-bank holding company (Maitland,
Florida), Reliance Bank of Florida (Melbourne, Florida), and First Seminole
Bank (Lake Mary, Florida). These acquisitions are expected to be consummated
in the second quarter of 1995. The combined total assets of the pending
affiliations was $335 million at December 31, 1994.
REGULATORY MATTERS
GENERAL
As a registered bank holding company, Huntington is subject to the
supervision of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board") and is required to file with the Federal Reserve Board
reports and other information regarding its business operations and the
business operations of its subsidiaries. It is also subject to examination by
the Federal Reserve Board and is required to obtain Federal Reserve Board
approval prior to acquiring, directly or indirectly, ownership or control of
voting shares of any bank, if, after such acquisition, it would own or control
more than 5% of the voting stock of such bank. In addition, pursuant to
federal law and regulations promulgated by the Federal Reserve Board,
Huntington may only engage in, or own or control companies that engage in,
activities deemed by the Federal Reserve Board to be so closely related to
banking as to be a proper incident thereto. Prior to engaging in most new
business activities, Huntington must obtain approval from the Federal Reserve
Board. Because of its ownership of thrift institutions, Huntington is also
regulated as a savings and loan holding company by the Office of Thrift
Supervision (the "OTS").
Huntington's bank subsidiaries have deposits insured by the Bank
Insurance Fund ("BIF") of the Federal Deposit Insurance Corporation ("FDIC"),
and are subject to supervision, examination, and regulation by the Office of
the Comptroller of the Currency ("OCC") if a national bank, or by state banking
authorities and either the FDIC or the Federal Reserve Board if a
state-chartered bank. Certain deposits of certain of Huntington's bank
subsidiaries were acquired from savings associations and are insured by the
Savings Association Insurance Fund ("SAIF") of the FDIC. Huntington's thrift
subsidiaries, whose deposits are insured by the SAIF, are regulated primarily
by the OTS. Huntington's nonbank subsidiaries are also subject to supervision,
examination, and regulation by the Federal Reserve Board and examination by
applicable federal and state banking agencies. In addition to the impact of
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federal and state supervision and regulation, the banking and nonbanking
subsidiaries of Huntington are affected significantly by the actions of the
Federal Reserve Board as it attempts to control the money supply and credit
availability in order to influence the economy.
To the extent that the following information describes statutory or
regulatory provisions, it is qualified in its entirety by reference to such
statutory or regulatory provisions.
HOLDING COMPANY STRUCTURE
Huntington's depository institution subsidiaries are subject to
affiliate transaction restrictions under federal law which limit the transfer
of funds by the subsidiary banks and thrifts to the parent and any nonbank
subsidiaries of the parent, whether in the form of loans, extensions of credit,
investments, or asset purchases. Such transfers by any subsidiary bank or
thrift to its parent corporation or to any nonbank subsidiary are limited in
amount to 10% of the institution's capital and surplus and, with respect to
such parent and all such nonbank subsidiaries of the parent, to an aggregate of
20% of any such institution's capital and surplus. Furthermore, such loans and
extensions of credit are required to be secured in specified amounts. In
addition, all affiliate transactions must be conducted on terms and under
circumstances that are substantially the same as such transactions with
unaffiliated entities. Under applicable regulations, at December 31, 1994,
approximately $162 million was available for loans to Huntington from its
subsidiary banks and thrifts.
The Federal Reserve Board has a policy to the effect that a bank
holding company is expected to act as a source of financial and managerial
strength to each of its subsidiary banks and to commit resources to support
each such subsidiary bank. Under the source of strength doctrine, the Federal
Reserve Board may require a bank holding company to make capital injections
into a troubled subsidiary bank, and may charge the bank holding company with
engaging in unsafe and unsound practices for failure to commit resources to
such a subsidiary bank. This capital injection may be required at times when
Huntington may not have the resources to provide it. Any loans by a holding
company to any of its subsidiary banks are subordinate in right of payment to
deposits and to certain other indebtedness of such subsidiary bank. Moreover,
in the event of a bank or thrift holding company's bankruptcy, any commitment
by such holding company to a federal bank or thrift regulatory agency to
maintain the capital of a subsidiary bank or thrift will be assumed by the
bankruptcy trustee and entitled to a priority of payment.
In 1989, the United States Congress passed comprehensive financial
institutions legislation known as the Financial Institutions Reform, Recovery,
and Enforcement Act ("FIRREA"). Among other things, FIRREA established a new
principle of liability on the part of depository institutions insured by the
FDIC for any losses incurred by, or reasonably expected to be incurred by, the
FDIC after August 9, 1989, in connection with (i) the default of a commonly
controlled FDIC-insured depository institution, or (ii) any assistance provided
by the FDIC to a commonly controlled FDIC-insured depository institution in
danger of default. "Default" is defined generally as the appointment of a
conservator or receiver and "in danger of default" is defined generally as the
existence of certain conditions indicating that a "default" is likely to occur
in the absence of regulatory assistance. Accordingly, in the event that any
insured bank or thrift subsidiary of Huntington causes a loss to the FDIC,
other bank and thrift subsidiaries of Huntington could be required to
compensate the FDIC by reimbursing to it the amount of such loss, and such
reimbursement could cause a loss of Huntington's investment in such other
subsidiaries.
Federal law permits the OCC to order the pro rata assessment of
shareholders of a national bank whose capital stock has become impaired, by
losses or otherwise, to relieve a deficiency in such national bank's capital
stock. This statute also provides for the enforcement of any such pro rata
assessment of shareholders of such national bank to cover such impairment of
capital stock by sale, to the extent necessary, of the capital stock of any
assessed shareholder failing to pay the assessment. Similarly, the laws of
certain states provide for such assessment and sale with respect to the
subsidiary banks chartered by such states. Huntington, as the sole shareholder
of its subsidiary banks and thrifts, is subject to such provisions. Moreover,
under legislation that became effective August 10, 1993, the claims of a
receiver of an insured depository institution for administrative expenses and
the claims of holders of deposit liabilities of such an institution are
accorded priority over the claims of general unsecured creditors of such an
institution, including the holders of the institution's note obligations, in
the event of a liquidation or other resolution of such institution. As a
result of such legislation, claims of a receiver for administrative expenses
and claims of holders of deposit liabilities of Huntington's depository
subsidiaries
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(including the FDIC, as the subrogee of such holders) would receive priority
over the holders of notes and other senior debt of such subsidiaries in the
event of a liquidation or other resolution and over the interests of Huntington
as sole shareholder of its subsidiaries.
DIVIDEND RESTRICTIONS
Dividends from subsidiary banks and thrifts are a significant source of
funds for payment of dividends to the shareholders of bank holding companies.
There are, however, statutory limits on the amount of dividends that
Huntington's depository institution subsidiaries can pay to Huntington without
regulatory approval.
National banks may not pay a dividend in any amount greater than such
bank's undivided profits. In addition, the prior approval of the OCC is
required for the payment of a dividend by a national bank if the total of all
dividends declared by the bank in a calendar year would exceed the total of its
net income for the year combined with its retained net income for the two
preceding years. The OTS also imposes limits on capital distributions by
thrift institutions that generally allow dividends up to current net income and
up to one-half of the association's capital in excess of its regulatory
requirements, depending upon an institution's level of capital compliance.
Under these provisions and in accordance with the above-described formulas,
Huntington's subsidiary banks and thrifts could, without regulatory approval,
declare dividends to Huntington in 1995 of approximately $224 million plus an
additional amount equal to their net profits during 1995. In the year ended
December 31, 1994, Huntington declared cash dividends of approximately $93
million.
If, in the opinion of the applicable regulatory authority, a bank or
thrift under its jurisdiction is engaged in or is about to engage in an unsafe
or unsound practice (which, depending on the financial condition of the bank or
thrift, could include the payment of dividends), such authority may require,
after notice and hearing, that such bank or thrift cease and desist from such
practice. The Federal Reserve Board, the OCC, and the FDIC have issued policy
statements which provide that insured banks and bank holding companies should
generally only pay dividends out of current operating earnings.
FDIC INSURANCE
The level of deposit premiums affects the profitability of subsidiary
banks and thrifts and thus the potential flow of dividends to parent companies.
The FDIC has the authority to raise the insurance premiums for institutions in
the BIF or the SAIF to a level necessary to achieve a target reserve level of
1.25% of insured deposits within not more than 15 years from the enactment of
FIRREA. Changes in the fundamental features of the system of assessing
insurance premiums are also possible. In October 1994, the FDIC issued an
advance notice of proposed rule making seeking public comment on a possible
redefinition of the base on which insurance premiums are calculated. Such
redefinition could have a significant effect on individul institutions. In
addition, the FDIC has the authority to impose special assessments in certain
circumstances.
Under the risk-based insurance assessment system that became effective
January 1, 1994, the FDIC places each insured depository institution in one of
nine risk categories based on its level of capital and other relevant
information (such as supervisory evaluations). Assessment rates for deposit
insurance premiums currently range from 0.23% to 0.31% for all depository
institutions, depending upon the assessment category into which the insured
institution is placed. The FDIC proposed in February 1995 to widen the range
for BIF insured institutions to 0.04% for banks in the best risk classification
and 0.31% for banks in the riskiest classification, effective at a point,
expected to be early in the second half of 1995, when the 1.25% target reserve
level for the BIF is attained. The FDIC also proposed to maintain the current
range of assessment rates for the SAIF. Portions of the deposits of certain of
Huntington's bank subsidiaries are insured by the SAIF. The portion of a
bank's average assessment base that is attributable to the adjusted amount of
deposits acquired from savings associations is assessed at the rate applicable
to SAIF members and is treated as SAIF deposits. The insured depository
subsidiaries of Huntington are all subject to this risk-based assessment
system.
Huntington incurred $25.3 million of FDIC insurance expense during 1994.
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CAPITAL REQUIREMENTS
The Federal Reserve Board has issued risk-based capital ratio and
leverage ratio guidelines for bank holding companies such as Huntington. The
risk-based capital ratio guidelines establish a systematic analytical framework
that makes regulatory capital requirements more sensitive to differences in
risk profiles among banking organizations, takes off-balance sheet exposures
into explicit account in assessing capital adequacy, and minimizes
disincentives to holding liquid, low-risk assets. Under the guidelines and
related policies, bank holding companies must maintain capital sufficient to
meet both a risk-based asset ratio test and a leverage ratio test on a
consolidated basis. The risk-based ratio is determined by allocating assets
and specified off-balance sheet commitments into four weighted categories, with
higher weighting being assigned to categories perceived as representing greater
risk. A bank holding company's capital (as described below) is then divided by
total risk weighted assets to yield the risk-based ratio. The leverage ratio
is determined by relating core capital (as described below) to total assets
adjusted as specified in the guidelines. Each of Huntington's banking and
thrift subsidiaries is subject to substantially similar capital requirements
adopted by applicable regulatory agencies.
Generally, under the applicable guidelines, a financial institution's
capital is divided into two tiers. "Tier 1", or core capital, includes common
equity, noncumulative perpetual preferred stock (excluding auction rate
issues), and minority interests in equity accounts of consolidated
subsidiaries, less goodwill and, with certain limited exceptions, all other
intangible assets. Bank holding companies, however, may include cumulative
preferred stock in their Tier 1 capital, up to a limit of 25% of such Tier 1
capital. "Tier 2", or supplementary capital, includes, among other things,
cumulative and limited-life preferred stock, hybrid capital instruments,
mandatory convertible securities, qualifying subordinated debt, and the
allowance for loan and lease losses, subject to certain limitations. "Total
capital" is the sum of Tier 1 and Tier 2 capital.
The Federal Reserve Board and the other federal banking regulators
require that all intangible assets, with certain limited exceptions, be
deducted from Tier 1 capital. Under the Federal Reserve Board's rules, the
only types of intangible assets that may be included in (i.e., not deducted
from) a bank holding company's capital are readily marketable purchased
mortgage servicing rights ("PMSRs") and purchased credit card relationships
("PCCRs"), provided that, in the aggregate, the total amount of PMSRs and PCCRs
included in capital does not exceed 50% of Tier 1 capital. PCCRs are subject
to a separate sublimit of 25% of Tier 1 capital. The amount of PMSRs and PCCRs
that a bank holding company may include in its capital is limited to the lesser
of (i) 90% of such assets' fair market value (as determined under the
guidelines), or (ii) 100% of such assets' book value, each determined
quarterly. Identifiable intangible assets (i.e., intangible assets other than
goodwill) other than PMSRs and PCCRs, including core deposit intangibles,
acquired on or before February 19, 1992 (the date the Federal Reserve Board
issued its original proposal for public comment), generally will not be
deducted from capital for supervisory purposes, although they will continue to
be deducted for purposes of evaluating applications filed by bank holding
companies.
Under the risk-based guidelines, financial institutions are required to
maintain a risk-based ratio (total capital to risk-weighted assets) of 8%, of
which 4% must be Tier 1 capital. The appropriate regulatory authority may set
higher capital requirements when an institution's circumstances warrant.
Under the leverage guidelines, financial institutions are required to
maintain a leverage ratio (Tier 1 capital to adjusted total assets, as
specified in the guidelines) of at least 3%. The 3% minimum ratio is
applicable only to financial institutions that meet certain specified criteria,
including excellent asset quality, high liquidity, low interest rate exposure,
and the highest regulatory rating. Financial institutions not meeting these
criteria are required to maintain a leverage ratio which exceeds 3% by a
cushion of at least 100 to 200 basis points.
The guidelines also provide that financial institutions experiencing
internal growth or making acquisitions will be expected to maintain strong
capital positions substantially above the minimum supervisory level.
Furthermore, the Federal Reserve Board's guidelines indicate that the Federal
Reserve Board will continue to consider a "tangible Tier 1 leverage ratio" in
evaluating proposals for expansion or new activities. The tangible Tier 1
leverage ratio is the ratio of an institution's Tier 1 capital, less all
intangibles, to total assets, less all intangibles.
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Failure to meet applicable capital guidelines could subject the
financial institution to a variety of enforcement remedies available to the
federal regulatory authorities, including limitations on the ability to pay
dividends, the issuance by the regulatory authority of a capital directive to
increase capital, and the termination of deposit insurance by the FDIC, as well
as to the measures described below under "Federal Deposit Insurance Corporation
Improvement Act of 1991" as applicable to undercapitalized institutions.
As of December 31, 1994, the Tier 1 risk-based capital ratio, total
risk-based capital ratio, and leverage ratio for Huntington were as follows:
Requirement Huntington
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Tier 1 Risk-Based Capital Ratio 4.00% 9.55%
Total Risk-Based Capital Ratio 8.00% 13.57%
Tier 1 Leverage Ratio 3.00% 7.99%
As of December 31, 1994, each of Huntington's bank and thrift subsidiaries had
capital in excess of the minimum requirements.
The Federal Reserve Board, the OCC, and the FDIC proposed in September
1993 to revise their risk-based capital requirements to ensure that such
requirements provide for explicit consideration by commercial banks of interest
rate risk. It is anticipated that the regulatory agencies will issue a revised
proposed rule for further public comment. Pending issuance of such revised
proposal, Huntington's management cannot determine what effect, if any, an
interest rate risk component would have on the capital of its subsidiary
commercial banks.
FEDERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENT ACT OF 1991
In December 1991, Congress enacted the Federal Deposit Insurance
Corporation Improvement Act of 1991 ("FDICIA"), which substantially revised the
bank regulatory and funding provisions of the Federal Deposit Insurance Act and
made revisions to several other federal banking statutes.
Among other things, FDICIA requires federal banking regulatory
authorities to take "prompt corrective action" with respect to depository
institutions that do not meet minimum capital requirements. For these
purposes, FDICIA establishes five capital tiers: well capitalized, adequately
capitalized, undercapitalized, significantly undercapitalized, and critically
undercapitalized.
The federal banking regulatory agencies have adopted regulations to
implement the prompt corrective action provisions of FDICIA. Among other
things, the regulations define the relevant capital measures for the five
capital categories. An institution is deemed to be "well capitalized" if it
has a total risk-based capital ratio of 10% or greater, a Tier 1 risk-based
capital ratio of 6% or greater, and a Tier 1 leverage ratio of 5% or greater
and is not subject to a regulatory order, agreement, or directive to meet and
maintain a specific capital level for any capital measure. An institution is
deemed to be "adequately capitalized" if it has a total risk-based capital
ratio of 8% or greater, a Tier 1 risk-based capital ratio of 4% or greater,
and, generally, a Tier 1 leverage ratio of 4% or greater and the institution
does not meet the definition of a "well capitalized" institution. An
institution that does not meet one or more of the "adequately capitalized"
tests is deemed to be "undercapitalized". If the institution has a total
risk-based capital ratio that is less than 6%, a Tier 1 risk-based capital
ratio that is less than 3%, or a leverage ratio that is less than 3%, it is
deemed to be "significantly undercapitalized". Finally, an institution is
deemed to be "critically undercapitalized" if it has a ratio of tangible equity
(as defined in the regulations) to total assets that is equal to or less than
2%.
FDICIA generally prohibits a depository institution from making any
capital distribution (including payment of a cash dividend) or paying any
management fee to its holding company if the depository institution would
thereafter be undercapitalized. Undercapitalized institutions are subject to
growth limitations and are required to submit a capital restoration plan. If
any of Huntington's depository institution subsidiaries is required to submit a
capital restoration plan, Huntington would be required to provide a limited
guarantee regarding compliance with the plan as a condition of approval of such
plan by
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the appropriate federal banking agency. If an undercapitalized institution
fails to submit an acceptable plan, it is treated as if it is significantly
undercapitalized. Significantly undercapitalized institutions may be subject
to a number of requirements and restrictions, including orders to sell
sufficient voting stock to become adequately capitalized, requirements to
reduce total assets, and cessation of receipt of deposits from correspondent
banks. Critically undercapitalized institutions may not, beginning 60 days
after becoming critically undercapitalized, make any payment of principal or
interest on their subordinated debt. In addition, critically undercapitalized
institutions are subject to appointment of a receiver or conservator within 90
days of becoming critically undercapitalized.
Under FDICIA, a depository institution that is not well capitalized is
generally prohibited from accepting brokered deposits and offering interest
rates on deposits higher than the prevailing rate in its market. Huntington
expects that the FDIC's brokered deposit rule will not adversely affect the
ability of its depository institution subsidiaries to accept brokered deposits.
Under the regulatory definition of brokered deposits, as of December 31, 1994,
Huntington's depository subsidiaries had brokered deposits of $56.7 million,
compared to $34.3 million as of December 31, 1993.
FDICIA, as amended, directs that each federal banking regulatory agency
prescribe standards, by regulation or guideline, for depository institutions
relating to internal controls, information systems, internal audit systems,
loan documentation, credit underwriting, interest rate exposure, asset growth,
compensation, asset quality, earnings, and stock valuation. The Federal
Reserve Board has adopted a regulation in the form of guidelines covering most
of these items, and the other federal banking regulatory agencies are expected
to adopt identical regulations shortly. Huntington believes that the
regulation and guidelines will not have a material effect on the operations of
its depository institution subsidiaries.
RECENT DEVELOPMENTS
The Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994, enacted in September 1994, provides for nationwide interstate banking and
branching. Under the law, interstate acquisitions of banks or bank holding
companies in any state by bank holding companies in any other state will be
permissible one year after enactment. Interstate branching and consolidations
of existing bank subsidiaries in different states will be permissible beginning
June 1, 1997. The permissibility of consolidations and branching may be
accelerated by "opt-ins" by individual states. A state may also, until June 1,
1997, adopt legislation to "opt-out" of interstate branching and
consolidations, but in that event the state's own banks become ineligible to
branch into, or consolidate their operations, in other states.
The Riegle Community Development and Regulatory Improvement Act of
1994, also enacted in September 1994, made several changes in existing law
affecting bank holding companies, including a reduction in the minimum
post-approval antitrust review waiting period for depository institution
mergers and acquisitions, and the substitution of a notice for an application
when a bank holding company proposes to engage in, or acquire a company to
engage in, nonbanking activities.
GUIDE 3 INFORMATION
Information required by Industry Guide 3 relating to statistical
disclosure by bank holding companies is set forth in Huntington's 1994 Annual
Report to Shareholders, and is incorporated herein by reference:
<TABLE>
<CAPTION>
Table Page
<S> <C> <C>
Distribution of Assets, Liabilities and Shareholders'
Equity; Interest Rates and Interest Differential:
Average Balance Sheet 34, 35
Net Interest Earnings Analysis 34, 35
Change in Net Interest Income Due to
Changes in Average Volume and
Interest Rates 3 20
Investment Securities:
Book Value of Investments 8 24
Maturity Distribution and Yields 8 24
Securities Available for Sale:
</TABLE>
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<TABLE>
<CAPTION>
Table Page
<S> <C> <C>
Book Value of Investments 9 25
Maturity Distribution and Yields 9 25
Loan Portfolio:
Types of Loans 13 31
Maturities and Sensitivities to
Changes in Interest Rates 14 31
Non-accrual, Past Due and
Renegotiated Loans 12 30
Potential Problem Loans 31
Foreign Outstandings 33
Loan Concentrations 13 31
Summary of Loan Loss Experience:
Allowance for Loan Losses 4 21, 22
Allocation of Allowance for Loan Losses 5 21, 22
Deposits:
Average Balances 34, 35
Large CD Maturities 11 29
Return on Equity and Assets 1 18
Short-Term Borrowings 10 29
</TABLE>
ITEM 2: PROPERTIES
The headquarters of Huntington and its lead subsidiary, The Huntington
National Bank, are located in the Huntington Center, a thirty-seven story
office building located in Columbus, Ohio. Of the building's total office
space available, Huntington occupies approximately 30 percent. The original
lease term is 25 years, expiring in 2009, with renewal options for up to 50
years with no purchase option. The Huntington National Bank is a limited
partner in the entity that owns the building. In addition to these
headquarters, Huntington's other major properties consist of a thirteen-story
and a twelve-story office building, both of which are located adjacent to the
Huntington Center; a twenty-one story office building, known as the Huntington
Building, located in Cleveland, Ohio; The Huntington Mortgage Company's
building, located in the greater Columbus area; an office complex located in
Troy, Michigan; and two data processing and operations centers located
throughout Ohio. Of these properties, Huntington owns the twelve-story and
thirteen-story office buildings, The Huntington Mortgage Company building, the
building in Troy, Michigan, and the operations centers located in Cleveland and
Columbus. All of the other major properties are held under long-term leases.
ITEM 3: LEGAL PROCEEDINGS
Information required by this item is set forth in Note 12 of Notes to
Consolidated Financial Statements on page 51 of the 1994 Annual Report to
Shareholders, and is incorporated herein by reference.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
Part II
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ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The common stock of Huntington Bancshares Incorporated is traded on the
NASDAQ National Market System under the symbol "HBAN". The stock is listed as
"HuntgBcshr" or "HuntBanc" in most newspapers. As of January 31, 1995,
Huntington had 30,943 shareholders of record.
Information regarding the high and low sale prices of Huntington Common
Stock and cash dividends declared on such shares, as required by this item, is
set forth in a table entitled "Market Prices, Key Ratios and Statistics, Non
Performing Assets (Quarterly Data)" on page 37 of the 1994 Annual
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Report to Shareholders, and is incorporated herein by reference. Information
regarding restrictions on dividends, as required by this item, is set forth
under "Item 1: Business-Regulatory Matters-Dividend Restrictions" above and in
Notes 9 and 21 of Notes to Consolidated Financial Statements on pages 49 and
56, respectively, of the 1994 Annual Report to Shareholders, and is
incorporated herein by reference.
ITEM 6: SELECTED FINANCIAL DATA
Information required by this item is set forth in Table 1 on page 18 of
Huntington's 1994 Annual Report to Shareholders, and is incorporated herein by
reference.
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Information required by this item is set forth on pages 18 - 33 of
Huntington's 1994 Annual Report to Shareholders, and is incorporated herein by
reference.
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information required by this item is set forth on pages 42 - 58
(consolidated financial statements), and on page 59 (report of independent
auditors), of Huntington's 1994 Annual Report to Shareholders, and is
incorporated herein by reference.
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
Part III
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ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information required by this item is set forth under the captions
"Class I Directors," "Class II Directors," and "Class III Directors" on pages 3
through 5, under the caption "Executive Officers of the Corporation" on pages
26 through 28, and under the caption "Compliance with Section 16(a) of the
Securities Exchange Act of 1934" on page 34, of Huntington's 1995 Proxy
Statement, and is incorporated herein by reference.
ITEM 11: EXECUTIVE COMPENSATION
Information required by this item is set forth under the caption
"Executive Compensation" on pages 10 through 19, and under the caption
"Compensation of Directors" on pages 6 through 8, of Huntington's 1995 Proxy
Statement, and is incorporated herein by reference.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by this item is set forth under the caption
"Ownership of Voting Stock" on pages 8 through 10 of Huntington's 1995 Proxy
Statement, and is incorporated herein by reference.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this item is set forth under the caption
"Transactions With Directors and Officers" on page 10 of Huntington's 1995
Proxy Statement, and is incorporated herein by reference.
Part IV
-------
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
(1) The following consolidated financial statements and report of
independent auditors appearing in Huntington's 1994 Annual Report to
Shareholders on the pages indicated below are incorporated by reference in Item
8:
9
<PAGE> 10
<TABLE>
<CAPTION>
Annual
Report Page
-----------
<S> <C>
Consolidated Balance Sheets as of 42
December 31, 1994 and 1993
Consolidated Statements of Income 43
for the years ended December 31,
1994, 1993 and 1992
Consolidated Statements of Changes 44
in Shareholders' Equity for the years
ended December 31, 1994, 1993 and 1992
Consolidated Statements of Cash Flows 45
for the years ended December 31,
1994, 1993 and 1992
Notes to Consolidated Financial Statements 46-58
Report of Independent Auditors 59
</TABLE>
(2) Huntington is not filing separately financial statement schedules
because of the absence of conditions under which they are required or because
the required information is included in the consolidated financial statements
or the notes thereto.
(3) The exhibits required by this item are listed in the Exhibit Index
on pages 12 through 13 of this Form 10-K. The management contracts and
compensatory plans or arrangements required to be filed as exhibits to this
Form 10-K are listed as Exhibits 10(a) through 10(s) in the Exhibit Index.
(b) During the quarter ended December 31, 1994, Huntington filed one Report
on Form 8-K. The report was dated October 18, 1994. The information contained
therein was filed under report item number five, "Other Events", and contained
Huntington's press release to announce the results of operations for the
quarter ended September 30, 1994.
(c) The exhibits to this Form 10-K begin on page 12.
(d) See Item 14(a)(2) above.
10
<PAGE> 11
Signatures
- ----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized, on the 15th day of
February, 1995.
HUNTINGTON BANCSHARES INCORPORATED
----------------------------------
(Registrant)
<TABLE>
<S> <C> <C>
By: /s/Frank Wobst By: /s/Gerald R. Williams
-------------------------------- ---------------------------------
Frank Wobst Gerald R. Williams
Director, Chairman and Executive Vice President and
Chief Executive Officer Chief Financial Officer
(Principal Executive Officer) (Principal Financial Officer)
By: /s/John D. Van Fleet
--------------------------------
John D. Van Fleet
Senior Vice President and
Corporate Controller
(Principal Accounting Officer)
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on the 15th day of February, 1995.
<TABLE>
<S> <C>
/s/Don Monroe Casto, III /s/Timothy P. Smucker
- -------------------------------- -----------------------------------
Don Monroe Casto, III Timothy P. Smucker
Director Director
/s/Don Conrad /s/Zuheir Sofia
- -------------------------------- -----------------------------------
Don Conrad Zuheir Sofia
Director Director
/s/John B. Gerlach /s/Marvin E. White
- -------------------------------- -----------------------------------
John B. Gerlach Marvin E. White
Director Director
/s/W. Lee Hoskins /s/William J. Williams
- -------------------------------- -----------------------------------
W. Lee Hoskins William J. Williams
Director Director
/s/Wm. J. Lhota
- -------------------------------- -----------------------------------
Wm. J. Lhota Milton A. Wolf
Director Director
/s/Gerald E. Mayo
- --------------------------------
Gerald E. Mayo
Director
</TABLE>
11
<PAGE> 12
Exhibit Index
- -------------
3(i). Articles of Restatement of Charter, Articles of Amendment to Articles of
Restatement of Charter, and Articles Supplementary -- previously
filed as Exhibit 3(i) to Annual Report on Form 10-K for the year
ended December 31, 1993, and incorporated herein by reference.
(ii). Bylaws -- previously filed as Exhibit 3(b) to Annual Report on Form 10-K
for the year ended December 31, 1987, and incorporated herein by
reference.
4(a). Instruments defining the Rights of Security Holders -- reference is made
to Articles V, VIII and X of Articles of Restatement of Charter, as
amended and supplemented. Instruments defining the rights of
holders of long-term debt will be furnished to the Securities and
Exchange Commission upon request.
(b). Rights Plan, dated February 22, 1990, between Huntington Bancshares
Incorporated and The Huntington Trust Company, National
Association -- previously filed as Exhibit 1 to Registration
Statement on Form 8-A, filed with the Securities and Exchange
Commission on February 22, 1990, and incorporated herein by
reference.
10. Material contracts:
(a) Employment Agreement, dated September 16, 1991, between Huntington
Bancshares Incorporated and Frank Wobst -- previously filed as
Exhibit 10(a) to Annual Report on Form 10-K for the year ended
December 31, 1991, and incorporated herein by reference.
(b) Employment Agreement, dated September 16, 1991, between Huntington
Bancshares Incorporated and Zuheir Sofia -- previously filed as
Exhibit 10(b) to Annual Report on Form 10-K for the year ended
December 31, 1991, and incorporated herein by reference.
(c) Employment Agreement, dated September 16, 1991, between Huntington
Bancshares Incorporated and W. Lee Hoskins -- previously filed
as Exhibit 10(c) to Annual Report on Form 10-K for the year
ended December 31, 1991, and incorporated herein by reference.
(d) Executive Agreement, dated September 16, 1991, between Huntington
Bancshares Incorporated and Frank Wobst -- previously filed as
Exhibit 10(f) to Annual Report on Form 10-K for the year ended
December 31, 1991, and incorporated herein by reference.
(e) Executive Agreement, dated September 16, 1991, between Huntington
Bancshares Incorporated and Zuheir Sofia -- previously filed as
Exhibit 10(g) to Annual Report on Form 10-K for the year ended
December 31, 1991, and incorporated herein by reference.
(f) Executive Agreement, dated September 16, 1991, between Huntington
Bancshares Incorporated and W. Lee Hoskins -- previously filed
as Exhibit 10(h) to Annual Report on Form 10-K for the year
ended December 31, 1991, and incorporated herein by reference.
(g) Form of Executive Agreement for certain executive officers --
previously filed as Exhibit 10(g) to Annual Report on Form 10-K
for the year ended December 31, 1993, and incorporated herein
by reference.
(h) Schedule identifying material details of Executive Agreements,
substantially similar to 10(g).
(i) Incentive Compensation Plan -- previously filed as Exhibit 10(i) to
Annual Report on Form 10-K for the year ended December 31,
1993, and incorporated herein by reference.
(j) Long-Term Incentive Compensation Plan, as amended and effective for
performance cycles beginning on or after January 1, 1992 --
previously filed as Exhibit 10(j) to Annual Report on Form 10-K
for the year ended December 31, 1993, and incorporated herein
by reference.
12
<PAGE> 13
(k) Supplemental Executive Retirement Plan -- previously filed as Exhibit
10(g) to Annual Report on Form 10-K for the year ended December
31, 1987, and incorporated herein by reference.
(l) Deferred Compensation Plan and Trust for Directors -- reference is
made to Exhibit 4(a) of Post-Effective Amendment No. 2 to
Registration Statement on Form S-8, Registration No. 33-10546,
filed with the Securities and Exchange Commission on January
28, 1991, and incorporated herein by reference.
(m)(1) 1983 Stock Option Plan -- reference is made to Exhibit 4A of
Registration Statement on Form S-8, Registration No. 2-89672,
filed with the Securities and Exchange Commission on February
27, 1984, and incorporated herein by reference.
(2) 1983 Stock Option Plan -- Second Amendment -- previously filed
as Exhibit 10(j)(2) to Annual Report on Form 10-K for the
year ended December 31, 1987, and incorporated herein by
reference.
(3) 1983 Stock Option Plan -- Third Amendment -- previously filed
as Exhibit 10(j)(3) to Annual Report on Form 10-K for the
year ended December 31, 1987, and incorporated herein by
reference.
(4) 1983 Stock Option Plan -- Fourth Amendment -- previously filed
as Exhibit (m)(4) to Annual Report on Form 10-K for the year
ended December 31, 1993, and incorporated herein by reference.
(n)(1) 1990 Stock Option Plan -- reference is made to Exhibit 4(a) of
Registration Statement on Form S-8, Registration No.
33-37373, filed with the Securities and Exchange Commission
on October 18, 1990, and incorporated herein by reference.
(2) First Amendment to Huntington Bancshares Incorporated 1990
Stock Option Plan -- previously filed as Exhibit 10(q)(2) to
Annual Report on Form 10-K for the year ended December 31,
1991, and incorporated herein by reference.
(o) The Huntington Supplemental Stock Purchase and Tax Savings Plan and
Trust (as amended and restated as of February 9, 1990) --
previously filed as Exhibit 4(a) to Registration Statement on
Form S-8, Registration No. 33-44208, filed with the Securities
and Exchange Commission on November 26, 1991, and incorporated
herein by reference.
(p) Deferred Compensation Plan and Trust for Huntington Bancshares
Incorporated Directors -- reference is made to Exhibit 4(a) of
Registration Statement on Form S-8, Registration No. 33-41774,
filed with the Securities and Exchange Commission on July 19,
1991, and incorporated herein by reference.
(q) Huntington Bancshares Incorporated Retirement Plan For Outside
Directors, previously filed as Exhibit 10(t) to Annual Report
on Form 10-K for the year ended December 31, 1992, and
incorporated herein by reference.
(r) 1994 Stock Option Plan -- reference is made to Exhibit 4(a) of
Registration Statement on Form S-8, Registration No. 33-52553,
filed with the Securities and Exchange Commission on March 8,
1994, and incorporated herein by reference.
(s) Huntington Supplemental Retirement Income Plan
11. Statement re: Computation of Earnings Per Share
13. Portions of Huntington's 1994 Annual Report to Shareholders.
21. Subsidiaries of the Registrant.
23. Consent of Independent Auditors.
27. Financial Data Schedule
13
<PAGE> 1
<TABLE>
Exhibit 10(h)
Schedule Identifying Material Details of
Executive Agreements Substantially
Similar to Exhibit 10(g)
<CAPTION>
Date of Effective
Name Execution Date
---- ------------- ------------
<S> <C> <C>
Ralph K. Frasier June 9, 1989 May 24, 1989
Norman A. Jacobs June 9, 1989 May 24, 1989
J. Christopher Scott June 12, 1989 May 24, 1989
Gerald R. Williams June 9, 1989 May 24, 1989
</TABLE>
<PAGE> 1
Exhibit 10(s)
HUNTINGTON SUPPLEMENTAL RETIREMENT INCOME PLAN
The Huntington Bancshares Supplemental Retirement Income Plan is adopted
effective January 1, 1994 solely for the purpose of providing supplemental
benefits to certain highly compensated employees whose benefits under the
Huntington Bancshares Retirement Plan are limited by Internal Revenue Code
Section 415 or 401(a)(17). This Supplemental Retirement Income Plan is an
unfunded "top hat plan" subject only to certain reporting and disclosure rules
of the Employee Retirement Income Security Act of 1974 (ERISA).
Huntington Bancshares Incorporated does hereby establish the Plan for
the benefit of Eligible Employees of Huntington Bancshares Incorporated and its
Related Companies on the terms and conditions set forth below:
ARTICLE I
Definitions
-----------
SECTION 1.01. CODE means the Internal Revenue Code of 1986, as amended
from time to time, and any regulations relating thereto.
SECTION 1.02. COMPANY means Huntington Bancshares Incorporated.
Related Company shall have the meaning given it by Article I of the Qualified
Plan.
SECTION 1.03. COMMITTEE means the Retirement Committee appointed
pursuant to Article IX of the Qualified Plan.
SECTION 1.04. COMPENSATION means the monthly equivalent of the total
cash remuneration paid for services rendered to an Employer during the calendar
Year excluding overtime pay, bonuses, incentive compensation, stock options,
disability payments, contributions to any public or private benefit plan and
other forms of irregular payments, pensions or other deferred compensation.
Where payments not for services such as payments for travel or expenses, are
not separately stated, the Committee may determine and make appropriate
reduction for such payments. Compensation shall include any salary reduction
or salary deferral amounts pursuant to plans sponsors by the Employer under
Sections 125 and 401(k) of the Code.
In respect to an Employee who transferred directly into the employ of an
Employer from a Related Company, applicable earnings for services rendered to
the Related Company shall be treated as Compensation from his Employer for
purposes of this Plan.
SECTION 1.05. COVERED COMPENSATION means the average of Social
Security taxable wage bases for the 35-year period ending with the year of the
individual's Social Security retirement age (as defined in section 414(b)(8) of
the Code). For purposes of this Section, Covered Compensation amounts shall be
determined and fixed on the date of a Participant's separation from service so
that the Social Security wage base in the year of a Participant's separation
from service will be projected until the Participant's Social Security normal
retirement age.
SECTION 1.06. CREDITED SERVICE shall be determined as provided in the
Qualified Plan.
1
<PAGE> 2
SECTION 1.07. DEFERRED VESTED PENSION shall have the meaning given to
it by Article I of the Qualified Plan; provided however, with respect to a
Participant, who was a participant in a Predecessor Plan and whose Credited
Service does not include service accrued under the Predecessor Plan, the term
Deferred Vested Pension does not include the portion, if any, of such
Participant's Deferred Vested Pension attributable to such Predecessor Plan.
SECTION 1.08. DISABILITY RETIREMENT PENSION means the disability
benefit payable to a Participant pursuant to the Qualified Plan; provided
however, with respect to a Participant, who was a participant in a Predecessor
Plan and whose Credited Service does not include service accrued under the
Predecessor Plan, the term Disability Retirement Pension does not include the
portion, if any, of such Participant's Disability Retirement Pension
attributable to such Predecessor Plan.
SECTION 1.09. DEFINITIONS. If a term is treated as a defined term in
this Plan and is not specifically defined in this Article, the term shall have
the meaning given it by Article I of the Qualified Plan.
SECTION 1.10. ELIGIBLE EMPLOYEE means any Employee who has completed
two years of Continuous Employment with the Company or a Related Company and
whose Compensation is in excess of the limitation on Compensation imposed by
Code Section 401(a)(17). Solely for the purpose of determining who is an
Eligible Employee, Service with a Related Company prior to the time such
corporation became a Related Company shall be ignored.
SECTION 1.11. FINAL AVERAGE COMPENSATION means a Participant's average
monthly Compensation during the highest five (5) consecutive calendar years
preceding (but not including) the year of Late, Normal or Early Retirement or
other termination of employment, as applicable.
If the Participant shall not have completed five (5) calendar Years of
Service, such average shall be based on his Compensation averaged over such
lesser period of Service. For a Participant who incurs an Approved Absence or
who is rehired after a Break in Service with his prebreak Service restored, the
Plan Years and his Approved Absence or Break in Service shall be considered
consecutive Plan Years even though they were not contiguous.
SECTION 1.12. PARTICIPANT means any Eligible Employee entitled to a
benefit under the Qualified Plan.
SECTION 1.13. PLAN means the Huntington Bancshares Supplemental
Retirement Income Plan, as set forth herein or as hereafter amended.
SECTION 1.14. A PREDECESSOR PLAN means a plan which has merged into the
Qualified Plan.
SECTION 1.15. PRERETIREMENT SURVIVOR'S BENEFIT shall have the meaning
given it by Article I of the Qualified Plan; provided however, with respect to
a Participant, who was a participant in a Predecessor Plan and whose Credited
Service does not include service accrued under the Predecessor Plan, the term
Preretirement Survivor's Benefit does not include the portion, if any, of such
Participant's Preretirement Survivor's Benefit attributable to such Predecessor
Plan.
SECTION 1.16. QUALIFIED PLAN means the Huntington Bancshares
Retirement Plan as restated effective January 1, 1986, as it may be amended
from time to time specifically including a required Tax Reform Act of 1986
compliance restatement generally effective January 1, 1989.
2
<PAGE> 3
SECTION 1.17. QUALIFIED PLAN RETIREMENT BENEFIT means the Accrued
Retirement Pension payable to a Participant pursuant to the Qualified Plan by
reason of his termination of employment with the Company and all Related
Companies for any reason; provided however, with respect to a Participant, who
was a participant in a Predecessor Plan, and whose Credited Service does not
include service accrued under the Predecessor Plan, the term Qualified Plan
Retirement Benefit does not include the portion, if any, of such Participant's
Qualified Plan Retirement Benefit attributable to such Predecessor Plan.
SECTION 1.18. SUPPLEMENTAL RETIREMENT BENEFIT AND SUPPLEMENTAL
SURVIVING SPOUSE BENEFIT. Supplemental Retirement Benefit means the benefit
payable to a Participant pursuant to Sections 3.01, 3.02, 3.03, 3.04 and 3.05
of this Plan by reason of the Participant's termination of employment with the
Company or a Related Company for any reason. Supplemental Surviving Spouse
Benefit means the benefit payable pursuant to Section 4.01 to a Participant's
Surviving Spouse.
For the purpose of determining the Supplemental Retirement Benefit and
the Supplemental Surviving Spouse Benefit the following rule of construction
shall apply: Benefits provided by the Huntington Supplemental Executive
Retirement Plan executed February 18, 1986 will be subtracted from the
Supplemental Retirement Benefit and the Supplemental Surviving Spouse Benefit;
benefits provided by the Huntington Supplemental Stock Purchase and Tax Savings
Plan will not be subtracted from the Supplemental Retirement Benefit or the
Supplemental Surviving Spouse Benefit.
ARTICLE II
Participation
-------------
SECTION 2.01. ELIGIBILITY. An Eligible Employee whose Qualified Plan
Retirement Benefit is limited by reason of the application of the limitations
on benefits imposed by the application of Section 415 or 401(a)(17) of the
Code, as in effect on the date for commencement of the Qualified Plan
Retirement Benefit shall be eligible to receive a Supplemental Retirement
Benefit. If an Eligible Employee described in the preceding sentence dies
prior to commencement of his Qualified Plan Retirement Benefit, survived by an
Eligible Spouse entitled to a Preretirement Survivor's Benefit under the
Qualified Plan, then such Spouse shall be eligible to receive a Supplemental
Surviving Spouse Benefit.
ARTICLE III
Supplemental Retirement Benefit
-------------------------------
SECTION 3.01. NORMAL RETIREMENT. The Supplemental Retirement Benefit
payable to a Participant retiring on his Normal Retirement Date shall be a
monthly amount equal to the difference between (a) and (b) below:
(a) (i) For Participants born in or before 1937, one and
one quarter percent (1.25%) of Final Average Compensation for each of the first
twenty five (25) years of Credited Service plus one percent (1.0%) of Final
Average Compensation for each year of Credited Service in excess of twenty five
(25), if any, up to a maximum of fifteen (15) additional years
PLUS
(ii) three quarters of one percent (.75%) of Final
Average Compensation in excess of Covered Compensation for each of the first
twenty five (25) years of Credited Service.
3
<PAGE> 4
One and one quarter percent (1.25%) is increased to one and three tenths
percent (1.30%) for Participants born in 1938-1954 and to one and thirty five
hundredths percent (1.35%) for Participants born after 1954.
Three quarters of one percent (.75%) is decreased to seven tenths of one
percent (.70%) for Participants born in 1938-1954 and to sixty five hundredths
of one percent (.65%) for Participants born after 1954;
LESS
(b) the monthly amount of the Qualified Plan Retirement
Benefit actually payable to the Participant under the Qualified Plan or any
supplemental executive retirement plan or agreement, sponsored or entered by
the Company or any Related Company; other than a supplemental executive
retirement plan whose primary purpose is to provide benefits in excess of
amounts permitted by Code Section 401(a)(17) or 415 with respect to a
Predecessor Plan.
The amounts described in (a) and (b) shall be computed as of the date of
termination of employment of the Participant with the Company or a Related
Company in the form of a straight life annuity payable over the lifetime of the
Participant only.
SECTION 3.02. EARLY RETIREMENT. A Participant who has attained age 55
and has completed ten (10) years of Service who retires early shall be entitled
to a benefit equal to the benefit calculated in Section 3.01(a) above reduced
by the factors in the table below:
<TABLE>
<CAPTION>
Factor to use on:
3.01(a)(i) 3.01(a)(ii)
Age at which portion of portion of
Benefits Commence the benefit the benefit
----------------- ----------- -----------
<S> <C> <C>
64 .97 .92
63 .94 .84
62 .91 .76
61 .88 .71
60 .85 .66
59 .82 .63
58 .79 .60
57 .76 .56
56 .73 .52
55 .70 .48
</TABLE>
If benefits commence other than at the above specified ages, linear
interpolation should be used to arrive at the appropriate factors.
Amounts payable under any other plans described in Section 3.01(b) shall also
be used to reduce the Supplemental Retirement Benefit payable on Early
Retirement.
SECTION 3.03. LATE RETIREMENT. If a Participant does not retire at
his Normal Retirement Date, he shall be entitled to a Supplemental Retirement
Benefit commencing as of his Late Retirement Date computed as provided in
Section 3.01 of this Plan.
4
<PAGE> 5
SECTION 3.04. DISABILITY. If a Participant becomes eligible for a
Disability Retirement Pension under the Qualified Plan, he shall be entitled to
a monthly amount equal to the difference between (a) and (b) below:
(a) the monthly amount of the Disability Retirement Pension
under the Qualified Plan to which the Participant would have been entitled
under the Qualified Plan if such Disability Retirement Pension were computed
without giving effect to the limitations on benefits imposed by the application
of Section 415 or Section 401(a)(17) of the Code;
LESS
(b) the monthly amount of the Normal or Disability Retirement
Pension actually payable to the Participant under the Qualified Plan or any
supplemental executive retirement plan or agreement, sponsored or entered by
the Company or any Related Company; other than a supplemental executive
retirement plan whose primary purpose is to provide benefits in excess of
amounts permitted by Code Section 401(a)(17) or 415 with respect to a
Predecessor Plan.
SECTION 3.05. DEFERRED VESTED PENSION. If Participant becomes
eligible for a Deferred Vested Pension under the Qualified Plan, he shall be
entitled to a monthly amount equal to the difference between (a) and (b) below:
(a) the monthly amount of the Deferred Vested Pension to which
the Participant would have been entitled under the Qualified Plan if such
benefit were computed without giving effect to the limitations on benefits
imposed by application of Section 415 or Section 401(a)(17) of the Code;
LESS
(b) the monthly amount of the Deferred Vested Pension actually
payable to the Participant under the Qualified Plan or any supplemental
executive retirement plan or agreement, sponsored or entered by the Company or
any Related Company; other than a supplemental executive retirement plan whose
primary purpose is to provide benefits in excess of amounts permitted by Code
Section 401(a)(17) or 415 with respect to a Predecessor Plan.
SECTION 3.06. FORM OF BENEFIT. The Supplemental Retirement Benefit
payable to a Participant shall be paid in the form of a straight life annuity
over the lifetime of the Participant only. The Company may, at its discretion,
permit a Participant who is married on the date benefit payments commence to
elect payment in the form of a Qualified Joint and Survivor Pension provided
such request is made at least 60 days prior to commencement of the benefit.
Such election shall be made in a manner provided by the Committee. Except as
provided at Section 7.09 of the Plan, the form of benefit described in this
Section 3.06 is the only form in which the Supplemental Retirement Benefit is
paid.
SECTION 3.07. COMMENCEMENT OF BENEFIT. Payment of the Supplemental
Retirement Benefit to a Participant shall commence on the same date as payment
of the Qualified Plan Retirement Benefit to the Participant commences.
ARTICLE IV
Supplemental Surviving Spouse Benefit
-------------------------------------
SECTION 4.01. AMOUNT. If a Participant dies prior to commencement of
payment of his Qualified Plan Retirement Benefit under circumstances in which a
Preretirement Survivor's Benefit is payable to his Surviving Spouse, then a
Supplemental Surviving Spouse Benefit is payable to his Surviving Spouse as
hereinafter provided. The monthly amount of the
5
<PAGE> 6
Supplemental Surviving Spouse Benefit payable to a Surviving Spouse shall be
equal to the difference between (a) and (b) below:
(a) the monthly amount of the Preretirement Survivor's Benefit
to which the Surviving Spouse would have been entitled under the Qualified Plan
if such Benefit were computed without giving effect to the limitations on
benefits imposed by application of Section 415 or 401(a)(17) of the Code to
plans to which that section applies;
LESS
(b) the monthly amount of the Preretirement Survivor's Benefit
actually payable to the Surviving Spouse under the Qualified Plan or any
supplemental executive retirement plan or agreement, sponsored or entered by
the Company or any Related Company; other than a supplemental executive
retirement plan whose primary purpose is to provide benefits in excess of
amounts permitted by Code Section 401(a)(17) or 415 with respect to a
Predecessor Plan.
SECTION 4.02. FORM AND COMMENCEMENT OF BENEFIT. A Supplemental
Surviving Spouse Benefit shall be payable over the lifetime of the Surviving
Spouse only in monthly installments commencing on the date for commencement of
payment of the Preretirement Survivor's Benefit to the Surviving Spouse under
the Qualified Plan and terminating on the date of the last payment of the
Preretirement Survivor's Benefit made before the Surviving Spouse's death.
ARTICLE V
Vesting
-------
SECTION 5.01. PARTICIPANT VESTING. A Participant credited with five
years of Service under the Qualified Plan shall be fully vested in the Plan.
ARTICLE VI
Administration of the Plan
--------------------------
SECTION 6.01. ADMINISTRATION BY THE COMMITTEE. The Committee shall be
responsible for the general operation and administration of the Plan and for
carrying out the provisions thereof.
SECTION 6.02. GENERAL POWERS OF ADMINISTRATION. All provisions set
forth in the Qualified Plan with respect to the administrative powers and
duties of the Company or the Committee, when relevant, shall apply to this
Plan. The Company shall be entitled to rely conclusively upon all tables,
valuations, certificates, opinions and reports furnished by any actuary,
accountant, controller, counsel or other person employed or engaged by the
Company with respect to the Plan. The Committee may delegate its powers and
duties to one or more members in the same manner as permitted by the Qualified
Plan.
ARTICLE VII
Miscellaneous
-------------
SECTION 7.01. AMENDMENT OR TERMINATION. The Company reserves the
right at any time to amend or terminate this Plan.
6
<PAGE> 7
SECTION 7.02. NO CONTRACT OF EMPLOYMENT. Nothing in the Plan shall be
deemed or construed to impair or affect in any manner whatsoever, the right of
the Employers, in their discretion, to hire Employees and, with or without
cause, to discharge or terminate the service of Employees or Participants.
SECTION 7.03. PAYMENT IN EVENT OF INCAPACITY. If any person entitled
to any payment under the Plan shall be physically, mentally or legally
incapable of receiving or acknowledging receipt of such payment, the Committee,
upon receipt of satisfactory evidence of his incapacity and satisfactory
evidence that another person or institution is maintaining him and that no
guardian or committee has been appointed for him, may cause any payment
otherwise payable to him to be made to such person or institution so
maintaining him.
SECTION 7.04. FUNDING. The Plan at all times shall be entirely
unfunded and no provision shall at any time be made with respect to segregating
any assets of the Company for payment of any benefits hereunder. No
Participant, Surviving Spouse or any other person shall have any interest in
any particular assets of the Company by reason of the right to receive a
benefit under the Plan and any such Participant, Surviving Spouse or other
person shall have only the rights of a general unsecured creditor of the
Company with respect to any rights under the Plan.
SECTION 7.05. GENERAL CONDITIONS. Except as otherwise expressly
provided herein, all terms and conditions of the Qualified Plan applicable to a
Qualified Plan Retirement Benefit or a Preretirement Survivor's Benefit shall
also be applicable to a Supplemental Retirement Benefit or a Supplemental
Surviving Spouse Benefit payable hereunder. Any Qualified Plan Retirement
Benefit or Preretirement Survivor's Benefit, or any other benefit payable under
the Qualified Plan, shall be paid solely in accordance with the terms and
conditions of the Qualified Plan and nothing in this Plan shall operate or be
construed in any way to modify, amend or affect the terms and provisions of the
Qualified Plan. However, nothing in this Section shall modify the requirement,
except as provided in Section 7.09, that all Supplemental Retirement Benefits
provided by this Plan be paid in the form of a straight life annuity.
SECTION 7.06. NO GUARANTY OF BENEFITS. Nothing contained in the Plan
shall constitute a guaranty by the Company or any other entity or person that
the assets of the Company will be sufficient to pay any benefit hereunder.
SECTION 7.07. SPENDTHRIFT PROVISION. No interest of any person or
entity in, or right to receive a benefit under, the Plan shall be subject in
any manner to sale, transfer, assignment, pledge, attachment, garnishment, or
other alienation or encumbrance of any kind; nor may such interest or right to
receive a benefit be taken, either voluntarily or involuntarily, for the
satisfaction of the debts of, or other obligations or claims against, such
person or entity, including claims for alimony, support, separate maintenance
and claims in bankruptcy proceedings.
SECTION 7.08. APPLICABLE LAW. The Plan shall be construed and
administered under the laws of the State of Ohio.
SECTION 7.09. SMALL BENEFITS. If the Actuarial Equivalent of any
Supplemental Retirement Benefit or Supplemental Surviving Spouse Benefit is
less than $10,000, the Company may pay the actuarial value of such Benefit to
the Participant or Surviving Spouse in a single lump sum in lieu of any further
benefit payments hereunder.
SECTION 7.10. LIMITATIONS ON LIABILITY. Notwithstanding any of the
preceding provisions of the Plan, neither the Company nor any individual acting
as an employee or agent of the
7
<PAGE> 8
Company shall be liable to any Participant, former Participant, Surviving
Spouse or any other person for any claim, loss, liability or expense incurred
in connection with the Plan.
SECTION 7.11. ACTUARIAL EQUIVALENT. If any benefit required by this
Plan to be subtracted from the Supplemental Retirement Benefit provided by this
Plan is not payable in the form of a straight life annuity, such benefit's
Actuarial Equivalent in the form of a straight life annuity shall be calculated
using the same methods as used by the Qualified Plan.
In determining whether a Supplemental Retirement Benefit is less than
$10,000, the Committee shall employ the same actuarial method as used by the
Qualified Plan.
SECTION 7.12. TAXES. All benefits payable pursuant to this Plan shall
be reduced by any and all federal, state and local taxes imposed upon the
Participant or the Beneficiary which are required to be paid or withheld by the
Company or a Related Company.
SECTION 7.13. CLAIMS PROCEDURE. The Committee shall have complete
authority and discretion regarding benefit determinations. Unless waived by
the Committee, any person entitled to benefits hereunder must file a claim with
the Committee upon forms furnished by the Committee. Notwithstanding any other
provision of this Plan, payment of benefits need not be made until receipt of
the claim and the expiration of the time periods specified in this Section 7.13
for rendering a decision on the claim. In the event a claim is denied,
benefits need not be made or commence until a final decision is reached by the
Committee.
The Committee shall notify the claimant of its decision within ninety (90) days
after receipt of the claim. However, if special circumstances require, the
Committee may defer action on a claim for benefits for an additional period not
to exceed ninety (90) days, and in that case it shall notify the claimant of
the special circumstances involved and the time by which it expects to render a
decision.
If the Committee determines that any benefits claimed should be denied, it
shall give notice to the claimant setting forth the specific reason or reasons
for the denial and provide a specific reference to the Plan provisions on which
the denial is based. The Committee shall also describe any additional
information necessary for the Participant to perfect the claim and explain why
the information is necessary. Such claimant shall be entitled to full and fair
review by the Committee of the denial. The claimant shall have sixty (60) days
after receipt of the denial in which to file a notice of appeal with the
Committee. A final determination by the Committee shall be rendered within
sixty (60) days after receipt of the claimant's notice of appeal. Under
special circumstances such determination may be delayed for an additional
period not to exceed sixty (60) days, in which case the claimant shall be
notified of the delay prior to the close of the initial sixty (60) day period.
The Committee's final decision shall set forth the reasons and the references
to the Plan provisions on which it is based. The Committee shall have
discretion in interpreting the terms of the Plan and in making claim
determinations. Final determinations shall be made by the Committee and such
determinations shall be conclusive and binding on all persons. The Committee
shall be deemed to have properly exercised its authority unless it has abused
its discretion hereunder by acting arbitrarily and capriciously.
SECTION 7.14. GENDER AND NUMBER. The masculine gender shall be deemed
to include the feminine, the feminine gender shall be deemed to include the
masculine, and the singular shall include the plural unless otherwise clearly
required by the context.
SECTION 7.15. HEADINGS. The headings and subheadings in this Plan
have been inserted for convenience and reference only and are to be ignored in
any construction of the provisions hereof.
8
<PAGE> 9
IN WITNESS WHEREOF: the Company has caused this Plan to be executed on
the 21st day of April, 1994; effective January 1, 1994.
----
HUNTINGTON BANCSHARES INCORPORATED
By: /s/ Ralph K. Frasier
--------------------------
Title: General Counsel & Secretary
------------------------------
9
<PAGE> 1
<TABLE>
Exhibit 11
Huntington Bancshares Incorporated
Computation of Earnings Per Share
Years Ended December 31, 1994, 1993, and 1992
<CAPTION>
Year Ended December 31, 1994 1993 1992
--------------- --------------- ---------------
<S> <C> <C> <C>
Net Income $242,593,000 $236,912,000 $161,046,000
Favorable Effect of Convertible Debt $71,000 $102,000 $145,000
--------------- --------------- ---------------
Fully Diluted Net Income $242,664,000 $237,014,000 $161,191,000
=============== =============== ===============
Average Common Shares Outstanding 129,723,581 128,313,640 126,425,920
Dilutive Effect of Stock Options
Outstanding 773,497 1,257,727 1,283,910
Dilutive Effect of Convertible Debt
Outstanding 125,279 180,939 257,259
--------------- --------------- ---------------
Fully Diluted Shares Outstanding 130,622,357 129,752,306 127,967,089
=============== =============== ===============
Net Income per Common Share:
No dilution $1.87 $1.85 $1.27
Primary $1.86 $1.83 $1.26
Fully diluted $1.86 $1.83 $1.26
</TABLE>
<PAGE> 1
<TABLE>
EXHIBIT 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
TABLE 1
- ------------------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED SELECTED FINANCIAL DATA YEAR ENDED DECEMBER 31,
- ------------------------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS OF DOLLARS, EXCEPT PER
SHARE AMOUNTS) 1994 1993 1992 1991 1990 1989
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Total interest income .................. $ 1,219,721 $ 1,236,311 $ 1,202,286 $ 1,208,407 $ 1,266,770 $ 1,177,754
Total interest expense ................. 463,671 440,111 504,846 659,918 780,759 730,386
Net interest income .................... 756,050 796,200 697,440 548,489 486,011 447,368
Securities gains ....................... 2,594 27,189 36,332 16,951 579 302
Provision for loan losses .............. 15,284 79,294 81,562 62,061 76,434 43,739
Net income ............................. 242,593 236,912 161,046 133,940 99,765 122,829
PER COMMON SHARE(1)
Net income ............................. 1.87 1.85 1.27 1.06 .79 1.02
Cash dividends declared ................ .72 .60 .50 .46 .41 .35
Book value at year end ................. 10.84 10.21 8.87 8.10 7.43 7.06
BALANCE SHEET HIGHLIGHTS
Total assets at year-end ............... 17,770,640 17,618,707 16,246,526 14,500,477 13,671,182 13,353,001
Total long-term debt at year-end ....... 1,214,052 762,310 478,872 261,168 206,578 209,808
Average long-term debt ................... 927,797 640,976 299,905 218,645 200,939 206,356
Average shareholders' equity ............. 1,403,314 1,216,470 1,074,159 977,073 917,474 815,270
Average total assets ..................... $16,749,850 $16,850,719 $15,165,151 $13,612,543 $13,489,939 $12,247,488
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
KEY RATIOS AND STATISTICS 1994 1993 1992 1991 1990 1989
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
MARGIN ANALYSIS - AS A %
OF AVERAGE EARNING ASSETS(2)
Interest income ........................ 7.97% 8.03% 8.75% 9.85% 10.51% 10.85%
Interest expense ....................... 3.01 2.83 3.63 5.30 6.37 6.59
----- ----- ----- ----- ----- -----
Net interest margin ...................... 4.96% 5.20% 5.12% 4.55% 4.14% 4.26%
===== ===== ===== ===== ===== =====
RETURN ON
Average total assets ................... 1.45% 1.41% 1.06% .98% .74% 1.00%
Average earning assets ................. 1.57% 1.53% 1.16% 1.08% .81% 1.11%
Average shareholders' equity ........... 17.29% 19.48% 14.99% 13.71% 10.87% 15.07%
Dividend payout ratio .................... 38.50% 32.47% 38.99% 42.86% 51.52% 34.65%
Average shareholders' equity to
average total assets ................... 8.38% 7.22% 7.08% 7.18% 6.80% 6.66%
Tier I risk-based capital ratio .......... 9.55% 9.60% 9.39% 9.07% 8.68% 8.69%
Total risk-based capital ratio ........... 13.57% 14.02% 12.56% 11.27% 11.19% 11.16%
Tier I leverage ratio .................... 7.99% 7.03% 6.72% 7.00% 6.54% 6.34%
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
OTHER DATA 1994 1993 1992 1991 1990 1989
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Full-time equivalent employees 8,152 8,395 8,039 7,562 7,074 6,884
Banking and thrift offices 344 352 346 334 318 304
</TABLE>
(1) Restated for the five-for-four stock split distributed in July 1994.
(2) Presented on a fully tax equivalent basis assuming a 35% tax rate in 1994
and 1993 and a 34% tax rate in years 1989 through 1992.
18
<PAGE> 2
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OVERVIEW
Huntington reported net income of $242.6 million in 1994, compared with
$236.9 million and $161.0 million in 1993 and 1992, respectively. On a per share
basis, net income increased to $1.87 in 1994, up from $1.85 and $1.27 in the
preceding two years. Huntington's earnings were stronger in the first half of
1994 than in the final six months. Although earnings were higher in 1994,
adverse changes in market conditions such as rising interest rates caused
compression in the margin and reduced fee-based income from mortgage banking
activities and investment management and sales, particularly in the last half of
the year. Per share amounts for all prior periods have been restated to reflect
the five-for-four stock split distributed to shareholders in July 1994.
Huntington's returns on average assets (ROA) and average equity (ROE)
during 1994 were 1.45% and 17.29%, respectively, which compare favorably with
industry averages and the performance of its peer group. In the prior two years,
ROA was 1.41% and 1.06%, and ROE was 19.48% and 14.99%.
Total assets were $17.8 billion at December 31, 1994, representing a slight
increase from December 31 of last year. The most significant growth in the
balance sheet has been in the area of loans, particularly in the consumer
component of the portfolio, which is indicative of Huntington's continued
penetration into new and existing markets and a general improvement in economic
conditions. Average total loans of $11.5 billion for the year ended December 31,
1994, increased 13.7% from the average balance of $10.1 billion reported for
1993. Conversely, mortgages held for sale dropped significantly from an average
balance of $827 million in 1993 to $367 million in the year just ended. This
resulted as a rapid rise in interest rates precipitated a substantial
curtailment of residential loan originations. The average balance of securities
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
TABLE 2
- ------------------------------------------------------------------------------------------------------------------------------------
CHANGES IN EARNINGS PER SHARE(1) 1994/1993 1993/1992
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net income per share for 1993 and 1992, respectively ................................... $ 1.85 $ 1.27
Increase (decrease) attributable to:
Net interest income .................................................................. (.31) .77
Provision for loan losses ............................................................ .49 .01
Mortgage banking income .............................................................. (.38) .28
Service charges on deposit accounts .................................................. .03 .07
Securities transactions .............................................................. (.19) (.07)
Other income ......................................................................... (.01) .16
Salaries ............................................................................. -- (.15)
Commissions .......................................................................... .08 (.02)
Employee benefits .................................................................... (.02) (.06)
Provision for other real estate ...................................................... .05 .40
Other expense ........................................................................ .28 (.36)
Income taxes ......................................................................... .02 (.43)
Additional shares outstanding ........................................................ (.02) (.02)
------ ------
Net change ..................................................................... .02 .58
------ ------
Net income per share for 1994 and 1993, respectively ................................... $ 1.87 $ 1.85
====== ======
</TABLE>
(1) Restated for the five-for-four stock split distributed in July 1994.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
1994 1993 1992
----------------- ------------------ -------------------
CONTRI- % OF CONTRI- % OF CONTRI- % OF
(IN MILLIONS) BUTION TOTAL BUTION TOTAL BUTION TOTAL
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BANKING SUBSIDIARIES
NET INCOME:
Ohio ............................................... $179.1 73.8% $162.1 68.4% $ 99.6 61.9%
West Virginia ...................................... 34.0 14.0 33.1 14.0 26.4 16.4
Michigan ........................................... 27.5 11.3 23.2 9.8 20.0 12.4
Indiana ............................................ 14.2 5.9 7.4 3.1 10.1 6.3
Kentucky ........................................... 6.7 2.8 5.9 2.5 5.1 3.2
Florida ............................................ 2.9 1.2 3.3 1.4 1.3 .8
------ ----- ------ ----- ------ -----
Total Banking Subsidiaries ................... 264.4 109.0 235.0 99.2 162.5 101.0
NON-BANKING SUBSIDIARIES
NET INCOME(LOSS)
Huntington Mortgage Company ........................ (11.2) (4.6) 15.0 6.3 10.5 6.5
Trust Services ..................................... 4.0 1.6 3.2 1.4 2.1 1.3
Other Non-banking .................................. 1.7 .7 .8 .3 2.3 1.4
Parent Company, debt service, and other
supporting operations ............................ (16.3) (6.7) (17.1) (7.2) (16.4) (10.2)
------ ----- ------ ----- ------ -----
NET INCOME ........................................... $242.6 100.0% $236.9 100.0% $161.0 100.0%
====== ===== ====== ===== ====== =====
</TABLE>
19
<PAGE> 3
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
available for sale also declined in 1994, as management repositioned the balance
sheet during the first half of the year to reduce the portfolio's exposure to
rising rates. The timing of this repositioning was such that Huntington was able
to achieve a lower level of interest rate risk without incurring significant
losses from securities sales. Total deposits have declined slightly from the
prior year amount, in large part because of an expected decrease in time
deposits of $100,000 or more and foreign time deposits, as well as a lower
amount of funds held in escrow in connection with Huntington's mortgage banking
activities. The decline in large domestic and foreign time deposits reflects
management's decision to utilize alternative sources to raise national market
liabilities. In doing so, Huntington was able to reduce its FDIC insurance
premiums without impeding balance sheet liquidity. As more fully discussed in
the liquidity section, Huntington's core deposit base has been its most
significant source of funding. Management recognizes the continued importance of
core deposits and anticipates that they will remain the primary source of
funding in the future.
Shareholders' equity was $1.4 billion at December 31, 1994, an increase of
6.6% from one year ago. Huntington's regulatory capital ratios, including those
of its banking and thrift subsidiaries, show continued strength and exceed the
minimum levels established for well-capitalized institutions. In addition,
Huntington and its subsidiaries meet all other requirements to be considered
well-capitalized.
UNIT PROFITABILITY
Net income at all of Huntington's banking and thrift subsidiaries increased
during each of the past two years, with the exception of its Indiana operations
which reported a decrease from 1992 to 1993 as a result of certain nonrecurring
acquisition costs, and its Florida location which reported lower net income in
the most recent year principally because of a lower contribution from its
mortgage banking activities. In terms of the non-banking results over these same
periods, The Huntington Mortgage Company reported a net loss of $11.2 million
during 1994, compared with net income of $15.0 million and $10.5 million,
respectively, in the two preceding years. Huntington's mortgage banking
activities are more fully discussed in the sections which follow.
RESULTS OF OPERATIONS
NET INTEREST INCOME
Huntington reported net interest income of $756.1 million in 1994, compared
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
TABLE 3
- ------------------------------------------------------------------------------------------------------------------------------------
CHANGE IN NET INTEREST INCOME DUE TO CHANGES IN AVERAGE VOLUME AND INTEREST RATES(1)
- ------------------------------------------------------------------------------------------------------------------------------------
FULLY TAX EQUIVALENT BASIS(2) 1994 1993
---------------------------------- ----------------------------------
(IN MILLIONS OF DOLLARS) INCREASE (DECREASE) INCREASE (DECREASE)
FROM PREVIOUS FROM PREVIOUS
YEAR DUE TO: YEAR DUE TO:
---------------------------------- ----------------------------------
VOLUME YIELD/RATE TOTAL VOLUME YIELD/RATE TOTAL
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest bearing deposits in banks ................... $ (1.3) $ .4 $ (.9) $ (2.7) $ (.2) $ (2.9)
Trading account securities ........................... .2 .2 .4 (.6) (.1) (.7)
Federal funds sold and securities
purchased under resale agreements ................... 1.5 .9 2.4 (1.7) (.6) (2.3)
Mortgages held for sale .............................. (32.5) (1.8) (34.3) 11.0 (5.9) 5.1
Taxable securities ................................... (69.9) 13.7 (56.2) 39.4 (29.4) 10.0
Tax-exempt securities ................................ (7.6) (1.0) (8.6) (7.9) 5.3 (2.6)
Total loans .......................................... 119.1 (40.7) 78.4 90.4 (66.1) 24.3
------ ------ ------ ------ ------ ------
TOTAL EARNING ASSETS ............................ 9.5 (28.3) (18.8) 127.9 (97.0) 30.9
------ ------ ------ ------ ------ ------
Interest bearing demand deposits ..................... 1.2 (5.0) (3.8) 4.3 (17.1) (12.8)
Savings deposits ..................................... 1.3 (9.8) (8.5) 14.4 (21.0) (6.6)
Certificates of deposit of
$100,000 or more ................................... (9.1) 3.6 (5.5) (16.9) (8.7) (25.6)
Other domestic time deposits ......................... (2.1) (.1) (2.2) (23.3) (33.2) (56.5)
Foreign time deposits ................................ (6.5) 3.6 (2.9) 10.0 (.7) 9.3
Short-term borrowings ................................ (6.5) 23.8 17.3 24.8 (8.3) 16.5
Long-term debt ....................................... 17.6 11.6 29.2 19.1 (8.1) 11.0
------ ------ ------ ------ ------ ------
TOTAL INTEREST BEARING LIABILITIES .............. (4.1) 27.7 23.6 32.4 (97.1) (64.7)
------ ------ ------ ------ ------ ------
NET INTEREST INCOME ............................. $ 13.6 $(56.0) $(42.4) $ 95.5 $ .1 $ 95.6
====== ====== ====== ====== ====== ======
</TABLE>
(1) The change in interest due to both rate and volume has been allocated
between the factors in proportion to the relationship of the absolute
dollar amounts of the change in each.
(2) Calculated assuming a 35% tax rate.
20
<PAGE> 4
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
TABLE 4
- ------------------------------------------------------------------------------------------------------------------------------------
SUMMARY OF ALLOWANCE FOR LOAN LOSSES AND SELECTED STATISTICS
- ------------------------------------------------------------------------------------------------------------------------------------
(in thousands of dollars) 1994 1993 1992 1991 1990 1989
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ALLOWANCE FOR LOAN LOSSES, BEGINNING OF YEAR ..... $ 211,835 $ 153,654 $ 134,770 $ 123,622 $ 91,039 $ 79,110
Loan losses
Commercial ..................................... (10,404) (20,289) (26,634) (26,610) (17,524) (13,180)
Real estate
Construction ................................. (5,957) (422) (14,001) (34) (850) (4,077)
Mortgage ..................................... (5,428) (2,060) (6,665) (6,859) (8,115) (1,825)
Consumer ....................................... (23,356) (21,492) (25,621) (28,773) (26,276) (23,585)
Lease financing ................................ (977) (1,329) (2,734) (1,338) (1,255) (1,048)
---------- ---------- ---------- ---------- ---------- ----------
Total loan losses .............................. (46,122) (45,592) (75,655) (63,614) (54,020) (43,715)
---------- ---------- ---------- ---------- ---------- ----------
RECOVERIES OF LOANS PREVIOUSLY CHARGED OFF
Commercial ..................................... 7,724 3,564 3,607 2,589 3,527 4,235
Real estate
Construction ................................. 1 1 -- 400 -- --
Mortgage ..................................... 506 352 120 736 179 155
Consumer ....................................... 9,503 9,058 8,313 6,781 6,229 5,166
Lease financing ................................ 368 263 424 230 197 214
---------- ---------- ---------- ---------- ---------- ----------
Total recoveries of loans previously charged off 18,102 13,238 12,464 10,736 10,132 9,770
---------- ---------- ---------- ---------- ---------- ----------
NET LOAN LOSSES .................................. (28,020) (32,354) (63,191) (52,878) (43,888) (33,945)
---------- ---------- ---------- ---------- ---------- ----------
PROVISION FOR LOAN LOSSES ........................ 15,284 79,294 81,562 62,061 76,434 43,739
ALLOWANCE OF ASSETS ACQUIRED ..................... 1,393 11,241 513 1,965 37 2,135
---------- ---------- ---------- ---------- ---------- ----------
ALLOWANCE FOR LOAN LOSSES, END OF YEAR ........... $ 200,492 $ 211,835 $ 153,654 $ 134,770 $ 123,622 $ 91,039
========== ========== ========== ========== ========== ==========
AS A % OF AVERAGE TOTAL LOANS
Net loan losses ................................ .24% .32% .69% .61% .52% .44%
Provision for loan losses ...................... .13% .78% .89% .72% .91% .57%
Allowance for loan losses as a %
of total loans (end of period) ................. 1.63% 1.93% 1.61% 1.52% 1.42% 1.12%
Net loan loss coverage (1) ....................... 13.62x 13.69x 4.98x 4.77x 4.82x 6.08x
</TABLE>
(1) Income before income taxes and the provision for loan losses to net
loan losses.
- --------------------------------------------------------------------------------
with $796.2 million and $697.4 million, respectively, in 1993 and 1992. The net
interest margin, on a fully tax equivalent basis, was 4.96% during the most
recent twelve months, a decrease from 5.20% in 1993 and 5.12% in 1992. Rising
interest rates put downward pressure on the net interest margin and further
compression is expected in 1995. The drop in 1994 reflects the impact of the
increase in short-term interest rates (e.g. a 250 basis point increase occurred
in the federal funds rate) which increased Huntington's funding costs more
rapidly than its yields on earning assets. The lower margin and reduced level of
net interest income also were due to the decrease in mortgages held for sale,
competitive pricing pressures on new loans, and actions taken to reposition the
balance sheet to reduce Huntington's exposure to increases in interest rates.
The competitive pressures on loan pricing existed throughout the entire
portfolio and were particularly evident in terms of indirect automobile lending,
a significant component of Huntington's consumer business.
PROVISION AND ALLOWANCE FOR LOAN
LOSSES
The provision for loan losses was $15.3 million in 1994, $79.3 million in
1993 and $81.6 million in 1992. The decrease from prior years is directly
related to a significant improvement in credit quality, as total nonperforming
loans decreased $32.7 million, or 42.4%, over the last twelve months. Moreover,
Huntington's net charge-offs decreased 13.4% from 1993, a significant
achievement given the loan growth during 1994 and the sharp drop in net
charge-offs from 1992 to 1993 of $30.8 million, or 48.8%.
The allowance for loan losses (ALL) is maintained at a level considered
appropriate by management, based on its estimate of losses inherent in the loan
portfolio. The procedures employed by Huntington in evaluating the adequacy of
the ALL include an analysis of specific credits which
21
<PAGE> 5
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
TABLE 5
- ------------------------------------------------------------------------------------------------------------------------------------
ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
- ------------------------------------------------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990
- ------------------------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS OF DOLLARS) PERCENT OF PERCENT OF PERCENT OF PERCENT OF PERCENT OF
LOANS TO LOANS TO LOANS TO LOANS TO LOANS TO
TOTAL TOTAL TOTAL TOTAL TOTAL
AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial ........... $ 31,682 29.3% $ 33,156 31.4% $ 51,764 32.8% $ 55,778 32.4% $ 48,309 35.2%
Tax-free ............. -- .5 -- .7 47 .7 10 .9 15 1.0
Real estate
Construction ....... 908 2.5 1,636 3.1 1,329 4.0 6,672 4.9 19,046 5.8
Mortgage ........... 16,677 24.5 18,008 24.5 12,274 23.7 10,545 23.6 7,833 20.8
Consumer ............. 28,672 37.9 24,901 35.9 23,604 34.9 23,836 34.6 22,407 33.5
Lease financing ...... 2,972 5.3 2,107 4.4 1,943 3.9 1,565 3.6 1,381 3.7
Unallocated .......... 119,581 -- 132,027 -- 62,693 -- 36,364 -- 24,631 --
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Total ........ $200,492 100.0% $211,835 100.0% $153,654 100.0% $134,770 100.0% $123,622 100.0%
======== ===== ======== ===== ======== ===== ======== ===== ======== =====
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
are generally selected for review on the basis of size and relative risk,
portfolio trends, current and historical loss experience, prevailing economic
conditions and other relevant factors. For analytical purposes, the ALL has been
allocated to various portfolio segments. However, the total ALL is available to
absorb losses from any segment of the portfolio. The methods used by Huntington
to allocate the ALL are also subject to change and accordingly, the December 31,
1994 allocation is not necessarily indicative of the trend of future loan losses
in any particular loan category.
At year end 1994, the ALL of $200.5 million represented 1.63% of total
loans, compared with ratios of 1.93% and 1.61%, respectively, at December 31,
1993 and 1992. Huntington believes this decrease from one year ago is
appropriate based on the trend in nonperforming loans, as evidenced by the
coverage ratio improving from 274.4% at the end of last year to 450.8% as of
December 31, 1994. Additional information regarding the ALL and asset quality
appears in the section "CREDIT RISK".
NON-INTEREST INCOME
Non-interest income totaled $235.4 million in 1994, down from $305.8
million in 1993, and $250.1 million in 1992. Excluding securities transactions,
the respective amounts were $232.8 million, $278.6 million, and $213.8 million.
A significant downturn in mortgage banking operations was the predominant
reason for the decrease in fee-based income from prior years. In 1993, mortgage
loan originations increased substantially in response to mortgage interest rates
which had reached their lowest level in several years. This trend began to level
off at the beginning of 1994, and Huntington's mortgage loan production
decreased dramatically throughout the year from a total volume of $6.1 billion
in 1993 to $2.2 billion in 1994. Moreover, the decline in residential mortgage
loan production, coupled with sales of servicing rights, resulted in a decline
in the volume of mortgage loans serviced by Huntington from $9.6 billion,
including loans subject to temporary subservicing agreements of $2.6 billion, to
$5.4 billion at year end 1994. Given the current market conditions, and
Huntington's outlook for mortgage interest rates in the coming months, this
trend of decreasing fees from mortgage loan originations and other mortgage
banking activities is expected to continue into 1995.
A comparative analysis of the major components of mortgage banking income
follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(IN THOUSANDS) 1994 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Net servicing fees ............. $21,586 $15,105 $16,777
Fee income ..................... 13,428 38,639 33,734
Gain on sale of
servicing rights ............. 11,583 31,765 1,539
Other income ................... 3,770 13,676 11,247
------- ------- -------
Total ........................ $50,367 $99,185 $63,297
======= ======= =======
- --------------------------------------------------------------------------------
</TABLE>
Net servicing fees for 1993 were significantly affected by accelerated
amortization of excess mortgage servicing rights (EMSRs) during the year. As the
refinancing volume which fueled the accelerated amortization last year declined
dramatically in 1994, amortization of EMSRs decreased $18.1 million, from $21.2
million in 1993, to $3.1 million in the most recent twelve months.
Servicing rights sold by Huntington for each of the last two years were
related to loans totaling $2.2 billion in 1994 and $3.8 billion in 1993. Gains
on such sales were the primary reason for the increase in mortgage banking
income of 56.7% from 1992 to 1993, as no significant servicing sales occurred
during 1992. At the end of the most recent year, the servicing portfolio had an
average contractual maturity of approximately 22 years, which was comparable to
a year ago, and an average coupon rate of 8.12%, versus 7.92% in 1993. The
decrease between years in other mortgage banking income is a reflection
22
<PAGE> 6
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
TABLE 6
- ------------------------------------------------------------------------------------------------------------------------------------
ANALYSIS OF NON-INTEREST INCOME
- ------------------------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS OF DOLLARS) PERCENT
YEAR ENDED DECEMBER 31, INCREASE (DECREASE)
- ------------------------------------------------------------------------------------------------------------------------------------
1994 1993 1992 1994/93 1993/92
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Service charges on deposit accounts ................ $ 76,836 $ 73,172 $ 64,471 5.0% 13.5%
Mortgage banking ................................... 50,367 99,185 63,297 (49.2) 56.7
Credit card fees ................................... 34,045 31,794 27,037 7.1 17.6
Trust services ..................................... 28,448 27,948 25,129 1.8 11.2
Investment product sales ........................... 6,624 9,016 5,193 (26.5) 73.6
Net gains on sales of securities
available for sale ............................... 2,481 22,973 19,174 (89.2) 19.8
Net investment securities gains .................... 113 4,216 17,158 (97.3) (75.4)
Other .............................................. 36,446 37,474 28,680 (2.7) 30.7
-------- -------- --------
TOTAL NON-INTEREST INCOME .......................... $235,360 $305,778 $250,139 (23.0)% 22.2%
======== ======== ========
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
TABLE 7
- ------------------------------------------------------------------------------------------------------------------------------------
ANALYSIS OF NON-INTEREST EXPENSE
- ------------------------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS OF DOLLARS) PERCENT
YEAR ENDED DECEMBER 31, INCREASE (DECREASE)
- ------------------------------------------------------------------------------------------------------------------------------------
1994 1993 1992 1994/93 1993/92
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Salaries ...................................... $226,668 $226,405 $206,429 .1% 9.7%
Commissions ................................... 10,775 20,992 18,310 (48.7) 14.6
Employee benefits ............................. 58,158 55,259 46,596 5.2 18.6
Net occupancy ................................. 40,291 39,955 36,272 .8 10.2
Equipment ..................................... 38,792 37,230 34,184 4.2 8.9
Credit card ................................... 26,539 24,248 20,474 9.4 18.4
FDIC insurance ................................ 25,271 25,322 25,500 (.2) (.7)
Advertising ................................... 15,320 13,259 13,308 15.5 (.4)
Printing and supplies ......................... 14,821 14,721 13,588 .7 8.3
Legal and loan collection ..................... 8,298 11,361 13,109 (27.0) (13.3)
Other ......................................... 144,719 190,141 204,812 (23.9) (7.2)
-------- -------- --------
TOTAL NON-INTEREST EXPENSE .................... $609,652 $658,893 $632,582 (7.5)% 4.2%
======== ======== ========
</TABLE>
of general market conditions which resulted in lower gains from the sale of
loans during 1994.
Huntington realized gains from securities transactions of $2.6 million in
1994, $27.2 million in 1993, and $36.3 million in 1992. These gains resulted
principally from different programs in each of the years. In the most recent
year, management initiated a program to sell certain fixed rate securities in
anticipation of increased market interest rates, while the more significant
sales of 1993 were the result of a program to change the earning asset mix,
which was effected by deploying proceeds from securities sales into loans.
Finally, expectations of accelerated prepayments of mortgage-backed securities
were the primary reason for the 1992 sales.
The remaining components of non-interest income were, in the aggregate,
relatively flat when comparing 1994 results with 1993. Service charges on
deposits and credit card fees represented the largest increases and were
mostly volume related, while income from investment product sales showed the
most significant decrease. Many of these components showed more significant
increases from 1992 to 1993 as a result of changes in the pricing of service
charges on various corporate and retail products, and market conditions which
benefitted fee-based activities such as trust services and investment product
sales.
NON-INTEREST EXPENSE
Non-interest expense decreased $49.2 million, or 7.5%, when comparing 1994
results with the prior year, while the 1993
23
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
total exceeded the corresponding amount for 1992 by $26.3 million, or 4.2%.
In 1993, Huntington experienced unsurpassed levels of mortgage refinancings
resulting in significant prepayments of the mortgage servicing portfolio. As
discussed previously, the upward trend in mortgage interest rates which began in
early 1994 considerably slowed the pace of refinancings during the year.
Accordingly, amortization of purchased mortgage servicing rights (PMSRs), which
is included in other non-interest expense, decreased from $37.2 million in the
prior year to $5.8 million in the year just ended. PMSR amortization in 1993
exceeded the 1992 total by $22.2 million.
Huntington has seen reductions in various components of other non-interest
expense in each of the past two years from continued improvements in asset
quality, particularly in terms of costs associated with other real estate owned
and loan collection. Salaries increased only slightly
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
TABLE 8
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT SECURITIES DECEMBER 31,
- ------------------------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS OF DOLLARS) 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury and Federal agencies ............................ $ 317,713 $ 94,466 $3,420,855
States and political subdivisions ............................. 153,649 232,721 282,426
Other ......................................................... 4,330 32,158 228,626
---------- ---------- ----------
Total ................................................. $ 475,692 $ 359,345 $3,931,907
========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
AMORTIZED COST AND FAIR VALUES BY MATURITY AT DECEMBER 31, 1994
(IN THOUSANDS OF DOLLARS) AMORTIZED COST FAIR VALUE YIELD(1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S Treasury
Under 1 year ...................................................... $ 150 $ 150 8.63%
-------- --------
Total ....................................................... 150 150
-------- --------
Federal agencies
Mortgage-backed securities
1-5 years ......................................................... 371 344 4.90
6-10 years ........................................................ 4,812 4,806 8.54
Over 10 years ..................................................... 3,130 3,133 8.94
-------- --------
Total ....................................................... 8,313 8,283
-------- --------
Other agencies
1-5 years ......................................................... 101,774 99,446 6.23
6-10 years ........................................................ 207,043 205,358 6.12
Over 10 years ..................................................... 433 350 5.60
-------- --------
Total ....................................................... 309,250 305,154
-------- --------
Total U.S. Treasury and Federal agencies ............................ 317,713 313,587
-------- --------
States and political subdivisions
Under 1 year ...................................................... 56,361 57,080 10.99
1-5 years ......................................................... 72,812 74,975 10.18
6-10 years ........................................................ 18,433 18,059 8.14
Over 10 years ..................................................... 6,043 6,196 10.08
-------- --------
Total ....................................................... 153,649 156,310
-------- --------
Other
Under 1 year ...................................................... 1,508 1,508 9.82
1-5 years ......................................................... 5 5 5.50
6-10 years ........................................................ 1,504 1,424 9.74
Over 10 years ..................................................... 1,313 1,313 9.14
-------- --------
Total ....................................................... 4,330 4,250
-------- --------
Total Investment Securities ......................................... $475,692 $474,147
======== ========
</TABLE>
(1) Weighted average yields are calculated on the basis of book value. Such
yields have been adjusted to a fully tax equivalent basis, assuming a 35%
tax rate.
At December 31, 1994, Huntington had no concentrations of securities by a
single issuer in excess of 10% of shareholders' equity.
24
<PAGE> 8
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
during 1994, as the effects of merit raises were largely negated by reductions
in staff at Huntington's mortgage subsidiary. Employee benefits were up 5.2%
from the prior year, as a result of the change made at the end of 1993 to an
actuarial assumption associated with the defined benefit pension plan and other
general cost increases. Commissions expense decreased significantly during 1994,
principally because of reduced mortgage loan originations. Advertising costs
increased 15.5% during the most recent year in connection with several new
initiatives undertaken by Huntington such as Huntington Direct, the National
Clearinghouse Association, and Direct Bill Pay.
Huntington's expanded mortgage banking activities and, to a lesser extent,
two purchase business combinations consummated during 1993 were significant
reasons for the increase in non-interest expense from 1992 to 1993. Salaries
were 9.7% higher in 1993 than 1992 primarily
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
TABLE 9
- ------------------------------------------------------------------------------------------------------------------------------------
SECURITIES AVAILABLE FOR SALE DECEMBER 31,
- ------------------------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS OF DOLLARS) 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury and Federal agencies ............................ $3,006,277 $3,691,190 $ 393,535
States and political subdivisions ............................. -- -- 5,686
Other ......................................................... 298,216 148,874 --
---------- ---------- ----------
Total ................................................. $3,304,493 $3,840,064 $ 399,221
========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
AMORTIZED COST AND FAIR VALUES BY MATURITY AT DECEMBER 31, 1994
(IN THOUSANDS OF DOLLARS) AMORTIZED COST FAIR VALUE YIELD(1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S Treasury
Under 1 year ................................................... $ 25,399 $ 25,320 6.12%
1-5 years ...................................................... 662,106 643,100 6.27
6-10 years ..................................................... 166,909 147,671 5.60
---------- ----------
Total .................................................... 854,414 816,091
---------- ----------
Federal agencies
Mortgage-backed securities
1-5 years ...................................................... 17,727 16,922 6.65
6-10 years ..................................................... 369,061 362,716 7.72
Over 10 years .................................................. 114,742 110,119 6.21
---------- ----------
Total .................................................... 501,530 489,757
---------- ----------
Other agencies
Under 1 year ................................................... 531,082 526,617 5.78
1-5 years ...................................................... 506,740 499,748 7.01
6-10 years ..................................................... 382,849 369,404 6.16
Over 10 years .................................................. 323,451 304,660 6.52
---------- ----------
Total .................................................... 1,744,122 1,700,429
---------- ----------
Total U.S. Treasury and Federal agencies ......................... 3,100,066 3,006,277
---------- ----------
Other
1-5 years ...................................................... 95,410 94,887 5.78
6-10 years ..................................................... 165,422 164,087 6.13
Over 10 years .................................................. 32,854 32,818 6.57
Marketable equity securities ................................... 8,359 6,424 4.95
---------- ----------
Total .................................................... 302,045 298,216
---------- ----------
Total Securities Available for Sale .............................. $3,402,111 $3,304,493
========== ==========
</TABLE>
(1) Weighted average yields are calculated on the basis of book value.
Such yields have been adjusted to a fully tax equivalent basis,
assuming a 35% tax rate.
At December 31, 1994, Huntington had no concentrations of securities by a
single issuer in excess of 10% of shareholders' equity.
25
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
as a result of an increased workforce at Huntington's mortgage subsidiary and
normal merit increases, while related employee benefits were up 18.6% due to the
additional personnel and increased costs of providing post-retirement,
post-employment, and employee stock purchase plan benefits. The remaining
components of non-interest expense also generally increased at a greater rate
from 1992 to 1993 than was experienced during the most recent year. These
increases were the result of higher volumes of mortgage originations and credit
card transactions, as well as corporate expansion.
PROVISION FOR INCOME TAXES
The provision for income taxes was $123.9 million in 1994, compared with
$126.9 million in 1993 and $72.4 million in 1992. Huntington's effective tax
rate decreased slightly during the most recent twelve months, principally as a
result of a one-time charge recorded in 1993 of $4.0 million related to the
conversion of an acquired thrift to a bank charter. In each of the three years,
the major difference in the statutory and effective tax rates is tax-exempt
interest income. A change in the federal income tax rate from 34% to 35% in
1993 also contributed to the higher effective rate when comparing the
immediately preceding year to 1992.
On January 1, 1993, Huntington prospectively adopted the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes". Adoption of this standard did not materially impact the consolidated
financial statements.
INTEREST RATE RISK AND
LIQUIDITY MANAGEMENT
INTEREST RATE RISK MANAGEMENT
The principal objective of asset/liability management is to maximize
shareholder value in a manner consistent with prudent balance sheet management.
Through its asset/liability management process, Huntington seeks to achieve
consistent growth in both net interest income and net income while managing
volatility arising from shifts in interest rates. This is accomplished with the
oversight of the Asset/Liability Management Committee (ALCO), which is comprised
of key members of executive management. ALCO establishes policies and operating
limits that govern the management of both interest rate and market risk as well
as ensure maintenance of adequate liquidity. Both on- and off-balance sheet
tactics and strategies are regularly reviewed and monitored by ALCO to confirm
their consistency with Huntington's operating objectives as well as to evaluate
their appropriateness and effectiveness in light of changing market and business
conditions.
Huntington monitors its interest rate risk exposure by measuring the amount
that net interest income will change over a twelve to twenty-four month period
given a directional shift in interest rates. The net interest income-at-risk
estimation is determined using multiple interest rate and balance sheet
scenarios to provide management a framework for evaluating its risk tolerance
under various market conditions.
Actively and effectively managing interest rate risk requires the use of a
variety of financial instruments and funding sources. On-balance sheet
investment and funding vehicles, along with off-balance sheet financial
instruments such as interest rate swaps, interest rate caps/floors, and
financial futures, represent the primary means by which Huntington responds to
the balance sheet mismatches created by customer loan and deposit preferences
and to changing market conditions. These activities are closely monitored by
ALCO.
Over the past year, Huntington has undertaken several strategies to protect
earnings against rising rates. These have included the sale of approximately
$2.1 billion of fixed rate securities designated as available for sale, the
issuance of term fixed-rate retail deposits and wholesale liabilities, and the
adjustment of interest rate swap and other off-balance sheet positions. These
initiatives reduced Huntington's interest rate risk exposure during 1994 and
have better positioned the company in light of expectations for further rate
increases in 1995.
At December 31, 1994, the results of Huntington's internal interest
sensitivity analysis indicate that a 100 basis point increase in the federal
funds rate from the current 5.50% level (assuming a 25 basis point increase per
quarter) and corresponding changes in other market rates, reflected in
Huntington's interest rate forecast, would result in a decrease in annual net
interest income of 0% to 0.9%. This represents a significant decrease from the
end of 1993, at which time Huntington's equivalent exposure was a 4-5% decline
in net interest income. Assuming a gradual 200 basis point increase in rates,
the sensitivity analysis indicates a decrease in net interest income ranging
between 0.1% and 1.8%. Huntington uses a range in measuring its "at-risk"
position because of varying assumptions regarding the volume and rate behaviors
of certain loans and core deposits under the rising rate scenarios.
Interest rate swaps are the principal off-balance sheet vehicles used by
Huntington for asset/liability management. In addition to the transactional
efficiencies afforded by a swap structure, which is less costly to execute than
a comparable cash instrument, the overall swap strategy has enabled Huntington
to lower the costs of raising wholesale funds and has allowed management to
synthetically alter, or customize, the repricing characteristics of selected
on-balance sheet financial instruments. Financial futures and interest rate
caps/floors, as well as forward delivery contracts purchased in connection with
Huntington's mortgage banking activities, are also integral to asset/liability
management. These off-balance sheet financial instruments are often more
attractive than the use of cash securities or other on-balance sheet
alternatives because, though they provide similar protection against interest
rate movements, they require less capital and may not impede liquidity.
26
<PAGE> 10
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The notional amounts of off-balance sheet positions used by Huntington for
purposes other than interest rate risk management, consisting principally of
transactions entered into on behalf of customers for which the related interest
rate risk is countered by offsetting third party contracts, were $700 million
and $572 million, respectively, at the end of 1994 and 1993. Total credit
exposure from such contracts was $12.6 million at December 31, 1994. These
separate activities, which are accounted for at fair value, are not a
significant part of Huntington's operations. Accordingly, they have been
excluded from the discussion of off-balance sheet financial instruments and the
related tables which follow.
The contributions to net interest income from swaps and other off-balance
sheet financial instruments used for asset/liability management purposes,
including amortization of $21.6 million in 1994 and $12.2 million in 1993
attributable to deferred net gains from previously terminated contracts, are
presented below.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(IN MILLIONS) 1994 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income ...................... $29.0 $61.0 $42.1
Interest expense ..................... 5.6 30.0 22.7
----- ----- -----
Net interest income .................. $34.6 $91.0 $64.8
===== ===== =====
</TABLE>
Expressed in terms of the net interest margin, the contribution was 22
basis points in 1994, compared with 59 basis points and 55 basis points,
respectively, in the two preceding years. The following table illustrates the
estimated maturities and weighted average rates of the interest rate swaps used
by Huntington in its interest rate risk management program. In preparing the
information presented below, management has made no assumptions with respect to
future changes in interest rates. Accordingly, as interest rates change, both
the maturity and variable rate information below are subject to change.
The portfolio of amortizing swaps consists of contracts with notional
values that are indexed to certain market interest rates, primarily the London
inter-bank offered rate (LIBOR) or Constant Maturity U.S. Treasury yields (CMT).
To a much lesser degree, other contracts are amortized based upon the prepayment
experience of a specified pool of mortgage loans. As market interest rates
increase, amortization of the notional values will change, generally slowing.
Basis swaps are contracts which provide for both parties to receive floating
rates of interest according to different indices. All receive and pay amounts
applicable to Huntington's basis swaps are determined by LIBOR, the prime rate,
or other indices common to the banking industry. Certain basis swaps, with a
notional value of $700 million at December 31, 1994, have embedded written
periodic caps and, in some cases, purchased periodic floors. Also, embedded in
the receive fixed-generic swaps is $250 million of written caps.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
EXPIRING OR AMORTIZING IN
- ------------------------------------------------------------------------------------------------------------------------------------
(IN MILLIONS) 1995 1996 1997 1998 1999 THEREAFTER TOTAL
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
DECEMBER 31, 1994
Receive fixed-generic swaps
Notional value $134 $434 $600 -- $850 $400 $2,418
Weighted average receive rate 4.50% 4.22% 4.70% -- 7.76% 7.22% 6.10%
Weighted average pay rate 5.75% 5.94% 5.94% -- 5.98% 7.79% 6.25%
Receive fixed-amortizing swaps
Notional value $389 $216 $213 $198 $295 $178 $1,489
Weighted average receive rate 4.93% 4.93% 4.95% 5.19% 5.74% 5.66% 5.22%
Weighted average pay rate 5.70% 6.00% 5.98% 6.51% 5.97% 5.98% 5.98%
Pay fixed-generic swaps
Notional value $325 $1,608 -- -- -- -- $1,933
Weighted average receive rate 5.57% 5.91% -- -- -- -- 5.85%
Weighted average pay rate 5.19% 6.82% -- -- -- -- 6.54%
Basis swaps
Notional value $750 -- -- -- $250 -- $1,000
Weighted average receive rate 5.99% -- -- -- 6.19% -- 6.04%
Weighted average pay rate 6.08% -- -- -- 5.73% -- 5.99%
</TABLE>
27
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
As of December 31, 1994, interest rate swaps were designated to the assets
and liabilities presented below.
The notional values of the swap portfolio represent contractually
determined amounts on which calculations of interest payments to be exchanged
are based. These notional values do not represent direct credit exposures. At
the end of the most recent twelve months, Huntington's credit risk from interest
rate swaps and other off-balance sheet financial instruments used for
asset/liability management purposes was $49.7 million, which is significantly
less than the notional value of the contracts, and represents the sum of the
aggregate fair value of positions that have become favorable to Huntington and
any accrued interest receivable due from counterparties. In order to minimize
the risk that a swap counterparty will not satisfy its interest payment
obligation under the terms of the contract, Huntington performs credit reviews
on all counterparties, restricts the number of counterparties used to a select
group of high quality institutions, obtains collateral, and enters into formal
netting arrangements. Huntington has never experienced any past due amounts from
a swap counterparty and does not anticipate non-performance in the future by any
such counterparties.
The second table on this page summarizes activity in the interest rate
swap portfolio and other off-balance sheet financial instruments used for
asset/liability management purposes during each of the last three years.
Terminations reflect the decisions made by ALCO to modify, refine, or
change balance sheet management strategies, as a result of either a change in
overall interest rate risk tolerances or changes in balance sheet composition.
During 1993, Huntington entered into basis swaps to protect a portion of its
prime based loan portfolio against an expected narrowing in the prime/LIBOR
spread. Based upon the market conditions over the past year
<TABLE>
<CAPTION>
DESIGNATED ASSETS/LIABILITIES
- ---------------------------------------------------------------------------------------------
SHORT-TERM LONG-TERM
(IN MILLIONS) SECURITIES LOANS DEPOSITS BORROWINGS DEBT TOTAL
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Receive fixed-generic $ 233 $1,350 $ 200 $ 135 $ 500 $2,418
Receive fixed-amortizing 198 727 549 -- 15 1,489
Pay fixed-generic -- -- -- 1,008 925 1,933
Basis -- 250 -- 750 -- 1,000
------ ------ ------ ------ ------ ------
Total $ 431 $2,327 $ 749 $1,893 $1,440 $6,840
====== ====== ====== ====== ====== ======
- ---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PURCHASED
INTEREST RATE FORWARD
INTEREST INTEREST CAPS, COLLARS, DELIVERY
(IN MILLIONS) RATE SWAPS RATE FUTURES AND FLOORS CONTRACTS
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance December 31, 1991 $ 2,380 $ 138 $ 300 $ 669
Additions 3,677 1,775 2,525 4,963
Maturities/Amortization (505) (121) (100) (4,749)
Terminations (1,125) (535) (300) --
------- ------- -------- -------
Balance December 31, 1992 4,427 1,257 2,425 883
------- ------- -------- -------
Additions 6,585 1,556 2,320 7,064
Maturities/Amortization (1,210) (1,187) (2,625) (6,655)
Terminations (2,900) (1,123) (300) --
------- ------- -------- -------
Balance December 31, 1993 6,902 503 1,820 1,292
------- ------- -------- -------
Additions 3,492 5,802 860 1,065
Maturities/Amortization (904) (275) (1,250) (2,281)
Terminations (2,650) (6,014) (300) --
------- ------- -------- -------
Balance December 31, 1994 $ 6,840 $ 16 $ 1,130 $ 76
======= ======= ======== =======
</TABLE>
and Huntington's current interest rate forecast, a significant narrowing of the
spread between these indices is not expected in the foreseeable future.
Accordingly, basis swaps with a notional value of $1.5 billion were terminated
in December 1994. The realized loss of approximately $69.5 million is being
amortized over the 2.5 year remaining life of the original contracts.
Unrealized gains and losses on interest rate swaps are presented in the
table below. The combined net unrealized loss of $268.9 million at December 31,
1994, compares unfavorably with a net unrealized gain of $14.1 million at the
end of 1993. Short-term interest rate increases during 1994 have significantly
changed the fair value of the swap portfolio during the year. The unrealized
gains and losses on forward delivery contracts and other off-balance sheet
financial instruments used for asset/liability management purposes were not
significant at either period end.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
NOTIONAL UNREALIZED UNREALIZED NET UNREALIZED
(IN MILLIONS) VALUE GAINS LOSSES GAINS(LOSSES)
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DECEMBER 31, 1994:
Receive fixed-generic swaps $2,418 $ -- $119.9 $(119.9)
Receive fixed-amortizing swaps 1,489 -- 123.0 (123.0)
------ ------ ------ -------
Total receive fixed swaps 3,907 -- 242.9 (242.9)
Less: Pay fixed-generic swaps 1,933 31.8 -- 31.8
------ ------ ------ -------
Net receive fixed position $1,974 $ 31.8 $242.9 $(211.1)
====== ====== ====== =======
Basis swaps $1,000 $ -- $ 57.8 $ (57.8)
====== ====== ====== =======
</TABLE>
28
<PAGE> 12
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
TABLE 10
- ------------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM BORROWINGS YEAR ENDED DECEMBER 31,
- ------------------------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS OF DOLLARS) 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FEDERAL FUNDS PURCHASED AND REPURCHASE AGREEMENTS
Balance at year-end ................................................. $1,442,138 $2,164,752 $2,547,972
Weighted average interest rate at year-end .......................... 4.82% 2.62% 3.07%
Maximum amount outstanding at month-end during the year ............. $1,798,524 $2,361,306 $2,808,686
Average amount outstanding during the year .......................... $1,374,741 $1,964,282 $1,941,199
Weighted average interest rate during the year ...................... 3.58% 2.89% 3.39%
SHORT-TERM BANK NOTES
Balance at year-end ................................................. $ 640,000 $ 860,000 $ 20,000
Weighted average interest rate at year-end .......................... 5.55% 3.49% 3.25%
Maximum amount outstanding at month-end during the year ............. $ 785,000 $1,000,000 $ 40,000
Average amount outstanding during the year .......................... $ 637,055 $ 719,767 $ 9,508
Weighted average interest rate during the year ...................... 4.28% 3.55% 3.23%
MEDIUM-TERM BANK NOTES WITH ORIGINAL MATURITIES OF LESS THAN ONE YEAR
Balance at year-end ................................................. $ 624,000
Weighted average interest rate at year-end .......................... 5.55%
Maximum amount outstanding at month-end during the year ............. $ 724,000
Average amount outstanding during the year .......................... $ 501,225
Weighted average interest rate during the year ...................... 4.73%
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
TABLE 11
- ------------------------------------------------------------------------------------------------------------------------------------
MATURITY OF DOMESTIC CERTIFICATES OF DEPOSIT GREATER THAN $100,000 AS OF DECEMBER 31, 1994 (IN THOUSANDS OF DOLLARS)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Three months or less .............................................................................. $380,569
Over three through six months ..................................................................... 85,569
Over six through twelve months .................................................................... 62,088
Over twelve months ................................................................................ 77,537
--------
Total ............................................................................................. $605,763
========
NOTE: All foreign time deposits are denominated in amounts greater than $100,000.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The valuation of interest rate swap contracts is largely a function of the
financial market's expectations regarding the future direction of interest
rates. The recent high degree of market uncertainty surrounding short-term
interest rates has significantly contributed to the drop in the fair value of
Huntington's swap portfolio. However, current market values are not necessarily
indicative of the future impact of the swaps on net interest income. This will
depend, in large part, on the shape of the yield curve as well as interest rate
levels.
Including the effects of the basis swap terminations, Huntington had
deferred approximately $(74.1) million and $45.7 million, respectively, at
December 31, 1994 and 1993, of net realized (losses) gains from interest rate
swaps. The net losses as of the most recent year end are to be amortized as
yield adjustments over the remaining term of the original contracts, as
presented below. Deferred realized gains and losses on other off-balance sheet
financial instruments used for asset/liability management purposes were not
significant at either period end.
<TABLE>
<CAPTION>
- -------------------------------------------------------------
AMORTIZING IN
- -------------------------------------------------------------
(IN MILLIONS) 1995 1996 1997 TOTAL
- -------------------------------------------------------------
DECEMBER 31, 1994:
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
Deferred gains $ 16.3 $ 7.4 $ 1.3 $ 25.0
Deferred losses (41.3) (41.3) (16.5) (99.1)
------ ------ ------ ------
Net losses $(25.0) $(33.9) $(15.2) $(74.1)
====== ====== ====== ======
</TABLE>
LIQUIDITY MANAGEMENT
Liquidity management is also a significant responsibility of ALCO. The goal
of ALCO in this regard is to maintain an optimum balance of maturities among
Huntington's assets and liabilities such that sufficient cash, or access to
cash, is available at all times to meet the needs of borrowers, depositors, and
creditors, as well as to fund corporate expansion and other activities. A chief
source of Huntington's liquidity is derived from the large retail deposit base
accessible by its extensive network of geographically dispersed banking
offices. Retail deposits and other core funding sources provided a
29
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULT OF OPERATIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
TABLE 12
- ------------------------------------------------------------------------------------------------------------------------------------
NON-PERFORMING ASSETS AND PAST DUE LOANS
- ------------------------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS OF DOLLARS) 1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C>
Non-accrual loans ................................ $ 41,929 $ 75,933 $ 87,541 $139,024 $100,899 $ 81,356
Renegotiated loans ............................... 2,550 1,254 2,508 5,491 9,447 3,969
-------- -------- -------- -------- -------- --------
Total Non-Performing Loans ....................... 44,479 77,187 90,049 144,515 110,346 85,325
-------- -------- -------- -------- -------- --------
Other real estate, net ........................... 51,909 62,446 73,130 99,646 57,467 17,897
-------- -------- -------- -------- -------- --------
Total Non-Performing Assets ...................... $ 96,388 $139,633 $163,179 $244,161 $167,813 $103,222
======== ======== ======== ======== ======== ========
Non-performing loans as a % of total loans ....... .36% .70% .95% 1.63% 1.27% 1.05%
Non-performing assets as a % of total loans and
other real estate ................................ .78% 1.27% 1.70% 2.72% 1.91% 1.27%
Allowance for loan losses as a % of non-performing
loans ........................................... 450.76% 274.44% 170.63% 93.26% 112.03% 106.70%
Allowance for loan losses and other real estate as
a % of non-performing assets ..................... 193.13% 143.41% 95.22% 56.53% 74.36% 88.20%
Accruing loans past due 90 days or more .......... $ 20,877 $ 25,550 $ 24,298 $ 36,270 $ 30,169 $ 32,169
======== ======== ======== ======== ======== ========
Accruing loans past due 90 days or more to total
loans ............................................ .17% .23% .26% .41% .35% .40%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: For 1994, the amount of interest income which would have been recorded
under the original terms for total loans classified as non-accrual or
renegotiated was $5.6 million. Amounts actually collected and recorded
as interest income for these loans totalled $1.7 million.
minimum of 70% of all funding needs in both 1994 and 1993. This core funding is
supplemented by Huntington's demonstrated ability to raise funds in capital
markets and to access national funds. During 1993, Huntington, through its lead
subsidiary, The Huntington National Bank, initiated a bank note program which
provides short and medium term funding. Significant additional funds were
generated under the bank note program over the most recent twelve months, and a
total of $1.9 billion was outstanding at year end. A similar program was begun
at the parent company in 1994 to fund certain non-banking activities, of which
$75 million was outstanding at year end. Huntington also has a fully available
$200 million line of credit which supports commercial paper borrowings and other
short-term working capital needs.
In addition, Huntington has significant asset liquidity from its sizeable
portfolio of securities available for sale, loans which may be securitized and
sold, and maturing investments. ALCO regularly monitors the liquidity position
and ensures that various alternative strategies exist to cover unanticipated
reductions in presently available funding sources. At December 31, 1994,
Huntington's liquidity was within all key parameters established by ALCO.
CREDIT RISK
Huntington's exposure to credit risk is managed through the use of
underwriting standards which emphasize "in-market" lending to established
borrowers. Highly leveraged transactions and industry or other concentrations
are avoided. The credit administration function also employs extensive
monitoring procedures to ensure problem loans are promptly identified and
adherence with corporate compliance policies. These procedures provide executive
management with information necessary to implement appropriate change and take
corrective action as needed.
Asset quality continues to improve. Net charge-offs as a percentage of
average total loans were .24% in 1994, compared with .32% in 1993 and .69% in
1992. Non-performing assets, which include loans that are no longer accruing
interest, loans that have been renegotiated based upon financial difficulties of
the borrower, and real estate acquired through foreclosure, have trended
significantly downward and are at their lowest level since 1989. The most
substantial decrease in non-performing loans occurred in the construction and
commercial real estate segments, which showed a combined reduction from 1993 of
$28.9 million, largely as a result of additional principal paydowns. An analysis
of the activity in other real estate (ORE) during the past three years follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
(IN MILLIONS) 1994 1993 1992
- ------------------------------------------------------------------
<S> <C> <C> <C>
Beginning balance $89.1 $109.2 $107.1
Additions 29.3 15.9 50.0
Write-downs (6.6) (11.8) (24.3)
Sales (44.5) (24.2) (23.6)
----- ------ ------
Total ORE 67.3 89.1 109.2
ORE reserve (15.4) (26.7) (36.1)
----- ------ ------
Ending balance, net $51.9 $ 62.4 $ 73.1
===== ====== ======
</TABLE>
30
<PAGE> 14
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
TABLE 13
- ------------------------------------------------------------------------------------------------------------------------------------
LOAN PORTFOLIO COMPOSITION YEAR ENDED DECEMBER 31,
- ------------------------------------------------------------------------------------------------------------------------------------
(IN MILLIONS OF DOLLARS) 1994 1993 1992 1991 1990
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial .................................... $ 3,611 $ 3,435 $ 3,121 $ 2,879 $ 2,941
Tax-free ...................................... 58 72 70 81 87
Real estate
Construction ................................ 305 337 379 439 492
Mortgage .................................... 3,002 2,685 2,252 2,097 2,059
Consumer ...................................... 4,642 3,944 3,325 3,061 2,821
Lease financing ............................... 646 481 368 321 311
------- ------- ------- ------- -------
Total loans ............................... $12,264 $10,954 $ 9,515 $ 8,878 $ 8,711
======= ======= ======= ======= =======
</TABLE>
NOTE: There are no loans outstanding which would be considered a
concentration of lending in any particular industry or group of
industries.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
TABLE 14
- ------------------------------------------------------------------------------------------------------------------------------------
MATURITY SCHEDULE OF SELECTED LOANS
- ------------------------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS OF DOLLARS) DECEMBER 31, 1994
- ------------------------------------------------------------------------------------------------------------------------------------
AFTER ONE
WITHIN BUT WITHIN AFTER
ONE YEAR FIVE YEARS FIVE YEARS TOTAL
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Commercial and tax-free ........................ $2,222,656 $1,136,707 $ 309,535 $3,668,898
Real estate - construction ..................... 140,663 126,685 37,421 304,769
---------- ---------- ---------- ----------
Total ..................................... $2,363,319 $1,263,392 $ 346,956 $3,973,667
========== ========== ========== ==========
Variable interest rates ........................ $ 993,707 $ 229,717
========== ==========
Fixed interest rates ........................... $ 269,685 $ 117,239
========== ==========
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Huntington's management continues to aggressively pursue the sale of its
ORE to further reduce non-performing assets.
Huntington also has certain loans which are past due ninety days or more
but have not been placed on nonaccrual status. These loans, which total $20.9
million at year end 1994, are primarily consumer and residential real estate
loans that are considered well-secured and in the process of collection. There
were also loans outstanding of $51.5 million and $84.5 million, respectively, at
December 31, 1994 and 1993, that Huntington considers to be potential problem
credits and monitors closely for any further deterioration in borrower
performance.
All significant loan categories, except construction, experienced growth
during 1994, the most significant occurring in the consumer and leasing segments
of the portfolio which were up, in terms of average balances outstanding, 20.8%
and 31.1%, respectively. Huntington has enjoyed success in the installment
lending business for more than thirty years, and continues to increase its
market share through higher volumes from traditional banking offices,
complemented significantly by the additional market opportunities afforded by
The Huntington Acceptance Company, an indirect auto lending affiliate.
Huntington has achieved this growth without compromising credit quality, as its
indirect lending function uses sophisticated credit scoring systems, applies
consistent underwriting standards, and has a well-designed portfolio tracking
system. Over the past two years, net losses resulting from this segment of the
portfolio were only .21% and .20%, respectively, of related average loans.
Average commercial real estate loans as a percent of average total loans
increased only slightly from 11.2% in 1993 to 11.5% in 1994. This increase
represents additional extensions of credit to borrowers within the small to
middle markets for which the underlying collateral is typically owner-occupied
properties with a demonstrated trend of positive cash flows.
CAPITAL AND DIVIDENDS
Huntington places significant emphasis on the maintenance of strong
capital, which promotes investor confidence, provides access to the national
markets under favorable terms, and enhances the ability to capitalize on
business growth and acquisition opportunities. Capital is managed at each
subsidiary based upon the respective risks and growth opportunities, as well as
regulatory requirements.
Shareholders' equity at December 31, 1994 was approximately $1.4 billion,
up 6.6% from one year ago. Huntington's ratio of average equity to average
assets increased significantly over the last twelve months to 8.38%, compared
with 7.22% and 7.08%, respectively, in the two preceding years. In addition to
the increase in the ratio of average equity to average assets during 1994,
Huntington continues to show strength in each of the key regulatory capital
ratios. At December 31, 1994, the Tier 1 and total risk-based capital ratios
were 9.55% and 13.57%, respectively, and exceeded the corresponding minimum
levels to be considered "well capitalized" of 6% and 10%, respectively. These
same ratios one year ago were 9.60% and 14.02%, respectively. The year end Tier
1 leverage ratio of 7.99% also exceeded the minimum regulatory requirement of
5%, and compares favorably with the ratio at the end of 1993 of 7.03%.
Huntington increased its cash dividends to shareholders during 1994 to $.72
a share, which was 20% higher than the corresponding amount in 1993 of $.60 per
share. That increase, which resulted in a pay-out ratio during the most recent
year of 38.5%, was accompanied by the distribution of a five-for-four stock
split in July 1994.
Huntington also announced a con-
31
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
tinuation of its common stock repurchase program during 1994, upon receiving
Board of Directors' authorization in July to acquire up to 5.0 million shares
(as adjusted for the July 1994 stock split) through open market purchases and
privately negotiated transactions. Approximately 1.3 million of the shares
repurchased pursuant to the 1994 authorization were reissued prior to year end
in connection with the acquisition of a thrift holding company. Certain shares
have also been reissued in connection with Huntington's dividend reinvestment,
stock purchase, stock option, and other benefit plans. The treasury stock on
hand at year end and all other shares to be repurchased pursuant to the 1994
authorization, of which 3.0 million shares remains available at December 31,
1994, are expected to be reissued as required by the terms and provisions of
these benefit plans.
NEW ACCOUNTING STANDARDS
On January 1, 1994, Huntington adopted Statement of Financial Accounting
Standards No. 115 (SFAS No. 115), "Accounting for Certain Investments in Debt
and Equity Securities." SFAS No. 115 requires entities to classify debt and
equity securities as either held to maturity, available for sale, or trading
securities. Held to maturity securities are recorded at amortized cost, whereas
available for sale securities and trading securities are carried at fair value.
The statement further requires that unrealized gains and losses on available for
sale securities be reported, net of tax, as a separate component of
shareholders' equity. At the date of adoption, the unrealized gain on available
for sale securities, net of applicable income taxes, increased Huntington's
equity by $67.2 million. During 1994, as market interest rates rose, the
available for sale portfolio depreciated in value, resulting in a year end
reduction of shareholders' equity of $63.3 million. In the latter part of 1993,
in anticipation of adopting SFAS No. 115, Huntington transferred the majority of
its securities to the available for sale category. Adoption of the new
accounting standard had no effect on earnings.
In May 1993, the Financial Accounting Standards Board (FASB) issued SFAS
No. 114, "Accounting by Creditors for Impairment of a Loan", which applies to
financial statements for fiscal years beginning after December 15, 1994. SFAS
No. 114 requires that "impaired loans" be measured based upon the present value
of expected future cash flows discounted at the loan's effective interest rate
or, as a practical expedient, at the loan's observable market price or the fair
value of the collateral if the loan is collateral dependent. The adoption of
SFAS No. 114, which will occur in the first quarter of 1995, is not expected to
have a material effect on Huntington's consolidated financial statements.
The FASB has also issued an Exposure Draft (ED) dated June 1994,
"Accounting for Mortgage Servicing Rights and Excess Servicing Receivables and
for Securitization of Mortgage Loans", that would amend certain provisions of
SFAS No. 65, which currently governs the accounting for mortgage banking
activities. The most significant change proposed in the ED involves the
recognition of rights to service loans for others as separate assets, regardless
of whether purchased or originated. A final statement from the FASB is expected
in the first half of 1995, the provisions of which are expected to be applied
prospectively to transactions subsequent to the date of adoption. Because a
final pronouncement has not yet been issued, Huntington is unable to determine
the potential effects of the accounting change.
FOURTH QUARTER RESULTS
Net income for the fourth quarter of 1994 was $52.5 million, or $.41 per
share, compared with $63.4 million, or $.49 per share, in the same period last
year. ROA and ROE for the most recent quarter were 1.22% and 14.78%,
respectively, versus 1.44% and 19.60% in the final quarter of 1993.
Net interest income was $177.3 million in the final quarter of 1994, down
$31.7 million from the corresponding period of the prior year. Similarly, a
decrease occurred in the net interest margin, which was 4.54% and 5.24% in the
respective quarters. The downward pressures on net interest income which began
in the second quarter of 1994 continued into the fourth quarter of the year,
most notably in terms of reduced spreads in the rising rate environment and the
effects of initiatives undertaken by Huntington to reduce exposure to further
increases in interest rates.
The provision for loan losses was $2.5 million in the final quarter of the
year versus $15.3 million in the same period of 1993. The significant factors
which were noted earlier as contributing to the decrease on an annual basis are
also the principal considerations when comparing the quarterly results, as net
loan losses were only .31% of average loans in the three months ended December
31, 1994, and period end asset quality was strong.
Non-interest income was $54.7 million and $82.0 million, respectively, for
the quarters ended December 31, 1994 and 1993. Securities transactions were not
significant in either period. The sharp drop in fee income from mortgage banking
activities during the most recent year was most pronounced when comparing the
fourth quarter 1994 results with the corresponding amounts for 1993. For the
32
<PAGE> 16
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
quarter just ended, mortgage banking income was $8.6 million versus the record
level in the same quarter one year ago of $36.0 million. A $13.6 million
decrease in gains on the sale of servicing rights, coupled with a $9.4 million
decrease in origination fees, was the primary reason for this downturn. Income
from certain other fee-based activities such as investment management and sales
was also down when comparing these two quarters as a result of rising interest
rates.
Non-interest expenses of $150.5 million in the fourth quarter of 1994 were
12.6% less than the total for the corresponding period last year of $181.3
million. Personnel costs, including commissions, declined $10.5 million, or
13.2% largely because of lower loan production at Huntington's mortgage banking
subsidiary which resulted in staff reductions and decreased volume-based
compensation. Costs associated with ORE were down from the final quarter of
1993, as were legal and loan collection expenses, due to the continued
improvement in asset quality.
The provision for income taxes decreased considerably when comparing the
last three months of 1994 to the same period a year ago, principally because of
a drop in pre-tax earnings. A non-recurring charge of $4.0 million in the final
quarter of 1993 related to the conversion of an acquired thrift to a bank
charter was also a significant reason for the lower provision.
FOREIGN ACTIVITIES
Huntington has very limited foreign activities, consisting principally of
deposits accepted by its Cayman Islands branch. At December 31, 1994, Huntington
had no investments in foreign assets.
INFLATION
Huntington's assets and liabilities are principally monetary in nature.
Accordingly, its financial condition is affected by changes in interest rates to
a much greater degree than by inflation. Although interest rates are determined
in large measure by changes in the general level of inflation, they do not
change at the same rate or in the same magnitude, but rather react in
correlation with changes in the expected rate of inflation and changes to
monetary and fiscal policy. A financial institution's ability to react to
changes in interest rates is a better indicator of its ability to perform. More
information regarding the effects of changing interest rates appears in the
section "Interest Rate Risk and Liquidity Management".
33
<PAGE> 17
CONSOLIDATED AVERAGE BALANCES AND INTEREST RATES
(ANNUAL DATA)
- --------------------------------------------------------------------------------
Huntington
Bancshares
Incorporated
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FULLY TAX EQUIVALENT BASIS(1) 1994 1993
(IN MILLIONS OF DOLLARS) ---------------------------------- ---------------------------------
INTEREST INTEREST
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE
---------------------------------- ---------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest bearing deposits in banks-foreign ............ -- -- -- $ 10 $ .5 4.38%
Interest bearing deposits in banks-domestic ........... $ 4 $ .3 7.57% 16 .6 4.02
Trading account securities ............................ 14 .9 6.16 10 .5 5.04
Federal funds sold and securities purchased
under resale agreements ............................. 115 5.0 4.32 78 2.6 3.36
Mortgages held for sale ............................... 367 25.9 7.06 827 60.2 7.28
Securities available for sale ......................... 2,944 180.7 6.14 1,359 81.6 6.00
Investment securities
U.S. Treasury and Federal agencies .................. 257 17.0 6.60 2,669 164.4 6.16
States and political subdivisions ................... 190 20.5 10.80 260 29.1 11.22
Other ............................................... 16 .9 5.71 171 8.9 5.21
------- -------- ------- --------
Total investment securities ...................... 463 38.4 8.29 3,100 202.4 6.53
------- -------- ------- --------
Loans
Commercial .......................................... 3,501 295.8 8.45 3,216 274.0 8.52
Tax-free ............................................ 64 6.4 9.92 77 7.3 9.41
Real estate
Construction ...................................... 298 23.1 7.75 368 26.1 7.09
Mortgage .......................................... 2,786 220.3 7.91 2,473 203.6 8.24
Consumer ............................................ 4,316 354.2 8.21 3,575 323.8 9.06
Lease financing ..................................... 556 40.8 7.34 424 34.4 8.11
------- -------- ------- --------
Total loans ....................................... 11,521 940.6 8.16 10,133 869.2 8.58
Allowance for loan losses/loan fees ............... 212 37.4 194 30.4
------- -------- ------- --------
Net Loans ......................................... 11,309 978.0 8.49 9,939 899.6 8.88
------- -------- ------- --------
Total earning assets .............................. 15,428 $1,229.2 7.97% 15,533 $1,248.0 8.03%
------- -------- ------- --------
Cash and due from banks ............................... 741 693
All other assets ...................................... 793 819
------- -------
TOTAL ASSETS .......................................... $16,750 $16,851
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Demand deposits
Non-interest bearing ................................ $ 2,116 $ 2,141
Interest bearing .................................... 2,713 $ 59.9 2.21% 2,662 $ 63.7 2.39%
Savings deposits ...................................... 2,281 49.0 2.15 2,229 57.5 2.58
Certificates of deposit of $100,000 or more ........... 607 25.6 4.22 831 31.1 3.74
Other domestic time deposits .......................... 3,523 148.1 4.20 3,572 150.3 4.21
Foreign time deposits ................................. 286 12.2 4.25 455 15.0 3.30
------- -------- ------- --------
Total deposits ...................................... 11,526 294.8 3.13 11,890 317.6 3.26
------- -------- ------- --------
Short-term borrowings ................................. 2,629 106.7 4.06 2,825 89.4 3.17
Long-term debt ........................................ 928 62.2 6.71 640 33.1 5.18
------- -------- ------- --------
Interest bearing liabilities ........................ 12,967 $ 463.7 3.58% 13,214 $ 440.1 3.33%
------- -------- ------- --------
All other liabilities ................................. 264 280
Shareholders' equity .................................. 1,403 1,216
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ............ $16,750 $16,851
======= =======
Net interest rate spread .............................. 4.39% 4.70%
Impact of non-interest bearing funds on margin ........ .57% .50%
NET INTEREST INCOME/MARGIN ............................ $ 765.5 4.96% $ 807.9 5.20%
======== ========
</TABLE>
(1) Fully tax equivalent yields are calculated assuming a 35% tax rate in
1994 and 1993 and a 34% tax rate in years 1989 through 1992.
Average loan balances include non-accruing loans. Loan income includes cash
received on non-accruing loans.
34
<PAGE> 18
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1992 1991 1990 1989
------------------------------- ------------------------------ ---------------------------- ---------------------------
Interest Interest Interest Interest
Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate Balance Expense Rate Balance Expense Rate
------------------------------ ------------------------------ ---------------------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 54 $ 2.6 4.74% $ 10 $ .7 6.71% $ 3 $ .2 6.91% $ 33 $ 3.3 9.75%
27 1.4 5.15 42 3.1 7.47 60 5.2 8.80 72 6.6 9.29
22 1.2 5.43 27 1.8 6.83 9 .8 8.69 10 1.0 9.66
126 4.9 3.90 152 8.8 5.76 231 18.4 7.94 243 21.7 8.93
681 55.1 8.09 386 34.0 8.80 274 27.0 9.86 111 10.9 9.79
142 11.0 7.79 21 2.0 9.34 -- -- -- -- -- --
3,163 220.3 6.96 2,459 209.0 8.50 2,563 227.8 8.89 1,921 169.9 8.85
336 31.7 9.43 396 41.6 10.51 458 47.9 10.47 509 52.5 10.30
205 13.6 6.65 281 24.5 8.75 239 21.1 8.80 445 37.0 8.32
------- -------- ------- -------- ------- -------- ------ -------
3,704 265.6 7.17 3,136 275.1 8.77 3,260 296.8 9.10 2,875 259.4 9.02
------- -------- ------- -------- ------- -------- ------ -------
2,993 249.4 8.34 2,878 264.2 9.18 2,810 294.5 10.48 2,669 300.4 11.25
83 8.2 9.84 89 10.1 11.32 111 13.4 12.04 147 18.5 12.60
393 26.4 6.71 457 38.2 8.37 547 57.4 10.49 522 59.0 11.31
2,145 191.2 8.92 2,036 202.9 9.96 1,947 203.1 10.44 1,703 178.3 10.47
3,190 340.7 10.68 2,904 336.6 11.59 2,710 324.1 11.96 2,427 300.4 12.38
342 30.8 9.00 314 30.0 9.57 298 29.1 9.75 267 26.7 10.00
------- -------- ------- -------- ------- -------- ------- --------
9,146 846.7 9.26 8,678 882.0 10.16 8,423 921.6 10.94 7,735 883.3 11.42
144 28.6 131 19.2 100 18.1 84 16.1
------- -------- ------- -------- ------- -------- ------- --------
9,002 875.3 9.57 8,547 901.2 10.38 8,323 939.7 11.16 7,651 899.4 11.63
------- -------- ------- -------- ------- -------- ------- --------
13,902 $1,217.1 8.75% 12,452 $1,226.7 9.85% 12,260 $1,288.1 10.51% 11,079 $1,202.3 10.85%
------- -------- ------- -------- ------- -------- ------- --------
636 567 670 680
771 725 660 572
------- ------- ------- -------
$15,165 $13,613 $13,490 $12,247
======= ======= ======= =======
$ 1,749 1,401 $ 1,393 $ 1,365
2,513 $ 76.5 3.05% 2,210 $ 103.3 4.68% 2,070 $ 112.1 5.42% 2,017 $ 109.5 5.43%
1,770 64.1 3.62 1,326 64.9 4.89 1,228 61.3 4.99 1,198 60.1 5.01
1,251 56.7 4.53 1,523 100.1 6.57 1,714 142.8 8.34 1,648 149.2 9.06
4,066 206.8 5.09 4,223 288.5 6.83 3,894 307.1 7.89 3,244 265.4 8.18
153 5.7 3.73 69 3.8 5.56 40 3.2 7.85 34 3.2 9.45
------- -------- ------- -------- ------- --------- ------- --------
11,502 409.8 4.20 10,752 560.6 5.99 10,339 626.5 7.00 9,506 587.4 6.29
------- -------- ------- -------- ------- --------- ------- --------
2,062 72.9 3.54 1,406 81.2 5.77 1,731 136.5 7.89 1,431 124.7 8.72
300 22.1 7.36 219 18.4 8.41 201 17.8 8.88 204 18.3 8.95
------- -------- ------- -------- ------- --------- ------- --------
12,115 $ 504.8 4.17% 10,976 $ 660.2 6.01% 10,878 $ 780.8 7.18% 9,776 $ 730.4 7.47%
------- -------- ------- -------- ------- --------- ------- --------
227 259 302 291
1,074 977 917 815
------- ------- ------- -------
$15,165 $13,613 $13,490 $12,247
======= ======= ======= =======
4.58% 3.84% 3.33% 3.38%
.54% .71% .81% .88%
$ 712.3 5.12% $ 566.5 4.55% $ 507.3 4.14% $ 471.9 4.26%
======== ======== ========= ========
</TABLE>
35
<PAGE> 19
SELECTED ANNUAL INCOME STATEMENT DATA
- --------------------------------------------------------------------------------
Huntington
Bancshares
Incorporated
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
(IN THOUSANDS OF DOLLARS) 1994 1993 1992 1991 1990 1989
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
TOTAL INTEREST INCOME ........................ $ 1,219,721 $ 1,236,311 $ 1,202,286 $ 1,208,407 $ 1,266,770 $ 1,177,754
TOTAL INTEREST EXPENSE ....................... 463,671 440,111 504,846 659,918 780,759 730,386
----------- ----------- ----------- ----------- ----------- -----------
NET INTEREST INCOME .......................... 756,050 796,200 697,440 548,489 486,011 447,368
Provision for loan losses .................... 15,284 79,294 81,562 62,061 76,434 43,739
----------- ----------- ----------- ----------- ----------- -----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES .................. 740,766 716,906 615,878 486,428 409,577 403,629
----------- ----------- ----------- ----------- ----------- -----------
Service charges on deposit accounts .......... 76,836 73,172 64,471 57,024 50,559 44,643
Mortgage banking ............................. 50,367 99,185 63,297 41,753 33,949 14,904
Credit card fees ............................. 34,045 31,794 27,037 24,601 24,739 25,052
Trust services ............................... 28,448 27,948 25,129 24,435 23,769 23,878
Investment product sales ..................... 6,624 9,016 5,193 2,548 746 930
Net gains (losses) on sales of securities
available for sale ......................... 2,481 22,973 19,174 10,978 (155) (66)
Net investment securities gains .............. 113 4,216 17,158 5,973 734 368
Other ........................................ 36,446 37,474 28,680 28,545 30,087 39,711
----------- ----------- ----------- ----------- ----------- -----------
TOTAL NON-INTEREST INCOME .................... 235,360 305,778 250,139 195,857 164,428 149,420
----------- ----------- ----------- ----------- ----------- -----------
Salaries ..................................... 226,668 226,405 206,429 175,749 162,621 148,199
Commissions .................................. 10,775 20,992 18,310 9,307 5,908 3,583
Employee benefits ............................ 58,158 55,259 46,596 42,435 37,504 33,619
Net occupancy ................................ 40,291 39,955 36,272 33,542 32,464 27,503
Equipment .................................... 38,792 37,230 34,184 31,735 29,608 27,550
Credit card .................................. 26,539 24,248 20,474 17,726 17,068 18,339
FDIC insurance ............................... 25,271 25,322 25,500 22,126 12,200 7,717
Advertising .................................. 15,320 13,259 13,308 10,526 9,460 9,130
Printing and supplies ........................ 14,821 14,721 13,588 12,599 12,625 12,336
Legal and loan collection .................... 8,298 11,361 13,109 10,807 12,471 10,869
Other ........................................ 144,719 190,141 204,812 125,615 107,013 91,559
----------- ----------- ----------- ----------- ----------- -----------
TOTAL NON-INTEREST EXPENSE ................... 609,652 658,893 632,582 492,167 438,942 390,404
----------- ----------- ----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES ................... 366,474 363,791 233,435 190,118 135,063 162,645
Provision for income taxes ................... 123,881 126,879 72,389 56,178 35,298 39,816
----------- ----------- ----------- ----------- ----------- -----------
NET INCOME ................................... $ 242,593 $ 236,912 $ 161,046 $ 133,940 $ 99,765 $ 122,829
=========== =========== ============ =========== =========== ===========
PER COMMON SHARE(1)
Net income ................................. $ 1.87 $ 1.85 $ 1.27 $ 1.06 $ .79 $ 1.02
Cash dividends declared .................... $ .72 $ .60 $ .50 $ .46 $ .41 $ .35
FULLY TAX EQUIVALENT MARGIN:
Net Interest Income .......................... $ 756,050 $ 796,200 $ 697,440 $ 548,489 $ 486,011 $ 447,368
Tax Equivalent Adjustment(2) ................. 9,505 11,670 14,897 18,007 21,321 24,515
----------- ----------- ----------- ----------- ----------- -----------
Tax Equivalent Net Interest Income ........... $ 765,555 $ 807,870 $ 712,337 $ 566,496 $ 507,332 $ 471,883
=========== =========== =========== ============ =========== ===========
</TABLE>
(1) Adjusted for the five-for-four stock split distributed in July 1994.
(2) Calculated assuming a 35% tax rate in 1994 and 1993 and a 34% tax rate
in years 1989 through 1992.
36
<PAGE> 20
MARKET PRICES, KEY RATIOS AND STATISTICS, NON-PERFORMING ASSETS
(QUARTERLY DATA)
- --------------------------------------------------------------------------------
Huntington
Bancshares
Incorporated
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
QUARTERLY COMMON STOCK SUMMARY(1) 1994 1993
IV Q III Q II Q I Q IV Q III Q II Q I Q
- ------------------------------------- ------------------------------------------- ------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
High ................................ $18 7/8 $21 5/8 $22 1/4 $19 1/4 $21 3/8 $22 $20 1/4 $19 1/8
Low ................................. 16 5/8 18 1/8 17 7/8 17 3/4 16 1/4 19 5/8 17 3/8 15 5/8
Close ............................... 17 1/4 18 1/8 20 1/4 18 3/8 18 7/8 21 3/8 19 5/8 17 5/8
Cash dividends declared ............. .20 .20 .16 .16 .16 .16 .15 .13
</TABLE>
(1) Restated for the five-for-four stock split distributed in July 1994.
Note: Stock price quotations were obtained from NASDAQ.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
KEY RATIOS AND STATISTICS 1994 1993
MARGIN ANALYSIS - AS A %
OF AVERAGE EARNING ASSETS(1) IV Q III Q II Q I Q IV Q III Q II Q I Q
- -------------------------------------------- --------------------------------------- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income ............................ 8.11% 7.98% 7.91% 7.86% 7.84% 7.85% 8.16% 8.32%
Interest expense ........................... 3.57 3.09 2.78 2.55 2.60 2.76 2.93 3.06
---- ---- ---- ---- ---- ---- ---- ----
Net Interest Margin .................... 4.54% 4.89% 5.13% 5.31% 5.24% 5.09% 5.23% 5.26%
RETURN ON
Average total assets ....................... 1.22% 1.35% 1.64% 1.60% 1.44% 1.41% 1.39% 1.39%
Average earning assets ..................... 1.32% 1.46% 1.78% 1.73% 1.56% 1.52% 1.50% 1.51%
Average shareholders' equity ............... 14.78% 15.77% 19.43% 19.26% 19.60% 19.48% 19.56% 19.25%
</TABLE>
(1) Presented on a fully tax equivalent basis assuming a 35% tax rate.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NON-PERFORMING ASSETS 1994 1993
(QUARTER-END)
(IN THOUSANDS OF DOLLARS) IV Q III Q II Q I Q IV Q III Q II Q I Q
- ------------------------------ ------------------------------------------ ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Non-accrual loans ............ $ 41,929 $ 40,313 $ 61,015 $ 60,060 $ 75,933 $ 85,092 $ 87,640 $ 78,923
Renegotiated loans ........... 2,550 13,547 5,737 8,048 1,254 1,875 1,770 2,495
-------- -------- -------- -------- -------- -------- -------- --------
TOTAL NON-PERFORMING LOANS ... 44,479 53,860 66,752 68,108 77,187 86,967 89,410 81,418
-------- -------- -------- -------- -------- -------- -------- --------
Other real estate, net ....... 51,909 51,558 59,157 65,664 62,446 64,924 72,261 72,854
-------- -------- -------- -------- -------- -------- -------- --------
TOTAL NON-PERFORMING ASSETS .. $ 96,388 $105,418 $125,909 $133,772 $139,633 $151,891 $161,671 $154,272
======== ======== ======== ======== ======== ======== ======== ========
NON-PERFORMING LOANS AS A
% OF TOTAL LOANS ........... .36% .45% .57% .61% .70% .83% .87% .84%
NON-PERFORMING ASSETS AS A
% OF TOTAL LOANS AND
OTHER REAL ESTATE .......... .78% .88% 1.08% 1.20% 1.27% 1.44% 1.56% 1.59%
ALLOWANCE FOR LOAN LOSSES
AS A % OF NON-PERFORMING
LOANS ...................... 450.76% 382.41% 318.31% 314.37% 274.44% 234.38% 222.64% 208.22%
ALLOWANCE FOR LOAN LOSSES
AND OTHER REAL ESTATE AS
A % OF NON-PERFORMING
ASSETS ..................... 193.13% 181.70% 160.22% 152.27% 143.41% 128.97% 119.69% 108.20%
ACCRUING LOANS PAST DUE
90 DAYS OR MORE ............ $ 20,877 $ 24,182 $ 23,464 $ 19,601 $ 25,550 $ 25,891 $ 20,018 $ 21,180
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
37
<PAGE> 21
CONSOLIDATED AVERAGE BALANCES AND INTEREST RATES
(QUARTERLY DATA)
- --------------------------------------------------------------------------------
Huntington
Bancshares
Incorporated
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FULLY TAX EQUIVALENT BASIS(1) 4TH QUARTER 1994 3RD QUARTER 1994 2ND QUARTER 1994
(IN MILLIONS OF DOLLARS) ----------------- ------------------ ---------------
AVERAGE YIELD/ AVERAGE YIELD/ AVERAGE YIELD/
BALANCE RATE BALANCE RATE BALANCE RATE
- ------------------------------------------------------------------ ----------------- ------------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest bearing deposits in banks ................................ $ 2 8.80% $ 3 7.46% $ 3 8.58%
Trading account securities ........................................ 15 6.21 17 6.61 12 6.64
Federal funds sold and securities purchased under
resale agreements ............................................... 115 4.91 188 4.48 117 3.76
Mortgages held for sale ........................................... 135 6.75 214 7.74 417 7.19
Securities available for sale ..................................... 2,977 6.33 2,553 5.98 2,788 6.26
Investment securities
U.S. Treasury and Federal agencies .............................. 311 6.75 318 6.70 250 6.32
States and political subdivisions ............................... 160 10.50 176 10.61 206 10.80
Other ........................................................... 4 14.66 4 8.08 24 4.72
------ ------ ------
Total investment securities .................................. 475 8.09 498 8.09 480 8.15
------ ------ ------
Loans
Commercial ...................................................... 3,562 8.75 3,511 8.47 3,519 8.18
Tax-free ........................................................ 59 10.28 62 9.87 67 10.09
Real estate
Construction .................................................. 302 7.82 275 8.02 289 7.63
Mortgage ...................................................... 2,905 8.06 2,822 8.04 2,736 7.75
Consumer ........................................................ 4,578 8.24 4,440 8.12 4,243 8.15
Lease financing ................................................. 620 7.24 574 7.26 534 7.38
------ ------ ------
Total loans ................................................... 12,026 8.29 11,684 8.17 11,388 8.02
Allowance for loan losses ..................................... 205 212 216
------ ------ ------
Net loans ..................................................... 11,821 8.60 11,472 8.48 11,172 8.37
------ ------ ------
Total earning assets .......................................... 15,745 8.11% 15,158 7.98% 15,205 7.91%
------ ------ ------
Cash and due from banks ........................................... 770 737 735
All other assets .................................................. 759 781 792
------ ------ ------
TOTAL ASSETS ...................................................... $17,069 $16,465 $16,516
====== ====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Demand deposits
Non-interest bearing ............................................ $ 2,127 $ 2,061 $2,096
Interest bearing ................................................ 2,652 2.30% 2,695 2.21% 2,744 2.16%
Savings deposits .................................................. 2,171 2.43 2,264 2.23 2,336 2.02
Certificates of deposit of $100,000 or more ....................... 581 4.88 589 4.38 599 3.86
Other domestic time deposits ...................................... 3,678 4.62 3,553 4.23 3,474 4.02
Foreign time deposits ............................................. 296 5.41 199 4.66 306 3.82
------ ------ ------
Total deposits .................................................. 11,505 3.50 11,359 3.18 11,555 2.97
------ ------ ------
Short-term borrowings ............................................. 2,797 5.06 2,519 4.30 2,468 3.58
Long-term debt .................................................... 1,138 8.19 938 6.99 831 6.44
------ ------ ------
Interest bearing liabilities .................................... 13,313 4.23% 12,756 3.68% 12,758 3.31%
------ ------ ------
All other liabilities ............................................. 220 242 270
Shareholders' equity .............................................. 1,409 1,406 1,392
------ ------ ------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ........................ $17,069 $16,465 $16,516
====== ====== ======
Net interest rate spread .......................................... 3.88% 4.30% 4.60%
Impact of non-interest bearing funds on margin .................... .66% .59% .53%
NET INTEREST MARGIN ............................................... 4.54% 4.89% 5.13%
</TABLE>
(1) Fully tax equivalent yields are calculated assuming a 35% tax rate.
38
<PAGE> 22
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1ST QUARTER 1994 4TH QUARTER 1993 3RD QUARTER 1993 2ND QUARTER 1993 1ST QUARTER 1993
-------------------- ------------------- ------------------ -------------------- ------------------
AVERAGE YIELD/ AVERAGE YIELD/ AVERAGE YIELD/ AVERAG YIELD/ AVERAGE YIELD/
BALANCE RATE BALANCE RATE BALANCE RATE BALANCE RATE BALANCE RATE
-------------------- ------------------ ------------------ -------------------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 6 6.65% $ 14 3.85% $ 15 4.35% $ 18 3.89% $ 56 4.28%
13 5.09 15 3.96 8 5.34 10 5.81 7 5.89
40 3.44 75 3.60 99 3.21 60 3.06 80 3.56
708 6.75 1,015 6.90 904 7.09 880 7.53 501 8.03
3,469 5.98 2,557 5.99 1,840 5.66 704 6.55 307 6.92
146 6.61 1,447 5.76 2,187 6.12 3,365 6.18 3,708 6.30
220 11.12 238 11.10 253 11.20 267 11.36 280 11.18
33 4.84 58 4.63 147 5.17 241 5.12 243 5.40
------- ------- ------- ------- -------
399 8.96 1,743 6.46 2,587 6.56 3,873 6.47 4,231 6.57
------- ------- ------- ------- -------
3,410 8.39 3,346 8.52 3,218 8.24 3,227 8.58 3,068 8.76
69 9.50 73 9.46 78 9.41 79 9.37 80 9.41
325 7.55 350 7.11 366 7.49 373 6.84 385 6.93
2,675 7.78 2,597 8.12 2,574 8.05 2,444 8.36 2,271 8.46
3,996 8.33 3,846 8.54 3,674 8.87 3,456 9.27 3,315 9.67
495 7.55 468 7.85 440 8.00 407 8.22 380 8.46
------- ------- ------- ------- -------
10,970 8.16 10,680 8.36 10,350 8.39 9,986 8.69 9,499 8.92
216 211 207 190 165
------- ------- ------- ------- -------
10,754 8.51 10,469 8.64 10,143 8.69 9,796 9.02 9,334 9.22
------- ------- ------- ------- -------
15,605 7.86% 16,099 7.84% 15,803 7.85% 15,531 8.16% 14,681 8.32%
------- ------- ------- ------- -------
720 754 698 686 631
842 819 830 822 803
------- ------- ------- ------- -------
$16,951 $17,461 $17,124 $16,849 $15,950
======= ======= ======= ======= =======
$2,181 $ 2,408 $ 2,177 $2,132 $ 1,839
2,763 2.15% 2,719 2.30% 2,669 2.36% 2,649 2.41% 2,610 2.51%
2,358 1.93 2,327 2.21 2,312 2.56 2,211 2.70 2,063 2.90
658 3.80 764 3.26 781 3.69 885 3.99 896 3.94
3,385 3.91 3,413 4.03 3,514 3.97 3,645 4.33 3,720 4.48
344 3.38 418 3.42 531 3.24 614 3.25 253 3.39
------- ------- ------- ------- -------
11,689 2.88 12,049 3.02 11,984 3.14 12,136 3.36 11,381 3.52
------- ------- ------- ------- -------
2,733 3.22 3,074 3.08 2,972 3.24 2,646 3.18 2,604 3.17
800 4.59 734 4.54 653 5.11 609 5.61 561 5.65
------- ------- ------- ------- -------
13,041 3.06% 13,449 3.11% 13,432 3.26% 13,259 3.43% 12,707 3.54%
------- ------- ------- ------- -------
324 321 278 263 255
1,405 1,283 1,237 1,195 1,149
------- ------- ------- ------- -------
$16,951 $17,461 $17,124 $16,849 $15,950
======= ======= ======= ======= =======
4.80% 4.73% 4.59% 4.73% 4.78%
.51% .51% .50% .50% .48%
5.31% 5.24% 5.09% 5.23% 5.26%
</TABLE>
39
<PAGE> 23
SELECTED QUARTERLY INCOME STATEMENT DATA
- --------------------------------------------------------------------------------
Huntington
Bancshares
Incorporated
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1993
(IN THOUSANDS OF DOLLARS) IVQ III Q II Q I Q IV Q III Q II Q I Q
- ---------------------------------- ----------------------------------------------- ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
TOTAL INTEREST INCOME ............ $ 318,875 $ 301,724 $ 297,485 $ 301,637 $ 314,369 $ 308,934 $ 313,259 $ 299,749
TOTAL INTEREST EXPENSE ........... 141,625 118,173 105,403 98,470 105,456 110,230 113,416 111,009
--------- --------- --------- --------- --------- --------- --------- ---------
NET INTEREST INCOME .............. 177,250 183,551 192,082 203,167 208,913 198,704 199,843 188,740
Provision for loan losses ........ 2,488 1,113 3,219 8,464 15,365 15,280 25,170 23,479
--------- --------- --------- --------- --------- --------- --------- ---------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES ...... 174,762 182,438 188,863 194,703 193,548 183,424 174,673 165,261
--------- --------- --------- --------- --------- --------- --------- ---------
Service charges on
deposit accounts ............... 19,417 19,628 19,225 18,566 18,700 18,838 18,378 17,256
Mortgage banking ................. 8,630 9,246 15,418 17,073 36,031 25,707 21,187 16,260
Credit card fees ................. 9,728 9,451 7,933 6,933 8,937 8,500 7,693 6,664
Trust services ................... 6,686 6,732 6,902 8,128 7,015 6,885 6,697 7,351
Investment product sales ......... 1,307 1,694 1,750 1,873 2,655 2,153 2,295 1,913
Net gains (losses) on sales of
securities available for sale .. (64) 735 62 1,748 565 16,168 1,505 4,735
Net investment securities
gains (losses) ................. 9 (87) 141 50 336 778 1,598 1,504
Other ............................ 9,012 9,999 10,553 6,882 7,786 11,692 10,066 7,930
--------- --------- --------- --------- --------- --------- --------- ---------
TOTAL NON-INTEREST INCOME ........ 54,725 57,398 61,984 61,253 82,025 90,721 69,419 63,613
--------- --------- --------- --------- --------- --------- --------- ---------
Salaries ......................... 54,314 57,740 57,535 57,079 59,651 57,444 55,942 53,368
Commissions ...................... 1,523 3,547 2,624 3,081 5,434 6,025 5,968 3,565
Employee benefits ................ 13,091 13,388 15,244 16,435 14,365 13,343 13,798 13,753
Net occupancy .................... 9,962 10,593 9,621 10,115 10,030 10,526 9,466 9,933
Equipment ........................ 10,151 9,651 9,491 9,499 9,960 9,225 9,247 8,798
Credit card ...................... 7,281 7,382 6,219 5,657 6,887 6,562 5,705 5,094
FDIC insurance ................... 6,218 5,992 6,530 6,531 5,739 5,736 6,757 7,090
Advertising ...................... 4,152 2,684 4,296 4,188 3,231 3,343 3,307 3,378
Printing and supplies ............ 3,911 3,734 3,710 3,466 4,048 3,675 3,636 3,362
Legal and loan collection ........ 3,370 1,719 1,808 1,401 4,065 2,717 2,319 2,260
Other ............................ 36,498 38,531 33,117 36,573 48,681 62,672 41,590 37,198
--------- --------- --------- --------- --------- --------- --------- ---------
TOTAL NON-INTEREST EXPENSE ....... 150,471 154,961 150,195 154,025 172,091 181,268 157,735 147,799
--------- --------- --------- --------- --------- --------- --------- ---------
INCOME BEFORE INCOME TAXES ....... 79,016 84,875 100,652 101,931 103,482 92,877 86,357 81,075
Provision for income taxes ....... 26,520 28,973 33,199 35,189 40,124 32,142 28,086 26,527
--------- --------- --------- --------- --------- --------- --------- ---------
NET INCOME ....................... $ 52,496 $ 55,902 $ 67,453 $ 66,742 $ 63,358 $ 60,735 $ 58,271 $ 54,548
========= ========= ========= ========= ========= ========= ========= =========
PER COMMON SHARE(1)
Net income ..................... $ .41 $ .43 $ .52 $ .51 $ .49 $ .47 $ .46 $ .43
Cash dividends declared ........ $ .20 $ .20 $ .16 $ .16 $ .16 $ .16 $ .15 $ .13
FULLY TAX EQUIVALENT MARGIN:
Net Interest Income .............. $ 177,250 $ 183,551 $ 192,082 $ 203,167 $ 208,913 $ 198,704 $ 199,843 $ 188,740
Tax Equivalent Adjustment(2) ..... 2,042 2,211 2,545 2,707 2,708 2,882 3,007 3,073
--------- --------- --------- --------- --------- --------- --------- ---------
Tax Equivalent Net Interest Income $ 179,292 $ 185,762 $ 194,627 $ 205,874 $ 211,621 $ 201,586 $ 202,850 $ 191,813
========= ========= ========= ========= ========= ========= ========= =========
</TABLE>
(1) Adjusted for the five-for-four stock split distributed in July 1994.
(2) Calculated assuming a 35% tax rate.
40
<PAGE> 24
LOAN LOSS EXPERIENCE (QUARTERLY DATA)
- --------------------------------------------------------------------------------
Huntington
Bancshares
Incorporated
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
1994 1993
(IN THOUSANDS OF DOLLARS) IV Q III Q II Q I Q IV Q III Q II Q I Q
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ALLOWANCE FOR LOAN LOSSES,
BEGINNING OF PERIOD ........ $ 205,964 $ 212,479 $ 214,111 $ 211,835 $ 203,830 $ 199,058 $ 169,525 $ 153,654
Loan losses .................. (14,602) (12,613) (8,932) (9,975) (11,783) (13,664) (9,281) (10,864)
Recoveries of loans
previously charged off ..... 5,249 4,985 4,081 3,787 3,159 3,660 3,163 3,256
Provision for loan losses .... 2,488 1,113 3,219 8,464 15,365 15,280 25,170 23,479
Allowance of assets
acquired (sold) ............ 1,393 -- -- -- 1,264 (504) 10,481 --
--------- --------- --------- --------- --------- --------- --------- ---------
ALLOWANCE FOR LOAN LOSSES,
END OF PERIOD .............. $ 200,492 $ 205,964 $ 212,479 $ 214,111 $ 211,835 $ 203,830 $ 199,058 $ 169,525
========= ========= ========= ========= ========= ========= ========= =========
AS A % OF AVERAGE TOTAL LOANS
Net loan losses - annualized .31% .26% .17% .23% .32% .38% .25% .32%
Provision for loan losses -
annualized ............... .08% .04% .11% .31% .57% .59% 1.01% 1.00%
Allowance for loan losses
as a % of total loans
(end of period) ............ 1.63% 1.73% 1.83% 1.93% 1.93% 1.94% 1.94% 1.75%
Net loan loss coverage(1) .... 8.71x 11.27x 21.41x 17.84x 13.78x 10.81x 18.23x 13.74x
</TABLE>
(1) Income before income taxes and the provision for loan losses to net loan
losses.
41
<PAGE> 25
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
Huntington
Bancshares
Incorporated
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(IN THOUSANDS OF DOLLARS) DECEMBER 31, 1994 1993
------------ ------------
<S> <C> <C>
ASSETS
Cash and due from banks ...................................................... $ 885,327 $ 704,007
Interest bearing deposits in banks ........................................... 3,059 12,610
Trading account securities ................................................... 9,427 21,964
Federal funds sold and securities purchased under resale agreements .......... 5,329 41,072
Mortgages held for sale ...................................................... 138,997 1,032,338
Securities available for sale -- at fair value in 1994; fair value in
1993 of $3,947,751 ......................................................... 3,304,493 3,840,064
Investment securities -- fair value $474,147 and $373,567, respectively ...... 475,692 359,345
Total loans .................................................................. 12,264,436 10,953,928
Less allowance for loan losses ............................................. 200,492 211,835
------------ ------------
Net loans .................................................................... 12,063,944 10,742,093
------------ ------------
Premises and equipment ....................................................... 288,793 290,218
Customers' acceptance liability .............................................. 53,883 48,603
Accrued income and other assets .............................................. 541,696 526,393
------------ ------------
TOTAL ASSETS ................................................................. $ 17,770,640 $ 17,618,707
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Demand deposits
Non-interest bearing ....................................................... $ 2,169,095 $ 2,068,515
Interest bearing ........................................................... 2,646,785 2,808,951
Savings deposits ............................................................. 2,227,406 2,716,553
Certificates of deposit of $100,000 or more .................................. 605,763 674,349
Other domestic time deposits ................................................. 3,909,061 3,412,685
Foreign time deposits ........................................................ 406,957 363,637
------------ ------------
Total deposits ............................................................. 11,965,067 12,044,690
------------ ------------
Short-term borrowings ........................................................ 2,898,201 3,195,463
Bank acceptances outstanding ................................................. 53,883 48,603
Long-term debt ............................................................... 1,214,052 762,310
Accrued expenses and other liabilities ....................................... 227,617 243,004
------------ ------------
Total Liabilities .......................................................... 16,358,820 16,294,070
------------ ------------
Shareholders' equity
Preferred stock -- authorized 6,617,808 shares; none outstanding
Common stock -- without par value; authorized 200,000,000 shares;
issued and outstanding -- 131,119,504 and 104,410,737 shares, respectively 912,318 902,107
Less 904,739 and 608,032 treasury shares, respectively ..................... (16,577) (15,290)
Capital surplus ............................................................ 215,084 216,168
Net unrealized losses on securities available for sale ..................... (63,289) --
Retained earnings .......................................................... 364,284 221,652
------------ ------------
Total Shareholders' Equity ................................................. 1,411,820 1,324,637
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ................................... $ 17,770,640 $ 17,618,707
============ ============
</TABLE>
See notes to consolidated financial statements.
42
<PAGE> 26
CONSOLIDATED STATEMENTS OF INCOME
- --------------------------------------------------------------------------------
Huntington
Banchsares
Incorporated
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS) YEAR ENDED DECEMBER 31,
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
Interest and fee income
Loans ............................................. $ 975,604 $ 896,932 $ 872,308
Investment securities
Taxable ......................................... 17,849 173,247 233,676
Tax-exempt ...................................... 13,663 20,268 20,155
Securities available for sale ..................... 180,745 81,548 11,043
Mortgages held for sale ........................... 25,886 60,188 55,076
Trading account ................................... 716 413 1,137
Other ............................................. 5,258 3,715 8,891
------------ ------------ ------------
TOTAL INTEREST INCOME ........................... 1,219,721 1,236,311 1,202,286
------------ ------------ ------------
Interest expense
Deposits .......................................... 294,780 317,545 409,798
Short-term borrowings ............................. 106,646 89,444 72,967
Long-term debt .................................... 62,245 33,122 22,081
------------ ------------ ------------
TOTAL INTEREST EXPENSE ............................ 463,671 440,111 504,846
------------ ------------ ------------
NET INTEREST INCOME ............................... 756,050 796,200 697,440
------------ ------------ ------------
Provision for loan losses ........................... 15,284 79,294 81,562
------------ ------------ ------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 740,766 716,906 615,878
------------ ------------ ------------
Total non-interest income ........................... 235,360 305,778 250,139
Total non-interest expense .......................... 609,652 658,893 632,582
------------ ------------ ------------
INCOME BEFORE INCOME TAX EXPENSE .................. 366,474 363,791 233,435
Provision for income taxes .......................... 123,881 126,879 72,389
------------ ------------ ------------
NET INCOME ........................................ $ 242,593 $ 236,912 $ 161,046
============ ============ ============
PER COMMON SHARE(1)
Net income ........................................ $ 1.87 $ 1.85 $ 1.27
Cash dividends .................................... $ .72 $ .60 $ .50
AVERAGE COMMON SHARES OUTSTANDING ................... 129,723,581 128,313,640 126,425,920
</TABLE>
See notes to consolidated financial statements.
(1) Restated for the five-for-four stock split distributed in July 1994.
43
<PAGE> 27
<TABLE>
CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY
- --------------------------------------------------------------------------------
Huntington
Bancshares
Incorporated
- --------------------------------------------------------------------------------
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NET UNREALIZED
COMMON COMMON TREASURY TREASURY CAPITAL GAINS (LOSSES) RETAINED
SHARES STOCK SHARES STOCK SURPLUS ON SECURITIES EARNINGS TOTAL
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE -- JANUARY 1, 1992 ............. 77,197 $ 634,031 (509) $ (9,018) $ 203,062 $ 190,235 $1,018,310
Net income ............................. 161,046 161,046
Cash dividends declared
($.50 per share) ..................... (52,423) (52,423)
Stock options exercised ................ 280 4,957 (1,655) (1,078) 2,224
Five-for-four stock split .............. 15,497 (72) (115) (115)
Treasury shares purchased .............. (900) (19,149) (19,149)
Treasury shares sold:
Shareholder dividend
reinvestment plan .................. 357 6,830 483 (31) 7,282
Employee stock purchase plan ......... 541 10,311 1,144 11,455
Change in valuation allowance
for marketable equity securities ..... 141 141
Pre-merger transactions of pooled
banks ................................ 1,046 732 9,569 (9,403) 898
------- ---------- ------ ---------- ---------- ---------- ---------- ----------
BALANCE -- DECEMBER 31, 1992 ............ 93,740 634,763 (303) (6,069) 212,603 -- 288,372 1,129,669
------- ---------- ------ ---------- ---------- ---------- ---------- ----------
Stock issued for acquisitions .......... 1,972 42,052 42,052
Net income ............................. 236,912 236,912
Cash dividends declared ($.60 per
share) ............................... (68,064) (68,064)
Stock options exercised ................ 336 8,278 1,049 (6,897) 2,430
10% stock dividend ..................... 8,479 224,544 (18) (224,747) (203)
Treasury shares purchased .............. (1,447) (36,795) (36,795)
Treasury shares sold:
Shareholder dividend reinvestment
plan ............................... 408 9,561 353 (59) 9,855
Employee stock purchase plan ......... 416 9,735 691 (117) 10,309
Conversion of convertible notes ........ 36 346 346
Change in valuation allowance
for marketable equity securities ..... 1,098 1,098
Pre-merger transactions of pooled
banks ............................... 184 402 1,472 (4,846) (2,972)
------- ---------- ------ ---------- ---------- ---------- ---------- ----------
BALANCE -- DECEMBER 31, 1993 ............104,411 902,107 (608) (15,290) 216,168 -- 221,652 1,324,637
------- ---------- ------ ---------- ---------- ---------- ---------- ----------
Change in accounting method
for securities ....................... $ 65,548 1,624 67,172
Stock issued for acquisition ........... 573 9,842 1,318 24,984 (2,026) 32,800
Net income ............................. 242,593 242,593
Cash dividends declared
($.72 per share) ..................... (93,176) (93,176)
Stock options exercised ................ 290 6,625 775 (5,669) 1,731
Five-for-four stock split .............. 26,088 (160)
Treasury shares purchased .............. (3,537) (73,634) (73,634)
Treasury shares sold:
Shareholder dividend reinvestment
plan ............................... 1,159 26,635 30 (2,151) 24,514
Employee stock purchase plan ......... 633 14,103 137 (589) 13,651
Conversion of convertible notes ........ 48 369 369
Change in net unrealized gains (losses)
on securities available for sale ..... (128,837) (128,837)
------- ---------- ------ ---------- ---------- ---------- ---------- ----------
BALANCE -- DECEMBER 31, 1994 ............131,120 $ 912,318 (905) $ (16,577) $ 215,084 $ (63,289) $ 364,284 $1,411,820
======= ========== ====== ========== ========== ========== ========== ==========
<FN>
See notes to consolidated financial statements.
</TABLE>
44
<PAGE> 28
CONSOLIDATED STATEMENTS OF
CASH FLOWS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Huntington
Bancshares
Incorporated
- ------------------------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS OF DOLLARS) YEAR ENDED DECEMBER 31, 1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net Income ............................................. $ 242,593 $ 236,912 $ 161,046
Adjustments to reconcile net income to net cash
provided by operating activities
Provision for loan losses ............................ 15,284 79,294 81,562
Provision for other real estate ...................... (4,999) 1,051 52,253
Provision for depreciation and amortization .......... 84,215 127,459 76,856
Deferred income tax expense(benefit) ................. 57,329 (30,412) (26,014)
Decrease(increase) in trading account securities ..... 12,537 (20,681) 2,670
Decrease(increase) in mortgages held for sale ........ 893,341 (288,296) (99,768)
Net gains on sales of securities available for sale .. (2,481) (22,973) (19,174)
Net gains on calls and sales of investment securities (113) (4,216) (17,158)
(Increase)decrease in accrued income receivable ..... (247) 3,924 (13,817)
Net increase in other assets ......................... (54,963) (68,255) (67,016)
Decrease in accrued expenses ......................... (22,033) (8,775) (8,801)
Net (decrease)increase in other liabilities ......... (41,018) 54,532 13,612
Other ................................................ 565 3,413 1,893
----------- ----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES .......... 1,180,010 62,977 138,144
----------- ----------- -----------
INVESTING ACTIVITIES
Decrease(increase) in interest bearing deposits in banks 9,551 152,077 (103,504)
Proceeds from:
Maturities of investment securities .................. 32,923 308,654 615,928
Maturities of securities available for sale .......... 317,031 542,062 24,500
Calls of investment securities ....................... 53,104 -- --
Sales of investment securities ....................... -- 252,590 918,517
Sales and calls of securities available for sale ..... 2,316,843 2,306,111 991,360
Purchases of:
Investment securities ................................ (230,676) (239,164) (3,363,276)
Securities available for sale ........................ (2,146,362) (2,956,527) --
Net loan originations .................................. (1,187,428) (959,314) (736,814)
Proceeds from disposal of premises and equipment ....... 1,200 13,035 1,360
Purchases of premises and equipment .................... (25,938) (56,820) (22,986)
Proceeds from sales of other real estate ............... 44,484 24,169 23,698
Net cash received(paid) from purchase/sale of subsidiary 2,670 (10,201) 17,346
----------- ----------- -----------
NET CASH USED FOR INVESTING ACTIVITIES ............... (812,598) (623,328) (1,633,871)
----------- ----------- -----------
FINANCING ACTIVITIES
(Decrease)increase in total deposits ................... (240,219) (300,206) 471,758
(Decrease)increase in short-term borrowings ............ (303,287) 517,008 911,969
Net proceeds from issuance of long-term debt ........... 475,000 560,961 332,417
Payment of long-term debt .............................. (26,415) (278,611) (114,578)
Dividends on common stock .............................. (68,662) (58,412) (45,256)
Acquisition of treasury stock .......................... (73,634) (36,795) (19,149)
Sales of treasury stock ................................ 13,651 10,309 11,455
Proceeds from exercise of stock options ................ 1,731 2,430 2,224
Pre-merger transactions of pooled banks ................ -- (2,972) (5,544)
----------- ----------- -----------
NET CASH (USED FOR) PROVIDED BY FINANCING ACTIVITIES (221,835) 413,712 1,545,296
----------- ----------- -----------
CHANGE IN CASH AND CASH EQUIVALENTS ................ 145,577 (146,639) 49,569
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR ..... 745,079 891,718 842,149
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR ........... $ 890,656 $ 745,079 $ 891,718
=========== =========== ===========
</TABLE>
NOTE: Huntington made interest payments of $451,694,000, $430,701,000, and
$510,830,000 in 1994, 1993, and 1992, respectively. Federal income tax
payments were $97,775,000 in 1994, $155,457,000 in 1993, and
$93,717,000 in 1992.
See notes to consolidated financial statements.
45
<PAGE> 29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. Accounting Policies
BASIS OF PRESENTATION: The consolidated financial statements include the
accounts of Huntington Bancshares Incorporated (Huntington) and its
subsidiaries and are presented on the basis of generally accepted accounting
principles. All significant intercompany accounts and transactions have been
eliminated in consolidation.
Certain amounts in the prior year's financial statements have been
reclassified to conform with the 1994 presentation. The reclassifications had
no effect on net income.
SECURITIES: Effective January 1, 1994, Huntington adopted Statement of
Financial Accounting Standards No. 115 (FAS 115), "Accounting for Certain
Investments in Debt and Equity Securities". Debt securities that Huntington has
both the positive intent and ability to hold to maturity are classified as
investments and are carried at amortized cost. Securities purchased with the
intention of recognizing short-term profits are placed in the trading account
and carried at fair value. Securities not classified as investments or trading
are designated available-for-sale and carried at fair value. Unrealized gains
and losses on securities classified as available-for-sale are carried as a
separate component of shareholders' equity. Unrealized gains and losses on
securities classified as trading are reported in earnings. The amortized cost
of specific securities sold is used to compute the realized gain or loss at the
date of sale.
Prior to the adoption of FAS 115, if Huntington had the intent and the
ability at the time of purchase to hold securities until maturity or on a
long-term basis, they were classified as investment securities and reported at
amortized cost. Securities to be held for indefinite periods of time and not
intended to be held to maturity or on a long-term basis were considered held
for sale and carried at the lower of aggregate cost or market value, with
net unrealized losses reflected in earnings. Marketable equity securities were
also reported at the lower of aggregate cost or market value, with net
unrealized losses reflected as a reduction of shareholders' equity.
LOANS: Loans are stated at the principal amount outstanding, net of
unearned discount. Interest on loans is recognized primarily on the accrual
basis using the "simple interest" method. The accrual of interest income is
discontinued when the collection of principal, interest, or both is doubtful.
When interest accruals are suspended, interest income accrued in the current
period is reversed.
Huntington principally uses the financing method of accounting for lease
contracts. Under this method, a receivable is recorded for the total amount of
lease payments due; lease income, represented by the excess of the total
contract receivable plus estimated residual value of the leased asset over the
asset cost is recognized in decreasing amounts over the term of the contract,
resulting in a level rate of return on the outstanding principal.
Significant nonrefundable loan fees and certain loan origination costs are
being amortized over the commitment period and/or the term of the loan as an
adjustment to the yield.
ALLOWANCE FOR LOAN LOSSES: The allowance for loan losses reflects
management's judgment as to the level considered appropriate to absorb
potential losses inherent in the portfolio. This judgment is based on a review
of individual loans, historical loss experience, economic conditions,
portfolio trends, and other factors. The allowance is increased by provisions
charged to earnings and reduced by charge-offs, net of recoveries.
OTHER REAL ESTATE: Other real estate, acquired through partial or total
satisfaction of loans, is included in other assets and carried at the lower of
cost or fair value. At the date of acquisition, any losses are charged to the
allowance for loan losses. Subsequent declines in fair value which are
considered permanent or realized losses from disposition of the property are
charged to the reserve for other real estate.
PREMISES AND EQUIPMENT: Premises and equipment are stated at cost, less
accumulated depreciation. Depreciation is computed principally by the
straight-line method over the estimated useful lives of the related assets.
Estimated useful lives employed are on average 30 years for premises and 3 to
10 years for equipment.
INCOME TAXES: The amounts provided for income taxes are based on the
amounts of current and deferred taxes payable (or refundable) at the date of
the consolidated financial statements. A deferred tax liability (or asset) is
recognized for temporary differences that will result in net taxable or
deductible amounts in future years when the temporary differences reverse.
MORTGAGE BANKING ACTIVITIES: Mortgages held for sale are valued at the
lower of cost or aggregate market value as determined by outstanding
commitments from investors. The cost of purchased mortgage servicing rights is
capitalized and amortized over the period of, and in proportion to, the related
net servicing income to be generated from the various servicing portfolios
acquired.
Huntington performs evaluations of capitalized servicing rights, including
excess servicing receivables arising from loans sold in the secondary market,
comparing amortized cost to the estimated value of the discounted future net
revenues on an aggregate basis. Adjustments to reduce amortized cost to
estimated fair value are recorded as direct reductions in carrying value and
are included in non-interest income or non-interest expense, as appropriate.
PURCHASE BUSINESS COMBINATIONS: Net assets of entities acquired in
transactions accounted for under the purchase method of accounting are recorded
at estimated fair value at the date of acquisition. The excess of cost over the
fair value of net assets acquired (goodwill) is being amortized over periods
ranging from 15 to 25 years. Core deposits and other identifiable acquired
intangible assets are amortized on an accelerated basis over their estimated
useful lives.
OFF-BALANCE SHEET FINANCIAL INSTRUMENTS: Off-balance sheet financial
instruments used for trading purposes are recorded in the balance sheet at fair
value as of the reporting date. Realized and unrealized changes in fair value
are recognized in net trading income in the period in which the changes occur.
Amounts receivable or payable under interest rate swap, interest rate
cap/floor and forward delivery agreements used in connection with Huntington's
asset/liability management activities are recognized as income or expense
according to the nature of the designated on-balance sheet financial assets and
liabilities. With the exception of
46
<PAGE> 30
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
forward delivery contracts, amounts accrued under these agreements are included
as a component of interest income or expense. Amounts receivable or payable on
forward delivery contracts, which are used exclusively to manage interest rate
risk on loans to be originated for resale in the secondary market, are included
in non-interest income along with related mortgage banking activities. Gains
and losses on qualifying hedges, consisting principally of interest rate
futures, are deferred and recognized in income or expense in the period the
hedged transaction occurs. Gains and losses from the early termination of
interest rate swaps and other asset/liability management positions for which
Huntington applies accrual accounting are also deferred and are amortized over
the remaining term of the original contracts.
CASH EQUIVALENTS: Cash equivalents are defined as "Cash and due from banks"
and "Federal funds sold and securities purchased under resale agreements."
EARNINGS PER SHARE: Per common share amounts have been calculated based
upon the weighted average number of common shares outstanding in each period,
as adjusted for the five-for-four stock split distributed in July 1994. The
dilutive effects of unexercised stock options are not significant.
- --------------------------------------------------------------------------------
2. RESTRICTIONS ON CASH AND DUE FROM BANKS
The bank and thrift subsidiaries of Huntington are required to maintain
reserve balances with the Federal Reserve Bank. During 1994, the average
balances were $133,012,738.
- --------------------------------------------------------------------------------
3. SECURITIES AVAILABLE FOR SALE
In May 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities." Huntington adopted the provisions of the new
standard for investments held as of or acquired after January 1, 1994. In
accordance with the Statement, prior period financial statements have not been
restated to reflect the change in accounting principle. The opening balance of
shareholders' equity was increased by $67,172,000 (net of $36,170,000 in
deferred income taxes) to reflect the net unrealized holding gains on
securities classified as available-for-sale previously carried at the lower of
amortized cost or market value.
Amortized cost, unrealized gains and losses, and fair values of securities
available for sale as of December 31, 1994 and 1993 were:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
UNREALIZED
---------------------
AMORTIZED GROSS GROSS FAIR
(IN THOUSANDS OF DOLLARS) COST GAINS LOSSES VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
AT DECEMBER 31, 1994
<S> <C> <C> <C> <C>
U.S. Treasury .............................................. $ 854,414 $ 475 $ 38,798 $ 816,091
Federal Agencies
Mortgage-backed securities ............................... 501,530 1,473 13,246 489,757
Other agencies ........................................... 1,744,122 805 44,498 1,700,429
---------- ---------- ---------- ----------
Total U.S. Treasury and agencies ......................... 3,100,066 2,753 96,542 3,006,277
---------- ---------- ---------- ----------
Other debt securities ...................................... 293,686 -- 1,894 291,792
Marketable equity securities ............................... 8,359 -- 1,935 6,424
---------- ---------- ---------- ----------
Total securities available for sale ................ $3,402,111 $ 2,753 $ 100,371 $3,304,493
========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
UNREALIZED
--------------------------
AMORTIZED GROSS GROSS FAIR
(IN THOUSANDS OF DOLLARS) COST GAINS LOSSES VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AT DECEMBER 31, 1993
U.S. Treasury .............................................. $1,988,945 $ 95,027 $ 6,348 $2,077,624
Federal Agencies
Mortgage-backed securities ............................... 146,055 8,096 4,958 149,193
Other agencies ........................................... 1,556,190 13,915 11 1,570,094
---------- ---------- ---------- ----------
Total U.S. Treasury and agencies ......................... 3,691,190 117,038 11,317 3,796,911
---------- ---------- ---------- ----------
Other debt securities ...................................... 140,506 2,084 122 142,468
Marketable equity securities ............................... 8,368 4 -- 8,372
---------- ---------- ---------- ----------
Total securities available for sale ................ $3,840,064 $ 119,126 $ 11,439 $3,947,751
========== ========== ========== ==========
</TABLE>
Amortized cost and fair values by contractual maturity at December 31, 1994
and 1993 were:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
AMORTIZED FAIR
(IN THOUSANDS OF DOLLARS) COST VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C>
AT DECEMBER 31, 1994
Under 1 year ............................... $ 556,481 $ 551,937
1-5 years .................................. 1,281,983 1,254,657
6-10 years ................................. 1,084,241 1,043,878
Over 10 years .............................. 471,047 447,597
Marketable equity securities ............... 8,359 6,424
---------- ----------
Total ................................. $3,402,111 $3,304,493
========== ==========
AT DECEMBER 31, 1993
Under 1 year ............................... $ 130,828 $ 132,853
1-5 years .................................. 2,160,439 2,264,122
6-10 years ................................. 592,213 591,796
Over 10 years .............................. 948,216 950,608
Marketable equity securities ............... 8,368 8,372
---------- ----------
Total ................................. $3,840,064 $3,947,751
========== ==========
</TABLE>
Proceeds from sales of securities available for sale were $2,316,843,000,
$2,306,111,000, and $991,360,000 during 1994, 1993, and 1992, respectively.
Gross gains of $15,194,000, $25,894,000, and $19,284,000 were realized in 1994,
1993, and 1992, respectively. Gross losses totaled $12,713,000 in 1994,
$2,921,000 in 1993, and $110,000 in 1992.
- --------------------------------------------------------------------------------
4. INVESTMENT SECURITIES
Amortized cost, unrealized gains and losses, and fair values of investment
securities as of December 31, 1994 and 1993 were:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
UNREALIZED
----------------
AMORTIZED GROSS GROSS FAIR
(IN THOUSANDS OF DOLLARS) COST GAINS LOSSES VALUE
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AT DECEMBER 31, 1994
U.S. Treasury ...................... $ 150 $ 150
Federal Agencies
Mortgage-backed securities ....... 8,313 $ 23 $ 53 8,283
Other agencies ................... 309,250 97 4,193 305,154
-------- -------- -------- --------
Total U.S. Treasury and agencies . 317,713 120 4,246 313,587
-------- -------- -------- --------
States and political subdivisions .. 153,649 3,996 1,335 156,310
Other securities ................... 4,330 -- 80 4,250
-------- -------- -------- --------
Total investment securities ...... $475,692 $ 4,116 $ 5,661 $474,147
======== ======== ======== ========
</TABLE>
47
<PAGE> 31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. INVESTMENT SECURITIES (CONTINUED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
UNREALIZED
----------------
AMORTIZED GROSS GROSS FAIR
(IN THOUSANDS OF DOLLARS) COST GAINS LOSSES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AT DECEMBER 31, 1993
U.S. Treasury ...................... $ 150 -- -- $ 150
Federal Agencies
Mortgage-backed securities ....... 12,868 $ 576 -- 13,444
Other agencies ................... 81,448 1 -- 81,449
-------- -------- -------- --------
Total U.S. Treasury and agencies . 94,466 577 -- 95,043
-------- -------- -------- --------
States and political subdivisions .. 232,721 13,600 $ 137 246,184
Other securities ................... 32,158 195 13 32,340
-------- -------- -------- --------
Total investment securities ... $359,345 $ 14,372 $ 150 $373,567
======== ======== ======== ========
</TABLE>
Amortized cost and fair values by contractual maturity at December 31, 1994
and 1993 were:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
AMORTIZED FAIR
(IN THOUSANDS OF DOLLARS) COST VALUE
- ---------------------------------------------------------------------------------
<S> <C> <C>
AT DECEMBER 31, 1994
Under 1 year ............................. $ 58,019 $ 58,738
1-5 years ................................ 174,962 174,770
6-10 years ............................... 231,792 229,647
Over 10 years ............................ 10,919 10,992
-------- --------
Total .............................. $475,692 $474,147
======== ========
AT DECEMBER 31, 1993
Under 1 year ............................. $ 71,522 $ 73,097
1-5 years ................................ 130,909 140,526
6-10 years ............................... 111,007 112,887
Over 10 years ............................ 45,907 47,057
-------- --------
Total ............................... $359,345 $373,567
======== ========
</TABLE>
There were no sales of investment securities in 1994. Proceeds from sales
of investment securities were $252,590,000 and $918,517,000 during 1993 and
1992, respectively. Gross gains of $5,612,000, and $18,829,000 were realized in
1993 and 1992, respectively. Gross losses totaled $1,396,000 in 1993 and
$1,671,000 in 1992.
- --------------------------------------------------------------------------------
5. LOANS
At December 31, 1994 and 1993, loans were comprised of the following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(IN THOUSANDS OF DOLLARS) 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
Commercial ....................................... $ 3,610,892 $ 3,434,738
Tax-free ......................................... 58,006 71,525
Real estate
Construction ................................... 304,769 337,585
Commercial ..................................... 1,378,398 1,214,575
Residential .................................... 1,624,367 1,470,242
Consumer (net of $11,651 and $15,858 unearned
discount, respectively) ........................ 4,641,946 3,943,666
Lease financing .................................. 646,058 481,597
----------- -----------
Total loans ................................. $12,264,436 $10,953,928
=========== ===========
</TABLE>
Huntington's subsidiaries have granted loans to its officers, directors,
and their associates. Such loans were made in the ordinary course of
business at the banking subsidiaries' normal credit terms, including interest
rate and collateralization, and do not represent more than the normal risk of
collection. These loans to related parties are summarized as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
(IN THOUSANDS OF DOLLARS) 1994 1993
- ---------------------------------------------------------------------------------
<S> <C> <C>
Balance, beginning of year ................... $ 100,856 $ 108,594
Loans made ................................. 14,069 52,903
Repayments ................................. (21,066) (36,221)
Changes due to status of executive
officers and directors .................... 4,366 (24,420)
--------- --------
Balance, end of year ......................... $ 98,225 $ 100,856
========= =========
</TABLE>
- --------------------------------------------------------------------------------
6. ALLOWANCE FOR LOAN LOSSES
A summary of the transactions in the allowance for loan losses for the
three years ended December 31 follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
(IN THOUSANDS OF DOLLARS) 1994 1993 1992
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, beginning of year ........... $ 211,835 $ 153,654 $ 134,770
Allowance of assets acquired ......... 1,393 11,241 513
Loan losses .......................... (46,122) (45,592) (75,655)
Recoveries of loans previously
charged off ......................... 18,102 13,238 12,464
Provision for loan losses ............ 15,284 79,294 81,562
--------- --------- ---------
Balance, end of year ................. $ 200,492 $ 211,835 $ 153,654
========= ========= =========
</TABLE>
In May 1993, the FASB issued Statement No. 114, "Accounting by Creditors
for Impairment of a Loan". This Statement applies to financial statements for
fiscal years beginning after December 15, 1994. It requires that impaired loans
be measured based upon the present value of expected future cash flows
discounted at the loan's effective interest rate or, as a practical expedient,
at the loan's observable market price or the fair value of the collateral if the
loan is collateral dependent. The adoption of this Statement, which will occur
in the first quarter of 1995, is not expected to have a material effect on
Huntington's consolidated financial statements.
- --------------------------------------------------------------------------------
7. PREMISES AND EQUIPMENT
At December 31, 1994 and 1993, premises and equipment stated at cost were
comprised of the following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(IN THOUSANDS OF DOLLARS) 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
Land ........................................... $ 44,445 $ 43,614
Buildings ...................................... 215,708 197,071
Leasehold improvements ......................... 79,350 82,979
Equipment ...................................... 250,049 234,728
-------- --------
Total premises and equipment .............. 589,552 558,392
Less accumulated depreciation
and amortization ............................. 300,759 268,174
-------- --------
Net premises and equipment ..................... $288,793 $290,218
======== ========
</TABLE>
Depreciation and amortization charged to expense and rental income credited
to occupancy expense were as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
(IN THOUSANDS OF DOLLARS) 1994 1993 1992
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Occupancy expense .................... $11,382 $10,720 $10,011
Equipment expense .................... 16,588 16,399 14,052
------- ------- -------
Total depreciation
and amortization ................. $27,970 $27,119 $24,063
======= ======= =======
Rental income credited to
occupancy expense .................. $11,798 $12,264 $14,490
======= ======= =======
</TABLE>
48
<PAGE> 32
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
8. SHORT-TERM BORROWINGS
At December 31, 1994 and 1993, short-term borrowings were comprised of the
following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(IN THOUSANDS OF DOLLARS) 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
Federal funds purchased and securities
sold under agreements to repurchase .......... $1,442,138 $2,164,752
Medium-term bank notes with original
maturities of less than one year ............. 624,000 --
Short-term bank notes .......................... 640,000 860,000
Commercial paper ............................... 50,987 97,392
Other .......................................... 141,076 73,319
---------- ----------
Total short-term borrowings .................... $2,898,201 $3,195,463
========== ==========
</TABLE>
Commercial paper is issued by Huntington Bancshares Financial Corporation,
a non-bank subsidiary with principal and interest guaranteed by Huntington
Bancshares Incorporated (Parent Company).
Huntington has the ability to borrow under a line of credit totaling
$200,000,000 to support commercial paper borrowings or other short-term working
capital needs. Under the terms of agreement, a quarterly fee must be paid and
there are no compensating balances required. The line is cancelable, by
Huntington, upon written notice and terminates September 30, 1997. There were
no borrowings under the line in 1994 and 1993.
Securities pledged to secure public or trust deposits, repurchase
agreements, and for other purposes were $1,696,674,000 and $1,628,248,000 at
December 31, 1994 and 1993, respectively.
- --------------------------------------------------------------------------------
9. LONG-TERM DEBT
At December 31, 1994 and 1993, long-term debt was comprised of the
following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(IN THOUSANDS OF DOLLARS) 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
Notes, 7 5/8%, maturing in 2003, face value
$150,000,000 at December 31, 1994 and
1993, net of discount .......................... $ 149,450 $ 149,382
Notes, 7 7/8%, maturing in 2002, face value
$150,000,000 at December 31, 1994 and
1993, net of discount .......................... 148,994 148,866
Notes, 6 3/4%, maturing in 2003, face value
$100,000,000 at December 31, 1994 and
1993, net of discount .......................... 99,720 99,687
Debentures, 7 7/8%, retired in 1994 ............... -- 10,519
Debentures, 7 7/8%, retired in 1994 ............... -- 9,368
Medium Term Bank Notes, 4.13% to 6.55%
maturing in 1995 to 1997 ....................... 616,600 191,600
Medium Term Notes, 5.50% and 5.67%,
maturing in 1995 ............................... 50,000 --
Federal Home Loan Bank Notes, 4.23%
to 7.30%, maturing in 1995 to 1997 ............. 148,500 150,500
Other ............................................ 788 2,388
---------- ----------
Total long-term debt ............................. $1,214,052 $ 762,310
========== ==========
</TABLE>
HOLDING COMPANY OBLIGATIONS:
The 7 7/8% Notes are not redeemable prior to maturity in 2002 and do not
provide for any sinking fund.
The 7 7/8% Debentures due in 1997 and 1998 were redeemed at face value on
May 23, 1994 at the option of Huntington.
The Medium Term Notes were issued by Huntington in 1994 and are not
redeemable prior to their maturity in 1995.
SUBSIDIARY OBLIGATIONS:
The 7 5/8% Notes and the 6 3/4% Notes were both issued by The Huntington
National Bank in 1993. These Notes are not redeemable prior to maturity in 2003,
and do not provide for any sinking fund.
The Medium Term Bank Notes were issued by The Huntington National Bank in
1993 and 1994. These Notes are not redeemable prior to their maturity in 1995
through 1997.
The Federal Home Loan Bank Notes mature serially over the period beginning
February 1995 through November 1997. These advances cannot be prepaid without
penalty.
The terms of Huntington's long-term debt obligations contain various
restrictive covenants including limitations on the acquisition of additional
debt in excess of specified levels, dividend payments, and the disposition of
subsidiaries. As of December 31, 1994, Huntington was in compliance with all
such covenants.
The following table summarizes the maturities of Huntington's long-term
debt (excluding discounts).
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
YEAR (IN THOUSANDS OF DOLLARS)
- --------------------------------------------------------------------------------
<S> <C>
1995 ................................................. $ 191,166
1996 ................................................. 567,362
1997 ................................................. 57,361
1998 ................................................. --
1999 ................................................. --
2000 and thereafter .................................. 400,000
-----------
1,215,889
Discount ............................................. (1,837)
-----------
Total ................................................ $ 1,214,052
===========
</TABLE>
- --------------------------------------------------------------------------------
10. OPERATING LEASES
At December 31, 1994, Huntington and its subsidiaries were obligated under
noncancelable leases for land, buildings, and equipment. Many of these leases
contain renewal options, and certain leases provide options to purchase the
leased property during or at the expiration of the lease period at specified
prices. Some leases contain escalation clauses calling for rentals to be
adjusted for increased real estate taxes and other operating expenses, or
proportionately adjusted for increases in the consumer or other price indices.
49
<PAGE> 33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10. OPERATING LEASES (CONTINUED)
The following summary reflects the future minimum rental payments, by year,
required under operating leases that have initial or remaining noncancelable
lease terms in excess of one year as of December 31, 1994.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
YEAR (IN THOUSANDS OF DOLLARS)
- ------------------------------------------------------------------------
<S> <C>
1995 ..................................................... $ 22,156
1996 ..................................................... 18,860
1997 ..................................................... 15,285
1998 ..................................................... 13,491
1999 ..................................................... 13,107
2000 and thereafter ...................................... 137,741
--------
Total Minimum Payments ................................... $220,640
========
</TABLE>
Total minimum lease payments have not been reduced by minimum sublease
rentals of $69,531,000 due in the future under noncancelable subleases. The
rental expense for all operating leases, except those with terms of a month or
less, was $23,797,000 for 1994 compared with $22,141,000 in 1993 and $19,476,000
in 1992.
- --------------------------------------------------------------------------------
11. OFF-BALANCE SHEET TRANSACTIONS
In the normal course of business, Huntington is party to financial
instruments with varying degrees of credit and market risk in excess of the
amounts reflected as assets and liabilities in the consolidated balance sheet.
Loan commitments and letters of credit are commonly used to meet the financing
needs of customers, while interest rate swaps, futures, and caps/floors as well
as forward delivery contracts are an integral part of Huntington's
asset/liability management activities. To a much lesser extent, various
financial instrument agreements are entered into to assist customers in managing
their exposure to interest rate fluctuations. These customer agreements, for
which Huntington counters interest rate risk through offsetting third party
contracts, are considered trading activities.
The credit risk arising from loan commitments and letters of credit,
represented by their contract amounts, is essentially the same as that involved
in extending loans to customers, and both arrangements are subject to
Huntington's standard credit policies and procedures. Collateral is obtained
based on management's credit assessment of the customer and, for commercial
transactions, may consist of accounts receivable, inventory, income-producing
properties, and other assets. Residential properties are the principal form of
collateral for consumer commitments.
Notional values of interest rate swaps and other off-balance sheet
financial instruments significantly exceed the credit risk associated with these
instruments and represent contractual balances on which calculations of amounts
to be exchanged are based. Credit exposure is limited to the sum of the
aggregate fair value of positions that have become favorable to Huntington and
any accrued interest receivable due from counterparties. Potential credit losses
are minimized through careful evaluation of counterparty credit standing,
selection of counterparties from a limited group of high quality institutions,
collateral agreements, and other contract provisions. At December 31, 1994,
Huntington's credit risk from these off-balance sheet arrangements, including
trading activities, was approximately $62.4 million.
The contract or notional amount of financial instruments with off-balance
sheet risk at December 31, 1994 and 1993, is presented in the following table:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(IN MILLIONS OF DOLLARS) 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
CONTRACT AMOUNT REPRESENTS CREDIT RISK
Commitments to extend credit
Commercial ....................................... $2,672 $2,080
Consumer ......................................... 2,169 2,512
Other ............................................ 218 171
Standby letters of credit .......................... 416 360
Commercial letters of credit ....................... 137 148
NOTIONAL AMOUNT EXCEEDS CREDIT RISK
Asset/liability management activities
Interest rate swaps .............................. 6,840 6,902
Interest rate futures ............................ 16 503
Purchased interest rate caps ..................... 560 1,250
Purchased interest rate floors ................... 570 570
Forward delivery contracts ....................... 76 1,292
Trading activities
Interest rate swaps .............................. 303 323
Interest rate collars ............................ 217 41
Interest rate caps ............................... 114 147
Interest rate floors ............................. 66 61
</TABLE>
Commitments to extend credit generally have short-term, fixed expiration
dates, are variable rate, and contain clauses which permit Huntington to
terminate or otherwise renegotiate the contracts in the event of a significant
deterioration in the customer's credit quality. These arrangements normally
require the payment of a fee by the customer, the pricing of which is based on
prevailing market conditions, credit quality, probability of funding, and other
relevant factors. Since many of these commitments are expected to expire without
being drawn upon, the contract amounts are not necessarily indicative of future
cash requirements. The interest rate risk arising from these financial
instruments is insignificant as a result of their predominantly short-term,
variable rate nature.
Standby letters of credit are conditional commitments issued by
Huntington 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. Approximately
60% of standby letters of credit are collateralized, and approximately 85% are
expected to expire without being drawn upon.
Commercial letters of credit represent short-term, self-liquidating
instruments which facilitate customer trade transactions and have maturities of
no longer than ninety days. These instruments are normally secured by the
merchandise or cargo being traded.
Interest rate swaps are agreements between two parties to exchange periodic
interest payments that are calculated on a notional principal amount.
Huntington enters into swaps to synthetically alter the repricing
characteristics of designated earning assets and interest bearing liabilities
and, on a much more limited basis, as an intermediary for customers. Because
only interest payments are exchanged, cash requirements of swaps are
significantly less than the notional amounts.
50
<PAGE> 34
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
At December 31, 1994, $3.9 billion of the swaps related to asset/liability
management activities provide for Huntington to receive a fixed rate of interest
and pay a variable rate based on the London inter-bank offered rate (LIBOR). For
approximately 38% of the receive fixed swaps, the notional amounts amortize
according to movements in market interest rates, principally Constant Maturity
U.S. Treasury Yields and LIBOR. Generally, as the applicable interest rate
indices increase, as they did throughout much of 1994, amortization of the
notional amounts occurs at a slower rate. Notional values of the remaining
receive fixed swaps and the entire $1.9 billion portfolio of pay fixed swaps,
for which Huntington receives LIBOR and pays a fixed rate of interest, do not
change during the lives of the contracts. Huntington also has basis swaps of $1
billion outstanding at December 31, 1994, which provide for both parties to
receive floating rates of interest according to different indices. These
contracts are used to protect against a potential narrowing in the spread
between the variable rates paid on certain interest rate swaps and the variable
rates of on-balance sheet financial instruments to which the swaps were
designated.
Interest rate futures and forward contracts are commitments to either
purchase or sell a financial instrument at a future date for a specified price
or yield and may be settled in cash or through delivery of the underlying
financial instrument. During the latter part of 1994, Huntington initiated a
program to sell futures contracts on Eurodollar deposits to hedge the risks of
certain LIBOR-based funding. Futures contracts were used for this purpose due to
their liquidity and credit risk advantages over swaps. Forward delivery
contracts, which are used by Huntington in connection with its mortgage banking
activities to reduce the exposure of fixed rate loan commitments to changing
interest rates, settle in cash at a specified future date based on the
differential between agreed interest rates applied to a notional amount. Forward
contracts generally have a greater degree of credit risk than futures as daily
cash settlements are not required.
Huntington also uses interest rate caps/floors to manage fluctuating
interest rates. Premiums paid for interest rate caps/floors grant Huntington the
right to receive at specified future dates the amount, if any, by which a
specified market interest rate exceeds the fixed cap rate or falls below the
fixed floor rate, applied to a notional amount. The purchased caps outstanding
at December 31, 1994, have an average remaining term of approximately two years.
The interest rate floors, which were purchased in September 1993 to protect
against mortgage loan prepayments, expired on January 1, 1995.
For more detailed information concerning off-balance sheet transactions,
refer to the "Interest Rate Risk Management" section of Management's Discussion
and Analysis.
- --------------------------------------------------------------------------------
12. LEGAL CONTINGENCIES
In the ordinary course of business, there are various legal proceedings
pending against Huntington and its subsidiaries. The aggregate liabilities, if
any, arising from such proceedings would not have a material adverse effect on
Huntington's consolidated financial position.
13. STOCK OPTION PLANS
Huntington has non-qualified and incentive stock option plans covering key
employees. Most recently, shareholders approved The Huntington Bancshares
Incorporated 1994 Stock Option Plan in April, 1994. Under this plan, as adjusted
for the five-for-four stock split distributed in July, 1994, a maximum of
7,500,000 shares of common stock may be optioned at prices not less than the
fair market value of the common stock at the date of grant. At December 31, 1994
and 1993, total options available for future grants under all stock option plans
were 8,313,741 and 1,411,359, respectively.
Huntington recognizes stock options when exercised by crediting
shareholders' equity for the cash option price paid by the optionee. No amounts
are charged or credited to income in connection with the stock option plans. All
outstanding options are considered common stock equivalents for purposes of
computing primary and fully-diluted earnings per share.
Activity in the plans for 1994 and 1993 is summarized as follows:
<TABLE>
<CAPTION>
SHARES
UNDER
OPTION PRICE RANGE
- --------------------------------------------------------------------------------
<S> <C> <C>
Outstanding at January 1, 1993 ............ 2,760,758 $ 2.75-$14.14
Granted ................................... 671,040 $ 9.73-$20.65
Exercised ................................. (846,739) $ 2.70-$14.14
Cancelled ................................. (9,205) $ 2.75-$20.65
--------- -------------
Outstanding at December 31, 1993 .......... 2,575,854 $ 2.70-$20.65
- --------------------------------------------------------------------------------
Exercisable at December 31, 1993 .......... 1,901,890 $ 2.70-$17.32
- --------------------------------------------------------------------------------
Outstanding at January 1, 1994 ............ 2,575,854 $ 2.70-$20.65
Granted ................................... 635,861 $20.55-$21.13
Exercised ................................. (532,931) $ 2.70-$17.32
Cancelled ................................. (41,590) $ 7.41-$21.13
--------- -------------
Outstanding at December 31, 1994 .......... 2,637,194 $ 2.75-$21.13
- --------------------------------------------------------------------------------
Exercisable at December 31, 1994 .......... 1,995,643 $ 2.75-$20.65
- --------------------------------------------------------------------------------
</TABLE>
14. EMPLOYEE BENEFIT PLANS
Huntington sponsors a non-contributory defined benefit pension plan
covering substantially all employees of Huntington and its subsidiaries. This
plan provides benefits based upon a percent of final average salary for each
year of service. The funding policy of Huntington is to contribute an annual
amount which is at least equal to the minimum funding requirements but not more
than that deductible under the Internal Revenue Code. Plan assets, held in
trust, primarily consist of marketable mutual funds.
51
<PAGE> 35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
14. EMPLOYEE BENEFIT PLANS (CONTINUED)
The following tables show the funded status of the plan at December 31,
1994 and 1993, the components of pension cost recognized in 1994, 1993, and
1992, and a summary of the key assumptions underlying the actuarial valuations.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(IN THOUSANDS OF DOLLARS) 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation ........................ $ 64,496 $ 63,790
========= =========
Accumulated benefit obligation ................... $ 70,172 $ 69,714
========= =========
Projected benefit obligation ....................... $ 104,381 $ 113,305
Plan assets, at fair value ......................... 97,105 101,372
--------- ---------
Projected benefit obligation in excess
of plan assets ................................... 7,276 11,933
Unrecognized transition asset,
net of amortization .............................. 3,480 4,044
Unrecognized net gain .............................. 14,090 695
Unrecognized prior service cost .................... (1,776) (1,917)
--------- ---------
Accrued pension cost ............................... $ 23,070 $ 14,755
========= =========
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(IN THOUSANDS OF DOLLARS) 1994 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
NET PENSION COST INCLUDED THE
FOLLOWING COMPONENTS
Service cost-benefits earned
during the period ............. $ 10,604 $ 7,485 $ 6,937
Interest cost on projected
benefit obligation ............ 7,923 7,060 6,656
Net amortization and deferral ... (12,111) (1,292) 3,213
Actual loss (return) on
plan assets ................... 1,899 (7,448) (11,512)
-------- -------- --------
Net pension expense ............... $ 8,315 $ 5,805 $ 5,294
======== ======== ========
ACTUARIAL ASSUMPTIONS
Discount rate ................... 8.00% 7.00% 8.25%
Rate of salary increases ........ 5.00% 5.00% 6.00%
Long-term rate of return
on assets ..................... 8.75% 8.75% 8.75%
</TABLE>
Huntington also sponsors an unfunded Supplemental Executive Retirement
Plan, a non-qualified plan that provides certain key officers of Huntington and
its subsidiaries with defined pension benefits in excess of limits imposed by
federal tax law. At December 31, 1994, the projected benefit obligation for this
plan totaled $10,958,000, of which $3,974,000 was subject to later amortization.
The remaining $6,984,000 is included in other liabilities. At December 31, 1993,
the projected benefit obligation for this plan totaled $7,416,000 of which
$1,554,000 was subject to later amortization. The remaining $5,862,000 is
included in other liabilities. Pension costs for this plan were $1,188,000 in
1994, $971,000 in 1993, and $980,000 in 1992.
In addition to providing pension benefits, Huntington and its subsidiaries
provide certain health care and life insurance benefits to retired employees who
have attained the age of 55 and have at least 10 years of service. For any
employee retiring on or after January 1, 1993, Huntington's contribution is
based upon the employees' number of months of service and is limited to the
actual cost of coverage.
Effective January 1, 1993, Huntington adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Post-retirement
Benefits Other Than Pensions." The Statement requires that the expected cost of
providing post-retirement benefits be recognized in the financial statements
during the employees' active service period.
The post-retirement benefit plan is unfunded. Net periodic post-retirement
benefit cost for 1994 and 1993 included the following components:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(IN THOUSANDS OF DOLLARS) 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
Service cost ......................................... $1,458 $ 782
Interest cost ........................................ 2,853 2,095
Amortization of transition obligation ................ 1,261 1,261
Net amortization and deferral ........................ 722 --
------ ------
Net periodic post-retirement benefit cost ............ $6,294 $4,138
====== ======
</TABLE>
The following table sets forth the amounts recorded in the consolidated
balance sheets at December 31, 1994 and 1993:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(IN THOUSANDS OF DOLLARS) 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
Accumulated post-retirement benefit obligation:
Retirees ......................................... $ 20,426 $ 16,031
Fully eligible active plan participants .......... 7,045 6,187
Other active plan participants ................... 9,805 9,515
-------- --------
Total accumulated post-retirement
benefit obligation ........................... 37,276 31,733
Unrecognized net loss ............................ (1,352) (5,328)
Unrecognized prior service cost .................. (6,320)
Unrecognized transition obligation ............... (22,693) (23,954)
-------- --------
Accrued post-retirement benefit cost ........... $ 6,911 $ 2,451
======== ========
</TABLE>
The transition obligation totaled $25.2 million at January 1, 1993 and is
being amortized over 20 years. Prior to 1993, Huntington recognized the cost of
providing these benefits as incurred. Post-retirement health care benefits
charged to expense were $1,080,000 in 1992.
The weighted average discount rate used in determining the accumulated
post-retirement benefit obligation was 8.0% in 1994 and 7.0% in 1993. The 1994
health care trend rate was projected to be 11.5% for pre-65 participants and
9.5% for post-65 participants compared to 12.25% and 10.0% in 1993. These rates
are assumed to decrease gradually until they reach 5.5% in the year 2004 and
remain at that level thereafter. Increasing the assumed health care cost trend
rates by one percentage point in each year would increase the accumulated
post-retirement benefit obligation as of December 31, 1994, by $2.9 million and
the aggregate of the service and interest components of net periodic
post-retirement benefit cost for 1994 by $418,000.
Also in 1993, Huntington adopted Statement of Financial Accounting
Standards No. 112, "Employers' Accounting for Post-employment Benefits." This
Statement requires the recognition of the cost to provide post-employment
benefits, such as long-term disability and unemployment benefits, on an accrual
basis. The accrued post-employment benefit obligation totaled $3.6 million at
December 31, 1994 and $3.5 million at December 31, 1993.
52
<PAGE> 36
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Huntington has a contributory employee stock purchase plan available to
eligible employees. Employee contributions of up to 6% of eligible compensation
are matched 75% by Huntington. Huntington may also make additional matching
contributions up to an additional 25% of employee contributions, at the
discretion of the Board of Directors. Eligible employees may contribute in
excess of 6% up to an additional 10% on an after tax basis. These additional
contributions are not matched by Huntington. The cost of providing this plan was
$8.2 million in 1994, $6.7 million in 1993, and $5.4 million in 1992.
The Huntington Supplemental Stock Purchase and Tax Savings Plan was adopted
in 1989. The plan is a non-qualified plan created to allow senior officers,
whose contributions to the stock purchase plan are limited by federal tax law,
to defer compensation on terms similar to those provided by the stock purchase
plan.
- --------------------------------------------------------------------------------
15. ACQUISITIONS
On December 16, 1994, Huntington acquired FirstFed Northern Kentucky
Bancorp, Inc. (FirstFed), a $226 million savings and loan holding company, for
approximately 1.9 million shares of Huntington common stock. The acquisition was
accounted for as a purchase. Accordingly, results of operations of FirstFed have
been included in the consolidated results of Huntington from the date of
acquisition.Proforma results of operations relative to the acquisition have not
been presented due to the immaterial impact on Huntington's consolidated
financial statements.
Also in 1994, Huntington signed a definitive merger agreement with
Security National Corporation of Maitland, Florida, a $180 million bank holding
company, and Reliance Bank of Florida, a $93 million privately-owned bank. Both
mergers will be accounted for as a pooling-of-interests and are expected to be
completed during the second quarter of 1995.
- --------------------------------------------------------------------------------
16. INCOME TAXES
The following is a summary of the provision for income taxes:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(IN THOUSANDS OF DOLLARS) 1994 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Currently payable
Federal ............................. $ 62,648 $ 151,204 $ 94,430
State ............................... 3,904 6,087 3,973
--------- --------- ---------
Total current ..................... 66,552 157,291 98,403
Deferred tax expense(benefit)
Federal ............................. 56,624 (29,107) (25,973)
State ............................... 705 (1,305) (41)
--------- --------- ---------
Total deferred .................... 57,329 (30,412) (26,014)
--------- --------- ---------
Total provision for income taxes .... $ 123,881 $ 126,879 $ 72,389
========= ========= =========
</TABLE>
Tax expense associated with securities transactions included in the above
amounts was $908,000 in 1994, $9,516,000 in 1993, and $12,353,000 in 1992.
The following is a reconcilement of income tax expense to the amount
computed at the statutory rate of 35% in 1994 and 1993, respectively, and 34% in
1992.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(IN THOUSANDS OF DOLLARS) 1994 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Pre-tax income computed
at the statutory rate ........... $ 128,266 $ 127,327 $ 79,369
Increases (decreases):
Tax-exempt interest income ...... (6,077) (8,236) (10,191)
State income taxes .............. 2,996 3,109 2,595
Other-net ....................... (1,304) 4,679 616
--------- --------- ---------
Provision for income taxes ...... $ 123,881 $ 126,879 $ 72,389
========= ========= =========
</TABLE>
The significant components of Huntington's deferred tax assets and
liabilities at December 31, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(IN THOUSANDS OF DOLLARS) 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Allowance for loan losses ...................... $ 63,380 $ 65,894
Allowance for other real estate losses ......... 13,791 19,346
Financial instruments .......................... -- 16,202
Securities ..................................... 33,711 --
Pension and other employee benefits ............ 18,158 11,503
Deferred expenses .............................. 5,509 7,615
Other .......................................... 6,297 8,724
-------- --------
Total deferred tax assets .................... 140,846 129,284
Deferred tax liabilities:
Financial instruments .......................... 25,811 --
Lease financing transactions ................... 67,099 53,261
Premises and equipment ......................... 7,790 10,047
Revalued liabilities-net ....................... 7,779 7,971
Other .......................................... 8,081 7,450
-------- --------
Total deferred tax liabilities ............... 116,560 78,729
-------- --------
Net deferred tax asset ....................... $ 24,286 $ 50,555
======== ========
</TABLE>
The components of the provision for deferred income taxes for the year
ended December 31, 1992 are as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(IN THOUSANDS OF DOLLARS) 1992
- --------------------------------------------------------------------------------
<S> <C>
Provision for loan losses ................................... $ (7,476)
Provision for other real estate ............................. (16,694)
Lease financing ............................................. 2,785
Depreciation on premises and equipment ...................... 228
Pension and other employee benefits ......................... (1,648)
Other-net ................................................... (3,209)
--------
Total ..................................................... $(26,014)
========
</TABLE>
53
<PAGE> 37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
17. NON-INTEREST INCOME
A summary of the components in non-interest income for the three years
ended December 31 follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
(IN THOUSANDS OF DOLLARS) 1994 1993 1992
- ----------------------------------------- -------- -------- ---------
<S> <C> <C> <C>
Service charges on deposit accounts ..... $ 76,836 $ 73,172 $ 64,471
Mortgage banking ........................ 50,367 99,185 63,297
Credit card fees ........................ 34,045 31,794 27,037
Trust services .......................... 28,448 27,948 25,129
Investment product sales ................ 6,624 9,016 5,193
Net gains on sales of securities
available for sale .................... 2,481 22,973 19,174
Net investment securities gains ......... 113 4,216 17,158
Other ................................... 36,446 37,474 28,680
-------- -------- --------
TOTAL NON-INTEREST INCOME .......... $235,360 $305,778 $250,139
======== ======== ========
</TABLE>
- --------------------------------------------------------------------------------
18. NON-INTEREST EXPENSE
A summary of the components in non-interest expense for the three years
ended December 31 follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(IN THOUSANDS OF DOLLARS) 1994 1993 1992
- -------------------------------------- -------- -------- --------
<S> <C> <C> <C>
Salaries ............................. $226,668 $226,405 $206,429
Commissions .......................... 10,775 20,992 18,310
Employee benefits .................... 58,158 55,259 46,596
Net occupancy ........................ 40,291 39,955 36,272
Equipment ............................ 38,792 37,230 34,184
Credit card .......................... 26,539 24,248 20,474
FDIC insurance ....................... 25,271 25,322 25,500
Advertising .......................... 15,320 13,259 13,308
Printing and supplies ................ 14,821 14,721 13,588
Legal and loan collection ............ 8,298 11,361 13,109
Other ................................ 144,719 190,141 204,812
-------- -------- --------
TOTAL NON-INTEREST EXPENSE ...... $609,652 $658,893 $632,582
======== ======== ========
</TABLE>
54
<PAGE> 38
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
19. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of the unaudited quarterly results of operations
for the years ended December 31, 1994 and 1993.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA) I Q II Q III Q IV Q
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1994
Interest income .................................. $ 301,637 $ 297,485 $ 301,724 $ 318,875
Interest expense ................................. 98,470 105,403 118,173 141,625
--------- --------- --------- ---------
Net interest income .............................. 203,167 192,082 183,551 177,250
--------- --------- --------- ---------
Provision for loan losses ........................ 8,464 3,219 1,113 2,488
Gains (losses) on sales of
securities available for sale .................. 1,748 62 735 (64)
Net investment securities gains (losses) ......... 50 141 (87) 9
Non-interest income .............................. 59,455 61,781 56,750 54,780
Non-interest expense ............................. 154,025 150,195 154,961 150,471
--------- --------- --------- ---------
Income before income taxes ....................... 101,931 100,652 84,875 79,016
Provision for income taxes ....................... 35,189 33,199 28,973 26,520
--------- --------- --------- ---------
Net income ....................................... $ 66,742 $ 67,453 $ 55,902 $ 52,496
========= ========= ========= =========
Net income per common share(1) ................... $ .51 $ .52 $ .43 $ .41
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA) I Q II Q III Q IV Q
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1993
Interest income .................................. $ 299,749 $ 313,259 $ 308,934 $ 314,369
Interest expense ................................. 111,009 113,416 110,230 105,456
--------- --------- --------- ---------
Net interest income .............................. 188,740 199,843 198,704 208,913
--------- --------- --------- ---------
Provision for loan losses ........................ 23,479 25,170 15,280 15,365
Gains on sales of securities
available for sale ............................. 4,735 1,505 16,168 565
Net investment securities gains .................. 1,504 1,598 778 336
Non-interest income .............................. 57,374 66,316 73,775 81,124
Non-interest expense ............................. 147,799 157,735 181,268 172,091
--------- --------- --------- ---------
Income before income taxes ....................... 81,075 86,357 92,877 103,482
Provision for income taxes ....................... 26,527 28,086 32,142 40,124
--------- --------- --------- ---------
Net income ....................................... $ 54,548 $ 58,271 $ 60,735 $ 63,358
========= ========= ========= =========
Net income per common share(1) ................... $ .43 $ .46 $ .47 $ .49
</TABLE>
(1) Restated for the five-for-four stock split distributed in July 1994.
- --------------------------------------------------------------------------------
20. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts and estimated fair values of Huntington's
financial instruments are presented in the following table. Certain assets,
the most significant being premises and equipment, do not meet the definition
of a financial instrument and are excluded from this disclosure. Similarly,
intangible assets such as mortgage servicing rights, deposit base intangibles,
and other customer relationships are not considered financial instruments and
are not discussed below. Accordingly, this fair value information is not
intended to, and does not, represent Huntington's underlying value. Many of
the assets and liabilities subject to the disclosure requirements are not
actively traded, requiring fair values to be estimated by management. These
estimations necessarily involve the use of judgment about a wide variety of
factors, including but not limited to, relevancy of market prices of comparable
instruments, expected future cash flows, and appropriate discount rates.
<TABLE>
<CAPTION>
AT DECEMBER 31, 1994
- ------------------------------------------------------------------------------------------------------------------------------------
CARRYING FAIR
(IN THOUSANDS OF DOLLARS) AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
TRADING INSTRUMENTS
Securities ....................................................................... $ 9,427 $ 9,427
Interest rate swaps and other off-balance sheet agreements
Assets ......................................................................... 12,643 12,643
Liabilities .................................................................... (12,351) (12,351)
NONTRADING INSTRUMENTS
Asset
Cash and short-term assets ....................................................... 893,715 893,715
Mortgages held for sale .......................................................... 138,997 138,997
Securities ....................................................................... 3,780,185 3,778,640
Related off-balance sheet liabilities .......................................... -- (22,031)
Loans ............................................................................ 12,063,944 11,855,952
Related off-balance sheet assets ............................................... 4,768 6,172
Related off-balance sheet liabilities .......................................... -- (169,483)
Customers' acceptance liability .................................................. 53,883 53,883
Liabilities
Deposits ......................................................................... (11,965,067) (11,925,464)
Related off-balance sheet liabilities .......................................... -- (59,938)
Short-term borrowings ............................................................ (2,898,201) (2,898,201)
Related off-balance sheet assets ............................................... -- 14,647
Related off-balance sheet liabilities .......................................... -- (4,343)
Bank acceptances ................................................................. (53,883) (53,883)
Long-term debt ................................................................... (1,214,052) (1,183,634)
Related off-balance sheet assets ............................................... -- 17,210
Related off-balance sheet liabilities .......................................... -- (44,934)
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
AT DECEMBER 31, 1993
- ------------------------------------------------------------------------------------------------------------------------------------
CARRYING FAIR
(IN THOUSANDS OF DOLLARS) AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
TRADING INSTRUMENTS
Securities ....................................................................... $ 21,964 $ 21,964
Interest rate swaps and other off-balance sheet agreements
Assets ......................................................................... 5,301 5,301
Liabilities .................................................................... (4,952) (4,952)
NONTRADING INSTRUMENTS
Asset
Cash and short-term assets ....................................................... 757,689 757,689
Mortgages held for sale .......................................................... 1,032,338 1,032,338
Securities ....................................................................... 4,199,409 4,321,318
Related off-balance sheet liabilities .......................................... -- (275)
Loans ............................................................................ 10,742,093 10,799,391
Related off-balance sheet assets ............................................... -- 11,032
Related off-balance sheet liabilities .......................................... -- (22,535)
Customers' acceptance liability .................................................. 48,603 48,603
Other off-balance sheet financial instruments .................................... 1,438 604
Liabilities
Deposits ......................................................................... (12,044,690) (12,083,511)
Related off-balance sheet assets ............................................... -- 5,453
Related off-balance sheet liabilities .......................................... -- (5,332)
Short-term borrowings ............................................................ (3,195,463) (3,195,463)
Related off-balance sheet assets ............................................... -- 1,221
Related off-balance sheet liabilities .......................................... -- (64)
Bank acceptances ................................................................. (48,603) (48,603)
Long-term debt ................................................................... (762,310) (795,777)
Related off-balance sheet assets ............................................... -- 28,181
Related off-balance sheet liabilities .......................................... -- (3,580)
</TABLE>
55
<PAGE> 39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
20. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The terms and short-term nature of certain assets and liabilities result in
their carrying value approximating fair value. These include cash and due from
banks, interest bearing deposits in banks, trading account securities, federal
funds sold and securities purchased under resale agreements, customers'
acceptance liabilities, short-term borrowings, and bank acceptances outstanding.
As indicated in Note 11, loan commitments and letters of credit generally have
short-term, variable rate features and contain clauses which limit Huntington's
exposure to changes in customer credit quality. Accordingly, their carrying
values, which are immaterial at the respective balance sheet dates, are
reasonable estimates of fair value. The following methods and assumptions were
used by Huntington to estimate the fair value of the remaining classes of
financial instruments:
Mortgages held for sale are valued at the lower of aggregate
cost or market as determined using outstanding commitments
from investors. Accordingly, the carrying amount of mortgages
held for sale approximates fair value.
Fair values of securities available for sale and investment
securities are based on quoted market prices, where available.
If quoted market prices are not available, fair values are based
on quoted market prices of comparable instruments.
For variable rate loans that reprice frequently, fair values
are based on carrying amounts, as adjusted for estimated
credit losses. The fair values for other loans are estimated
using discounted cash flow analyses and employ interest rates
currently being offered for loans with similar terms. The
rates take into account the position of the yield curve, as
well as an adjustment for prepayment risk, operating costs,
and profit. This value is also reduced by an estimate of losses
inherent in the loan portfolio.
The fair values of demand deposits, savings accounts, and money
market deposits are, by definition, equal to the amount payable
on demand. The fair values of fixed rate time deposits are
estimated by discounting cash flows using interest rates currently
being offered on certificates with similar maturities.
The fair values of Huntington's long-term debt are based
substantially upon quoted market prices.
The fair values of interest rate swap agreements and other
off-balance sheet financial instruments used for asset/liability
management and trading purposes are based upon quoted
market prices or prices of similar instruments, when available,
or calculated with pricing models using current rate assumptions.
- --------------------------------------------------------------------------------
21. REGULATORY RESTRICTIONS
Payment of dividends to Huntington by the subsidiary banks and thrifts are
subject to various regulatory restrictions. The regulatory agencies must
approve the declaration of any dividends in excess of available retained
earnings and in excess of the sum of net income for that year and retained net
income for the preceding two years, less any required transfers to surplus.
Under this formula, subsidiary banks and thrifts could, without such approval,
declare dividends in 1995 of approximately $223,984,000 plus an additional
amount equal to their net income through the date of declaration.
The subsidiary banks and thrifts are also restricted by federal regulation
as to the amount and type of loans they may make to Huntington. At December 31,
1994, the subsidiary banks and thrifts could lend to Huntington $161,764,000,
subject to the qualifying collateral requirements defined in the regulations.
56
<PAGE> 40
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
22. HUNTINGTON BANCSHARES INCORPORATED (PARENT COMPANY ONLY) FINANCIAL INFORMATION
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE SHEETS (IN THOUSANDS OF DOLLARS) DECEMBER 31, 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and cash equivalents ................................................................ $ 69,767 $ 73,962
Securities available for sale ............................................................ 6,424 7,195
Due from non-bank subsidiaries ........................................................... 102,751 7,783
Investment in subsidiaries on the equity method
Bank subsidiaries ...................................................................... 1,426,888 1,371,406
Non-bank subsidiaries .................................................................. 48,195 47,716
Excess of cost of investment in subsidiaries over net assets acquired .................... 25,159 26,391
Other assets ............................................................................. 15,760 10,864
---------- ----------
TOTAL ASSETS ........................................................................... $1,694,944 $1,545,317
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term borrowings .................................................................... $ 25,000 --
Long-term debt ........................................................................... 198,994 $ 168,753
Dividends payable ........................................................................ 25,908 20,278
Accrued expenses and other liabilities ................................................... 33,222 31,649
---------- ----------
Total Liabilities ...................................................................... 283,124 220,680
Shareholders' Equity ..................................................................... 1,411,820 1,324,637
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ............................................. $1,694,944 $1,545,317
========== ==========
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
STATEMENTS OF INCOME (IN THOUSANDS OF DOLLARS) YEAR ENDED DECEMBER 31, 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCOME
Dividends from
Bank subsidiaries ................................................................. $ 167,729 $ 127,414 $ 58,750
Non-bank subsidiaries ............................................................. 5,245 5,356 4,214
Interest from
Bank subsidiaries ................................................................. 2,876 3,759 1,370
Non-bank subsidiaries ............................................................. 2,601 6 --
Other ............................................................................... 407 824 1,703
--------- --------- ---------
TOTAL INCOME .................................................................... 178,858 137,359 66,037
--------- --------- ---------
EXPENSE
Interest on long-term debt .......................................................... 15,056 13,292 12,020
Other ............................................................................... 12,075 15,303 15,347
--------- --------- ---------
TOTAL EXPENSE ................................................................... 27,131 28,595 27,367
--------- --------- ---------
Income before income taxes and equity in undistributed net income of subsidiaries ..... 151,727 108,764 38,670
Income tax benefit .................................................................... (8,007) (8,324) (7,826)
--------- --------- ---------
Income before equity in undistributed net income of subsidiaries ...................... 159,734 117,088 46,496
--------- --------- ---------
Equity in undistributed net income of
Bank subsidiaries ................................................................... 80,004 117,177 112,921
Non-bank subsidiaries ............................................................... 2,855 2,647 1,629
--------- --------- ---------
NET INCOME ...................................................................... $ 242,593 $ 236,912 $ 161,046
========= ========= =========
</TABLE>
57
<PAGE> 41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
22. HUNTINGTON BANCSHARES INCORPORATED (PARENT COMPANY ONLY) FINANCIAL INFORMATION (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS (IN THOUSANDS OF DOLLARS) YEAR ENDED DECEMBER 31, 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income ....................................................................... $ 242,593 $ 236,912 $ 161,046
Adjustments to reconcile net income to net cash provided by operating activities
Equity in undistributed net income of subsidiaries ............................. (82,859) (119,824) (114,550)
Amortization ................................................................... 4,974 2,400 1,559
Losses (gains) on sales of securities .......................................... 25 21 (930)
Increase in other assets ....................................................... (4,909) (5,400) (2,422)
Increase in other liabilities .................................................. 5,926 4,003 8,371
--------- --------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES ...................................... 165,750 118,112 53,074
--------- --------- ---------
INVESTING ACTIVITIES
Proceeds from sales of investment securities ..................................... 173 329 4,390
(Advances to) repayments from subsidiaries ....................................... (94,968) 94,485 (100,282)
Acquisitions and additional capitalization of subsidiaries ....................... (10) (31,944) (5,000)
--------- --------- ---------
NET CASH (USED FOR) PROVIDED BY INVESTING ACTIVITIES ........................... (94,805) 62,870 (100,892)
--------- --------- ---------
FINANCING ACTIVITIES
Net proceeds from issuance of long-term debt ..................................... 49,958 -- 147,747
Payment of long-term debt ........................................................ (23,184) (100,246) (6,648)
Increase in short-term borrowings ................................................ 25,000 -- --
Dividends on common stock ........................................................ (68,662) (58,412) (45,256)
Acquisition of treasury stock .................................................... (73,634) (36,795) (19,149)
Sales of treasury stock .......................................................... 13,651 10,309 11,455
Proceeds from exercise of stock options .......................................... 1,731 2,430 2,224
--------- --------- ---------
NET CASH (USED FOR) PROVIDED BY FINANCING ACTIVITIES ........................... (75,140) (182,714) 90,373
--------- --------- ---------
CHANGE IN CASH AND CASH EQUIVALENTS ............................................ (4,195) (1,732) 42,555
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR ................................. 73,962 75,694 33,139
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR ....................................... $ 69,767 $ 73,962 $ 75,694
========= ========= =========
</TABLE>
58
<PAGE> 42
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
To The Board of Directors And Shareholders
Huntington Bancshares Incorporated
We have audited the accompanying consolidated balance sheets of Huntington
Bancshares Incorporated and Subsidiaries as of December 31, 1994 and 1993, and
the related consolidated statements of income, changes in shareholders' equity,
and cash flows for each of the three years in the period ended December 31,
1994. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. These standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Huntington
Bancshares Incorporated and Subsidiaries at December 31, 1994 and 1993, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1994, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
Columbus, Ohio
January 11, 1995
59
<PAGE> 1
Exhibit 21
SUBSIDIARIES OF HUNTINGTON BANCSHARES INCORPORATED
--------------------------------------------------
The subsidiaries of Huntington Bancshares Incorporated are listed below. The
state or jurisdiction of incorporation of each subsidiary (unless otherwise
noted) is Ohio.
The Huntington National Bank (United States) and its direct and indirect
subsidiaries, The Huntington Leasing Company, The Huntington Mortgage Company,
Huntington Residential Mortgage Securities, Inc., The Huntington Investment
Company, Forty-One Corporation, First Sunset Development, Inc., Nature Bridge
Hotel Corporation, SFA Holding, Inc., East Sound Realty, Inc., Lodestone Realty
Management, Inc., WS Realty, Inc., Spring Valley Hotel Corporation, Fourteen
Corporation, Airbase Realty Company, HNB Clearing, Inc., The Check Exchange
System Co., Thirty-Seven Corporation, and Charter Oak Insurance Services
Agency, Inc.
Huntington Bancshares Kentucky, Inc., and its direct subsidiaries, The
Huntington Bank, Inc. (Kentucky) and Commonwealth Banclease, Inc. (Kentucky).
Huntington Bancshares Indiana, Inc., and its direct subsidiaries, The
Huntington National Bank of Indiana (United States), and Huntington Federal
Savings Bank of Illinois (United States).
Huntington Bancshares Michigan, Inc., and its direct and indirect subsidiaries,
Huntington Banks of Michigan (Michigan), First Macomb Mortgage Company
(Michigan), and Hunter Insurance Agency, Inc. (Michigan).
Huntington Bancshares West Virginia, Inc., and its direct subsidiaries,
Huntington National Bank West Virginia (United States), The Huntington National
Bank of Pennsylvania (United States), and CB&T Capital Investment Company, Inc.
(West Virginia).
The Huntington Financial Services Company and its direct subsidiaries, The
Huntington Trust Company, National Association (United States), and The
Huntington Trust Company of Florida, National Association (United States).
Huntington Bancshares Florida, Inc.
Huntington Federal Savings Bank (United States) and its direct subsidiary, HFSB
Service Corp. (Florida).
The Huntington Asset Management Company (Delaware)
Huntington Capital Corp.
Huntington Bancshares Financial Corporation
Seventeen Corporation
The Huntington Acceptance Company
The Huntington National Life Insurance Company (Arizona)
Huntington Bancshares Ohio, Inc. and its direct and indirect subsidiaries,
First Trust Savings Bank, F.S.B. (United States), and F.T.S.B. Mortgage
Corporation (Florida).
The Huntington State Bank and its direct and indirect subsidiaries, Huntington
Insurance Agency Services, Inc., Huntington Insurance Agency, Inc., and
Huntington Life Insurance Agency, Inc.
Union Commerce Leasing Corporation
The Huntington Service Company
The Huntington Community Development Corporation
Money Station, Inc.
Heritage Service Corporation and its direct subsidiary, Cross Creek Partnership
(Florida).
<PAGE> 1
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
-------------------------------
We consent to the incorporation by reference in Post Effective Amendment No. 1
to Registration Statement No. 33-59068 dated March 12, 1993, Registration
Statement No. 33-46327 dated March 11, 1992, Registration Statement No.
33-44208 dated November 26, 1991, Registration Statement No. 33-41774 dated
July 19, 1991, Registration Statement No. 33-38784 dated January 28, 1991, Post
Effective Amendment No. 2 to Registration Statement No. 33-10546 dated January
28, 1991, Registration Statement No. 33-37373 dated October 18, 1990, all on
Form S-8, and Registration Statement No. 33-52569 dated March 8, 1994 and
Registration Statement No. 33-52555 dated March 8, 1994, both on Form S-3, of
our report dated January 11, 1995 with respect to the consolidated financial
statements of Huntington Bancshares Incorporated and Subsidiaries incorporated
by reference in this Annual Report on Form 10-K for the year ended December 31,
1994.
/s/Ernst & Young LLP
Columbus, Ohio
February 28, 1995
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM HUNTINGTON
BANCSHARES INCORPORATED'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER
31, 1994, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 885,327
<INT-BEARING-DEPOSITS> 3,059
<FED-FUNDS-SOLD> 5,329
<TRADING-ASSETS> 9,427
<INVESTMENTS-HELD-FOR-SALE> 3,304,493
<INVESTMENTS-CARRYING> 475,692
<INVESTMENTS-MARKET> 474,147
<LOANS> 12,264,436
<ALLOWANCE> 200,492
<TOTAL-ASSETS> 17,770,640
<DEPOSITS> 11,965,067
<SHORT-TERM> 2,898,201
<LIABILITIES-OTHER> 227,617
<LONG-TERM> 1,214,052
<COMMON> 0
0
912,318
<OTHER-SE> 499,502
<TOTAL-LIABILITIES-AND-EQUITY> 17,770,640
<INTEREST-LOAN> 1,001,490
<INTEREST-INVEST> 212,257
<INTEREST-OTHER> 5,258
<INTEREST-TOTAL> 1,219,721
<INTEREST-DEPOSIT> 294,780
<INTEREST-EXPENSE> 463,671
<INTEREST-INCOME-NET> 756,050
<LOAN-LOSSES> 15,284
<SECURITIES-GAINS> 2,594
<EXPENSE-OTHER> 609,652
<INCOME-PRETAX> 366,474
<INCOME-PRE-EXTRAORDINARY> 242,593
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 242,593
<EPS-PRIMARY> 1.87
<EPS-DILUTED> 1.86
<YIELD-ACTUAL> 4.96
<LOANS-NON> 41,929
<LOANS-PAST> 20,877
<LOANS-TROUBLED> 2,550
<LOANS-PROBLEM> 51,500
<ALLOWANCE-OPEN> 211,835
<CHARGE-OFFS> 46,122
<RECOVERIES> 18,102
<ALLOWANCE-CLOSE> 200,492
<ALLOWANCE-DOMESTIC> 80,911
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 119,581
</TABLE>
