<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
Commission File Number 0-2525
HUNTINGTON BANCSHARES INCORPORATED
MARYLAND 31-0724920
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
41 SOUTH HIGH STREET, COLUMBUS, OHIO 43287
Registrant's telephone number (614) 480-8300
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 and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
----- -----
There were 144,672,422 shares of Registrant's without par value common stock
outstanding on October 31, 1996.
1
<PAGE> 2
PART I. FINANCIAL INFORMATION
1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(in thousands of dollars) SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
1996 1995 1995
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks ........................................................ $ 872,300 $ 860,958 $ 852,399
Interest bearing deposits in banks ............................................. 1,653 284,393 1,259
Trading account securities ..................................................... 11,444 12,924 19,135
Federal funds sold and securities
purchased under resale agreements ......................................... 8,868 197,531 276,747
Mortgages held for sale ........................................................ 114,169 159,705 156,051
Securities available for sale - at fair value .................................. 4,782,503 4,721,144 4,290,570
Investment securities - fair value $66,655; $69,196;
and $419,773 respectively ................................................ 66,229 67,604 416,236
Total loans (1) ................................................................ 13,939,218 13,261,667 13,457,831
Less allowance for loan losses ............................................ 200,215 194,456 198,573
------------ ------------ ------------
Net loans ...................................................................... 13,739,003 13,067,211 13,259,258
------------ ------------ ------------
Premises and equipment ......................................................... 312,457 296,465 296,708
Customers' acceptance liability ................................................ 56,023 56,926 59,785
Accrued income and other assets ................................................ 601,156 529,737 544,982
------------ ------------ ------------
TOTAL ASSETS ................................................................... $ 20,565,805 $ 20,254,598 $ 20,173,130
============ ============ ============
LIABILITIES
Total deposits (1) ............................................................. $ 13,175,649 $ 12,636,582 $ 12,544,500
Short-term borrowings .......................................................... 3,797,739 3,514,773 4,047,206
Bank acceptances outstanding ................................................... 56,023 56,926 59,785
Long-term debt ................................................................. 1,690,998 2,103,024 1,622,411
Accrued expenses and other liabilities ......................................... 344,312 424,428 416,429
------------ ------------ ------------
Total Liabilities ......................................................... 19,064,721 18,735,733 18,690,331
------------ ------------ ------------
SHAREHOLDERS' EQUITY
Preferred stock - authorized 6,617,808 shares;
none outstanding
Common stock - without par value; authorized 300,000,000 shares; issued and
outstanding 151,883,704; 141,402,769; and 141,394,248
shares, respectively ................................................. 1,264,661 1,056,209 1,056,146
Less 7,514,688; 8,351,978; and 6,877,908
treasury shares, respectively ........................................ (160,641) (180,632) (144,262)
Capital surplus ........................................................... 240,349 235,802 235,661
Net unrealized (losses) gains on securities
available for sale ................................................... (32,829) 40,972 7,162
Retained earnings ......................................................... 189,544 366,514 328,092
------------ ------------ ------------
Total Shareholders' Equity ................................................ 1,501,084 1,518,865 1,482,799
------------ ------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ..................................... $ 20,565,805 $ 20,254,598 $ 20,173,130
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
(1) See page 7 for detail of total loans and total deposits.
2
<PAGE> 3
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
(in thousands of dollars, except per share amounts) THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
Interest and fee income 1996 1995 1996 1995
--------------------------- --------------------------
<S> <C> <C> <C> <C>
Loans....................................... $300,888 $296,472 $886,656 $857,639
Securities.................................. 74,774 77,694 232,002 211,159
Other....................................... 2,760 3,693 9,139 11,661
----------- ----------- ----------- -----------
TOTAL INTEREST INCOME............. 378,422 377,859 1,127,797 1,080,459
----------- ----------- ----------- -----------
Interest Expense
Deposits.................................... 115,555 111,549 342,049 313,207
Short-term borrowings....................... 42,565 57,054 128,845 156,763
Long-term debt.............................. 28,601 22,678 91,191 67,812
----------- ----------- ----------- -----------
TOTAL INTEREST EXPENSE............ 186,721 191,281 562,085 537,782
----------- ----------- ----------- -----------
NET INTEREST INCOME............... 191,701 186,578 565,712 542,677
----------- ----------- ----------- -----------
Provision for loan losses........................ 20,250 7,187 43,916 16,582
----------- ----------- ----------- -----------
NET INTEREST INCOME
AFTER PROVISION FOR LOAN LOSSES 171,451 179,391 521,796 526,095
----------- ----------- ----------- -----------
Total non-interest income (1).................... 71,028 59,800 206,366 176,211
Total non-interest expense (1)................... 141,578 137,446 430,540 423,139
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES........ 100,901 101,745 297,622 279,167
Provision for income taxes....................... 34,438 35,808 103,246 100,207
----------- ----------- ----------- -----------
NET INCOME........................ $66,463 $65,937 $194,376 $178,960
=========== =========== =========== ===========
PER COMMON SHARE (2)
Net income.................................. $0.46 $0.44 $1.33 $1.17
Cash dividends declared..................... $0.20 $0.18 $0.56 $0.52
AVERAGE COMMON SHARES OUTSTANDING................ 145,287,296 150,901,045 146,672,598 153,024,040
</TABLE>
See notes to consolidated financial statements.
(1) See page 8 for detail of non-interest income and non-interest expense.
(2) Adjusted for the ten percent stock dividend distributed July 31, 1996.
3
<PAGE> 4
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
NET
UNREALIZED
GAINS
COMMON COMMON TREASURY TREASURY CAPITAL (LOSSES) ON RETAINED
(IN THOUSANDS) SHARES STOCK SHARES STOCK SURPLUS SECURITIES EARNINGS TOTAL
------- -------- ---- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Nine Months Ended September 30, 1995:
Balance, beginning of period 131,120 $912,318 (905) ($16,577) $215,084 ($63,289) $364,284 $1,411,820
Stock issued for acquisitions 3,510 3,434 20,061 (985) 8,474 30,984
Net income 178,960 178,960
Cash dividends declared
($.52 per share) (79,852) (79,852)
Stock options exercised 184 3,233 76 (2,342) 967
5% stock dividend 6,732 140,146 (45) (140,272) (126)
Treasury shares purchased (7,726) (159,368) (159,368)
Treasury shares sold:
Shareholder dividend reinvestment plan 1,213 21,434 310 (1,114) 20,630
Employee benefit plans 401 7,016 130 (46) 7,100
Conversion of convertible notes 32 248 248
Change in net unrealized gains (losses)
on securities available for sale 71,436 71,436
------- -------- ---- -------- -------- -------- -------- ----------
Balance, end of period 141,394 $1,056,146 (6,878) ($144,262) $235,661 $7,162 $328,092 $1,482,799
======= ========== ====== ========= ======== ======== ======== ==========
NINE MONTHS ENDED SEPTEMBER 30, 1996:
BALANCE, BEGINNING OF PERIOD 141,403 $1,056,209 (8,352) ($180,632) $235,802 $40,972 $366,514 $1,518,865
STOCK ISSUED FOR ACQUISITION 4,733 102,760 5,037 107,797
NET INCOME 194,376 194,376
CASH DIVIDENDS DECLARED
($.56 PER SHARE) (82,556) (82,556)
STOCK OPTIONS EXERCISED 179 3,566 (2,984) 582
10% STOCK DIVIDEND 10,431 208,110 2,837 78,030 2,444 (288,790) (206)
TREASURY SHARES PURCHASED (8,066) (190,294) (582) (190,876)
TREASURY SHARES SOLD:
SHAREHOLDER DIVIDEND REINVESTMENT PLAN 994 22,378 386 22,764
EMPLOYEE BENEFIT PLANS 160 3,551 246 3,797
CONVERSION OF CONVERTIBLE NOTES 50 342 342
CHANGE IN NET UNREALIZED GAINS (LOSSES)
ON SECURITIES AVAILABLE FOR SALE (73,801) (73,801)
------- -------- ---- -------- -------- -------- -------- ----------
BALANCE, END OF PERIOD 151,884 $1,264,661 (7,515) ($160,641) $240,349 ($32,829) $189,544 $1,501,084
======= ========== ====== ========= ======== ======== ======== ==========
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 5
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(in thousands of dollars) NINE MONTHS ENDED SEPTEMBER 30,
1996 1995
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net Income ........................................................... $ 194,376 $ 178,960
Adjustments to reconcile net income to net cash
provided by operating activities
Provision for loan losses .................................. 43,916 16,582
Provision for depreciation and amortization ................ 62,259 47,182
Deferred income tax expense ................................ 11,699 18,034
Decrease (increase) in trading account securities .......... 1,480 (9,708)
Decrease (increase) in mortgages held for sale ............. 45,536 (17,054)
Net gains on sales of securities ........................... (13,463) (8,754)
Decrease (increase) in accrued income receivable ........... 7,912 (26,900)
Net increase in other assets ............................... (41,489) (30,797)
(Decrease) increase in accrued expenses .................... (17,781) 114,417
Net (decrease) increase in other liabilities ............... (26,108) 15,393
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES .......... 268,337 297,355
----------- -----------
INVESTING ACTIVITIES
Decrease in interest bearing deposits in banks ....................... 282,940 1,800
Proceeds from :
Maturities and calls of investment securities .................... 17,889 61,792
Maturities and calls of securities available for sale ............ 306,122 212,750
Sales of securities available for sale ........................... 2,068,196 2,388,018
Purchases of:
Investment securities ............................................ (4,000) (2,660)
Securities available for sale .................................... (2,199,930) (3,377,820)
Proceeds from sales of loans ......................................... 94,755 --
Net loan originations, excluding sales ............................... (697,586) (1,071,526)
Proceeds from disposal of premises and equipment ..................... 1,616 2,344
Purchases of premises and equipment .................................. (30,924) (23,255)
Proceeds from sales of other real estate ............................. 14,000 26,446
Net cash received from purchase of subsidiaries ...................... 631 148,490
----------- -----------
NET CASH USED FOR INVESTING ACTIVITIES ............. (146,291) (1,633,621)
----------- -----------
FINANCING ACTIVITIES
Increase in total deposits ........................................... 87,783 231,223
Increase in short-term borrowings .................................... 268,924 1,144,187
Proceeds from issuance of long-term debt ............................. 450,424 590,000
Payment of long-term debt ............................................ (862,280) (181,565)
Dividends paid on common stock ....................................... (80,485) (78,292)
Acquisition of treasury stock ........................................ (190,876) (159,368)
Proceeds from issuance of treasury stock ............................. 27,143 28,571
----------- -----------
NET CASH (USED FOR) PROVIDED BY FINANCING ACTIVITIES (299,367) 1,574,756
----------- -----------
CHANGE IN CASH AND CASH EQUIVALENTS ................ (177,321) 238,490
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ... 1,058,489 890,656
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ......... $ 881,168 $ 1,129,146
=========== ===========
</TABLE>
See notes to consolidated financial statements.
5
<PAGE> 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. The accompanying unaudited consolidated financial statements reflect all
adjustments (consisting of normal recurring accruals) which are, in the opinion
of management, necessary for a fair presentation of the results for the interim
periods. The Notes to Consolidated Financial Statements appearing in
Huntington's 1995 Annual Report to Shareholders should be read in conjunction
with these interim financial statements.
B. On January 1, 1996, Huntington adopted Financial Accounting Standards Board
(FASB) Statement No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed of " (FAS 121). The Statement
prescribes the accounting for the impairment of long-lived assets and goodwill
related to those assets. The new rules specify when assets should be reviewed
for impairment, how to determine whether an asset or group of assets is
impaired, how to measure an impairment loss, and what financial statement
disclosures are necessary. Also prescribed is the accounting for long-lived
assets and identifiable intangibles that a company plans to dispose of, other
than those that are part of a discontinued operation. Any impairment of a
long-lived asset resulting from management's review is to be recognized as a
component of non-interest expense. The adoption of FAS 121 did not have a
material effect on Huntington's consolidated financial statements.
In June 1996, the FASB issued Statement No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities"
(FAS 125). The standard provides that, following a transfer of financial assets,
an entity is to recognize the financial and servicing assets it controls and the
liabilities it has incurred, derecognize financial assets when control has been
surrendered, and derecognize liabilities when extinguished. The Statement is
effective for transactions occurring after December 31, 1996. The adoption of
FAS 125 is not expected to have a material impact on Huntington's consolidated
financial statements.
C. Huntington acquired Peoples Bank of Lakeland (Lakeland), a $551 million
commercial bank headquartered in Lakeland, Florida, on January 23, 1996.
Huntington paid $46.2 million in cash and issued approximately 4.7 million
shares of common stock in exchange for all the common stock of Lakeland. The
transaction was accounted for as a purchase; accordingly, the results of
Lakeland have been included in the consolidated financial statements from the
date of acquisition.
In October 1996, Huntington entered into a merger agreement with
Citi-Bancshares, Inc. (Citi-Bancshares), a $524 million bank holding company
headquartered in Leesburg, Florida. Huntington is to exchange a combination of
its common stock and cash for the outstanding common stock of Citi-Bancshares in
a purchase transaction. The acquisition is expected to be completed in the first
quarter of 1997, subject to approval by Citi-Bancshares' shareholders and
applicable regulatory authorities.
D. Per common share amounts have been calculated based on the weighted average
number of common shares outstanding in each period, adjusted for the ten percent
stock dividend issued July 31, 1996. The dilutive effects of unexercised stock
options and convertible debentures were not significant for any period
presented.
E. Certain amounts in the prior year's financial statements have been
reclassified to conform with the 1996 presentation. These reclassifications had
no effect on net income.
6
<PAGE> 7
FINANCIAL REVIEW
<TABLE>
<CAPTION>
LOAN PORTFOLIO COMPOSITION
(in thousands of dollars) SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
1996 1995 1995
----------- ----------- -----------
<S> <C> <C> <C>
Commercial ................................. $ 4,381,646 $ 4,260,561 $ 4,233,861
Real Estate
Construction .......................... 430,992 367,889 364,721
Commercial ............................ 1,660,610 1,578,891 1,540,534
Residential ........................... 1,130,455 1,176,715 1,546,754
Consumer
Loans ................................. 5,291,826 5,094,036 5,059,492
Leases ................................ 1,043,689 783,575 712,469
----------- ----------- -----------
TOTAL LOANS ........................... $13,939,218 $13,261,667 $13,457,831
=========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
DEPOSIT COMPOSITION
(in thousands of dollars) .................. SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
1996 1995 1995
----------- ----------- -----------
<S> <C> <C> <C>
Demand deposits
Non-interest bearing .................. $ 2,343,743 $ 2,088,074 $ 1,989,624
Interest bearing ...................... 2,500,209 2,772,845 2,686,800
Savings deposits ........................... 2,591,667 2,207,378 2,118,333
Certificates of deposit of $100,000 or more 989,886 909,403 916,157
Other domestic time deposits ............... 4,410,190 4,384,949 4,523,528
Foreign time deposits ...................... 339,954 273,933 310,058
----------- ----------- -----------
TOTAL DEPOSITS ........................ $13,175,649 $12,636,582 $12,544,500
=========== =========== ===========
</TABLE>
7
<PAGE> 8
FINANCIAL REVIEW
<TABLE>
<CAPTION>
ANALYSIS OF NON-INTEREST INCOME
(in thousands of dollars) THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, PERCENT SEPTEMBER 30, PERCENT
1996 1995 CHANGE 1996 1995 CHANGE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Service charges on deposit accounts $ 23,342 $ 21,109 10.58% $ 68,935 $ 64,110 7.53%
Mortgage banking .................. 9,680 8,274 16.99 26,533 24,460 8.48
Trust services .................... 8,432 7,312 15.32 25,549 22,953 11.31
Securities gains .................. 6,173 2,315 166.65 13,463 8,754 53.79
Credit card fees .................. 4,092 4,669 (12.36) 17,472 13,013 34.27
Investment product sales .......... 2,694 2,159 24.78 9,219 5,829 58.16
Electronic banking fees ........... 2,988 1,270 135.28 6,826 3,292 107.35
Other ............................. 13,627 12,692 7.37 38,369 33,800 13.52
-------- -------- -------- --------
TOTAL NON-INTEREST INCOME ......... $ 71,028 $ 59,800 18.78% $206,366 $176,211 17.11%
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
ANALYSIS OF NON-INTEREST EXPENSE
(in thousands of dollars) THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, PERCENT SEPTEMBER 30, PERCENT
1996 1995 CHANGE 1996 1995 CHANGE
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Salaries ......................... $ 58,475 $ 54,391 7.51% $171,070 $165,473 3.38%
Commissions ...................... 3,117 3,074 1.40 10,204 6,694 52.44
Employee benefits ................ 13,858 13,958 (0.72) 45,875 45,038 1.86
Net occupancy .................... 10,602 10,039 5.61 32,311 30,804 4.89
Equipment ........................ 10,670 9,470 12.67 30,551 28,865 5.84
Credit card and electronic banking 4,255 3,398 25.22 11,850 9,712 22.01
Printing and supplies ............ 3,712 3,508 5.82 11,371 10,442 8.90
Advertising ...................... 2,845 3,149 (9.65) 9,762 9,092 7.37
Legal and loan collection ........ 2,000 1,857 7.70 6,392 5,885 8.62
FDIC insurance ................... 332 151 119.87 1,530 13,236 (88.44)
Other ............................ 31,712 34,451 (7.95) 99,624 97,898 1.76
-------- -------- -------- --------
TOTAL NON-INTEREST EXPENSE ....... $141,578 $137,446 3.01% $430,540 $423,139 1.75%
======== ======== ======== ========
</TABLE>
8
<PAGE> 9
Management's Discussion and Analysis
OVERVIEW
Huntington reported net income of $66.5 million, or $.46 per share, for
the third quarter of 1996 compared with $65.9 million, or $.44 per share, for
the same period last year. For the first nine months of the year, net income was
$194.4 million, or $1.33 per share, versus $179.0 million, or $1.17 per share,
in the corresponding period of 1995.
Huntington's return on average equity (ROE) was 17.92% in the recent
three months of 1996 and 17.15% year-to-date, up from 17.03% and 15.75%,
respectively, in 1995. Return on average assets (ROA) was 1.33% in the third
quarter and 1.30% for the nine months ended September 30, 1996. ROA for the
comparable periods last year was 1.34% and 1.27%.
Total assets were $20.6 billion at the recent quarter-end, a slight
increase from both December 31 and September 30, 1995. Total loans increased
$677.6 million, or 5.1%, during the first nine months of the year, which was
largely offset by a reduction in temporary investments. With respect to the
average balance sheet, consumer loans were up 11.05% when comparing the
year-to-date total to the same period in 1995; commercial growth was also a
respectable 5.2%.
Huntington's funding mix changed somewhat over the first three quarters
of 1996 as total deposits grew 4.3% and borrowed funds decreased 2.3% from
year-end. The increase in deposits was principally due to the January 1996
acquisition of Peoples Bank of Lakeland, Florida.
Shareholders' equity was relatively flat versus December 31 and
September 30, 1995. Excluding the effects of net unrealized gains and losses on
securities available for sale, equity increased approximately 4%. Huntington
continues to maintain an appropriate balance between capital adequacy and
returns to shareholders. A primary tool used by management in this regard has
been the common stock repurchase program. At the recent quarter-end,
Huntington's regulatory capital ratios, including those of its bank
subsidiaries, exceeded the levels established for well-capitalized institutions.
(See "Capital" section for further information).
RESULTS OF OPERATIONS
NET INTEREST INCOME
Huntington reported net interest income of $191.7 million and $565.7
million, respectively, for the three and nine months ended September 30, 1996,
compared with $186.6 million and $542.7 million for the corresponding periods in
1995. The net interest margin of 4.16% during the quarter just ended was largely
unchanged from the previous three months and the third quarter a year ago.
For the recent three months, interest rate swaps and other off-balance
sheet financial instruments used for asset/liability management purposes reduced
interest income by $8.2 million and increased interest expense by $4.2 million.
On a year-to-date basis, the decrease in interest income was $26.4 million and
interest expense was up $16.6 million. For the same periods last year, these
products lowered interest income by $9.5 million and $22.2 million and
9
<PAGE> 10
increased interest expense by $3.8 million and $16.8 million. Included in the
preceding amounts is amortization of deferred gains and losses from terminated
contracts, that decreased net interest income by $9.2 million in the recent
quarter and $29.8 million in the first nine months of the year, compared with
reductions in the year-ago periods of $8.9 million and $18.6 million. At the
recent quarter-end, deferred net losses remaining to be amortized totaled $9.6
million.
Expressed in terms of the margin, the effect of the off-balance sheet
portfolio was a reduction of 27 basis points in the third quarter of 1996 and 31
basis points for the nine months versus declines in the respective periods last
year of 29 basis points and 30 basis points. A large part of the current year
margin reduction (21 basis points) is related to amortization of net losses from
closed positions. A swap strategy used by Huntington to create synthetic fixed
rate wholesale liabilities, while lowering funding costs from what would have
resulted from a comparable cash instrument, resulted in the majority of the
remaining margin reduction attributable to the off-balance sheet portfolio.
NON-INTEREST INCOME
Non-interest income, excluding securities transactions, totaled $64.9
million and $192.9 million in the recent three and nine month periods, up 12.8%
and 15.2% from the same periods one year ago. Fee income remained strong in all
major categories. Credit card fees were up significantly on a year-to-date basis
but down 12.4% when comparing third quarter 1996 to the same three months last
year. These fluctuations relate primarily to an alliance formed in the preceding
quarter that resulted in the sale by Huntington of a portion of its interest in
certain payment processing contracts.
Mortgage banking income was $9.7 million in the third quarter and $26.5
million in the first nine months of 1996, up from $8.3 million and $24.4 million
in the three and nine months ended September 30, 1995. Fueled by lower interest
rates in the early part of the year, mortgage loan originations totaled $1.0
billion for the nine months, an increase of 13.6% from the same period last
year. In addition to the increased fee income from higher production, Huntington
benefited from improved marketing gains and the sale of certain portfolio loans
in first quarter 1996. These favorable effects were somewhat offset by reduced
gains from servicing sales, as Huntington sold no servicing rights through
September 30, 1996, versus $432 million sold in the first nine months of last
year that generated gains of $5.3 million. Net servicing fees were also down
approximately 8.5% on a year-to-date basis. The decrease is principally due to a
change in the mix of loans serviced by Huntington, following the sale in early
1995 of the governmental servicing portfolio. At the recent quarter end, the
mortgage loan servicing portfolio (including loans serviced by Huntington on its
own behalf) totaled $6.0 billion.
Net gains from sales of securities were $6.2 million in the quarter
just ended and $13.5 million for the nine months. The third quarter gains were
largely due to the sale of U.S. Treasury securities, while the gains in the
first half of the year resulted principally from collateralized mortgage
obligations and mortgage backed securities that were sold to reduce price and/or
prepayment risk.
10
<PAGE> 11
NON-INTEREST EXPENSE
Non-interest expense was $141.6 million in the three months just ended
and $430.5 million in the first nine months of the year, compared with $137.4
million and $423.1 million in the year-ago periods. The growth in expenses was
due, in part, to the acquisition of two Florida banks, that added $2.4 million
and $8.6 million, respectively, to the third quarter and year-to-date totals.
Excluding these amounts, non-interest expense would have been flat with the same
periods in 1995. FDIC insurance was down significantly for the nine months, as
Huntington benefited from the reduction in assessment rates on bank deposits
that occurred in the latter part of 1995. The legislation recently enacted to
recapitalize the Savings Association Insurance Fund did not have a material
effect on Huntington's results of operations.
INTEREST RATE RISK MANAGEMENT
Huntington seeks to achieve consistent growth in net interest income
and net income while managing volatility arising from shifts in interest rates.
The Asset/Liability Management Committee (ALCO) oversees risk management,
establishing broad policies and specific operating limits that govern a variety
of risks inherent in Huntington's operations including interest rate, liquidity,
and market risks. On and off-balance sheet strategies and tactical programs are
reviewed and monitored regularly by ALCO to ensure consistency with approved
risk tolerances.
Interest rate risk management is a dynamic process, encompassing both
the business flows onto the balance sheet and the changing market and business
environment. Effective management of interest rate risk begins with
appropriately diversified financial instruments and funding sources. To
accomplish its overall balance sheet objectives, Huntington regularly uses a
multiple of markets: money market, bond market, and futures and options market.
In addition, dealers in over-the-counter financial instruments provide
availability of interest rate swaps as needed.
Measurement and monitoring of interest rate risk is an ongoing process.
A key element in this process is Huntington's estimation of the amount that net
interest income will change over a twelve to twenty-four month period given a
directional shift in interest rates. The income simulation model used by
Huntington captures all assets and liabilities and off-balance sheet financial
instruments, accounting for significant variables which are believed to be
affected by interest rates. These include prepayment speeds on real estate
mortgages and consumer installment credits, cash flow assumptions on other
financial instruments, and changing balance sheet volume assumptions. The model
captures embedded options, e.g. interest rate caps and floors or call options,
and accounts for changes in rate relationships as various rate indices lead and
lag changes in short-term market rates. While these assumptions are inherently
uncertain, management believes that the model provides an accurate indication of
the company's interest rate risk exposure and is a more relevant depiction of
interest rate risks than less sophisticated measures. Management reporting of
this information is regularly shared with the Board of Directors.
At September 30, 1996, the results of Huntington's internal interest
sensitivity analysis indicated that net interest income would be relatively
unchanged by a 100 basis points increase
11
<PAGE> 12
or decrease in the federal funds rate (assuming the change occurs evenly over
the next year and that corresponding changes in other market rates occur as
forecasted); a slight reduction of .5% to .8% should rates rise versus a modest
increase if rates drop. Net interest income is expected to increase 1.6% if
rates were to fall 200 basis points. A 200 basis points rise in rates could
result in a decline in net interest income of up to 3.2%.
Active interest rate risk management includes the use of various types
of off-balance sheet financial instruments, primarily interest rate swaps. Risk
created by different indices on assets and liabilities, by unequal terms to
maturity of assets and liabilities, and by products that are appealing to
customers but incompatible with current risk limits are but a few risks that can
be eliminated or decreased in a cost efficient manner. In addition, the swap
strategy has enabled Huntington to lower the costs of raising wholesale funds.
Financial futures, interest rate caps and floors, options, and forward rate
agreements are also used to control risk effectively. Off-balance sheet products
are often preferable to similar cash instruments because, though they perform
financially quite similarly, they may require less capital and preserve access
to the marketplace for future needs.
The following table illustrates the approximate market values,
estimated maturities and weighted average rates of the interest rate swaps used
by Huntington in its interest rate risk management program. The valuation of
interest rate swap contracts is largely a function of the financial market's
expectations regarding the future direction of interest rates. At September 30,
1996, forward rates were higher than those prevailing at the recent year-end.
Consequently, the interest rate swap portfolio ended the third quarter with an
unrealized loss of $10.7 million versus a $10.9 million unrealized gain at
December 31. 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. For purposes of
the variable rate information and the indexed amortizing swap maturities
presented in the table below, management made no assumptions with respect to
future changes in interest rates.
<TABLE>
<CAPTION>
Average
Notional Maturity Market Average Rate
(dollars in millions) Value (years) Value Receive Pay
- --------------------- ----- ------- ----- ------- ---
<S> <C> <C> <C> <C> <C>
September 30, 1996:
ASSET CONVERSION SWAPS
Receive fixed $ 800 2.22 ($9.5) 5.65% 5.62%
Receive fixed-amortizing 93 1.73 (1.2) 5.27 5.73
------ -----
TOTAL ASSET CONVERSION SWAPS $ 893 2.17 ($10.7) 5.61% 5.63%
====== ======
LIABILITY CONVERSION SWAPS
Receive fixed $1,630 2.17 $ 6.5 5.96% 5.50%
Receive fixed-amortizing 195 2.75 (4.5) 5.63 5.50
Pay fixed 950 .09 (1.8) 5.65 7.11
------ -----
TOTAL LIABILITY CONVERSION SWAPS $2,775 1.50 $ .2 5.83% 6.05%
====== =====
BASIS PROTECTION SWAPS $ 250 2.44 ($ .2) 5.60% 5.57%
====== =====
</TABLE>
12
<PAGE> 13
The pay rates on Huntington's receive fixed swaps vary based on
movements in the applicable London inter-bank offered rate (LIBOR). Receive
fixed asset conversion swaps with a notional value of $200 million have embedded
written LIBOR-based call options. Also, receive fixed liability conversion swaps
with a notional value of $150 million have embedded written LIBOR-based caps.
The portfolio of amortizing swaps consists of contracts with notional values
that are indexed to the prepayment experience of a specified pool of mortgage
loans or Constant Maturity U.S. Treasury yields (CMT). As market interest rates
change, the amortization of the notional values will also change, generally
slowing as rates increase and accelerating when rates fall. Basis swaps are
contracts which provide for both parties to receive floating rates of interest
according to different indices and are used to protect against changes in
spreads. The receive and pay amounts applicable to Huntington's basis swaps are
determined by LIBOR or other indices common to the banking industry.
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
September 30, 1996, Huntington's credit risk from interest rate swaps used for
asset/liability management purposes was $47.6 million, which represents the sum
of the aggregate fair value of positions that have become favorable to
Huntington, including 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 nonperformance
in the future by any such counterparties.
The total notional amount of off-balance sheet instruments used by
Huntington on behalf of customers (for which the related interest rate risk is
offset by third party contracts) was $450 million at September 30, 1996. Total
credit exposure from such contracts, represented by those instruments with a
positive fair value, was $1.7 million at the recent quarter-end. 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 above
discussion of off-balance sheet financial instruments and the related tables.
ASSET QUALITY
Huntington's exposure to credit risk is managed through the use of
consistent underwriting standards that emphasize "in-market" lending to
established borrowers. Highly leveraged transactions and excessive industry or
other concentrations are avoided. The credit administration function also
employs extensive monitoring procedures to ensure that problem loans are
promptly identified and that loans adhere to corporate policy. These procedures
provide executive management with the information necessary to implement
appropriate change and take corrective action as needed.
Asset quality continues to be strong. Non-performing loans, which
include loans that are no longer accruing interest and loans that have been
renegotiated based upon financial difficulties of the borrower, totaled $55.0
million at the most recent quarter end and represented .39% of total loans.
Huntington also has certain loans that are past due ninety days or more but have
not
13
<PAGE> 14
been placed on nonaccrual status. These loans, which totaled $32.4 million
at September 30, 1996, are primarily consumer and residential real estate loans
that are considered well-secured and in the process of collection or are being
renewed.
Other real estate owned (ORE) was $15.6 million at the end of the first
nine months of 1996, down from $23.7 million at the same time last year.
Huntington's management continues to aggressively pursue the sale of its ORE to
further reduce these non-performing assets.
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 that 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. Annualized net charge-offs as a percent of average total loans were
.48% for the quarter just ended and .40% for the first nine months of the year,
versus .32% for all of 1995. At the recent quarter end, the ALL represented
1.44% of total loans and 364% of non-performing loans. The combined ALL and
allowance for other real estate was 275% of total non-performing assets.
CAPITAL
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. Huntington also recognizes the
importance of managing excess capital and continually strives to maintain an
appropriate balance between capital adequacy and returns to shareholders.
Capital is managed at each subsidiary based upon the respective risks and growth
opportunities, as well as regulatory requirements.
Average equity to average assets was 7.41% in the third quarter of 1996
and 7.60% for the nine months, compared with 7.87% and 8.10% in the same periods
one year ago. Presented below are Huntington's regulatory capital ratios and the
related levels established for "well-capitalized" institutions:
September 30, 1996 "Well Capitalized"
------------------ ------------------
Tier 1 risk-based capital 8.03% 6.00%
Total risk-based capital 11.57 10.00
Leverage 6.78 5.00
On February 21, 1996, the Board of Directors authorized Huntington to
repurchase up to 10 million additional shares of its common stock through open
market purchases and privately negotiated transactions. The authorization
represents a continuation of the common stock repurchase program begun in August
1987 and provides that the shares will be reserved for reissue in connection
with Huntington's benefit plans as well as for other corporate purposes. The
company acquired 8.1 million shares in the first nine months of 1996 at an
aggregate cost of $190.9 million, leaving 6.6 million shares available for
repurchase. Huntington's management believes the remaining authorized shares
will be repurchased by the end of 1997.
14
<PAGE> 15
CONSOLIDATED FINANCIAL HIGHLIGHTS
(in thousands of dollars, except per share amounts)
<TABLE>
<CAPTION>
--------------- --------------- ---------------
THREE MONTHS ENDED SEPTEMBER 30, 1996 1995 % CHANGE
--------------- --------------- ---------------
<S> <C> <C> <C>
NET INCOME ................................ $ 66,463 $ 65,937 0.8 %
PER COMMON SHARE (1):
Net income ........................... $ 0.46 $ 0.44 4.5
Cash dividends declared .............. $ 0.20 $ 0.18 11.1
AVERAGE SHARES OUTSTANDING (1) ............ 145,287,296 150,901,045 (3.7)
KEY RATIOS
Return on:
Average total assets ................. 1.33% 1.34% (0.7)
Average shareholders' equity ......... 17.92% 17.03% 5.2
Efficiency ratio .......................... 55.57% 56.49% (1.6)
Average equity/average assets ............. 7.41% 7.87% (5.8)
Net Interest Margin ....................... 4.16% 4.18% (0.5)
--------------- --------------- ---------------
NINE MONTHS ENDED SEPTEMBER 30, 1996 1995 % CHANGE
--------------- --------------- ---------------
NET INCOME ................................ $ 194,376 $ 178,960 8.6 %
PER COMMON SHARE (1):
Net income ........................... $ 1.33 $ 1.17 13.7
Cash dividends declared .............. $ 0.56 $ 0.52 7.7
AVERAGE SHARES OUTSTANDING (1) ............ 146,672,598 153,024,040 (4.2)
KEY RATIOS
Return on:
Average total assets ................. 1.30% 1.27% 2.4
Average shareholders' equity ......... 17.15% 15.75% 8.9
Efficiency ratio .......................... 56.87% 59.41% (4.3)
Average equity/average assets ............. 7.60% 8.10% (6.2)
Net Interest Margin ....................... 4.11% 4.21% (2.4)
--------------- --------------- ---------------
AT SEPTEMBER 30, 1996 1995 % CHANGE
--------------- --------------- ---------------
Total Loans ............................... $ 13,939,218 $ 13,457,831 3.6 %
Total Deposits ............................ $ 13,175,649 $ 12,544,500 5.0
Total Assets .............................. $ 20,565,805 $ 20,173,130 1.9
Shareholders' Equity ...................... $ 1,501,084 $ 1,482,799 1.2
Period-End Shares Outstanding (1) ......... 144,369,016 147,967,974 (2.4)
Shareholders' Equity Per Common Share (1) . $ 10.40 $ 10.02 3.8
Total Risk-Adjusted Assets ................ $ 16,899,738 $ 16,116,690 4.9
Tier 1 Risk-Based Capital Ratio ........... 8.03% 8.46% (5.1)
Total Risk-Based Capital Ratio ............ 11.57% 12.17% (4.9)
Tier 1 Leverage Ratio ..................... 6.78% 6.96% (2.6)
</TABLE>
(1) Adjusted for the ten percent stock dividend distributed July 31, 1996.
15
<PAGE> 16
FINANCIAL REVIEW
INVESTMENT SECURITIES - AMORTIZED COST & FAIR VALUES BY MATURITY AT SEPTEMBER
30, 1996 AND DECEMBER 31, 1995
<TABLE>
<CAPTION>
(in thousands of dollars) SEPTEMBER 30, 1996 DECEMBER 31, 1995
- ----------------------------------------------------------------------------------------------
AMORTIZED COST FAIR VALUE AMORTIZED COST FAIR VALUE
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury
1-5 years .................. $ 156 $ 156 $ 156 $ 156
------- ------- ------- -------
Total ................... 156 156 156 156
------- ------- ------- -------
States and political subdivisions
Under 1 year ............... 20,216 20,341 27,340 27,592
1-5 years .................. 22,942 23,410 23,637 24,496
6-10 years ................. 21,065 21,037 12,638 13,040
Over 10 years .............. 1,850 1,711 3,833 3,912
------- ------- ------- -------
Total ................... 66,073 66,499 67,448 69,040
------- ------- ------- -------
Total Investment Securities ..... $66,229 $66,655 $67,604 $69,196
======= ======= ======= =======
</TABLE>
16
<PAGE> 17
FINANCIAL REVIEW
SECURITIES AVAILABLE FOR SALE - AMORTIZED COST & FAIR VALUES BY MATURITY AT
SEPTEMBER 30, 1996 AND DECEMBER 31, 1995.
<TABLE>
<CAPTION>
(in thousands of dollars) September 30, 1996 December 31, 1995
Amortized Cost Fair Value Amortized Cost Fair Value
------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury
Under 1 year ...................... $ 73,597 $ 74,549 $ 176,502 $ 178,264
1-5 years ......................... 768,395 762,341 228,234 231,018
6-10 years ........................ 159,838 150,841 162,352 160,596
---------- ---------- ---------- ----------
Total .......................... 1,001,830 987,731 567,088 569,878
---------- ---------- ---------- ----------
Federal agencies
Mortgage-backed securities
Under 1 year ...................... 575 573 1,097 1,124
1-5 years ......................... 142,309 143,371 110,192 114,723
6-10 years ........................ 912,914 890,913 712,804 724,317
Over 10 years ..................... 76,814 76,635 58,762 60,695
---------- ---------- ---------- ----------
Total .......................... 1,132,612 1,111,492 882,855 900,859
---------- ---------- ---------- ----------
Other agencies
Under 1 year ...................... 76,572 77,066 53,912 54,499
1-5 years ......................... 1,646,655 1,640,624 1,928,431 1,953,446
6-10 years ........................ 189,413 186,820 234,393 234,920
Over 10 years ..................... 328,791 323,964 509,735 514,568
---------- ---------- ---------- ----------
Total .......................... 2,241,431 2,228,474 2,726,471 2,757,433
---------- ---------- ---------- ----------
Total U.S. Treasury and Federal agencies 4,375,873 4,327,697 4,176,414 4,228,170
---------- ---------- ---------- ----------
Other
Under 1 year ...................... 3,875 3,945 6,818 6,826
1-5 years ......................... 13,236 13,897 22,352 23,578
6-10 years ........................ 157,371 156,533 230,651 240,965
Over 10 years ..................... 275,254 273,397 212,950 214,605
Marketable equity securities ...... 8,480 7,034 8,359 7,000
---------- ---------- ---------- ----------
Total .......................... 458,216 454,806 481,130 492,974
---------- ---------- ---------- ----------
Total Securities Available for Sale .... $4,834,089 $4,782,503 $4,657,544 $4,721,144
========== ========== ========== ==========
</TABLE>
17
<PAGE> 18
FINANCIAL REVIEW
<TABLE>
<CAPTION>
LOAN LOSS EXPERIENCE
(in thousands of dollars) THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
1996 1995 1996 1995
-------------------------------- -------------------------------
<S> <C> <C> <C> <C>
ALLOWANCE FOR LOAN LOSSES, BEGINNING OF PERIOD $ 196,486 $ 198,264 $ 194,456 $ 200,492
Loan losses ................................... (20,799) (13,557) (53,923) (34,068)
Recoveries of loans previously charged off .... 4,278 3,222 13,566 10,490
Provision for loan losses ..................... 20,250 7,187 43,916 16,582
Allowance of assets acquired .................. -- 3,457 2,200 5,077
--------- --------- --------- ---------
ALLOWANCE FOR LOAN LOSSES, END OF PERIOD ...... $ 200,215 $ 198,573 $ 200,215 $ 198,573
========= ========= ========= =========
AS A % OF AVERAGE TOTAL LOANS
Net loan losses -- annualized ............... 0.48 % 0.31 % 0.40 % 0.24 %
Provision for loan losses -- annualized ..... 0.59 % 0.22 % 0.43 % 0.17 %
Allowance for loan losses as a % of total loans 1.44 % 1.48 % 1.44 % 1.48 %
Net loan loss coverage (1) .................... 7.33 x 10.54 x 8.46 x 12.54 x
</TABLE>
(1) Income before taxes and the provision for loan losses to net loan losses.
<TABLE>
<CAPTION>
NON-PERFORMING ASSETS AND PAST DUE LOANS
(Quarter-End) 1996 1995
------------------------------------------------------------------------
(in thousands of dollars) III Q II Q I Q IV Q III Q
--------------------------------------- -----------------------
<S> <C> <C> <C> <C> <C>
Non-accrual loans ...................... $49,800 $51,470 $57,530 $50,669 $41,997
Renegotiated loans ..................... 5,174 5,558 5,578 4,299 4,313
------- ------- ------- ------- -------
TOTAL NON-PERFORMING LOANS ............. 54,974 57,028 63,108 54,968 46,310
------- ------- ------- ------- -------
Other real estate, net ................. 15,610 21,720 20,386 22,026 23,668
------- ------- ------- ------- -------
TOTAL NON-PERFORMING ASSETS ............ $70,584 $78,748 $83,494 $76,994 $69,978
======= ======= ======= ======= =======
NON-PERFORMING LOANS AS A
% OF TOTAL LOANS ..................... 0.39% 0.42% 0.47% 0.41% 0.34%
NON-PERFORMING ASSETS AS A
% OF TOTAL LOANS AND OTHER REAL ESTATE 0.51% 0.57% 0.62% 0.58% 0.52%
ALLOWANCE FOR LOAN LOSSES AS A % OF
NON-PERFORMING LOANS ................. 364.20% 344.54% 312.76% 353.76% 428.79%
ALLOWANCE FOR LOAN LOSSES AND OTHER REAL
ESTATE AS A % OF NON-PERFORMING ASSETS 274.54% 238.03% 225.01% 238.65% 263.26%
ACCRUING LOANS PAST DUE 90 DAYS OR MORE $32,382 $29,859 $25,824 $27,018 $24,001
======= ======= ======= ======= =======
</TABLE>
18
<PAGE> 19
CONSOLIDATED AVERAGE BALANCES AND INTEREST RATES (QUARTERLY DATA)
<TABLE>
<CAPTION>
FULLY TAX EQUIVALENT BASIS (1) 3RD QUARTER 1996 2ND QUARTER 1996
(in millions of dollars) AVERAGE YIELD/ AVERAGE YIELD/
BALANCE RATE BALANCE RATE
------------------ -----------------
<S> <C> <C> <C> <C>
ASSETS
Interest bearing deposits in banks.................................. $2 5.91 % $2 9.43 %
Trading account securities.......................................... 15 5.83 14 5.47
Federal funds sold and securities purchased under resale agreements. 17 6.61 29 5.33
Mortgages held for sale............................................. 109 8.23 117 7.62
Securities:
Taxable........................................................ 4,593 6.39 4,609 6.52
Tax exempt..................................................... 89 9.32 96 9.75
------- -------
Total Securities.......................................... 4,682 6.44 4,705 6.58
------- -------
Loans
Commercial..................................................... 4,275 7.72 4,319 7.68
Real Estate
Construction.............................................. 413 8.46 386 8.50
Mortgage.................................................. 2,793 8.50 2,783 8.49
Consumer
Loans..................................................... 5,225 8.85 5,142 9.04
Leases.................................................... 991 7.88 885 7.85
------- -------
Total Loans............................................... 13,697 8.34 13,515 8.40
------- -------
Allowance for loan losses................................. 202 199
------- -------
Net loans................................................. 13,495 8.86 13,316 8.89
------- -------
Total earning assets...................................... 18,522 8.15 % 18,382 8.19 %
------- -------
Cash and due from banks............................................. 754 755
All other assets.................................................... 853 906
------- -------
TOTAL ASSETS........................................................ $19,927 $19,844
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Demand deposits
Non-interest bearing........................................... $2,315 $2,307
Interest bearing............................................... 2,561 2.36 % 2,595 2.40 %
Savings deposits.................................................... 2,474 3.21 2,437 3.19
Certificates of deposit of $100,000 or more......................... 1,011 5.25 971 5.37
Other domestic time deposits........................................ 4,417 5.56 4,406 5.61
Foreign time deposits............................................... 343 5.85 219 6.17
------- -------
Total deposits................................................. 13,121 4.24 12,935 4.26
------- -------
Short-term borrowings............................................... 3,114 5.35 3,061 5.39
Long-term debt...................................................... 1,810 6.22 1,927 6.40
------- -------
Interest bearing liabilities................................... 15,730 4.69 % 15,616 4.75 %
------- -------
All other liabilities............................................... 406 430
Shareholders' equity................................................ 1,476 1,491
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $19,927 $19,844
======= =======
Net interest rate spread............................................ 3.46 % 3.44 %
Impact of non-interest bearing funds on margin...................... 0.70 % 0.71 %
NET INTEREST MARGIN................................................. 4.16 % 4.15 %
</TABLE>
(1) Fully tax equivalent yields are calculated assuming a 35% tax rate.
19
<PAGE> 20
<TABLE>
<CAPTION>
------------------ ------------------ -----------------
1ST QUARTER 1996 4TH QUARTER 1995 3RD QUARTER 1995
------------------ ------------------ -----------------
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.................................. $39 5.70% $74 6.10% $2 5.73%
Trading account securities.......................................... 19 5.64 20 6.88 24 7.54
Federal funds sold and securities purchased under resale agreements. 27 6.19 48 5.52 22 7.49
Mortgages held for sale............................................. 127 7.18 129 6.78 174 7.73
Securities:
Taxable........................................................ 4,835 6.55 4,550 6.74 4,473 6.76
Tax exempt..................................................... 106 9.09 110 10.04 118 10.55
------- ------- -------
Total Securities.......................................... 4,941 6.60 4,660 6.82 4,591 6.86
------- ------- -------
Loans
Commercial..................................................... 4,281 7.77 4,251 7.91 4,173 8.13
Real Estate
Construction.............................................. 364 8.52 369 8.54 349 8.68
Mortgage.................................................. 2,760 8.48 3,011 8.56 3,058 8.59
Consumer
Loans..................................................... 5,079 8.99 5,099 8.97 4,979 9.05
Leases.................................................... 811 7.87 753 7.89 673 7.46
------- ------- -------
Total Loans............................................... 13,295 8.41 13,483 8.53 13,232 8.56
------- ------- -------
Allowance for loan losses................................. 198 198 198
------- ------- -------
Net loans................................................. 13,097 8.87 13,285 8.93 13,034 9.04
------- ------- -------
Total earning assets...................................... 18,448 8.14% 18,414 8.26% 18,045 8.37%
------- ------- -------
Cash and due from banks............................................. 746 766 783
All other assets.................................................... 988 895 876
------- ------- -------
TOTAL ASSETS........................................................ $19,984 $19,877 $19,506
======= ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Demand deposits
Non-interest bearing........................................... $2,391 $2,241 $2,194
Interest bearing............................................... 2,506 2.53% 2,514 2.48% 2,488 2.45%
Savings deposits.................................................... 2,249 3.03 2,084 2.93 2,020 2.76
Certificates of deposit of $100,000 or more......................... 977 5.52 926 5.68 878 5.78
Other domestic time deposits........................................ 4,458 5.69 4,458 5.76 4,467 5.69
Foreign time deposits............................................... 268 6.15 189 6.50 318 6.32
------- ------- -------
Total deposits................................................. 12,849 4.36 12,412 4.38 12,365 4.34
------- ------- -------
Short-term borrowings............................................... 3,078 5.58 3,682 5.91 3,786 5.96
Long-term debt...................................................... 2,016 6.41 1,850 6.76 1,403 6.36
------- ------- -------
Interest bearing liabilities................................... 15,552 4.87% 15,703 5.02% 15,360 4.92%
------- ------- -------
All other liabilities............................................... 464 447 416
Shareholders' equity................................................ 1,577 1,486 1,536
------- ------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $19,984 $19,877 $19,506
======= ======= =======
Net interest rate spread............................................ 3.27% 3.24% 3.45%
Impact of non-interest bearing funds on margin...................... 0.76% 0.74% 0.73%
NET INTEREST MARGIN................................................. 4.03% 3.98% 4.18%
</TABLE>
20
<PAGE> 21
SELECTED QUARTERLY INCOME STATEMENT DATA
<TABLE>
<CAPTION>
1996 1995
-------------------------------------------------------------
(in thousands of dollars, except per share amounts) IIIQ IIQ IQ IVQ IIIQ
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
TOTAL INTEREST INCOME............................ $378,422 $375,079 $374,296 $381,437 $377,859
TOTAL INTEREST EXPENSE........................... 186,721 185,786 189,578 199,551 191,281
-------- -------- -------- -------- --------
NET INTEREST INCOME.............................. 191,701 189,293 184,718 181,886 186,578
Provision for loan losses........................ 20,250 11,843 11,823 12,139 7,187
-------- -------- -------- -------- --------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES...................... 171,451 177,450 172,895 169,747 179,391
-------- -------- -------- -------- --------
Service charges on deposit accounts ............. 23,342 23,132 22,461 21,008 21,109
Mortgage banking ................................ 9,680 7,976 8,877 9,752 8,274
Trust services .................................. 8,432 8,324 8,793 7,424 7,312
Securities gains ................................ 6,173 200 7,090 302 2,315
Credit card fees ................................ 4,092 8,544 4,836 5,450 4,669
Investment product sales ........................ 2,694 3,286 3,239 2,292 2,159
Electronic banking fees ......................... 2,988 2,172 1,666 1,740 1,270
Other ........................................... 13,627 13,542 11,200 18,830 12,692
-------- -------- -------- -------- --------
TOTAL NON-INTEREST INCOME ....................... 71,028 67,176 68,162 66,798 59,800
-------- -------- -------- -------- --------
Salaries ........................................ 58,475 56,776 55,819 54,695 54,391
Commissions ..................................... 3,117 3,480 3,607 3,149 3,074
Employee benefits ............................... 13,858 14,801 17,216 12,752 13,958
Net occupancy ................................... 10,602 10,835 10,874 10,459 10,039
Equipment ....................................... 10,670 10,267 9,614 9,406 9,470
Credit card and electronic banking............... 4,255 4,023 3,572 3,695 3,398
Printing and supplies ........................... 3,712 4,164 3,495 3,705 3,508
Advertising ..................................... 2,845 4,052 2,865 2,179 3,149
Legal and loan collection ....................... 2,000 2,498 1,894 2,758 1,857
FDIC insurance .................................. 332 679 519 1,820 151
Other ........................................... 31,712 33,891 34,021 32,646 34,451
-------- -------- -------- -------- --------
TOTAL NON-INTEREST EXPENSE ...................... 141,578 145,466 143,496 137,264 137,446
-------- -------- -------- -------- --------
INCOME BEFORE INCOME TAXES ...................... 100,901 99,160 97,561 99,281 101,745
Provision for income taxes ...................... 34,438 34,072 34,736 33,752 35,808
-------- -------- -------- -------- --------
NET INCOME ...................................... $66,463 $65,088 $62,825 $65,529 $65,937
======== ======== ======== ======== ========
PER COMMON SHARE (1)
Net income .................................... $0.46 $0.45 $0.42 $0.45 $0.44
Cash dividends declared ....................... $0.20 $0.18 $0.18 $0.18 $0.18
FULLY TAX EQUIVALENT MARGIN:
Net Interest Income ............................. $191,701 $189,293 $184,718 $181,886 $186,578
Tax Equivalent Adjustment (2) ................... 1,204 1,319 1,368 1,523 1,635
-------- -------- -------- -------- --------
Tax Equivalent Net Interest Income .............. $192,905 $190,612 $186,086 $183,409 $188,213
======== ======== ======== ======== ========
</TABLE>
(1) Adjusted for the ten percent stock dividend distributed July 31, 1996.
(2) Calculated assuming a 35% tax rate.
21
<PAGE> 22
PART II. OTHER INFORMATION
In accordance with the instructions to Part II, the other specified items in
this part have been omitted because they are not applicable or the information
has been previously reported.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3. ( i )( a ) 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.
( i )( b ) Articles of Amendment to Articles of
Restatement of Charter -- previously filed as Exhibit
3(i)(b) to Quarterly Report on Form 10-Q for the
quarter ended March 31, 1996, 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. Instruments defining the Rights of Security Holders:
Reference is made to Articles Fifth, Eighth and Tenth
of Articles of Restatement of Charter, previously
filed as Exhibit 3(i) to Form 10-K for the year ended
December 31, 1993, and incorporated herein by
reference. Also, reference is made to Rights Plan,
dated February 22, 1990, previously filed as Exhibit
1 to Registration Statement on Form 8-A, and
incorporated herein by reference and to Amendment No.
1 to the Rights Agreement, dated as of August 16,
1995, previously filed as Exhibit 4(b) to Form 8-K
filed with the Securities and Exchange Commission on
August 28, 1995, and incorporated herein by
reference. Instruments defining the rights of holders
of long-term debt will be furnished to the Securities
and Exchange Commission upon request.
11. Computation of Earnings Per Share
27. Financial Data Schedule
(b) Reports on Form 8-K
1. A report on Form 8-K, dated July 10, 1996, was
filed under report item numbers 5 and 7, concerning
Huntington's results of operations for the quarter
ended June 30, 1996.
22
<PAGE> 23
SIGNATURES
Pursuant to the requirements 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.
Huntington Bancshares Incorporated
----------------------------------
(Registrant)
Date: November 14, 1996 /s/ Ralph K. Frasier
-----------------------------------------
Ralph K. Frasier
General Counsel and Secretary
Date: November 14, 1996 /s/ John D. Van Fleet
-----------------------------------------
John D. Van Fleet
Senior Vice President, Corporate
Controller, and Principal Accounting
Officer (Chief Accounting Officer)
<PAGE> 1
Exhibit 11
Huntington Bancshares Incorporated
Computation of Earnings Per Share
For Periods Ended September 30, 1996, and 1995
(in thousands of dollars, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
-------------------------- -------------------------
1996 1995 1996 1995
-------------------------- -------------------------
<S> <C> <C> <C> <C>
Net Income $66,463 $65,937 $194,376 $178,960
Effect of Convertible Debt 0 8 13 34
----------- ----------- ----------- -----------
Fully Diluted Net Income $66,463 $65,945 $194,389 $178,994
=========== =========== =========== ===========
Average Common Shares Outstanding 145,287,296 150,901,045 146,672,598 153,024,040
Dilutive Effect of Stock Options 1,101,311 1,021,261 1,136,341 899,726
----------- ----------- ----------- -----------
Average Common Shares and Common
Share Equivalents -- Primary 146,388,607 151,922,306 147,808,939 153,923,766
Additional Dilutive Effect of Stock Options 72,972 88,805 72,972 87,142
Dilutive Effect of Convertible Debt 2,010 69,737 35,463 92,793
----------- ----------- ----------- -----------
Fully Diluted Shares 146,463,589 152,080,848 147,917,374 154,103,701
=========== =========== =========== ===========
Net Income per Common Share Outstanding $0.46 $0.44 $1.33 $1.17
Primary Earnings per Share $0.45 $0.43 $1.32 $1.16
Fully Diluted Earnings per Share $0.45 $0.43 $1.31 $1.16
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM HUNTINGTON
BANCSHARES INCORPORATED'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED
SEPTEMBER 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 872,300
<INT-BEARING-DEPOSITS> 1,653
<FED-FUNDS-SOLD> 8,868
<TRADING-ASSETS> 11,444
<INVESTMENTS-HELD-FOR-SALE> 4,782,503
<INVESTMENTS-CARRYING> 66,229
<INVESTMENTS-MARKET> 66,655
<LOANS> 13,939,218
<ALLOWANCE> 200,215
<TOTAL-ASSETS> 20,565,805
<DEPOSITS> 13,175,649
<SHORT-TERM> 3,797,739
<LIABILITIES-OTHER> 344,312
<LONG-TERM> 1,690,998
0
0
<COMMON> 1,264,661
<OTHER-SE> 236,423
<TOTAL-LIABILITIES-AND-EQUITY> 20,565,805
<INTEREST-LOAN> 886,656
<INTEREST-INVEST> 232,002
<INTEREST-OTHER> 9,139
<INTEREST-TOTAL> 1,127,797
<INTEREST-DEPOSIT> 342,049
<INTEREST-EXPENSE> 562,085
<INTEREST-INCOME-NET> 565,712
<LOAN-LOSSES> 43,916
<SECURITIES-GAINS> 13,463
<EXPENSE-OTHER> 430,540
<INCOME-PRETAX> 297,622
<INCOME-PRE-EXTRAORDINARY> 194,376
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 194,376
<EPS-PRIMARY> 1.32
<EPS-DILUTED> 1.31
<YIELD-ACTUAL> 4.11
<LOANS-NON> 49,800
<LOANS-PAST> 32,382
<LOANS-TROUBLED> 5,174
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 194,456
<CHARGE-OFFS> 53,923
<RECOVERIES> 13,566
<ALLOWANCE-CLOSE> 200,215
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
