<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 MARCH 31, 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 132,891,485 shares of Registrant's without par value common stock
outstanding on April 30, 1996.
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<TABLE>
<CAPTION>
Part I. Financial Information
1. Financial Statements
- --------------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
- ----------------------------------------------------------------------------------------------------------
(in thousands of dollars) MARCH 31, DECEMBER 31, MARCH 31,
1996 1995 1995
------------ ------------- -----------
<S> <C> <C> <C>
ASSETS
Cash and due from banks.................................. $789,092 $860,958 $896,514
Interest bearing deposits in banks....................... 1,666 284,393 1,366
Trading account securities............................... 13,466 12,924 25,558
Federal funds sold and securities
purchased under resale agreements................... 5,833 197,531 21,125
Mortgages held for sale.................................. 155,528 159,705 117,404
Securities available for sale - at fair value............ 4,954,577 4,721,144 3,442,958
Investment securities - fair value $75,392 ; $69,196;
and $453,454, respectively......................... 74,213 67,604 452,054
Total loans (1).......................................... 13,369,308 13,261,667 12,817,663
Less allowance for loan losses...................... 197,375 194,456 201,088
----------- ------------- -----------
Net loans................................................ 13,171,933 13,067,211 12,616,575
----------- ------------- -----------
Premises and equipment................................... 310,985 296,465 294,512
Customers' acceptance liability.......................... 68,312 56,926 61,300
Accrued income and other assets.......................... 592,377 529,737 491,168
----------- ------------- -----------
TOTAL ASSETS............................................. $20,137,982 $20,254,598 $18,420,534
=========== ============= ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Total deposits (1)....................................... $13,006,213 $12,636,582 $12,188,579
Short-term borrowings.................................... 3,150,974 3,514,773 3,088,467
Bank acceptances outstanding............................. 68,312 56,926 61,300
Long-term debt........................................... 1,985,806 2,103,024 1,253,032
Accrued expenses and other liabilities................... 424,167 424,428 319,527
----------- ------------- -----------
Total Liabilities................................... 18,635,472 18,735,733 16,910,905
----------- ------------- -----------
Shareholders' equity
Preferred stock - authorized 6,617,808 shares;
none outstanding
Common stock - without par value; authorized
200,000,000 shares; issued and outstanding
141,402,769; 141,402,769 ; and 134,400,331
shares, respectively........................... 1,056,209 1,056,209 914,020
Less 8,392,446; 8,351,978; and 1,215,779
treasury shares, respectively.................. (193,213) (180,632) (22,168)
Capital surplus..................................... 241,079 235,802 235,184
Net unrealized (losses) gains on securities
available for sale............................. (3,954) 40,972 (17,806)
Retained earnings................................... 402,389 366,514 400,399
----------- ------------- -----------
Total Shareholders' Equity.......................... 1,502,510 1,518,865 1,509,629
----------- ------------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY............... $20,137,982 $20,254,598 $18,420,534
=========== ============= ===========
<FN>
See notes to consolidated financial statements.
(1) See page 7 for detail of total loans and total deposits.
</TABLE>
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- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(in thousands of dollars, except per share amounts) THREE MONTHS ENDED MARCH 31,
Interest and fee income 1996 1995
----------------------------
<S> <C> <C>
Loans ........................................ $ 290,129 $ 273,109
Securities ................................... 80,653 65,370
Other ........................................ 3,514 3,918
------------ ------------
TOTAL INTEREST INCOME .............. 374,296 342,397
------------ ------------
Interest Expense
Deposits ..................................... 113,535 95,506
Short-term borrowings ........................ 44,537 47,514
Long-term debt ............................... 31,506 23,168
------------ ------------
TOTAL INTEREST EXPENSE ............. 189,578 166,188
------------ ------------
NET INTEREST INCOME ................ 184,718 176,209
------------ ------------
Provision for loan losses ......................... 11,823 4,608
------------ ------------
NET INTEREST INCOME
AFTER PROVISION FOR LOAN LOSSES 172,895 171,601
------------ ------------
Total non-interest income (1) ..................... 68,162 57,887
Total non-interest expense (1) .................... 143,496 144,641
------------ ------------
INCOME BEFORE INCOME TAXES ......... 97,561 84,847
Provision for income taxes ........................ 34,736 29,985
------------ ------------
NET INCOME ......................... $ 62,825 $ 54,862
============ ============
PER COMMON SHARE (2)
Net income ................................... $ 0.47 $ 0.39
Cash dividends declared ...................... $ 0.20 $ 0.19
AVERAGE COMMON SHARES OUTSTANDING ................. 135,054,096 140,192,042
<FN>
See notes to consolidated financial statements.
(1) See page 8 for detail of non-interest income and non-interest expense.
(2) Adjusted for the five percent stock dividend distributed July 31, 1995.
</TABLE>
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- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) NET
UNREALIZED
GAINS
(LOSSES)
COMMON COMMON TREASURY TREASURY CAPITAL ON RETAINED
SHARES STOCK SHARES STOCK SURPLUS SECURITIES EARNINGS TOTAL
- ----------------------------------------------- ------- ------------ -------- ---------- -------- -------- -------- -----------
Three Months Ended March 31, 1995:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, beginning of period 131,120 $ 912,318 (905) ($ 16,577) $215,084 ($63,289) $364,284 $1,411,820
Stock issued for acquisition 3,279 1,690 19,947 (985) 8,474 29,126
Net income 54,862 54,862
Cash dividends declared
($.19 per share) (25,986) (25,986)
Stock options exercised 19 337 116 (398) 55
Treasury shares purchased (957) (17,331) (17,331)
Treasury shares sold:
Shareholder dividend reinvestment plan 425 7,780 6 (792) 6,994
Employee benefit plans 202 3,623 31 (45) 3,609
Conversion of convertible notes 1 12 12
Change in net unrealized gains (losses)
on securities available for sale 46,468 46,468
-------- ----------- -------- --------- -------- -------- -------- ----------
Balance, end of period 134,400 $ 914,020 (1,216) ($ 22,168) $235,184 ($17,806) $400,399 $1,509,629
======== =========== ======== ========= ======== ======== ======== ==========
Three Months Ended March 31, 1996:
Balance, beginning of period 141,403 $ 1,056,209 (8,352) ($180,632) $235,802 $ 40,972 $366,514 $1,518,865
Stock issued for acquisition 4,733 102,760 5,037 107,797
Net income 62,825 62,825
Cash dividends declared
($.20 per share) (26,950) (26,950)
Stock options exercised 19 376 (298) 78
Treasury shares purchased (5,189) (124,313) (124,313)
Treasury shares sold:
Shareholder dividend reinvestment plan 326 7,050 390 7,440
Employee benefit plans 71 1,546 148 1,694
Change in net unrealized gains (losses)
on securities available for sale (44,926) (44,926)
-------- ----------- -------- --------- -------- -------- -------- ----------
Balance, end of period 141,403 $ 1,056,209 (8,392) ($193,213) $241,079 ($ 3,954) $402,389 $1,502,510
======== =========== ======== ========= ======== ======== ======== ==========
</TABLE>
See notes to consolidated financial statements.
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<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
- ----------------------------------------------------------------------------------------------------------
(in thousands of dollars) THREE MONTHS ENDED MARCH 31,
1996 1995
------------ -------------
<S> <C> <C>
OPERATING ACTIVITIES
Net Income ........................................................... $ 62,825 $ 54,862
Adjustments to reconcile net income to net cash
provided by operating activities
Provision for loan losses .................................. 11,823 4,608
Provision for depreciation and amortization ................ 21,178 14,364
Deferred income tax (benefit) expense ...................... (66) 814
Increase in trading account securities ..................... (542) (16,131)
Decrease in mortgages held for sale ........................ 4,177 21,593
Net gains on sales of securities ........................... (7,090) (60)
Decrease (increase) in accrued income receivable ........... 1,199 (3,590)
Net decrease in other assets ............................... 506 14,020
Increase (decrease) in accrued expenses .................... 20,968 (3,703)
Net (decrease) increase in other liabilities ............... (374) 71,222
----------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES .......... 114,604 157,999
----------- ---------
INVESTING ACTIVITIES
Decrease in interest bearing deposits in banks ....................... 282,927 1,693
Proceeds from :
Maturities and calls of investment securities .................... 6,061 24,091
Maturities and calls of securities available for sale ............ 69,208 109,170
Sales of securities available for sale ........................... 1,032,686 603,745
Purchases of securities available for sale ........................... (1,060,567) (664,461)
Proceeds from sales of loans ......................................... 35,657 --
Net loan originations, excluding sales ............................... (37,302) (423,254)
Proceeds from disposal of premises and equipment ..................... 522 111
Purchases of premises and equipment .................................. (11,769) (5,498)
Proceeds from sales of other real estate ............................. 2,299 18,244
Net cash received from purchase of subsidiaries ...................... 631 33,463
----------- ---------
NET CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES 320,353 (302,696)
----------- ---------
FINANCING ACTIVITIES
Decrease in total deposits ........................................... (61,715) (20,322)
(Decrease) increase in short-term borrowings ......................... (377,841) 185,448
Proceeds from issuance of long-term debt ............................. 200,000 50,000
Payment of long-term debt ............................................ (317,275) (11,065)
Dividends paid on common stock ....................................... (26,589) (25,708)
Acquisition of treasury stock ........................................ (124,313) (17,331)
Proceeds from issuance of treasury stock ............................. 9,212 10,658
----------- ---------
NET CASH (USED FOR) PROVIDED BY FINANCING ACTIVITIES (698,521) 171,680
----------- ---------
CHANGE IN CASH AND CASH EQUIVALENTS ................ (263,564) 26,983
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ... 1,058,489 890,656
----------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ......... $ 794,925 $ 917,639
=========== =========
</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 the 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
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.
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.
D. Per common share amounts have been calculated based on the weighted average
number of common shares outstanding in each period, adjusted for the five
percent stock dividend issued July 31, 1995. 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
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- ------------------------------------------------------------
FINANCIAL REVIEW
- ------------------------------------------------------------
LOAN PORTFOLIO COMPOSITION
- ------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------
(in thousands of
dollars) MARCH 31, DECEMBER 31, MARCH 31,
1996 1995 1995
----------- ----------- -----------
<S> <C> <C> <C>
Commercial................................. $ 4,243,363 $ 4,190,237 $ 3,962,921
Real Estate................................
Construction.......................... 374,178 367,889 325,736
Commercial............................ 1,614,090 1,578,891 1,457,381
Residential........................... 1,148,113 1,176,715 1,668,562
Consumer................................... 5,078,645 5,094,036 4,726,277
Lease financing............................ 910,919 853,899 676,786
----------- ----------- -----------
TOTAL LOANS .......................... $13,369,308 $13,261,667 $12,817,663
=========== =========== ===========
</TABLE>
- ------------------------------------------------------------
DEPOSIT COMPOSITION
- ------------------------------------------------------------
<TABLE>
<CAPTION>
(in thousands of dollars) MARCH 31, DECEMBER 31, MARCH 31,
1996 1995 1995
----------- ----------- -----------
<S> <C> <C> <C>
Demand deposits
Non-interest bearing ................. $ 2,010,396 $ 2,088,074 $ 2,147,204
Interest bearing ..................... 2,873,281 2,772,845 2,553,270
Savings deposits .......................... 2,486,925 2,207,378 2,134,725
Certificates of deposit of $100,000 or more 990,825 909,403 725,822
Other domestic time deposits .............. 4,447,207 4,384,949 4,356,152
Foreign time deposits ..................... 197,579 273,933 271,406
----------- ----------- -----------
TOTAL DEPOSITS ....................... $13,006,213 $12,636,582 $12,188,579
=========== =========== ===========
</TABLE>
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- --------------------------------------------------------------------------------
FINANCIAL REVIEW
- --------------------------------------------------------------------------------
ANALYSIS OF NON-INTEREST INCOME
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(in thousands of dollars) THREE MONTHS ENDED
MARCH 31, PERCENT
1996 1995 CHANGE
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Service charges on deposit accounts $22,461 $22,514 (0.24)%
Mortgage banking .................. 8,877 9,573 (7.27)
Trust services .................... 8,793 8,055 9.16
Securities gains .................. 7,090 60 N.M.
Credit card fees .................. 4,836 3,945 22.59
Investment product sales .......... 3,239 1,699 90.64
Electronic banking fees ........... 1,666 954 74.63
Other ............................. 11,200 11,087 1.02
------- -------
TOTAL NON-INTEREST INCOME ......... $68,162 $57,887 17.75%
======= =======
</TABLE>
- --------------------------------------------------------------------------------
ANALYSIS OF NON-INTEREST EXPENSE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(in thousands of dollars) THREE MONTHS ENDED
MARCH 31, PERCENT
1996 1995 CHANGE
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Salaries .......................... $ 55,819 $ 56,108 (0.52)%
Commissions ....................... 3,607 1,688 113.68
Employee benefits ................. 17,216 15,661 9.93
Net occupancy ..................... 10,874 10,686 1.76
Equipment ......................... 9,614 9,802 (1.92)
Credit card ....................... 3,572 3,118 14.56
Printing and supplies ............. 3,495 3,572 (2.16)
Advertising ....................... 2,865 3,031 (5.48)
Legal and loan collection.......... 1,894 2,123 (10.79)
FDIC insurance .................... 519 6,536 (92.06)
Other ............................. 34,021 32,316 5.28
-------- --------
TOTAL NON-INTEREST EXPENSE......... $143,496 $144,641 (0.79)%
======== ========
<FN>
N.M. - Not meaningful
</TABLE>
8
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Management's Discussion and Analysis
- ------------------------------------
OVERVIEW
Huntington reported net income of $62.8 million, or $.47 per share, for
the first quarter of 1996 compared with $54.9 million, or $.39 per share, for
the same period last year. Though Huntington anticipates earnings per share for
all of 1996 to exceed the previous year, the 20.5% increase in the first quarter
is higher than what is expected for the entire year due to net income in the
second half of 1995 being much stronger than last year's first six months.
Returns on average assets and average equity were 1.26% and 16.02%,
respectively, in the most recent quarter versus 1.23% and 15.08% in the first
three months of 1995.
Total assets were $20.1 billion at March 31, 1996, relatively flat with
year end but up 9.3% from one year ago. In terms of asset composition, the
recent quarter end balance sheet reflects a large decrease in temporary
investments from December 31, 1995, that was substantially offset by increases
in securities and loans arising from the acquisition of Peoples Bank of
Lakeland, Florida (Lakeland) in January 1996. The growth in investments from the
first quarter of 1995 was the result of programs directed by Huntington's
Asset/Liability Management Committee (ALCO) in the second half of last year to
neutralize the interest rate risk exposure arising from customer-driven business
sectors. Huntington also experienced solid loan growth over the past twelve
months. Excluding the effects of $340 million of principally fixed-rate
residential mortgage loans that were sold in the recent two quarters, average
total loans increased 8.2%.
Total deposits grew 2.9% from year-end 1995, in large part because of
the Lakeland acquisition, and 6.7% from the same time one year ago. Huntington's
short-term and long-term borrowings decreased during the quarter just ended as a
result of the reduced temporary
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investments referred to above. Borrowings have increased from the end of the
first quarter of last year because of bank notes issued by Huntington and other
funds obtained in the wholesale market to support the higher asset base.
Huntington issued 4.7 million common shares and paid cash of $46.2
million in exchange for all of Lakeland's common shares outstanding. As the
business combination was recorded under the purchase method of accounting, the
results of Lakeland have been included in the consolidated financial statements
from the date of acquisition. The $551 million of assets arising from the
Lakeland transaction brings Huntington's total assets in Central and West Coast
Florida to $1.2 billion.
Shareholders' equity was flat with both December 31 and March 31, 1995.
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 most 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 $184.7 million for the three
months ended March 31, 1996, up from $176.2 million in the same period of 1995.
The increase was principally attributable to growth in earning assets of 10.2%.
The net interest margin was 4.03% during the recent quarter, 5 basis points
higher than the immediately preceding quarter but 23 basis points less than the
first three months of 1995. The lower margin from one year ago was
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<PAGE> 11
the result of increased deposit rates (partially offset by reduced wholesale
funding rates), a reduced yield on the investment securities portfolio, and a
change in the mix of earning assets.
For the quarter just ended, interest rate swaps and other off-balance
sheet financial instruments used for asset/liability management purposes reduced
interest income by $9.1 million and increased interest expense by $6.0 million.
These products decreased interest income by $4.5 million and increased interest
expense by $7.0 million in the same period one year ago. Included in the
preceding amounts is amortization of deferred gains and losses from terminated
contracts, that decreased net interest income by $10.2 million in 1996 and $3.9
million in 1995. Expressed in terms of the margin, the effect of the off-balance
sheet portfolio was a reduction of 33 basis points and 28 basis points for the
respective quarters ended March 31, of which 21 basis points and 10 basis points
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, was $61.1
million for the first three months of 1996 compared with $57.8 million during
the same period one year ago. The 5.7% increase was driven by higher fee income
from retail investment sales, credit cards, trust, and electronic banking
services.
Mortgage banking income was $8.9 million in the first quarter of 1996
versus $9.6 million for the quarter ended March 31, 1995. Net servicing fees
were down $1.2 million due to a reduction in the average volume of loans
serviced for others by Huntington as a result of large servicing sales that
occurred in 1995. The decrease in servicing income was partially offset by
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<PAGE> 12
more origination fees, as mortgage loan production increased from $163 million
in the first three months of 1995 to $355 million in the quarter just ended.
Gains from servicing sales were $4.2 million lower quarter-to-quarter, as
Huntington sold no servicing rights in 1996, compared with $350 million sold in
the same period last year. Substantially mitigating the effect of the reduced
gains from servicing sales were gains from the sale of certain portfolio loans
and the positive impact of a new accounting standard adopted by Huntington in
third quarter 1995 related to the capitalization of mortgage servicing rights.
At the recent quarter end, the mortgage loan servicing portfolio (including
loans serviced by Huntington on its own behalf) totaled $5.7 billion.
Huntington realized income from securities transactions of $7.1
million in the recent quarter. These gains resulted principally from
collateralized mortgage obligations and mortgage backed securities that were
sold to reduce price and/or prepayment risk.
NON-INTEREST EXPENSE
Non-interest expense in the first three months of 1996 was $143.5
million, a slight decline from $144.6 million one year ago. Most major
categories of non-interest expense were flat to down with FDIC insurance showing
the biggest decrease, as Huntington benefited from the reduction in assessment
rates on bank deposits that occurred in the latter part of 1995. This was
largely offset by higher commissions and increased personnel costs related to
corporate-sponsored retirement and benefit programs, as well as certain other
costs following the Lakeland acquisition. Fringe benefit costs are typically
higher early in the year and trend downward in subsequent quarters.
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<PAGE> 13
INTEREST RATE RISK MANAGEMENT
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.
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, price, 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
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<PAGE> 14
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 March 31, 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 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). Net interest income is
expected to increase 1.5% 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 2.7%.
Active interest rate risk management includes the use of various types
of off-balance sheet financial instruments, primarily interest rate swaps. For
example, 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. The swap strategy has
also enabled Huntington to lower the costs of raising wholesale funds.
Other off-balance sheet financial instruments used to control risk
effectively include financial futures, interest rate caps and floors, options,
and forward rate agreements. These instruments are used regularly in mortgage
banking, securities investing, and wholesale funding. The use of these products
versus similar cash instruments is often preferable because, though
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<PAGE> 15
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 March 31,
1996, forward rates were somewhat higher than those prevailing at the recent
year end. Consequently, the interest rate swap portfolio ended the first quarter
with an unrealized loss of $9.5 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 Average Rate
Notional Maturity Market --------------
(dollars in millions) Value (years) Value Receive Pay
- --------------------- ----- ------- ----- ------- ---
<S> <C> <C> <C> <C> <C>
March 31, 1996:
ASSET CONVERSION SWAPS
Receive fixed $ 875 2.32 $ (3.5) 5.70% 5.39%
Receive fixed-amortizing 99 2.25 (1.1) 5.27 5.50
------ -------
TOTAL ASSET CONVERSION SWAPS $ 974 2.31 $ (4.6) 5.65% 5.40%
====== =======
LIABILITY CONVERSION SWAPS
Receive fixed $1,401 2.71 $ 12.7 5.90% 5.40%
Receive fixed-amortizing 197 3.25 (4.6) 5.63 5.40
Pay fixed 1,801 .46 (12.7) 5.48 7.15
------ -------
TOTAL LIABILITY CONVERSION SWAPS $3,399 1.55 $ (4.6) 5.67% 6.33%
====== =======
BASIS PROTECTION SWAPS $ 250 2.95 $ (.3) 5.38% 5.58%
====== =======
</TABLE>
15
<PAGE> 16
The pay rates on Huntington's receive fixed swaps vary based on movements in
the applicable London inter-bank offered rate (LIBOR). Receive fixed liability
conversion swaps with a notional value of $150 million have embedded written
LIBOR-based caps. Also, receive fixed asset conversion swaps with a notional
value of $200 million have embedded written LIBOR-based call options. 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 March 31,
1996, Huntington's credit risk from interest rate swaps used for asset/liability
management purposes was $42.2 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, 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
16
<PAGE> 17
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 following table summarizes activity in the interest rate swap portfolio
used for asset/liability management purposes during the first three months of
1996 and 1995:
<TABLE>
<CAPTION>
Asset Liability Basis
Conversion Conversion Protection
---------------------------------
(in millions)
<S> <C> <C> <C>
Balance at December 31, 1995 $ 1,115 $ 3,142 $ 250
Additions 175 500 --
Maturities/Amortization (13) (243) --
Terminations (303) -- --
------- ------- -------
Balance at March 31, 1996 $ 974 $ 3,399 $ 250
======= ======= =======
Balance at December 31, 1994 $ 2,508 $ 3,332 $ 1,000
Additions -- 525 --
Maturities/Amortization (31) (100) (300)
Terminations -- (34) --
------- ------- -------
Balance at March 31, 1995 $ 2,477 $ 3,723 $ 700
======= ======= =======
</TABLE>
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. At March
31, 1996, Huntington had deferred approximately $27.8 million of net realized
losses from terminated interest rate swaps, which are to be amortized as yield
adjustments over the remaining term of the original contracts, as presented
below.
17
<PAGE> 18
<TABLE>
<CAPTION>
Amortizing In
--------------------------------------
1996 1997 1998 1999 Total
---- ---- ---- ---- -----
(in millions)
<S> <C> <C> <C> <C> <C>
MARCH 31, 1996:
Deferred gains $ 10.6 $ 8.3 $ 7.0 $ 5.7 $ 31.6
Deferred losses (38.3) (19.4) (1.3) (.4) (59.4)
------- ------- ------ ------ -------
Net (losses) gains $ (27.7) $ (11.1) $ 5.7 $ 5.3 $ (27.8)
======= ======= ====== ====== =======
</TABLE>
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 $452 million at March 31, 1996. Total
credit exposure from such contracts, represented by those instruments with a
positive fair value, was $1.3 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
underwriting standards which 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 $63.1
million at the most recent quarter end and represented .47% of
18
<PAGE> 19
total loans. 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
$25.8 million at March 31, 1996, are primarily consumer and residential real
estate loans that are considered well-secured and in the process of collection
or are being extended.
Other real estate owned (ORE) totaled $20.3 million at the end of the first
three months of 1996, down from $26.6 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. The provision for loan losses was $11.8 million in the first three
months of 1996 versus $4.6 million in the same period one year ago. Annualized
net charge-offs as a percent of average total loans were .34% for the quarter
just ended, roughly flat with full year 1995. At the recent quarter end, the ALL
represented 1.48% of total loans and covered 312.8% of non-performing loans;
when combined with the allowance for other real estate, it was 225% 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. The company also recognizes the
importance of managing excess capital and continually strives to maintain an
19
<PAGE> 20
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 7.89% in the first quarter of 1996,
compared with 8.15% in the same period last year. Presented below are
Huntington's regulatory capital ratios and the related levels established for
"well-capitalized" institutions:
<TABLE>
<CAPTION>
March 31, 1996 "Well Capitalized"
-------------- ------------------
<S> <C> <C>
Tier 1 risk-based capital 7.94% 6.00%
Total risk-based capital 11.53 10.00
Leverage 6.62 5.00
</TABLE>
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 5.2 million shares in the quarter just ended at an aggregate
cost of $124.3 million, leaving 8.7 million shares available for repurchase.
Huntington's management believes the remaining authorized shares will be
repurchased by the end of 1997.
20
<PAGE> 21
<TABLE>
<CAPTION>
_____________________________________________________________________________________
CONSOLIDATED FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------------------------
(in thousands of dollars, except per share amounts)
- -------------------------------------------- ----------- ----------- ---------
THREE MONTHS ENDED MARCH 31, 1996 1995 % CHANGE
----------- ----------- ---------
<S> <C> <C> <C>
NET INCOME.................................. $62,825 $54,862 14.5 %
PER COMMON SHARE AMOUNTS (1)...............
Net income............................. $0.47 $0.39 20.5
Cash dividends declared................ $0.20 $0.19 5.3
AVERAGE SHARES OUTSTANDING (1)............. 135,054,096 140,192,042 (3.7)
KEY RATIOS
Return on:
Average total assets................... 1.26% 1.23% 2.4
Average shareholders' equity........... 16.02% 15.08% 6.2
Efficiency ratio............................ 58.24% 61.90% (5.9)
Average equity/average assets............... 7.89% 8.15% (3.2)
Net Interest Margin......................... 4.03% 4.26% (5.4)
- -------------------------------------------- ----------- ----------- ---------
AT MARCH 31, 1996 1995 % CHANGE
----------- ----------- ---------
Total Loans................................. $13,369,308 $12,817,663 4.3 %
Total Deposits.............................. $13,006,213 $12,188,579 6.7
Total Assets................................ $20,137,982 $18,420,534 9.3
Shareholders' Equity........................ $1,502,510 $1,509,629 (0.5)
Period-End Shares Outstanding (1)........... 133,010,323 139,843,779 (4.9)
Shareholders' Equity Per Common Share (1)... $11.30 $10.80 4.6
Total Risk-Adjusted Assets.................. $16,618,923 $14,895,301 11.6
Tier 1 Risk-Based Capital Ratio............. 7.94% 9.58% (17.1)
Total Risk-Based Capital Ratio.............. 11.53% 13.51% (14.7)
Tier 1 Leverage Ratio....................... 6.62% 7.81% (15.2)
<FN>
(1) Adjusted for the five percent stock dividend distributed July 31, 1995.
</TABLE>
21
<PAGE> 22
<TABLE>
<CAPTION>
__________________________________________________________________________________
FINANCIAL REVIEW
- ------------------------------------------------------------------------------------------------------------
INVESTMENT SECURITIES - AMORTIZED COST & FAIR VALUES BY MATURITY AT MARCH 31, 1996 AND DECEMBER 31, 1995
- ----------------------------------------------------------------------------------------------------------
(in thousands of dollars) MARCH 31, 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................... 29,488 29,805 27,340 27,592
1-5 years...................... 21,924 22,552 23,637 24,496
6-10 years..................... 18,619 18,789 12,638 13,040
Over 10 years.................. 4,026 4,090 3,833 3,912
------- ------- ------- -------
Total....................... 74,057 75,236 67,448 69,040
------- ------- ------- -------
Total Investment Securities......... $74,213 $75,392 $67,604 $69,196
======= ======= ======= =======
</TABLE>
22
<PAGE> 23
<TABLE>
<CAPTION>
_______________________________________________________________________________
FINANCIAL REVIEW
- -----------------------------------------------------------------------------------------------------------------------
SECURITIES AVAILABLE FOR SALE - AMORTIZED COST & FAIR VALUES BY MATURITY AT MARCH 31, 1996 AND DECEMBER 31, 1995
- -----------------------------------------------------------------------------------------------------------------------
(in thousands of dollars) MARCH 31, 1996 December 31, 1995
- -----------------------------------------------------------------------------------------------------------------------
AMORTIZED COST FAIR VALUE Amortized Cost Fair Value
_______________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
U.S. Treasury
Under 1 year......................... $178,980 $180,191 $176,502 $178,264
1-5 years............................ 525,996 517,515 228,234 231,018
6-10 years........................... 162,265 153,987 162,352 160,596
---------- ---------- ---------- ----------
Total............................. 867,241 851,693 567,088 569,878
---------- ---------- ---------- ----------
Federal agencies
Mortgage-backed securities
Under 1 year......................... 1,156 1,167 1,097 1,124
1-5 years............................ 81,432 84,440 110,192 114,723
6-10 years........................... 819,997 821,075 712,804 724,317
Over 10 years........................ 7,822 8,187 58,762 60,695
---------- ---------- ---------- ----------
Total............................. 910,407 914,869 882,855 900,859
---------- ---------- ---------- ----------
Other agencies
Under 1 year......................... 123,365 124,413 53,912 54,499
1-5 years............................ 1,819,936 1,821,039 1,928,431 1,953,446
6-10 years........................... 199,152 197,355 234,393 234,920
Over 10 years........................ 472,981 472,046 509,735 514,568
---------- ---------- ---------- ----------
Total............................. 2,615,434 2,614,853 2,726,471 2,757,433
---------- ---------- ---------- ----------
Total U.S. Treasury and Federal agencies.. 4,393,082 4,381,415 4,176,414 4,228,170
---------- ---------- ---------- ----------
Other
Under 1 year......................... 951 983 6,818 6,826
1-5 years............................ 20,471 21,450 22,352 23,578
6-10 years........................... 261,260 267,799 230,651 240,965
Over 10 years........................ 276,951 275,972 212,950 214,605
Marketable equity securities......... 8,359 6,958 8,359 7,000
---------- ---------- ---------- ----------
Total............................. 567,992 573,162 481,130 492,974
---------- ---------- ---------- ----------
Total Securities Available for Sale....... $4,961,074 $4,954,577 $4,657,544 $4,721,144
========== ========== ========== ==========
</TABLE>
23
<PAGE> 24
<TABLE>
<CAPTION>
________________________________________________________________________________
FINANCIAL REVIEW
____________________________________________________________________________________________________________________________
LOAN LOSS EXPERIENCE
____________________________________________________________________________________________________________________________
(in thousands of dollars) 1996 1995
-------------------------------------------------------------------
IQ IVQ IIIQ IIQ IQ
-------- ----------------------------------------------------
<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR LOAN LOSSES, BEGINNING OF PERIOD ..... $194,456 $198,573 $198,264 $201,088 $200,492
Loan losses ........................................ (15,707) (21,500) (13,557) (10,718) (9,793)
Recoveries of loans previously charged off ......... 4,603 3,494 3,222 3,312 3,956
Provision for loan losses .......................... 11,823 12,139 7,187 4,787 4,608
Allowance of assets acquired (sold)/other .......... 2,200 1,750 3,457 (205) 1,825
-------- -------- ---------- -------- ---------
ALLOWANCE FOR LOAN LOSSES, END OF PERIOD ........... $197,375 $194,456 $198,573 $198,264 $201,088
======== ======== ========== ======== =========
AS A % OF AVERAGE TOTAL LOANS
Net loan losses -- annualized .................... 0.34% 0.53% 0.31% 0.23% 0.19%
Provision for loan losses -- annualized .......... 0.36% 0.36% 0.22% 0.15% 0.15%
Allowance for loan losses as a % of total loans .... 1.48% 1.47% 1.48% 1.51% 1.57%
Net loan loss coverage (1) ......................... 9.85x 6.19x 10.54x 13.15x 15.33x
(1) Income before taxes and the provision for loan losses to net loan losses.
____________________________________________________________________________________________________________________________
NON-PERFORMING ASSETS AND PAST DUE LOANS
(Quarter-End) 1996 1995
(in thousands of dollars) -------------------------------------------------------------------
IQ IVQ IIIQ IIQ IQ
-------- ----------------------------------------------------
Non-accrual loans .................................. $57,530 $50,669 $41,997 $41,554 $41,576
Renegotiated loans ................................. 5,578 4,299 4,313 13,424 11,568
-------- -------- ---------- -------- ---------
TOTAL NON-PERFORMING LOANS ......................... 63,108 54,968 46,310 54,978 53,144
-------- -------- ---------- -------- ---------
Other real estate, net ............................. 20,386 22,026 23,668 24,029 26,558
-------- -------- ---------- -------- ---------
TOTAL NON-PERFORMING ASSETS ........................ $83,494 $76,994 $69,978 $79,007 $79,702
======== ======== ========== ========= =========
NON-PERFORMING LOANS AS A
% OF TOTAL LOANS ................................. 0.47% 0.41% 0.34% 0.42% 0.41%
NON-PERFORMING ASSETS AS A
% OF TOTAL LOANS AND OTHER REAL ESTATE ........... 0.62% 0.58% 0.52% 0.60% 0.62%
ALLOWANCE FOR LOAN LOSSES AS A % OF
NON-PERFORMING LOANS ............................. 312.76% 353.76% 428.79% 360.62% 378.38%
ALLOWANCE FOR LOAN LOSSES AND OTHER REAL
ESTATE AS A % OF NON-PERFORMING ASSETS ........... 225.01% 238.65% 263.26% 234.30% 235.10%
ACCRUING LOANS PAST DUE 90 DAYS OR MORE ............ $25,824 $27,018 $24,001 $20,685 $19,771
======== ======== ========= ======== ========
</TABLE>
24
<PAGE> 25
_____________________________________________________________________________
CONSOLIDATED AVERAGE BALANCES AND INTEREST RATES (QUARTERLY DATA)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Fully Tax Equivalent Basis (1) 1ST QUARTER 1996 4TH QUARTER 1995
(in millions of dollars) ------------------ -------------------
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE RATE BALANCE RATE
------------------ -------------------
<S> <C> <C> <C>
ASSETS
Interest bearing deposits in banks................................. $39 5.70 % $74 6.10 %
Trading account securities......................................... 19 5.64 20 6.88
Federal funds sold and securities purchased ....................... 27 6.19 48 5.52
under resale agreements
Mortgages held for sale............................................ 127 7.18 129 6.78
Securities:
Taxable....................................................... 4,835 6.55 4,550 6.74
Tax exempt.................................................... 106 9.09 110 10.04
-------- --------
Total Securities......................................... 4,941 6.60 4,660 6.82
-------- --------
Loans
Commercial.................................................... 4,212 7.76 4,178 7.91
Real Estate
Construction............................................. 364 8.52 369 8.54
Mortgage................................................. 2,760 8.48 3,011 8.56
Consumer...................................................... 5,079 8.99 5,099 8.97
Lease Financing.............................................. 880 7.90 826 7.93
-------- --------
Total Loans.............................................. 13,295 8.41 13,483 8.53
Allowance for loan losses................................ 198 198
-------- --------
Net loans................................................ 13,097 8.87 13,285 8.93
-------- --------
Total earning assets..................................... 18,448 8.14 % 18,414 8.26 %
-------- --------
Cash and due from banks............................................ 746 766
All other assets................................................... 988 895
-------- --------
TOTAL ASSETS....................................................... $19,984 $19,877
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Demand deposits
Non-interest bearing.......................................... $2,391 $2,241
Interest bearing.............................................. 2,506 2.53 % 2,514 2.48 %
Savings deposits................................................... 2,249 3.03 2,084 2.93
Certificates of deposit of $100,000 or more........................ 977 5.52 926 5.68
Other domestic time deposits....................................... 4,458 5.69 4,458 5.76
Foreign time deposits.............................................. 268 6.15 189 6.50
-------- -------
Total deposits................................................ 12,849 4.36 12,412 4.38
-------- --------
Short-term borrowings.............................................. 3,078 5.72 3,682 5.91
Long-term debt..................................................... 2,016 6.20 1,850 6.76
-------- --------
Interest bearing liabilities.................................. 15,552 4.87 % 15,703 5.02 %
-------- --------
All other liabilities.............................................. 464 447
Shareholders' equity............................................... 1,577 1,486
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $19,984 $19,877
======== ========
Net interest rate spread........................................... 3.27 % 3.24 %
Impact of non-interest bearing funds on margin..................... 0.76 % 0.74 %
NET INTEREST MARGIN................................................ 4.03 % 3.98 %
<FN>
(1) Fully tax equivalent yields are calculated assuming a 35% tax rate.
</TABLE>
25
<PAGE> 26
CONSOLIDATED AVERAGE BALANCES AND INTEREST RATES (QUARTERLY DATA)
<TABLE>
<CAPTION>
__________________________________________________________________________________________________________________________________
Fully Tax Equivalent Basis (1) 3RD QUARTER 1995 2ND QUARTER 1995 1ST QUARTER 1995
(in millions of dollars) ----------------- ----------------- -------------------
AVERAGE YIELD/ AVERAGE YIELD/ AVERAGE YIELD/
BALANCE RATE BALANCE RATE BALANCE RATE
----------------- ----------------- -------------------
<S> <C> <C> <C>
Assets
Interest bearing deposits in banks............................ $2 5.73 % $3 5.03 % $3 4.50 %
Trading account securities.................................... 24 7.54 23 8.07 27 6.68
Federal funds sold and securities purchased under
resale agreement........................................... 22 7.49 70 6.70 45 6.56
Mortgages held for sale....................................... 174 7.73 109 7.52 106 8.42
Securities:
Taxable.................................................. 4,473 6.76 3,913 6.75 3,819 6.63
Tax exempt............................................... 118 10.55 127 10.29 140 10.28
------- ------- -------
Total Securities.................................... 4,591 6.86 4,040 6.86 3,959 6.75
------- ------- -------
Loans
Commercial............................................... 4,099 8.13 4,082 8.58 3,832 8.68
Real Estate
Construction........................................ 349 8.68 324 8.38 315 8.57
Mortgage............................................ 3,058 8.59 3,100 8.20 3,111 8.09
Consumer................................................. 4,979 9.05 4,805 8.90 4,678 8.58
Lease Financing......................................... 747 7.53 690 7.43 660 7.24
------- ------- -------
Total Loans......................................... 13,232 8.56 13,001 8.54 12,596 8.42
Allowance for loan losses........................... 198 201 203
------- ------- -------
Net loans........................................... 13,034 9.04 12,800 9.00 12,393 8.87
------- ------- -------
Total earning assets................................ 18,045 8.37 % 17,246 8.38 % 16,736 8.26 %
------- ------- -------
Cash and due from banks....................................... 783 796 774
All other assets.............................................. 876 838 798
------- ------- -------
Total Assets.................................................. $19,506 $18,679 $18,105
======= ======= =======
Liabilities and Shareholders' Equity
Demand deposits
Non-interest bearing..................................... $2,194 $2,159 $2,119
Interest bearing......................................... 2,488 2.45 % 2,533 2.45 % 2,622 2.42 %
Savings deposits.............................................. 2,020 2.76 2,013 2.68 2,097 2.62
Certificates of deposit of $100,000 or more................... 878 5.78 770 5.84 671 5.59
Other domestic time deposits.................................. 4,467 5.69 4,447 5.54 4,156 5.14
Foreign time deposits......................................... 318 6.32 264 6.57 274 6.31
------- ------- -------
Total deposits........................................... 12,365 4.34 12,186 4.24 11,939 3.94
------- ------- -------
Short-term borrowings......................................... 3,786 5.96 3,348 6.13 3,137 5.99
Long-term debt................................................ 1,403 6.36 1,208 7.23 1,246 7.44
------- ------- -------
Interest bearing liabilities............................. 15,360 4.92 % 14,583 4.93 % 14,203 4.71 %
------- ------- -------
All other liabilities......................................... 416 390 308
Shareholders' equity.......................................... 1,536 1,547 1,475
------- ------- -------
Total Liabilities and Shareholders' Equity $19,506 $18,679 $18,105
======= ======= =======
Net interest rate spread...................................... 3.45 % 3.45 % 3.55 %
Impact of non-interest bearing funds on margin................ 0.73 % 0.76 % 0.71 %
Net Interest Margin........................................... 4.18 % 4.21 % 4.26 %
<FN>
(1) Fully tax equivalent yields are calculated assuming a 35% tax
</TABLE>
26
<PAGE> 27
_______________________________________________
SELECTED QUARTERLY INCOME STATEMENT DATA
<TABLE>
<CAPTION>
_________________________________________________________________________________________________________
1996 1995
---- ------------------------------------------
(in thousands of dollars, except per share amounts) IQ IVQ IIIQ IIQ IQ
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
TOTAL INTEREST INCOME.................... $374,296 $381,437 $377,859 $360,203 $342,397
TOTAL INTEREST EXPENSE................... 189,578 199,551 191,281 180,313 166,188
-------- -------- -------- -------- --------
NET INTEREST INCOME...................... 184,718 181,886 186,578 179,890 176,209
Provision for loan losses................ 11,823 12,139 7,187 4,787 4,608
-------- -------- -------- -------- --------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES.............. 172,895 169,747 179,391 175,103 171,601
-------- -------- -------- -------- --------
Service charges on deposit accounts...... 22,461 21,008 21,109 20,487 22,514
Mortgage banking ........................ 8,877 9,752 8,274 6,613 9,573
Trust services .......................... 8,793 7,424 7,312 7,586 8,055
Securities gains ........................ 7,090 302 2,315 6,379 60
Credit card fees ........................ 4,836 5,450 4,669 4,399 3,945
Investment product sales ................ 3,239 2,292 2,159 1,971 1,699
Electronic banking fees ................. 1,666 1,740 1,270 1,068 954
Other ................................... 11,200 18,830 12,692 10,021 11,087
-------- -------- -------- -------- --------
TOTAL NON-INTEREST INCOME ............... 68,162 66,798 59,800 58,524 57,887
-------- -------- -------- -------- --------
Salaries ................................ 55,819 54,695 54,391 54,974 56,108
Commissions ............................. 3,607 3,149 3,074 1,932 1,688
Employee benefits ....................... 17,216 12,752 13,958 15,419 15,661
Net occupancy ........................... 10,874 10,459 10,039 10,079 10,686
Equipment ............................... 9,614 9,406 9,470 9,593 9,802
Credit card ............................. 3,572 3,695 3,398 3,196 3,118
Printing and supplies ................... 3,495 3,705 3,508 3,362 3,572
Advertising ............................. 2,865 2,179 3,149 2,912 3,031
Legal and loan collection ............... 1,894 2,758 1,857 1,905 2,123
FDIC insurance .......................... 519 1,820 151 6,549 6,536
Other ................................... 34,021 32,646 34,451 31,131 32,316
-------- -------- -------- -------- --------
TOTAL NON-INTEREST EXPENSE .............. 143,496 137,264 137,446 141,052 144,641
-------- -------- -------- -------- --------
INCOME BEFORE INCOME TAXES .............. 97,561 99,281 101,745 92,575 84,847
Provision for income taxes .............. 34,736 33,752 35,808 34,414 29,985
-------- -------- -------- -------- --------
NET INCOME .............................. $62,825 $65,529 $65,937 $58,161 $54,862
======== ======== ======== ======== ========
PER COMMON SHARE (1)
Net income ............................ $0.47 $0.49 $0.48 $0.42 $0.39
Cash dividends declared ............... $0.20 $0.20 $0.20 $0.19 $0.19
FULLY TAX EQUIVALENT MARGIN:
Net Interest Income ..................... $184,718 $181,886 $186,578 $179,890 $176,209
Tax Equivalent Adjustment (2) ........... 1,368 1,523 1,635 1,723 1,885
-------- -------- -------- -------- --------
Tax Equivalent Net Interest Income $186,086 $183,409 $188,213 $181,613 $178,094
======== ======== ======== ======== ========
<FN>
(1) Adjusted for the five percent stock dividend distributed July 31, 1995.
(2) Calculated assuming a 35% tax rate.
</TABLE>
27
<PAGE> 28
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, filed with the State Department of Assessments and
Taxation of the State of Maryland on May 3, 1996.
( 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 January 10, 1996, was filed under
report item numbers 5 and 7, concerning Huntington's results of
operations for the fourth quarter and year ended December 31,
1995.
28
<PAGE> 29
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: May 15, 1996 /s/ Ralph K. Frasier
--------------------
Ralph K. Frasier
General Counsel and Secretary
Date: May 15, 1996 /s/ John D. Van Fleet
---------------------
John D. Van Fleet
Senior Vice President, Corporate Controller, and Principal
Accounting Officer (Chief Accounting Officer)
29
<PAGE> 1
EXHIBIT 3.(i)(b)
HUNTINGTON BANCSHARES INCORPORATED
ARTICLES OF AMENDMENT
TO ARTICLES OF RESTATEMENT OF CHARTER
Huntington Bancshares Incorporated, a Maryland corporation having its
principal office in Baltimore City, Maryland (the "Corporation"), hereby
certifies to the State Department of Assessments and Taxation of the State of
Maryland that:
FIRST: ARTICLE FIFTH of the Charter of the Corporation is hereby
amended by striking out the first paragraph of ARTICLE FIFTH, and
inserting in lieu thereof the following:
"FIFTH: The total number of shares of all classes of
stock which the Corporation shall have authority to issue
is 306,617,808 shares, of which 300,000,000 shares shall
be Common Stock, without par value, and 6,617,808
shares shall be Serial Preferred Stock, without par value."
SECOND: The Board of Directors of the Corporation, by resolutions
adopted at a meeting duly convened and held on January 17, 1996,
advised the foregoing amendment and directed that it be submitted for
consideration at a meeting of the stockholders entitled to vote
thereon.
THIRD: Notice, calling a meeting of the stockholders of the
Corporation, describing the foregoing amendment and stating that a
purpose of the meeting of the stockholders would be to take action
thereon, was given as required by law to all stockholders entitled to
vote thereon or to receive notice thereof. The foregoing amendment was
approved by the stockholders of the Corporation at a meeting held on
April 25, 1996, by the requisite vote under the Charter of the
Corporation and the laws of the State of Maryland.
FOURTH: The amendment of the Charter of the Corporation, as set forth
above, has been duly advised by the Board of Directors and approved by
the stockholders of the Corporation.
FIFTH: (a) The total number of shares of all classes of stock which the
Corporation was heretofore authorized to issue was 206,617,808 shares,
of which 200,000,000 shares were Common Stock, without par value, and
6,617,808 shares were Serial Preferred Stock, without par value. The
total number of shares of all classes of stock which the Corporation is
authorized to issue is increased by this
<PAGE> 2
amendment to 306,617,808 shares, of which 300,000,000 shares are Common
Stock, without par value, and 6,617,808 shares are Serial Preferred
Stock, without par value.
(b) The description of each class of stock which the
Corporation is authorized to issue has not been changed by this
amendment.
IN WITNESS WHEREOF, Huntington Bancshares Incorporated has caused these
presents to be signed in its name and on its behalf by its President and
Secretary, and its corporate seal to be affixed hereto on May 3, 1996.
HUNTINGTON BANCSHARES INCORPORATED
/s/ Zuheir Sofia
-----------------------
By: Zuheir Sofia, President
ATTEST:
/s/ Ralph K. Frasier [SEAL]
- ---------------------------
Ralph K. Frasier, Secretary
CERTIFICATE OF PRESIDENT
The undersigned, Zuheir Sofia, President of Huntington Bancshares
Incorporated, having executed the foregoing Articles of Amendment for and on
behalf of the Corporation, hereby acknowledges the Articles of Amendment to be
the corporate act of the Corporation and further certifies under penalty of
perjury that, to the best of his knowledge, information, and belief, the matters
and facts set forth herein with respect to approval hereof are true in all
material respects.
/s/ Zuheir Sofia
-----------------------
Zuheir Sofia
<PAGE> 1
Exhibit 11
Huntington Bancshares Incorporated
Computation of Earnings Per Share
For Periods Ended March 31, 1996, and 1995
( in thousands of dollars, except per share amounts )
<TABLE>
<CAPTION>
Period Ended March 31, 1996 1995
----------- -----------
<S> <C> <C>
Net Income $62,825 $54,862
Effect of Convertible Debt 6 13
----------- -----------
Fully Diluted Net Income $62,831 $54,875
=========== ===========
Average Common Shares Outstanding 135,054,096 140,192,042
Dilutive Effect of Stock Options 1,058,336 779,532
----------- -----------
Average Common Shares and Common
Share Equivalents -- Primary 136,112,432 140,971,574
Additional Dilutive Effect of Stock Options 19,381 15,127
Dilutive Effect of Convertible Debt 47,445 94,849
----------- -----------
Fully Diluted Shares 136,179,258 141,081,550
=========== ===========
Net Income per Common Share Outstanding $0.47 $0.39
Primary Earnings per Share $0.46 $0.39
Fully Diluted Earnings per Share $0.46 $0.39
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM HUNTINGTON
BANCSHARES INCORPORATED'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED
MARCH 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 789,092
<INT-BEARING-DEPOSITS> 1,666
<FED-FUNDS-SOLD> 5,833
<TRADING-ASSETS> 13,466
<INVESTMENTS-HELD-FOR-SALE> 4,954,577
<INVESTMENTS-CARRYING> 74,213
<INVESTMENTS-MARKET> 75,392
<LOANS> 13,369,308
<ALLOWANCE> 197,375
<TOTAL-ASSETS> 20,137,982
<DEPOSITS> 13,006,213
<SHORT-TERM> 3,150,974
<LIABILITIES-OTHER> 424,167
<LONG-TERM> 1,985,806
<COMMON> 1,056,209
0
0
<OTHER-SE> 446,301
<TOTAL-LIABILITIES-AND-EQUITY> 20,137,982
<INTEREST-LOAN> 290,129
<INTEREST-INVEST> 80,653
<INTEREST-OTHER> 3,514
<INTEREST-TOTAL> 374,296
<INTEREST-DEPOSIT> 113,535
<INTEREST-EXPENSE> 189,578
<INTEREST-INCOME-NET> 184,718
<LOAN-LOSSES> 11,823
<SECURITIES-GAINS> 7,090
<EXPENSE-OTHER> 143,496
<INCOME-PRETAX> 97,561
<INCOME-PRE-EXTRAORDINARY> 62,825
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 62,825
<EPS-PRIMARY> .46
<EPS-DILUTED> .46
<YIELD-ACTUAL> 4.03
<LOANS-NON> 57,530
<LOANS-PAST> 25,824
<LOANS-TROUBLED> 5,578
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 194,456
<CHARGE-OFFS> 15,707
<RECOVERIES> 4,603
<ALLOWANCE-CLOSE> 197,375
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
