<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 JUNE 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 145,232,747 shares of Registrant's without par value common stock
outstanding on July 31, 1996.
1
<PAGE> 2
PART I. FINANCIAL INFORMATION
1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(in thousands of dollars) JUNE 30, DECEMBER 31, JUNE 30,
1996 1995 1995
---- ---- ----
<S> <C> <C> <C>
ASSETS
Cash and due from banks ............................ $ 842,384 $ 860,958 $ 861,240
Interest bearing deposits in banks ................. 2,488 284,393 2,746
Trading account securities ......................... 10,935 12,924 18,003
Federal funds sold and securities
purchased under resale agreements ............. 463,295 197,531 6,307
Mortgages held for sale ............................ 112,328 159,705 168,711
Securities available for sale - at fair value ...... 4,368,844 4,721,144 4,098,801
Investment securities - fair value $67,226; $69,196;
and $434,696 respectively .................... 66,796 67,604 431,862
Total loans (1) .................................... 13,688,675 13,261,667 13,137,593
Less allowance for loan losses ................ 196,486 194,456 198,264
------------ ------------ ------------
Net loans .......................................... 13,492,189 13,067,211 12,939,329
------------ ------------ ------------
Premises and equipment ............................. 312,702 296,465 293,005
Customers' acceptance liability .................... 54,830 56,926 56,680
Accrued income and other assets .................... 594,375 529,737 494,084
------------ ------------ ------------
TOTAL ASSETS ....................................... $ 20,321,166 $ 20,254,598 $ 19,370,768
============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Total deposits (1) ................................. $ 13,112,831 $ 12,636,582 $ 12,518,517
Short-term borrowings .............................. 3,440,075 3,514,773 3,681,085
Bank acceptances outstanding ....................... 54,830 56,926 56,680
Long-term debt ..................................... 1,897,287 2,103,024 1,171,089
Accrued expenses and other liabilities ............. 340,847 424,428 371,354
------------ ------------ ------------
Total Liabilities ............................. 18,845,870 18,735,733 17,798,725
------------ ------------ ------------
Shareholders' equity
Preferred stock - authorized 6,617,808 shares;
none outstanding
Common stock - without par value; authorized
300,000,000 shares; issued and outstanding
141,402,769; 141,402,769; and 134,631,285
shares, respectively ..................... 1,056,209 1,056,209 915,764
Less 8,641,865; 8,351,978; and 1,819,475
treasury shares, respectively ............ (199,619) (180,632) (34,359)
Capital surplus ............................... 239,396 235,802 235,471
Net unrealized (losses) gains on securities
available for sale ....................... (61,603) 40,972 24,052
Retained earnings ............................. 440,913 366,514 431,115
------------ ------------ ------------
Total Shareholders' Equity .................... 1,475,296 1,518,865 1,572,043
------------ ------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ......... $ 20,321,166 $ 20,254,598 $ 19,370,768
============ ============ ============
</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 THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
share amounts)
Interest and fee income 1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Loans ............................. $ 295,639 $ 288,058 $ 585,768 $ 561,167
Securities ........................ 76,575 68,095 157,228 133,465
Other ............................. 2,865 4,050 6,379 7,968
------------ ------------ ------------ ------------
TOTAL INTEREST INCOME .......... 375,079 360,203 749,375 702,600
------------ ------------ ------------ ------------
Interest Expense
Deposits .......................... 112,959 106,152 226,494 201,658
Short-term borrowings ............. 41,743 52,195 86,280 99,709
Long-term debt .................... 31,084 21,966 62,590 45,134
------------ ------------ ------------ ------------
TOTAL INTEREST EXPENSE .......... 185,786 180,313 375,364 346,501
------------ ------------ ------------ ------------
NET INTEREST INCOME ............. 189,293 179,890 374,011 356,099
------------ ------------ ------------ ------------
Provision for loan losses ........... 11,843 4,787 23,666 9,395
------------ ------------ ------------ ------------
NET INTEREST INCOME
AFTER PROVISION FOR LOAN LOSSES 177,450 175,103 350,345 346,704
------------ ------------ ------------ ------------
Total non-interest income (1) ....... 67,176 58,524 135,338 116,411
Total non-interest expense (1 ....... 145,466 141,052 288,962 285,693
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES ...... 99,160 92,575 196,721 177,422
------------ ------------ ------------ ------------
Provision for income taxes .......... 34,072 34,414 68,808 64,399
------------ ------------ ------------ ------------
NET INCOME ...................... $ 65,088 $ 58,161 $ 127,913 $ 113,023
============ ============ ============ ============
PER COMMON SHARE (2)
Net income ..................... $ 0.45 $ 0.38 $ 0.87 $ 0.73
Cash dividends declared ........ $ 0.18 $ 0.17 $ 0.36 $ 0.34
AVERAGE COMMON SHARES OUTSTANDING ... 146,205,121 153,996,205 147,382,313 154,103,132
</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 issued July 31, 1996.
3
<PAGE> 4
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
NET
UNREALIZED
COMMON COMMON TREASURY TREASURY CAPITAL GAINS (LOSSES) RETAINED
(IN THOUSANDS) SHARES STOCK SHARES STOCK SURPLUS ON SECURITIES EARNINGS TOTAL
- -------------- ------ ----- ------ ----- ------- ------------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Six Months Ended June 30, 1995:
Balance, beginning of period 131,120 $ 912,318 (905) ($ 16,577) $ 215,084 ($63,289) $364,284 $1,411,820
Stock issued for acquisitions 3,510 3,434 20,061 (985) 8,474 30,984
Net income 113,023 113,023
Cash dividends declared
($.34 per share) (52,600) (52,600)
Stock options exercised 57 1,030 239 (905) 364
Treasury shares purchased (2,111) (39,582) (39,582)
Treasury shares sold:
Shareholder dividend
reinvestment plan 802 14,660 21 (1,114) 13,567
Employee benefit plans 338 6,110 66 (47) 6,129
Conversion of convertible notes 1 12 12
Change in net unrealized
gains (losses) on
securities available
for sale 88,326 88,326
------- ---------- ------ ---------- --------- -------- -------- ----------
Balance, end of period 134,631 $ 915,764 (1,819) ($ 34,359) $ 235,471 $ 24,052 $431,115 $1,572,043
======= ========== ====== ========== ========= ======== ======== ==========
SIX MONTHS ENDED JUNE 30, 1996:
BALANCE, BEGINNING OF PERIOD 141,403 $1,056,209 (8,352) ($ 180,632) $ 235,802 $ 40,972 $366,514 $1,518,865
STOCK ISSUED FOR ACQUISITION 4,733 102,760 5,037 107,797
NET INCOME 127,913 127,913
CASH DIVIDENDS DECLARED
($.36 PER SHARE) (53,514) (53,514)
STOCK OPTIONS EXERCISED 81 1,760 (1,463) 297
TREASURY SHARES PURCHASED (5,881) (140,850) (582) (141,432)
TREASURY SHARES SOLD:
SHAREHOLDER DIVIDEND
REINVESTMENT PLAN 665 14,866 408 15,274
EMPLOYEE BENEFIT PLANS 112 2,477 194 2,671
CHANGE IN NET UNREALIZED
GAINS (LOSSES)
ON SECURITIES AVAILABLE
FOR SALE ( 102,575) (102,575)
------- ---------- ------ ---------- --------- --------- -------- ----------
BALANCE, END OF PERIOD 141,403 $1,056,209 (8,642) ($ 199,619) $ 239,396 ($ 61,603) $440,913 $1,475,296
======= ========== ====== ========== ========= ========= ======== ==========
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 5
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(in thousands of dollars) SIX MONTHS ENDED JUNE 30,
1996 1995
---- ----
OPERATING ACTIVITIES
<S> <C> <C>
Net Income ............................................................... $ 127,913 $ 113,023
Adjustments to reconcile net income to net cash
provided by operating activities
Provision for loan losses ...................................... 23,666 9,395
Provision for depreciation and amortization .................... 43,922 29,212
Deferred income tax expense .................................... 1,758 6,952
Decrease (increase) in trading account securities .............. 1,989 (8,576)
Decrease (increase) in mortgages held for sale ................. 47,377 (29,714)
Net gains on sales of securities ............................... (7,290) (6,439)
Decrease (increase) in accrued income receivable ............... 7,653 (10,527)
Net (increase) decrease in other assets ........................ (34,793) 8,203
(Decrease) increase in accrued expenses ........................ (24,251) 72,097
Net increase in other liabilities .............................. 1,231 16,910
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIEs .............. 189,175 200,536
----------- -----------
INVESTING ACTIVITIES
Decrease in interest bearing deposits in banks ........................... 282,105 313
Proceeds from:
Maturities and calls of investment securities ........................ 14,175 43,892
Maturities and calls of securities available for sale ................ 248,897 209,750
Sales of securities available for sale ............................... 1,826,034 1,687,263
Purchases of:
Investment securities ................................................ (800) (460)
Securities available for sale ........................................ (1,537,580) (2,431,764)
Proceeds from sales of loans ............................................. 94,755 --
Net loan originations, excluding sales ................................... (430,266) (769,781)
Proceeds from disposal of premises and equipment ......................... 545 1,322
Purchases of premises and equipment ...................................... (21,676) (11,907)
Proceeds from sales of other real estate ................................. 6,100 22,430
Net cash received from purchase of subsidiaries .......................... 631 33,433
----------- -----------
NET CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIEs ... 482,920 (1,215,509)
----------- -----------
FINANCING ACTIVITIES
Increase in total deposits ............................................... 46,391 328,090
(Decrease) increase in short-term borrowings ............................. (88,740) 778,066
Proceeds from issuance of long-term debt ................................. 300,424 50,000
Payment of long-term debt ................................................ (506,275) (93,066)
Dividends paid on common stock ........................................... (53,515) (51,704)
Acquisition of treasury stock ............................................ (141,432) (39,582)
Proceeds from issuance of treasury stock ................................. 18,242 20,060
----------- -----------
NET CASH (USED FOR) PROVIDED BY FINANCING ACTIVITIES ... (424,905) 991,864
----------- -----------
CHANGE IN CASH AND CASH EQUIVALENTS .................... 247,190 (23,109)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ....... 1,058,489 890,656
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ............. $ 1,305,679 $ 867,547
=========== ===========
</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.
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) JUNE 30, DECEMBER 31, JUNE 30,
1996 1995 1995
---- ---- ----
<S> <C> <C> <C>
Commercial ................................ $ 4,311,853 $ 4,190,237 $ 4,186,379
Real Estate
Construction ......................... 388,851 367,889 324,975
Commercial ........................... 1,683,195 1,578,891 1,456,121
Residential .......................... 1,138,177 1,176,715 1,576,203
Consumer .................................. 5,165,854 5,094,036 4,880,805
Lease financing ........................... 1,000,745 853,899 713,110
----------- ----------- -----------
TOTAL LOANS .......................... $13,688,675 $13,261,667 $13,137,593
=========== =========== ===========
DEPOSIT COMPOSITION
(in thousands of dollars) ................. JUNE 30, DECEMBER 31, JUNE 30,
1996 1995 1995
---- ---- ----
Demand deposits
Non-interest bearing ................. $ 1,905,876 $ 2,088,074 $ 2,200,241
Interest bearing ..................... 2,943,215 2,772,845 2,465,139
Savings deposits .......................... 2,542,802 2,207,378 2,101,183
Certificates of deposit of $100,000 or more 973,990 909,403 829,768
Other domestic time deposits .............. 4,396,161 4,384,949 4,480,797
Foreign time deposits ..................... 350,787 273,933 441,389
----------- ----------- -----------
TOTAL DEPOSITS ......................... $13,112,831 $12,636,582 $12,518,517
=========== =========== ===========
</TABLE>
7
<PAGE> 8
FINANCIAL REVIEW
<TABLE>
<CAPTION>
ANALYSIS OF NON-INTEREST INCOME
(in thousands of dollars) THREE MONTHS ENDED SIX MONTHS ENDED
June 30, PERCENT JUNE 30, PERCENT
1996 1995 CHANGE 1996 1995 CHANGE
---- ---- ------ ---- ---- ------
<S> <C> <C> <C> <C> <C> <C>
Service charges on deposit accounts ............. $23,132 $20,487 12.91 % $45,593 $43,001 6.03 %
Mortgage banking ................................ 7,976 6,613 20.61 16,853 16,186 4.12
Trust services .................................. 8,324 7,586 9.73 17,117 15,641 9.44
Securities gains................................. 200 6,379 N.M. 7,290 6,439 13.22
Credit card fees ................................ 8,544 4,399 94.23 13,380 8,344 60.35
Investment product sales ........................ 3,286 1,971 66.72 6,525 3,670 77.79
Electronic banking fees ......................... 2,172 1,068 103.37 3,838 2,022 89.81
Other ........................................... 13,542 10,021 35.14 24,742 21,108 17.22
------- ------- -------- --------
TOTAL NON-INTEREST INCOME ....................... $67,176 $58,524 14.78 % $135,338 $116,411 16.26 %
======= ======= ======== ========
</TABLE>
<TABLE>
<CAPTION>
ANALYSIS OF NON-INTEREST EXPENSE
(in thousands of dollars) THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, PERCENT JUNE 30, PERCENT
1996 1995 CHANGE 1996 1995 CHANGE
---- ---- ------ ---- ---- ------
<S> <C> <C> <C> <C> <C> <C>
Salaries ........................................ $56,776 $54,974 3.28 % $112,595 $111,082 1.36 %
Commissions ..................................... 3,480 1,932 80.12 7,087 3,620 95.77
Employee benefits ............................... 14,801 15,419 (4.01) 32,017 31,080 3.01
Net occupancy ................................... 10,835 10,079 7.50 21,709 20,765 4.55
Equipment ....................................... 10,267 9,593 7.03 19,881 19,395 2.51
Credit card ..................................... 4,023 3,196 25.88 7,595 6,314 20.29
Printing and supplies ........................... 4,164 3,362 23.85 7,659 6,934 10.46
Advertising ..................................... 4,052 2,912 39.15 6,917 5,943 16.39
Legal and loan collection ....................... 2,498 1,905 31.13 4,392 4,028 9.04
FDIC insurance .................................. 679 6,549 (89.63) 1,198 13,085 (90.84)
Other ........................................... 33,891 31,131 8.87 67,912 63,447 7.04
------- ------- -------- --------
TOTAL NON-INTEREST EXPENSE ...................... $145,466 $141,052 3.13 % $288,962 $285,693 1.14 %
======= ======= ======== ========
</TABLE>
N.M. - Not meaningful
8
<PAGE> 9
Management's Discussion and Analysis
OVERVIEW
Huntington reported net income of $65.1 million, or $.45 per share, for
the second quarter of 1996 compared with $58.2 million, or $.38 per share, for
the same period last year. For the first half of 1996, net income was $127.9
million, or $.87 per share, versus $113.0 million, or $.73 per share, in the
first six months of 1995. All per share amounts have been adjusted for the 10%
stock dividend payable July 31, 1996.
Huntington's return on average assets (ROA) of 1.32% in the second
quarter and 1.29% for the first six months of the year was up from 1.25% and
1.24% in the comparable periods of last year. Return on average equity (ROE) was
also stronger at 17.56% in the recent three months of 1996 and 16.77%
year-to-date, versus 15.08% in the same periods one year ago.
Total assets were $20.3 billion at June 30, 1996, flat with year-end
but up 4.9% from one year ago. The growth in total assets over the past twelve
months was primarily attributable to higher loan volumes and the acquisition of
Peoples Bank of Lakeland, Florida, (Lakeland) in January 1996.
Huntington's funding mix also changed somewhat during the first half of
the year as total deposits grew 3.8% from year-end 1995, in large part because
of the Lakeland acquisition, and short-term and long-term borrowings decreased
5%. Borrowings increased from the end of the second 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.
Shareholders' equity was down 2.9% from December 31 and 6.2% from June
30, 1995. The decreases were principally due to changes in net unrealized gains
and losses on securities available for sale, that reduced equity by $102.6
million in the recent six months and $85.7 million over the last year. Excluding
the effects of these unrealized gains and losses, equity increased 4% from year
end and was flat versus one year ago. 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 $189.3 million and $374.0
million, respectively, for the three and six months ended June 30, 1996,
approximately 5% higher than the corresponding periods in 1995. The net interest
margin was 4.15% during the recent quarter, down modestly from the corresponding
three month period a year ago, but up 12 basis points
9
<PAGE> 10
over the immediately preceding quarter. The increase in the margin from the
first quarter was the result of improved spreads, driven by a favorable change
in asset mix and reduced funding costs.
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 $6.4 million.
On a year-to-date basis, the decrease in interest income was $18.2 million and
interest expense was up $12.4 million. For the same periods last year, these
products lowered interest income by $8.2 million and $12.7 million and increased
interest expense by $5.9 million and $13.0 million. Included in the preceding
amounts is amortization of deferred gains and losses from terminated contracts,
that decreased net interest income by $10.4 million in the recent three months
and $20.6 million in the first half of the year, compared with reductions in the
year-ago periods of $5.7 million and $9.7 million. Expressed in terms of the
margin, the effect of the off-balance sheet portfolio was a reduction of 34
basis points in the second quarter of 1996 and 33 basis points for the first six
months versus declines in the respective periods last year of 35 basis points
and 30 basis points. A large part of the current year margin reduction (22 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, was $67.0
million and $128.0 million in the recent three and six month periods, up 28.4%
and 16.4% from the same periods one year ago. Fee income showed broad-based
improvement with growth in all major categories. A significant component of the
increase in credit card fees relates to an alliance formed in second quarter
1996 that resulted in the sale by Huntington of a portion of its interest in
certain payment processing contracts.
Mortgage banking income was $8.0 million in the second quarter and
$16.9 million in the first half of 1996, up from $6.6 million and $16.2 million
in the three and six months ended June 30, 1995. Fueled by lower interest rates
in the early part of the year, mortgage loan originations totaled $689 million
in the first half of 1996, an increase of 38.9% from the same period last year.
In addition to the increased fee income from higher production, Huntington
benefited from a new accounting standard adopted in third quarter 1995 related
to the capitalization of mortgage servicing rights 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 June 30, 1996, versus $432 million sold in the first half of last
year that generated gains of $5.3 million. Net servicing fees were also down
approximately 5% when comparing the quarters and 16.7% on a year-to-date basis.
The decrease through six months 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 $5.9 billion.
10
<PAGE> 11
Net gains from sales of securities were immaterial in the quarter just
ended and totaled $7.3 million in the first half of 1996. 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 was $145.5 million in the three months just ended
and $289.0 million in the first half of the year, up from $141.1 million and
$285.7 million in the year-ago periods. The growth in expenses was due, in part,
to the acquisition of two Florida banks subsequent to June 30, 1995, which added
$3.3 million and $6.4 million, respectively, to the second quarter and
year-to-date totals. Excluding these amounts, non-interest expense would have
been flat with the same periods one year ago. FDIC insurance was down
significantly, as Huntington benefited from the reduction in assessment rates on
bank deposits that occurred in the latter part of 1995.
PROVISION FOR INCOME TAXES
The provision for income taxes was $34.1 million and $68.8 million for
the recent quarter and six months, a slight decrease versus the corresponding
three months of 1995, but up 6.8% for the year-to-date period. Huntington's
effective tax rate was higher in the first half of last year as a result of a
$2.1 million charge recorded in connection with the conversion of a thrift to a
bank charter and various nondeductible expenses associated with bank
acquisitions.
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
11
<PAGE> 12
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 June 30, 1996, the results of Huntington's internal interest
sensitivity analysis indicated that net interest income would increase
approximately .5% in the event of a 100 basis points 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) versus a drop
of .5% should rates rise 100 basis points. 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 2.5%.
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 June 30, 1996,
forward rates were higher than those prevailing at the recent year end.
Consequently, the interest rate swap portfolio ended the second quarter with an
unrealized loss of $28.5 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.
12
<PAGE> 13
<TABLE>
<CAPTION>
Average Average Rate
Notional Maturity Market ------------
(dollars in millions) Value (years) Value Receive Pay
- --------------------- ------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
June 30, 1996:
ASSET CONVERSION SWAPS
Receive fixed $1,000 2.27 ($11.5) 5.80% 5.50%
Receive fixed-amortizing 99 1.90 ( 1.8) 5.27 5.78
------ -----
TOTAL ASSET CONVERSION SWAPS $1,099 2.24 ($13.3) 5.75% 5.53%
====== =====
LIABILITY CONVERSION SWAPS
Receive fixed $1,485 2.41 ($ 3.5) 5.88% 5.49%
Receive fixed-amortizing 197 3.00 ( 6.2) 5.63 5.46
Pay fixed 1,525 .26 ( 5.3) 5.51 7.07
----- ----- ----
TOTAL LIABILITY CONVERSION SWAPS $3,207 1.42 ( 15.0) 5.69% 6.24%
====== =====
BASIS PROTECTION SWAPS $ 250 2.70 ($ .2) 5.56% 5.54%
====== =====
</TABLE>
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
June 30, 1996, Huntington's credit risk from interest rate swaps used for
asset/liability management purposes was $34.5 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
non-performance in the future by any such counterparties.
Certain interest rate swaps have been closed by Huntington prior to
contractual maturity in response to 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 June 30, 1996, Huntington had deferred approximately $18.8
13
<PAGE> 14
million of net realized losses from closed positions, which are to be amortized
as yield adjustments over the remaining term of the original contracts, as
presented below.
<TABLE>
<CAPTION>
Amortizing In
-------------------------------------------------------------
1996 1997 1998 1999 Total
---- ---- ---- ---- -----
(in millions)
JUNE 30, 1996:
<S> <C> <C> <C> <C> <C>
Deferred gains $ 6.5 $ 8.3 $ 7.0 $5.7 $ 27.5
Deferred losses (25.2) (19.4) (1.3) (.4) (46.3)
----- ----- ---- --- -----
Net (losses) gains $(18.7) $(11.1) $ 5.7 $5.3 $(18.8)
====== ====== ===== ==== ======
</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 $450 million at June 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
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 $57.0
million at the most recent quarter end and represented .42% of total loans.
Huntington also has certain loans that are past due ninety days or more but have
not been placed on nonaccrual status. These loans, which total $29.9 million at
June 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) totaled $21.7 million at the end of the
first half of 1996, down from $24.0 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
14
<PAGE> 15
factors. Annualized net charge-offs as a percent of average total loans were
.38% for the quarter just ended and .36% for the first six months of the year,
versus .32% for all of 1995. At the recent quarter end, the ALL represented
1.44% of total loans and 345% of non-performing loans. The combined ALL and
allowance for other real estate was 238% 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
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 7.51% in the second quarter of
1996 and 7.70% for the first six months of the year, compared with 8.28% and
8.22% in the same periods one year ago. Presented below are Huntington's
regulatory capital ratios and the related levels established for
"well-capitalized" institutions:
<TABLE>
<CAPTION>
June 30, 1996 "Well Capitalized"
<S> <C> <C>
Tier 1 risk-based capital 8.05% 6.00%
Total risk-based capital 11.59 10.00
Leverage 6.81 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 5.9 million shares in the first half of 1996 at an aggregate
cost of $141.4 million, leaving 8.0 million shares available for repurchase.
Huntington's management believes the remaining authorized shares will be
repurchased by the end of 1997.
15
<PAGE> 16
CONSOLIDATED FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
(in thousands of dollars, except per share amounts)
THREE MONTHS ENDED JUNE 30, 1996 1995 % CHANGE
---- ---- --------
<S> <C> <C> <C>
NET INCOME .............................. $ 65,088 $ 58,161 11.9 %
PER COMMON SHARE AMOUNTS (1)
Net income ......................... $ 0.45 $ 0.38 18.4
Cash dividends declared ............ $ 0.18 $ 0.17 5.9
AVERAGE SHARES OUTSTANDING (1) .......... 146,205,121 153,996,205 (5.1)
KEY RATIOS
Return on:
Average total assets ............... 1.32% 1.25% 5.6
Average shareholders' equity ....... 17.56% 15.08% 16.4
Efficiency ratio ........................ 56.86% 59.97% (5.2)
Average equity/average assets ........... 7.51% 8.28% (9.3)
Net Interest Margin ..................... 4.15% 4.21% (1.4)
SIX MONTHS ENDED JUNE 30, ............... 1996 1995 % CHANGE
---- ---- --------
NET INCOME .............................. $ 127,913 $ 113,023 13.2 %
PER COMMON SHARE AMOUNTS (1)
Net income ......................... $ 0.87 $ 0.73 19.2
Cash dividends declared ............ $ 0.36 $ 0.34 5.9
AVERAGE SHARES OUTSTANDING (1) .......... 147,382,313 154,103,132 (4.4)
KEY RATIOS
Return on:
Average total assets ............... 1.29% 1.24% 4.0
Average shareholders' equity ....... 16.77% 15.08% 11.2
Efficiency ratio ........................ 57.53% 60.94% (5.6)
Average equity/average assets ........... 7.70% 8.22% (6.3)
Net Interest Margin ..................... 4.09% 4.24% (3.5)
AT JUNE 30, ............................. 1996 1995 % CHANGE
---- ---- --------
Total Loans ............................. $ 13,688,675 $ 13,137,593 4.2 %
Total Deposits .......................... $ 13,112,831 $ 12,518,517 4.7
Total Assets ............................ $ 20,321,166 $ 19,370,768 4.9
Shareholders' Equity .................... $ 1,475,296 $ 1,572,043 (6.2)
Period-End Shares Outstanding (1) ....... 146,036,994 153,397,641 (4.8)
Shareholders' Equity Per Common Share (1) $ 10.10 $ 10.25 (1.5)
Total Risk-Adjusted Assets .............. $ 16,834,872 $ 15,588,590 8.0
Tier 1 Risk-Based Capital Ratio ......... 8.05% 9.30% (13.4)
Total Risk-Based Capital Ratio .......... 11.59% 13.11% (11.6)
Tier 1 Leverage Ratio ................... 6.81% 7.72% (11.8)
</TABLE>
(1) Adjusted for the ten percent stock dividend issued July 31, 1996.
16
<PAGE> 17
FINANCIAL REVIEW
<TABLE>
<CAPTION>
INVESTMENT SECURITIES - AMORTIZED COST & FAIR VALUES BY MATURITY AT JUNE 30, 1996 AND DECEMBER 31, 1995
(in thousands of dollars) JUNE 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........................ 16,284 16,380 27,340 27,592
1-5 years........................... 23,883 24,416 23,637 24,496
6-10 years.......................... 21,688 21,588 12,638 13,040
Over 10 years....................... 4,785 4,686 3,833 3,912
------- ------- ------- -------
Total............................ 66,640 67,070 67,448 69,040
------- ------- ------- -------
Total Investment Securities.............. $66,796 $67,226 $67,604 $69,196
======= ======= ======= =======
</TABLE>
17
<PAGE> 18
FINANCIAL REVIEW
<TABLE>
<CAPTION>
SECURITIES AVAILABLE FOR SALE - AMORTIZED COST & FAIR VALUES BY MATURITY AT JUNE
30, 1996 AND DECEMBER 31, 1995
(IN THOUSANDS OF DOLLARS) JUNE 30, 1996 DECEMBER 31, 1995
------------- -----------------
AMORTIZED COST FAIR VALUE Amortized Cost Fair Value
-------------- ---------- -------------- ----------
U.S. Treasury
<S> <C> <C> <C> <C>
Under 1 year........................ $83,389 $83,817 $176,502 $178,264
1-5 years........................... 385,040 369,219 228,234 231,018
6-10 years.......................... 158,981 150,668 162,352 160,596
--------- -------- --------- ---------
Total............................ 627,410 603,704 567,088 569,878
--------- -------- --------- ---------
Federal agencies
Mortgage-backed securities
Under 1 year........................ 979 984 1,097 1,124
1-5 years........................... 183,007 178,917 110,192 114,723
6-10 years.......................... 871,854 847,756 712,804 724,317
Over 10 years....................... 33,952 33,994 58,762 60,695
--------- -------- --------- ---------
Total............................ 1,089,792 1,061,651 882,855 900,859
--------- -------- --------- ---------
Other agencies
Under 1 year........................ 94,937 95,380 53,912 54,499
1-5 years........................... 1,633,768 1,609,864 1,928,431 1,953,446
6-10 years.......................... 196,101 191,175 234,393 234,920
Over 10 years....................... 362,375 354,092 509,735 514,568
--------- -------- --------- ---------
Total............................ 2,287,181 2,250,511 2,726,471 2,757,433
--------- -------- --------- ---------
Total U.S. Treasury and Federal agencies. 4,004,383 3,915,866 4,176,414 4,228,170
--------- -------- --------- ---------
Other
Under 1 year........................ 5,854 6,007 6,818 6,826
1-5 years........................... 13,929 14,694 22,352 23,578
6-10 years.......................... 157,365 154,751 230,651 240,965
Over 10 years....................... 275,391 270,505 212,950 214,605
Marketable equity securities........ 8,477 7,021 8,359 7,000
--------- -------- --------- ---------
Total............................ 461,016 452,978 481,130 492,974
--------- -------- --------- ---------
Total Securities Available for Sale...... $4,465,399 $4,368,844 $4,657,544 $4,721,144
========== ========== ========== ==========
</TABLE>
18
<PAGE> 19
FINANCIAL REVIEW
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
LOAN LOSS EXPERIENCE
- ----------------------------------------------------------------------------------------------------------------------
(in thousands of dollars) THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
ALLOWANCE FOR LOAN LOSSES, BEGINNING OF PERIOD ......... $197,375 $201,088 $194,456 $200,492
Loan losses ............................................ (17,417) (10,718) (33,124) (20,511)
Recoveries of loans previously charged off ............. 4,685 3,312 9,288 7,268
Provision for loan losses .............................. 11,843 4,787 23,666 9,395
Allowance of assets acquired (sold) .................... 0 (205) 2,200 1,620
-------- -------- -------- --------
Allowance for loan losses, end of period ............... $196,486 $198,264 $196,486 $198,264
======= ======== ======== ========
AS A % OF AVERAGE TOTAL LOANS
Net loan losses -- annualized ........................ 0.38 % 0.23 % 0.36 % 0.21 %
Provision for loan losses -- annualized .............. 0.35 % 0.15 % 0.36 % 0.15 %
Allowance for loan losses as a % of total loans ........ 1.44 % 1.51 % 1.44 % 1.51 %
Net loan loss coverage (1) ............................. 8.72 x 13.15 x 9.25 x 14.11 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) II Q I Q IV Q III Q II Q
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Non-accrual loans ...................................... $51,470 $57,530 $50,669 $41,997 $41,554
Renegotiated loans ..................................... 5,558 5,578 4,299 4,313 13,424
------- ------- ------- ------- ------
TOTAL NON-PERFORMING LOANS ............................. 57,028 63,108 54,968 46,310 54,978
------- ------- ------- ------- ------
Other real estate, net ................................. 21,720 20,386 22,026 23,668 24,029
------- ------- ------- ------- ------
TOTAL NON-PERFORMING ASSETS ............................ $78,748 $83,494 $76,994 $69,978 $79,007
======= ======= ======= ======= =======
NON-PERFORMING LOANS AS A
% OF TOTAL LOANS ..................................... 0.42% 0.47% 0.41% 0.34% 0.42%
NON-PERFORMING ASSETS AS A
% OF TOTAL LOANS AND OTHER REAL ESTATE ............... 0.57% 0.62% 0.58% 0.52% 0.60%
ALLOWANCE FOR LOAN LOSSES AS A % OF
NON-PERFORMING LOANS ................................. 344.54% 312.76% 353.76% 428.79% 360.62%
ALLOWANCE FOR LOAN LOSSES AND OTHER REAL
ESTATE AS A % OF NON-PERFORMING ASSETS ............... 238.03% 225.01% 238.65% 263.26% 234.30%
ACCRUING LOANS PAST DUE 90 DAYS OR MORE ................ $29,859 $25,824 $27,018 $24,001 $20,685
======= ======= ======= ======= =======
</TABLE>
19
<PAGE> 20
CONSOLIDATED AVERAGE BALANCES AND INTEREST RATES (QUARTERLY DATA)
<TABLE>
<CAPTION>
Fully Tax Equivalent Basis (1) 2ND QUARTER 1996 1ST 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 9.43 % $39 5.70 %
Trading account securities.............................................. 14 5.47 19 5.64
Federal funds sold and securities purchased under resale agreements..... 29 5.33 27 6.19
Mortgages held for sale................................................. 117 7.62 127 7.18
Securities:
Taxable............................................................ 4,609 6.52 4,835 6.55
Tax exempt......................................................... 96 9.75 106 9.09
------- -------
Total Securities.............................................. 4,705 6.58 4,941 6.60
------- -------
Loans
Commercial......................................................... 4,251 7.67 4,212 7.76
Real Estate
Construction.................................................. 386 8.50 364 8.52
Mortgage...................................................... 2,783 8.49 2,760 8.48
Consumer........................................................... 5,142 9.04 5,079 8.99
Lease Financing................................................... 953 7.87 880 7.90
------- -------
Total Loans................................................... 13,515 8.40 13,295 8.41
Allowance for loan losses..................................... 199 198
------- -------
Net loans..................................................... 13,316 8.89 13,097 8.87
------- -------
Total earning assets.......................................... 18,382 8.19 % 18,448 8.14 %
------- -------
Cash and due from banks................................................. 755 746
All other assets........................................................ 906 988
------- -------
TOTAL ASSETS............................................................ $19,844 $19,984
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Demand deposits
Non-interest bearing............................................... $2,307 $2,391
Interest bearing................................................... 2,595 2.40 % 2,506 2.53 %
Savings deposits........................................................ 2,437 3.19 2,249 3.03
Certificates of deposit of $100,000 or more............................. 971 5.37 977 5.52
Other domestic time deposits............................................ 4,406 5.61 4,458 5.69
Foreign time deposits................................................... 219 6.17 268 6.15
------- -------
Total deposits..................................................... 12,935 4.26 12,849 4.36
------- -------
Short-term borrowings................................................... 3,061 5.39 3,078 5.58
Long-term debt.......................................................... 1,927 6.40 2,016 6.41
------- -------
Interest bearing liabilities....................................... 15,616 4.75 % 15,552 4.87 %
------- -------
All other liabilities................................................... 430 464
Shareholders' equity.................................................... 1,491 1,577
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $19,844 $19,984
======= =======
Net interest rate spread................................................ 3.44 % 3.27 %
Impact of non-interest bearing funds on margin.......................... 0.71 % 0.76 %
NET INTEREST MARGIN..................................................... 4.15 % 4.03 %
</TABLE>
(1) Fully tax equivalent yields are calculated assuming a 35% tax rate.
20
<PAGE> 21
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
4TH QUARTER 1995 3RD QUARTER 1995 2ND QUARTER 1995
-------------------- -------------------- --------------------
AVERAGE YIELD/ AVERAGE YIELD/ AVERAGE YIELD/
BALANCE RATE BALANCE RATE BALANCE RATE
- --------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C>
$ 74 6.10 % $ 2 5.73 % $ 3 5.03 %
20 6.88 24 7.54 23 8.07
48 5.52 22 7.49 70 6.70
129 6.78 174 7.73 109 7.52
4,550 6.74 4,473 6.76 3,913 6.75
110 10.04 118 10.55 127 10.29
------- ------- -------
4,660 6.82 4,591 6.86 4,040 6.86
------- ------- -------
4,178 7.91 4,099 8.13 4,082 8.58
369 8.54 349 8.68 324 8.38
3,011 8.56 3,058 8.59 3,100 8.20
5,099 8.97 4,979 9.05 4,805 8.90
826 7.93 747 7.53 690 7.43
------- ------- -------
13,483 8.53 13,232 8.56 13,001 8.54
198 198 201
------- ------- -------
13,285 8.93 13,034 9.04 12,800 9.00
------- ------- -------
18,414 8.26 % 18,045 8.37 % 17,246 8.38 %
------- ------- -------
766 783 796
895 876 838
------- ------- -------
$19,877 $19,506 $18,679
======= ======= =======
$2,241 $2,194 $2,159
2,514 2.48 % 2,488 2.45 % 2,533 2.45 %
2,084 2.93 2,020 2.76 2,013 2.68
926 5.68 878 5.78 770 5.84
4,458 5.76 4,467 5.69 4,447 5.54
189 6.50 318 6.32 264 6.57
------- ------- -------
12,412 4.38 12,365 4.34 12,186 4.24
------- ------- -------
3,682 5.91 3,786 5.96 3,348 6.13
1,850 6.76 1,403 6.36 1,208 7.23
------- ------- -------
15,703 5.02 % 15,360 4.92 % 14,583 4.93 %
------- ------- -------
447 416 390
1,486 1,536 1,547
------- ------- -------
$19,877 $19,506 $18,679
======= ======= =======
3.24 % 3.45 % 3.45 %
0.74 % 0.73 % 0.76 %
3.98 % 4.18 % 4.21 %
</TABLE>
21
<PAGE> 22
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
SELECTED QUARTERLY INCOME STATEMENT DATA
- ---------------------------------------------------------------------------------------------------------
1996 1995
---------------------- ---------------------------------
(in thousands of dollars, except per
share amounts) IIQ IQ IVQ IIIQ IIQ
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
TOTAL INTEREST INCOME................... $375,079 $374,296 $381,437 $377,859 $360,203
TOTAL INTEREST EXPENSE.................. 185,786 189,578 199,551 191,281 180,313
-------- -------- -------- -------- --------
NET INTEREST INCOME..................... 189,293 184,718 181,886 186,578 179,890
Provision for loan losses............... 11,843 11,823 12,139 7,187 4,787
-------- -------- -------- -------- --------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES............. 177,450 172,895 169,747 179,391 175,103
Service charges on deposit accounts .... 23,132 22,461 21,008 21,109 20,487
Mortgage banking ....................... 7,976 8,877 9,752 8,274 6,613
Trust services ......................... 8,324 8,793 7,424 7,312 7,586
Securities gains ....................... 200 7,090 302 2,315 6,379
Credit card fees ....................... 8,544 4,836 5,450 4,669 4,399
Investment product sales ............... 3,286 3,239 2,292 2,159 1,971
Electronic banking fees ................ 2,172 1,666 1,740 1,270 1,068
Other .................................. 13,542 11,200 18,830 12,692 10,021
-------- -------- -------- -------- --------
TOTAL NON-INTEREST INCOME .............. 67,176 68,162 66,798 59,800 58,524
-------- -------- -------- -------- --------
Salaries ............................... 56,776 55,819 54,695 54,391 54,974
Commissions ............................ 3,480 3,607 3,149 3,074 1,932
Employee benefits ...................... 14,801 17,216 12,752 13,958 15,419
Net occupancy .......................... 10,835 10,874 10,459 10,039 10,079
Equipment .............................. 10,267 9,614 9,406 9,470 9,593
Credit card ............................ 4,023 3,572 3,695 3,398 3,196
Printing and supplies .................. 4,164 3,495 3,705 3,508 3,362
Advertising ............................ 4,052 2,865 2,179 3,149 2,912
Legal and loan collection .............. 2,498 1,894 2,758 1,857 1,905
FDIC insurance ......................... 679 519 1,820 151 6,549
Other .................................. 33,891 34,021 32,646 34,451 31,131
-------- -------- -------- -------- --------
TOTAL NON-INTEREST EXPENSE ............. 145,466 143,496 137,264 137,446 141,052
-------- -------- -------- -------- --------
Income Before Income Taxes ............. 99,160 97,561 99,281 101,745 92,575
Provision for income taxes ............. 34,072 34,736 33,752 35,808 34,414
-------- -------- -------- -------- --------
NET INCOME ............................. $ 65,088 $ 62,825 $ 65,529 $ 65,937 $ 58,161
======== ======== ======== ======== ========
PER COMMON SHARE (1)
Net income ........................... $0.45 $0.42 $0.45 $0.44 $0.38
Cash dividends declared .............. $0.18 $0.18 $0.18 $0.18 $0.17
FULLY TAX EQUIVALENT MARGIN:
Net Interest Income .................... $189,293 $184,718 $181,886 $186,578 $179,890
Tax Equivalent Adjustment (2) .......... 1,319 1,368 1,523 1,635 1,723
-------- -------- -------- -------- --------
Tax Equivalent Net Interest Income ..... $190,612 $186,086 $183,409 $188,213 $181,613
======== ======== ======== ======== ========
</TABLE>
(1) Adjusted for the ten percent stock dividend issued July 31, 1996.
(2) Calculated assuming a 35% tax rate.
22
<PAGE> 23
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 4. Submission of Matters to a Vote of Security Holders
Huntington Bancshares Incorporated held its annual meeting of
shareholders on April 25, 1996. At that meeting, shareholders approved
the following management proposals:
<TABLE>
<CAPTION>
ABSTAIN/ BROKER
FOR AGAINST WITHHELD NON-VOTES
--- ------- -------- ---------
<S> <C> <C> <C> <C>
1. Election of directors
to serve as Class III
Directors until the 1999
Meeting of Shareholders
as follows:
Don M. Casto, III 111,821,023 935,551
Patricia T. Hayot 111,808,623 947,951
William J. Lhota 111,988,789 767,785
Timothy P. Smucker 112,012,654 743,920
2. Proposal to amend the
Corporation's Charter
99,688,503 12,277,210 783,955 6,906
3. Proposal to approve the
Amended Long-Term Incentive
Compensation Plan
100,124,189 10,524,498 2,100,981 6,906
4. Ratification of Ernst &
Young LLP to serve as independent
auditors for the Corporation
for the year 1996
111,898,865 387,848 462,955 6,906
</TABLE>
23
<PAGE> 24
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.
10. Material contracts:
(a) Employment Agreement, dated April 25, 1996, between
Huntington Bancshares Incorporated and Frank Wobst.
11. Computation of Earnings Per Share
27. Financial Data Schedule
(b) Reports on Form 8-K
1. A report on Form 8-K, dated April 10, 1996, was filed under
report item numbers 5 and 7, concerning Huntington's results
of operations for the first quarter ended March 31, 1996.
24
<PAGE> 25
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: August 14, 1996 /s/ Ralph K. Frasier
---------------------------------------
Ralph K. Frasier
General Counsel and Secretary
Date: August 14, 1996 /s/ John D. Van Fleet
--------------------------------------
John D. Van Fleet
Senior Vice President, Corporate
Controller, and Principal
Accounting Officer (Chief Accounting Officer)
25
<PAGE> 1
Exhibit 10(a)
EMPLOYMENT AGREEMENT
THIS AGREEMENT made effective as of the 25th day of April, 1996 by and
between Huntington Bancshares Incorporated, a Maryland corporation, with its
principal office at the Huntington Center, 41 South High Street, Columbus, OH
43287 ("Huntington") and Frank Wobst, residing at 129 North Columbia Avenue,
Columbus, OH 43209 ("Executive").
R E C I T A L S:
WHEREAS, Executive currently is employed by Huntington as the Chairman
of the Board and Chief Executive Officer of Huntington;
WHEREAS, Huntington desires to continue to employ Executive and secure
for itself the continued services of Executive upon the terms and conditions
specified herein; and
WHEREAS, Executive wishes to continue his employment by Huntington.
A G R E E M E N T:
NOW, THEREFORE, in consideration of such continued employment, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, intending to be legally bound, hereby
agree as follows:
I. Employment Duties and Term.
A. Executive shall perform such duties as Huntington through its
Board of Directors from time to time shall determine; provided, however, that
such duties shall be comparable to those currently performed by Executive and
ordinarily expected of executive officers of Huntington and its subsidiaries and
affiliates. Executive shall devote his full time and attention and best efforts
to the performance of such duties. Executive shall serve as an officer of
Huntington and as an officer of any of its affiliate corporations, if duly
elected at any time or times during the term of this Agreement.
B. Executive's employment and the initial term of this Agreement
shall be for a period commencing on April 25, 1996 ("Commencement Date"), and
ending on November 15, 2001 ("Termination Date"), unless terminated at an
earlier date pursuant to an event described in Section III of this Agreement
(referred to hereafter as the "employment period"). After the initial term, this
Agreement shall be automatically renewed on November 15, 2001 for a term of five
years and, if not terminated as provided herein, every five (5) years thereafter
unless either party gives the other party written notice at least 60 days prior
to the
<PAGE> 2
Termination Date of such party's intent not to renew the Agreement. During each
subsequent renewal term, the Termination Date, as used herein, shall be the day
following the fifth anniversary of the day on which the renewal term begins.
II. Compensation.
Huntington agrees to pay to Executive and Executive agrees to accept
the following amounts as compensation in full for his services in any capacity
hereunder, including services as an officer, director or member of any committee
or in the performance of other like duties assigned to him by the Board of
Directors of Huntington.
A. Base Compensation. During the initial five years of the
employment period, Huntington shall pay to Executive a base annual salary in the
amount equal to the current annual base salary of Executive, payable in equal
semi-monthly installments plus such increased base annual compensation that the
Board of Directors of Huntington may authorize as provided herein (the "Minimum
Annual Base Salary"). The compensation of Executive shall be reviewed in good
faith by both parties no less often than every fifteen (15) months during the
initial and renewal terms and may be increased by mutual consent, but in no
event shall the annual base salary be less than the Minimum Annual Base Salary
described above.
B. Participation in Corporation's Incentive Compensation Plans.
Executive currently participates in Huntington's Incentive Compensation Plan and
Huntington's Long-Term Incentive Compensation Plan, as in effect on the date
hereof (both which shall be referred to hereinafter as the "Incentive
Compensation Plans"). As additional compensation, Executive shall continue to
participate in the Incentive Compensation Plans.
C. Participation in Retirement Plan and Rights Under Other
Agreements. Executive shall be entitled to certain rights and benefits as in
effect on the date hereof under a) the Huntington Stock Purchase and Tax Savings
Plan (the "Stock Plan"), b) the Huntington Supplemental Stock Purchase and Tax
Savings Plan (the "Supplemental Stock Plan") c) Huntington's noncontributory
retirement plan for salaried employees, qualified under Section 401(a) of the
Internal Revenue Code (the "Qualified Plan"), d) Huntington's nonqualified,
unfunded, non-contributory Supplemental Executive Retirement Plan (the "SERP"),
e) Huntington's Supplemental Retirement Income Plan (the "SRIP") and f) the 1994
Stock Option Plan or any successor or additional stock option plans (the "Stock
Option Plans"). Executive's rights and benefits under such plans shall continue
in effect and shall not in any manner be altered or affected by this Agreement
other than any increase in benefits as a result of the terms of this Agreement.
Notwithstanding any other provision contained in the Stock Option Plan, in the
event Executive's employment is terminated for any reason, he shall have a
period of not less than ninety (90) days in which to exercise any stock option
provided pursuant to the Stock Option Plan, provided, however, that the period
during which such options can be exercised will be such longer period if
provided under the terms of such Stock Option Plan.
2
<PAGE> 3
D. Other Fringe Benefits. In addition to the benefits provided
for in subsections (B) and (C) of this Section II, Executive shall receive and
enjoy other fringe benefits, including without limitation participation in or
coverage under: transition pay plan, health care insurance (including any health
care and dependent care flexible spending account plan), long term and short
term disability insurance, group life insurance, business travel insurance,
employee assistance plan, executive life insurance (group universal life
insurance), Section 125 premium only cafeteria plan and tuition reimbursement
plan, paid vacations, use of a corporate automobile and all reasonable
maintenance and service costs associated therewith, financial consulting and tax
return preparation allowance, paid reserved parking, and payment of dues in
those professional organizations in which he is currently a member. All such
fringe benefits shall be at least comparable in scope and amount to that which
Executive enjoys on the date hereof. In addition, Executive shall be entitled to
reimbursement for all out-of-pocket expenses incurred by Executive in the
performance of his duties hereunder; provided that such reimbursement shall be
in accordance with Huntington's then existing policy regarding the same.
E. Participation in Future Compensation, Retirement, and Fringe
Benefit Plans. In addition to the benefits provided for in subsections (B), (C),
and (D) of this Section II, Executive shall participate in and shall also
receive and enjoy such other compensation, retirement, or fringe benefits which
are now or in the future made available to executives of Huntington.
F. Discontinuance of Fringe Benefits. If at any time prior to
the termination of Executive's employment in accordance with the terms of this
Agreement, Huntington shall for any reason discontinue or cause a material
reduction in retirement or fringe benefits specified in subsections (C) and (D)
of this Section II, Huntington shall thereupon immediately, at its expense,
provide Executive with individual coverage or benefits comparable to (and not
less beneficial than) the benefits in existence prior to such discontinuance or
material reduction until termination of this Agreement.
G. Deferred Compensation. Huntington agrees that, if requested
by Executive, it will enter into an unfunded deferred compensation agreement
acceptable to Executive providing for the deferral at the election of Executive
of certain compensation payable to Executive.
H. Security. Corporate officers in positions similar that
occupied by Executive have by virtue of their position in the recent past been
the target of kidnapping, burglary, robbery, extortion, hostage, hijacking and
other threats to the health, life, safety and property of similarly situated
officers. In order to reduce the risk of harm to Executive, Executive shall be
entitled to receive from time to time, if and whenever Executive, Huntington's
Director of Security and, to the extent utilized by Huntington, any independent
security consultant determine, at Huntington's expense, security services and
protection as they determine to be appropriate under the circumstances. Such
security services may include, but not by way of limitation: (a) at Executive's
customary residences, dedicated phone lines for audio, data and
3
<PAGE> 4
alarm transmission, fire, smoke, intrusion detection and alarm systems and
devices, perimeter protection, including fences, gates and camera; and (b) the
employment of one or more personal security escorts. In addition, to the extent
feasible, Executive, and when accompanied by Executive, Executive's spouse, and
children under the age of 25 shall be required to utilize corporate owned or
leased secure aircraft for all air travel.
III. Termination.
A. Disability. If during the term of this Agreement Executive
shall be unable to perform substantially his duties hereunder because of illness
or other incapacity (referred to hereafter as "Disability"), and such Disability
shall continue for a period of more than six (6) consecutive months in any
twelve month period, Huntington shall thereafter have the right, on not less
than forty-five (45) days written notice to Executive, to terminate this
Agreement, in which case the date of termination shall be not less than the
forty-fifth (45th) day following the date of written notice. In such event, in
addition to any other benefits to which Executive would be entitled, Huntington
shall be obligated to pay Executive his full compensation pursuant to Sections
II (A) and (B) hereof up to the date of termination; thereafter Huntington shall
be obligated to pay Executive an amount equal to two-thirds (2/3) of the base
salary pursuant to Section II(A) hereof less any benefits which Executive
receives during such period from any disability insurance program which
Huntington may provide Executive. The compensation provided under this paragraph
shall continue for the full period of Disability or until the Termination Date,
whichever first occurs.
A determination of Disability shall be subject to the certification of
a qualified medical doctor agreed to by Huntington and Executive or, in the
event of Executive's incapacity to designate a qualified medical doctor, by
Executive's legal representative. If Huntington and Executive fail to agree upon
a qualified medical doctor, each party shall nominate a qualified medical doctor
and the two doctors shall select a third doctor, who shall make the
determination as to Disability.
Executive's compensation and benefits described in Section II shall be
reinstated in full upon his return to employment and the discharge of his full
duties hereunder.
B. Death. In the event of Executive's death during his employment
hereunder, in addition to any other benefits to which any person would be
entitled upon Executive's death, his semi-monthly compensation under Section
II(A) shall continue until the last day of the sixth full calendar month
following the month in which his death occurs. Compensation to which Executive
is entitled pursuant to Section II(B) hereof shall be paid pursuant to the terms
of Huntington's Incentive Compensation Plans. Executive's compensation for the
period following his death shall be paid to the beneficiary indicated on the
Beneficiary Designation attached hereto as Exhibit A.
4
<PAGE> 5
C. Voluntary Termination. Except as provided for in the Executive
Agreement dated November 15, 1991, between Executive and Huntington (the
"Executive Agreement") a copy of which is attached hereto as Exhibit B, in the
event Executive voluntarily terminates his employment, he shall cease to receive
compensation as of the date of termination of his employment, except that to
which he is then entitled pursuant to Huntington's Incentive Compensation Plans.
D. Termination for Cause. In the event that the Board of Directors
determines that Executive's employment pursuant to this Agreement should be
terminated for cause, Executive shall be entitled: (a) to receive the
compensation to which he is entitled pursuant to Huntington's Incentive
Compensation Plans, and (b) to continue to receive as severance pay the
semi-monthly installments as described in Section II(A) for three (3) full
calendar months following the date of termination. "Cause" means fraud,
embezzlement, gross negligence, or willful misconduct by Executive in the
performance of his duties or a material default by Executive of his duties
hereunder. For purposes of this paragraph, no act or failure to act on
Executive's part shall be considered "willful" unless done or omitted to be done
by him not in good faith and without reasonable belief that his action or
omission was in the best interest of Huntington. If Huntington decides to
terminate this Agreement as provided in this Section, Huntington will give
Executive 60 days advance written notice of its intention to terminate this
Agreement. If, within such 60-day period Executive notifies Huntington that a
dispute exists concerning the termination, the termination of this Agreement
will occur on the earlier of the Termination Date or the date the dispute is
finally determined by agreement of the parties or by a court of competent
jurisdiction.
E. Termination without Cause. In the event that the Board of
Directors determines that this Agreement and the employment of Executive should
be terminated without cause, Executive, or his designated beneficiary, shall be
entitled to full compensation, retirement and fringe benefits in accordance with
Section II herein (1) until the Termination Date or (2) for six months after
termination, whichever is longer.
F. Change of Control. In the event that Huntington shall have
undergone a Change of Control, in lieu of any compensation otherwise provided
under this Agreement, Executive shall be entitled to the benefits described in
the Executive Agreement upon the termination of his employment, either
voluntarily by Executive or by Huntington for any reason except Executive's
Disability or death. For purposes of this Agreement "Change of Control" shall
have the meaning defined in the Executive Agreement.
G. Mitigation. In the event that Executive voluntarily terminates
his employment, as set forth in Section III(C) herein, or Executive's employment
pursuant to this Agreement is terminated for cause, as set forth in Section
III(E) herein, or Executive is terminated pursuant to a Change of Control, as
set forth in Section III(F) herein, Executive shall have no duty to mitigate his
damages by seeking other Employment, and Huntington shall not be
5
<PAGE> 6
entitled to set off against amounts payable hereunder any compensation which he
may receive from future employment.
IV. Executive's Rights Under Certain Plans.
Notwithstanding anything contained herein, Huntington agrees that
the benefits provided to Executive herein are not in lieu of any rights and
privileges to which Executive may be entitled as an employee of Huntington under
any retirement, pension, insurance, hospitalization, or other plan which may now
or hereafter be in effect, it being understood that, except to the extent
currently provided in such plans, Executive shall have the same rights and
privileges to participate in such plans or benefits as any other employee of
Huntington.
If Executive shall be entitled to participate in any retirement or
fringe benefit plan pursuant to the terms of this Agreement after the cessation
of his employment and if the terms of any such retirement or fringe benefit plan
do not permit continued participation by Executive after termination of
employment, then Huntington will arrange for other coverage at Huntington's
expense providing substantially similar benefits.
If continued participation in any retirement plan is not permitted
by law or the terms of the plan, Huntington shall pay to Executive or, if
applicable, his beneficiary, a supplemental benefit equal to the value on the
date of termination of employment of the excess of (i) the benefit Executive
would have been paid under such plan if he had continued to be covered as if
Executive had earned compensation described under Section II above and had made
contributions sufficient to earn the maximum matching contribution, if any,
under such plan (less any amounts he would have been required to contribute),
over (ii) the benefit actually payable to or on behalf of the Executive under
such plan. For purposes of determining the benefit under (i) in the preceding
sentence, contributions deemed to be made under a defined contribution plan will
be deemed to be invested in the same manner as Executive's account under such
plan at the time of termination of employment. Huntington shall pay such
supplemental benefits (if any) in a lump sum within 60 days of the termination
of employment.
V. Confidential Information.
Executive agrees to receive Confidential Information (defined
below) of Huntington in confidence, and not to disclose to others, assist others
in the application of, or use for his own gain, such information, or any part
thereof, unless and until it has become public knowledge or has come into the
possession of such other or others by legal and equitable means and other than
as a result of disclosure by Executive. Executive further agrees that, upon
termination of his employment with Huntington, all documents, records,
notebooks, and similar repositories containing Confidential Information,
including copies thereof, then in Executive's possession, whether prepared by
him or others, will be left with Huntington. For purposes of this
6
<PAGE> 7
Section V, "Confidential Information" means information disclosed to Executive
or known by Huntington, not generally known in the business in which Huntington
is or may become engaged, including, but not limited to, information about
Huntington's services, trade secrets, financial information, customer lists,
books, records, memoranda, and other proprietary information of Huntington.
Executive further agrees that during the employment period he will
devote substantially all of his time and effort to the performance of his duties
hereunder and will refrain from engaging on his own behalf or on the behalf of a
third party in any line of activities or business in which Huntington is or may
become engaged.
VI. Place of Performance.
In connection with his employment by Huntington, Executive shall
not be required to relocate or transfer his principal residence and shall not be
required to perform services which would make the continuance of his principal
residence in Columbus, Ohio, unreasonably difficult or inconvenient for him.
Huntington shall give Executive at least three months' advance notice of any
relocation of its principal executive offices to a location more than fifty
miles from Executive's principal residence in Columbus, Ohio. In the event that
Executive shall thereupon elect to relocate his principal residence within fifty
miles of the principal executive offices of Huntington, Huntington shall
promptly pay (or reimburse Executive for) all reasonable relocation expenses
incurred by Executive relating to a change of his principal residence in
connection with any such relocation of Huntington's principal executive offices.
In the event that Executive shall not relocate his principal residence, he shall
make himself available for performance in Columbus, Ohio, of the services
described in Section I herein.
VII. Successors.
A. This Agreement shall inure to the benefit of and be binding
upon Huntington, its successors and assigns, including without limitation, any
person, partnership, or corporation which may acquire voting control of
Huntington or all or substantially all of the Huntington's assets and business,
or which may be a party to any consolidation, merger, or other transaction that
results in a Change of Control of Huntington.
B. This Agreement shall also inure to the benefit of and be
binding on Executive, his heirs, successors, and legal representatives.
7
<PAGE> 8
VIII. COBRA Continuation Coverage.
Notwithstanding any provision of this Agreement to the contrary,
in the event of any qualifying event, as defined in Section 162(k) of the
Internal Revenue Code (the "Code"), Executive and his qualifying beneficiaries
shall be entitled to continuation of health care coverage, as provided under
Section 162(k) of the Code. The foregoing is intended as a statement of
Executive's continuation coverage rights and is in no way intended to limit any
greater rights of Executive or his qualified beneficiaries under this Agreement.
If a greater benefit is available to Executive or his qualifying beneficiaries
under this Agreement or otherwise, Executive or his qualified beneficiaries may
forego continuation coverage and elect instead such greater benefit.
IX. Indemnification.
Huntington, as provided for in its Articles of Association, shall
indemnify Executive to the full extent of the general laws of the State of
Maryland, now or hereafter in force, including the advance of expenses under
procedures provided by such laws.
X. Entire Agreement.
This Agreement contains the entire agreement of the parties hereto
with respect to the employment of Executive by Huntington, and completely
supersedes any prior employment agreements or arrangements between the parties
hereto. The parties hereto agree that this Agreement cannot be hereafter
amended, modified, or supplemented in any respect, except by a subsequent
written agreement signed by both parties hereto.
XI. Applicable Law.
This Agreement shall be governed in all respects by the laws of
the State of Ohio.
XII. Notices.
All notices under this Agreement shall be in writing, and will be
duly sent if sent by registered or certified mail to the respective parties'
addresses shown hereinabove, or such other addresses as the parties may
hereafter designate in writing for such purpose.
8
<PAGE> 9
XIII. Assignment.
Except as expressly provided herein, neither this Agreement nor
any rights, benefits, or obligations hereunder may be assigned by Huntington or
Executive without the prior written consent of the other.
XIV. Waiver.
The failure by a party to exercise or enforce any of the terms or
conditions of this Agreement will not constitute or be deemed a waiver of that
party's rights hereunder to enforce each and every term of this Agreement. The
failure by a party to insist upon strict performance of any of the terms and
provisions herein will not be deemed a waiver of any subsequent default in the
terms or provisions herein.
XV. Rights and Remedies Cumulative.
All rights and remedies of the parties hereunder are cumulative.
XVI. Divisibility.
The provisions of this Agreement are divisible. If any such
provision shall be deemed invalid or unenforceable, itshall not affect the
applicability or validity of any other provision of this Agreement, and if any
such provision shall be deemed invalid or unenforceable as to any periods of
time, territory, or business activities, such provision shall be deemed limited
to the extent necessary to render it valid and enforceable.
XVII. Captions and Titles.
Captions and titles have been used in this Agreement only for
convenience and in no way define, limit, or describe the meaning of any Article
or any part thereof.
XVIII. Capitalized Terms.
Capitalized terms not otherwise defined herein have the meaning
given in the Executive Agreement.
9
<PAGE> 10
IN WITNESS WHEREOF, the parties have signed this Agreement which
is effective immediately on the date and year first above written.
ATTEST Huntington Bancshares Incorporated
/s/ Ralph K. Frasier By: /s/ John B. Gerlach
- ------------------------------ -----------------------------------------
Ralph K. Frasier, Secretary John B. Gerlach
Its: Chairman of the Board's Compensation
and Stock Option Committee
/s/ Frank Wobst
-----------------------------------------
Frank Wobst
10
<PAGE> 1
<TABLE>
EXHIBIT 11
Huntington Bancshares Incorporated
Computation of Earnings Per Share
For Periods Ended June 30, 1996, and 1995
(in thousands of dollars, except per share amounts)
Three Months Ended Six Months Ended
June 30 June 30
------------------------------- -------------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Income $ 65,088 $ 58,161 $ 127,913 $ 113,023
Effect of Convertible Debt 7 13 13 25
------------ ------------ ------------ ------------
Fully Diluted Net Income $ 65,095 $ 58,174 $ 127,926 $ 113,048
============ ============ ============ ============
Average Common Shares Outstanding 146,205,121 153,996,205 147,382,313 154,103,132
Dilutive Effect of Stock Options 1,143,542 820,434 1,153,856 838,960
------------ ------------ ------------ ------------
Average Common Shares and Common
Share Equivalents -- Primary 147,348,663 154,816,639 148,536,169 154,942,092
Additional Dilutive Effect of Stock Options -- 149,225 10,659 130,699
Dilutive Effect of Convertible Debt 52,190 104,305 52,190 104,320
------------ ------------ ------------ ------------
Fully Diluted Shares 147,400,853 155,070,169 148,599,018 155,177,111
============ ============ ============ ============
Net Income per Common Share Outstanding $ 0.45 $ 0.38 $ 0.87 $ 0.73
Primary Earnings per Share $ 0.44 $ 0.38 $ 0.86 $ 0.73
Fully Diluted Earnings per Share $ 0.44 $ 0.38 $ 0.86 $ 0.73
</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
JUNE 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 842,384
<INT-BEARING-DEPOSITS> 2,488
<FED-FUNDS-SOLD> 463,295
<TRADING-ASSETS> 10,935
<INVESTMENTS-HELD-FOR-SALE> 4,368,844
<INVESTMENTS-CARRYING> 66,796
<INVESTMENTS-MARKET> 67,226
<LOANS> 13,688,675
<ALLOWANCE> 196,486
<TOTAL-ASSETS> 20,321,166
<DEPOSITS> 13,112,831
<SHORT-TERM> 3,440,075
<LIABILITIES-OTHER> 340,847
<LONG-TERM> 1,897,287
0
0
<COMMON> 1,056,209
<OTHER-SE> 419,087
<TOTAL-LIABILITIES-AND-EQUITY> 20,321,166
<INTEREST-LOAN> 585,768
<INTEREST-INVEST> 157,228
<INTEREST-OTHER> 6,379
<INTEREST-TOTAL> 749,375
<INTEREST-DEPOSIT> 226,494
<INTEREST-EXPENSE> 375,364
<INTEREST-INCOME-NET> 374,011
<LOAN-LOSSES> 23,666
<SECURITIES-GAINS> 7,290
<EXPENSE-OTHER> 288,962
<INCOME-PRETAX> 196,721
<INCOME-PRE-EXTRAORDINARY> 127,913
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 127,913
<EPS-PRIMARY> .86
<EPS-DILUTED> .86
<YIELD-ACTUAL> 4.09
<LOANS-NON> 51,470
<LOANS-PAST> 29,859
<LOANS-TROUBLED> 5,558
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 194,456
<CHARGE-OFFS> 33,124
<RECOVERIES> 9,288
<ALLOWANCE-CLOSE> 196,486
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
