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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended December 31, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file Number 0-2525
Huntington Bancshares Incorporated
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(Exact name of registrant as specified in its charter)
Maryland 31-0724920
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Huntington Center, 41 S. High Street, Columbus, OH 43287
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (614) 480-8300
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock - Without Par Value
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(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of voting stock held by non-affiliates of the
registrant as of December 31, 1996, was $3,200,586,311. As of January 31, 1997,
141,507,973 shares of common stock without par value were outstanding.
Documents Incorporated By Reference
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Parts I and II of this Form 10-K incorporate by reference certain
information from the registrant's 1996 Annual Report to Shareholders. Part III
of this Form 10-K incorporates by reference certain information from the
registrant's definitive Proxy Statement for the 1997 Annual Shareholders'
Meeting.
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Huntington Bancshares Incorporated
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Part I
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ITEM 1: BUSINESS
Huntington Bancshares Incorporated (Huntington), incorporated in
Maryland in 1966, is a multi-state bank holding company headquartered in
Columbus, Ohio. Its subsidiaries conduct a full-service commercial and consumer
banking business, engage in mortgage banking, lease financing, trust services,
discount brokerage services, underwriting credit life and disability insurance,
and issuing commercial paper guaranteed by Huntington, and provide other
financial products and services. At December 31, 1996, Huntington's subsidiaries
had 183 banking offices in Ohio, 43 banking offices in West Virginia, 42 banking
offices in Michigan, 31 banking offices in Florida, 24 banking offices in
Indiana, 15 banking offices in Kentucky, and 1 foreign office in the Cayman
Islands. The Huntington Mortgage Company (a wholly-owned subsidiary) has loan
origination offices throughout the Midwest and East Coast. Foreign banking
activities, in total or with any individual country, are not significant to the
operations of Huntington. At December 31, 1996, Huntington and its subsidiaries
had 7,936 full-time equivalent employees.
Competition in the form of price and service from other banks and
financial companies such as savings and loans, credit unions, finance companies,
and brokerage firms is intense in most of the markets served by Huntington and
its subsidiaries. Mergers between and the expansion of financial institutions
both within and outside Ohio have provided significant competitive pressure in
major markets. Since September 1995, when federal interstate banking legislation
became effective that made it permissible for bank holding companies in any
state to acquire banks in any other state, actual or potential competition in
each of Huntington's markets has been intensified. The same federal legislation
permits further competition through interstate branching beginning in mid-1997,
subject to certain limitations by individual states.
Huntington acquired Peoples Bank of Lakeland (Lakeland), a $551 million
commercial bank headquartered in Lakeland, Florida, on January 23, 1996.
Huntington paid $46.2 million in cash and issued approximately 4.7 million
shares of common stock in exchange for all the common stock of Lakeland. The
transaction was accounted for as a purchase; accordingly, the results of
Lakeland have been included in the consolidated financial statements from the
date of acquisition.
In October 1996, Huntington entered into a merger agreement with
Citi-Bancshares, Inc. (Citi-Bancshares), a $538 million one-bank holding company
headquartered in Leesburg, Florida. Huntington is to exchange a combination of
its common stock and cash for the outstanding common stock of Citi-Bancshares in
a purchase transaction. The acquisition is expected to be completed in the first
quarter of 1997.
REGULATORY MATTERS
GENERAL
As a registered bank holding company, Huntington is subject to the
supervision of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board") and is required to file with the Federal Reserve Board
reports and other information regarding its business operations and the business
operations of its subsidiaries. It is also subject to examination by the Federal
Reserve Board and is required to obtain Federal Reserve Board approval prior to
acquiring, directly or indirectly, ownership or control of voting shares of any
bank, if, after such acquisition, it would own or control more than 5% of the
voting stock of such bank. In addition, pursuant to federal law and regulations
promulgated by the Federal Reserve Board, Huntington may only engage in, or own
or control companies that engage in, activities deemed by the Federal Reserve
Board to be so closely related to banking as to be a proper incident thereto.
Under legislation effective September 30, 1996, Huntington may, in most cases,
commence permissible new non-banking business activities de novo with only
subsequent notice to the Federal Reserve Board and may acquire smaller companies
that engage in permissible non-banking activities under an expedited procedure
requiring only 12 business days notice to the Federal Reserve Board.
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Huntington's bank subsidiaries have deposits insured by the Bank
Insurance Fund ("BIF") of the Federal Deposit Insurance Corporation ("FDIC"),
and are subject to supervision, examination, and regulation by the Office of the
Comptroller of the Currency ("OCC") if a national bank, or by state banking
authorities and either the FDIC or the Federal Reserve Board if a
state-chartered bank. Certain deposits of Huntington's bank subsidiaries were
acquired from savings associations and are insured by the Savings Association
Insurance Fund ("SAIF") of the FDIC. Huntington's nonbank subsidiaries are also
subject to supervision, examination, and regulation by the Federal Reserve Board
and examination by applicable federal and state banking agencies. In addition to
the impact of federal and state supervision and regulation, the bank and nonbank
subsidiaries of Huntington are affected significantly by the actions of the
Federal Reserve Board as it attempts to control the money supply and credit
availability in order to influence the economy.
To the extent that the following information describes statutory or
regulatory provisions, it is qualified in its entirety by reference to such
statutory or regulatory provisions.
HOLDING COMPANY STRUCTURE
Huntington's depository institution subsidiaries are subject to
affiliate transaction restrictions under federal law which limit the transfer of
funds by the subsidiary banks to the parent and any nonbank subsidiaries of the
parent, whether in the form of loans, extensions of credit, investments, or
asset purchases. Such transfers by any subsidiary bank to its parent corporation
or to any nonbank subsidiary of the parent are limited in amount to 10% of the
institution's capital and surplus and, with respect to such parent and all such
nonbank subsidiaries of the parent, to an aggregate of 20% of any such
institution's capital and surplus. Furthermore, such loans and extensions of
credit are required to be secured in specified amounts. In addition, all
affiliate transactions must be conducted on terms and under circumstances that
are substantially the same as such transactions with unaffiliated entities.
Under applicable regulations, at December 31, 1996, approximately $185.5 million
was available for loans to Huntington from its subsidiary banks.
The Federal Reserve Board has a policy to the effect that a bank
holding company is expected to act as a source of financial and managerial
strength to each of its subsidiary banks and to commit resources to support each
such subsidiary bank. Under the source of strength doctrine, the Federal Reserve
Board may require a bank holding company to make capital injections into a
troubled subsidiary bank, and may charge the bank holding company with engaging
in unsafe and unsound practices for failure to commit resources to such a
subsidiary bank. This capital injection may be required at times when Huntington
may not have the resources to provide it. Any loans by a holding company to any
of its subsidiary banks are subordinate in right of payment to deposits and to
certain other indebtedness of such subsidiary bank. Moreover, in the event of a
bank holding company's bankruptcy, any commitment by such holding company to a
federal bank regulatory agency to maintain the capital of a subsidiary bank will
be assumed by the bankruptcy trustee and entitled to a priority of payment.
In 1989, the United States Congress passed comprehensive financial
institutions legislation known as the Financial Institutions Reform, Recovery,
and Enforcement Act ("FIRREA"). Among other things, FIRREA established a new
principle of liability on the part of depository institutions insured by the
FDIC for any losses incurred by, or reasonably expected to be incurred by, the
FDIC after August 9, 1989, in connection with (i) the default of a commonly
controlled FDIC-insured depository institution, or (ii) any assistance provided
by the FDIC to a commonly controlled FDIC-insured depository institution in
danger of default. "Default" is defined generally as the appointment of a
conservator or receiver and "in danger of default" is defined generally as the
existence of certain conditions indicating that a "default" is likely to occur
in the absence of regulatory assistance. Accordingly, in the event that any
insured bank subsidiary of Huntington causes a loss to the FDIC, other bank
subsidiaries of Huntington could be required to compensate the FDIC by
reimbursing to it the amount of such loss, and such reimbursement could cause a
loss of Huntington's investment in such other subsidiaries.
Federal law permits the OCC to order the pro rata assessment of
shareholders of a national bank whose capital stock has become impaired, by
losses or otherwise, to relieve a deficiency in such national bank's capital
stock. This statute also provides for the enforcement of any such pro rata
assessment of shareholders of such national bank to cover such impairment of
capital stock by sale, to the extent necessary, of the capital stock of any
assessed shareholder failing to pay the assessment. Similarly, the laws of
certain states provide for such assessment and sale with respect to the
subsidiary banks chartered
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by such states. Huntington, as the sole shareholder of its subsidiary banks, is
subject to such provisions. Moreover, under legislation that became effective
August 10, 1993, the claims of a receiver of an insured depository institution
for administrative expenses and the claims of holders of deposit liabilities of
such an institution are accorded priority over the claims of general unsecured
creditors of such an institution, including the holders of the institution's
note obligations, in the event of a liquidation or other resolution of such
institution. As a result of such legislation, claims of a receiver for
administrative expenses and claims of holders of deposit liabilities of
Huntington's depository subsidiaries (including the FDIC, as the subrogee of
such holders) would receive priority over the holders of notes and other senior
debt of such subsidiaries in the event of a liquidation or other resolution and
over the interests of Huntington as sole shareholder of its subsidiaries.
DIVIDEND RESTRICTIONS
Dividends from subsidiary banks are a significant source of funds for
payment of dividends to Huntington's shareholders. There are, however, statutory
limits on the amount of dividends that Huntington's depository institution
subsidiaries can pay to Huntington without regulatory approval.
Huntington's subsidiary banks may not, without prior regulatory
approval, pay a dividend in an amount greater than such banks' undivided
profits. In addition, the prior approval of the OCC is required for the payment
of a dividend by a national bank if the total of all dividends declared by the
bank in a calendar year would exceed the total of its net income for the year
combined with its retained net income for the two preceding years. Under these
provisions and in accordance with the above-described formula, Huntington's
subsidiary banks could, without regulatory approval, declare dividends to
Huntington in 1997 of approximately $87.8 million plus an additional amount
equal to their net profits during 1997. In the year ended December 31, 1996,
Huntington declared cash dividends to its shareholders of approximately $111.1
million.
If, in the opinion of the applicable regulatory authority, a bank under
its jurisdiction is engaged in or is about to engage in an unsafe or unsound
practice (which, depending on the financial condition of the bank, could include
the payment of dividends), such authority may require, after notice and hearing,
that such bank cease and desist from such practice. The Federal Reserve Board,
the OCC, and the FDIC have issued policy statements which provide that insured
banks and bank holding companies should generally only pay dividends out of
current operating earnings.
FDIC INSURANCE
Under current FDIC practices, none of Huntington's banks will be
required to pay deposit insurance premiums during 1997. However, each of
Huntington's banks will be required to make payments for the servicing of
obligations of the Financing Corporation ("FICO") issued in connection with the
resolution of savings and loan associations, so long as such obligations remain
outstanding.
CAPITAL REQUIREMENTS
The Federal Reserve Board has issued risk-based capital ratio and
leverage ratio guidelines for bank holding companies such as Huntington. The
risk-based capital ratio guidelines establish a systematic analytical framework
that makes regulatory capital requirements more sensitive to differences in risk
profiles among banking organizations, takes off-balance sheet exposures into
explicit account in assessing capital adequacy, and minimizes disincentives to
holding liquid, low-risk assets. Under the guidelines and related policies, bank
holding companies must maintain capital sufficient to meet both a risk-based
asset ratio test and a leverage ratio test on a consolidated basis. The
risk-based ratio is determined by allocating assets and specified off-balance
sheet commitments into four weighted categories, with higher weighting being
assigned to categories perceived as representing greater risk. A bank holding
company's capital (as described below) is then divided by total risk weighted
assets to yield the risk-based ratio. The leverage ratio is determined by
relating core capital (as described below) to total assets adjusted as specified
in the guidelines. Each of Huntington's subsidiary banks is subject to
substantially similar capital requirements adopted by applicable regulatory
agencies.
Generally, under the applicable guidelines, a financial institution's
capital is divided into two tiers. "Tier 1", or core capital, includes common
equity, noncumulative perpetual preferred stock (excluding auction rate issues),
and minority interests in equity accounts of consolidated subsidiaries, less
goodwill
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and, with certain limited exceptions, all other intangible assets. Bank holding
companies, however, may include cumulative preferred stock in their Tier 1
capital, up to a limit of 25% of such Tier 1 capital. "Tier 2", or supplementary
capital, includes, among other things, cumulative and limited-life preferred
stock, hybrid capital instruments, mandatory convertible securities, qualifying
subordinated debt, and the allowance for loan and lease losses, subject to
certain limitations. "Total capital" is the sum of Tier 1 and Tier 2 capital.
The Federal Reserve Board and the other federal banking regulators
require that all intangible assets, with certain limited exceptions, be deducted
from Tier 1 capital. Under the Federal Reserve Board's rules, the only types of
intangible assets that may be included in (i.e., not deducted from) a bank
holding company's capital are originated mortgage servicing rights ("OMSRs"),
readily marketable purchased mortgage servicing rights ("PMSRs") and purchased
credit card relationships ("PCCRs"), provided that, in the aggregate, the total
amount of OMSRs/PMSRs and PCCRs included in capital does not exceed 50% of Tier
1 capital. PCCRs are subject to a separate sublimit of 25% of Tier 1 capital.
The amount of OMSRs/PMSRs and PCCRs that a bank holding company may include in
its capital is limited to the lesser of (i) 90% of such assets' fair market
value (as determined under the guidelines), or (ii) 100% of such assets' book
value, each determined quarterly. Identifiable intangible assets (i.e.,
intangible assets other than goodwill) other than OMSRs/PMSRs and PCCRs,
including core deposit intangibles, acquired on or before February 19, 1992 (the
date the Federal Reserve Board issued its original proposal for public comment),
generally will not be deducted from capital for supervisory purposes, although
they will continue to be deducted for purposes of evaluating applications filed
by bank holding companies.
Under the risk-based guidelines, financial institutions are required to
maintain a risk-based ratio (total capital to risk-weighted assets) of 8%, of
which 4% must be Tier 1 capital. The appropriate regulatory authority may set
higher capital requirements when an institution's circumstances warrant.
Under the leverage guidelines, financial institutions are required to
maintain a leverage ratio (Tier 1 capital to adjusted total assets, as specified
in the guidelines) of at least 3%. The 3% minimum ratio is applicable only to
financial institutions that meet certain specified criteria, including excellent
asset quality, high liquidity, low interest rate exposure, and the highest
regulatory rating. Financial institutions not meeting these criteria are
required to maintain a leverage ratio which exceeds 3% by a cushion of at least
100 to 200 basis points.
The guidelines also provide that financial institutions experiencing
internal growth or making acquisitions will be expected to maintain strong
capital positions substantially above the minimum supervisory level.
Furthermore, the Federal Reserve Board's guidelines indicate that the Federal
Reserve Board will continue to consider a "tangible Tier 1 leverage ratio" in
evaluating proposals for expansion or new activities. The tangible Tier 1
leverage ratio is the ratio of an institution's Tier 1 capital, less all
intangibles, to total assets, less all intangibles.
Failure to meet applicable capital guidelines could subject the
financial institution to a variety of enforcement remedies available to the
federal regulatory authorities, including limitations on the ability to pay
dividends, the issuance by the regulatory authority of a capital directive to
increase capital, and the termination of deposit insurance by the FDIC, as well
as to the measures described below under "Federal Deposit Insurance Corporation
Improvement Act of 1991" as applicable to undercapitalized institutions.
As of December 31, 1996, the Tier 1 risk-based capital ratio, total
risk-based capital ratio, and Tier I leverage ratio for Huntington were as
follows:
<TABLE>
<CAPTION>
Requirement Huntington
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<S> <C> <C>
Tier 1 Risk-Based Capital Ratio 4.00% 7.84%
Total Risk-Based Capital Ratio 8.00% 11.31%
Tier I Leverage Ratio 3.00% 6.66%
</TABLE>
As of December 31, 1996, each of Huntington's bank subsidiaries had capital in
excess of the minimum requirements.
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The Federal Reserve Board, the OCC, and the FDIC jointly announced a
final rule in August 1995, revising their risk-based capital standards to
specify that evaluations by the banking agencies of a bank's capital adequacy
will include an assessment of the exposure to declines in the economic value of
the bank's capital due to changes in interest rates. The final rule did not,
however, codify a measurement framework for assessing the level of a bank's
interest rate exposure. Instead, the banking agencies issued for comment a joint
policy statement describing a measurement process. After extended consideration
of such measurement process, the banking agencies concluded that adoption of a
standardized, accurate supervisory model was not feasible, and in June 1996,
issued a joint policy statement on interest rate risk describing prudent methods
for monitoring such risk that rely principally on internal measures of exposure
and active oversight of risk management activities by senior management.
FEDERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENT ACT OF 1991
In December 1991, Congress enacted the Federal Deposit Insurance
Corporation Improvement Act of 1991 ("FDICIA"), which substantially revised the
bank regulatory and funding provisions of the Federal Deposit Insurance Act and
made revisions to several other federal banking statutes.
Among other things, FDICIA requires federal banking regulatory
authorities to take "prompt corrective action" with respect to depository
institutions that do not meet minimum capital requirements. For these purposes,
FDICIA establishes five capital tiers: well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized, and critically
undercapitalized.
The federal banking regulatory agencies have adopted regulations to
implement the prompt corrective action provisions of FDICIA. Among other things,
the regulations define the relevant capital measures for the five capital
categories. An institution is deemed to be "well capitalized" if it has a total
risk-based capital ratio of 10% or greater, a Tier 1 risk-based capital ratio of
6% or greater, and a Tier I leverage ratio of 5% or greater and is not subject
to a regulatory order, agreement, or directive to meet and maintain a specific
capital level for any capital measure. An institution is deemed to be
"adequately capitalized" if it has a total risk-based capital ratio of 8% or
greater, a Tier 1 risk-based capital ratio of 4% or greater, and, generally, a
Tier I leverage ratio of 4% or greater and the institution does not meet the
definition of a "well capitalized" institution. An institution that does not
meet one or more of the "adequately capitalized" tests is deemed to be
"undercapitalized". If the institution has a total risk-based capital ratio that
is less than 6%, a Tier 1 risk-based capital ratio that is less than 3%, or a
Tier I leverage ratio that is less than 3%, it is deemed to be "significantly
undercapitalized". Finally, an institution is deemed to be "critically
undercapitalized" if it has a ratio of tangible equity (as defined in the
regulations) to total assets that is equal to or less than 2%.
FDICIA generally prohibits a depository institution from making any
capital distribution (including payment of a cash dividend) or paying any
management fee to its holding company if the depository institution would
thereafter be undercapitalized. Undercapitalized institutions are subject to
growth limitations and are required to submit a capital restoration plan. If any
depository institution subsidiary of a holding company is required to submit a
capital restoration plan, the holding company would be required to provide a
limited guarantee regarding compliance with the plan as a condition of approval
of such plan by the appropriate federal banking agency. If an undercapitalized
institution fails to submit an acceptable plan, it is treated as if it is
significantly undercapitalized. Significantly undercapitalized institutions may
be subject to a number of requirements and restrictions, including orders to
sell sufficient voting stock to become adequately capitalized, requirements to
reduce total assets, and cessation of receipt of deposits from correspondent
banks. Critically undercapitalized institutions may not, beginning 60 days after
becoming critically undercapitalized, make any payment of principal or interest
on their subordinated debt. In addition, critically undercapitalized
institutions are subject to appointment of a receiver or conservator within 90
days of becoming critically undercapitalized.
Under FDICIA, a depository institution that is not well capitalized is
generally prohibited from accepting brokered deposits and offering interest
rates on deposits higher than the prevailing rate in its market. Huntington
expects that the FDIC's brokered deposit rule will not adversely affect the
ability of its depository institution subsidiaries to accept brokered deposits.
Under the regulatory definition of brokered deposits, as of December 31, 1996,
Huntington's depository subsidiaries had an insignificant amount of brokered
deposits.
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FDICIA, as amended, directs that each federal banking regulatory agency
prescribe standards, by regulation or guideline, for depository institutions
relating to internal controls, information systems, internal audit systems, loan
documentation, credit underwriting, interest rate exposure, asset growth,
compensation, asset quality, earnings, and stock valuation. The Federal Reserve
Board has adopted a regulation in the form of guidelines covering most of these
items, and the other federal banking regulatory agencies are expected to adopt
identical regulations. Huntington believes that the regulation and guidelines
will not have a material effect on the operations of its depository institution
subsidiaries.
INTERESTATE BRANCHING AND CONSOLIDATIONS
The Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994, enacted in September 1994, provides for nationwide interstate banking and
branching. Under the law, interstate acquisitions of banks or bank holding
companies in any state by bank holding companies in any other state became
permissible as of September 29, 1995. Interstate branching and consolidations of
existing bank subsidiaries in different states will be permissible beginning
June 1, 1997. The permissibility of consolidations and branching may be
accelerated by "opt-ins" by individual states. A state may also, until June 1,
1997, adopt legislation to "opt-out" of interstate branching and consolidations,
but in that event the state's own banks become ineligible to branch into, or
consolidate their operations in, other states.
Subject to obtaining all necessary regulatory approvals, Huntington
presently intends to merge all of its subsidiary banks, except The Huntington
State Bank, into its principal bank, The Huntington National Bank, headquartered
in Columbus, Ohio, and to consolidate all of its active subsidiary holding
companies into Huntington, as soon as practicable after June 1, 1997. The merger
of Huntington's national bank subsidiary in Florida and of Huntington's
subsidiary holding company for that national bank into The Huntington National
Bank and Huntington, respectively, may be deferred pending receipt of a private
letter ruling from the Internal Revenue Service to the effect that such mergers
will not adversely impact the characterization of Huntington's pending
acquisition of Citi-Bancshares as a tax-free reorganization.
OTHER DEVELOPMENTS
The Riegle Community Development and Regulatory Improvement Act of
1994, also enacted in September 1994, made several changes in existing law
affecting bank holding companies, including a reduction in the minimum
post-approval antitrust review waiting period for depository institution mergers
and acquisitions, and the substitution of a notice for an application when a
bank holding company proposes to engage in, or acquire a company to engage in,
nonbank activities.
The Economic Growth and Regulatory Paperwork Reduction Act of 1996,
enacted in September 1996, provided, in addition to arrangements for the
recapitalization of the SAIF, regulatory relief for bank holding companies in
several significant areas. Bank holding companies that also owned savings
associations and were therefore subject to regulation by the Office of Thrift
Supervision ("OTS") as savings and loan holding companies were relieved of such
duplicate regulation, and neither future acquisitions of savings associations by
bank holding companies nor mergers of savings associations into banks will any
longer require application to and approval by OTS. Acquisitions by
well-capitalized and well-managed bank holding companies of companies engaging
in permissible nonbanking activities (other than savings associations) may now
be made with only 12 days prior notice to the Federal Reserve Board, and de novo
engagement in such activities by such bank holding companies may be commenced
without prior notice to the Federal Reserve Board. The same legislation gave
regulatory relief to banks in regard to corporate governance, branching,
disclosure, and other operational areas.
GUIDE 3 INFORMATION
Information required by Industry Guide 3 relating to statistical
disclosure by bank holding companies is set forth in Huntington's 1996 Annual
Report to Shareholders, and is incorporated herein by reference:
<TABLE>
<CAPTION>
Table Page
<S> <C> <C>
Distribution of Assets, Liabilities and Shareholders'
Equity; Interest Rates and Interest Differential:
Average Balance Sheet 18, 19
Net Interest Earnings Analysis 18, 19
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
Change in Net Interest Income Due to
Changes in Average Volume and
Interest Rates 2 9
Investment Securities:
Book Value of Investments 7 12
Maturity Distribution and Yields 7 12
Securities Available for Sale:
Book Value of Investments 8 13
Maturity Distribution and Yields 8 13
Loan Portfolio:
Types of Loans 3 10
Maturities and Sensitivities to
Changes in Interest Rates 4 10
Non-accrual, Past Due and
Renegotiated Loans 12 16, 28
Potential Problem Loans 16
Loan Concentrations 3 10
Summary of Loan Loss Experience:
Allowance for Loan Losses 5 10, 11
Allocation of Allowance for Loan Losses 6 11
Deposits:
Average Balances 18, 19
Large CD Maturities 10 15
Return on Equity and Assets 1 8
Short-Term Borrowings 11 15
</TABLE>
ITEM 2: PROPERTIES
The headquarters of Huntington and its lead subsidiary, The Huntington
National Bank, are located in the Huntington Center, a thirty-seven story office
building located in Columbus, Ohio. Of the building's total office space
available, Huntington occupies approximately 39 percent. The original lease term
is 25 years, expiring in 2009, with renewal options for up to 50 years with no
purchase option. The Huntington National Bank has an equity interest in the
entity that owns the building. In addition to these headquarters, Huntington's
other major properties consist of a thirteen-story and a twelve-story office
building, both of which are located adjacent to the Huntington Center; a
twenty-one story office building, known as the Huntington Building, located in
Cleveland, Ohio; an office building in Lakeland, Florida; The Huntington
Mortgage Company's building, located in the greater Columbus area; an office
complex located in Troy, Michigan; and two data processing and operations
centers located in Ohio. Of these properties, Huntington owns the thirteen-story
and twelve-story office buildings, the building in Lakeland, Florida, The
Huntington Mortgage Company building, the building in Troy, Michigan, and the
operations centers located in Cleveland and Columbus. All of the other major
properties are held under long-term leases.
ITEM 3: LEGAL PROCEEDINGS
Information required by this item is set forth in Note 12 of Notes to
Consolidated Financial Statements on page 33 of the 1996 Annual Report to
Shareholders, and is incorporated herein by reference.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
Part II
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ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The common stock of Huntington Bancshares Incorporated is traded on the
NASDAQ National Market System under the symbol "HBAN". The stock is listed as
"HuntgBcshr" or "HuntBanc" in most newspapers. As of January 31, 1997,
Huntington had 29,342 shareholders of record.
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Information regarding the high and low sale prices of Huntington Common
Stock and cash dividends declared on such shares, as required by this item, is
set forth in a table entitled "Market Prices, Key Ratios and Statistics, Non
Performing Assets (Quarterly Data)" on page 21 of the 1996 Annual Report to
Shareholders, and is incorporated herein by reference. Information regarding
restrictions on dividends, as required by this item, is set forth under "Item 1:
Business-Regulatory Matters-Dividend Restrictions" above and in Notes 8 and 17
of Notes to Consolidated Financial Statements on pages 31 and 35, respectively,
of the 1996 Annual Report to Shareholders, and is incorporated herein by
reference.
ITEM 6: SELECTED FINANCIAL DATA
Information required by this item is set forth in Table 1 on page 8 of
Huntington's 1996 Annual Report to Shareholders, and is incorporated herein by
reference.
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Information required by this item is set forth on pages 8 - 17 of
Huntington's 1996 Annual Report to Shareholders, and is incorporated herein by
reference.
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information required by this item is set forth on page 23 (report of
independent auditors) and pages 24 through 40 (consolidated financial
statements) of Huntington's 1996 Annual Report to Shareholders, and is
incorporated herein by reference.
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
Part III
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ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information required by this item is set forth under the captions
"Class I Directors," "Class II Directors," and "Class III Directors" on pages 3
through 5, under the caption "Executive Officers of the Corporation" on pages 28
through 30, and under the caption "Section 16(a) Beneficial Ownership Reporting
Compliance" on page 34, of Huntington's 1997 Proxy Statement, and is
incorporated herein by reference.
ITEM 11: EXECUTIVE COMPENSATION
Information required by this item is set forth under the caption
"Executive Compensation" on pages 11 through 27, and under the caption
"Compensation of Directors" on pages 6 through 8, of Huntington's 1997 Proxy
Statement, and is incorporated herein by reference.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by this item is set forth under the caption
"Ownership of Voting Stock" on pages 9 through 11, of Huntington's 1997 Proxy
Statement, and is incorporated herein by reference.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this item is set forth under the caption
"Transactions With Directors and Executive Officers" on page 11 of Huntington's
1997 Proxy Statement, and is incorporated herein by reference.
9
<PAGE> 10
Part IV
-------
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8- K
(a) The following documents are filed as part of this report:
(1) The report of independent auditors and consolidated financial
statements appearing in Huntington's 1996 Annual Report to Shareholders on the
pages indicated below are incorporated by reference in Item 8:
<TABLE>
<CAPTION>
Annual
Report Page
-----------
<S> <C>
Report of Independent Auditors 23
Consolidated Balance Sheets as of 24
December 31, 1996 and 1995
Consolidated Statements of Income 25
for the years ended December 31,
1996, 1995, and 1994
Consolidated Statements of Changes 26
in Shareholders' Equity for the years
ended December 31, 1996, 1995, and 1994
Consolidated Statements of Cash Flows 27
for the years ended December 31,
1996, 1995, and 1994
Notes to Consolidated Financial Statements 28-40
</TABLE>
(2) Huntington is not filing separately financial statement schedules
because of the absence of conditions under which they are required or because
the required information is included in the consolidated financial statements or
the notes thereto.
(3) The exhibits required by this item are listed in the Exhibit Index
on pages 12 through 14 of this Form 10-K. The management contracts and
compensatory plans or arrangements required to be filed as exhibits to this Form
10-K are listed as Exhibits 10(a) through 10(s) in the Exhibit Index.
(b) During the quarter ended December 31, 1996, Huntington filed one Current
Report on Form 8-K. The report was dated October 9, 1996. The information
contained therein was filed under report item number five, "Other Events", and
contained Huntington's press release to announce the results of operations for
the quarter ended September 30, 1996.
(c) The exhibits to this Form 10-K begin on page 12.
(d) See Item 14(a)(2) above.
10
<PAGE> 11
Signatures
- ----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized, on the 19th day of
February, 1997.
HUNTINGTON BANCSHARES INCORPORATED
----------------------------------
(Registrant)
By: /s/Frank Wobst By: /s/Gerald R. Williams
---------------------------------- ----------------------
Frank Wobst Gerald R. Williams
Director, Chairman and Executive Vice President and
Chief Executive Officer Chief Financial Officer
(Principal Executive Officer) (Principal Financial Officer and
Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on the 19th day of February, 1997.
/s/George A. Skestos
- ---------------------- ------------------------------
Don M. Casto, III George A. Skestos
Director Director
/s/Don Conrad /s/Lewis R. Smoot, Sr.
- ---------------------- ------------------------------
Don Conrad Lewis R. Smoot, Sr.
Director Director
/s/Patricia T. Hayot /s/Timothy P. Smucker
- ---------------------- ------------------------------
Patricia T. Hayot Timothy P. Smucker
Director Director
/s/W. Lee Hoskins /s/Zuheir Sofia
- ---------------------- ------------------------------
W. Lee Hoskins Zuheir Sofia
Director Director
/s/Wm. J. Lhota /s/William J. Williams
- ---------------------- ------------------------------
Wm. J. Lhota William J. Williams
Director Director
11
<PAGE> 12
Exhibit Index
- -------------
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 quarterly period 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(a). Instruments defining the Rights of Security Holders -- reference is
made to Articles V, VIII and X of Articles of Restatement of
Charter, as amended and supplemented. Instruments defining the
rights of holders of long-term debt will be furnished to the
Securities and Exchange Commission upon request.
(b). Rights Plan, dated February 22, 1990, between Huntington Bancshares
Incorporated and The Huntington Trust Company, National
Association -- previously filed as Exhibit 1 to Registration
Statement on Form 8-A, filed with the Securities and Exchange
Commission on February 22, 1990, and incorporated herein by
reference.
(c). Amendment No. 1 to the Rights Agreement, dated August 16, 1995,
previously filed as Exhibit 4(b) to Form 8-K, dated August
16, 1995, and incorporated herein by reference.
10. Material contracts:
(a). Employment Agreement, dated April 25, 1996, between Huntington
Bancshares Incorporated and Frank Wobst --previously filed as
Exhibit 10(a) to Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 1996, and incorporated herein
by reference.
(b). Employment Agreement, dated September 16, 1991, between Huntington
Bancshares Incorporated and Zuheir Sofia --previously filed as
Exhibit 10(b) to Annual Report on Form 10-K for the year ended
December 31, 1991, and incorporated herein by reference.
(c)(1). Employment Agreement, dated September 16, 1991, between Huntington
Bancshares Incorporated and W. Lee Hoskins -- previously
filed as Exhibit 10(c) to Annual Report on Form 10-K for the
year ended December 31, 1991, and incorporated herein by
reference.
(c)(2). Notice of Non-Renewal and Amendment of September 16, 1991
Employment Agreement between Huntington Bancshares
Incorporated and W. Lee Hoskins.
(d). Executive Agreement, dated January 22, 1997, between Huntington
Bancshares Incorporated and Frank Wobst.
(e). Executive Agreement, dated January 22, 1997, between Huntington
Bancshares Incorporated and Zuheir Sofia.
(f). Executive Agreement, dated September 16, 1991, between Huntington
Bancshares Incorporated and W. Lee Hoskins -- previously filed
as Exhibit 10(h) to Annual Report on Form 10-K for the year
ended December 31, 1991, and incorporated herein by reference.
(g). Form of Executive Agreement for certain executive officers.
(h). Schedule identifying material details of Executive Agreements,
substantially similar to 10(g).
12
<PAGE> 13
(i). Huntington Bancshares Incorporated Incentive Compensation Plan --
previously filed as Exhibit 10(i) to Quarterly Report on Form
10-Q for the quarterly period ended March 31, 1995, and
incorporated herein by reference.
(j)(1). Long-Term Incentive Compensation Plan, as amended and effective for
performance cycles beginning on or after January 1, 1992 --
previously filed as Exhibit 10(j) to Annual Report on Form
10-K for the year ended December 31, 1993, and incorporated
herein by reference.
(j)(2). Long-Term Incentive Compensation Plan, as amended and effective for
performance cycles beginning on or after January 1, 1996.
(k). Supplemental Executive Retirement Plan -- previously filed as
Exhibit 10(g) to Annual Report on Form 10-K for the year ended
December 31, 1987, and incorporated herein by reference
(l). Deferred Compensation Plan and Trust for Directors -- reference is
made to Exhibit 4(a) of Post-Effective Amendment No. 2 to
Registration Statement on Form S-8, Registration No. 33-10546,
filed with the Securities and Exchange Commission on January
28, 1991, and incorporated herein by reference.
(m)(1). 1983 Stock Option Plan -- reference is made to Exhibit 4A of
Registration Statement on Form S-8, Registration No. 2-89672,
filed with the Securities and Exchange Commission on February
27, 1984, and incorporated herein by reference.
(m)(2). 1983 Stock Option Plan -- Second Amendment -- previously filed as
Exhibit 10(j)(2) to Annual Report on Form 10-K for the year
ended December 31, 1987, and incorporated herein by
reference.
(m)(3). 1983 Stock Option Plan -- Third Amendment -- previously filed as
Exhibit 10(j)(3) to Annual Report on Form 10-K for the year
ended December 31, 1987, and incorporated herein by
reference.
(m)(4). 1983 Stock Option Plan -- Fourth Amendment -- previously filed as
Exhibit (m)(4) to Annual Report on Form 10-K for the year
ended December 31, 1993, and incorporated herein by
reference.
(m)(5). 1983 Stock Option Plan -- Fifth Amendment.
(n)(1). 1990 Stock Option Plan -- reference is made to Exhibit 4(a) of
Registration Statement on Form S-8, Registration No.
33-37373, filed with the Securities and Exchange Commission
on October 18, 1990, and incorporated herein by reference.
(n)(2). First Amendment to Huntington Bancshares Incorporated 1990 Stock
Option Plan -- previously filed as Exhibit 10(q)(2) to Annual
Report on Form 10-K for the year ended December 31, 1991, and
incorporated herein by reference.
(n)(3). Second Amendment to Huntington Bancshares Incorporated 1990 Stock
Option Plan.
(o). The Huntington Supplemental Stock Purchase and Tax Savings Plan and
Trust (as amended and restated as of February 9, 1990) --
previously filed as Exhibit 4(a) to Registration Statement on
Form S-8, Registration No. 33-44208, filed with the Securities
and Exchange Commission on November 26, 1991, and incorporated
herein by reference.
(p). Deferred Compensation Plan and Trust for Huntington Bancshares
Incorporated Directors -- reference is made to Exhibit 4(a) of
Registration Statement on Form S-8, Registration No. 33-41774,
filed with the Securities and Exchange Commission on July 19,
1991, and incorporated herein by reference.
(q). Huntington Bancshares Incorporated Retirement Plan For Outside
Directors, previously filed as Exhibit 10(t) to Annual Report
on Form 10-K for the year ended December 31, 1992, and
incorporated herein by reference.
13
<PAGE> 14
(r). Amended and Restated 1994 Stock Option Plan.
(s). Huntington Supplemental Retirement Income Plan -- previously filed
as Exhibit 10(s) to Annual Report on Form 10-K for the year
ended December 31, 1994, and incorporated herein by reference.
11. Statement re: Computation of Earnings Per Share.
13. Portions of Huntington's 1996 Annual Report to Shareholders.
21. Subsidiaries of the Registrant.
23. Consent of Independent Auditors.
27. Financial Data Schedule.
14
<PAGE> 1
Exhibit 10(c)(2)
[logo]
Huntington
Huntington Bancshares Incorporated
Columbus, Ohio 43287
Frank Wobst
Chairman and Chief Executive Officer
614 480 3623
August 19, 1996
W. Lee Hoskins
403 North Columbia Avenue
Columbus, Ohio 43209
RE: Notice of Non-Renewal and Amendment of September 16, 1991 Employment
Agreement between Huntington Bancshares Incorporated and W. Lee Hoskins
(the "Agreement").
Dear Lee:
As we discussed, this letter is being forwarded as a formal memorialization of
our discussions concerning your Employment Agreement and is being given as is
required by the Agreement itself.
The term of the Agreement between Huntington Bancshares Incorporated and W. Lee
Hoskins will not be renewed. The term of the Agreement, as amended, will end on
June 30, 1997, or on such earlier date as may be determined by mutual
agreement.
In consideration of the payments and enhancements and the good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Huntington Bancshares Incorporated ("Huntington") and W. Lee Hoskins
("Executive") (the "Parties"), intending to be legally bound, hereby agree to
the following amendments and modifications to the Agreement:
1. Section I of said Agreement is amended by deleting the term "Board of
Directors" and substituting in lieu thereof "Chief Executive Officer".
2. Section I B of said Agreement is deleted in its entirety and in lieu
thereof, the following is substituted:
Section I B - The term of this agreement will end on June 30,
1997, or on such earlier date as may be determined by mutual
agreement of the Parties ("Termination Date").
<PAGE> 2
W. Lee Hoskins
Page 2
August 19, 1996
- --------------------------------------------------------------------------------
3. Section II A of the Agreement is amended and modified by deleting the
last sentence of said paragraph.
4. Notwithstanding any contrary provision contained in Section III A, B,
C, D, E or G of said Agreement, no payment, benefit, right or
entitlement shall extend beyond or be continued beyond the Termination
Date.
5. Notwithstanding any provision of the Agreement or the letter agreement
dated September 11, 1991, between the Parties, the relationship between
the Parties following the Termination Date shall be determined and
governed exclusively by the provisions of this Agreement.
6. The provisions of this Amendment shall become effective upon execution
by Huntington and Executive and ratification of said Amendment by the
Compensation and Stock Option Committee of the Board of Directors of
Huntington.
7. The letter agreement between the Parties dated September 11, 1991, is
hereby revoked and is of no legal effect.
8. Executive agrees that his status as an officer and director of The
Huntington National Bank and his status as an officer of Huntington and
all affiliated companies will end on the Termination Date.
9. In consideration of and conditioned (except to the extent vested and
nonforfeitable by law) on the performance and compliance of Executive
with the promises and agreements made herein by Executive, Huntington
shall, after the Termination Date, provide to Executive the specific
benefits set forth in Exhibit A attached hereto, the terms of which are
incorporated herein by reference. Executive agrees that such benefits
are in lieu of any and all benefits, rights and incidence of
employment, including without limitation, compensation, incentives,
club memberships, bonus, or right to use any Huntington property or
privileges.
10. With respect to the period following the Termination Date, Executive,
for himself, his heirs, executors and assigns, hereby releases, waives,
extinguishes and covenants not to sue with respect to any and all
rights, liabilities, claims or actions which he has or may have
against Huntington or its affiliates, its or their successors and
assigns and the directors, officers, employees or agents of any them or
their heirs or assigns and Executive forever releases and agrees to hold
them harmless for any and
<PAGE> 3
W. Lee Hoskins
Page 3
August 19, 1996
- --------------------------------------------------------------------------------
all rights, liabilities, claims or actions of whatever nature arising
in any manner out of his employment or the termination of his
employment. The rights, liabilities, claims and actions released,
waived and extinguished herein by Executive and with respect to which
Executive covenants not to sue, shall include but not be limited to
those arising or which might arise under Title VII of the Civil Rights
Act of 1964, as amended; the Civil Rights Act of 1866, as amended;
Executive Order 11246, as amended; the National Labor Relations Act,
as amended; the Americans with Disabilities Act of 1990; any claims or
rights arising in fact or by implication pursuant to any alleged
contract and any other claim arising under any federal, state, county,
city or other local law, rule, ordinance, or regulation, order or
decision concerning discrimination in employment or the terms, rate,
hours, benefits, conditions or privileges of employment or any other
term or condition of employment including, but not limited to, any
claim arising out of his employment which relates to or arises out of
a claim of discrimination because of race, color, religion, sex,
national origin, handicap, age or ancestry pursuant to Chapter 4112 of
the Ohio Revised Code or which relates to or arises out of age
discrimination, pursuant to the Federal Age Discrimination in
Employment Act or any state or local age discrimination statute, law,
ordinance or decision. Executive agrees not to assert or to file after
the Termination Date, any new or amended claim, charge or complaint or
other allegation with respect to matters arising out of his term of
employment or the termination thereof with any federal, state, county,
city or local agency or court.
11. Executive agrees that after the Termination Date, if requested, he will
from time to time consult with the staff of Huntington with respect to
projects on which he has worked including projects to which he has been
assigned which are incomplete.
12. Both before and following the Termination Date, Huntington will
indemnify Executive, including the advance of expenses associated with
the resistance or defense of any and all claims, suits, charges or
proceedings arising from the performance by Executive of duties as an
officer or director of Huntington or any affiliated company, to the
full extent permitted by federal law and the laws of the State of
Maryland.
13. Both before and following the Termination Date, Executive agrees that
he will not engage in any activities which may be disruptive or
disparaging of Huntington's business or the business of its affiliates,
directors, officers, and employees.
<PAGE> 4
W. Lee Hoskins
Page 4
August 19, 1996
- --------------------------------------------------------------------------------
14. Huntington and Executive acknowledge that they have read this Amendment
in its entirety, fully understand the same, and are in full accord with
the terms contained herein.
15. Executive acknowledges that after the Termination Date and prior to
July 1, 2000, he will not, without the prior written consent of the
Chief Executive Officer of Huntington, engage in the banking business
as a director, officer, employee, agent or consultant with any
financial institution, including any bank, thrift, bank holding company
or thrift holding company with more than 5% of its loans or deposits
located in the state of Ohio.
16. Upon execution hereof, this Amendment, along with the attached Exhibit
A to this Amendment, constitutes the Parties' entire Agreement with
respect to all compensation, benefits, entitlements, bonuses,
retirement or income continuation arising from Executive's employment
with Huntington or any Company. By execution of this Amendment,
Executive agrees that all prior contracts and agreements between the
Parties or predecessor entities, with respect to the subject matter
contained herein, are superseded by this Amendment.
If the foregoing fairly and accurately represents your understanding of the
agreement between Parties, please execute and return to me the enclosed copy of
this letter.
Sincerely,
/s/ Frank Wobst
Frank Wobst
Chairman and Chief Executive Officer
Huntington Bancshares Incorporated
EXECUTIVE ACKNOWLEDGES THAT HE WAS GIVEN UP TO 21 CALENDAR DAYS WITHIN WHICH TO
CONSIDER THIS AMENDMENT; THAT HE WAS ADVISED OF HIS RIGHT TO CONSULT WITH LEGAL
COUNSEL PRIOR TO SIGNING THIS AGREEMENT; AND THAT EITHER PARTY HAS THE RIGHT TO
REVOKE THIS AGREEMENT, IN WRITING, FOR A PERIOD NOT TO EXCEED 7 DAYS AFTER THE
DATE
<PAGE> 5
W. Lee Hoskins
Page 5
August 19, 1996
- --------------------------------------------------------------------------------
ON WHICH IT WAS SIGNED BY EXECUTIVE. ALL PARTIES FURTHER ACKNOWLEDGE IF EITHER
PARTY FAILS TO EXERCISE THIS RIGHT TO REVOKE, THIS AMENDMENT WILL IMMEDIATELY
BECOME A BINDING CONTRACT AS TO ITS TERMS
Notice received and accepted and this
Amendment approved and accepted this
19th day of August, 1996.
By: /s/ W. Lee Hoskins
---------------------------------
W. Lee Hoskins
Ratified and affirmed by the
Compensation and Stock Option Committee
of the Board of Directors of Huntington
Bancshares Incorporated this 21st day
of August, 1996.
By: /s/John B. Gerlach
---------------------------------
John B. Gerlach, Chairman
Compensation and Stock Option Committee
<PAGE> 6
EXHIBIT A
NOTICE OF NON-RENEWAL AND AMENDMENT OF SEPTEMBER 16, 1991, EMPLOYMENT AGREEMENT
BETWEEN HUNTINGTON BANCSHARES INCORPORATED AND W. LEE HOSKINS
INCENTIVE PLANS
1. You are a participant in the Incentive Compensation Plan, also known as
the Annual Management Incentive Plan (the "MIP"), until the Termination
Date. The Compensation Committee has agreed to "deem you a retiree," as
of the Termination Date, for purposes of the MIP.
You shall be eligible to receive a MIP payment for the plan year 1996.
Your MIP payment for the plan year 1996 will be based on Huntington
Bancshares Incorporated's ("Huntington's") Return on average
shareholder's equity ("ROAE") performance and calculated pursuant to
the terms of the MIP. Your MIP payment for the plan year 1996 will be a
pro rata amount equal to a fraction of a year, the numerator of which
shall be the number of full months worked after December 31, 1995,
prior to the earlier of December 31, 1996 or the Termination Date, and
the denominator shall be twelve (12). You shall receive this payment
prior to the last day in February, 1997. The payment is contingent upon
your continued fulfillment of the responsibilities and requirements of
your current position through the earlier of December 31, 1996, or the
Termination Date.
If the Termination Date shall occur after December 31, 1996, and before
July 1, 1997, you shall be eligible to receive a MIP payment for the
plan year 1997. Your MIP payment for plan year 1997 will be based on
Huntington's ROAE performance and calculated pursuant to the terms of
the plan. Your MIP payment will be a pro-rata amount equal to a
fraction of a year, up to a maximum of one half year, the numerator of
which shall be the number of full months worked after December 31,
1996, prior to the Termination Date, and the denominator shall be
twelve (12). The foregoing is contingent upon your continued
fulfillment of the responsibilities and requirements of your current
position through the Termination Date.
2. You are a participant in the fourth and fifth cycles of the Long Term
Incentive Compensation Plan (the "Long Term Plan"). The Compensation
Committee has agreed to "deem you a retiree," as of the Termination
Date, for purposes of the Long Term Plan.
The fourth cycle of the Long Term Plan covers the period of January 1,
1994 through December 31, 1996. You are a participant in the fourth
cycle of the Long Term Plan and shall be eligible to receive a fourth
cycle Long Term Plan payment. Your Long Term Plan payment will be
determined based on Huntington's Return on Beginning Shareholder's
Equity ("ROBE") performance relative to the performance of the fourth
1
<PAGE> 7
EMPLOYMENT AGREEMENT
EXHIBIT A - Page 2
W. Lee Hoskins
cycle Pacesetter Group and calculated pursuant to the terms of that
plan. Your payment will be a pro rata amount equal to a fraction of the
fourth cycle period, the numerator of which shall be the number of full
months worked after December 31, 1993, prior to the earlier of December
31, 1996, or the Termination Date, and the denominator shall be
thirty-six (36). Payment from this plan will be in the form of shares
of common stock with the opportunity to elect up to 50% of the payment
in cash. You will receive this payment prior to the last day of
February, 1997. The foregoing is contingent upon your continued
fulfillment of the responsibilities and requirements of your current
position through the Termination Date.
The fifth cycle of the Long Term Plan covers the period of January 1,
1996 through December 31, 1998. You are a participant in the fifth
cycle of the Long Term Incentive Compensation Plan (the "Long Term
Plan") and shall be eligible to receive a fifth cycle Long Term Plan
payment. Your Long Term Plan payment will be determined based on
Huntington's ROAE performance relative to the performance of the fifth
cycle Pacesetter Group and calculated pursuant to the terms of that
plan. Your payment will be a pro rata amount equal to a fraction of the
fifth cycle period, up to a maximum of one and one half years, the
numerator of which shall be the number of full months worked after
December 31, 1995, prior to the Termination Date, and the denominator
shall be thirty six (36). Payment from this plan will be in the form of
shares of common stock with the opportunity to elect up to 50% of the
payment in cash. You will receive this payment prior to the last day in
February, 1999. The foregoing is contingent upon your continued
fulfillment of the responsibilities and requirements of your current
position through the Termination Date.
WELFARE BENEFITS
1. You are a participant in the Huntington's Executive Life Insurance
Plan. The agent, David Fisher, Acordia/McElroy-Minister, Co., will
review options available under the plan with you. He can be reached at
614-228-5565. Your Group Term Life Insurance in the amount of $50,000
will terminate at the end of the month in which the Termination Date
occurs.
2. Your Business Travel AD&D coverage, and Voluntary AD&D coverage, if
applicable, will terminate on the last day of the month coincident
with, or next following, the Termination Date. Your Long Term
Disability coverage will terminate on the Termination Date.
3. Your group medical and dental coverage will terminate on the last day
of the month coincident with, or next following, the Termination Date.
Coverage for you and your
2
<PAGE> 8
EMPLOYMENT AGREEMENT
EXHIBIT A - Page 3
W. Lee Hoskins
spouse may be continued up to eighteen (18) additional months if you
elect COBRA coverage and make the required payments. You will be paid a
lump sum of $6,498 as of the Termination Date. This amount is the
present value of the estimated cost to you of COBRA medical and dental
coverage, for you and your spouse, for the eighteen month period
following the Termination Date.
4. Following the expiration of your eighteen month COBRA coverage period,
Huntington will pay you an amount equal to 80% of the eligible medical
expenses you incur. Eligible medical expenses are those expenses that
would have been paid by the Medical Benefits portion of the Huntington
Bancshares Health Care Plan, as amended from time to time, had you been
eligible for coverage under that plan when the expenses were incurred.
All terms and limitations set forth in the Huntington Bancshares Health
Care Plan, as amended from time to time, shall apply to the
determination of the amount that will be paid to you according to this
provision. Huntington shall not pay you for medical expenses you incur
during any period you are covered, or are eligible for coverage, under
any private employer or government sponsored health care plan.
RETIREMENT INCOME BENEFITS
1. You will cease participation in the Huntington Stock Purchase and Tax
Savings Plan (the "Stock Plan") and the Huntington Supplemental Stock
Purchase and Tax Savings Plan (the "Supplemental Stock Plan") on the
Termination Date. Your Supplemental Stock Plan balance will be
distributed to you as soon as administratively feasible following the
Termination Date. You will receive information regarding options
relating to your balance in the Stock Plan.
2. You will cease participation in the Huntington Bancshares Retirement
Plan (the "Pension Plan") on the Termination Date. You will be eligible
to begin receipt of benefits from that plan on March 1, 2006, provided
you remain employed through November 1, 1996 (the date you will become
vested in the Pension Plan). You should notify Huntington's employee
benefits department several months before benefit payments are to
commence. Following receipt of your notification, you will be sent
information regarding the optional forms of payment you may elect. The
single life annuity optional form of payment, commencing on March 1,
2006 and assuming a Termination Date of 06/30/97, is estimated to be
$1,579.67 per month ($18,956.04 a year).
3. You will cease participation in the Huntington Bancshares Supplemental
Retirement Income Plan (the "SRIP") on the Termination Date. Absent
this Agreement, your monthly life annuity payment from the SRIP to
which you would otherwise be entitled, offset by your payment from the
Pension Plan, payable March 1, 2006, is estimated to be
3
<PAGE> 9
EMPLOYMENT AGREEMENT
EXHIBIT A - Page 4
W. Lee Hoskins
$2,638.82 ($31,665.84 a year). (Both the Pension Plan and SRIP
estimated amounts assume that you remain employed until June 30, 1997.)
SRIP payments are offset by payments from the Pension Plan AND payments
resulting from any contract or agreement between you and Huntington.
Therefore, because your payment pursuant to this Agreement is larger
than your estimated SRIP benefit, no payments will be made from the
SRIP.
4. Huntington agrees to provide to you a Retirement Income Supplement
equal to $8,333.33 a month ($100,000 a year), commencing on the first
day of the month following the Termination Date, and ending on the
sooner of I) the date of your death, or ii) February 1, 2006.
Commencing on March 1, 2006, the ending on the date of your death, the
Retirement Income Supplement shall be equal to $6,753.66 a month
($81,043.96 a year).
The Huntington Retirement Income Supplement commencing on March 1, 2006
and continuing thereafter until your death is based upon a deduction
from $100,000 of the amount of your accrued benefit under the
Huntington Pension Plan as of June 30, 1997, payable is a life annuity
($1,579.67 a month, $18,956.04 a year).
The first Retirement Income Supplement payment will be made to you
within thirty (30) days of the Termination Date and will be equal to
$8,333.33, times the number of months remaining in the calendar year in
which the Termination Date occurs, discounted to a present value amount
by the Applicable Interest Rate. Your subsequent Retirement Income
Supplement payments will be paid to you in the annual installments on
or before January 31 of each year (the "Payment Date"). The amount of
each payment shall be the sum of the monthly amounts due you for the
year in which the payment is made, discounted to a present value amount
by the Applicable Interest Rate. In the year of your death, your estate
shall return to Huntington an amount equal to the annual payment
reduced by one-twelfth of such annual payment multiplied by the number
of whole months prior to, and including, the date of your death. The
Applicable Interest Rate shall be the annual rate of interest on one
year Treasury Bills, as reported in National Financial Media on January
20, of each year, or if January 20 is not a date on which one year
Treasury Bill rates are reported, the next following reporting date.
5. You currently participate in the 1990 Stock Option Plan and the 1994
Stock Option Plan. You will not receive any new options after July 1,
1996. The Compensation and Stock Option Committee has agreed to "deem
you a retiree" for purposes of the Stock Option Plans. In consideration
of this designation, you shall not exercise the following grants or
portions of grants:
4
<PAGE> 10
EMPLOYMENT AGREEMENT
EXHIBIT A - Page 5
W. Lee Hoskins
<TABLE>
<CAPTION>
% of shares Exercisable, as of 7/30/97
--------------------------------------
Grant Number Plan/Type That Hoskins Agrees Not to Exercise
------------ --------- -----------------------------------
<S> <C> <C>
001102 1994/ISO 25.00%
001106 1994/NQ 25.00%
001319 1994/ISO 100.00%
001320 1994/NQ 45.33%
</TABLE>
OTHER BENEFITS
1. Huntington has provided you with a 1993, four door, Cadillac Seville
automobile for your personal and business use. This vehicle shall be
transferred to you as of the Termination Date.
2. Huntington will reimburse you for eligible tax and financial planning
bills you incur prior to June 30, 1997, to the extent the expenses do
not exceed 2% of your base salary.
3. Huntington has made a one time increase in your salary to reflect the
cost to you of purchasing certain club memberships and paying certain
club dues. All Huntington transferable club memberships shall be
transferred to Huntington effective one month after the Termination
Date.
Huntington will need to contact you after the Termination Date for many reasons
that are financially important to you, such as the payment of any distributions
for which you may be eligible from the Pension Plan, the Stock Plan or the
Supplemental Stock Plan, to mail your W-2 form, and to mail your COBRA election
form. To insure that you will receive this important information, please keep
Brenda Warne advised of any address change. She may be reached at (614)
480-3663.
MY SIGNATURE BELOW INDICATES THAT THIS DOCUMENT HAS BEEN REVIEWED WITH ME. I
UNDERSTAND ITS CONTENTS AND I HAVE RECEIVED A COPY. I AGREE TO NOTIFY
HUNTINGTON'S CORPORATE BENEFITS MANAGER IF I SHOULD BECOME COVERED AND/OR
ELIGIBLE FOR COVERAGE UNDER ANY PRIVATE, EMPLOYER, OR GOVERNMENT SPONSORED PLAN
THAT PROVIDES PAYMENT FOR HEALTH CARE EXPENSES I INCUR.
/s/ W. Lee Hoskins August 19, 1996
- ---------------------------------- -------------------------------
W. Lee Hoskins Date
HUNTINGTON BANCSHARES INCORPORATED
/s/ Frank Wobst August 21, 1996
- ---------------------------------- -------------------------------
By: Frank Wobst Date
5
<PAGE> 1
Exhibit 10 (d)
EXECUTIVE AGREEMENT
This is an Agreement 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 ("Executive"), effective as of January 22, 1997.
Recitals
--------
A. Executive is an executive officer of Huntington or one or more of
its affiliated companies with significant policy-making and operational
responsibilities in the conduct of its business. For purposes of describing the
employment of Executive, the term "Huntington" shall include the employment of
Executive by Huntington and such affiliated entities as shall be determined by
the Compensation and Stock Option Committee of the Board of Directors of
Huntington Bancshares Incorporated.
B. Huntington recognizes that Executive is a valuable resource for
Huntington and desires to be assured of the continued dedication and services of
Executive.
C. Huntington acknowledges that upon a threatened change in control
Executive may have concerns about the continuation of his employment status and
responsibilities and may be approached by others with employment opportunities,
and Huntington desires to provide Executive some assurance as to the
continuation of his employment status and responsibilities in the event of a
change in control.
D. Huntington desires to assure that if it should receive an offer
involving a possible change of control and Executive would be involved in
deliberations or negotiations in connection therewith, Executive would be in a
secure position to consider such offer and negotiate on behalf of Huntington and
its shareholders as objectively as possible, and to this end Huntington desires
to protect Executive from any direct or implied threat to his financial
well-being under such circumstances.
<PAGE> 2
E. Executive is willing to continue to serve as such but desires
assurance that in the event of a change in control he will not be exposed to
unreasonable financial hardship or loss of status.
Agreement
---------
The parties do hereby agree as follows:
1. Definitions. As used herein:
-----------
"Change in Control" - A change in control shall be deemed to have
occurred if and when, after the date hereof any of the following events have
occurred:
(i) Huntington, or in one or more transactions 50% or more of its
assets or earning power, is acquired by or combined with another Person and less
than a majority of the outstanding voting shares of the Person surviving such
transaction (or the ultimate parent of the surviving Person) after such
acquisition or combination is owned, immediately prior to such acquisition or
combination, by the owners of the voting shares of Huntington outstanding
immediately prior to such acquisition or combination;
(ii) there is a report filed on Schedule 13D or Schedule 14D-1 (or any
successor schedule, form or report), each as promulgated pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), disclosing
that any person (including any "person" as defined in Section 13(d) (3) or
Section 14(d) (2) of the Exchange Act) has become the beneficial owner (as the
term "beneficial owner" is defined under Rule 13d-3 or any successor rule or
regulation promulgated under the Exchange Act) of securities representing 10% or
more of the combined voting power of the then outstanding securities entitled to
vote generally in the election of directors ("Voting Stock") of Huntington;
2
<PAGE> 3
(iii) Huntington files a report or proxy statement with the Securities
and Exchange Commission pursuant to the Exchange Act disclosing in response to
Form 8-K or Schedule 14A (or any successor schedule, form or report or item
therein) that a change in control of Huntington has occurred or will occur in
the future pursuant to any then-existing contract or transaction; or
(iv) if, during any period of two consecutive years, individuals who at
the beginning of any such period constitute the Board of Directors of Huntington
("Board") cease for any reason to constitute at least a majority thereof;
provided, however, that for purposes of this clause (iv) each Director who is
first appointed, or first nominated for election by Huntington's stockholders,
by a vote of at least two-thirds of the Directors of Huntington (or a committee
thereof) then still in office who were Directors of Huntington at the beginning
of any such period will be deemed to have been a Director of Huntington at the
beginning of such period; or
(v) The occurrence of any other event or circumstance which is not
covered by (i) through (iv) above which the Board determines affects control of
Huntington and, in order to implement the purposes of this Agreement as set
forth above, adopts a resolution that such event or circumstance constitutes a
Change in Control for the purposes of this Agreement.
Notwithstanding the foregoing provisions of paragraphs 1 (ii) or (iii),
unless otherwise determined in a specific case by majority vote of the Board, a
"Change in Control" shall not be deemed to have occurred for purposes of
paragraphs (ii) or (iii) solely because (1) Huntington, (2) an entity in which
Huntington directly or indirectly beneficially owns 50% or more of the entity's
outstanding voting stock (a "Subsidiary"), or (3) any employee stock ownership
plan or any other employee benefit plan of Huntington or any Subsidiary either
files or becomes obligated to file a report or a proxy statement under or in
response to Schedule 13D, Schedule
3
<PAGE> 4
14D-1, Form 8-K or Schedule 14A (or any successor schedule, form or report or
item therein) under the Exchange Act disclosing beneficial ownership by it of
shares of voting stock of Huntington, whether in excess of 10% or otherwise, or
because Huntington reports that a change in control of Huntington has occurred
or will occur in the future by reason of such beneficial ownership. In defining
"Control," all voting securities of Huntington shall be considered to be a
single class.
"Minimum Annual Base Salary" means the Executive's current base annual
salary, plus such increases to the base annual compensation as the Board or
Compensation and Stock Option Committee of Huntington may authorize in their
discretion from time to time, but in no event less than the annual base salary
in effect at the time of making this agreement.
2. TERMINATION FOLLOWING CHANGE IN CONTROL. Executive shall be entitled
to the benefits described below if a Change in Control shall have occurred and
within three years of such Change in Control either (i) Executive terminates his
employment upon making a determination (which determination will be conclusive
and binding upon the parties hereto provided it has been made in good faith)
that Executive's employment status or employment responsibilities have been
materially and adversely affected thereby, or (ii) his employment is terminated
by Huntington:
(a) Executive shall be entitled to receive after termination
of his employment, his Minimum Annual Base Salary, through the
termination date, as such phrase is defined in any employment
agreement between Executive and Huntington, plus credit for
any vacation accrued but not taken and the amount of any
unpaid bonus,
4
<PAGE> 5
incentive compensation or any other benefit to which he is
entitled to under any employment agreement between Executive
and Huntington, if applicable.
(b) If the Minimum Annual Base Salary payable pursuant to
paragraph 2(a) above is less than three times the Minimum
Annual Base Salary in effect for the year in which termination
occurs, then in lieu of any payment of Minimum Annual Base
Salary under paragraph 2(a) Executive shall be entitled to
receive an amount equal to three times his Minimum Annual Base
Salary in effect for the year in which his termination of
employment occurs.
(c) In addition to the amount paid pursuant to subparagraph
(a) or (b) of this paragraph 2, Executive shall also be
entitled to receive three times the average bonus or incentive
compensation paid to him in respect of the three fiscal years
preceding his termination of employment.
(d) At Executive's option the amount payable under paragraphs
2(a) or (b), and paragraph 2(c) shall be paid to him in one
lump sum within thirty days after termination of employment or
in twenty-four equal consecutive monthly payments commencing
on the first day of the month following termination of
employment.
(e) Huntington shall maintain for Executive's benefit until
the earlier of (i) thirty-six months after termination of
employment, or (ii) Executive's commencement of full-time
employment with a new employer (the "Continuation Period"),
all costs and expenses associated with providing a corporate
automobile, all professional memberships, dues in all clubs in
which Executive maintains
5
<PAGE> 6
membership, all life insurance, medical, health and accident,
disability plans or programs and such other substantially
similar benefits which Executive shall have been entitled to
prior to termination, provided Executive's continued
participation is permitted under the general terms of such
plans and programs after the termination of employment. In the
event Executive's participation in any such plan or program is
not permitted, Huntington will provide at no cost to Executive
directly the benefits to which Executive would be entitled
under such plans and programs.
(f) Executive also shall be paid the aggregate of the
increases in the single sum actuarial equivalents of
Executive's vested accrued benefits under Huntington's
retirement plan or any successor plan (hereinafter referred to
as the "Pension Plan") and each nonqualified defined benefit
pension plan sponsored by Huntington, including the
supplemental executive retirement plan that would result if
Executive were credited with three additional years of service
and benefit service (as such terms are defined in the Pension
Plan) and three additional years of age under such plans.
(g) Without limiting the rights of Executive at law or in
equity, if Huntington fails to make any payment or provide any
benefit required to be made or provided hereunder on a timely
basis, Huntington will pay interest on the amount or value
thereof at an annualized rate of interest equal to the greater
of (i) 12% or (ii) the prime commercial rate in effect of The
Huntington National Bank or its successor
6
<PAGE> 7
from time to time. Such interest will be payable as it accrues
on demand. Any change in such prime rate will be effective on
and as of the date of such change.
3. CONSIDERATION FOR PAYMENTS. Huntington hereby acknowledges that it
will be difficult and may be impossible (a) for Executive to find reasonably
comparable employment, and (b) to measure the amount of damages which Executive
may suffer as a result of termination of employment hereunder. In addition,
Huntington acknowledges that its severance pay plans applicable in general to
its salaried employees do not provide for mitigation, offset or reduction of any
severance payment received thereunder. Accordingly, the payment of the severance
compensation by Huntington to Executive in accordance with the terms of this
Agreement is hereby acknowledged by Huntington to be reasonable and will be
liquidated damages, and Executive will not be required to mitigate the amount of
any payment provided for in this Agreement by seeking other employment or
otherwise, nor will any profits, income, earnings or other benefits from any
source whatsoever create any mitigation, offset, reduction or any other
obligation on the part of Executive hereunder or otherwise, except as provided
in Section 2(e). Huntington shall not be entitled to set off or counterclaim
against amounts payable hereunder any claim, debt or obligation of Executive.
4. EXCISE TAX PAYMENTS. In the event that Executive becomes entitled to
the benefits described in this Agreement ("Severance Payments"), if any of the
Severance Payments will be subject to the tax (the "Excise Tax") imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), or
any similar federal or state excise tax, Huntington shall pay to Executive at
the time specified in Section 2(d) above, an additional amount (the "Gross-Up
Payment") such that the net amount retained by Executive after payment of any
Excise Tax, and
7
<PAGE> 8
any federal, state and local income tax on the Gross-Up Payment itself, shall be
equal to the amount of the Severance Payments stated herein.
For purposes of determining whether any of the Severance Payments will
be subject to the Excise Tax and the amount of such Excise Tax:
(a) any other payments or benefits received or to be received
by Executive in connection with a Change in Control of
Huntington or the termination of employment (whether pursuant
to the terms of this Agreement or of any other plan,
arrangement or agreement with Huntington, or with any Person
whose actions result in a Change in Control or with any other
Person affiliated with Huntington or such Person) shall be
treated as "parachute payments" within the meaning of Section
280G(b)(2) of the Code, and all "excess parachute payments"
within the meaning of Section 280G(b)(1) shall be treated as
subject to the Excise Tax, unless in the opinion of tax
counsel selected by Huntington's independent auditors and
acceptable to Executive, other payments or benefits (in whole
or in part) do not constitute parachute payments, or such
excess parachute payments (in whole or in part) represent
reasonable compensation for services actually rendered within
the meaning of Section 280G(b)(4) of the Code;
(b) the amount of the Severance Payments which shall be
treated as subject to the Excise Tax shall be equal to the
lesser of (i) the total amount of the Severance Payments or
(ii) the amount of excess parachute payments within the
meaning of Sections 280G(b)(1) and (4) (after applying clause
(a), above); and
8
<PAGE> 9
(c) the value of any noncash benefits or any deferred payment
or benefit shall be determined by Huntington's independent
auditors in accordance with the principles of Sections
280G(d)(3) and (4) of the Code.
For purposes of determining the amount of the Gross-Up Payment,
Executive shall be deemed to pay federal income taxes at the highest marginal
rate of federal income taxation in the calendar year in which the Gross-Up
Payment is to be made and state and local income taxes at the highest marginal
rates of taxation in the state and locality of Executive's residence on the date
of termination, net of the maximum reduction in federal income taxes which could
be obtained from deduction of such state and local taxes.
If the Excise Tax is subsequently determined to be less than the amount
taken into account hereunder at the time of termination of employment, Executive
shall repay to Huntington, at the time the reduction in Excise Tax is finally
determined, the portion of the Gross-Up Payment attributable to such reduction.
If the Excise Tax is determined to exceed the amount taken into account
hereunder at the time of termination of employment, Huntington shall make an
additional Gross-Up Payment to Executive in respect of such excess at the time
the amount of such excess is finally determined.
5. ARRANGEMENTS NOT EXCLUSIVE. The specific benefit arrangements
referred to in this Agreement are not intended to exclude Executive from
participation in or from other benefits available to executive personnel
generally or to preclude Executive's right to other compensation or benefits as
may be authorized by the Board of Huntington at any time. The provisions of this
Agreement and any payments provided for hereunder shall not reduce any amounts
otherwise payable, or in any way diminish Executive's existing rights, or rights
which would accrue solely
9
<PAGE> 10
as the result of the passage of time under any benefit plan, incentive plan,
stock option plan, employment agreement or other contract, plan or arrangement
except as may be specified in such contract, plan or arrangement.
6. HUNTINGTON'S RIGHT TO TERMINATE EMPLOYMENT. This Agreement sets
forth the severance benefits payable to Executive in the event his employment
with Huntington is terminated under certain conditions subsequent to a Change in
Control (as defined in Section 1 hereof). This Agreement is not an employment
contract nor is it intended to confer upon the Executive any right to continued
employment. Notwithstanding the foregoing, any termination of employment of
Executive or the removal of the Executive from the current office or position of
Executive at Huntington following the commencement of any discussion with a
third person that ultimately results in a Change in Control shall be deemed to
be a termination or removal of Executive after a Change in Control for purposes
of this Agreement.
7. ENFORCEMENT COSTS; INTEREST. Huntington is aware that, upon the
occurrence of a Change in Control, the Board or a stockholder of Huntington may
then cause or attempt to cause Huntington to refuse to comply with its
obligations under this Agreement, or may cause or attempt to cause Huntington to
institute, or may institute, litigation seeking to have this Agreement declared
unenforceable, or may take, or attempt to take, other action to deny Executive
the benefits intended under this Agreement. In these circumstances, the purpose
of this Agreement could be frustrated. It is the intent of Huntington that
Executive not be required to incur the expenses associated with the enforcement
of his rights under this Agreement by litigation or other legal action nor be
bound to negotiate any settlement of his rights hereunder under threat of
incurring such expenses because the cost and expense thereof would substantially
10
<PAGE> 11
detract from the benefits intended to be extended to Executive hereunder.
Accordingly, if following a Change in Control it should appear to Executive that
Huntington has failed to comply with any of its obligations under this Agreement
or in the event that Huntington or any other person takes any action to declare
this Agreement void or unenforceable, or institute any litigation or other legal
action designed to deny, diminish or to recover from Executive, the benefits
intended to be provided to Executive hereunder, Huntington irrevocably
authorizes Executive from time to time to retain counsel of his choice at the
expense of Huntington as provided in this Section 7 to represent Executive in
connection with the initiation or defense of any litigation or other legal
action, whether by or against Huntington or any director, officer, stockholder
or other person affiliated with Huntington. Notwithstanding any existing or
prior attorney-client relationship between Huntington and such counsel,
Huntington irrevocably consents to Executive entering into an attorney-client
relationship with such counsel, and in that connection Huntington and Executive
agree that a confidential relationship shall exist between Executive and such
counsel. The reasonable fees and expenses of counsel selected from time to time
by Executive as hereinabove provided shall be paid or reimbursed to Executive by
Huntington on a regular, periodic basis upon presentation by Executive of a
statement or statements prepared by such counsel in accordance with its
customary practices. In any action involving this Agreement, Executive shall be
entitled to prejudgment interest on any amounts found to be due him from the
date such amounts would have been payable to Executive pursuant to this
Agreement at an annual rate of interest equal to the greater of (a) 12%, or (b)
the prime commercial rate in effect at The Huntington National Bank or its
successor from time to time during the prejudgment period.
11
<PAGE> 12
8. TERMINATION. This Agreement shall terminate if the employment of
Executive with Huntington shall terminate prior to a Change in Control.
9. SUCCESSORS AND ASSIGNS. In the event that Huntington shall merge or
consolidate with any other corporation or all or substantially all Huntington's
business or assets shall be transferred in any manner to any other Person, such
Person shall thereupon succeed to, and be subject to, all rights, interests,
duties and obligations of, and shall thereafter be deemed for all purposes
hereof to be, Huntington hereunder. This Agreement shall be binding upon and
inure to the benefit of any such successor and the personal and legal
representatives of Executive. If Executive should die while any amounts are
still payable to him hereunder, all such amounts shall be paid in accordance
with the terms of this Agreement to Executive's beneficiary indicated on the
Beneficiary Designation, attached hereto as Exhibit A.
10. SEVERABILITY. In the event that any section, paragraph, clause or
other provision of this Agreement shall be determined to be invalid or
unenforceable in any jurisdiction for any reason, such section, paragraph,
clause or other provision shall be enforceable in any other jurisdiction in
which valid and enforceable and, in any event, the remaining sections,
paragraphs, clauses and other provisions of this Agreement shall be unaffected
and shall remain in full force and effect to the fullest extent permitted by
law.
11. INDEMNIFICATION. For a period of five years after any termination
of Executive's employment, Huntington shall provide Executive (including his
heirs, executors and administrators) with coverage under a standard directors'
and officers' liability insurance policy at its expense, and shall indemnify,
hold harmless and defend Executive (and his heirs, executors and administrators)
to the fullest extent permitted under Maryland law against all expenses and
12
<PAGE> 13
liabilities reasonably incurred by him in connection with or arising out of any
action, suit or proceeding in which he may be involved by reason of his having
been a director or officer of Huntington or any subsidiary (whether or not he
continues to be a director or officer at the time of incurring such expenses or
liabilities), such expenses and liabilities to include, but not be limited to,
judgments, court costs and attorneys' fees and the cost of reasonable
settlements.
12. TERMINATION OF PRIOR AGREEMENTS. The Executive hereby agrees to a
mutual termination, effective as of the effective date of this Agreement, of any
prior existing change in control agreement providing benefits to the Executive
upon a termination of employment following a Change in Control of the Company,
to which he and Huntington are parties, and as to such prior agreement, if any,
the Executive releases all claims, rights and entitlement.
IN WITNESS WHEREOF, this Agreement has been executed on January 22,
1997.
HUNTINGTON BANCSHARES INCORPORATED
By /s/ Ralph K. Frasier
----------------------------------
/s/ Frank Wobst
------------------------------------
Frank Wobst
13
<PAGE> 14
Exhibit A
Beneficiary Designation
In the event of my death, I hereby direct that any amounts due me under
the agreement to which this Beneficiary Designation is attached shall be
distributed to the person designated below. If no beneficiary shall be living to
receive such assets they shall be paid to the administrator or executor of my
estate.
January 22, 1997 /s/ Frank Wobst
- ------------------------ ---------------------------
Date Frank Wobst
/s/ Joan F. Wobst
---------------------------
Beneficiary
Wife
---------------------------
Relationship to Executive
14
<PAGE> 1
Exhibit 10(e)
EXECUTIVE AGREEMENT
This is an Agreement 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
Zuheir Sofia ("Executive"), effective as of January 22, 1997.
Recitals
--------
A. Executive is an executive officer of Huntington or one or more of
its affiliated companies with significant policy-making and operational
responsibilities in the conduct of its business. For purposes of describing the
employment of Executive, the term "Huntington" shall include the employment of
Executive by Huntington and such affiliated entities as shall be determined by
the Compensation and Stock Option Committee of the Board of Directors of
Huntington Bancshares Incorporated.
B. Huntington recognizes that Executive is a valuable resource for
Huntington and desires to be assured of the continued dedication and services of
Executive.
C. Huntington acknowledges that upon a threatened change in control
Executive may have concerns about the continuation of his employment status and
responsibilities and may be approached by others with employment opportunities,
and Huntington desires to provide Executive some assurance as to the
continuation of his employment status and responsibilities in the event of a
change in control.
D. Huntington desires to assure that if it should receive an offer
involving a possible change of control and Executive would be involved in
deliberations or negotiations in connection therewith, Executive would be in a
secure position to consider such offer and negotiate on behalf of Huntington and
its shareholders as objectively as possible, and to this end Huntington desires
to protect Executive from any direct or implied threat to his financial
well-being under such circumstances.
<PAGE> 2
E. Executive is willing to continue to serve as such but desires
assurance that in the event of a change in control he will not be exposed to
unreasonable financial hardship or loss of status.
Agreement
---------
The parties do hereby agree as follows:
1. Definitions. As used herein:
-----------
"Change in Control" - A change in control shall be deemed to have
occurred if and when, after the date hereof any of the following events have
occurred:
(i) Huntington, or in one or more transactions 50% or more of its
assets or earning power, is acquired by or combined with another Person and less
than a majority of the outstanding voting shares of the Person surviving such
transaction (or the ultimate parent of the surviving Person) after such
acquisition or combination is owned, immediately prior to such acquisition or
combination, by the owners of the voting shares of Huntington outstanding
immediately prior to such acquisition or combination;
(ii) there is a report filed on Schedule 13D or Schedule 14D-1 (or any
successor schedule, form or report), each as promulgated pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), disclosing
that any person (including any "person" as defined in Section 13(d) (3) or
Section 14(d) (2) of the Exchange Act) has become the beneficial owner (as the
term "beneficial owner" is defined under Rule 13d-3 or any successor rule or
regulation promulgated under the Exchange Act) of securities representing 10% or
more of the combined voting power of the then outstanding securities entitled to
vote generally in the election of directors ("Voting Stock") of Huntington;
2
<PAGE> 3
(iii) Huntington files a report or proxy statement with the Securities
and Exchange Commission pursuant to the Exchange Act disclosing in response to
Form 8-K or Schedule 14A (or any successor schedule, form or report or item
therein) that a change in control of Huntington has occurred or will occur in
the future pursuant to any then-existing contract or transaction; or
(iv) if, during any period of two consecutive years, individuals who at
the beginning of any such period constitute the Board of Directors of Huntington
("Board") cease for any reason to constitute at least a majority thereof;
provided, however, that for purposes of this clause (iv) each Director who is
first appointed, or first nominated for election by Huntington's stockholders,
by a vote of at least two-thirds of the Directors of Huntington (or a committee
thereof) then still in office who were Directors of Huntington at the beginning
of any such period will be deemed to have been a Director of Huntington at the
beginning of such period; or
(v) The occurrence of any other event or circumstance which is not
covered by (i) through (iv) above which the Board determines affects control of
Huntington and, in order to implement the purposes of this Agreement as set
forth above, adopts a resolution that such event or circumstance constitutes a
Change in Control for the purposes of this Agreement.
Notwithstanding the foregoing provisions of paragraphs 1 (ii) or (iii),
unless otherwise determined in a specific case by majority vote of the Board, a
"Change in Control" shall not be deemed to have occurred for purposes of
paragraphs (ii) or (iii) solely because (1) Huntington, (2) an entity in which
Huntington directly or indirectly beneficially owns 50% or more of the entity's
outstanding voting stock (a "Subsidiary"), or (3) any employee stock ownership
plan or any other employee benefit plan of Huntington or any Subsidiary either
files or becomes obligated to file a report or a proxy statement under or in
response to Schedule 13D, Schedule
3
<PAGE> 4
14D-1, Form 8-K or Schedule 14A (or any successor schedule, form or report or
item therein) under the Exchange Act disclosing beneficial ownership by it of
shares of voting stock of Huntington, whether in excess of 10% or otherwise, or
because Huntington reports that a change in control of Huntington has occurred
or will occur in the future by reason of such beneficial ownership. In defining
"Control," all voting securities of Huntington shall be considered to be a
single class.
"Minimum Annual Base Salary" means the Executive's current base annual
salary, plus such increases to the base annual compensation as the Board or
Compensation and Stock Option Committee of Huntington may authorize in their
discretion from time to time, but in no event less than the annual base salary
in effect at the time of making this agreement.
2. TERMINATION FOLLOWING CHANGE IN CONTROL. Executive shall be entitled
to the benefits described below if a Change in Control shall have occurred and
within three years of such Change in Control either (i) Executive terminates his
employment upon making a determination (which determination will be conclusive
and binding upon the parties hereto provided it has been made in good faith)
that Executive's employment status or employment responsibilities have been
materially and adversely affected thereby, or (ii) his employment is terminated
by Huntington:
(a) Executive shall be entitled to receive after termination
of his employment, his Minimum Annual Base Salary, through the
termination date, as such phrase is defined in any employment
agreement between Executive and Huntington, plus credit for
any vacation accrued but not taken and the amount of any
unpaid bonus,
4
<PAGE> 5
incentive compensation or any other benefit to which he is
entitled to under any employment agreement between Executive
and Huntington, if applicable.
(b) If the Minimum Annual Base Salary payable pursuant to
paragraph 2(a) above is less than three times the Minimum
Annual Base Salary in effect for the year in which termination
occurs, then in lieu of any payment of Minimum Annual Base
Salary under paragraph 2(a) Executive shall be entitled to
receive an amount equal to three times his Minimum Annual Base
Salary in effect for the year in which his termination of
employment occurs.
(c) In addition to the amount paid pursuant to subparagraph
(a) or (b) of this paragraph 2, Executive shall also be
entitled to receive three times the average bonus or incentive
compensation paid to him in respect of the three fiscal years
preceding his termination of employment.
(d) At Executive's option the amount payable under paragraphs
2(a) or (b), and paragraph 2(c) shall be paid to him in one
lump sum within thirty days after termination of employment or
in twenty-four equal consecutive monthly payments commencing
on the first day of the month following termination of
employment.
(e) Huntington shall maintain for Executive's benefit until
the earlier of (i) thirty-six months after termination of
employment, or (ii) Executive's commencement of full-time
employment with a new employer (the "Continuation Period"),
all costs and expenses associated with providing a corporate
automobile, all professional memberships, dues in all clubs in
which Executive maintains
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membership, all life insurance, medical, health and accident,
disability plans or programs and such other substantially
similar benefits which Executive shall have been entitled to
prior to termination, provided Executive's continued
participation is permitted under the general terms of such
plans and programs after the termination of employment. In the
event Executive's participation in any such plan or program is
not permitted, Huntington will provide at no cost to Executive
directly the benefits to which Executive would be entitled
under such plans and programs.
(f) Executive also shall be paid the aggregate of the
increases in the single sum actuarial equivalents of
Executive's vested accrued benefits under Huntington's
retirement plan or any successor plan (hereinafter referred to
as the "Pension Plan") and each nonqualified defined benefit
pension plan sponsored by Huntington, including the
supplemental executive retirement plan that would result if
Executive were credited with three additional years of service
and benefit service (as such terms are defined in the Pension
Plan) and three additional years of age under such plans.
(g) Without limiting the rights of Executive at law or in
equity, if Huntington fails to make any payment or provide any
benefit required to be made or provided hereunder on a timely
basis, Huntington will pay interest on the amount or value
thereof at an annualized rate of interest equal to the greater
of (i) 12% or (ii) the prime commercial rate in effect of The
Huntington National Bank or its successor
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from time to time. Such interest will be payable as it accrues
on demand. Any change in such prime rate will be effective on
and as of the date of such change.
3. CONSIDERATION FOR PAYMENTS. Huntington hereby acknowledges that it
will be difficult and may be impossible (a) for Executive to find reasonably
comparable employment, and (b) to measure the amount of damages which Executive
may suffer as a result of termination of employment hereunder. In addition,
Huntington acknowledges that its severance pay plans applicable in general to
its salaried employees do not provide for mitigation, offset or reduction of any
severance payment received thereunder. Accordingly, the payment of the severance
compensation by Huntington to Executive in accordance with the terms of this
Agreement is hereby acknowledged by Huntington to be reasonable and will be
liquidated damages, and Executive will not be required to mitigate the amount of
any payment provided for in this Agreement by seeking other employment or
otherwise, nor will any profits, income, earnings or other benefits from any
source whatsoever create any mitigation, offset, reduction or any other
obligation on the part of Executive hereunder or otherwise, except as provided
in Section 2(e). Huntington shall not be entitled to set off or counterclaim
against amounts payable hereunder any claim, debt or obligation of Executive.
4. EXCISE TAX PAYMENTS. In the event that Executive becomes entitled to
the benefits described in this Agreement ("Severance Payments"), if any of the
Severance Payments will be subject to the tax (the "Excise Tax") imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), or
any similar federal or state excise tax, Huntington shall pay to Executive at
the time specified in Section 2(d) above, an additional amount (the "Gross-Up
Payment") such that the net amount retained by Executive after payment of any
Excise Tax, and
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any federal, state and local income tax on the Gross-Up Payment itself, shall be
equal to the amount of the Severance Payments stated herein.
For purposes of determining whether any of the Severance Payments will
be subject to the Excise Tax and the amount of such Excise Tax:
(a) any other payments or benefits received or to be received
by Executive in connection with a Change in Control of
Huntington or the termination of employment (whether pursuant
to the terms of this Agreement or of any other plan,
arrangement or agreement with Huntington, or with any Person
whose actions result in a Change in Control or with any other
Person affiliated with Huntington or such Person) shall be
treated as "parachute payments" within the meaning of Section
280G(b)(2) of the Code, and all "excess parachute payments"
within the meaning of Section 280G(b)(1) shall be treated as
subject to the Excise Tax, unless in the opinion of tax
counsel selected by Huntington's independent auditors and
acceptable to Executive, other payments or benefits (in whole
or in part) do not constitute parachute payments, or such
excess parachute payments (in whole or in part) represent
reasonable compensation for services actually rendered within
the meaning of Section 280G(b)(4) of the Code;
(b) the amount of the Severance Payments which shall be
treated as subject to the Excise Tax shall be equal to the
lesser of (i) the total amount of the Severance Payments or
(ii) the amount of excess parachute payments within the
meaning of Sections 280G(b)(1) and (4) (after applying clause
(a), above); and
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(c) the value of any noncash benefits or any deferred payment
or benefit shall be determined by Huntington's independent
auditors in accordance with the principles of Sections
280G(d)(3) and (4) of the Code.
For purposes of determining the amount of the Gross-Up Payment,
Executive shall be deemed to pay federal income taxes at the highest marginal
rate of federal income taxation in the calendar year in which the Gross-Up
Payment is to be made and state and local income taxes at the highest marginal
rates of taxation in the state and locality of Executive's residence on the date
of termination, net of the maximum reduction in federal income taxes which could
be obtained from deduction of such state and local taxes.
If the Excise Tax is subsequently determined to be less than the amount
taken into account hereunder at the time of termination of employment, Executive
shall repay to Huntington, at the time the reduction in Excise Tax is finally
determined, the portion of the Gross-Up Payment attributable to such reduction.
If the Excise Tax is determined to exceed the amount taken into account
hereunder at the time of termination of employment, Huntington shall make an
additional Gross-Up Payment to Executive in respect of such excess at the time
the amount of such excess is finally determined.
5. ARRANGEMENTS NOT EXCLUSIVE. The specific benefit arrangements
referred to in this Agreement are not intended to exclude Executive from
participation in or from other benefits available to executive personnel
generally or to preclude Executive's right to other compensation or benefits as
may be authorized by the Board of Huntington at any time. The provisions of this
Agreement and any payments provided for hereunder shall not reduce any amounts
otherwise payable, or in any way diminish Executive's existing rights, or rights
which would accrue solely
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as the result of the passage of time under any benefit plan, incentive plan,
stock option plan, employment agreement or other contract, plan or arrangement
except as may be specified in such contract, plan or arrangement.
6. HUNTINGTON'S RIGHT TO TERMINATE EMPLOYMENT. This Agreement sets
forth the severance benefits payable to Executive in the event his employment
with Huntington is terminated under certain conditions subsequent to a Change in
Control (as defined in Section 1 hereof). This Agreement is not an employment
contract nor is it intended to confer upon the Executive any right to continued
employment. Notwithstanding the foregoing, any termination of employment of
Executive or the removal of the Executive from the current office or position of
Executive at Huntington following the commencement of any discussion with a
third person that ultimately results in a Change in Control shall be deemed to
be a termination or removal of Executive after a Change in Control for purposes
of this Agreement.
7. ENFORCEMENT COSTS; INTEREST. Huntington is aware that, upon the
occurrence of a Change in Control, the Board or a stockholder of Huntington may
then cause or attempt to cause Huntington to refuse to comply with its
obligations under this Agreement, or may cause or attempt to cause Huntington to
institute, or may institute, litigation seeking to have this Agreement declared
unenforceable, or may take, or attempt to take, other action to deny Executive
the benefits intended under this Agreement. In these circumstances, the purpose
of this Agreement could be frustrated. It is the intent of Huntington that
Executive not be required to incur the expenses associated with the enforcement
of his rights under this Agreement by litigation or other legal action nor be
bound to negotiate any settlement of his rights hereunder under threat of
incurring such expenses because the cost and expense thereof would substantially
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detract from the benefits intended to be extended to Executive hereunder.
Accordingly, if following a Change in Control it should appear to Executive that
Huntington has failed to comply with any of its obligations under this Agreement
or in the event that Huntington or any other person takes any action to declare
this Agreement void or unenforceable, or institute any litigation or other legal
action designed to deny, diminish or to recover from Executive, the benefits
intended to be provided to Executive hereunder, Huntington irrevocably
authorizes Executive from time to time to retain counsel of his choice at the
expense of Huntington as provided in this Section 7 to represent Executive in
connection with the initiation or defense of any litigation or other legal
action, whether by or against Huntington or any director, officer, stockholder
or other person affiliated with Huntington. Notwithstanding any existing or
prior attorney-client relationship between Huntington and such counsel,
Huntington irrevocably consents to Executive entering into an attorney-client
relationship with such counsel, and in that connection Huntington and Executive
agree that a confidential relationship shall exist between Executive and such
counsel. The reasonable fees and expenses of counsel selected from time to time
by Executive as hereinabove provided shall be paid or reimbursed to Executive by
Huntington on a regular, periodic basis upon presentation by Executive of a
statement or statements prepared by such counsel in accordance with its
customary practices. In any action involving this Agreement, Executive shall be
entitled to prejudgment interest on any amounts found to be due him from the
date such amounts would have been payable to Executive pursuant to this
Agreement at an annual rate of interest equal to the greater of (a) 12%, or (b)
the prime commercial rate in effect at The Huntington National Bank or its
successor from time to time during the prejudgment period.
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8. TERMINATION. This Agreement shall terminate if the employment of
Executive with Huntington shall terminate prior to a Change in Control.
9. SUCCESSORS AND ASSIGNS. In the event that Huntington shall merge or
consolidate with any other corporation or all or substantially all Huntington's
business or assets shall be transferred in any manner to any other Person, such
Person shall thereupon succeed to, and be subject to, all rights, interests,
duties and obligations of, and shall thereafter be deemed for all purposes
hereof to be, Huntington hereunder. This Agreement shall be binding upon and
inure to the benefit of any such successor and the personal and legal
representatives of Executive. If Executive should die while any amounts are
still payable to him hereunder, all such amounts shall be paid in accordance
with the terms of this Agreement to Executive's beneficiary indicated on the
Beneficiary Designation, attached hereto as Exhibit A.
10. SEVERABILITY. In the event that any section, paragraph, clause or
other provision of this Agreement shall be determined to be invalid or
unenforceable in any jurisdiction for any reason, such section, paragraph,
clause or other provision shall be enforceable in any other jurisdiction in
which valid and enforceable and, in any event, the remaining sections,
paragraphs, clauses and other provisions of this Agreement shall be unaffected
and shall remain in full force and effect to the fullest extent permitted by
law.
11. INDEMNIFICATION. For a period of five years after any termination
of Executive's employment, Huntington shall provide Executive (including his
heirs, executors and administrators) with coverage under a standard directors'
and officers' liability insurance policy at its expense, and shall indemnify,
hold harmless and defend Executive (and his heirs, executors and administrators)
to the fullest extent permitted under Maryland law against all expenses and
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liabilities reasonably incurred by him in connection with or arising out of any
action, suit or proceeding in which he may be involved by reason of his having
been a director or officer of Huntington or any subsidiary (whether or not he
continues to be a director or officer at the time of incurring such expenses or
liabilities), such expenses and liabilities to include, but not be limited to,
judgments, court costs and attorneys' fees and the cost of reasonable
settlements.
12. TERMINATION OF PRIOR AGREEMENTS. The Executive hereby agrees to a
mutual termination, effective as of the effective date of this Agreement, of any
prior existing change in control agreement providing benefits to the Executive
upon a termination of employment following a Change in Control of the Company,
to which he and Huntington are parties, and as to such prior agreement, if any,
the Executive releases all claims, rights and entitlement.
IN WITNESS WHEREOF, this Agreement has been executed on
January 22, 1997.
HUNTINGTON BANCSHARES INCORPORATED
By /s/ Frank Wobst
----------------------------------
/s/ Zuheir Sofia
------------------------------------
Zuheir Sofia
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Exhibit A
Beneficiary Designation
In the event of my death, I hereby direct that any amounts due me under
the agreement to which this Beneficiary Designation is attached shall be
distributed to the person designated below. If no beneficiary shall be living to
receive such assets they shall be paid to the administrator or executor of my
estate.
1/24/97 /s/ Zuheir Sofia
- ---------------------------- ---------------------------
Date Zuheir Sofia
"The A. Zuheir Sofia
Restatement of Trust dated
March 1, 1996 with Susan
R. Sofia and A. Zuheir
Sofia Co-Trustee."
---------------------------
Beneficiary
---------------------------
Relationship to Executive
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<PAGE> 1
Exhibit 10(g)
EXECUTIVE AGREEMENT
This is an Agreement 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
___________________________ ("Executive"), effective as of ____________, 199__.
Recitals
--------
A. Executive is an executive officer of Huntington or one or more of
its affiliated companies with significant policy-making and operational
responsibilities in the conduct of its business. For purposes of describing the
employment of Executive, the term "Huntington" shall include the employment of
Executive by Huntington and such affiliated entities as shall be determined by
the Compensation and Stock Option Committee of the Board of Directors of
Huntington Bancshares Incorporated.
B. Huntington recognizes that Executive is a valuable resource for
Huntington and desires to be assured of the continued dedication and services of
Executive.
C. Huntington acknowledges that upon a threatened change in control
Executive may have concerns about the continuation of his employment status and
responsibilities and may be approached by others with employment opportunities,
and Huntington desires to provide Executive some assurance as to the
continuation of his employment status and responsibilities in the event of a
change in control.
D. Huntington desires to assure that if it should receive an offer
involving a possible change of control and Executive would be involved in
deliberations or negotiations in connection therewith, Executive would be in a
secure position to consider such offer and negotiate on behalf of Huntington and
its shareholders as objectively as possible, and to this end Huntington desires
to protect Executive from any direct or implied threat to his financial
well-being under such circumstances.
<PAGE> 2
E. Executive is willing to continue to serve as such but desires
assurance that in the event of a change in control he will not be exposed to
unreasonable financial hardship or loss of status.
Agreement
---------
The parties do hereby agree as follows:
1. DEFINITIONS. As used herein:
"Change in Control" - A change in control shall be deemed to have
occurred if and when, after the date hereof any of the following events have
occurred:
(i) Huntington, or in one or more transactions 50% or more of its
assets or earning power, is acquired by or combined with another Person and less
than a majority of the outstanding voting shares of the Person surviving such
transaction (or the ultimate parent of the surviving Person) after such
acquisition or combination is owned, immediately prior to such acquisition or
combination, by the owners of the voting shares of Huntington outstanding
immediately prior to such acquisition or combination;
(ii) there is a report filed on Schedule 13D or Schedule 14D-1 (or any
successor schedule, form or report), each as promulgated pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), disclosing
that any person (including any "person" as defined in Section 13(d) (3) or
Section 14(d) (2) of the Exchange Act) has become the beneficial owner (as the
term "beneficial owner" is defined under Rule 13d-3 or any successor rule or
regulation promulgated under the Exchange Act) of securities representing 10% or
more of the combined voting power of the then outstanding securities entitled to
vote generally in the election of directors ("Voting Stock") of Huntington;
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<PAGE> 3
(iii) Huntington files a report or proxy statement with the Securities
and Exchange Commission pursuant to the Exchange Act disclosing in response to
Form 8-K or Schedule 14A (or any successor schedule, form or report or item
therein) that a change in control of Huntington has occurred or will occur in
the future pursuant to any then-existing contract or transaction; or
(iv) if, during any period of two consecutive years, individuals who at
the beginning of any such period constitute the Board of Directors of Huntington
("Board") cease for any reason to constitute at least a majority thereof;
provided, however, that for purposes of this clause (iv) each Director who is
first appointed, or first nominated for election by Huntington's stockholders,
by a vote of at least two-thirds of the Directors of Huntington (or a committee
thereof) then still in office who were Directors of Huntington at the beginning
of any such period will be deemed to have been a Director of Huntington at the
beginning of such period; or
(v) The occurrence of any other event or circumstance which is not
covered by (i) through (iv) above which the Board determines affects control of
Huntington and, in order to implement the purposes of this Agreement as set
forth above, adopts a resolution that such event or circumstance constitutes a
Change in Control for the purposes of this Agreement.
Notwithstanding the foregoing provisions of paragraphs 1 (ii) or (iii),
unless otherwise determined in a specific case by majority vote of the Board, a
"Change in Control" shall not be deemed to have occurred for purposes of
paragraphs (ii) or (iii) solely because (1) Huntington, (2) an entity in which
Huntington directly or indirectly beneficially owns 50% or more of the entity's
outstanding voting stock (a "Subsidiary"), or (3) any employee stock ownership
plan or any other employee benefit plan of Huntington or any Subsidiary either
files or becomes obligated to file a report or a proxy statement under or in
response to Schedule 13D, Schedule
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<PAGE> 4
14D-1, Form 8-K or Schedule 14A (or any successor schedule, form or report or
item therein) under the Exchange Act disclosing beneficial ownership by it of
shares of voting stock of Huntington, whether in excess of 10% or otherwise, or
because Huntington reports that a change in control of Huntington has occurred
or will occur in the future by reason of such beneficial ownership. In defining
"Control," all voting securities of Huntington shall be considered to be a
single class.
"Minimum Annual Base Salary" means the Executive's current base annual
salary, plus such increases to the base annual compensation as the Board or
Compensation and Stock Option Committee of Huntington may authorize in their
discretion from time to time, but in no event less than the annual base salary
in effect at the time of making this agreement.
2. TERMINATION FOLLOWING CHANGE IN CONTROL. Executive shall be entitled
to the benefits described below if a Change in Control shall have occurred and
within three years of such Change in Control either (i) Executive terminates his
employment upon making a determination (which determination will be conclusive
and binding upon the parties hereto provided it has been made in good faith)
that Executive's employment status or employment responsibilities have been
materially and adversely affected thereby, or (ii) his employment is terminated
by Huntington:
Executive shall be entitled to receive an amount equal to three times
his Minimum Annual Base Salary in effect for the year in which his termination
of employment occurs.
(a) Executive shall also be entitled to receive three times the
average bonus or incentive compensation paid to him in respect of the
three fiscal years preceding his termination of employment.
Notwithstanding any provision for compensation
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<PAGE> 5
under this paragraph 2(a), if Executive will attain his Normal
Retirement Date as defined in Section 1.31(c) of the Huntington
Bancshares Retirement Plan ("Normal Retirement Date") within three
years of his termination of employment, then Executive shall be
entitled to an amount equal to his Minimum Annual Base Salary for each
year, or any portion thereof, remaining between his termination of
employment and his Normal Retirement Date. At Executive's option the
amount payable under this paragraph 2(a) shall be paid to him in one
lump sum within thirty days after termination of employment or in
twenty-four equal consecutive monthly payments commencing on the first
day of the month following termination of employment.
(b) Huntington shall maintain for Executive's benefit until the
earlier of (i) thirty-six months after termination of employment, or
(ii) Executive's commencement of full-time employment with a new
employer (the "Continuation Period"), all costs and expenses
associated with providing a corporate automobile, all professional
memberships, dues in all clubs in which Executive maintains
membership, all life insurance, medical, health and accident,
disability plans or programs and such other substantially similar
benefits which Executive shall have been entitled to prior to
termination, provided Executive's continued participation is permitted
under the general terms of such plans and programs after the
termination of employment. In the event Executive's participation in
any such plan or program is not permitted, Huntington will provide at
no cost to Executive
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<PAGE> 6
directly the benefits to which Executive would be entitled under such
plans and programs.
(c) Executive also shall be paid the aggregate of the increases in the
single sum actuarial equivalents of Executive's vested accrued
benefits under Huntington's retirement plan or any successor plan
(hereinafter referred to as the "Pension Plan") and each nonqualified
defined benefit pension plan sponsored by Huntington, including the
supplemental executive retirement plan that would result if Executive
were credited with three additional years of service and benefit
service and three additional years of age under such plans.
(d) Without limiting the rights of Executive at law or in equity, if
Huntington fails to make any payment or provide any benefit required
to be made or provided hereunder on a timely basis, Huntington will
pay interest on the amount or value thereof at an annualized rate of
interest equal to the greater of (i) 12% or (ii) the prime commercial
rate in effect of The Huntington National Bank or its successor from
time to time. Such interest will be payable as it accrues on demand.
Any change in such prime rate will be effective on and as of the date
of such change.
3. CONSIDERATION FOR PAYMENTS. Huntington hereby acknowledges that it
will be difficult and may be impossible (a) for Executive to find reasonably
comparable employment, and (b) to measure the amount of damages which Executive
may suffer as a result of termination of employment hereunder. In addition,
Huntington acknowledges that its severance pay plans applicable in general to
its salaried employees do not provide for mitigation, offset or reduction of any
severance payment received thereunder. Accordingly, the payment of the severance
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<PAGE> 7
compensation by Huntington to Executive in accordance with the terms of this
Agreement is hereby acknowledged by Huntington to be reasonable and will be
liquidated damages, and Executive will not be required to mitigate the amount of
any payment provided for in this Agreement by seeking other employment or
otherwise, nor will any profits, income, earnings or other benefits from any
source whatsoever create any mitigation, offset, reduction or any other
obligation on the part of Executive hereunder or otherwise, except as provided
in Section 2(e). Huntington shall not be entitled to set off or counterclaim
against amounts payable hereunder any claim, debt or obligation of Executive.
4. TAX CONSIDERATIONS.
(a) BASIC RULE. Anything in this Agreement to the contrary
notwithstanding, in the event that a firm of Certified Public
Accountants chosen by Huntington (the "Auditors") determine that
any payment or distribution by Huntington to or for the benefit
of the Executive, whether paid or payable (or distributed or
distributable) pursuant to the terms of this Agreement or
otherwise (a "Payment"), would be nondeductible by Huntington for
federal income tax purposes because of Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code"), then the
aggregate present value of the amounts payable or distributable
to or for the benefit of the Executive pursuant to this Agreement
or any employment agreement (the "Agreement Payments") shall be
reduced (but not below zero) to the Reduced Amount. For purposes
of this Section 4, the "Reduced Amount" shall be an amount
expressed in present value which maximizes the aggregate
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<PAGE> 8
present value of Agreement Payments without causing any Payment
to be nondeductible by Huntington because of Section 280G of the
Code.
(b) REDUCTION OF PAYMENTS. If the Auditors determine that any
Payment would be nondeductible by Huntington because of Section
280G of the Code, Huntington shall promptly give the Executive
notice to that effect and a copy of the detailed calculation
thereof and of the Reduced Amount, and the Executive may then
elect, in his sole discretion, which and how much of the
Agreement Payments shall be eliminated or reduced (as long as
after such election the aggregate present value of the Agreement
Payments equals the Reduced Amount) and shall advise Huntington
in writing of his election within ten days of his receipt of
notice. If no such election is made by the Executive within such
ten-day period, then Huntington may elect which and how much of
the Agreement Payments shall be eliminated or reduced (as long as
after such election the aggregate present value of the Agreement
Payments equals the Reduced Amount) and shall notify the
Executive promptly of such election. For purposes of this Section
4, present value shall be determined in accordance with Section
280G(d)(4) of the Code. All determinations made by the Auditors
under this Section 4 shall be binding upon Huntington and the
Executive and shall be made within 60 days of the Executive's
termination of employment. As promptly as practicable following
such determination and the elections hereunder, Huntington shall
pay to or distribute to or for the benefit of the Executive such
amounts as are then due to him under this Agreement and shall
promptly pay to or distribute for
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<PAGE> 9
the benefit of the Executive in the future such amounts as become
due to him under this Agreement.
(c) OVERPAYMENTS AND UNDERPAYMENTS. As a result of the
uncertainty in the application of Section 280G of the Code at the
time of the initial determination by the Auditors hereunder, it
is possible that Agreement Payments will have been made by
Huntington which should not have been made (an "Overpayment") or
that additional Agreement Payments which will not have been made
by Huntington could have been made (an "Underpayment"),
consistent in each case with the calculation of the Reduced
Amount hereunder. In the event that the auditors, based upon the
assertion of a deficiency by the Internal Revenue Service against
the Company or the Employee which the Auditors believe has a high
probability of success, determine that an Overpayment has been
made, such Overpayment shall be treated for all purposes as a
loan to the Executive which he shall repay to Huntington,
together with interest at the applicable federal rate provided
for in Section 7872(f)(2) of the Code; provided, however, that no
amount shall be payable by the Executive to Huntington if and to
the extent that such payment would not reduce the amount which is
subject to taxation under Section 4999 of the Code. In the event
that the Auditors, based upon controlling precedent, determine
that an Underpayment has occurred, such Underpayment shall
promptly be paid by Huntington to or for the benefit of the
Executive, together with interest at the applicable federal rate
provided for in Section 7872(f)(2)(A) of the Code.
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<PAGE> 10
5. ARRANGEMENTS NOT EXCLUSIVE. The specific benefit arrangements
referred to in this Agreement are not intended to exclude Executive from
participation in or from other benefits available to executive personnel
generally or to preclude Executive's right to other compensation or benefits as
may be authorized by the Board of Huntington at any time. The provisions of this
Agreement and any payments provided for hereunder shall not reduce any amounts
otherwise payable, or in any way diminish Executive's existing rights, or rights
which would accrue solely as the result of the passage of time under any benefit
plan, incentive plan, stock option plan, employment agreement or other contract,
plan or arrangement except as may be specified in such contract, plan or
arrangement.
6. HUNTINGTON'S RIGHT TO TERMINATE EMPLOYMENT. This Agreement sets
forth the severance benefits payable to Executive in the event his employment
with Huntington is terminated under certain conditions subsequent to a Change in
Control (as defined in Section 1 hereof). This Agreement is not an employment
contract nor is it intended to confer upon the Executive any right to continued
employment. Notwithstanding the foregoing, any termination of employment of
Executive or the removal of the Executive from the current office or position of
Executive at Huntington following the commencement of any discussion with a
third person that ultimately results in a Change in Control shall be deemed to
be a termination or removal of Executive after a Change in Control for purposes
of this Agreement.
7. ENFORCEMENT COSTS; INTEREST. Huntington is aware that, upon the
occurrence of a Change in Control, the Board or a stockholder of Huntington may
then cause or attempt to cause Huntington to refuse to comply with its
obligations under this Agreement, or may cause or attempt to cause Huntington to
institute, or may institute, litigation seeking to have this
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<PAGE> 11
Agreement declared unenforceable, or may take, or attempt to take, other action
to deny Executive the benefits intended under this Agreement. In these
circumstances, the purpose of this Agreement could be frustrated. It is the
intent of Huntington that Executive not be required to incur the expenses
associated with the enforcement of his rights under this Agreement by litigation
or other legal action nor be bound to negotiate any settlement of his rights
hereunder under threat of incurring such expenses because the cost and expense
thereof would substantially detract from the benefits intended to be extended to
Executive hereunder. Accordingly, if following a Change in Control it should
appear to Executive that Huntington has failed to comply with any of its
obligations under this Agreement or in the event that Huntington or any other
person takes any action to declare this Agreement void or unenforceable, or
institute any litigation or other legal action designed to deny, diminish or to
recover from Executive, the benefits intended to be provided to Executive
hereunder, Huntington irrevocably authorizes Executive from time to time to
retain counsel of his choice at the expense of Huntington as provided in this
Section 7 to represent Executive in connection with the initiation or defense of
any litigation or other legal action, whether by or against Huntington or any
director, officer, stockholder or other person affiliated with Huntington.
Notwithstanding any existing or prior attorney-client relationship between
Huntington and such counsel, Huntington irrevocably consents to Executive
entering into an attorney-client relationship with such counsel, and in that
connection Huntington and Executive agree that a confidential relationship shall
exist between Executive and such counsel. The reasonable fees and expenses of
counsel selected from time to time by Executive as hereinabove provided shall be
paid or reimbursed to Executive by Huntington on a regular, periodic basis upon
presentation by Executive of a statement or
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statements prepared by such counsel in accordance with its customary practices.
In any action involving this Agreement, Executive shall be entitled to
prejudgment interest on any amounts found to be due him from the date such
amounts would have been payable to Executive pursuant to this Agreement at an
annual rate of interest equal to the greater of (a) 12%, or (b) the prime
commercial rate in effect at The Huntington National Bank or its successor from
time to time during the prejudgment period.
8. TERMINATION. This Agreement shall terminate if the employment of
Executive with Huntington shall terminate prior to a Change in Control.
9. SUCCESSORS AND ASSIGNS. In the event that Huntington shall merge or
consolidate with any other corporation or all or substantially all Huntington's
business or assets shall be transferred in any manner to any other Person, such
Person shall thereupon succeed to, and be subject to, all rights, interests,
duties and obligations of, and shall thereafter be deemed for all purposes
hereof to be, Huntington hereunder. This Agreement shall be binding upon and
inure to the benefit of any such successor and the personal and legal
representatives of Executive. If Executive should die while any amounts are
still payable to him hereunder, all such amounts shall be paid in accordance
with the terms of this Agreement to Executive's beneficiary indicated on the
Beneficiary Designation, attached hereto as Exhibit A.
10. SEVERABILITY. In the event that any section, paragraph, clause or
other provision of this Agreement shall be determined to be invalid or
unenforceable in any jurisdiction for any reason, such section, paragraph,
clause or other provision shall be enforceable in any other jurisdiction in
which valid and enforceable and, in any event, the remaining sections,
paragraphs,
12
<PAGE> 13
clauses and other provisions of this Agreement shall be unaffected and shall
remain in full force and effect to the fullest extent permitted by law.
11. INDEMNIFICATION. For a period of five years after any termination
of Executive's employment, Huntington shall provide Executive (including his
heirs, executors and administrators) with coverage under a standard directors'
and officers' liability insurance policy at its expense, and shall indemnify,
hold harmless and defend Executive (and his heirs, executors and administrators)
to the fullest extent permitted under Maryland law against all expenses and
liabilities reasonably incurred by him in connection with or arising out of any
action, suit or proceeding in which he may be involved by reason of his having
been a director or officer of Huntington or any subsidiary (whether or not he
continues to be a director or officer at the time of incurring such expenses or
liabilities), such expenses and liabilities to include, but not be limited to,
judgments, court costs and attorneys' fees and the cost of reasonable
settlements.
12. TERMINATION OF PRIOR AGREEMENTS. The Executive hereby agrees to a
mutual termination, effective as of the effective date of this Agreement, of any
prior existing change in control agreement providing benefits to the Executive
upon a termination of employment following a Change in Control of the Company,
to which he and Huntington are parties, and as to such prior agreement, if any,
the Executive releases all claims, rights and entitlement.
IN WITNESS WHEREOF, this Agreement has been executed on ____________,
199__.
HUNTINGTON BANCSHARES INCORPORATED
By
---------------------------------
---------------------------------
13
<PAGE> 14
Exhibit A
Beneficiary Designation
In the event of my death, I hereby direct that any amounts due me under
the agreement to which this Beneficiary Designation is attached shall be
distributed to the person designated below. If no beneficiary shall be living to
receive such assets they shall be paid to the administrator or executor of my
estate.
Date
----------------- ---------------------------
---------------------------
Beneficiary
---------------------------
Relationship to Executive
14
<PAGE> 1
Exhibit 10(h)
Schedule Identifying Material Details of
Executive Agreements Substantially
Similar to Exhibit 10(g)
Effective
Name Date
- ---- ---------
Judith D. Fisher January 22,1997
Ralph K. Fraiser January 22,1997
Peter E. Geier January 22,1997
Dieter E. Heren January 22,1997
Leslie P. Ridout, Jr. January 22,1997
Ronald J. Seiffert January 22,1997
Gerald R. Williams January 22,1997
<PAGE> 1
EXHIBIT 10(j)(2)
HUNTINGTON BANCSHARES INCORPORATED
LONG-TERM INCENTIVE COMPENSATION PLAN
As Amended and Effective for Performance Cycles
beginning on or after January 1, 1996
(including amendment adopted February 21, 1996)
PURPOSE; EFFECTIVE DATE
-----------------------
1.1 The purpose of this Long-Term Incentive Compensation Plan (the "Plan")
is to provide incentive for key employees whose sustained performance directly
influences the creation of shareholder value.
1.2 The Plan, as amended, will become effective upon approval by a
majority of the votes cast by shareholders of the Corporation at the annual
Imeeting on April 25, 1996, but will relate to Performance Cycles beginning
January 1, 1996, and thereafter. No payments will be made under the Plan unless
shareholder approval is obtained.
DEFINITION OF TERMS
-------------------
2.1 As used herein, the following words shall have the meanings stated
after them, unless otherwise specifically provided:
(a) "U.S. BANKING ORGANIZATION" shall mean a bank or bank holding
company organized under the laws of the United States of America or any
state, territory or other
<PAGE> 2
political subdivision thereof including the District of Columbia, whose
stock is publicly traded.
(b) "BASE SALARY" shall mean the annual cash salary payable to an
Officer excluding bonuses, incentive compensation, stock options, employer
contributions to pension or benefit plans, and other forms of irregular
payments and deferred compensation.
(c) "COMMITTEE" shall mean the Compensation and Stock Option Committee
of the Board of Directors of the Corporation, which shall be composed of
two or more "outside directors" within the meaning of Section 162(m) as
hereinafter defined.
(d) "CORPORATION" shall mean Huntington Bancshares Incorporated.
(e) "OFFICER" shall mean an officer of the Corporation or of a
Subsidiary.
(f) "PACESETTER GROUP" shall mean the U.S. Banking Organizations
selected by the Committee to be members of the Pacesetter Group in
accordance with Section 5.1.
(g) "PARTICIPANT" shall mean an Officer selected to participate in the
Plan in accordance with section 4.1.
(h) "PERFORMANCE CYCLE" OR "CYCLE" shall mean a period of three
calendar years. A new Performance Cycle begins on January 1 of each even
numbered year.
(i) "RETURN ON AVERAGE EQUITY" OR "ROAE" shall mean the annual return
on average shareholders' equity reported in publicly available financial
reports.
(j) "SECTION 162(M)" shall mean Section 162(m) of the Internal Revenue
Code of 1986, as amended, or any successor statute of similar import.
(k) "SUBSIDIARY" shall mean a subsidiary of the Corporation of which
at least 50% of the voting power is directly or indirectly owned or
controlled by the Corporation.
2
<PAGE> 3
ADMINISTRATION
--------------
3.1 The Committee shall administer the Plan. The Committee is authorized to
interpret and construe the Plan and to adopt such rules, regulations, and
procedures for the administration of the Plan as the Committee deems necessary
or advisable. The Committee's interpretations of the Plan, and all decisions and
determinations made by the Committee, shall be conclusive and binding on all
parties including the Corporation and any person claiming an award under the
Plan.
PLAN PARTICIPANTS
-----------------
4.1 Participation in the Plan shall be limited to Officers who are
considered to be key employees whose performance may, in the opinion of the
Committee, significantly contribute to the long-term strategic performance and
growth of the Corporation. The Committee shall select those Officers who will
participate in the Plan for each Performance Cycle during the first 90 days of
the Cycle and may select Officers who are hired or promoted during a Cycle to
participate for the remainder of the Cycle.
PACESETTER GROUP
----------------
5.1 During the first 90 days of each Performance Cycle, the Committee shall
select the U.S. Banking Organizations comprising the Pacesetter Group for that
Cycle. If during any Performance Cycle a member of the Pacesetter Group for that
Cycle ceases to exist as an independent U.S. Banking Organization as a result of
a merger, purchase or exchange of stock or otherwise, that member shall be
included in the Pacesetter Group only for those full years during which it
existed as an independent U.S. Banking Organization.
3
<PAGE> 4
PERFORMANCE CRITERIA AND GOALS
------------------------------
6.1 Awards under the Plan shall be based upon the Corporation's performance
during each Performance Cycle measured by Return on Average Equity relative to
the Return on Average Equity of the members of the Pacesetter Group. During the
first 90 days of each Performance Cycle, the Committee shall establish written
ROAE performance goals for the Corporation for that Cycle relative to the ROAE
performance of members of the Pacesetter Group.
6.2 Awards under the Plan shall be equal to a percentage of a
Participant's annual Base Salary as of December 31 of the last year of a
Performance Cycle determined by reference to the attainment of the
Corporation's performance goals for that Cycle. The Committee shall adopt a
written schedule of potential awards, expressed as a percentage of Base Salary,
during the first 90 days of each Performance Cycle. For an Officer who is
selected to participate after the first 90 days of a Cycle, the award shall be
pro-rated based upon the length of time the Officer is a Participant. No awards
shall be paid pursuant to the Plan with respect to a Performance Cycle if the
average annual ROAE of the Corporation for that Cycle is below the minimum
corporate performance goal established by the Committee. In addition,
notwithstanding the attainment of specified performance goals, the Committee
has the discretion to reduce or eliminate an award that would otherwise be
payable to any Participant. The maximum award payable under the Plan with
respect to a Performance Cycle shall be $1,000,000, notwithstanding that the
average annual ROAE of the Corporation for a Performance Cycle may exceed the
maximum performance goal.
4
<PAGE> 5
PAYMENT OF AWARDS
-----------------
7.1 Awards will be made under the Plan in the form of shares of Common
Stock of the Corporation; provided, however, that the maximum amount of shares
of Common Stock to be issued after January 1, 1996 shall not exceed 400,000
shares (which number shall be adjusted to reflect future stock splits, stock
dividends, or other changes in capitalization of the Corporation); and provided
further that any Participant, with the approval of the Committee, may elect to
receive up to 50% of his or her award in cash, whereupon that Participant will
be entitled to receive only that number of shares of Common Stock determined as
set forth in Section 10.2 or 10.3 hereof. Payment of awards will be made as soon
as practicable following the end of each Performance Cycle; provided that
payments will be made only after the Committee has certified in writing, in the
minutes of a committee meeting or otherwise, that applicable performance goals
have been satisfied.
7.2 Except as provided in Sections 8.2 and 9.1 - 9.5 hereof, no award shall
be paid to an Officer who is not employed by the Corporation or a Subsidiary on
the day the award is paid.
7.3 If at the time Participants are to receive payment of awards, the
Corporation or any Participant is prohibited from trading in Common Stock under
applicable state or federal securities laws, the Committee may in its discretion
withhold distribution of stock until such time as distribution is permitted; or
imay in its discretion authorize the entire payment to be paid in cash. If
distribution of Common Stock is withheld, the Corporation shall make additional
cash payments to reflect dividends paid during the period in which distribution
was withheld.
7.4 The Corporation may deduct from any payment made under this Plan all
federal, state and local taxes required to be withheld with respect to such
payment or may require that the Participant pay to the Corporation an amount
equal to any such taxes.
5
<PAGE> 6
TERMINATION OF EMPLOYMENT
-------------------------
8.1 If a Participant's employment is terminated for any reason other than
death, disability or retirement prior to receipt of payment of an award with
respect to a Performance Cycle, the Participant shall not receive any payment
under the Plan based upon that Cycle.
8.2 In the event a Participant dies, becomes disabled, or retires before
receipt of payment of an award, as determined in the sole discretion of the
Committee, the Committee may authorize payment to the Participant or the
Participant's estate or beneficiary in such amount as the Committee deems
appropriate.
CHANGE IN CONTROL OF THE CORPORATION
------------------------------------
9.1 In the event of a Change in Control of the Corporation, as hereinafter
defined, the provisions set forth below shall apply, and in the event of any
conflict between Sections 9.1 - 9.5 and any other section of the Plan, the
provisions of Sections 9.1 - 9.5 shall prevail.
9.2 Within 90 days after the Change in Control occurs, the persons who are
Participants immediately prior to the Change in Control shall receive payment of
awards under the Plan in cash determined as follows:
(a) If the Change in Control occurs before the end of the first year of a
Cycle, no payment shall be made with respect to that Cycle.
(b) If the Change in Control occurs during the second year of a Cycle,
Participants shall receive the full amount of the award for that Cycle
based upon ROAE of the Corporation and the Pacesetter Group for the
first year of the Cycle.
6
<PAGE> 7
(c) If the Change in Control occurs during the third year of a Cycle,
Participants shall receive the full amount of the award for that Cycle
based upon average annual ROAE of the Corporation and the Pacesetter
Group for the first two years of the Cycle.
(d) If the Change in Control occurs after the third year of a Cycle,
Participants shall receive the full amount of the award for that Cycle
based upon the average annual ROAE of the Corporation and the
Pacesetter Group for the full Cycle.
9.3 Notwithstanding Section 8.1 hereof, Participants whose employment
terminates following a Change in Control shall receive payment of awards in
accordance with Section 9.2.
9.4 After a Change in Control has occurred, neither the Committee nor the
Board of Directors of the Corporation shall change the performance levels for a
Performance Cycle that began prior to the date the Change of Control occurred or
reduce or eliminate any awards otherwise payable to an Officer under this Plan.
9.5 For purposes of this section, a "Change in Control" of the Corporation
shall be deemed to have occurred if and when, after the date hereof, (i) subject
to the limitations set forth in this paragraph, any "Person" (as that term is
defined as of the date hereof in Section 225.2(k) of Regulation Y ("Regulation
Y") issued by the Board of Governors of the Federal Reserve System), other than
the Corporation or any employee stock ownership, profit-sharing, salary
adjustment or other employee benefit plan of the Corporation or of any
Subsidiary or any trustee or fiduciary with respect thereto solely by reason of
such capacity of such trustee or fiduciary, acquires, directly or indirectly, or
through or in concert with one or more Persons, "Control" (as that term is
defined as of the date hereof in Section 225.2(e) (1) of Regulation Y) of the
Corporation or control of, or the power to vote, 10% or more (but less than 25%)
of the votes attributable to the voting securities of
7
<PAGE> 8
the Corporation if no other person will own a greater percentage of the votes
attributable to such voting securities immediately after the acquisition
transaction; (ii) the Corporation, or in one or more transactions 50% or more of
its assets or earning power, is acquired by or combined with another Person and
less than a majority of the outstanding voting shares of the Person surviving
such transaction (or the ultimate parent of the surviving Person) after such
acquisition or combination is owned, immediately after such acquisition or
combination, by the owners of the voting shares of the Corporation outstanding
immediately prior to such acquisition or combination; or (iii) any Person,
acting alone or through or in concert with one or more Persons, shall elect, at
one or more meetings of shareholders of the Corporation, a majority of the
members of the Board of Directors who were not members of, or elected or
recommended by, the previously existing Board of Directors of the Corporation.
In defining "Control," all voting securities of the Corporation shall be
considered to be a single class.
PURCHASE AND DELIVERY OF STOCK
------------------------------
10.1 Common Stock delivered to Participants under the Plan shall be issued
by the Corporation or, if the Committee so directs, shall be purchased in the
open market by an independent buying agent selected by the Corporation. In
either case if a Participant shall be entitled to receive a fractional share,
the Participant shall receive one whole share in lieu of that fractional share.
10.2 In the event that the Common Stock to be delivered hereunder shall be
issued by the Corporation, the number of shares to be issued and delivered to
each Participant shall be that number of shares which could be purchased at the
market price per share of Common Stock of the Corporation with the amount of the
award to be made to that Participant, calculated as provided in
8
<PAGE> 9
Section 6.2, less the amount of such award that the Participant has elected to
receive in cash. The "market price per share" of the Common Stock for purposes
of this subsection shall be (1) the average of the highest and lowest sale
prices per share quoted in the NASDAQ National Market System, if the shares are
so quoted, (2) the mean between the bid and asked prices per share as reported
by NASDAQ, if the shares are publicly traded, but are not quoted in the National
Market System or listed on a securities exchange, or (3) if the shares are
listed on a securities exchange, the average of the high and low prices at which
such shares are quoted or traded on such exchange, in each case on a date which
shall be fixed by the Committee (and shall in no case be a date earlier than the
date when such determination is made), or if such date is not a trading day, the
next preceding trading day.
10.3 In the event that the Committee shall determine that the Common Stock
to be delivered shall be purchased in the open market, the Committee shall
select a buying agent which shall be a licensed securities broker that is not
affiliated with the Corporation. The Corporation or a Subsidiary shall pay to
the buying agent all awards under the Plan, except amounts which Participants
have elected to receive in cash, for the purchase of Common Stock in open market
purchases. The buying agent will perform all functions relating to the purchase
of Common Stock and will have complete discretion regarding the timing of
purchases; provided that purchases shall be made within thirty days after
receipt by the buying agent of funds representing awards unless such purchases
are restricted by federal or state securities laws. The buying agent shall not
purchase Common Stock directly from the Corporation. Certificates for Common
Stock shall be delivered to Participants promptly after purchases are made.
9
<PAGE> 10
10.4 Neither the Corporation nor buying agent shall have any liability to a
Participant with respect to the timing of payment of awards or the timing of
purchases of Common Stock.
MISCELLANEOUS PROVISIONS.
-------------------------
11.1 BINDING UPON SUCCESSORS - The obligations of the Corporation under the
Plan shall be binding upon any successor corporation or organization which
succeeds to substantially all of the assets and/or business of the Corporation.
The term Corporation, whenever used in this Plan, shall mean and include any
such corporation or organization after such succession.
11.2 RESTRICTIONS ON TRANSFER - Any benefits to which a Participant or his
or her beneficiary may become entitled under this Plan shall not be subject in
any manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, or charge, and any attempt to so transfer or encumber such benefits
shall be void. This Plan does not give a Participant any interest, lien, or
claim against any specific asset of the Corporation. No Participant or
beneficiary shall have any rights under this Plan other than as a general
creditor of the Corporation.
11.3 EXPENSES OF PLAN - The costs and expenses of administering the Plan,
including brokerage fees and commissions, if any, will be borne by the
Corporation.
11.4 NO EMPLOYMENT RIGHTS - No Participant has any right to be retained in
the employ of the Corporation or any Subsidiary by virtue of participation in
the Plan.
11.5 GOVERNING LAW - The Plan shall be governed by and construed according
to the laws of the State of Ohio.
10
<PAGE> 11
AMENDMENT AND TERMINATION
-------------------------
12.1 The Corporation may at any time terminate, or from time to time, amend
the Plan by action of the Board of Directors or by action of the Committee
without shareholder approval unless such approval is required to satisfy the
applicable provisions of Section 162(m).
11
<PAGE> 1
Exhibit 10(m)(5)
FIFTH AMENDMENT
TO
HUNTINGTON BANCSHARES INCORPORATED
1983 STOCK OPTION PLAN
----------------------
Effective August 21, 1996, the Huntington Bancshares Incorporated 1983
Stock Option Plan (the "Plan") shall be amended as follows:
1. Section 5(f) of the Plan is hereby deleted in its entirety and
substituted in lieu and in place thereof is the following new Section 5(f):
"(f) Except as provided below, no option shall be transferable by the
optionholder, except by will or the laws of descent and distribution,
and shall be exercisable during his or her lifetime only by such
optionholder. Any attempted assignment, transfer, pledge,
hypothecation or other disposition of the option contrary to the
provisions hereof, and the levy of any execution, attachment or
similar process upon the option, shall thereupon cause the option to
terminate and be cancelled, and such option shall then be null and
void and without effect.
Notwithstanding the above, an optionholder may, to the extent provided
in this Plan: (a) designate in writing a beneficiary to exercise his
or her Non-Statutory Stock Option after the optionholder's death; (b)
transfer a Non- Statutory Stock Option to a revocable inter vivos
trust as to which the optionholder is the settlor; and (c) transfer a
Non-Statutory Stock Option for no consideration to any of the
following permissible transferees (each a "Permissible Transferee"):
(w) any member of the Immediate Family of the optionholder to whom
such Non-Statutory Stock Option was granted, (x) any trust solely for
the benefit of members of the optionholder's Immediate Family, or (y)
any partnership whose only partners are members of the Optionholder's
Immediate Family; and further provided that (i) the transferee shall
remain subject to all of the terms and conditions applicable to such
Non- Statutory Stock Options prior to and after such transfer; and
(ii) any such transfer shall be subject to and in accordance with the
rules and regulations prescribed by the Committee in accordance with
Section 5. Any such transfer to a Permissible Transferee shall consist
of one or more options covering a minimum of five thousand (5,000)
option shares. A Non- Statutory Stock Option may not be retransferred
by a Permissible Transferee except by will or the laws of descent and
distribution and then only to another Permissible Transferee. In the
case of (b) and (c) the
<PAGE> 2
option shall only be exercisable by the trustee or Permissible
Transferee, as applicable. For the purposes of this Section 4,
"Immediate Family" means, with respect to a particular optionholder,
such optionholder's child, stepchild, grandchild, parent, stepparent,
grandparent, spouse, sibling, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law, or sister-in-law, and
shall include adoptive relationships."
2. The last sentence of Section 5(k) is hereby deleted in its entirety.
<PAGE> 1
Exhibit 10(n)(3)
SECOND AMENDMENT
TO
HUNTINGTON BANCSHARES INCORPORATED
1990 STOCK OPTION PLAN
----------------------
Effective August 21, 1996, the Huntington Bancshares Incorporated 1990
Stock Option Plan (the "Plan") shall be amended as follows:
1. Section 5(g) of the Plan is hereby deleted in its entirety and
substituted in lieu and in place thereof is the following new Section 5(g):
"(g) Except as provided below, no option shall be transferable by the
Optionholder, except by will or the laws of descent and distribution,
and shall be exercisable during his or her lifetime only by such
Optionholder. Any attempted assignment, transfer, pledge,
hypothecation or other disposition of the option contrary to the
provisions hereof, and the levy of any execution, attachment or
similar process upon the option, shall thereupon cause the option to
terminate and be cancelled, and such option shall then be null and
void and without effect.
Notwithstanding the above, an Optionholder may, to the extent provided
in this Plan: (a) designate in writing a beneficiary to exercise his
or her Non-Statutory Stock Option after the Optionholder's death; (b)
transfer a Non-Statutory Stock Option to a revocable inter vivos trust
as to which the Optionholder is the settlor; and (c) transfer a
Non-Statutory Stock Option for no consideration to any of the
following permissible transferees (each a "Permissible Transferee"):
(w) any member of the Immediate Family of the Optionholder to whom
such Non-Statutory Stock Option was granted, (x) any trust solely for
the benefit of members of the Optionholder's Immediate Family, or (y)
any partnership whose only partners are members of the Optionholder's
Immediate Family; and further provided that (i) the transferee shall
remain subject to all of the terms and conditions applicable to such
Non-Statutory Stock Options prior to and after such transfer; and (ii)
any such transfer shall be subject to and in accordance with the rules
and regulations prescribed by the Committee in accordance with Section
5. Any such transfer to a Permissible Transferee shall consist of one
or more options covering a minimum of five thousand (5,000) option
shares. A Non-Statutory Stock Option may not be retransferred by a
Permissible Transferee except by will or the laws of descent and
distribution and then only another Permissible Transferee. In the case
of (b) and (c) the option
<PAGE> 2
shall only be exercisable by the trustee or Permissible Transferee, as
applicable. For the purposes of this Section 6, "Immediate Family"
means, with respect to a particular Optionholder, such Optionholder's
child, stepchild, grandchild, parent, stepparent, grandparent, spouse,
sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law, or sister-in-law, and shall include adoptive
relationships."
2. The last sentence of Section 5(l) is hereby deleted in its entirety.
<PAGE> 1
Exhibit 10(r)
HUNTINGTON BANCSHARES INCORPORATED
AMENDED AND RESTATED
--------------------
1994 STOCK OPTION PLAN
----------------------
1. PURPOSE. This Amended and Restated 1994 Stock Option Plan is intended as
an incentive to encourage stock ownership by employees and Eligible Directors of
Huntington Bancshares Incorporated or its subsidiaries by granting them
Incentive Stock Options and/or Non-Statutory Stock Options to purchase its
shares so that they may acquire or increase their proprietary interest in the
success of the Company.
2. DEFINITIONS. For purposes of the Plan, the following terms shall have
the following meanings:
(i) "Change in Control" shall be deemed to have occurred if and when,
after the date hereof, (i) subject to the limitations set forth in this
paragraph, any "Person" (as that term is defined as of the date hereof in
Section 225.2(j) of Regulation Y ("Regulation Y") issued by the Board of
Governors of the Federal Reserve System), other than the Company or any
employee stock ownership, profit-sharing, salary adjustment or other
employee benefit plan of the Company, a majority of each class of equity
securities of which is directly or indirectly owned by HBI or any trustee
or fiduciary with respect thereto solely by reason of such capacity of such
trustee or fiduciary, acquires, directly or indirectly, or through or in
concert with one or more Persons, "Control" (as that term is defined as of
the date hereof in Section 225.2(e)(1) of Regulation Y) of HBI or control
or the power to vote 10% or more (but less than 25%) of the votes
attributable to the voting securities of HBI if no other person will own a
greater percentage of the votes attributable to such voting securities
immediately after the acquisition transaction; (ii) HBI or in one or more
transactions 50% or more of its assets or earning power, is acquired by or
combined with another Person and less than a majority of the outstanding
voting shares of the Person surviving such transaction (or the ultimate
parent of the surviving Person) after such acquisition or combination is
owned, immediately after such acquisition or combination, by the owners of
the voting shares of HBI outstanding immediately prior to such acquisition
or combination; or (iii) any Person, acting alone or through or in concert
with one or more Person, shall elect, at one or more meetings of
shareholders of HBI, a majority of the members of HBI's Board of Directors
who were not members of, or elected or recommended by, the previously
existing Board of Directors of HBI. In defining "Control," all voting
securities of HBI shall be considered to be a single class.
(ii)"Committee" shall mean the Compensation and Stock Option Committee
of the Board of Directors of HBI.
<PAGE> 2
(iii)"Company" shall mean HBI and its direct or indirect, present or
future, subsidiaries.
(iv)"Date of Grant" shall mean the date on which the Committee
approves the granting of an option.
(v) "Eligible Director" shall mean an individual who is now, or
hereafter becomes, a member of the Board of Directors of the Company and
who is neither an employee nor an officer of the Company.
(vi) "Expiration Date" shall mean the last day of the period during
which an option granted under this Plan may be exercised.
(vii)"Fair market value" of shares shall mean the mean between the
closing highest and lowest selling prices at which such stock was sold on
the Grant Date on the NASDAQ National Market. In the event the Date of
Grant or the date of exercise, as applicable, falls on a weekend or
holiday, the fair market value shall be determined as of the business day
immediately preceding the applicable Date of Grant or date of exercise. In
any other situation not covered by the foregoing, "fair market value" shall
be determined in good faith by the Committee, using principles consistent
with the intent and purpose of Section 422 of the Internal Revenue Code of
1986, as amended, and the regulations issued pursuant thereto.
(viii) "HBI" shall mean Huntington Bancshares Incorporated.
(ix) "Incentive Stock Option" shall have the meaning defined in
Section 422 of the Internal Revenue Code of 1986 as in effect on the
effective date of this Plan.
(x) "Non-Statutory Stock Option" shall mean a stock option not defined
in Section 422 of the Internal Revenue Code of 1986 as in effect on the
effective date of this Plan and not intended to qualify as an "Incentive
Stock Option".
(xi) "Optionholder" shall mean an employee or Eligible Director of the
Company to whom an option has been granted under the Plan.
(xii)"Other Termination" shall mean the termination of the employment
or the directorship of an Optionholder, as the case may be, for any reason
following a Change of Control or following the disposition other than in a
Change of Control, directly or indirectly, of substantially all of the
stock or assets of the Company to any person or entity other than the
Company.
(xiii) "Parent" and "subsidiary" shall have the meanings set forth in
Section 424 of the Internal Revenue Code of 1986, as amended.
(xiv) "Plan" shall mean the Amended and Restated Huntington Bancshares
Incorporated 1994 Stock Option Plan as set forth herein and as amended from
time to time.
<PAGE> 3
(xv) "Retirement" shall mean, in the case of an employee, the
retirement from the employ of the Company under one or more of the
retirement plans of the Company and, in the case of an Eligible Director,
shall mean the date when the Eligible Director is no longer serving as a
member of the Board of Directors of the Company and is no longer eligible
to be re-elected as a director of the Company pursuant to the mandatory
retirement provisions of the Company's by-laws and other applicable law.
3. ELIGIBILITY. All employees, full-time or part-time, of the Company,
including those employees who are also directors of HBI, and all Eligible
Directors shall be eligible to receive options pursuant to the Plan if selected
pursuant to Section 5 as a Plan participant. More than one option may be granted
to an employee or an Eligible Director, provided, however, in no event shall any
employee or Eligible Director be eligible to receive options to purchase more
than ONE MILLION EIGHT HUNDRED FOUR THOUSAND SIX HUNDRED EIGHTY SEVEN
(1,804,687) shares under this Plan subject to adjustment for stock splits, stock
dividends or other changes in the capitalization of HBI.
4. SHARES SUBJECT TO PLAN. Options may be granted under the Plan only for
common shares of HBI. The number of shares for which options may be granted
under the Plan shall be EIGHT MILLION SIX HUNDRED SIXTY TWO THOUSAND FIVE
HUNDRED (8,662,500). If during the term of the Plan there shall be a stock
split, stock dividend or other change in the capitalization of HBI, the number
of shares for which options may be granted under this Plan and the number of
shares for which options have been granted hereunder shall be appropriately and
proportionately adjusted to reflect the same. Any fractional share shall be
rounded down to a whole share. The number of shares for which options may be
granted or have been granted hereunder shall be made available from authorized
but unissued or reacquired common shares of HBI. Any shares for which an option
is granted hereunder which are released from such option, for any reason, shall
be available for other options under this Plan.
<PAGE> 4
5. GRANT OF OPTIONS. The Committee shall from time to time determine: (i)
those employees and/or Eligible Directors of the Company to whom options to
purchase shares shall be granted under this Plan, (ii) the number of shares
which shall be subject to each option as granted, (iii) whether such option is
an Incentive Stock Option or a Non-Statutory Stock Option, provided, however,
that any option that is granted to an Eligible Director may only be a
Non-Statutory Stock Option, and (iv) such other terms and conditions of the
option which are not inconsistent with this Plan.
No option shall be granted to any employee or Eligible Director if, upon
the granting of such option, the number of shares then subject to all options to
purchase held by the employee or Eligible Director, as the case may be, plus the
shares then owned by such employee or Eligible Director, would constitute more
than 10% of the total combined voting power of all classes of stock of HBI. For
the purpose of the preceding sentence, an employee or an Eligible Director shall
be deemed to own all shares which are attributable to him or her under Section
424(d) of the Internal Revenue Code of 1986, as amended, including, without
limiting the generality of the foregoing, shares owned by his or her brothers,
sisters, spouse, ancestors and lineal descendants.
6. OPTION AGREEMENT. Options granted pursuant to the Plan shall be
evidenced by agreements in such form as the Committee shall from time to time
approve. All such option agreements shall incorporate this Plan by reference,
shall be subject to all the terms and conditions of the Plan and shall include
the following information:
(a) TYPE OF OPTION. Each option agreement shall designate whether the
option thereby granted is an Incentive Stock Option or a Non-Statutory
Stock Option and shall state the number of shares for which it is granted.
Provided, however, that no option shall qualify as an Incentive Stock
Option if the aggregate fair market value of the stock (determined as of
the Date of Grant) with respect to which such option is exercisable for the
first time by
<PAGE> 5
any Optionholder during any calendar year under this Plan or any other
incentive stock option plan of HBI exceeds One Hundred Thousand Dollars
($100,000). Any option failing to qualify as an Incentive Stock Option
under the preceding sentence of this subsection (a) shall be deemed a
Non-Statutory Stock Option and all terms and conditions applicable to
Non-Statutory Stock Options shall apply. Notwithstanding the foregoing, any
option that is granted to an Eligible Director pursuant to the Plan shall
be a Non-Statutory Stock Option.
(b) DATE OF GRANT. Each option agreement shall state the Date of Grant
of the option thereunder and the period during which such option may be
exercised, which period shall end not more than ten years after the Date of
Grant of such option. All options shall be granted on or before April 21,
2004.
(c) EXERCISE PRICE. Each option agreement shall state the option price
or the method by which the option price will be determined, which shall not
be less than the fair market value of the shares subject to the option on
the Date of Grant of such option.
(d) INITIAL EXERCISE DATE. Each option agreement shall indicate the
date upon which such option is exercisable for the first time by the
Optionholder or the method by which the date shall be determined.
7. TERMS AND CONDITIONS. Each option granted pursuant to the Plan shall be
subject to the following terms and conditions:
(a) EXERCISE UPON DEATH. Upon the death of any Optionholder (1) while
in the employ of the Company, or (2) while serving as a member of the Board
of Directors of the Company, or (3) after Retirement, but prior to the
exercise in full of any option granted to such Optionholder, the
Optionholder's executor, administrator or such other person or persons to
whom the option shall pass by testamentary transfer, bequest or by the
operation of the laws of descent and distribution, may exercise any option
then unexercised in full
<PAGE> 6
within the period ending upon the earlier of the Expiration Date of the
option or the date thirteen months after the Optionholder's death, and may
then purchase all or any part of the shares subject to the option, whether
or not such option is then exercisable in full pursuant to its terms.
(b) EXERCISE UPON RETIREMENT OR OTHER TERMINATION. Upon the Retirement
of an Optionholder or upon the Other Termination of an Optionholder's
employment prior to the exercise in full of any Incentive Stock Option,
such Optionholder may exercise any such Incentive Stock Option then
unexercised within the period ending upon the earlier of the Expiration
Date of such Incentive Stock Option or the date three months after
Retirement or Other Termination of such Optionholder's employment, and may
then purchase all or any part of the shares subject to the option, whether
or not such option is then exercisable in full pursuant to its terms.
Upon the Retirement of an Optionholder or upon the Other Termination
of an Optionholder's employment or service as a director prior to the
exercise in full of any Non-Statutory Stock Option, such Optionholder may
exercise any such Non-Statutory Stock Option then unexercised within the
period ending upon the Expiration Date of such Non-Statutory Stock Option,
and may then purchase all or any part of the shares subject to the option,
whether or not such option is then exercisable in full pursuant to its
terms.
(c) EXERCISE UPON LIQUIDATION. If HBI shall liquidate, dissolve, or
shall be a party to a merger or consolidation to which the Company shall
not be the surviving corporation (other than in a "Change in Control"), HBI
shall give written notice thereof to all Optionholders under this Plan at
least thirty days prior thereto, and such Optionholders shall have the
right within such thirty-day period to exercise their options in full to
the extent not previously exercised; provided, however, that in no event
shall such options be exercised
<PAGE> 7
after the specific Expiration Date set forth therein. To the extent that
options shall not have been exercised on or prior to the effective date of
such liquidation, dissolution, merger or consolidation, such options shall
terminate on that date unless the surviving corporation (or its parent or
subsidiary) in any such merger or consolidation shall substitute or assume
the option in a transaction to which Section 424(a) of the Internal Revenue
Code of 1986, as amended, applies.
(d) NON-TRANSFERABILITY. Except as provided below, no option shall be
transferable by the Optionholder, except by will or the laws of descent and
distribution, and shall be exercisable during his or her lifetime only by
such Optionholder. Any attempted assignment, transfer, pledge,
hypothecation or other disposition of the option contrary to the provisions
hereof, and the levy of any execution, attachment or similar process upon
the option, shall thereupon cause the option to terminate and be cancelled,
and such option shall then be null and void and without effect.
Notwithstanding the above, an Optionholder may, to the extent provided
in this Plan: (a) designate in writing a beneficiary to exercise his or her
Non-Statutory Stock Option after the Optionholder's death; (b) transfer a
Non-Statutory Stock Option to a revocable inter vivos trust as to which the
Optionholder is the settlor; and (c) transfer a Non-Statutory Stock Option
for no consideration to any of the following permissible transferees (each
a "Permissible Transferee"): (w) any member of the Immediate Family of the
Optionholder to whom such Non-Statutory Stock Option was granted, (x) any
trust solely for the benefit of members of the Optionholder's Immediate
Family, or (y) any partnership whose only partners are members of the
Optionholder's Immediate Family; and further provided that (i) the
transferee shall remain subject to all of the terms and conditions
applicable to such Non-Statutory Stock Options prior to and after such
transfer; and (ii) any such transfer shall
<PAGE> 8
be subject to and in accordance with the rules and regulations prescribed
by the Committee in accordance with Section 9 herein. Any such transfer to
a Permissible Transferee shall consist of one or more options covering a
minimum of five thousand (5,000) option shares. A Non-Statutory Stock
Option may not be retransferred by a Permissible Transferee except by will
or the laws of descent and distribution and then only to another
Permissible Transferee. In the case of (b) and (c), the option shall only
be exercisable by the trustee or Permissible Transferee, as applicable. For
the purposes of this Section 7(d), "Immediate Family" means, with respect
to a particular Optionholder, such Optionholder's child, stepchild,
grandchild, parent, stepparent, grandparent, spouse, sibling,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law,
or sister-in-law, and shall include adoptive relationships.
(e) TERMINATION OF OPTION. Notwithstanding the first sentence of
Section 6(b), each option granted to an employee of the Company pursuant to
the Plan shall terminate and be cancelled upon the termination of the
employment with the Company for any reason other than the death,
Retirement, or Other Termination of such an Optionholder's employment.
Notwithstanding the first sentence of Section 7(b), upon the termination of
an Eligible Director's service as a director of the Company for any reason
other than the death, Retirement, or Other Termination of such
Optionholder, such Optionholder may exercise any Non-Statutory Stock Option
then unexercised within the period ending upon the earlier of (1) the
Expiration Date of such Non-Statutory Stock Option , or (2) the date
thirteen months after the termination of such Eligible Director's
directorship, or (3) the date that the Committee, in its sole discretion,
cancels and terminates any such unexercised Non-Statutory Stock Option.
<PAGE> 9
8. EXERCISE PROCEDURE. Subject to the limitations upon exercise imposed
under Sections 6(b), and 7(a), (b), (c), and (e) of the Plan, all options
granted under the Plan may be exercised in accordance with the following
requirements:
(a) Each option may be exercised in full or in any part at any time
during the period of the option, to the extent then exercisable, but not in
an amount less than fifty shares (or the remaining shares then covered by
the option, if less then fifty shares).
(b) Each option may be exercised by mailing or delivering to HBI at
the office of its Corporate Compensation Department (or other person
designated by the Committee) a written notice of exercise signed by the
person entitled to exercise the option, and stating the number of shares
with respect to which it is then being exercised.
(c) The date of exercise shall be the date such written notice of
exercise is received, if delivered by hand or through inter-company mail,
or, if mailed, the date of the legible postmark stamped on the envelope by
the U.S. Postal Service (metered dates shall not be accepted). Provided,
however, if the date of exercise as determined above shall be the record
date for the payment of a dividend by HBI, such written notice of exercise
must be received prior to 12:00 noon on the dividend record date;
otherwise, the date of exercise shall be the first business day immediately
following the dividend record date.
(d) Each written notice of exercise shall be accompanied by the
payment either (i) by check payable to HBI in the amount of the purchase
price of the shares then being purchased, or (ii) in shares of HBI having a
fair market value equal to the purchase price of the shares then being
purchased, or by written direction to HBI signed by the person entitled to
exercise the option to withhold from the shares otherwise to be delivered
on the exercise of the option that number of shares of HBI having a fair
market value equal to the exercise price, or any combination thereof.
<PAGE> 10
(e) Upon the exercise of any option, the Optionholder shall be
required to pay, or make satisfactory provision for payment, to HBI of an
amount equal to any tax which HBI is required to withhold under any
federal, state or local tax laws in connection with the exercise of any
option granted under this Plan. The Optionholder may satisfy this
obligation, in whole or in part, with respect to any option exercised by
making an election ("Election") at the time the Optionholder provides
written notice of exercise to HBI pursuant to Section 8(b) above to either
(i) have HBI withhold from the shares otherwise to be delivered on the
exercise of the option that number of shares of HBI having a fair market
value equal to the amount of the withholding requirement, or (ii) to
deliver to HBI sufficient shares of HBI having a fair market value equal to
the amount of the withholding requirement. Such shares shall be valued at
their fair market value on the date that income from the exercise of such
option becomes taxable ("Tax Date"). At the time of making an Election, the
Optionholder may certify to the Committee the rates (which shall not exceed
the maximum Federal and the maximum state statutory rates applicable to the
income of individuals for the year in which Tax Date occurs, exclusive of
any effect that losses of deduction or credits at various income levels may
have on such Optionholder's taxes) at which the Optionholder, upon adequate
investigation, expects his or her income from the shares to be taxed and
requests that withholding with respect to Federal and state income taxes be
made at such rates. Delivery of or withholding of fractional shares shall
not be permitted.
Upon receipt of payment of the exercise price or written direction
with respect to such exercise price and upon payment or satisfactory
provision for payment of any taxes due on the exercise of any option, HBI
shall issue and deliver to the person exercising the option a certificate
or certificates for the shares with respect to which the option shall have
been so
<PAGE> 11
exercised (less any shares withheld in payment of the exercise price or any
withholding requirement), dated as of the date of exercise.
9. AUTHORITY OF THE COMMITTEE.
(a) Subject to the express provisions of the Plan, the Committee shall
have the authority to construe and interpret the Plan and any option
granted hereunder and to establish, amend and rescind rules and regulations
for its administration, and it shall have such additional authority as the
Board of Directors may from time to time determine to be necessary or
desirable.
(b) In addition to such other rights of indemnification which they may
have as directors, the members of the Committee shall be indemnified by HBI
against the reasonable expenses, including attorneys fees, incurred in
connection with the defense of any action, suit or proceeding, or in
connection any appeal therein, to which they or any of them may be a party
by reason of any action taken or failure to act under or in connection with
the Plan or any option granted hereunder, and against all amounts paid by
them in settlement thereof (provided such settlement is approved by legal
counsel selected by HBI) or paid by them in satisfaction of a judgment in
any such action, suit or proceeding, except in relation to matters as to
which it shall be adjudged in such action, suit or proceeding that such
Committee member is liable for gross negligence or gross misconduct in the
performance of his duties; provided that within sixty days after
institution of any such action, suit or proceeding, a Committee member
shall in writing offer HBI the opportunity, at its sole expense, to handle
and defend the same.
10. GENERAL.
(a) HBI, by action of its Board of Directors, reserves the right to
amend, modify or terminate this Plan at any time, except that no action
shall be taken by HBI which will
<PAGE> 12
impair the validity of any option then outstanding or which will prevent
options issued or to be issued under this Plan from being Incentive Stock
Options.
(b) No Optionholder under this Plan shall have any rights as a
shareholder or otherwise with respect to stock subject to the option until
the option shall have been exercised with respect to such stock as herein
provided. No option granted under this Plan shall be exercised before the
stock subject to the Plan has been registered or qualified for sale under
appropriate federal and state securities laws.
(c) This Plan, and all options granted hereunder, shall be subject to
and interpreted and construed under the laws of the State of Ohio.
(d) This Plan is effective on the date of its adoption by HBI's Board
of Directors, provided it is approved by the shareholders of HBI. If not so
approved, the 1994 Stock Option Plan shall continue as the same was in
effect prior to the adoption of the amendments thereto and all options
granted thereunder shall remain in full force and effect.
<PAGE> 1
Exhibit 11
Huntington Bancshares Incorporated
Computation of Earnings Per Share
Years Ended December 31, 1996,1995, and 1994
(in thousands of dollars, except per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31, 1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Net Income $ 262,101 $ 244,489 $ 242,593
Effect of Convertible Debt 13 41 71
----------- ----------- -----------
Fully Diluted Net Income $ 262,114 $ 244,530 $ 242,664
=========== =========== ===========
Average Common Shares Outstanding 145,957,137 151,385,467 149,830,736
Dilutive Effect of Stock Options 1,157,156 975,814 893,389
----------- ----------- -----------
Average Common Shares and Common
Share Equivalents -- Primary 147,114,293 152,361,281 150,724,125
Additional Dilutive Effect of Stock Options 160,218 233,976 --
Dilutive Effect of Convertible Debt 26,986 84,691 144,698
----------- ----------- -----------
Fully Diluted Shares 147,301,497 152,679,948 150,868,823
=========== =========== ===========
Net Income per Common Share Outstanding $ 1.80 $ 1.62 $ 1.62
Primary Earnings per Share $ 1.78 $ 1.60 $ 1.61
Fully Diluted Earnings per Share $ 1.78 $ 1.60 $ 1.61
</TABLE>
<PAGE> 1
Exhibit 13
1996 ANNUAL REPORT TO SHAREHOLDERS
<TABLE>
<CAPTION>
TABLE 1
- ----------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED SELECTED FINANCIAL DATA Year Ended December 31,
- ----------------------------------------------------------------------------------------------------------------------------
(in thousands of dollars, except per
share amounts) 1996 1995 1994 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Total interest income........ $ 1,510,464 $ 1,461,896 $ 1,219,721 $ 1,236,311 $ 1,202,286 $ 1,208,407
Total interest expense....... 751,640 737,333 463,671 440,111 504,846 659,918
Net interest income.......... 758,824 724,563 756,050 796,200 697,440 548,489
Securities gains............. 17,703 9,056 2,594 27,189 36,332 16,951
Provision for loan losses.... 65,050 28,721 15,284 79,294 81,562 62,061
Net income................... 262,101 244,489 242,593 236,912 161,046 133,940
PER COMMON SHARE(1)
Net income................... 1.80 1.62 1.62 1.60 1.10 .92
Cash dividends declared...... .76 .70 .62 .51 .44 .40
Book value at year-end....... 10.60 10.38 9.38 8.84 7.68 7.01
BALANCE SHEET HIGHLIGHTS
Total assets at year-end..... 20,851,513 20,254,598 17,770,640 17,618,707 16,246,526 14,500,477
Total long-term debt at
year-end ................... 1,556,326 2,103,024 1,214,052 762,310 478,872 261,168
Average long-term debt ...... 1,818,935 1,423,537 927,797 640,976 299,905 218,645
Average shareholders' equity. 1,512,750 1,502,911 1,403,314 1,216,470 1,074,159 977,073
Average total assets......... $ 20,048,563 $ 19,047,912 $ 16,749,850 $ 16,850,719 $ 15,165,151 $ 13,612,543
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
KEY RATIOS AND STATISTICS 1996 1995 1994 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------------------
MARGIN ANALYSIS -- AS A %
OF AVERAGE EARNING ASSETS(2)
<S> <C> <C> <C> <C> <C> <C>
Interest income.............. 8.16% 8.34% 7.97% 8.03% 8.75% 9.85%
Interest expense............. 4.05 4.19 3.01 2.83 3.63 5.30
----- ----- ----- ----- ----- -----
NET INTEREST MARGIN ........... 4.11% 4.15% 4.96% 5.20% 5.12% 4.55%
===== ===== ===== ===== ===== =====
RETURN ON
Average total assets......... 1.31% 1.28% 1.45% 1.41% 1.06% .98%
Average earning assets....... 1.41 1.39 1.57 1.53 1.16 1.08
Average shareholders' equity. 17.33 16.27 17.29 19.48 14.99 13.71
Dividend payout ratio.......... 42.22 43.82 38.50 32.47 38.99 42.86
Average shareholders' equity to
average total assets......... 7.55 7.89 8.38 7.22 7.08 7.18
Tier I risk-based capital ratio 7.84 8.39 9.55 9.60 9.39 9.07
Total risk-based capital ratio. 11.31 12.03 13.57 14.02 12.56 11.27
Tier I leverage ratio.......... 6.66% 6.87% 7.99% 7.03% 6.72% 7.00%
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
OTHER DATA 1996 1995 1994 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------------------
Full-time equivalent employees. 7,936 7,551 8,153 8,395 8,039 7,562
Banking offices................ 339 322 344 352 346 334
<FN>
(1)Restated for the ten percent stock dividend distributed July 31, 1996.
(2)Presented on a fully tax equivalent basis assuming a 35% tax rate in years 1993 through 1996 and a 34% tax rate in years
1991 and 1992.
</TABLE>
<PAGE> 2
OVERVIEW
Huntington reported earnings of $262.1 million in 1996, compared with
$244.5 million and $242.6 million in 1995 and 1994, respectively. On a per share
basis, net income was $1.80 in 1996, versus $1.62 in both 1995 and 1994. Per
share amounts for all prior periods have been restated to reflect the ten
percent stock dividend distributed to shareholders in July 1996.
Huntington's return on average equity (ROE) and return on average assets
(ROA) were 17.33% and 1.31%, respectively, during 1996. In the prior two years,
ROE was 16.27% and 17.29%, and ROA was 1.28% and 1.45%.
Total assets were $20.9 billion at December 31, 1996, an increase of 2.9%
from the end of last year. Total loans increased by just under $1.0 billion, or
7.5%, which was somewhat offset by a reduction in temporary investments. In
terms of the average balance sheet, consumer loans and leases were up a solid
10.9%; commercial growth was also a respectable 4.9%.
Total deposits grew 5.9% from year-end 1995, in large part because of the
January 1996 acquisition of Peoples Bank of Lakeland, Florida (Lakeland). As
more fully discussed in the "Liquidity Management" section, core deposits
represent Huntington's most significant source of funding. When combined with
other core funding sources, they continue to provide approximately 70% of
Huntington's funding needs.
Short-term borrowings increased $429.9 million on a period-end basis. This
was accompanied by a decrease of $546.7 million in long-term debt. Average
short-term borrowings were down 6.7% while average long-term debt rose 27.7%.
These changes reflect the impact of medium-term notes with original maturities
of greater than one year that were outstanding for much of 1996 but were
replaced with shorter term wholesale liabilities upon maturity.
Shareholders' equity was relatively flat versus December 31, 1995.
Excluding the effect of net unrealized gains and losses on securities available
for sale, equity increased approximately 3.3%. 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. (See "Capital and Dividends" section for further
information).
RESULTS OF OPERATIONS
NET INTEREST INCOME
Huntington reported net interest income of $758.8 million in 1996,
compared with $724.6 million and $756.1 million, respectively, in 1995 and 1994.
The net interest margin, on a fully tax
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
TABLE 2
- ----------------------------------------------------------------------------------------------------------------------------
CHANGE IN NET INTEREST INCOME DUE TO CHANGES IN AVERAGE VOLUME AND INTEREST RATES(1)
- ----------------------------------------------------------------------------------------------------------------------------
Fully Tax Equivalent Basis(2) 1996 1995
(in millions of dollars) ---------------------------------------- ------------------------------------
Increase (Decrease) Increase (Decrease)
From Previous From Previous
Year Due To: Year Due To:
---------------------------------------- -------------------------------------
Volume Yield/Rate Total Volume Yield/Rate Total
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest bearing deposits in banks..... $ (.6) $ .0 $ (.6) $ 1.1 $ (.1) $ 1.0
Trading account securities............. (.4) (.4) (.8) .6 .2 .8
Federal funds sold and securities
purchased under resale agreements... (1.2) (.4) (1.6) (3.8) 1.8 (2.0)
Mortgages held for sale................ (1.3) .3 (1.0) (17.8) 1.7 (16.1)
Taxable securities..................... 31.0 (11.4) 19.6 64.2 18.7 82.9
Tax-exempt securities.................. (2.8) (1.1) (3.9) (6.8) (1.0) (7.8)
Total loans............................ 50.3 (15.0) 35.3 136.8 43.8 180.6
------ -------- ------- --------- -------- --------
TOTAL EARNING ASSETS ............... 75.0 (28.0) 47.0 174.3 65.1 239.4
------ -------- ------- --------- -------- --------
Interest bearing demand deposits....... .3 (1.1) (.8) (4.0) 6.3 2.3
Savings deposits....................... 10.9 9.9 20.8 (5.3) 12.7 7.4
Certificates of deposit of $100,000 or
more ................................ 9.6 (2.9) 6.7 10.2 11.3 21.5
Other domestic time deposits........... 2.1 3.7 5.8 41.1 53.7 94.8
Foreign time deposits.................. 2.7 (1.3) 1.4 (1.1) 5.9 4.8
Short-term borrowings.................. (13.6) (19.8) (33.4) 41.9 63.5 105.4
Long-term debt......................... 25.5 (11.7) 13.8 34.8 2.6 37.4
------ -------- ------- --------- -------- --------
TOTAL INTEREST BEARING LIABILITIES . 37.5 (23.2) 14.3 117.6 156.0 273.6
------ -------- ------- --------- -------- --------
NET INTEREST INCOME ................ $ 37.5 $ (4.8) $ 32.7 $ 56.7 $ (90.9) $ (34.2)
====== ======== ======= ========= ======== ========
<FN>
(1)The change in interest due to both rate and volume has been allocated between the factors in proportion to the
relationship of the absolute dollar amounts of the change in each.
(2)Calculated assuming a 35% tax rate.
</TABLE>
<PAGE> 3
1996 ANNUAL REPORT TO SHAREHOLDERS
TABLE 3
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
LOAN PORTFOLIO COMPOSITION December 31,
- ----------------------------------------------------------------------------------
(in millions of dollars) 1996 1995 1994 1993 1992
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial...................... $ 4,463 $4,260 $ 3,743 $ 3,577 $3,268
Real estate
Construction................. 474 368 305 337 379
Mortgage..................... 2,737 2,756 3,002 2,685 2,252
Consumer
Loans........................ 5,404 5,094 4,642 3,944 3,325
Leases....................... 1,183 784 572 411 291
------- ------- ------- ------- ------
Total loans ............... $14,261 $13,262 $12,264 $10,954 $9,515
======= ======= ======= ======= ======
<FN>
NOTE: There are no loans outstanding which would be considered a concentration of lending
in any particular industry or group of industries.
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
TABLE 4
- --------------------------------------------------------------------------------------
MATURITY SCHEDULE OF SELECTED LOANS
- --------------------------------------------------------------------------------------
(in thousands of dollars) DECEMBER 31, 1996
- --------------------------------------------------------------------------------------
After One
Within But Within After
One Year Five Years Five Years Total
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Commercial and tax free ........ $3,014,762 $1,103,669 $344,205 $4,462,636
Real estate-- construction...... 252,409 149,448 72,113 473,970
---------- ---------- -------- ----------
Total ..................... $3,267,171 $1,253,117 $416,318 $4,936,606
========== ========== ======== ==========
Variable interest rates......... $ 953,873 $317,064
========== ========
Fixed interest rates............ $ 299,244 $ 99,254
========== ========
</TABLE>
equivalent basis, was 4.11% during the twelve months, a slight decrease from
4.15% in 1995. As illustrated in the table of "Consolidated Average Balances and
Interest Rates" on pages 18 and 19, Huntington's yield on earning assets
declined 18 basis points, principally due to commercial loans repricing at the
lower prime interest rate in 1996 and reinvestment within the securities
portfolio at decreased rates. On the liability side, funding costs were down, as
a drop in wholesale liability rates more than offset a modest increase in the
cost of deposits. The reduction in net interest income and lower margin when
comparing 1995 with 1994 were the result of significantly narrowed spreads, as
competitive factors that influenced the pricing of new loans and actions taken
during 1994 and 1995 to reduce earnings sensitivity to rising rates exerted
downward pressure.
Interest rate swaps and other off-balance sheet financial instruments used
for asset/liability management purposes reduced interest income by $36.1 million
and $32.8 million, and increased interest expense by $16.0 million and $23.0
million in 1996 and 1995, respectively. These products increased interest income
by $29.0 million and decreased interest expense by $5.6 million in 1994.
Included in the preceding amounts is amortization of deferred gains and losses
from terminated contracts that decreased net interest income by $39.3 million in
1996 and $28.6 million in 1995, and increased net interest income by $21.6
million in 1994. At December 31, 1996, deferred net losses remaining to be
amortized were immaterial.
Expressed in terms of the margin, the effect of the off-balance sheet
portfolio was a reduction of 28 basis points and 32 basis points, respectively,
in the two most recent years, substantially as a result of amortization of net
losses from terminated contracts. A swap strategy used to create synthetic
fixed-rate wholesale funding, while lowering costs from what would have resulted
from a comparable cash instrument, caused the majority of the remaining margin
reduction attributable to the off-balance sheet portfolio. In 1994, swaps and
other interest rate contracts contributed 22 basis points to the margin.
PROVISION AND ALLOWANCE FOR LOAN LOSSES
The provision for loan losses was $65.1 million in 1996, up from $28.7
million in 1995 and $15.3 million in 1994. Net charge-offs as a percent of
average total loans were .46% in 1996, compared with .32% and .24%,
respectively, in the two preceding years. The ratio in the recent year was
adversely affected by higher losses in the consumer portfolio, indicative of
general market trends, and the charge-off of a large commercial credit.
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. For analytical purposes, the ALL has been allocated to various
portfolio segments. However, the total ALL is available to absorb losses from
any segment of the portfolio. The methods used by Huntington to allocate the ALL
are also subject to change; accordingly, the December 31, 1996, allocation is
not necessarily indicative of the trend of future loan losses in any particular
loan category.
At the most recent year end, the ALL of $199.1 million represented 1.40%
of total loans and covered non-performing loans almost four times. When combined
with the allowance for other real estate, it was 291.69% of total non-performing
assets. Additional information regarding the ALL and asset quality appears in
the section "Credit Risk".
NON-INTEREST INCOME
Non-interest income was $273.0 million in 1996, versus $243.0 million and
$213.9 million, respectively, in 1995 and 1994. Excluding securities
transactions, non-interest income increased 9.1% over last year. All major
categories showed increases, with particularly strong results in
<PAGE> 4
<TABLE>
<CAPTION>
TABLE 5
- ----------------------------------------------------------------------------------------------------------------------------
SUMMARY OF ALLOWANCE FOR LOAN LOSSES AND SELECTED STATISTICS
- ----------------------------------------------------------------------------------------------------------------------------
(in thousands of dollars) 1996 1995 1994 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ALLOWANCE FOR LOAN LOSSES, BEGINNING OF YEAR $194,456 $200,492 $211,835 $153,654 $134,770 $123,622
LOAN LOSSES
Commercial............................... (22,616) (14,338) (10,419) (20,534) (28,496) (26,693)
Real estate
Construction.......................... -- (391) (5,957) (422) (14,001) (34)
Mortgage.............................. (2,189) (4,490) (5,428) (2,060) (6,665) (6,859)
Consumer
Loans................................. (51,792) (34,360) (23,356) (21,492) (25,621) (28,773)
Leases................................ (4,492) (1,989) (962) (1,084) (872) (1,255)
--------- --------- --------- -------- --------- ---------
Total loan losses........................ (81,089) (55,568) (46,122) (45,592) (75,655) (63,614)
--------- --------- --------- -------- --------- ---------
RECOVERIES OF LOANS PREVIOUSLY CHARGED OFF
Commercial............................... 4,307 3,296 7,739 3,582 3,809 2,607
Real estate
Construction.......................... 531 5 1 1 -- 400
Mortgage.............................. 995 653 506 352 120 736
Consumer
Loans................................. 12,180 9,727 9,503 9,058 8,313 6,781
Leases................................ 721 303 353 245 222 212
--------- --------- --------- -------- --------- ---------
Total recoveries of loans previously charged
off 18,734 13,984 18,102 13,238 12,464 10,736
--------- --------- --------- -------- --------- ---------
NET LOAN LOSSES ............................ (62,355) (41,584) (28,020) (32,354) (63,191) (52,878)
--------- --------- --------- -------- --------- ---------
PROVISION FOR LOAN LOSSES .................. 65,050 28,721 15,284 79,294 81,562 62,061
ALLOWANCE ACQUIRED/OTHER .................. 1,907 6,827 1,393 11,241 513 1,965
--------- --------- --------- -------- --------- ---------
ALLOWANCE FOR LOAN LOSSES, END OF YEAR ..... $ 199,058 $ 194,456 $ 200,492 $211,835 $ 153,654 $ 134,770
========= ========= ========= ======== ========= =========
AS A % OF AVERAGE TOTAL LOANS
Net loan losses ........................ .46% .32% .24% .32% .69% .61%
Provision for loan losses................ .48% .22% .13% .78% .89% .72%
Allowance for loan losses as a %
of total loans (end of period) ......... 1.40% 1.47% 1.63% 1.93% 1.61% 1.52%
Net loan loss coverage (1) ................ 7.4 x 9.79x 13.62x 13.69x 4.98x 4.77x
<FN>
(1) Income before income taxes and the provision for loan losses to net loan losses.
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
TABLE 6
- -----------------------------------------------------------------------------------------------------------------------------
ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
- -----------------------------------------------------------------------------------------------------------------------------
(in thousands of dollars) 1996 1995 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------------
Percent of Percent of Percent of Percent of Percent of
Loans to Loans to Loans to Loans to Loans to
Total Total Total Total Total
Amount Loans Amount Loans Amount Loans Amount Loans Amount Loans
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial............ $ 97,825 31.3% $ 105,109 32.1% $ 120,922 30.5% $ 138,063 32.7% $ 91,118 34.3%
Real estate
Construction....... 755 3.3 1,342 2.8 908 2.5 1,636 3.1 1,329 4.0
Mortgage........... 15,299 19.2 14,091 20.8 16,677 24.5 18,008 24.5 12,274 23.7
Consumer
Loans.............. 43,540 37.9 34,944 38.4 28,672 37.9 24,901 35.9 23,604 34.9
Leases............. 3,457 8.3 3,651 5.9 2,632 4.6 1,800 3.8 1,536 3.1
Unallocated........... 38,182 -- 35,319 -- 30,681 -- 27,427 -- 23,793 --
---------- ----- --------- ----- ---------- ----- ---------- ----- ---------- -----
Total.............. $ 199,058 100.0% $ 194,456 100.0% $ 200,492 100.0% $ 211,835 100.0% $ 153,654 100.0%
========== ===== ========= ===== ========== ===== ========== ===== ========== =====
</TABLE>
<PAGE> 5
1996 ANNUAL REPORT TO SHAREHOLDERS
electronic banking and investment product sales. Included within the "Other"
component of non-interest income for 1995 was an $8.9 million gain on the sale
of Huntington's Pennsylvania bank.
Huntington also achieved broad-based growth in non-interest income from
1994 to 1995, as all categories but mortgage banking income reflected
improvement. The decrease in mortgage banking income resulted from lower
production in the higher interest rate environment that prevailed in 1995, as
well as from both a reduction in the average volume and a change in the mix of
loans serviced by Huntington.
Huntington realized gains from securities transactions of $17.7 million in
1996, $9.1 million in 1995, and $2.6 million in 1994. These gains resulted from
specific programs in each of the years. The 1996 gains resulted principally from
collateralized mortgage obligations and mortgage backed securities that were
sold to reduce price and/or prepayment risk as well as from the sale of U.S.
Treasury securities. The majority of the 1995 gains related to the sale of
callable agency securities, the proceeds from which were reinvested in
securities of moderately longer duration, while the 1994 activity was undertaken
to sell certain fixed-rate securities in anticipation of increased market
interest rates.
NON-INTEREST EXPENSE
Non-interest expense increased 1.3% from one year ago. Two Florida banks
acquired under the purchase method of accounting, one in third quarter 1995 and
the other in first quarter 1996, represented $11.1 million of the overall
increase. Excluding this amount, non-interest expense would have been down
slightly from last year.
Personnel costs (salaries, commissions, and benefits) were up $11.8
million, or 4.1%, which is indicative of more full-time equivalent employees
(FTEs) and normal salary adjustments. The larger organization, driven by higher
business volumes, acquisitions, and new business initiatives, also contributed
to an increase in various other components of non-interest expense. FDIC
insurance was down significantly in 1996, as Huntington benefited from the
reduction in assessment rates on bank deposits that occurred in the latter part
of 1995. The legislation enacted in September 1996 to recapitalize the Savings
Association Insurance Fund did not have a material effect on Huntington's
results of operations.
The drop in expenses when comparing 1995 with 1994 was primarily
attributable to the restructuring of certain business activities. The resulting
decrease in FTEs contributed to a $7.8 million, or 2.6%, decline in personnel
costs. These initiatives also gave rise to substantial reductions in various
components of other non-interest expense, particularly at The Huntington
Mortgage Company. Provision for Income Taxes
The provision for income taxes was $136.7 million in 1996, compared with
$134.0 million in 1995 and $123.9 million in 1994. Huntington's effective tax
rate declined somewhat from 1995, as a $2.1 million charge was recorded last
year in connection with the conversion of a thrift to a bank charter.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
TABLE 7
- ----------------------------------------------------------------------------------------------------------------------------
INVESTMENT SECURITIES December 31,
- ----------------------------------------------------------------------------------------------------------------------------
(in thousands of dollars) 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury and Federal Agencies.................................... $ 156 $ 156 $317,713
States and political subdivisions...................................... 60,288 67,448 153,649
Other.................................................................. -- -- 4,330
------- --------- --------
Total Investment Securities......................................... $60,444 $ 67,604 $475,692
======= ========= ========
- ----------------------------------------------------------------------------------------------------------------------------
AMORTIZED COST AND FAIR VALUES BY MATURITY AT DECEMBER 31, 1996
(in thousands of dollars) Amortized Cost Fair Value Yield(1)
- ----------------------------------------------------------------------------------------------------------------------------
U.S. Treasury
1 - 5 years......................................................... $ 156 $ 156 7.75%
-------- --------
Total............................................................. 156 156
-------- --------
States and political subdivisions
Under 1 year........................................................ 13,875 13,955 8.30
1-5 years........................................................... 22,283 22,706 8.45
6-10 years.......................................................... 20,143 20,304 7.76
Over 10 years....................................................... 3,987 3,986 9.08
-------- --------
Total............................................................. 60,288 60,951
-------- --------
Total Investment Securities ........................................... $ 60,444 $ 61,107
======== ========
<FN>
(1)Weighted average yields were calculated on the basis of amortized cost and have been adjusted to a fully tax
equivalent basis, assuming a 35% tax rate.
At December 31, 1996, Huntington had no concentrations of securities by a single
issuer in excess of 10% of shareholders' equity.
</TABLE>
<PAGE> 6
INTEREST RATE RISK AND
LIQUIDITY 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. The
Asset and Liability Management Committee (ALCO) oversees financial risk
management, establishing broad policies and specific operating limits that
govern a variety of financial risks inherent in Huntington's operations,
including interest rate, liquidity, and market risks. On and off-balance sheet
strategies and tactics 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 investments and funding sources. To accomplish its
overall balance sheet objectives, Huntington regularly accesses a variety of
markets--money, bond, and futures and options--as well as numerous trading
exchanges. In addition, dealers in over-the-counter financial instruments
provide availability of interest rate swaps as needed.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
TABLE 8
- ------------------------------------------------------------------------------------------------------------------------------
SECURITIES AVAILABLE FOR SALE December 31,
- ------------------------------------------------------------------------------------------------------------------------------
(in thousands of dollars) 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury and Federal Agencies..................................... $4,294,946 $4,228,170 $3,006,277
Other Securities....................................................... 448,987 492,974 298,216
------------ ------------ ----------
Total Securities Available for Sale................................. $4,743,933 $4,721,144 $3,304,493
========== ========== ==========
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
AMORTIZED COST AND FAIR VALUES BY MATURITY AT DECEMBER 31, 1996
(in thousands of dollars) Amortized Cost Fair Value Yield(1)
- ------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury
<S> <C> <C> <C>
Under 1 year........................................................ $ 58,572 $ 58,835 6.54%
1-5 years........................................................... 390,881 384,021 5.51
6-10 years.......................................................... 159,747 153,489 5.46
------------ ------------
Total............................................................. 609,200 596,345
------------ ------------
Federal Agencies
Mortgage-backed securities
1-5 years........................................................... 179,601 182,239 7.33
6-10 years.......................................................... 842,331 830,653 6.28
Over 10 years....................................................... 259,214 259,519 6.82
------------ ------------
Total............................................................. 1,281,146 1,272,411
------------ ------------
Other agencies
Under 1 year........................................................ 63,586 63,823 6.49
1-5 years........................................................... 1,843,924 1,845,256 6.56
6-10 years.......................................................... 176,519 175,143 6.20
Over 10 years....................................................... 343,946 341,968 6.33
------------ ------------
Total............................................................. 2,427,975 2,426,190
------------ ------------
Total U.S. Treasury and Federal Agencies............................... 4,318,321 4,294,946
------------ ------------
Other Securities
Under 1 year........................................................ 7,305 7,497 12.28
1-5 years........................................................... 9,304 9,706 10.97
6-10 years.......................................................... 157,904 158,906 6.56
Over 10 years....................................................... 265,534 265,649 6.78
Marketable equity securities........................................ 8,480 7,229 5.74
------------ ------------
Total............................................................. 448,527 448,987
------------ ------------
Total Securities Available for Sale.................................... $ 4,766,848 $ 4,743,933
============ ============
<FN>
(1)Weighted average yields were calculated on the basis of amortized cost.
At December 31, 1996, Huntington had no concentrations of securities by a single issuer in excess of 10% of
shareholders' equity.
</TABLE>
<PAGE> 7
1996 ANNUAL REPORT TO SHAREHOLDERS
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, 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 loans, principal amortization and maturities
on other financial instruments, and balance sheet growth assumptions. The model
captures embedded options, e.g. interest rate caps/floors or call options, and
accounts for changes in rate relationships, as various rate indices lead or lag
changes in market rates. While these assumptions are inherently uncertain,
management utilizes probabilities and, therefore, believes that the model
provides an accurate estimate of Huntington's interest rate risk exposure.
Management reporting of this information is regularly shared with the Board of
Directors.
At December 31, 1996, the results of Huntington's 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 would be expected to
increase 1.2% if rates were to fall 200 basis points versus a decline in net
interest income of 2.8% if rates rose.
Active interest rate risk management necessitates the use of various types
of off-balance sheet financial instruments, primarily interest rate swaps. Risk
that is created by different indices on products, by unequal terms to maturity
of assets and liabilities, and by products that are appealing to customers but
incompatible with current risk limits can be eliminated or decreased in a cost
efficient manner by utilizing interest rate swaps. In addition, the swap
strategy has enabled Huntington to lower the overall cost of raising wholesale
funds. Similarly, financial futures, interest rate caps and floors, options, and
forward rate agreements are used to control financial risk effectively.
Off-balance sheet instruments are often preferable to similar cash instruments
because, though
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TABLE 9
- --------------------------------------------------------------------------------
INTEREST RATE SWAP PORTFOLIO
- --------------------------------------------------------------------------------
(in millions of dollars) December 31, 1996
- --------------------------------------------------------------------------------
Average
Notional Maturity Market Average Rate
Value (years) Value Receive Pay
----- ------- ----- ------- ---
<S> <C> <C> <C> <C> <C>
ASSET CONVERSION SWAPS
Receive fixed $ 800 1.86 $(3.8) 5.65% 5.53%
Receive fixed-amortizing 93 1.49 (.6) 5.27 5.60
------- -----
TOTAL ASSET CONVERSION SWAPS $ 893 1.82 $(4.4) 5.61% 5.54%
======= =====
LIABILITY CONVERSION SWAPS
Receive fixed $ 1,430 2.20 $ 18.5 6.05% 5.50%
Receive fixed-amortizing 195 2.49 (3.0) 5.63 5.67
Pay fixed 50 .68 (.8) 5.53 8.05
------- -----
TOTAL LIABILITY CONVERSION SWAPS $ 1,675 2.19 $ 14.7 5.98% 5.60%
======= =====
BASIS PROTECTION SWAPS $ 250 2.18 $ (.3) 5.54% 5.56%
======= =====
- --------------------------------------------------------------------------------
</TABLE>
performing identically, they require less capital while preserving access to the
marketplace.
Table 9 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. Accordingly, 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. With respect to the variable rate information and the
indexed amortizing swap maturities presented in the table, management made no
assumptions regarding future changes in interest rates.
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 primarily of contracts that are indexed
to the prepayment experience of a specified pool of mortgage loans. As market
interest rates change, the amortization of the notional value of the swap will
also change, generally slowing as rates increase and accelerating when rates
fall. Basis swaps are contracts which provide for both parties to receive
interest payments according to different rate indices and are used to protect
against changes in spreads between market rates. The receive and pay amounts
applicable to Huntington's basis swaps are based predominantly on LIBOR.
The notional values of the swap portfolio represent contractual amounts on
which interest payments to be exchanged are based. These notional values do not
represent direct credit exposures. At December 31, 1996, Huntington's credit
risk from interest rate swaps used for asset/liability management purposes was
$59.8 million, which represents the sum of the
<PAGE> 8
<TABLE>
<CAPTION>
TABLE 10
- --------------------------------------------------------------------------------
MATURITIES OF DOMESTIC CERTIFICATES OF DEPOSIT OF $100,000 OR MORE
AS OF DECEMBER 31, 1996 (in thousands of dollars)
- --------------------------------------------------------------------------------
<S> <C>
Three months or less........................ $514,845
Over three through six months............... 206,028
Over six through twelve months.............. 131,708
Over twelve months.......................... 76,346
--------
Total....................................... $928,927
========
<FN>
NOTE: All foreign time deposits are denominated in amounts greater than $100,000.
- --------------------------------------------------------------------------------
</TABLE>
aggregate fair value of positions that have become favorable to Huntington,
including any accrued interest receivable due from counterparties. In order to
minimize the risk that a swap counterparty will not satisfy its interest payment
obligation under the terms of the contract, Huntington performs credit reviews
on all counterparties, restricts the number of counterparties used to a select
group of high quality institutions, obtains collateral, and enters into formal
netting arrangements. Huntington has never experienced any past due amounts from
a swap counterparty and does not anticipate nonperformance in the future by any
such counterparties.
The total notional amount of off-balance sheet instruments used by
Huntington on behalf of customers (for which the related interest rate risk is
offset by third party contracts) was $450 million at December 31, 1996. Total
credit exposure from such contracts, represented by those instruments with a
positive fair value, was $4.2 million. 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 table.
LIQUIDITY MANAGEMENT
Liquidity management is also a significant responsibility of ALCO. The
objective of ALCO in this regard is to maintain an optimum balance of maturities
among Huntington's assets and liabilities such that sufficient cash, or access
to cash, is available at all times to meet the needs of borrowers, depositors,
and creditors, as well as to fund corporate expansion and other activities.
A chief source of Huntington's liquidity is derived from the large retail
deposit base accessible by its network of geographically dispersed banking
offices. This core funding is supplemented by Huntington's demonstrated ability
to raise funds in capital markets and to access funds nationwide. Huntington's
$4 billion bank note program is a significant source of wholesale funding. Bank
notes may range in maturity from 30 days to 15 years, with interest based on
prevailing market rates. At the end of the most recent twelve months, a total of
$1.1 billion of such notes was outstanding. A similar $750 million note program
is available to the parent company, the proceeds from which are used from time
to time to fund certain non-banking activities, finance acquisitions, repurchase
Huntington's common stock, or for other general corporate purposes. At year end
1996, $320 million was outstanding in connection with the parent company
program. In addition, a $2 billion European note program was initiated in
October 1996, providing additional funding diversification. As of year end, $325
million was outstanding under this arrangement. Huntington also has a fully
available $200 million line of credit that supports commercial paper borrowings
and other short-term working capital needs.
While liability sources are many, significant liquidity is available from
Huntington's investment and loan portfolios. ALCO regularly monitors the overall
liquidity position of the business and ensures that various alternative
strategies exist to cover unanticipated events. At December 31, 1996, sufficient
liquidity was available to meet estimated short-term and
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
TABLE 11
- ---------------------------------------------------------------------------------------------------------------------------
SHORT-TERM BORROWINGS Year Ended December 31,
- ---------------------------------------------------------------------------------------------------------------------------
(in thousands of dollars) 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
FEDERAL FUNDS PURCHASED AND REPURCHASE AGREEMENTS
<S> <C> <C> <C>
Balance at year-end........................................ $3,230,902 $2,854,142 $1,442,138
Weighted average interest rate at year-end................. 5.24% 5.12% 4.82%
Maximum amount outstanding at month-end during the year.... $3,230,902 $2,854,142 $1,798,524
Average amount outstanding during the year................. $2,668,182 $2,154,114 $1,374,741
Weighted average interest rate during the year............. 5.21% 5.77% 3.58%
BANK NOTES WITH ORIGINAL MATURITIES OF LESS THAN ONE YEAR
Balance at year-end........................................ $505,300 $494,000 $1,264,000
Weighted average interest rate at year-end................. 5.67% 6.17% 5.55%
Maximum amount outstanding at month-end during the year.... $575,300 $1,401,000 $1,364,000
Average amount outstanding during the year................. $357,923 $1,127,228 $1,138,280
Weighted average interest rate during the year............. 7.47% 6.67% 4.48%
</TABLE>
<PAGE> 9
1996 ANNUAL REPORT TO SHAREHOLDERS
<TABLE>
<CAPTION>
TABLE 12
- ----------------------------------------------------------------------------------------------------------------------------
NON-PERFORMING ASSETS AND PAST DUE LOANS
- ----------------------------------------------------------------------------------------------------------------------------
(in thousands of dollars) 1996 1995 1994 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Non-accrual loans ............................ $ 47,155 $ 50,669 $ 41,929 $ 75,933 $ 87,541 $ 139,024
Renegotiated loans............................ 3,326 4,299 2,550 1,254 2,508 5,491
--------- --------- ---------- ---------- --------- ---------
TOTAL NON-PERFORMING LOANS ................... 50,481 54,968 44,479 77,187 90,049 144,515
--------- --------- ---------- ---------- --------- ---------
Other real estate, net........................ 16,772 22,026 51,909 62,446 73,130 99,646
--------- --------- ---------- ---------- --------- ---------
TOTAL NON-PERFORMING ASSETS .................. $ 67,253 $ 76,994 $ 96,388 $ 139,633 $ 163,179 $ 244,161
========= ========= ========== ========== ========= =========
NON-PERFORMING LOANS AS A % OF
TOTAL LOANS ............................... .35% .41% .36% .70% .95% 1.63%
NON-PERFORMING ASSETS AS A % OF
TOTAL LOANS AND OTHER REAL ESTATE ......... .47% .58% .78% 1.27% 1.70% 2.72%
ALLOWANCE FOR LOAN LOSSES AS A % OF
NON-PERFORMING LOANS ...................... 394.32% 353.76% 450.76% 274.44% 170.63% 93.26%
ALLOWANCE FOR LOAN LOSSES AND
OTHER REAL ESTATE AS A % OF
NON-PERFORMING ASSETS ..................... 291.69% 238.65% 193.13% 143.41% 95.22% 56.53%
ACCRUING LOANS PAST DUE 90 DAYS OR MORE ...... $34,056 $27,018 $20,877 $ 25,550 $24,298 $36,270
========= ========= ========== ========== ========= =========
ACCRUING LOANS PAST DUE 90 DAYS OR MORE
TO TOTAL LOANS ............................ .24% .20% .17% .23% .26% .41%
<FN>
NOTE: For 1996, the amount of interest income which would have been recorded under the original terms for total loans
classified as non-accrual or renegotiated was $6.6 million. Amounts actually collected and recorded as interest income
for these loans totaled $0.7 million.
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
long-term funding needs.
CREDIT RISK
Huntington's exposure to credit risk is managed through the use of
consistent underwriting standards that emphasize "in-market" lending to
established borrowers. Highly leveraged transactions and excessive industry or
other concentrations are avoided. The credit administration function also
employs extensive monitoring procedures to ensure 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 assets, consisting of
loans that are no longer accruing interest, loans that have been renegotiated
based upon financial difficulties of the borrower, and real estate acquired
through foreclosure, totaled $67.3 million at the most recent year end, down
12.7% from one year ago. As of December 31, 1996, non-performing loans
represented .35% of total loans and non-performing assets as a percent of total
loans and other real estate were only .47%. Loans past due ninety days or more
but continuing to accrue interest (primarily consumer and residential real
estate) were $34.1 million at year end 1996.
There were also loans outstanding of $50.7 million and $49.0 million,
respectively, at December 31, 1996 and 1995, that were current as to principal
and interest that Huntington considered to be potential problem credits. These
loans are closely monitored for any further deterioration in borrower
performance.
CAPITAL AND DIVIDENDS
Huntington places significant emphasis on the maintenance of strong
capital, which promotes investor confidence, provides access to the national
markets under favorable terms, and enhances business growth and acquisition
opportunities. Huntington also recognizes the importance of managing excess
capital and continually strives to maintain an appropriate balance between
capital adequacy and returns to shareholders. Capital is managed at each
subsidiary based upon the respective risks and growth opportunities, as well as
regulatory requirements.
Huntington's ratio of average equity to average assets over the last
twelve months was 7.55%, compared with 7.89% and 8.38%, respectively, in the two
preceding years. At December 31, 1996, Huntington met all regulatory capital
requirements. In addition, each bank subsidiary had regulatory capital ratios in
excess of the levels established for "well-capitalized" institutions.
Cash dividends declared were $.76 a share in 1996, up 8.6% from the
corresponding amount in 1995 of $.70 per share. A 10% stock dividend was also
distributed to shareholders in 1996.
On February 21, 1996, the Board of Directors authorized Huntington to
repurchase up to 11.0 million additional shares of its common stock (adjusted
for the July 1996 stock dividend) through open
<PAGE> 10
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.
Huntington purchased 10.4 million shares in 1996 at an aggregate cost of $249.2
million, leaving 4.2 million shares available for repurchase. Huntington's
management believes the remaining authorized shares will be repurchased by the
end of 1997.
FOURTH QUARTER RESULTS
Net income for the fourth quarter of 1996 was $67.7 million, or $.47 per
share, compared with $65.5 million, or $.45 per share, in the same period last
year. ROE and ROA for the most recent quarter were 17.87% and 1.32%,
respectively, versus 17.50% and 1.31% in the final three months of 1995.
Net interest income was $193.1 million in the recent quarter versus $181.9
million in the corresponding period of the prior year, as the net interest
margin and average earning assets each increased more than 3%.
The provision for loan losses was $21.1 million in the last quarter of the
year, compared with $12.1 million in the same period of 1995. Net charge-offs
were .62% of average loans in the recent three months, up from .53% in the final
quarter one year ago. As previously discussed, increased consumer charge-offs
contributed to the higher loss ratio in 1996.
Non-interest income was $66.6 million for the three months ended December
31, 1996. Similar to the full year results, improvements occurred across most of
the major categories. The fourth quarter 1995 total was impacted significantly
by the above-mentioned gain on sale of a bank subsidiary as well as a gain of
$2.8 million on the sale of residential mortgage loans (a component of mortgage
banking income). Securities gains were up $3.9 million when comparing the recent
quarter with the same three months a year ago.
Non-interest expense totaled $137.4 million in the most recent three
months, flat with the final quarter of last year. Higher personnel and equipment
costs were offset by a reduction in other non-interest expense. FDIC insurance
expense was also lower, as the entire amount paid by Huntington for the fourth
quarter of 1996 was refunded. Total non-interest expense for the quarter just
ended included approximately $2.5 million related to the Lakeland acquisition.
<PAGE> 11
HUNTINGTON BANCSHARES INCORPORATED
- ---------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Fully Tax Equivalent Basis(1) 1996 1995
(in millions of dollars) -------------------------------- -------------------------------
Interest Interest
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
- ------------------------------------------------- -------------------------------- -------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest bearing deposits in banks............... $ 11 $ .7 5.98% $ 21 $ 1.3 5.99%
Trading account securities....................... 16 .9 5.66 23 1.7 7.29
Federal funds sold and securities purchased
under resale agreements....................... 25 1.4 5.95 46 3.0 6.45
Mortgages held for sale.......................... 113 8.8 7.72 130 9.8 7.58
Securities:
Taxable....................................... 4,667 301.2 6.45 4,191 281.6 6.72
Tax Exempt.................................... 94 8.7 9.27 124 12.6 10.30
------- -------- -------- --------
Total Securities............................ 4,761 309.9 6.51 4,315 294.2 6.82
------- -------- -------- --------
Loans
Commercial.................................... 4,323 338.0 7.82 4,123 347.2 8.43
Real Estate
Construction................................ 405 34.3 8.48 339 29.1 8.58
Mortgage.................................... 2,774 235.8 8.50 3,070 256.6 8.36
Consumer
Loans....................................... 5,203 464.0 8.92 4,892 434.3 8.88
Leases...................................... 950 74.8 7.87 657 51.0 7.76
------- -------- -------- --------
Total loans................................. 13,655 1,146.9 8.40 13,081 1,118.2 8.55
Allowance for loan losses/loan fees......... 201 47.0 200 40.4
------- -------- -------- --------
Net loans................................... 13,454 1,193.9 8.74 12,881 1,158.6 8.86
------- -------- -------- --------
Total earning assets........................ 18,581 $1,515.6 8.16% 17,616 $1,468.6 8.34%
------- -------- -------- --------
Cash and due from banks.......................... 757 780
All other assets................................. 912 852
------- --------
TOTAL ASSETS .................................... $20,049 $ 19,048
======= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Demand deposits
Non-interest bearing.......................... $ 2,340 $ 2,179
Interest bearing.............................. 2,551 $ 61.4 2.41% 2,539 $ 62.2 2.45%
Savings deposits................................. 2,420 77.2 3.19 2,053 56.4 2.75
Certificates of deposit of $100,000 or more...... 986 53.8 5.45 812 47.1 5.80
Other domestic time deposits..................... 4,421 248.7 5.63 4,383 242.9 5.54
Foreign time deposits............................ 305 18.4 6.03 261 17.0 6.50
------- -------- -------- --------
Total deposits................................ 13,023 459.5 4.30 12,227 425.6 4.24
------- -------- -------- --------
Short-term borrowings............................ 3,258 178.7 5.49 3,491 212.1 6.08
Long-term debt................................... 1,819 113.4 6.23 1,424 99.6 7.00
------- -------- -------- --------
Interest bearing liabilities.................. 15,760 $ 751.6 4.77% 14,963 $ 737.3 4.93%
------- -------- -------- --------
All other liabilities............................ 436 403
Shareholders' equity............................. 1,513 1,503
------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ...... $20,049 $ 19,048
======= ========
Net interest rate spread......................... 3.39% 3.41%
Impact of non-interest bearing funds on margin... .72% .74%
NET INTEREST INCOME/MARGIN ...................... $ 764.0 4.11% $ 731.3 4.15%
======== ========
<FN>
(1)Fully tax equivalent yields are calculated assuming a 35% tax rate in 1993
through 1996 and a 34% tax rate in years 1991 and 1992.
Average loan balances include non-accruing loans. Loan income includes
cash received on non-accruing loans.
</TABLE>
<PAGE> 12
HUNTINGTON BANCSHARES INCORPORATED
---------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
1994 1993 1992 1991
- ----------------------------- ------------------------------ ------------------------------ --------------------------
Interest Interest Interest Interest
Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate Balance Expense Rate Balance Expense Rate
- ----------------------------- ------------------------------ ------------------------------ --------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 4 $ .3 7.57% $ 26 $ 1.1 4.16% $ 81 $ 4.0 4.88% $ 52 $ 3.8 7.32%
14 .9 6.16 10 .5 5.04 22 1.2 5.43 27 1.8 6.83
115 5.0 4.32 78 2.6 3.36 126 4.9 3.90 152 8.8 5.76
367 25.9 7.06 827 60.2 7.28 681 55.1 8.09 386 34.0 8.80
3,217 198.6 6.17 4,199 254.9 6.07 3,510 244.9 6.98 2,761 235.5 8.53
190 20.5 10.80 260 29.1 11.22 336 31.7 9.43 396 41.6 10.51
- --------- -------- -------- --------- ------- -------- -------- --------
3,407 219.1 6.43 4,459 284.0 6.37 3,846 276.6 7.19 3,157 277.1 8.78
- --------- -------- -------- --------- ------- -------- -------- --------
3,636 308.3 8.48 3,368 287.9 8.55 3,155 265.1 8.40 3,050 282.0 9.25
298 23.1 7.75 368 26.1 7.09 393 26.4 6.71 457 38.2 8.37
2,786 220.3 7.91 2,473 203.6 8.24 2,145 191.2 8.92 2,036 202.9 9.96
4,316 354.2 8.21 3,575 323.8 9.06 3,190 340.7 10.68 2,904 336.6 11.59
485 34.7 7.15 349 27.8 7.97 263 23.3 8.86 231 22.3 9.65
- --------- -------- -------- --------- ------- -------- -------- --------
11,521 940.6 8.16 10,133 869.2 8.58 9,146 846.7 9.26 8,678 882.0 10.16
212 37.4 194 30.4 144 28.6 131 19.2
- --------- -------- -------- --------- ------- -------- -------- --------
11,309 978.0 8.49 9,939 899.6 8.88 9,002 875.3 9.57 8,547 901.2 10.38
- --------- -------- -------- --------- ------- -------- -------- --------
15,428 $1,229.2 7.97% 15,533 $ 1,248.0 8.03% 13,902 $1,217.1 8.75% 12,452 $ 1,226.7 9.85%
- --------- -------- -------- --------- ------- -------- -------- --------
741 693 636 567
793 819 771 725
- --------- -------- ------- --------
$ 16,750 $ 16,851 $15,165 $13,613
========= ======== ======= ========
$ 2,116 $ 2,141 $ 1,749 $ 1,401
2,713 $ 59.9 2.21% 2,662 $ 63.7 2.39% 2,513 $ 76.5 3.05% 2,210 $ 103.3 4.68%
2,281 49.0 2.15 2,229 57.5 2.58 1,770 64.1 3.62 1,326 64.9 4.89
607 25.6 4.22 831 31.1 3.74 1,251 56.7 4.53 1,523 100.1 6.57
3,523 148.1 4.20 3,572 150.3 4.21 4,066 206.8 5.09 4,223 288.5 6.83
286 12.2 4.25 455 15.0 3.30 153 5.7 3.73 69 3.8 5.56
- --------- -------- -------- --------- ------- -------- -------- --------
11,526 294.8 3.13 11,890 317.6 3.26 11,502 409.8 4.20 10,752 560.6 5.99
- --------- -------- -------- --------- ------- -------- -------- --------
2,629 106.7 4.06 2,825 89.4 3.17 2,062 72.9 3.54 1,406 81.2 5.77
928 62.2 6.71 640 33.1 5.18 300 22.1 7.36 219 18.4 8.41
- --------- -------- -------- --------- ------- -------- -------- --------
12,967 $ 463.7 3.58% 13,214 $ 440.1 3.33% 12,115 $ 504.8 4.17% 10,976 $ 660.2 6.01%
- --------- -------- -------- --------- ------- -------- -------- --------
264 280 227 259
1,403 1,216 1,074 977
- --------- -------- ------- --------
$ 16,750 $ 16,851 $15,165 $13,613
========= ======== ======= ========
4.39% 4.70% 4.58% 3.84%
.57% .50% .54% .71%
$ 765.5 4.96% $ 807.9 5.20% $ 712.3 5.12% $ 566.5 4.55%
======== ========= ======== ========
</TABLE>
<PAGE> 13
HUNTINGTON BANCSHARES INCORPORATED
- ---------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
(in thousands of dollars, except per share amounts) Year Ended December 31,
1996 1995 1994 1993 1992 1991
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
TOTAL INTEREST INCOME ............. $ 1,510,464 $ 1,461,896 $ 1,219,721 $ 1,236,311 $ 1,202,286 $1,208,407
TOTAL INTEREST EXPENSE ............ 751,640 737,333 463,671 440,111 504,846 659,918
----------- ----------- ----------- ----------- ----------- ----------
NET INTEREST INCOME ............... 758,824 724,563 756,050 796,200 697,440 548,489
Provision for loan losses.......... 65,050 28,721 15,284 79,294 81,562 62,061
----------- ----------- ----------- ----------- ----------- ----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES ...... 693,774 695,842 740,766 716,906 615,878 486,428
----------- ----------- ----------- ----------- ----------- ----------
Service charges on deposit accounts 92,353 85,118 76,836 73,172 64,471 57,024
Mortgage banking................... 35,025 34,212 41,918 52,874 43,480 34,291
Trust services..................... 34,010 30,377 28,448 27,948 25,129 24,435
Credit card fees................... 22,506 18,463 18,410 17,954 16,467 15,261
Securities gains................... 17,703 9,056 2,594 27,189 36,332 16,951
Investment product sales........... 12,219 8,121 6,624 9,016 5,193 2,548
Electronic banking fees............ 10,358 5,032 2,589 1,427 1,083 1,324
Other.............................. 48,819 52,630 36,446 37,474 28,680 28,545
----------- ----------- ----------- ----------- ----------- ----------
TOTAL NON-INTEREST INCOME ......... 272,993 243,009 213,865 247,054 220,835 180,379
----------- ----------- ----------- ----------- ----------- ----------
Salaries........................... 229,153 220,168 226,668 226,405 206,429 175,749
Commissions........................ 13,645 9,843 10,775 20,992 18,310 9,307
Employee benefits.................. 56,827 57,790 58,158 55,259 46,596 42,435
Net occupancy...................... 42,543 41,263 40,291 39,955 36,272 33,542
Equipment.......................... 42,129 38,271 38,792 37,230 34,184 31,735
Credit card and electronic banking. 15,509 13,407 13,493 11,835 10,987 9,710
Printing and supplies.............. 15,338 14,147 14,821 14,721 13,588 12,599
Advertising........................ 12,447 11,271 15,320 13,259 13,308 10,526
Legal and loan collection.......... 10,050 8,643 8,298 11,361 13,109 10,807
FDIC insurance..................... 1,232 15,056 25,271 25,322 25,500 22,126
Other.............................. 129,073 130,544 136,270 143,830 184,995 118,153
----------- ----------- ----------- ----------- ----------- ----------
TOTAL NON-INTEREST EXPENSE ........ 567,946 560,403 588,157 600,169 603,278 476,689
----------- ----------- ----------- ----------- ----------- ----------
INCOME BEFORE INCOME TAXES ........ 398,821 378,448 366,474 363,791 233,435 190,118
Provision for income taxes......... 136,720 133,959 123,881 126,879 72,389 56,178
----------- ----------- ----------- ----------- ----------- ----------
NET INCOME ........................ $ 262,101 $ 244,489 $ 242,593 $ 236,912 $ 161,046 $ 133,940
=========== =========== =========== =========== =========== ===========
PER COMMON SHARE(1)
Net income...................... $1.80 $1.62 $1.62 $1.60 $1.10 $.92
Cash dividends declared......... $.76 $.70 $.62 $.51 $.44 $.40
FULLY TAX EQUIVALENT MARGIN:
Net Interest Income................ $ 758,824 $ 724,563 $ 756,050 $ 796,200 $ 697,440 $ 548,489
Tax Equivalent Adjustment(2) ...... 5,101 6,766 9,505 11,670 14,897 18,007
----------- ----------- ----------- ----------- ----------- ----------
Tax Equivalent Net Interest Income. $ 763,925 $ 731,329 $ 765,555 $ 807,870 $ 712,337 $ 566,496
=========== =========== =========== =========== =========== =========
<FN>
(1)Adjusted for the ten percent stock dividend distributed July 31, 1996.
(2)Calculated assuming a 35% tax rate in years 1993 through 1996 and a 34% tax
rate in years 1991 and 1992.
</TABLE>
<PAGE> 14
HUNTINGTON BANCSHARES INCORPORATED
- ------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Quarterly Common Stock Summary(1) 1996 1995
IV Q III Q II Q I Q IV Q III Q II Q I Q
--------------------------------------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
High..................................... $28 7/8 $23 1/2 $23 $ 22 1/8 $ 23 1/8 $21 1/2 $18 1/4 $16 1/2
Low...................................... 22 7/8 21 1/4 21 1/2 20 1/2 20 3/8 18 3/8 15 5/8 14 5/8
Close.................................... 26 3/8 23 21 3/4 21 3/4 21 3/4 20 1/2 18 15 3/4
Cash dividends declared.................. .20 .20 .18 .18 .18 .18 .17 .17
<FN>
(1) Restated for the ten percent stock dividend distributed July 31, 1996.
Note: Stock price quotations were obtained from NASDAQ.
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
KEY RATIOS AND STATISTICS 1996 1995
MARGIN ANALYSIS-- AS A %
OF AVERAGE EARNING ASSETS(1) IV Q III Q II Q I Q IV Q III Q II Q I Q
- ------------------------------ ------------------------------------------ ------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income............... 8.04% 8.15% 8.19% 8.14% 8.26% 8.37% 8.38% 8.26%
Interest expense.............. 3.94 3.99 4.04 4.11 4.28 4.19 4.17 4.00
---- ---- ---- ---- ---- ---- ---- ----
Net Interest Margin........ 4.10% 4.16% 4.15% 4.03% 3.98% 4.18% 4.21% 4.26%
RETURN ON
Average total assets.......... 1.32% 1.33% 1.32% 1.26% 1.31% 1.34% 1.25% 1.23%
Average earning assets........ 1.42% 1.43% 1.42% 1.37% 1.41% 1.45% 1.35% 1.33%
Average shareholders' equity.. 17.87% 17.92% 17.56% 16.02% 17.50% 17.03% 15.08% 15.08%
<FN>
(1) Presented on a fully tax equivalent basis assuming a 35% tax rate.
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
NON-PERFORMING ASSETS 1996 1995
(QUARTER-END)
(in thousands of dollars) IV Q III Q II Q I Q IV Q III Q II Q I Q
- ------------------------------ -------------------------------------------- ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Non-accrual loans............ $ 47,155 $ 49,800 $ 51,470 $ 57,530 $ 50,669 $ 41,997 $ 41,554 $ 41,576
Renegotiated loans........... 3,326 5,174 5,558 5,578 4,299 4,313 13,424 11,568
--------- --------- --------- --------- --------- --------- --------- ---------
TOTAL NON-PERFORMING LOANS .. 50,481 54,974 57,028 63,108 54,968 46,310 54,978 53,144
--------- --------- --------- --------- --------- --------- --------- ---------
Other real estate, net....... 16,772 15,610 21,720 20,386 22,026 23,668 24,029 26,558
--------- --------- --------- --------- --------- --------- --------- ---------
TOTAL NON-PERFORMING ASSETS . $ 67,253 $ 70,584 $ 78,748 $ 83,494 $ 76,994 $ 69,978 $ 79,007 $ 79,702
========= ========= ========= ========= ========= ========= ========= =========
NON-PERFORMING LOANS AS A
% OF TOTAL LOANS ......... .35% .39% .42% .47% .41% .34% .42% .41%
NON-PERFORMING ASSETS AS A
% OF TOTAL LOANS AND
OTHER REAL ESTATE ....... .47% .51% .57% .62% .58% .52% .60% .62%
ALLOWANCE FOR LOAN LOSSES
AS A % OF NON-PERFORMING
LOANS .................... 394.32% 364.20% 344.54% 312.76% 353.76% 428.79% 360.62% 378.38%
ALLOWANCE FOR LOAN LOSSES
AND OTHER REAL ESTATE AS
A % OF NON-PERFORMING
ASSETS ................... 291.69% 274.54% 238.03% 225.01% 238.65% 263.26% 234.30% 235.10%
ACCRUING LOANS PAST DUE
90 DAYS OR MORE .......... $ 34,056 $ 32,382 $ 29,859 $ 25,824 $ 27,018 $ 24,001 $ 20,685 $ 19,771
========= ========= ========= ========= ========= ========= ========= =========
</TABLE>
<PAGE> 15
HUNTINGTON BANCSHARES INCORPORATED
- ------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
1996 1995
(in thousands of dollars,
except per share amounts) IVQ III Q II Q I Q IV Q III Q II Q I Q
- ------------------------------ ---------------------------------------------- -----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
TOTAL INTEREST INCOME ........ $ 382,667 $ 378,422 $ 375,079 $ 374,296 $ 381,437 $ 377,859 $ 360,203 $ 342,397
TOTAL INTEREST EXPENSE ....... 189,555 186,721 185,786 189,578 199,551 191,281 180,313 166,188
---------- --------- --------- ---------- --------- --------- --------- ---------
NET INTEREST INCOME .......... 193,112 191,701 189,293 184,718 181,886 186,578 179,890 176,209
Provision for loan losses..... 21,134 20,250 11,843 11,823 12,139 7,187 4,787 4,608
---------- --------- --------- ---------- --------- --------- --------- ---------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES . 171,978 171,451 177,450 172,895 169,747 179,391 175,103 171,601
---------- --------- --------- ---------- --------- --------- --------- ---------
Service charges on
deposit accounts........... 23,418 23,342 23,132 22,461 21,008 21,109 20,487 22,514
Mortgage banking.............. 8,492 9,680 7,976 8,877 9,752 8,274 6,613 9,573
Trust services................ 8,461 8,432 8,324 8,793 7,424 7,312 7,586 8,055
Credit card fees.............. 5,034 4,092 8,544 4,836 5,450 4,669 4,399 3,945
Securities gains.............. 4,240 6,173 200 7,090 302 2,315 6,379 60
Investment product sales...... 3,000 2,694 3,286 3,239 2,292 2,159 1,971 1,699
Electronic banking fees....... 3,532 2,988 2,172 1,666 1,740 1,270 1,068 954
Other......................... 10,450 13,627 13,542 11,200 18,830 12,692 10,021 11,087
---------- --------- --------- ---------- --------- --------- --------- ---------
TOTAL NON-INTEREST INCOME .... 66,627 71,028 67,176 68,162 66,798 59,800 58,524 57,887
---------- --------- --------- ---------- --------- --------- --------- ---------
Salaries...................... 58,083 58,475 56,776 55,819 54,695 54,391 54,974 56,108
Commissions................... 3,441 3,117 3,480 3,607 3,149 3,074 1,932 1,688
Employee benefits............. 10,952 13,858 14,801 17,216 12,752 13,958 15,419 15,661
Net occupancy................. 10,232 10,602 10,835 10,874 10,459 10,039 10,079 10,686
Equipment..................... 11,578 10,670 10,267 9,614 9,406 9,470 9,593 9,802
Credit card and electronic
banking..................... 3,659 4,255 4,023 3,572 3,695 3,398 3,196 3,118
Printing and supplies......... 3,967 3,712 4,164 3,495 3,705 3,508 3,362 3,572
Advertising................... 2,685 2,845 4,052 2,865 2,179 3,149 2,912 3,031
Legal and loan collection..... 3,658 2,000 2,498 1,894 2,758 1,857 1,905 2,123
FDIC insurance................ (298) 332 679 519 1,820 151 6,549 6,536
Other......................... 29,449 31,712 33,891 34,021 32,646 34,451 31,131 32,316
---------- --------- --------- ---------- --------- --------- --------- ---------
TOTAL NON-INTEREST EXPENSE ... 137,406 141,578 145,466 143,496 137,264 137,446 141,052 144,641
---------- --------- --------- ---------- --------- --------- --------- ---------
INCOME BEFORE INCOME TAXES ... 101,199 100,901 99,160 97,561 99,281 101,745 92,575 84,847
Provision for income taxes.... 33,474 34,438 34,072 34,736 33,752 35,808 34,414 29,985
---------- --------- --------- ---------- --------- --------- --------- ---------
NET INCOME ................... $ 67,725 $ 66,463 $ 65,088 $ 62,825 $ 65,529 $ 65,937 $ 58,161 $ 54,862
========== ========= ========= ========== ========= ========= ========= =========
PER COMMON SHARE(1)
Net income................. $.47 $.46 $.45 $.42 $.45 $.44 $.38 $.35
Cash dividends declared.... $.20 $.20 $.18 $.18 $.18 $.18 $.17 $.17
FULLY TAX EQUIVALENT MARGIN:
Net Interest Income........... $ 193,112 $ 191,701 $ 189,293 $ 184,718 $ 181,886 $ 186,578 $ 179,890 $ 176,209
Tax Equivalent Adjustment(2) . 1,210 1,204 1,319 1,368 1,523 1,635 1,723 1,885
---------- --------- --------- ---------- --------- --------- --------- ---------
Tax Equivalent Net Interest
Income $ 194,322 $ 192,905 $ 190,612 $ 186,086 $ 183,409 $ 188,213 $ 181,613 $ 178,094
========== ========= ========= ========== ========= ========= ========= =========
<FN>
(1) Adjusted for the ten percent stock dividend distributed July 31, 1996.
(2) Calculated assuming a 35% tax rate.
</TABLE>
<PAGE> 16
To The Board Of Directors And Shareholders
Huntington Bancshares Incorporated
We have audited the accompanying consolidated balance sheets of Huntington
Bancshares Incorporated and Subsidiaries as of December 31, 1996 and 1995, and
the related consolidated statements of income, changes in shareholders' equity,
and cash flows for each of the three years in the period ended December 31,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. These standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Huntington
Bancshares Incorporated and Subsidiaries at December 31, 1996 and 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles.
Columbus, Ohio
January 15, 1997
/s/ Ernst & Young LLP
<PAGE> 17
HUNTINGTON BANCSHARES INCORPORATED
- -----------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
(in thousands of dollars) DECEMBER 31, 1996 1995
------------ ------------
ASSETS
<S> <C> <C>
Cash and due from banks......................................................... $ 915,636 $ 860,958
Interest bearing deposits in banks.............................................. 1,704 284,393
Trading account securities...................................................... 1,873 12,924
Federal funds sold and securities purchased under resale agreements............. 8,116 197,531
Mortgages held for sale......................................................... 119,202 159,705
Securities available for sale-- at fair value ................................. 4,743,933 4,721,144
Investment securities-- fair value $61,107 and $69,196, respectively............ 60,444 67,604
Total loans..................................................................... 14,260,747 13,261,667
Less allowance for loan losses............................................... 199,058 194,456
------------ ------------
Net loans....................................................................... 14,061,689 13,067,211
------------ ------------
Premises and equipment.......................................................... 311,793 296,465
Customers' acceptance liability................................................. 56,248 56,926
Accrued income and other assets................................................. 570,875 529,737
------------ ------------
TOTAL ASSETS ................................................................... $ 20,851,513 $ 20,254,598
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Demand deposits
Non-interest bearing......................................................... $ 2,463,442 $ 2,088,074
Interest bearing............................................................. 2,586,695 2,772,845
Savings deposits................................................................ 2,624,383 2,207,378
Certificates of deposit of $100,000 or more..................................... 928,927 909,403
Other domestic time deposits.................................................... 4,371,994 4,384,949
Foreign time deposits........................................................... 410,450 273,933
------------ ------------
Total deposits............................................................... 13,385,891 12,636,582
------------ ------------
Short-term borrowings........................................................... 3,944,703 3,514,773
Bank acceptances outstanding.................................................... 56,248 56,926
Long-term debt.................................................................. 1,556,326 2,103,024
Accrued expenses and other liabilities.......................................... 396,831 424,428
------------ ------------
Total Liabilities............................................................ 19,339,999 18,735,733
========== ==========
Shareholders' equity
Preferred stock -- authorized 6,617,808 shares; none outstanding
Common stock -- without par value; authorized 300,000,000 shares;
issued and outstanding-- 151,884,156 and 141,402,769 shares, respectively. 1,264,664 1,056,209
Less 9,284,844 and 8,351,978 treasury shares, respectively................... (204,634) (180,632)
Capital surplus.............................................................. 237,348 235,802
Net unrealized (losses) gains on securities available for sale............... (14,569) 40,972
Retained earnings............................................................ 228,705 366,514
------------ ------------
Total Shareholders' Equity................................................... 1,511,514 1,518,865
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ..................................... $ 20,851,513 $ 20,254,598
============ ============
</TABLE>
See notes to consolidated financial statements.
<PAGE> 18
HUNTINGTON BANCSHARES INCORPORATED
-----------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
(in thousands of dollars, except per share amounts)
YEAR ENDED DECEMBER 31, 1996 1995 1994
------------ ----------- -----------
<S> <C> <C> <C>
Interest and fee income
Loans......................................................... $ 1,193,896 $ 1,156,446 $ 975,604
Securities.................................................... 304,794 289,732 212,257
Other......................................................... 11,774 15,718 31,860
------------ ----------- -----------
TOTAL INTEREST INCOME ..................................... 1,510,464 1,461,896 1,219,721
------------ ----------- -----------
Interest expense
Deposits...................................................... 459,514 425,631 294,780
Short-term borrowings......................................... 178,721 212,110 106,646
Long-term debt................................................ 113,405 99,592 62,245
------------ ----------- -----------
TOTAL INTEREST EXPENSE .................................... 751,640 737,333 463,671
------------ ----------- -----------
NET INTEREST INCOME ....................................... 758,824 724,563 756,050
------------ ----------- -----------
Provision for loan losses........................................ 65,050 28,721 15,284
------------ ----------- -----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES ....... 693,774 695,842 740,766
------------ ----------- -----------
Total non-interest income ....................................... 272,993 243,009 213,865
Total non-interest expense ...................................... 567,946 560,403 588,157
------------ ----------- -----------
INCOME BEFORE INCOME TAXES ................................ 398,821 378,448 366,474
Provision for income taxes....................................... 136,720 133,959 123,881
------------ ----------- -----------
NET INCOME ................................................ $ 262,101 $ 244,489 $ 242,593
============ =========== ===========
PER COMMON SHARE(1)
Net income.................................................... $1.80 $1.62 $1.62
Cash dividends declared....................................... $.76 $.70 $.62
AVERAGE COMMON SHARES OUTSTANDING(1) ............................ 145,957,137 151,385,467 149,830,736
<FN>
See notes to consolidated financial statements.
(1) Restated for the ten percent stock dividend distributed July 31, 1996.
</TABLE>
<PAGE> 19
HUNTINGTON BANCSHARES INCORPORATED
- -----------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
(in thousands, except per share amounts) Net Unrealized
Common Common Treasury Treasury Capital Gains (Losses) Retained
Shares Stock Shares Stock Surplus on Securities Earnings Total
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE-- JANUARY 1, 1994...... 104,411 $ 902,107 (608) $ (15,290) $ 216,168 $ 221,652 $ 1,324,637
Change in accounting method
for securities.............. $65,548 1,624 67,172
Stock issued for acquisition... 573 9,842 1,318 24,984 (2,026) 32,800
Net income..................... 242,593 242,593
Cash dividends declared
($.62 per share)............ (93,176) (93,176)
Stock options exercised........ 290 6,625 775 (5,669) 1,731
Five-for-four stock split...... 26,088 (160)
Treasury shares purchased...... (3,537) (73,634) (73,634)
Treasury shares sold:
Shareholder dividend
reinvestment plan......... 1,159 26,635 30 (2,151) 24,514
Employee benefit plans...... 633 14,103 137 (589) 13,651
Conversion of convertible notes 48 369 369
Change in net unrealized gains
(losses) on securities
available for sale (128,837) (128,837)
------- ---------- ---- --------- --------- ------- ----------- -----------
BALANCE-- DECEMBER 31, 1994 ... 131,120 912,318 (905) (16,577) 215,084 (63,289) 364,284 1,411,820
------- ---------- ---- --------- --------- ------- ----------- -----------
Stock issued for acquisitions.. 3,510 3,434 20,061 (985) 8,474 30,984
Net income..................... 244,489 244,489
Cash dividends declared
($.70 per share)............ (106,493) (106,493)
Stock options exercised........ 231 4,155 7 (2,809) 1,353
5% stock dividend.............. 6,732 140,146 (45) (140,272) (126)
Treasury shares purchased...... (9,625) (204,645) (204,645)
Treasury shares sold:
Shareholder dividend
reinvestment plan......... 1,553 28,609 437 (1,114) 27,932
Employee benefit plans...... 439 7,826 213 (45) 7,994
Conversion of convertible notes 41 311 311
Change in net unrealized gains
(losses) on securities
available for sale 105,246 105,246
------- ---------- ---- --------- --------- -------- ----------- -----------
BALANCE-- DECEMBER 31, 1995 ... 141,403 1,056,209 (8,352) (180,632) 235,802 40,972 366,514 1,518,865
------- ---------- ---- --------- --------- -------- ----------- -----------
Stock issued for acquisition... 4,733 102,760 5,037 107,797
Net income..................... 262,101 262,101
Cash dividends declared
($.76 per share)............ (111,120) (111,120)
Stock options exercised........ 284 5,385 (4,318) 1,067
10% stock dividend............. 10,431 208,110 2,837 78,030 2,444 (288,790) (206)
Treasury shares purchased...... (10,419) (246,341) (2,819) (249,160)
Treasury shares sold:
Shareholder dividend
reinvestment plan......... 1,405 31,189 805 31,994
Employee benefit plans...... 227 4,975 397 5,372
Conversion of convertible notes 50 345 345
Change in net unrealized gains
(losses) on securities
available for sale (55,541) (55,541)
------- ---------- ---- --------- --------- -------- -------- -----------
BALANCE-- DECEMBER 31, 1996 ... 151,884 $1,264,664 (9,285) $(204,634) $ 237,348 ($14,569) $228,705 $ 1,511,514
======= ========== ====== ========= ========= ======== ======== ===========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 20
HUNTINGTON BANCSHARES INCORPORATED
-----------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
(in thousands of dollars) Year Ended December 31, 1996 1995 1994
------------- ----------- ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net Income...................................................... $ 262,101 $ 244,489 $ 242,593
Adjustments to reconcile net income to net cash
provided by operating activities
Provision for loan losses................................... 65,050 28,721 15,284
Provision for depreciation and amortization................. 85,639 68,763 84,215
Deferred income tax expense ................................ 30,577 26,694 57,329
Decrease (increase) in trading account securities........... 11,051 (3,497) 12,537
Decrease (increase) in mortgages held for sale.............. 40,503 (20,708) 893,341
Gain on sale of subsidiary.................................. -- (8,939) --
Net gains on sales of securities............................ (17,703) (9,056) (2,594)
Decrease (increase) in accrued income receivable............ 7,036 (23,331) (247)
Net increase in other assets................................ (48,541) (37,053) (59,397)
(Decrease) increase in accrued expenses..................... (19,863) 112,963 (22,033)
Net increase (decrease) in other liabilities................ 1,506 879 (46,649)
------------- ----------- ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES .............. 417,356 379,925 1,174,379
------------- ----------- ------------
INVESTING ACTIVITIES
Decrease (increase) in interest bearing deposits in banks....... 282,889 (281,334) 9,551
Proceeds from:
Maturities and calls of investment securities................. 23,763 82,082 86,027
Maturities and calls of securities available for sale......... 381,208 216,878 317,031
Sales of securities available for sale........................ 2,715,130 2,653,545 2,316,843
Purchases of:
Investment securities......................................... (4,000) (2,660) (230,676)
Securities available for sale................................. (2,850,892) (3,719,144) (2,146,362)
Proceeds from sales of loans.................................... 110,737 306,105 --
Net loan originations, excluding sales ......................... (1,060,446) (1,267,185) (1,187,428)
Proceeds from disposal of premises and equipment................ 1,664 2,902 1,200
Purchases of premises and equipment............................. (39,654) (33,429) (25,938
Proceeds from sales of other real estate........................ 18,627 30,133 44,484
Net cash received from purchase/sale of subsidiaries............ 631 165,803 2,670
------------- ----------- ------------
NET CASH USED FOR INVESTING ACTIVITIES ................. (420,343) (1,846,304 (812,598)
------------- ----------- ------------
FINANCING ACTIVITIES
Increase (decrease) in total deposits........................... 318,978 397,675 (240,219)
Increase (decrease) in short-term borrowings.................. 415,888 620,369 (303,287)
Proceeds from issuance of long-term debt........................ 870,698 1,095,220 475,000
Payment of long-term debt....................................... (1,417,280) (206,166) (26,415)
Dividends paid on common stock.................................. (109,307) (105,520) (87,545)
Acquisition of treasury stock................................... (249,160) (204,645) (73,634)
Proceeds from issuance of treasury stock........................ 38,433 37,279 39,896
------------- ----------- ------------
NET CASH (USED FOR) PROVIDED BY FINANCING ACTIVITIES ... (131,750) 1,634,212 (216,204)
------------- ----------- ------------
CHANGE IN CASH AND CASH EQUIVALENTS .................... (134,737) 167,833 145,577
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR ......... 1,058,489 890,656 745,079
------------- ----------- ------------
CASH AND CASH EQUIVALENTS AT END OF YEAR ............... $ 923,752 $ 1,058,489 $ 890,656
============= =========== ===========
<FN>
NOTE: Huntington made interest payments of $756,763, $667,712 and $451,694 in
1996, 1995, and 1994, respectively. Federal income tax payments were
$102,809 in 1996, $100,039 in 1995, and $97,775 in 1994.
</TABLE>
See notes to consolidated financial statements.
<PAGE> 21
1996 ANNUAL REPORT TO SHAREHOLDERS
1. ACCOUNTING POLICIES
NATURE OF OPERATIONS: Huntington Bancshares Incorporated (Huntington) is a
multi-state bank holding company organized under Maryland law in 1966 and
headquartered in Columbus, Ohio. Through its subsidiaries, Huntington conducts a
full-service commercial and consumer banking business and provides other
financial products and services, principally to domestic customers.
BASIS OF PRESENTATION: The consolidated financial statements include the
accounts of Huntington and its subsidiaries and are presented on the basis of
generally accepted accounting principles (GAAP). All significant intercompany
accounts and transactions have been eliminated in consolidation. Certain prior
period amounts have been reclassified to conform with the current year's
presentation.
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect amounts reported in the
financial statements. Actual results could differ from those estimates.
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 a 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 FASB also
subsequently issued FAS No. 127 that delayed until January 1, 1998, the
effective date of certain provisions of FAS 125. Transactions subject to the
later effective date include securities lending, repurchase agreements, dollar
rolls, and similar secured financing arrangements. Application of the new rules
is not expected to have a material impact on Huntington's consolidated financial
statements.
SECURITIES: Debt securities that Huntington has both the positive intent and
ability to hold to maturity are classified as investments and are carried at
amortized cost. Securities purchased with the intention of recognizing
short-term profits are placed in the trading account and carried at fair value.
Securities not classified as investments or trading are designated
available-for-sale and carried at fair value. Unrealized gains and losses on
securities classified as available-for-sale are carried as a separate component
of shareholders' equity. Unrealized gains and losses on securities classified as
trading are reported in earnings. The amortized cost of specific securities sold
is used to compute realized gains and losses.
LOANS: Loans are stated at the principal amount outstanding, net of unearned
discount. Interest income on loans is primarily accrued based on principal
amounts outstanding. Income from lease financing is recognized on a basis to
achieve a constant periodic rate of return on the outstanding investment. The
accrual of interest income is discontinued when the collection of principal,
interest, or both is doubtful. When interest accruals are suspended, interest
income accrued in the current period is generally reversed. Huntington uses the
cost recovery method in accounting for cash received on non-accrual loans. Under
this method, cash receipts are applied entirely against principal until the loan
has been collected in full, after which time any additional cash receipts are
recognized as interest income.
Significant nonrefundable loan fees and certain direct loan origination costs
are deferred and amortized over the term of the loan as a yield adjustment.
ALLOWANCE FOR LOAN LOSSES: The allowance for loan losses reflects
management's judgment as to the level considered appropriate to absorb potential
losses inherent in the loan portfolio. This judgment is based on a review of
individual loans, historical loss experience, economic conditions, portfolio
trends, and other factors. The allowance is increased by provisions charged to
earnings and reduced by charge-offs, net of recoveries.
The portion of the allowance for loan losses related to impaired loans
(non-accruing and restructured credits, exclusive of smaller, homogeneous loans)
is based on discounted cash flows using the loans initial effective interest
rate or the fair value of the collateral for collateral-dependent loans.
OTHER REAL ESTATE: Other real estate, acquired through partial or total
satisfaction of loans, is included in other assets and carried at the lower of
cost or fair value less estimated costs of disposition. At the date of
acquisition, any losses are charged to the allowance for loan losses. Subsequent
write-downs are included in non-interest expense. Realized losses from
disposition of the property and declines in fair value that are considered
permanent are charged to the reserve for other real estate.
PREMISES AND EQUIPMENT: Premises and equipment are stated at cost, less
accumulated depreciation. Depreciation is computed principally by the
straight-line method over the estimated useful lives of the related assets.
Estimated useful lives employed are on average 30 years for premises and 3 to 10
years for equipment.
MORTGAGE BANKING ACTIVITIES: Mortgages held for sale are reported at the
lower of cost or aggregate market value primarily as determined by outstanding
commitments from investors.
Capitalized mortgage servicing rights are evaluated for impairment based on
the fair value of those rights, using a disaggregated approach. Mortgage
servicing rights are amortized on an accelerated basis over the estimated period
of net servicing revenue.
<PAGE> 22
PURCHASE BUSINESS COMBINATIONS: Net assets of entities acquired in
transactions accounted for under the purchase method of accounting are recorded
at estimated fair value at the date of acquisition. The excess of cost over the
fair value of net assets acquired (goodwill) is being amortized over periods
generally up to 25 years. Core deposits and other identifiable acquired
intangible assets are amortized on an accelerated basis over their estimated
useful lives.
OFF-BALANCE SHEET FINANCIAL INSTRUMENTS: Huntington uses certain off-balance
sheet financial instruments, principally interest rate swaps, in connection with
its asset/liability management activities. Purchased interest rate options
(including caps and floors), futures, and forwards are also used to manage
interest rate risk. Provided these instruments meet specific criteria, they are
considered hedges and accounted for under the accrual or deferral methods, as
more fully discussed below. Off-balance sheet financial instruments that do not
meet the required criteria are carried on the balance sheet at fair value with
realized and unrealized changes in that value recognized in earnings. Similarly,
if the hedged item is sold or its outstanding balance otherwise declines below
that of the related hedging instrument, the off-balance sheet product (or
applicable excess portion thereof) is marked-to-market and the resulting gain or
loss is included in earnings.
Accrual accounting is used when the cash flows attributable to the hedging
instrument satisfy the objectives of the asset/liability management strategy.
Huntington uses the accrual method for substantially all of its interest rate
swaps as well as for interest rate options. Amounts receivable or payable under
these agreements are recognized as an adjustment to the interest income or
expense of the hedged item. There is no recognition on the balance sheet for
changes in the fair value of the hedging instrument, except for interest rate
swaps designated as hedges of securities available for sale, for which changes
in fair values are reported in shareholders' equity. Premiums paid for interest
rate options are deferred as a component of other assets and amortized to
interest income or expense over the contract term. Gains and losses on
terminated hedging instruments are also deferred and amortized to interest
income or expense over the remaining life of the hedged item.
Huntington employs deferral accounting when the market value of the hedging
instrument meets the objectives of the asset/liability management strategy and
the hedged item is reported at other than fair value. In such cases, gains and
losses associated with futures and forwards are deferred as an adjustment to the
carrying value of the related asset or liability and are recognized in the
corresponding interest income or expense accounts over the remaining life of the
hedged item.
STATEMENT OF CASH FLOWS: Cash and cash equivalents are defined as "Cash and
due from banks" and "Federal funds sold and securities purchased under resale
agreements."
EARNINGS PER SHARE: Per common share amounts have been calculated based upon
the weighted average number of common shares outstanding in each period, as
adjusted for the ten percent stock dividend distributed July 31, 1996. The
dilutive effects of unexercised stock options are not significant.
2. SECURITIES AVAILABLE FOR SALE
Amortized cost, unrealized gains and losses, and fair values of securities
available for sale as of December 31, 1996, and 1995 were:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
Unrealized
--------------
Amortized Gross Gross Fair
(in thousands of dollars) Cost Gains Losses Value
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
AT DECEMBER 31, 1996
U.S. Treasury...........$ 609,200 $ 1,052 $ 13,907 $ 596,345
Federal Agencies
Mortgage-backed
securities........... 1,281,146 4,008 12,743 1,272,411
Other agencies........ 2,427,975 10,354 12,139 2,426,190
---------- ------- -------- ----------
Total U.S. Treasury
and Federal
Agencies.......... 4,318,321 15,414 38,789 4,294,946
Other securities........ 448,527 3,101 2,641 448,987
---------- ------- -------- ----------
Total securities
available for
sale............. $4,766,848 $18,515 $ 41,430 $4,743,933
========== ======= ======== ==========
AT DECEMBER 31, 1995
U.S. Treasury...........$ 567,088 $ 5,453 $ 2,663 $ 569,878
Federal Agencies
Mortgage-backed
securities........... 882,855 18,115 111 900,859
Other agencies........ 2,726,471 33,814 2,852 2,757,433
---------- ------- -------- ----------
Total U.S. Treasury
and Federal
Agencies.......... 4,176,414 57,382 5,626 4,228,170
Other securities........ 481,130 13,327 1,483 492,974
---------- ------- -------- ----------
Total securities
available for sale.$4,657,544 $70,709 $ 7,109 $4,721,144
========== ======= ======== ==========
Amortized cost and fair values by contractual maturity at December 31, 1996
and 1995 were:
- ----------------------------------------------------------------------
Amortized Fair
(in thousands of dollars) Cost Value
- ----------------------------------------------------------------------
<S> <C> <C>
AT DECEMBER 31, 1996
Under 1 year...................... $ 129,463 $ 130,155
1-5 years......................... 2,423,710 2,421,222
6-10 years........................ 1,336,501 1,318,191
Over 10 years..................... 868,694 867,136
Marketable equity securities...... 8,480 7,229
---------- ----------
Total.......................... $4,766,848 $4,743,933
========== ==========
AT DECEMBER 31, 1995
Under 1 year...................... $ 238,329 $ 240,713
1-5 years......................... 2,289,209 2,322,765
6-10 years........................ 1,340,200 1,360,798
Over 10 years..................... 781,447 789,868
Marketable equity securities...... 8,359 7,000
---------- ----------
Total.......................... $4,657,544 $4,721,144
========== ==========
</TABLE>
Proceeds from sales of securities available for sale were $2.7 billion in both
1996 and 1995, and $2.3 billion in 1994. Gross gains of $24.7 million, $12.5
million, and $15.2 million were realized in 1996, 1995, and 1994, respectively.
Gross losses totaled $7.0 million in 1996, $3.5 million in 1995, and $12.7
million in 1994.
<PAGE> 23
1996 ANNUAL REPORT TO SHAREHOLDERS
3. INVESTMENT SECURITIES
Amortized cost, unrealized gains and losses, and fair values of investment
securities as of December 31, 1996 and 1995 were:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
Unrealized
----------
Amortized Gross Gross Fair
(in thousands of dollars) Cost Gains Losses Value
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AT DECEMBER 31, 1996
U.S. Treasury............ $ 156 -- -- $ 156
States and political
subdivisions........... 60,288 $ 996 $ 333 60,951
------- ------ ------ -------
Total investment
securities.......... $60,444 $ 996 $ 333 $61,107
======= ====== ====== =======
AT DECEMBER 31, 1995
U.S. Treasury............ $ 156 -- -- $ 156
States and political
subdivisions........... 67,448 $1,704 $ 112 69,040
------- ------ ------ -------
Total investment
securities........... $67,604 $1,704 $ 112 $69,196
======= ====== ====== =======
<CAPTION>
Amortized cost and fair values by contractual maturity at
December 31, 1996 and 1995 were:
- -------------------------------------------------------------------------
Amortized Fair
(in thousands of dollars) Cost Value
- -------------------------------------------------------------------------
<S> <C> <C>
AT DECEMBER 31, 1996
Under 1 year...................... $ 13,875 $ 13,955
1-5 years......................... 22,439 22,862
6-10 years........................ 20,143 20,304
Over 10 years..................... 3,987 3,986
-------- --------
Total.......................... $ 60,444 $ 61,107
======== ========
AT DECEMBER 31, 1995
Under 1 year...................... $ 27,340 $ 27,592
1-5 years......................... 23,793 24,652
6-10 years........................ 12,638 13,040
Over 10 years..................... 3,833 3,912
-------- --------
Total.......................... $ 67,604 $ 69,196
======== ========
- -------------------------------------------------------------------------
</TABLE>
4. LOANS
At December 31, 1996, and 1995, loans were comprised of the following:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
(in thousands of dollars) 1996 1995
- -------------------------------------------------------------------------
<S> <C> <C>
Commercial........................ $ 4,462,636 $ 4,260,561
Real estate
Construction................... 473,970 367,889
Commercial 1,617,078 1,578,891
Residential 1,120,800 1,176,715
Consumer
Loans.......................... 5,403,616 5,094,036
Leases......................... 1,182,647 783,575
----------- -----------
Total loans................. $14,260,747 $13,261,667
=========== ===========
</TABLE>
Huntington's subsidiaries have granted loans to its officers, directors,
and their associates. Such loans were made in the ordinary course of business at
the banking subsidiaries' normal credit terms, including interest rate and
collateralization, and do not represent more than the normal risk of collection.
These loans to related parties are summarized below:
5. ALLOWANCE FOR LOAN LOSSES
A summary of the transactions in the allowance for loan losses for the three
years ended December 31 follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
(in thousands of dollars) 1996 1995 1994
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, beginning of year.. $194,456 $200,492 $211,835
Allowance acquired/other... 1,907 6,827 1,393
Loan losses................. (81,089) (55,568) (46,122)
Recoveries of loans previously
charged off............. 18,734 13,984 18,102
Provision for loan losses... 65,050 28,721 15,284
-------- -------- --------
Balance, end of year........ $199,058 $194,456 $200,492
======== ======== ========
</TABLE>
Approximately $20.7 million and $27.1 million of non-performing loans
presented in of Management's Discussion and Analysis are considered
impaired (as defined in FASB Statement No. 114) at December 31, 1996 and 1995,
respectively. Included in these amounts are $11.1 million and $20.0 million of
impaired loans for which the related allowance for loan losses is $4.5 million
and $7.3 million at December 31, 1996 and 1995. Principally as a result of
write-downs, $9.6 million and $7.1 million of impaired loans do not have an
allowance for loan losses. The average recorded investment in impaired loans
during the years ended December 31, 1996 and 1995, was approximately $23.4
million and $26.0 million, respectively.
- -------------------------------------------------------------------------
6. PREMISES AND EQUIPMENT
At December 31, 1996 and 1995, premises and equipment stated at cost were
comprised of the following:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
(in thousands of dollars) 1996 1995
- -------------------------------------------------------------------------
<S> <C> <C>
Land.............................. $ 45,508 $ 47,353
Buildings......................... 239,528 222,942
Leasehold improvements............ 85,137 80,987
Equipment......................... 282,119 265,607
-------- --------
Total premises and equipment... 652,292 616,889
Less accumulated depreciation
and amortization............... 340,499 320,424
-------- --------
Net premises and equipment........ $311,793 $296,465
======== ========
</TABLE>
<PAGE> 24
Depreciation and amortization charged to expense and rental income credited
to occupancy expense were as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
(in thousands of dollars) 1996 1995 1994
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Occupancy expense............... $12,751 $11,795 $11,382
Equipment expense............... 20,153 17,555 16,588
------- ------- -------
Total depreciation and
amortization $32,904 $29,350 $27,970
======= ======= =======
Rental income credited to
occupancy expense............ $11,916 $11,447 $11,798
======= ======= =======
- -------------------------------------------------------------------------
</TABLE>
7. SHORT-TERM BORROWINGS
At December 31, 1996 and 1995, short-term borrowings were comprised of the
following:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
(in thousands of dollars) 1996 1995
- -------------------------------------------------------------------------
<S> <C> <C>
Federal funds purchased and
securities sold under agreements
to repurchase................... $3,230,902 $2,854,142
Medium-term notes with original
maturities of less than one year
Parent company.................. 140,000 80,000
Subsidiary bank................. 505,300 494,000
Commercial paper................... 37,418 69,096
Other.............................. 31,083 17,535
---------- ----------
Total short-term borrowings........ $3,944,703 $3,514,773
========== ==========
</TABLE>
Information concerning securities sold under agreements to repurchase is
summarized as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
(in thousands of dollars) 1996 1995
- -------------------------------------------------------------------------
<S> <C> <C>
Average balance during the year..... $1,102,063 $843,598
Average interest rate during
the year........................... 4.46% 4.51%
Maximum month-end balance during
the year........................... $1,302,007 $945,241
</TABLE>
Commercial paper is issued by Huntington Bancshares Financial Corporation, a
non-bank subsidiary, with principal and interest guaranteed by Huntington
Bancshares Incorporated (Parent Company).
Huntington has the ability to borrow under a line of credit totaling $200
million to support commercial paper borrowings or other short-term working
capital needs. Under the terms of agreement, a quarterly fee must be paid and
there are no compensating balances required. The line is cancelable, by
Huntington, upon written notice and terminates August 23, 2000. There were no
borrowings under the line in 1996 or 1995.
Securities pledged to secure public or trust deposits, repurchase agreements,
and for other purposes were $1.9 billion and $1.5 billion at December 31, 1996
and 1995, respectively.
8. LONG-TERM DEBT
At December 31, 1996 and 1995, long-term debt was comprised of the following:
<TABLE>
<CAPTION>
(in thousands of dollars) 1996 1995
- -------------------------------------------------------------------------
<S> <C> <C>
Subordinated notes, 7 5/8%, maturing in
2003, face value $150,000 at
December 31, 1996 and 1995, net of
discount............................$ 149,587 $ 149,518
Subordinated notes, 7 7/8%, maturing in
2002, face value $150,000 at
December 31, 1996 and 1995, net of
discount............................ 149,249 149,121
Subordinated notes, 6 3/4%, maturing in
2003, face value $100,000 at
December 31, 1996 and 1995, net of
discount............................ 99,786 99,753
Medium-term notes with original
maturities greater than one year
Parent company (maturing through
1999)............................... 180,000 95,000
Subsidiary bank (maturing through
2001)............................... 935,000 1,510,000
Federal Home Loan Bank notes
maturing through 1997............... 42,000 99,000
Other.................................. 704 632
---------- ----------
Total long-term debt...................$1,556,326 $2,103,024
========== ==========
</TABLE>
PARENT COMPANY OBLIGATIONS:
The 7 7/8% Notes are not redeemable prior to maturity in 2002,
and do not provide for any sinking fund. Interest rate swaps were used by
Huntington to convert the Notes to a variable interest rate. At December 31,
1996, the effective interest rate on the synthetically altered Notes was 6.13%.
The Medium-term notes had weighted average interest rates of 5.92% and 5.85%
at December 31, 1996 and 1995, respectively.
SUBSIDIARY OBLIGATIONS:
The 7 5/8% Notes and the 6 3/4% Notes were both issued by The Huntington
National Bank in 1993. Adjusted for the effects of interest rate swaps, the
rates were 5.67% and 5.82% at December 31, 1996. These Notes are not redeemable
prior to maturity in 2003, and do not provide for any sinking fund.
The Medium-term bank notes had weighted average interest rates of 5.57% and
5.89% at December 31, 1996 and 1995, respectively. The stated interest rates on
certain of these notes have also been modified by interest rate swaps. At
December 31, 1996, the weighted average effective interest rate on the
synthetically altered Medium-term bank notes was 5.70%.
The Federal Home Loan Bank notes mature serially from February 1997 through
November 1997, and had a weighted average interest rate of 6.78% and 6.41% at
December 31, 1996 and 1995, respectively. These advances cannot be prepaid
without penalty.
The terms of Huntington's long-term debt obligations contain various
restrictive covenants including limitations on the acquisition of additional
debt in excess of specified levels, dividend payments, and the disposition of
subsidiaries. As of December 31, 1996, Huntington was in compliance with all
such covenants.
The following table summarizes the maturities of Huntington's long-term debt.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
Year (in thousands of dollars)
- -------------------------------------------------------------------------
<S> <C>
1997.................................. $ 617,307
1998.................................. 230,019
1999.................................. 35,021
2000.................................. 25,022
2001.................................. 250,023
2002 and thereafter................... 400,312
----------
1,557,704
Discount.............................. (1,378)
----------
Total $1,556,326
==========
</TABLE>
<PAGE> 25
1996 ANNUAL REPORT TO SHAREHOLDERS
9. OPERATING LEASES
At December 31, 1996, Huntington and its subsidiaries were obligated under
noncancelable leases for land, buildings, and equipment. Many of these leases
contain renewal options, and certain leases provide options to purchase the
leased property during or at the expiration of the lease period at specified
prices. Some leases contain escalation clauses calling for rentals to be
adjusted for increased real estate taxes and other operating expenses, or
proportionately adjusted for increases in the consumer or other price indices.
The following summary reflects the future minimum rental payments, by year,
required under operating leases that have initial or remaining noncancelable
lease terms in excess of one year as of December 31, 1996.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
Year (in thousands of dollars)
- -------------------------------------------------------------------------
<S> <C>
1997............................................ $ 19,619
1998............................................ 16,689
1999............................................ 15,291
2000............................................ 16,242
2001............................................ 16,041
2002 and thereafter............................. 96,388
--------
Total Minimum Payments.......................... $180,270
========
</TABLE>
Total minimum lease payments have not been reduced by minimum sublease
rentals of $60.5 million due in the future under noncancelable subleases. The
rental expense for all operating leases, except those with terms of a month or
less, was $23.0 million for 1996, compared with $23.6 million in 1995 and $23.8
million in 1994.
- -------------------------------------------------------------------------
10. Off-Balance Sheet Transactions
In the normal course of business, Huntington is party to financial
instruments with varying degrees of credit and market risk in excess of the
amounts reflected as assets and liabilities in the consolidated balance sheet.
Loan commitments and letters of credit are commonly used to meet the financing
needs of customers, while interest rate swaps, purchased options, futures, and
forwards are an integral part of Huntington's asset/liability management
activities. To a much lesser extent, various financial instrument agreements are
entered into to assist customers in managing their exposure to interest rate
fluctuations. These customer agreements, for which Huntington counters interest
rate risk through offsetting third party contracts, are considered trading
activities.
The credit risk arising from loan commitments and letters of credit,
represented by their contract amounts, is essentially the same as that involved
in extending loans to customers, and both arrangements are subject to
Huntington's standard credit policies and procedures. Collateral is obtained
based on management's credit assessment of the customer and, for commercial
transactions, may consist of accounts receivable, inventory, income-producing
properties, and other assets. Residential properties are the principal form of
collateral for consumer commitments.
Notional values of interest rate swaps and other off-balance sheet financial
instruments significantly exceed the credit risk associated with these
instruments and represent contractual balances on which calculations of amounts
to be exchanged are based. Credit exposure is limited to the sum of the
aggregate fair value of positions that have become favorable to Huntington,
including any accrued interest receivable due from counterparties. Potential
credit losses are minimized through careful evaluation of counterparty credit
standing, selection of counterparties from a limited group of high quality
institutions, collateral agreements, and other contract provisions. At December
31, 1996, Huntington's credit risk from these off-balance sheet arrangements,
including trading activities, was approximately $70.9 million.
The contract or notional amount of financial instruments with off-balance
sheet risk at December 31, 1996 and 1995, is presented in the following table:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
(in millions of dollars) 1996 1995
- -------------------------------------------------------------------------
<S> <C> <C>
CONTRACT AMOUNT REPRESENTS CREDIT RISK
Commitments to extend credit
Commercial.......................... $2,908 $2,857
Consumer............................ 2,826 2,561
Other............................... 334 360
Standby letters of credit ............ 557 424
Commercial letters of credit.......... 91 143
NOTIONAL AMOUNT EXCEEDS CREDIT RISK
Asset/liability management activities
Interest rate swaps................. 2,818 4,507
Purchased interest rate options..... 635 600
Interest rate forwards and futures.. 163 231
Trading activities
Interest rate swaps................. 298 284
Interest rate options............... 153 169
Interest rate futures............... 50 --
</TABLE>
Commitments to extend credit generally have short-term, fixed expiration
dates, are variable rate, and contain clauses that permit Huntington to
terminate or otherwise renegotiate the contracts in the event of a significant
deterioration in the customer's credit quality. These arrangements normally
require the payment of a fee by the customer, the pricing of which is based on
prevailing market conditions, credit quality, probability of funding, and other
relevant factors. Since many of these commitments are expected to expire without
being drawn upon, the contract amounts are not necessarily indicative of future
cash requirements. The interest rate risk arising from these financial
instruments is insignificant as a result of their predominantly short-term,
variable rate nature.
Standby letters of credit are conditional commitments issued by Huntington to
guarantee the performance of a customer to a third party. These guarantees are
primarily issued to support public and private borrowing arrangements, including
commercial paper, bond financing, and similar transactions. Most of these
arrangements mature within two years. Approximately 38% of standby letters of
credit are collateralized, and approximately 87% are expected to expire without
being drawn upon.
Commercial letters of credit represent short-term, self-liquidating
instruments which facilitate customer trade transactions and have maturities of
no longer than ninety days. These instruments are normally secured by the
merchandise or cargo being traded.
Interest rate swaps are agreements between two parties to exchange periodic
interest payments that are calculated on a notional principal amount. Huntington
enters into swaps to synthetically alter the repricing characteristics of
designated earning assets and
<PAGE> 26
interest bearing liabilities and, on a much more limited basis, as an
intermediary for customers. Because only interest payments are exchanged, cash
requirements of swaps are significantly less than the notional amounts.
Interest rate futures are commitments to either purchase or sell a financial
instrument at a future date for a specified price or yield and may be settled in
cash or through delivery of the underlying financial instrument. Forward
contracts, used primarily by Huntington in connection with its mortgage banking
activities, settle in cash at a specified future date based on the differential
between agreed interest rates applied to a notional amount. Huntington also
purchases interest rate options (e.g. caps and floors) to manage fluctuating
interest rates. Premiums paid for interest rate options grant Huntington the
right to receive at specified future dates the amount, if any, by which a
specified market interest rate exceeds the fixed cap rate or falls below the
fixed floor rate, applied to a notional amount. Exposure to loss from interest
rate contracts changes as interest rates fluctuate.
For more detailed information concerning off-balance sheet transactions,
refer to the "Interest Rate Risk Management" section of Management's Discussion
and Analysis.
- -------------------------------------------------------------------------
11. STOCK OPTIONS
Huntington sponsors non-qualified and incentive stock option plans
covering key employees. Approximately 16.3 million shares have been authorized
under the plans, 8.1 million of which were available at December 31, 1996 for
future grants. All options granted have a maximum term of 10 years. Options
granted on or after May 18, 1994, vest ratably over four years; all grants
preceding this date became fully exercisable after one year.
Huntington has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related interpretations
in accounting for its employee stock options because the alternative fair value
accounting provided for under FASB Statement No. 123, "Accounting for
Stock-Based Compensation", requires use of option valuation models that were not
developed for use in valuing employee stock options. Under APB 25, because the
exercise price of Huntington's employee stock options equals the market price of
the underlying stock on the date of grant, no compensation expense is
recognized.
Huntington's stock option activity and related information for the periods
ended December 31, 1996, and December 31, 1995, is summarized below:
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
----------------- -----------------
Weighted Weighted
Average Average
Options Exercise Options Exercise
(in 000's) Price (in 000's) Price
---------- ----- ---------- -----
<S> <C> <C> <C> <C>
Outstanding at
beginning of period 3,395 $14.05 3,046 $12.58
Granted................ 763 22.04 766 17.22
Exercised.............. (761) 12.32 (388) 8.48
Forfeited/Expired...... (46) 17.83 (29) 17.86
----- -----
Outstanding at end
of period........... 3,351 $16.21 3,395 $14.05
===== =====
Exercisable at end of
period 1,749 $13.12 2,101 $11.95
===== =====
Weighted average fair
value of options
granted during
the year............ $ 6.07 $ 4.33
</TABLE>
Exercise prices for options outstanding as of December 31, 1996, ranged from
$5.62 to $22.38. The weighted average remaining contractual life of these
options is 7.2 years.
The fair value of the options presented above was estimated at the date of
grant using a Black-Scholes option pricing model with the following weighted
average assumptions for 1996 and 1995, respectively: risk-free interest rates of
6.78% and 6.24%; dividend yields of 3.41% and 4.11%; volatility factors of the
expected market price of Huntington's common stock of .280 and .294; and a
weighted average expected option life of 6 years. Because the effect of applying
the fair value method to Huntington's stock options results in net income and
earnings per share that are not materially different from amounts reported in
the consolidated statements of income, pro forma information has not been
provided.
- -------------------------------------------------------------------------
12. LEGAL CONTINGENCIES
In the ordinary course of business, there are various legal proceedings
pending against Huntington and its subsidiaries. The aggregate liabilities, if
any, arising from such proceedings would not have a material adverse effect on
Huntington's consolidated financial position.
- -------------------------------------------------------------------------
13. EMPLOYEE BENEFIT PLANS
Huntington sponsors a non-contributory defined benefit pension plan
covering substantially all employees. The plan provides benefits based upon
length of service and compensation levels. The funding policy of Huntington is
to contribute an annual amount which is at least equal to the minimum funding
requirements but not more than that deductible under the Internal Revenue Code.
Plan assets, held in trust, primarily consist of mutual funds.
In 1996, Huntington changed from a December 31 to a September 30
measurement date for the valuation of its pension and other post-retirement
benefit obligations. The change in measurement date had no effect on 1996
operating results.
The following table reconciles the funded status of the pension plan at
the applicable measurement dates with the amounts recognized in the consolidated
balance sheet at December 31, 1996 and 1995.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
(in thousands of dollars) 1996 1995
- -------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefit
obligations:
Vested benefit obligation........ $ 81,561 $ 76,711
========= ========
Accumulated benefit obligation... $ 86,859 $ 82,958
========= ========
Projected benefit obligation $ 129,551 $128,642
Plan assets, at fair value.......... 122,097 113,029
--------- --------
Projected benefit obligation in
excess of plan assets............ 7,454 15,613
Unrecognized transition asset,
net of amortization ............. 2,485 2,940
Unrecognized net gain .............. 26,027 14,223
Unrecognized prior service cost..... (1,496) (1,636)
--------- --------
Accrued pension cost................ $ 34,470 $ 31,140
========= ========
</TABLE>
<PAGE> 27
1996 ANNUAL REPORT TO SHAREHOLDERS
- ------------------------------------------
13. EMPLOYEE BENEFIT PLANS (CONTINUED)
The following table shows the components of pension cost recognized in 1996,
1995, and 1994, and the assumptions used in determining the benefit liabilities
and costs.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
(in thousands of dollars) 1996 1995 1994
- -------------------------------------------------------------------------
<S> <C> <C> <C>
NET PENSION COST INCLUDED THE
FOLLOWING COMPONENTS
Service cost--benefits earned
during the period...........$ 9,493 $ 9,39 $10,604
Interest cost on projected
benefit obligation.......... 9,196 8,242 7,923
Net amortization and deferral. (3,717) 15,574 (12,111)
Actual (return) loss on plan
assets...................... (6,271) (24,247) 1,899
-------- -------- -------
Net pension expense...........$ 8,701 $ 8,968 $ 8,315
======== ======== =======
ACTUARIAL ASSUMPTIONS
Discount rate used for
benefit obligations......... 7.75% 7.50% 8.00%
Rate of salary increases...... 5.00% 5.00% 5.00%
Long-term rate of return
on assets................... 8.75% 8.75% 8.75%
</TABLE>
Huntington also sponsors an unfunded Supplemental Executive Retirement Plan,
a non-qualified plan that provides certain key officers of Huntington and its
subsidiaries with defined pension benefits in excess of limits imposed by
federal tax law. At December 31, 1996 and 1995, the accrued pension cost for
this plan totaled $9.4 million and $8.2 million, respectively. Pension expense
for this plan was $1.3 million in both 1996 and 1995, and $1.2 million in 1994.
Huntington's unfunded defined benefit post-retirement plan provides certain
health care and life insurance benefits to retired employees who have attained
the age of 55 and have at least 10 years of service. For any employee retiring
on or after January 1, 1993, Huntington's contribution is based upon the
employee's number of months of service and is limited to the actual cost of
coverage. The expected cost of providing these post-retirement benefits is
recognized in the financial statements during the employees' active service
period.
Net periodic post-retirement benefit cost included the following components
for the years ended December 31:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
(in thousands of dollars) 1996 1995 1994
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost.....................$ 1,072 $ 970 $ 1,458
Interest cost.................... 2,708 2,534 2,853
Amortization of transition
obligation...................... 1,261 1,261 1,261
Net amortization and deferral.... 500 397 722
-------- -------- -------
Net periodic post-retirement
benefit cost....................$ 5,541 $ 5,162 $ 6,294
======== ======== =======
</TABLE>
The following table sets forth the status of the post-retirement benefit
obligation at December 31:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
(in thousands of dollars) 1996 1995
- -------------------------------------------------------------------------
<S> <C> <C>
Accumulated post-retirement benefit
obligation:
Retirees........................ $18,800 $19,381
Fully eligible active plan participants 5,008 6,309
Other active plan participants.. 7,691 10,109
------- -------
Total accumulated post-retirement
benefit obligation........ 31,499 35,799
Unrecognized net gain .......... 9,267 2,566
Unrecognized prior service cost. (5,003) (5,503)
Unrecognized transition obligation (20,171) (21,432)
Benefits paid in fourth quarter. (491) --
------- -------
Accrued post-retirement benefit cost $15,101 $11,430
======= =======
</TABLE>
The weighted average discount rate used in determining the accumulated
post-retirement benefit obligation was 7.75% and 7.5%, at September 30, 1996 and
December 31, 1995, respectively. The 1997 health care cost trend rate was
projected to be 10.00% for pre-65 participants and 8.50% for post-65
participants compared with estimates of 10.75% and 9.00% in 1996. These rates
are assumed to decrease gradually until they reach 5.5% in the year 2004 and
remain at that level thereafter. Increasing the assumed health care cost trend
rates by one percentage point in each year would increase the accumulated
post-retirement benefit obligation as of December 31, 1996, by $1.5 million and
the aggregate of the service and interest components of net periodic
post-retirement benefit cost for 1996 by $187,000.
Huntington has a contributory employee stock purchase plan available to
eligible employees. Employee contributions of up to 6% of eligible compensation
are matched 75% by Huntington. Huntington may also make additional matching
contributions up to an additional 25% of employee contributions, at the
discretion of the Board of Directors. Eligible employees may contribute in
excess of 6% up to an additional 10% on an after tax basis. These additional
contributions are not matched by Huntington. The cost of providing this plan was
$8.0 million in 1996, $6.6 million in 1995, and $8.2 million in 1994.
- -------------------------------------------------------------------------
14. ACQUISITIONS
Huntington acquired Peoples Bank of Lakeland (Lakeland), a $551 million
commercial bank headquartered in Lakeland, Florida, on January 23, 1996.
Huntington paid $46.2 million in cash and issued approximately 4.7 million
shares of common stock in exchange for all the common stock of Lakeland. The
transaction was accounted for as a purchase; accordingly, the results of
Lakeland have been included in the consolidated financial statements from the
date of acquisition.
In October 1996, Huntington entered into a merger agreement with
Citi-Bancshares, Inc. (Citi-Bancshares), a $538 million one-bank holding company
headquartered in Leesburg, Florida. Huntington is to exchange a combination of
its common stock and cash for the outstanding common stock of Citi-Bancshares in
a purchase transaction. The acquisition is expected to be completed in the first
quarter of 1997.
<PAGE> 28
15. INCOME TAXES
The following is a summary of the provision for income taxes:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
(in thousands of dollars) 1996 1995 1994
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Currently payable
Federal.................... $103,067 $102,709 $ 62,648
State...................... 3,076 4,556 3,904
-------- -------- --------
Total current............ 106,143 107,265 66,552
Deferred tax expense (benefit)
Federal.................... 29,215 26,866 56,624
State...................... 1,362 (172) 705
-------- -------- --------
Total deferred........... 30,577 26,694 57,329
-------- -------- --------
Total provision for income
taxes.................... $136,720 $133,959 $123,881
======== ======== ========
</TABLE>
Tax expense associated with securities transactions included in the above
amounts was $6.2 million in 1996, $3.2 million in 1995, and $908,000 in 1994.
The following is a reconcilement of income tax expense to the amount
computed at the statutory federal rate of 35%.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
(in thousands of dollars) 1996 1995 1994
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Pre-tax income computed
at the statutory rate...... $ 139,587 $132,456 $128,266
Increases (decreases):
Tax-exempt interest income. (3,146) (4,180) (6,077)
State income taxes......... 2,885 2,849 2,996
Other-net.................. (2,606) 2,834 (1,304)
--------- -------- --------
Provision for income taxes. $ 136,720 $133,959 $123,881
========= ======== ========
</TABLE>
The significant components of Huntington's deferred tax assets and
liabilities at December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
(in thousands of dollars) 1996 1995
- -------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Allowance for loan losses...... $61,531 $59,472
Allowance for other real estate
losses........................ 2,740 8,122
Securities..................... 7,843 --
Pension and other employee
benefits...................... 24,803 23,722
Other.......................... 7,799 11,471
-------- --------
Total deferred tax assets.... 104,716 102,787
Deferred tax liabilities:
Financial instruments.......... 5,359 20,465
Lease financing ............... 120,708 88,938
Mortgage servicing rights...... 7,977 4,099
Premises and equipment......... 11,393 8,795
Revalued liabilities-net....... 5,061 4,678
Securities..................... -- 22,061
Other.......................... 11,581 7,756
-------- --------
Total deferred tax liabilities 162,079 156,792
-------- --------
Net deferred tax liability... $(57,363) $(54,005)
======== ========
</TABLE>
<PAGE> 29
16. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of the unaudited quarterly results of
operations for the years ended December 31, 1996 and 1995.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
(in thousands of dollars,
except per share data) I Q II Q III Q IV Q
- -------------------------------------------------------------------------
1996
<S> <C> <C> <C> <C>
Interest income....... $ 374,296 $ 375,079 $ 378,422 $ 382,667
Interest expense....... 189,578 185,786 186,721 189,555
--------- --------- --------- ---------
Net interest income.... 184,718 189,293 191,701 193,112
--------- --------- --------- ---------
Provision for loan losses 11,823 11,843 20,250 21,134
Securities gains ...... 7,090 200 6,173 4,240
Non-interest income.... 61,072 66,976 64,855 62,387
Non-interest expense... 143,496 145,466 141,578 137,406
--------- --------- --------- ---------
Income before income taxes 97,561 99,160 100,901 101,199
Provision for income taxes 34,736 34,072 34,438 33,474
--------- --------- --------- ---------
Net income............. $ 62,825 $ 65,088 $ 66,463 $ 67,725
========= ========= ======== =========
Net income per common share(1) $.42 $.45 $.46 $.47
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
(in thousands of dollars,
except per share data) I Q II Q III Q IV Q
- -------------------------------------------------------------------------
1995
<S> <C> <C> <C> <C>
Interest income....... $ 342,397 $ 360,203 $ 377,859 $ 381,437
Interest expense....... 166,188 180,313 191,281 199,551
--------- --------- --------- ---------
Net interest income.... 176,209 179,890 186,578 181,886
--------- --------- --------- ---------
Provision for loan losses 4,608 4,787 7,187 12,139
Securities gains ...... 60 6,379 2,315 302
Non-interest income.... 57,827 52,145 57,485 66,496
Non-interest expense... 144,641 141,052 137,446 137,264
--------- --------- --------- ---------
Income before income taxes 84,847 92,575 101,745 99,281
Provision for income taxes 29,985 34,414 35,808 33,752
--------- --------- --------- ---------
Net income............. $ 54,862 $ 58,161 $ 65,937 $ 65,529
========= ========= ========= =========
Net income per common share(1) $.35 $.38 $.44 $.45
<FN>
(1)Restated for the ten percent stock dividend distributed July 31, 1996.
- -------------------------------------------------------------------------
</TABLE>
17. REGULATORY MATTERS
The bank subsidiaries of Huntington are required to maintain reserve
balances with the Federal Reserve Bank. During 1996, the average balances were
$96.6 million.
Payment of dividends to Huntington by its subsidiary banks is subject to
various regulatory restrictions. Regulatory approval is required prior to the
declaration of any dividends in excess of available retained earnings. For
national banks, the amount of dividends that may be declared without regulatory
approval is further limited to the sum of net income for that year and retained
net income for the preceding two years, less any required transfers to surplus.
Huntington's subsidiary banks could, without regulatory approval, declare
dividends in 1997 of approximately $87.8 million plus an additional amount equal
to their net income through the date of declaration.
The subsidiary banks are also restricted as to the amount and type of loans
they may make to Huntington. At December 31, 1996, the subsidiary banks could
lend to Huntington $185.5 million, subject to the qualifying collateral
requirements defined in the regulations.
<PAGE> 30
1996 ANNUAL REPORT TO SHAREHOLDERS
- -------------------------------------
17. REGULATORY MATTERS (CONTINUED)
Huntington and its bank subsidiaries are subject to various regulatory
capital requirements administered by federal and state banking agencies. Failure
to meet minimum capital requirements can initiate certain actions by regulators
that, if undertaken, could have a material effect on Huntington's and its bank
subsidiaries' financial statements. Capital adequacy guidelines require minimum
ratios of 4.00% for Tier I risk-based capital, 8.00% for total risk-based
capital, and 3.00% for Tier I leverage. To be considered well capitalized under
the regulatory framework for prompt corrective action, the ratios are 6.00%,
10.00%, and 5.00%, respectively. Capital amounts and classification are also
subject to qualitative judgments by the regulators about components,
risk-weightings of assets and certain off-balance sheet items, and other
factors. Management believes, as of December 31, 1996, that Huntington met all
capital adequacy requirements. In addition, each bank subsidiary had regulatory
capital ratios in excess of the levels established for well capitalized
institutions.
Presented in the table below are the capital ratios of Huntington and its
lead subsidiary, The Huntington National Bank as well as a comparison of the
period-end capital balances with the related amounts established by the
regulators.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Capital Amounts
------------------------------------------
(in millions of dollars) Ratios Actual Minimum Well Capitalized
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AS OF DECEMBER 31, 1996:
Tier I Risk-Based Capital
Huntington Bancshares Incorporated............ 7.84% $1,351 $689 N/A
The Huntington National Bank.................. 6.30 787 500 $750
Total Risk-Based Capital
Huntington Bancshares Incorporated............ 11.31 1,948 1,378 N/A
The Huntington National Bank.................. 10.60 1,324 1,000 1,250
Tier I Leverage
Huntington Bancshares Incorporated............ 6.66 1,351 609 N/A
The Huntington National Bank.................. 5.62 787 420 700
AS OF DECEMBER 31, 1995:
Tier I Risk-Based Capital
Huntington Bancshares Incorporated............ 8.39% $1,370 $653 N/A
The Huntington National Bank.................. 8.08 986 488 $732
Total Risk-Based Capital
Huntington Bancshares Incorporated............ 12.03 1,963 1,306 N/A
The Huntington National Bank.................. 11.30 1,378 976 1,220
Tier I Leverage
Huntington Bancshares Incorporated............ 6.87 1,370 595 N/A
The Huntington National Bank.................. 7.06 986 419 698
<FN>
N/A = Not Applicable
</TABLE>
<PAGE> 31
- -------------------------------------------------------------------------------
18. NON-INTEREST INCOME
A summary of the components in non-interest income for the three years ended
December 31 follows:
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(in thousands of dollars) 1996 1995 1994
---------- --------- ---------
<S> <C> <C> <C>
Service charges on deposit accounts............................... $ 92,353 $ 85,118 $ 76,836
Mortgage banking.................................................. 35,025 34,212 41,918
Trust services.................................................... 34,010 30,377 28,448
Credit card fees.................................................. 22,506 18,463 18,410
Securities gains.................................................. 17,703 9,056 2,594
Investment product sales.......................................... 12,219 8,121 6,624
Electronic banking fees........................................... 10,358 5,032 2,589
Other ............................................................ 48,819 52,630 36,446
---------- --------- ---------
TOTAL NON-INTEREST INCOME ..................................... $ 272,993 $ 243,009 $ 213,865
========== ========= =========
</TABLE>
- --------------------------------------------------------------------------------
19. NON-INTEREST EXPENSE
A summary of the components in non-interest expense for the three years ended
December 31 follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(in thousands of dollars) 1996 1995 1994
---------- --------- ---------
<S> <C> <C> <C>
Salaries.......................................................... $ 229,153 $ 220,168 $ 226,668
Commissions....................................................... 13,645 9,843 10,775
Employee benefits................................................. 56,827 57,790 58,158
Net occupancy..................................................... 42,543 41,263 40,291
Equipment......................................................... 42,129 38,271 38,792
Credit card and electronic banking................................ 15,509 13,407 13,493
Printing and supplies............................................. 15,338 14,147 14,821
Advertising....................................................... 12,447 11,271 15,320
Legal and loan collection......................................... 10,050 8,643 8,298
FDIC insurance.................................................... 1,232 15,056 25,271
Other ............................................................ 129,073 130,544 136,270
---------- --------- ---------
TOTAL NON-INTEREST EXPENSE .................................... $ 567,946 $ 560,403 $ 588,157
========== ========= =========
</TABLE>
<PAGE> 32
1996 ANNUAL REPORT TO SHAREHOLDERS
- ----------------------------------------------
20. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts and estimated fair values of Huntington's financial
instruments are presented below. Certain assets, the most significant being
premises and equipment, do not meet the definition of a financial instrument and
are excluded from this disclosure. Similarly, mortgage servicing rights and
deposit base and other customer relationship intangibles are not considered
financial instruments and are not discussed below. Accordingly, this fair value
information is not intended to, and does not, represent Huntington's underlying
value. Many of the assets and liabilities subject to the disclosure requirements
are not actively traded, requiring fair values to be estimated by management.
These estimations necessarily involve the use of judgment about a wide variety
of factors, including but not limited to, relevancy of market prices of
comparable instruments, expected future cash flows, and appropriate discount
rates.
<TABLE>
<CAPTION>
At December 31, 1996
- ---------------------------------------------------------------------------
Carrying Fair
(in thousands of dollars) Amount Value
- ---------------------------------------------------------------------------
<S> <C> <C>
FINANCIAL ASSETS:
Cash and short-term assets.... $ 925,456 $ 925,456
Trading account securities.... 1,873 1,873
Mortgages held for sale....... 119,202 119,202
Securities.................... 4,804,377 4,805,040
Loans......................... 14,061,689 14,196,703
Customers' acceptance liability 56,248 56,248
Interest rate contracts:
Asset/liability management.. 4,893 27,758
Customer accommodation...... 4,239 4,239
FINANCIAL LIABILITIES:
Deposits...................... (13,385,891) (13,206,266)
Short-term borrowings......... (3,944,703) (3,944,703)
Bank acceptances outstanding.. (56,248) (56,248)
Long-term debt................ (1,556,326) (1,569,051)
Interest rate contracts:
Asset/liability management.. -- (11,424)
Customer accommodation...... (3,493) (3,493)
<CAPTION>
- ---------------------------------------------------------------------------
At December 31, 1995
- ---------------------------------------------------------------------------
Carrying Fair
(in thousands of dollars) Amount Value
- ---------------------------------------------------------------------------
<S> <C> <C>
FINANCIAL ASSETS:
Cash and short-term assets.... $ 1,342,882 $ 1,342,882
Trading account securities.... 12,924 12,924
Mortgages held for sale....... 159,705 159,705
Securities.................... 4,780,281 4,781,873
Loans......................... 13,067,211 13,096,826
Customers' acceptance liability 56,926 56,926
Interest rate contracts:
Asset/liability management.. 11,261 44,465
Customer accommodation...... 1,188 1,188
FINANCIAL LIABILITIES:
Deposits...................... (12,636,582) (12,672,505)
Short-term borrowings......... (3,514,773) (3,514,773)
Bank acceptances outstanding.. (56,926) (56,926)
Long-term debt................ (2,103,024) (2,132,567)
Interest rate contracts:
Asset/liability management.. -- (33,571)
Customer accommodation...... (970) (970)
</TABLE>
The terms and short-term nature of certain assets and liabilities result
in their carrying value approximating fair value. These include cash and due
from banks, interest bearing deposits in banks, trading account securities,
federal funds sold and securities purchased under resale agreements, customers'
acceptance liabilities, short-term borrowings, and bank acceptances outstanding.
Loan commitments and letters of credit generally have short-term, variable rate
features and contain clauses which limit Huntington's exposure to changes in
customer credit quality. Accordingly, their carrying values, which are
immaterial at the respective balance sheet dates, are reasonable estimates of
fair value. The following methods and assumptions were used by Huntington to
estimate the fair value of the remaining classes of financial instruments:
Mortgages held for sale are valued at the lower of aggregate cost or market
value primarily as determined using outstanding commitments from investors.
Fair values of securities available for sale and investment securities are
based on quoted market prices, where available. If quoted market prices are
not available, fair values are based on quoted market prices of comparable
instruments. The carrying amount and fair value of securities exclude the
fair value of asset/liability management interest rate contracts designated
as hedges of securities available for sale.
For variable rate loans that reprice frequently, fair values are based on
carrying amounts, as adjusted for estimated credit losses. The fair values
for other loans are estimated using discounted cash flow analyses and
employ interest rates currently being offered for loans with similar terms.
The rates take into account the position of the yield curve, as well as an
adjustment for prepayment risk, operating costs, and profit. This value is
also reduced by an estimate of losses inherent in the loan portfolio.
Although not considered financial instruments, lease financing receivables
have been included in the loan totals at their carrying amounts.
The fair values of demand deposits, savings accounts, and money market
deposits are, by definition, equal to the amount payable on demand. The
fair values of fixed rate time deposits are estimated by discounting cash
flows using interest rates currently being offered on certificates with
similar maturities.
The fair values of Huntington's fixed rate long-term debt are based upon
quoted market prices or, in the absence of quoted market prices, discounted
cash flows using rates for similar debt with the same maturities. The
carrying amount of variable rate notes approximates fair value.
The fair values of interest rate swap agreements and other off-balance
sheet interest rate contracts are based upon quoted market prices or prices
of similar instruments, when available, or calculated with pricing models
using current rate assumptions.
<PAGE> 33
<TABLE>
<CAPTION>
21. HUNTINGTON BANCSHARES INCORPORATED (PARENT COMPANY ONLY) FINANCIAL INFORMATION
- ------------------------------------------------------------------------------------------------------------------------------
BALANCE SHEETS (in thousands of dollars) DECEMBER 31, 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and cash equivalents............................................................ $ 45,053 $ 98,020
Securities available for sale........................................................ 7,229 6,999
Due from subsidiaries
Bank subsidiaries................................................................. 200,000 --
Non-bank subsidiaries............................................................. 286,936 143,467
Investment in subsidiaries on the equity method
Bank subsidiaries................................................................. 1,433,522 1,629,910
Non-bank subsidiaries............................................................. 35,097 27,377
Excess of cost of investment in subsidiaries over net assets acquired................ 22,694 23,926
Other assets......................................................................... 50,166 22,994
------------ ------------
TOTAL ASSETS ..................................................................... $ 2,080,697 $ 1,952,693
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term borrowings................................................................ $ 140,000 $ 80,000
Long-term debt....................................................................... 329,249 244,121
Dividends payable.................................................................... 28,899 26,881
Accrued expenses and other liabilities............................................... 71,035 82,826
------------ ------------
Total Liabilities................................................................. 569,183 433,828
Shareholders' Equity................................................................. 1,511,514 1,518,865
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ....................................... $ 2,080,697 $ 1,952,693
============ ============
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
STATEMENTS OF INCOME (in thousands of dollars) YEAR ENDED DECEMBER 31, 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCOME
Dividends from
Bank subsidiaries............................................................ $ 328,029 $209,201 $ 167,729
Non-bank subsidiaries........................................................ 4,585 5,730 5,245
Interest from
Bank subsidiaries............................................................ 2,978 2,753 2,876
Non-bank subsidiaries........................................................ 11,430 7,252 2,601
Other ......................................................................... 821 811 407
--------- -------- ---------
TOTAL INCOME ............................................................ 347,843 225,747 178,858
--------- -------- ---------
EXPENSE
Interest on borrowed funds..................................................... 22,723 15,298 15,056
Other ......................................................................... 8,683 12,182 12,075
--------- -------- ---------
TOTAL EXPENSE ........................................................... 31,406 27,480 27,131
--------- -------- ---------
Income before income taxes and equity in undistributed net income of subsidiaries. 316,437 198,267 151,727
Income tax benefit................................................................ (10,776) (7,936) (8,007)
--------- -------- ---------
Income before equity in undistributed net income of subsidiaries.................. 327,213 206,203 159,734
--------- -------- ---------
Equity in undistributed net income of
Bank subsidiaries.............................................................. (72,930) 35,638 80,004
Non-bank subsidiaries.......................................................... 7,818 2,648 2,855
--------- -------- ---------
NET INCOME .............................................................. $ 262,101 $244,489 $ 242,593
========= ======== =========
</TABLE>
<PAGE> 34
1996 ANNUAL REPORT TO SHAREHOLDERS
- ------------------------------------------
<TABLE>
<CAPTION>
21. HUNTINGTON BANCSHARES INCORPORATED (PARENT COMPANY ONLY) FINANCIAL INFORMATION (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS (in thousands of dollars) YEAR ENDED DECEMBER 31, 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income..................................................................... $ 262,101 $ 244,489 $ 242,593
Adjustments to reconcile net income to net cash provided by operating activities
Equity in undistributed net income of subsidiaries........................... 65,112 (38,286) (82,859)
Amortization................................................................. 2,107 1,707 4,974
(Gains) losses on sales of securities........................................ -- (20) 25
Increase in other assets..................................................... (28,041) (7,990) (4,951)
(Decrease) increase in other liabilities..................................... (17,990) (10,284) 295
----------- ---------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES ................................... 283,289 189,616 160,077
----------- ---------- ---------
INVESTING ACTIVITIES
Proceeds from sales of securities.............................................. -- 431 173
(Advances to) repayments from subsidiaries..................................... (159,789) 20,789 (94,968)
Acquisitions and additional capitalization of subsidiaries..................... (1,433) (9,697) (10)
----------- ---------- ---------
NET CASH (USED FOR) PROVIDED BY INVESTING ACTIVITIES ........................ (161,222) 11,523 (94,805)
----------- ---------- ---------
FINANCING ACTIVITIES
Increase in short-term borrowings.............................................. 60,000 55,000 25,000
Proceeds from issuance of long-term debt....................................... 85,000 95,000 50,000
Payment of long-term debt...................................................... -- (50,000) (23,184)
Dividends paid on common stock................................................. (109,307) (105,520) (87,545)
Acquisition of treasury stock.................................................. (249,160) (204,645) (73,634)
Proceeds from issuance of treasury stock....................................... 38,433 37,279 39,896
----------- ---------- ---------
NET CASH USED FOR FINANCING ACTIVITIES ...................................... (175,034) (172,886) (69,467)
----------- ---------- ---------
CHANGE IN CASH AND CASH EQUIVALENTS ......................................... (52,967) 28,253 (4,195)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR............................... 98,020 69,767 73,962
----------- ---------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR..................................... $ 45,053 $ 98,020 $ 69,767
=========== ========== =========
</TABLE>
<PAGE> 1
Exhibit 21
SUBSIDIARIES OF HUNTINGTON BANCSHARES INCORPORATED
--------------------------------------------------
The subsidiaries of Huntington Bancshares Incorporated are listed below. The
state or jurisdiction of incorporation or organization of each subsidiary
(unless otherwise noted) is Ohio.
The Huntington National Bank (United States) and its direct and indirect
subsidiaries, 41 South High Ltd., The Huntington Leasing Company, The Huntington
Mortgage Company, Huntington Residential Mortgage Securities, Inc., The
Huntington Investment Company, Forty-One Corporation, First Sunset Development,
Inc., SFA Holding, Inc., East Sound Realty, Inc., Lodestone Realty Management,
Inc., WS Realty, Inc., Fourteen Corporation, Airbase Realty Company, HNB
Clearing, Inc., National Returns Clearinghouse, Ltd., The Check Exchange System
Co., Thirty-Seven Corporation, Vehicle Reliance Company, Huntington Trade
Services, Inc., Huntington Trade Services, Asia, Limited (Hong Kong), Cybermark
L.L.C., and Huntington Merchant Services L.L.C.
Huntington Bancshares Indiana, Inc., and its direct subsidiary, The Huntington
National Bank of Indiana (United States).
Huntington Bancshares Michigan, Inc., and its direct and indirect subsidiaries,
Huntington Banks of Michigan (Michigan), First Macomb Mortgage Company
(Michigan), and Huntington Insurance Agency, Inc. (Michigan).
Huntington Bancshares West Virginia, Inc., and its direct subsidiaries,
Huntington National Bank West Virginia (United States) and CB&T Capital
Investment Company, Inc. (West Virginia).
The Huntington Financial Services Company and its direct subsidiaries, The
Huntington Trust Company, National Association (United States), and The
Huntington Trust Company of Florida, National Association (United States).
Huntington Bancshares Florida, Inc., and its direct and indirect subsidiaries,
The Huntington National Bank of Florida (United States) and Huntington Insurance
Agency, Inc. (Florida).
Huntington Capital Corp.
Huntington Bancshares Financial Corporation
The Huntington Acceptance Company
The Huntington National Life Insurance Company (Arizona)
Huntington Bancshares Ohio, Inc.
The Huntington State Bank and its direct and indirect subsidiaries, Huntington
Insurance Agency Services, Inc., Huntington Insurance Agency, Inc., and
Huntington Life Insurance Agency, Inc.
The Huntington Service Company
The Huntington Community Development Corporation
Security First Network Bank, FSB (United States) and its direct subsidiary,
Security First Technologies, Inc. (Kentucky).*
Money Station, Inc.
Heritage Service Corporation
* - Huntington owns less than a 5% voting interest in Security First Network
Bank, FSB, which owns 100% of Security First Technologies, Inc.; however,
Huntington is deemed by the Federal Reserve Board to have a controlling interest
in Security First Technologies, Inc.
<PAGE> 1
[ERNST & YOUNG LLP letterhead]
Exhibit 23
----------
CONSENT OF INDEPENDENT AUDITORS
-------------------------------
We consent to the incorporation by reference in Post-Effective Amendment No. 1
to the Registration Statement No. 33-59068 dated March 12, 1993, Registration
Statement No. 33-46327 dated March 11, 1992, Registration Statement No. 33-44208
dated November 26, 1991, Registration Statement No. 33-41774 dated July 19,
1991, Registration Statement No. 33-38784 dated January 28, 1991, Post-Effective
Amendment No. 2 to Registration Statement No. 33-10546 dated January 28 , 1991,
Registration Statement No. 33-37373 dated October 18, 1990, Registration
Statement No. 2-89672 dated February 27, 1984, and Registration Statement No.
33-52553 dated March 8, 1994, all on Form S-8, Registration Statement No.
33-52569 dated March 8, 1994, Registration Statement No. 33-52555 dated March 8,
1994 (which also constitutes a post-effective amendment of Registration
Statement No. 33-51036), and Registration Statement No. 33-63175 dated October
3, 1995, all on Form S-3 and Registration Statement No. 333-18729 dated January
6, 1997 on Form S-4 of our report dated January 15, 1997, with respect to the
consolidated financial statements of Huntington Bancshares Incorporated
incorporated by reference in this Annual Report on Form 10-K for the year ended
December 31, 1996, filed with the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
February 19, 1997
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM HUNTINGTON
BANCSHARES INCORPORATED'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER
31,1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 915,636
<INT-BEARING-DEPOSITS> 1,704
<FED-FUNDS-SOLD> 8,116
<TRADING-ASSETS> 1,873
<INVESTMENTS-HELD-FOR-SALE> 4,743,933
<INVESTMENTS-CARRYING> 60,444
<INVESTMENTS-MARKET> 61,107
<LOANS> 14,260,747
<ALLOWANCE> 199,058
<TOTAL-ASSETS> 20,851,513
<DEPOSITS> 13,385,891
<SHORT-TERM> 3,944,703
<LIABILITIES-OTHER> 396,831
<LONG-TERM> 1,556,326
<COMMON> 1,264,664
0
0
<OTHER-SE> 246,850
<TOTAL-LIABILITIES-AND-EQUITY> 20,851,513
<INTEREST-LOAN> 1,193,896
<INTEREST-INVEST> 304,794
<INTEREST-OTHER> 11,774
<INTEREST-TOTAL> 1,510,464
<INTEREST-DEPOSIT> 459,514
<INTEREST-EXPENSE> 751,640
<INTEREST-INCOME-NET> 758,824
<LOAN-LOSSES> 65,050
<SECURITIES-GAINS> 17,703
<EXPENSE-OTHER> 567,946
<INCOME-PRETAX> 398,821
<INCOME-PRE-EXTRAORDINARY> 262,101
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 262,101
<EPS-PRIMARY> 1.78
<EPS-DILUTED> 1.78
<YIELD-ACTUAL> 4.11
<LOANS-NON> 47,155
<LOANS-PAST> 34,056
<LOANS-TROUBLED> 3,326
<LOANS-PROBLEM> 50,691
<ALLOWANCE-OPEN> 194,456
<CHARGE-OFFS> 81,089
<RECOVERIES> 18,734
<ALLOWANCE-CLOSE> 199,058
<ALLOWANCE-DOMESTIC> 160,876
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 38,182
</TABLE>
